Legislature(2003 - 2004)
04/15/2004 01:40 PM Senate TRA
| Audio | Topic |
|---|
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SB 384-ROUTE OF NAT GAS PIPELINE FUNDED BY RR
The committee took up SB 384.
MS. MARY JACKSON, staff to Senator Wagoner, presented the
sponsor statement. She testified that there are two mechanisms
that have been discussed this session for funding a gas
pipeline: Stranded Gas Act and ANGDA. A third method is
bonding through the Alaska Railroad Corporation (ARRC). Last
year HB 267 passed and authorized the ARRC to issue bonds for a
natural gas pipeline from the North Slope. The authority was
for a maximum of $17 billion. It was loosely constructed so
there was no limitation on the number or timing of the
issuances. The ARRC was given the authority to negotiate with
the producers with one or more entities as they saw fit. Co-
Chair Wagoner spoke with the CEO of ARRC about that authority
and the possibility of constructing a gas line to the Cook Inlet
Basin. The result of that conversation is SB 384. The bill
amends the language that was approved last year to specifically
reference the route to the Cook Inlet Basin. The purpose of
specifying that route is to focus on the need for natural gas to
the Cook Inlet Basin. The Cook Inlet Basin serves the majority
of the residents in Alaska, and they need gas for home
consumption. The electrical utilities and the petrochemical
industries in the Basin need the natural gas.
CO-CHAIR COWDERY moved to adopt the CS for SB 384 [labeled 23-
LS1847\H, Cook, 4/7/04] as the working document for purposes of
discussion.
CO-CHAIR WAGONER asked if there was any objection. There being
none, it was so ordered.
MS. JACKSON acknowledged the intent was not to spend $17 billion
on one pipeline route, but rather that one of the routes should
be in place at some point, within the bonds approved by the
Railroad Authority to serve the Cook Inlet Basin. Regarding the
question as to whether or not a route to the Cook Inlet is a
reasonable consideration, she referred to a map from over 10
years ago, Denali Pipeline's route from the North Pole to the
Cook Inlet Basin for a [product line]. She emphasized that the
route is possible, "It's there," she said.
CO-CHAIR COWDERY referred to the new language in the CS, lines
[9 - 11], "except that a portion of the pipeline must follow the
Alaska Railroad right-of-way from the City of Fairbanks to the
pipeline terminus at the Cook Inlet Basin." He asked about the
Railroad's right-of-way.
MS. JACKSON said she had the same question; the terminus is
where the pipeline connects to the existing pipeline.
CO-CHAIR WAGONER said the terminus is in the "Mat Valley" and
would be where the 20-inch line comes over from Beluga - where
those two would intersect with the Railroad - one could tie in
there, back-feed gas back into Cook Inlet, or on through the
system.
CO-CHAIR COWDERY suggested the need for further clarification.
SENATOR GEORGIANNA LINCOLN asked if the map [in the committee
room] was the same as that included in the committee packet.
MS. JACKSON said the maps were similar. She referred to both
maps and pointed out Alaska Railroad's rights-of-way, the joint
pipeline from the North Slope.
SENATOR LINCOLN referred to the larger map and asked where the
right-of-way for the Railroad and the right-of-way for the
pipeline were located.
CO-CHAIR WAGONER responded that currently, there is no pipeline
right-of-way, but there is a Railroad right-of-way and also an
inter-tide right-of-way for the power line that runs from the
Mat Valley to Healy.
MS. JACKSON pointed to the black line on the map, the terminus
to the Cook Inlet Basin; that is the existing pipeline going to
the Cook Inlet.
CO-CHAIR COWDERY asked about the existing truck line and
pipeline.
CO-CHAIR WAGONER responded that the existing pipeline comes from
the Beluga gas field and intersects with the 20-inch line. "You
can feed back through the Beluga area over into the North Kenai
area. Or you can feed around this way into the Anchorage Basin.
From Anchorage there are two gas lines that Enstar has that come
down towards Sterling and over. It makes a full loop, is what
it does, after it intersects with that 20-inch line. But that's
in the future." Basically, it is possible to run a spur line
from the Fairbanks, North Pole area to Anchorage. He noted that
it's been stated on the public record several times by one or
two individuals that it's impossible, but said, "If you look at
this map real close, the power line does not go through the
Healy Canyon where the Railroad has all the trouble with the
Shale slide. It bypasses it. And therefore it eliminates the
problem of going through the national park. Because you can by-
pass the national park quite easily. It's already been done.
It is a very feasible route." It's close to the same number of
miles if there is a spur line - if the natural gas line did run
to the border and then into Canada - it's about the same number
of miles as it would be to run the spur line from Delta to
Glennallen and around. It would probably have fewer problems
with the EIS and permitting because rights-of-way have already
been permitted for utility lines and there is the Railroad
right-of-way to work with, he explained.
CO-CHAIR WAGONER added that Gary Hartley (ph), who lives in Salt
Lake City, was a sub-contractor for Tesoro Oil when Associated
Pipeline Contractors designed this pipeline (he pointed to a
full package of the design). This pipeline was designed 10
years ago when the companies of Tesoro and Williams were
involved in joint discussions of shipping the product between
the refinery in North Pole and the refinery in Nikiski because
of Williams's limited ability to process a certain portion of
the crude that ran through the plant. Tesoro had a more refined
process and was going to bring that product down and ship back
the other product in the Kenai. That didn't come about, but it
shows that it is very possible to put a line into that corridor.
They've already pre-engineered and designed it, he stated.
SENATOR GENE THERRIAULT read the new language, "except that a
portion of the pipeline must follow ..." referred to the smaller
map, and asked about the gold colored [line].
CO-CHAIR WAGONER explained this shows the current line as
proposed by ANGDA into Valdez. The red line to the west is the
spur line into Cook Inlet Basin. This map shows the different
routes, although it doesn't have the route to the border.
SENATOR THERRIAULT asked if any of these routes would be
available.
CO-CHAIR WAGONER replied yes.
MS. JACKSON pointed out that the black, yellow, and maroon lines
are currently ANGDA-authorized. The red line is not authorized.
SENATOR LINCOLN asked about the bridge, and questioned if this
would interfere with the proposed Knik Arm Bridge.
CO-CHAIR WAGONER said no, that there's a 20-inch pipeline, a
high-powered pressured line that's already in place that comes
around. It starts from the south. There's a line that comes
from Beluga.
SENATOR LINCOLN asked about the fiscal note.
MS. JACKSON said she had spoken with Steve Porter about the
fiscal note. She pointed out that this is an amendment to a
measure that was passed last year that had a fiscal note; she
had copies of the bill and the fiscal note from last year.
SENATOR LINCOLN asked if that bill had passed.
MS. JACKSON said yes.
SENATOR LINCOLN asked if that would be sufficient to cover the
additional spur.
MS. JACKSON said she didn't know but suggested that the measure
that passed - and this could be debated - was all-encompassing.
The bill authorizes the issuances of up to $17 million in
revenue bonds to pay for 70 percent of the construction based
upon current estimates. The Railroad would bear no liability,
have no responsibility for re-payment. The fiscal note, done by
the Railroad Corporation, has FY 2006 as its first impact year -
$163,000 in costs - to be offset in revenues that would be re-
cooped through the sale of the bonds. She suggested there would
not be a fiscal note on a portion of a route that had already
been approved.
SENATOR LINCOLN asked how this would interact with ANGDA.
MS. JACKSON said it would not.
CO-CHAIR WAGONER added that eventually, it could.
MS. JACKSON agreed that could occur in the future.
CO-CHAIR WAGONER pointed out that in the future, ANGDA may get
together with the Railroad and work out a mutual agreement
regarding construction. All this does is define that there is a
route. It's just another alternative to bring gas into Cook
Inlet. He emphasized that Cook Inlet is the only manufacturing
site for natural gas product currently in the state. There are
two manufacturing units: Agrium, producing ammonia and urea,
and ConocoPhillips that produces LNG. There are currently
problems with gas reserves in Cook Inlet and with maintaining
the necessary level of production to keep those plants
operating. Possibly in 2009 or 2010, there will be a need for
additional gas supply.
MR. MICHAEL HURLEY, Senior Commercial Analyst with
ConocoPhillips Alaska, testified that the company, in
conjunction with BP and Exxon Mobil has been working on
commercializing North Slope gas resources via a pipeline from
the North Slope, down the highway route, through Canada and into
the Lower '48. This bill helps to insure that the potential
benefit from the Railroad financing not be limited in any way.
"Whether it's our company and our partners, or whether it's an
independent gas pipeline company, there is potential for the
Railroad bonds to bring benefits to the project to help the
economics of that project. We would like to encourage the
committee to make sure that there's flexibility in how those
bonds can be used." He said he couldn't comment specifically on
the CS but thought that more flexibility in Railroad bonding
would be better for the project and for the opportunity to
commercialize stranded gas.
SENATOR DONNY OLSON asked if there was any opposition from Mr.
Hurley or who he represents relating to SB 384.
MR. HURLEY confirmed there was no opposition. He added that the
thinking is that it's appropriate for the state to maintain
flexibility and to use Railroad bonds in whatever way works to
most effectively commercialize the gas.
CO-CHAIR COWDERY asked if/when this project goes forward, would
the use of Railroad bonds need the Legislature's approval, even
with the passage of SB 384.
MR. HURLEY said he wasn't sure but perhaps the legislation from
a year or two ago may have provided for that ability.
MS. WENDY LINDSKOOG, Director of External Affairs for the Alaska
Railroad Corporation (ARRC), testified that she believed the
authorization was put in place last year, and this would just
amend that authorization to include a potential portion of a
pipeline.
CO-CHAIR COWDERY said this was why he had brought up the
question on the CS; maybe the language should be broadened so
that there wouldn't be problems.
CO-CHAIR WAGONER said the bill would be held over and that could
be done.
SENATOR LINCOLN referred to Mr. Hurley's prior testimony of
wanting to ensure that there was flexibility and also stating
there was no objection to the bill. She pointed out that the
bill as amended says, "a portion must follow." She asked,
regarding the CS, if Conoco has reservations about the
legislation as presented.
MR. HURLEY said the CS says "must" and that causes concern, but
if it is going to be re-worded to be more flexible, this would
be better and more in the state's interest.
MR. BILL POPP, Oil and Gas Liaison for the Kenai Peninsula
Borough, spoke in support of the CS, while also recognizing
there would be additional wordsmithing. Support is for the
concept to bring gas down the Railroad corridor, the Railbelt to
the Cook Inlet Basin to address long-term energy needs for 70
percent of the state's population residing along the railbelt
and relying on 85 percent of their electrical power being
generated by natural gas turbines. This is a significant issue
for the Cook Inlet Basin and Kenai Peninsula Borough and will
have long-term impacts if methods and means are not identified
to help support the construction of North Slope gas being
brought to the Cook Inlet Basin. As Co-Chair Wagoner referenced
earlier, a substantial portion of the state's value-added
industry for the petrochemical industry is based in the Nikiski
industrial site in the Kenai Peninsula Borough. That site
represents 65 percent of the employment of the state's
petrochemical workers. Two of the major employers,
ConocoPhillips and the Agrium Nitrogen Plant, rely specifically
on a plentiful supply of reasonably priced gas to maintain
operations. Their vision is not only to maintain those
operations but also to help to expand operations within the Cook
Inlet Basin - not necessarily within the Kenai Peninsula Borough
but throughout the Basin - to take advantage at monetizing and
getting value-added products generated from North Slope gas that
could be brought to the Cook Inlet Basin. This would take
advantage of the transportation hubs located here, the railroad,
the port, airport, and so forth. Also, the long-term economic
health of the Basin hinges on natural gas. He urged the
committee to pass the bill to assure the energy future of the
Cook Inlet Basin.
2:08 p.m.
CO-CHAIR COWDERY asked if he had a copy of the CS and received
confirmation that he did. He said it would probably be
appreciated and beneficial if Mr. Popp could work with staff on
the wordsmithing.
MR. POPP responded it would be a privilege.
MR. ROBERT VALDATTA testified from the Stranded Gas Committee in
Seward in support of Mr. Popp's idea of the Kenai Peninsula
being serviced on natural gas. He said that 10 - 15 years ago,
Seward applied for permits, and Enstar was going to build a
natural gas line but it did not materialize. They are still in
favor of that, but also have good harmony with the Railroad, so
by bringing natural gas through the Railroad, or through
permitting in the future, either way they hope the natural gas
line comes down the Kenai so that enough gas is there to support
Seward's future endeavors. He said they would work with Mr.
Popp on these issues.
CO-CHAIR WAGONER announced he would close this portion of the
hearing. He asked if there was anyone else wanting to testify,
and received no response. He asked if Tom Brooks was on-line.
MR. TOM BROOKS, Chief Engineer with Alaska Railroad, offered a
brief overview of the Railroad's right-of-way from Fairbanks to
Anchorage. Basically the Railroad has a 200-foot-wide right-of-
way from Fairbanks to Cook Inlet Basin. It's continuous and
generally the Railroad has exclusive use of that right-of-way.
The Denali Park area is an exception, as that right-of-way is
restricted to the traditional uses that have been employed, i.e.
railroad and communication lines. Those were the uses under
federal ownership. Generally the Railroad's title for a right-
of-way is in good shape for a pipeline with the exception of the
park service and the Healy Canyon. That has been identified as
having slide areas and shales, and that area is a priority for
reconstruction. Beyond that, the right-of-way and railway
engineering standards are compatible with pipelines.
CO-CHAIR WAGONER said when he talked with Pat Gamble before
going to the Energy Council in Washington D.C., he mentioned to
the Congressional delegation that a package would be provided
showing where the gas line would supposedly bypass the part in
the Healy Canyon.
SENATOR LINCOLN referred to the CS, the Alaska Railroad right-
of-way from Fairbanks to the terminus at the Cook Inlet Basin,
and asked if testimony was that the Railroad has no objection to
utilizing that right-of-way in the manner as stated in the bill.
MR. BROOKS confirmed that was correct.
CO-CHAIR WAGONER asked if the high pressure, 20-inch gas line
coming out of the Beluga field intersects with the Railroad
right-of-way at any place.
MR. BROOKS said there are high pressure gas lines in the right-
of-way but said he didn't know if that particular gas line
intersects the right-of-way or not. He said he believed it
comes pretty close, if it doesn't intersect.
CO-CHAIR WAGONER said he could check into this with Enstar.
SENATOR LINCOLN referred to the CS and asked Mr. Heinze if there
was concern with any overlapping that may occur, or funding that
may bring this in question regarding ANGDA.
MR. HAROLD HEINZE, Alaska Natural Gas Development Authority
(ANGDA), testified that he was in Anchorage with Steve Porter
and that unfortunately he did not have a copy of the CS but
wanted to emphasize the importance of getting gas to the Cook
Inlet area, as this would impact the energy and heating bills of
about half of Alaska's population. He estimated that about $100
million of disposable income per year is at stake from that one
sector of the economy, and he supports anything that would get
gas to Cook Inlet, and to tidewater so it could be available to
other parts of the state. The second point is that as a public
corporation, ANGDA has looked at a variety of financing to help
projects for getting gas up the North Slope. He reminded
members that this Railroad bonding capability is unique as it
was authorized through an act of Congress. He noted care needs
to be taken regarding whatever the general tax rules are. He
reflected, as someone in the private sector responsible for some
major pipeline - in some cases near the railroads or railroad
right-of-ways - that when the decision is made to lay a long
length of pipeline on the railroad right-of-way, there are
safety considerations for both the railroad and the pipeline.
He said he hopes the language would allow for the alignment of
things to be in parallel but necessarily in the right-of-way,
which at times may be a very narrow juncture, and there are
safety concerns. There have been issues in the past where
railroads and pipelines have interacted and generally everybody
loses when that happens.
SENATOR LINCOLN said in looking at the maps that were presented
by the Denali Pipeline Project and in consideration of where the
railroad is at the optional route and the proposed pipeline
route, it varies on each page; she said she couldn't judge the
distance regarding whether it goes off of that 200-foot right-
of-way. The language is very specific that it must follow that
right-of-way through that whole area from Fairbanks to Cook
Inlet. She said she was sure that is the part Co-Chair Wagoner
would be looking into, as to where it doesn't intersect.
Co-CHAIR WAGONER confirmed this would be addressed. He told Mr.
Heinze they would send him a copy of the preliminary engineering
study and the map.
MR. HEINZE said he thought there was a copy available at the
Joint Pipeline Office, which is where his office is. He
suggested that the Joint Pipeline Office be included in the
discussion of exact alignment because of their expertise in
pipeline safety and transportation.
CO-CHAIR WAGONER said Mr. Porter would be contacted regarding
fiscal notes.
CO-CHAIR COWDERY asked Mr. Brooks if the Railroad has rights-of-
way greater than 200-feet.
MR. BROOKS responded that rights-of-way are generally 200 feet,
and that in some areas there are reserves that exceed that, but
generally it is 200 feet.
CO-CHAIR WAGONER asked if within the 200 feet, "you're not
always in the center of the right-of-way with your tracks, are
you?"
MR. BROOKS replied, "Generally we are but there are a few places
where we've re-aligned or done other things that put us slightly
askew from the exact center."
CO-CHAIR WAGONER asked if there were any other questions. He
thanked people for their input and announced that SB 384 would
be held in committee.
There being no further business to come before the committee,
Co-Chair Wagoner adjourned the meeting at 2:25 p.m.
| Document Name | Date/Time | Subjects |
|---|