Legislature(2011 - 2012)BARNES 124

02/22/2011 10:15 AM ECON. DEV., TRADE & TOURISM


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Audio Topic
10:19:36 AM Start
10:22:49 AM HJR15
11:12:17 AM Presentation(s): "getting Alaskans' Gas to Alaskans in the Shortest Amount of Time While Maximizing an Export Opportunity," by David Gottstein
11:53:50 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
*+ HJR 15 SUPPORT ARCTIC CAUCUS TELECONFERENCED
Heard & Held
+ Presentation: "Getting Alaskans' Gas to Alaskans TELECONFERENCED
in the Shortest Amount of Time While Maximizing
an Export Opportunity," by David Gottstein
+ Bills Previously Heard/Scheduled TELECONFERENCED
                    ALASKA STATE LEGISLATURE                                                                                  
 HOUSE SPECIAL COMMITTEE ON ECONOMIC DEVELOPMENT, INTERNATIONAL                                                               
                       TRADE AND TOURISM                                                                                      
                       February 22, 2011                                                                                        
                           10:19 a.m.                                                                                           
                                                                                                                                
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Bob Herron, Chair                                                                                                
Representative Kurt Olson, Vice Chair                                                                                           
Representative Neal Foster                                                                                                      
Representative Wes Keller                                                                                                       
Representative Steve Thompson                                                                                                   
Representative Berta Gardner                                                                                                    
Representative Chris Tuck                                                                                                       
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative Cathy Engstrom Munoz                                                                                             
Representative Peggy Wilson                                                                                                     
                                                                                                                                
OTHER LEGISLATORS PRESENT                                                                                                     
Representative Bob Miller                                                                                                       
Representative Scott Kawasaki                                                                                                   
Senator Joe Paskvan                                                                                                             
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
HOUSE JOINT RESOLUTION NO. 15                                                                                                   
Relating to collaboration with the Yukon and the Northwest                                                                      
Territories through the Pacific NorthWest Economic Region and                                                                   
its Arctic Caucus to address common issues.                                                                                     
                                                                                                                                
     - HEARD & HELD                                                                                                             
                                                                                                                                
PRESENTATION(S): "GETTING ALASKANS' GAS TO ALASKANS IN THE                                                                      
SHORTEST AMOUNT OF TIME WHILE MAXIMIZING AN EXPORT OPPORTUNITY~"                                                                
BY DAVID GOTTSTEIN                                                                                                              
                                                                                                                                
     - HEARD                                                                                                                    
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
BILL: HJR 15                                                                                                                  
SHORT TITLE: SUPPORT ARCTIC CAUCUS                                                                                              
SPONSOR(s): REPRESENTATIVE(s) HERRON                                                                                            
                                                                                                                                
02/02/11       (H)       READ THE FIRST TIME - REFERRALS                                                                        
02/02/11       (H)       EDT                                                                                                    
02/22/11       (H)       EDT AT 10:15 AM BARNES 124                                                                             
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
ROB EARL, Staff                                                                                                                 
Representative Bob Herron                                                                                                       
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Introduced HJR 15 on behalf of                                                                           
Representative Herron, prime sponsor.                                                                                           
                                                                                                                                
MATT MORRISON, Executive Director                                                                                               
Pacific NorthWest Economic Region (PNWER)                                                                                       
Seattle, Washington                                                                                                             
POSITION STATEMENT:  Provided a PowerPoint presentation titled,                                                               
"PNWER's Arctic Caucus, February 22, 2011."                                                                                     
                                                                                                                                
NILS ANDREASSEN, Managing Director                                                                                              
Institute of the North (Institute)                                                                                              
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Testified in support of HJR 15.                                                                          
                                                                                                                                
MICHAEL O'HARE, Deputy Director                                                                                                 
Division of Homeland Security /Emergency Management                                                                             
Department of Military & Veterans' Affairs (DMVA)                                                                               
Ft. Richardson, Alaska                                                                                                          
POSITION STATEMENT:  Answered questions on emergency management                                                               
and preparedness during the hearing on HJR 15.                                                                                  
                                                                                                                                
PAUL FUHS, Board President                                                                                                      
Marine Exchange of Alaska                                                                                                       
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Testified during the hearing on HJR 15.                                                                  
                                                                                                                                
DAVID GOTTSTEIN, Chief Investment Officer/President                                                                             
Dynamic Capital Management Inc.                                                                                                 
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Provided a PowerPoint presentation titled,                                                               
"Getting Alaskans' Gas to Alaskans in the Shortest Amount of                                                                    
Time While Maximizing an Export Opportunity".                                                                                   
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
10:19:36 AM                                                                                                                   
                                                                                                                                
CHAIR BOB HERRON  called the House Special  Committee on Economic                                                             
Development, International Trade and  Tourism meeting to order at                                                               
10:19 a.m.  Representatives Herron,  Tuck, Olson, Keller, Foster,                                                               
and Thompson were  present at the call to  order.  Representative                                                               
Gardner arrived as the meeting  was in progress.  Representatives                                                               
Miller and Kawasaki, and Senator Paskvan were also present.                                                                     
                                                                                                                                
                  HJR 15-SUPPORT ARCTIC CAUCUS                                                                              
                                                                                                                                
10:22:49 AM                                                                                                                   
                                                                                                                                
CHAIR HERRON announced that the  first order of business would be                                                               
HOUSE  JOINT RESOLUTION  NO. 15,  Relating to  collaboration with                                                               
the  Yukon  and the  Northwest  Territories  through the  Pacific                                                               
NorthWest  Economic  Region  and  its Arctic  Caucus  to  address                                                               
common issues.                                                                                                                  
                                                                                                                                
CO-CHAIR  HERRON   called  a  brief  at-ease   due  to  technical                                                               
difficulties.                                                                                                                   
                                                                                                                                
10:23:08 AM                                                                                                                   
                                                                                                                                
CO-CHAIR HERRON called  an at-ease from 10:24 a.m.  to 10:28 a.m.                                                               
due to technical difficulties.                                                                                                  
                                                                                                                                
10:28:53 AM                                                                                                                   
                                                                                                                                
CO-CHAIR HERRON introduced Mr. Earl.                                                                                            
                                                                                                                                
10:29:15 AM                                                                                                                   
                                                                                                                                
ROB  EARL,   staff,  Representative  Bob  Herron,   Alaska  State                                                               
Legislature,  introduced  HJR  15  on  behalf  of  Representative                                                               
Herron, prime sponsor.  Mr.  Earl informed the committee that HJR
15  encourages  the  legislature  to support  the  Arctic  Caucus                                                               
within  the  Pacific  NorthWest Economic  Region  (PNWER).    The                                                               
Pacific NorthWest Economic Region was  founded in 1991 and is the                                                               
only   statutory,   non-partisan,   bi-national,   public-private                                                               
partnership  in North  America.   The organization  includes five                                                               
U.S.  states,  two  Canadian   territories,  and  three  Canadian                                                               
provinces;  its mission  is to  increase the  economic well-being                                                               
and  quality  of  life  for   all  citizens  of  the  region,  to                                                               
coordinate  provincial  and  state   policies,  to  identify  and                                                               
promote models  of success,  and to  serve as  a conduit  for the                                                               
exchange of  information.   Mr. Earl  noted that  PNWER addresses                                                               
issues  through eighteen  working  groups, one  of  which is  the                                                               
Arctic Caucus that  includes legislators, governmental officials,                                                               
and  business  and  non-profit  leaders  working  to  responsibly                                                               
develop  North America's  Arctic.   The caucus  began meeting  in                                                               
July  2010, for  the purpose  of  providing a  forum for  Alaska,                                                               
Northwest Territories (NWT), and  Yukon Territory (YT) to discuss                                                               
issues of  mutual concern, share information,  and identify areas                                                               
of  possible  collaboration;  for  example,  to  promote  a  pan-                                                               
northern  approach   to  federal  government.     The  resolution                                                               
addresses this approach  and states "the Arctic  Caucus will also                                                               
strive  to promote  a synchronized  message detailing  the common                                                               
needs of  the Arctic  Caucus member  regions to  their respective                                                               
federal    governments   and    emphasizing   that    coordinated                                                               
U.S./Canadian federal  policies are  vital for the  well-being of                                                               
the  region's  citizens."   He  advised  the  resolution's  final                                                               
resolve calls on the governments of  YT and NWT to join Alaska in                                                               
an enduring alliance to pursue common goals.                                                                                    
                                                                                                                                
10:32:22 AM                                                                                                                   
                                                                                                                                
MR. EARL  provided a  PowerPoint presentation  titled, "HJR  15 -                                                               
Support  Arctic Caucus."   Slide  2 indicated  that the  combined                                                               
land  area of  NWT and  YT is  larger than  Alaska, but  Alaska's                                                               
population  is almost  ten  times that  of  the two  territories.                                                               
Slide 3  was a map  of the Arctic Caucus  and he pointed  out the                                                               
expense of traveling to Whitehorse,  Inuvik, and Yellowknife from                                                               
Anchorage.    Slide 5  provided  economic  information about  the                                                               
region.   Slide 6  indicated that  Arctic populations  across the                                                               
Arctic Ocean  vastly outnumber the  population on  Alaska's side.                                                               
In  fact, almost  one-half of  Arctic residents  live in  Russia.                                                               
Mr. Earl  pointed out that  United Nations (UN)  mapping includes                                                               
all  of  Alaska's population  in  its  Arctic  totals.   Slide  7                                                               
indicated   that  Alaska   has  the   third  largest   indigenous                                                               
population behind  Canada and Greenland.   Slide  8 was a  map of                                                               
the two major  sea routes through the Arctic  Ocean; the Northern                                                               
Sea  Route  follows the  northern  coastline  of Russia  and  the                                                               
Northwest Passage follows the coastline  of Canada.  Slides 9 and                                                               
10  indicated that  there  is increasing  vessel  traffic in  the                                                               
Arctic  Ocean  and  Bering  Strait,  up  from  an  estimated  325                                                               
transits  per  year.   Slide  11  displayed extended  continental                                                               
shelf claims  under the United  Nations Convention on the  Law of                                                               
the  Sea  (UNCLOS).   Under  the  provisions of  UNCLOS,  coastal                                                               
countries have  resource control over an  Exclusive Economic Zone                                                               
(EEZ) from shoreline out to the  edge of the continental shelf or                                                               
200  miles,  whichever is  farther.    He  pointed out  that  the                                                               
continental shelf  around Alaska is  "narrow" except for  an area                                                               
near the maritime border with Russia,  where the U.S. can make an                                                               
extended  Continental Shelf  Claim north  of the  U.S. EEZ  after                                                               
UNCLOS is  ratified by the  U.S. Senate.  Slide  13 was a  map of                                                               
extended claims by country.                                                                                                     
                                                                                                                                
10:37:56 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE TUCK asked how claims are made.                                                                                  
                                                                                                                                
MR. EARL advised that claims are made to the UN for judgment.                                                                   
                                                                                                                                
10:38:19 AM                                                                                                                   
                                                                                                                                
CHAIR HERRON clarified  that the basis of Russia's  claim is that                                                               
the territory is an extension  of the Continental Shelf, and that                                                               
would pertain to the U.S. as well.                                                                                              
                                                                                                                                
MR.  EARL explained  that Slide  14 indicates  an area  about the                                                               
size  of New  Jersey  that  is under  a  maritime border  dispute                                                               
between the U.S. and Canada.   Canada has delineated its maritime                                                               
border as  an extension  of the land  boundary, whereas  the U.S.                                                               
has drawn the boundary perpendicular to the coastline.                                                                          
                                                                                                                                
10:39:33 AM                                                                                                                   
                                                                                                                                
MATT  MORRISON, Executive  Director,  Pacific NorthWest  Economic                                                               
Region  (PNWER), noted  that during  PNWER's twenty-year  history                                                               
two Alaskans have  served as its president.   Mr. Morrison opined                                                               
the   point  of   the  Arctic   Caucus  is   the  importance   of                                                               
relationships  in  accomplishing  goals for  a  large  geographic                                                               
area; in fact,  provincial and state efforts can  be combined for                                                               
a  greater   voice  in  the   federal  capitals  of   Ottawa  and                                                               
Washington, D.C.,  and throughout the  region.  Members  of PNWER                                                               
are:  Alaska, Alberta, British  Columbia, Idaho, Oregon, Montana,                                                               
Saskatchewan,   Washington,   Yukon  Territory,   and   Northwest                                                               
Territories.   He relayed  that an  example of  PNWER'S expanding                                                               
spheres of  cooperation between its  members is  the facilitation                                                               
of  enhanced  driver's  licenses  that will  serve  as  passports                                                               
within  the  region.   Another  example  is  PNWER's  Legislative                                                               
Energy Horizon Institute.   Graduates of the  institute are state                                                               
and  provincial legislators  who  participated  in a  bi-national                                                               
effort with the U.S. Department  of Energy and Canadian provinces                                                               
to study energy  policy.  Prior to the XXI  Olympic Winter Games,                                                               
PNWER formed a  border council to address  border concerns, which                                                               
led to further progress toward  the Beyond the Border Declaration                                                               
regarding  regulatory compliance  and perimeter  security issues.                                                               
In addition, PWNER  has hosted legislative visits  to the Alberta                                                               
Oil  Sands to  discuss royalty  issues.   The  Arctic Caucus  was                                                               
developed in  2009 with strong  support from NWT and  YT, because                                                               
of the  common concern with states  in the U.S. that  the federal                                                               
government in Ottawa  "doesn't listen to them,"  and linking with                                                               
Alaska  creates  a  different   opportunity  for  attention  from                                                               
Ottawa.  Mr. Morrison also  pointed out that PNWER contributed to                                                               
a  proposed  international  rail  connection  along  the  British                                                               
Colombia,  Washington,  and Oregon  corridor  which  led to  $726                                                               
million for rail infrastructure improvements.                                                                                   
                                                                                                                                
10:45:26 AM                                                                                                                   
                                                                                                                                
MR. MORRISON  advised that the Arctic  Caucus is a forum  for the                                                               
northern jurisdictions,  although other states and  provinces are                                                               
central to  many Arctic  issues such  as seaports  in Washington,                                                               
and  oil sands  development  in Alberta.    The first  leadership                                                               
forum was held  in Barrow, Alaska in 2010, and  action items that                                                               
were   addressed  included   advocacy  from   Canada  and   PNWER                                                               
encouraging  U.S.  participation  in   the  Arctic  Council,  and                                                               
promotion  of  a  northern  approach on  common  issues  to  both                                                               
federal  governments.    Other   issues  addressed  included  the                                                               
expansion   of   the   Marine  Exchange   of   Alaska   Automatic                                                               
Identification  System  (AIS)  to  support  better  capacity  for                                                               
search and  rescue, including joint  training exercises,  and the                                                               
promotion of federal  support for the Alaska  Highway and Shakwak                                                               
funding.    Other  issues  identified  included:    gas  pipeline                                                               
development; UNCLOS;  energy development and  transmission; joint                                                               
tourism  and  marketing;   training  and  workforce  development;                                                               
support   of   youth   exchange  programs;   completion   of   an                                                               
infrastructure   gap  analysis   to  provide   justification  for                                                               
investment in  future cross-border infrastructure.   The next two                                                               
meetings  of  the  Arctic  Caucus  are  scheduled  for  Portland,                                                               
Oregon, in  July 2011, and  in Yellowknife, NWT, in  August 2011.                                                               
Mr.  Morrison  said at  these  meetings  and others,  the  Arctic                                                               
Caucus will  push for  its action  items to  Ottawa and  the U.S.                                                               
federal government.   He concluded  by saying that there  will be                                                               
further  developments  to  implement and  support  Arctic  Caucus                                                               
initiatives, and he urged support of HJR 15.                                                                                    
                                                                                                                                
10:49:12 AM                                                                                                                   
                                                                                                                                
CHAIR  HERRON  asked  if  there   has  been  a  reaction  to  the                                                               
resolution from PNWER's Canadian members.                                                                                       
                                                                                                                                
10:49:19 AM                                                                                                                   
                                                                                                                                
MR.  MORRISON  observed there  is  keen  interest in  the  Alaska                                                               
legislation by YT and NWT.   In further response to Chair Herron,                                                               
he  opined  similar  action  is   forthcoming  in  YT,  but  both                                                               
territories are involved in upcoming elections.                                                                                 
                                                                                                                                
10:50:17 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE KELLER spoke of his  personal experiences with Mr.                                                               
Morrison and expressed his strong support for PNWER.                                                                            
                                                                                                                                
10:51:51 AM                                                                                                                   
                                                                                                                                
NILS  ANDREASSEN,  Managing  Director,  Institute  of  the  North                                                               
(Institute), noted  the hearing  was being filmed  by a  group of                                                               
young  Alaskans who  were brought  to  the State  Capitol by  the                                                               
Institute to film a series  of tutorials of the state legislature                                                               
for  young Alaskans.   He  then  advised that  the Institute  was                                                               
founded to educate Alaskans about  the reality, the richness, and                                                               
the  responsibility of  the northern  regions,  thus it  provides                                                               
opportunities for  stakeholders from across the  Arctic to engage                                                               
in   circumpolar  transportation,   energy,  and   infrastructure                                                               
issues.    In  addition,  the   Institute  serves  the  state  by                                                               
connecting  local,  state,  federal, and  international  parties,                                                               
often through Arctic Council initiatives  which it believes to be                                                               
the   proper  international   forum  for   addressing  technical,                                                               
scientific and  human challenges.   A  valuable corollary  to the                                                               
Arctic Council  would be a  sub-regional forum such as  the PNWER                                                               
Arctic  Caucus.    The caucus  would  provide  opportunities  for                                                               
Alaska to engage with its  neighbors to articulate a pan-northern                                                               
approach  to   infrastructure  and   policy  development.     Mr.                                                               
Andreassen  turned to  several important  Arctic issues,  such as                                                               
the  responsible   management  and  development  of   energy  and                                                               
resources that  will sustain the  economies of  northern regions.                                                               
Furthermore, Alaska's geographic location  reinforces its role to                                                               
respond  to  increases  in   Arctic  tourism  and  transportation                                                               
through the Bering Strait, thus must  be in a position to respond                                                               
to  the needs  of search  and rescue  in its  waters and  beyond.                                                               
Infrastructure  to  support  transportation  activity  is  needed                                                               
immediately due  to the aging  icebreaker fleet and  the distance                                                               
of the region  from responders.  In fact, the  940 miles from the                                                               
Coast Guard  base at Kodiak  to Point  Barrow is nearly  equal to                                                               
the distance  from Seattle to  Los Angeles.   He pointed  out the                                                               
state  must advocate  for investment  in critical  transportation                                                               
infrastructure   by  its   participation   in  sub-regional   and                                                               
international  forums.   The Institute  has strong  relationships                                                               
with   Alaska's   neighbors,   and   he   stressed   that   these                                                               
relationships  are  crucial  in  today's world  of  "mixed  media                                                               
messages and  hyper-sensationalism."  The Arctic  Caucus provides                                                               
a needed  opportunity to produce  sound and  relevant information                                                               
to address  critical issues.  Alaska  must play a strong  role in                                                               
decisions  affecting  northern  waters   such  as  Arctic  marine                                                               
shipping,  increased activity  along Alaska's  coast, search  and                                                               
rescue, and  Arctic aviation.   All of these issues  should align                                                               
with  national policies  in a  spirit of  cooperation similar  to                                                               
Canada's  commitment  to  the  Arctic in  2010  that  included  a                                                               
foreign policy statement to work  with international partners for                                                               
the advancement  of the  region.  The  Institute will  be hosting                                                               
the  Arctic  Policy Forum  with  presentations  from many  Arctic                                                               
neighbors  discussing  complex  regional   issues.    He  closed,                                                               
advising  that further  interaction  to strengthen  relationships                                                               
can be provided by PNWER's Arctic Caucus.                                                                                       
                                                                                                                                
10:58:53 AM                                                                                                                   
                                                                                                                                
CHAIR HERRON asked  for the highlight of the  Arctic Policy Forum                                                               
agenda.                                                                                                                         
                                                                                                                                
MR.  ANDREASSEN explained  the clear  priority of  the conference                                                               
will be the infrastructure deficit  revealed by the Arctic marine                                                               
shipping assessment, and the gaps  in Alaska's ability to respond                                                               
to issues along its coast.                                                                                                      
                                                                                                                                
11:00:03 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  GARDNER observed  that  Canada  has other  Arctic                                                               
provinces  and  asked  why  they are  not  participating  in  the                                                               
caucus.                                                                                                                         
                                                                                                                                
MR.  ANDREASSEN advised  that other  territories  and states  are                                                               
stakeholders and can participate in Arctic issues through PNWER.                                                                
                                                                                                                                
CHAIR HERRON observed  that the provinces and  territories have a                                                               
different relationship to  Ottawa, thus the Arctic  is the common                                                               
denominator in this PNWER sub-caucus.                                                                                           
                                                                                                                                
REPRESENTATIVE FOSTER  asked for the  first step that  Alaska can                                                               
take to solve the gaps in search and rescue response.                                                                           
                                                                                                                                
11:02:36 AM                                                                                                                   
                                                                                                                                
MR.  ANDRESASSEN  recalled  a recommendation  by  the  leadership                                                               
forum  that called  for two  processes:   to assess  and identify                                                               
benchmarks for infrastructure that is  needed at airports such as                                                               
lighting and  modifications at ports,  and a  baseline assessment                                                               
of existing infrastructure.                                                                                                     
                                                                                                                                
CHAIR HERRON  paraphrased a letter from  Lieutenant Governor Mead                                                               
Treadwell,  indicating  Alaska  is   an  important  part  of  our                                                               
national  security,  and  the governor  and  lieutenant  governor                                                               
appreciate the resolution.                                                                                                      
                                                                                                                                
11:03:59 AM                                                                                                                   
                                                                                                                                
MICHAEL O'HARE,  Deputy Director,  Division of  Homeland Security                                                               
/Emergency  Management,   Department  of  Military   &  Veterans'                                                               
Affairs  (DMVA),   stated  there  are  existing   agreements  and                                                               
advisory   committees  between   Alaska   and  Canada   regarding                                                               
coordination  on emergency  preparedness, response,  and recovery                                                               
issues.     Alaska   has  the   responsibility  to   ensure  that                                                               
communities are best prepared for any disaster.                                                                                 
                                                                                                                                
REPRESENTATIVE FOSTER  complimented the division on  its response                                                               
to problems in Savoonga.                                                                                                        
                                                                                                                                
11:06:36 AM                                                                                                                   
                                                                                                                                
PAUL FUHS,  Board President, Marine Exchange  of Alaska, informed                                                               
the committee  that vessels in  international trade  are required                                                               
to carry transponders  on board to transmit their  location.  The                                                               
Marine Exchange, with the support  of the U.S. Coast Guard, state                                                               
funds, and private  sector funds, installed an  array of antennas                                                               
in the Arctic and in Alaska to  track the vessels.  Mr. Fuhs said                                                               
the  amount   of  current  vessel   activity  in  this   area  is                                                               
incredible.    The tracking  system  allows  analysis of  "Arctic                                                               
domain  awareness"  and from  this  data  policy  can be  set  on                                                               
whether there  should be established  fairways and  buffer zones.                                                               
Tracking also indicates which  vessels are following regulations,                                                               
and  if there  is a  marine casualty,  can show  the command  and                                                               
control  of  the  assets,  response  vessel  location,  equipment                                                               
location, and the  drift zone of an oil spill.   Mr. Fuhs offered                                                               
to  display the  system to  the committee  at a  later date.   He                                                               
expressed his support  of HJR 15 with its focus  on Arctic issues                                                               
such as  the U.S. Arctic  policy, oceans  policy, the law  of the                                                               
sea  treaty,  the Endangered  Species  Act,  and risk  assessment                                                               
activities  of the  Bering Strait  and  Unimak Pass.   He  opined                                                               
these  are national  and  international  overarching issues  that                                                               
will affect  the state.   Mr. Fuhs also  spoke in support  of the                                                               
capital request by  the Institute of the North  for an assessment                                                               
task.   He stressed that the  state should be "on  the front end"                                                               
of the  issues in the  Arctic because  they are directly  tied to                                                               
economic development.                                                                                                           
                                                                                                                                
11:09:53 AM                                                                                                                   
                                                                                                                                
CHAIR  HERRON spoke  of  the importance  of  the Marine  Exchange                                                               
during the successful rescue of the  crew from a freighter in the                                                               
Aleutian Chain.                                                                                                                 
                                                                                                                                
[HJR 15 was heard and held.]                                                                                                    
                                                                                                                                
11:10:17 AM                                                                                                                   
                                                                                                                                
The committee took a brief at-ease.                                                                                             
                                                                                                                                
11:10:40 AM                                                                                                                   
                                                                                                                                
^PRESENTATION(S):  "GETTING  ALASKANS'  GAS TO  ALASKANS  IN  THE                                                               
SHORTEST AMOUNT OF TIME WHILE  MAXIMIZING AN EXPORT OPPORTUNITY,"                                                               
BY DAVID GOTTSTEIN                                                                                                              
   PRESENTATION(S): "GETTING ALASKANS' GAS TO ALASKANS IN THE                                                               
 SHORTEST AMOUNT OF TIME WHILE MAXIMIZING AN EXPORT OPPORTUNITY,"                                                           
                       BY DAVID GOTTSTEIN                                                                                   
                                                                                                                                
11:12:17 AM                                                                                                                   
                                                                                                                                
CHAIR HERRON  announced the  final order of  business would  be a                                                               
presentation, "Getting Alaskans' Gas  to Alaskans in the Shortest                                                               
Amount of Time While Maximizing  an Export Opportunity," by David                                                               
Gottstein.                                                                                                                      
                                                                                                                                
11:12:27 AM                                                                                                                   
                                                                                                                                
DAVID  GOTTSTEIN,  Chief  Investment  Officer/President,  Dynamic                                                               
Capital   Management  Inc.,   shared  with   the  committee   the                                                               
complexity of  the economic  challenge faced  by Alaska,  and the                                                               
accomplishments needed to overcome  this challenge.  He disclosed                                                               
that  he is  representing  himself.   Mr.  Gottstein  said he  is                                                               
concerned and  skeptical about the  conclusions reached  by Scott                                                               
Goldsmith  in  a  recent  report on  the  fiscal  challenges  and                                                               
opportunities  for  the  state.     As  a  registered  investment                                                               
analyst, Mr. Gottstein  said his study of the  economic future is                                                               
similar to  the analyses  he performs  for his  business clients.                                                               
He  called  attention  to  a   spreadsheet  he  provided  in  the                                                               
committee   packet  titled,   "Gottstein  Permanent   Fund  Value                                                               
Forecast  02-21-ll," and  pointed  out  several assumptions  upon                                                               
which the conclusions  of the spreadsheet are  based, although he                                                               
suggested that "the  numbers in this chart are  optimistic."  The                                                               
spreadsheet  also indicated  specifics  of  the Alaska  Permanent                                                               
Fund assets  and that  current state  savings, or  Year 1  of the                                                               
forecast,  are  about $49  billion.    After  the effect  of  the                                                               
assumed forecasts  on the permanent  fund, he concluded  that all                                                               
of the state's savings accounts "go negative" in 25 years.                                                                      
                                                                                                                                
11:17:56 AM                                                                                                                   
                                                                                                                                
MR. GOTTSTEIN cautioned that the  state is not in an economically                                                               
sustainable  position   unless  something  is  done   "to  change                                                               
course," and this  situation amounts to a crisis for  all but the                                                               
most senior  Alaskans.  Although  he agreed with a  recent report                                                               
by  Roger Marks  for the  Office of  the Federal  Coordinator for                                                               
Alaska Natural  Gas Transportation Projects about  his assessment                                                               
of a  large capacity pipe, he  disagreed with Mr. Marks's  use of                                                               
the term "subsidy."  From a  market perspective, a return that is                                                               
less than a  normal market return might be a  subsidy, but in the                                                               
case  of a  opportunity  for  the state's  involvement  in a  gas                                                               
pipeline,  the  returns are  robust  and  "the return  potential,                                                               
versus what we have to lose, are enormous."                                                                                     
                                                                                                                                
11:20:20 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE TUCK  asked  whether  the  Department  of  Revenue                                                               
(DOR)  forecast of  a  5 percent  rise in  annual  oil price  was                                                               
forecast over 25 years.                                                                                                         
                                                                                                                                
11:20:38 AM                                                                                                                   
                                                                                                                                
MR. GOTTSTEIN stated  "What it's really saying is that  even in a                                                               
very  optimistic  sense, we're  in  trouble  in  25 years."    He                                                               
clarified  that  he was  presenting  "from  a ballpark  point  of                                                               
view."   He  explained  that the  Alaska  Gasline Inducement  Act                                                               
(AGIA) is  not a problem,  but the problem  is the price  of gas.                                                               
In terms  of the  tax structure of  Alaska's Clear  and Equitable                                                               
Share  (ACES),  the solution  to  the  aggressive nature  of  the                                                               
program is to reduce the level  of growth of the progressivity by                                                               
way of a  "decaying level of progressivity."   He emphasized that                                                               
oil companies  strive to  have the state  act in  their interest,                                                               
and noted  his upcoming contacts  with corporate management  of a                                                               
pipeline company and  a mining company.   Regarding his proposal,                                                               
he advised  that the Federal Energy  Regulatory Commission (FERC)                                                               
will have a lesser role  than is customary for pipelines, because                                                               
this  is  an interstate  pipeline  with  an alternative  plan  of                                                               
finance.    Mr.  Gottstein  began  his  PowerPoint  presentation,                                                               
saying  that  Alaska is  headed  towards  long-term fiscal  decay                                                               
because  a non  oil-  and gas-based  economy  is insufficient  to                                                               
sustain state government.                                                                                                       
                                                                                                                                
11:23:55 AM                                                                                                                   
                                                                                                                                
MR. GOTTSTEIN continued  to explain that his goal  is to describe                                                               
a method  which will get gas  to Alaskans in six  to eight years,                                                               
will maximize the potential for  exports, will deliver lower cost                                                               
economies-of-scale,  and   will  provide  resources   to  sustain                                                               
government  and the  permanent fund.   This  is the  only way  to                                                               
provide long-term  lower costs and  remain competitive.   Success                                                               
on  Wall Street  is  driven  by three  components:   1.  Maximize                                                               
executives' wealth  through salaries, bonuses,  and compensation;                                                               
2.  Create  wealth  for stockholders  by  describing  cash  flow,                                                               
determining price,  and getting a  return; 3. Get others  to take                                                               
the risk.  On the other hand, Big  Oil does not make money by the                                                               
production,   transportation,   refining,    and   marketing   of                                                               
hydrocarbons, because  these tasks are  outsourced.  In  order to                                                               
make  profits, oil  and gas  companies accumulate  the rights  to                                                               
resources, cultivate  the resources at the  lowest possible cost,                                                               
and  set the  right price  for  their product.   Ultimately,  the                                                               
state  shares -  through  tax  and royalty  mechanisms  - in  the                                                               
profits   from  an   appropriate  price;   however,  in   today's                                                               
situation,  the state  needs  some  of the  gas.   Mr.  Gottstein                                                               
encouraged the committee to recognize  that there are four venues                                                               
in  which a  corporate industry  has a  duty to  tell the  truth:                                                               
under oath in a court of law;  under oath in front of Congress or                                                               
legislators;  in   federal  and   state  tax  filings;   in  U.S.                                                               
Securities  and  Exchange  Commission filings.    Therefore,  the                                                               
challenge to  build a  pipeline under  the traditional  "build it                                                               
and fill  it business model,"  is that the following  issues must                                                               
be in  alignment:  sufficient  proven reserves; bona  fide demand                                                               
from high-stature  credit-worthy purchasers; high volume  of gas;                                                               
low tariff; adequate rate-of-return.                                                                                            
                                                                                                                                
11:30:49 AM                                                                                                                   
                                                                                                                                
MR.  GOTTSTEIN continued,  saying  there  are numerous  estimates                                                               
from  a variety  of sources  that the  price of  gas needs  to be                                                               
between six and  seven dollars per one thousand  cubic feet (Mcf)                                                               
for  the abovementioned  alignment to  take place.   He  restated                                                               
that the price of gas is too low  for the oil and gas industry to                                                               
deploy  capital  for  new  projects  at  this  time.    In  fact,                                                               
everything  the  oil  and  gas   companies  are  doing  today  is                                                               
posturing  to  maintain  their   second  objective  which  is  to                                                               
cultivate the  resource options  at the lowest  cost.   Thus, the                                                               
industry  will not  proceed with  capital investment  in the  gas                                                               
pipeline  until the  state gives  enough tax  relief, builds  the                                                               
pipe for  them to  own, and  raises their  gross margin  equal to                                                               
that  from gas  priced at  six  or seven  dollars per  Mcf.   Mr.                                                               
Gottstein acknowledged  Alaska's serious need for  affordable gas                                                               
in  the  Interior and  Southcentral,  but  pointed out  that  the                                                               
state's  income is  from selling  the resource,  and it  does not                                                               
need tariffs.  He opined that  this situation puts the state in a                                                               
powerful position -  it can offer tariff discounts  to reduce the                                                               
price and induce demand.                                                                                                        
                                                                                                                                
11:34:42 AM                                                                                                                   
                                                                                                                                
MR. GOTTSTEIN warned  that the risks of not acting  are huge, but                                                               
the risks of proceeding with  the proposed project are relatively                                                               
small.   At this time,  the state has  four options:   do nothing                                                               
and import  LNG; build  a bullet  line, which  he explained  is a                                                               
very inefficient pipeline fraught  with high transportation costs                                                               
and long-term  high prices; wait  until gas prices rise;  build a                                                               
gas  pipeline  with  state participation.    Although  the  state                                                               
should limit  its participation,  it should  ensure that  a large                                                               
export-capacity pipeline from the North  Slope to the Interior is                                                               
built  in a  short  period of  time.   He  compared  this to  the                                                               
construction of  the Transcontinental Railroad,  with communities                                                               
and the private  sector completing pipelines to  connect with the                                                               
main pipeline  hub.  The state's  role will be to  "incubate" the                                                               
largely empty portion of the pipe "for  as long as it needs to be                                                               
empty, so that  we get Alaskan's gas to Alaskans  ...."  In order                                                               
to accomplish this, the administration  must renegotiate the AGIA                                                               
license  to  TransCanada  Pipeline  Limited  pertaining  to  this                                                               
portion of the pipeline.   Afterward, when the state announces it                                                               
is  co-sponsoring  a  pre-build  of  the  segment  to  Fairbanks,                                                               
investors  will show  interest in  the  project.   He said,  "The                                                               
rights to capacity  equals rights to tariff,  that's the economic                                                               
value that the state is  garnering."   Mr. Gottstein acknowledged                                                               
that complex  problems cannot be  solved is a simple  manner, but                                                               
he assured  the committee  this project  is "vastly  economic and                                                               
eminently  financeable," and  only  challenged by  politics.   He                                                               
displayed  a chart  titled,  "Plan  of Finance  (Condominium-Like                                                               
Financial Engineering)," which showed steps of a financing plan.                                                                
                                                                                                                                
11:42:03 AM                                                                                                                   
                                                                                                                                
MR.  GOTTSTEIN  displayed  a   slide  titled,  "Possible  Project                                                               
Ownership Carve-Outs," which  depicted possible project ownership                                                               
as a  series of circles.   He compared  this plan to  a developer                                                               
who borrows to build a shopping  center and uses rental income to                                                               
pay off  the loan.   Also,  he pointed out  that the  state could                                                               
auction off  capacity rights to  industry in different  stages so                                                               
that  further out  in capacity,  the tariffs  are less  valuable.                                                               
Therefore,  the center  circle on  the slide  represents about  5                                                               
percent  of the  initial capacity  that the  state would  sell to                                                               
utilities,  pipeline companies,  and oil  companies at  start-up.                                                               
Later on, the  second circle represents different  owners, and he                                                               
described  a method  to  lower  tariffs to  induce  demand.   Mr.                                                               
Gottstein  relayed   that  the  industries  needed   to  generate                                                               
economies of scale are in Alaska  waiting for a source of natural                                                               
gas,  and he  gave  the example  of a  mining  operation that  is                                                               
currently using diesel fuel.                                                                                                    
                                                                                                                                
11:46:57 AM                                                                                                                   
                                                                                                                                
MR.  GOTTSTEIN  continued,  saying  oil  companies  will  have  a                                                               
limited  capacity,  and  when that  is  exhausted,  hedge  funds,                                                               
private equity, and  sovereign wealth funds will step  in and the                                                               
state will keep  what it cannot sell for a  minimum bid.  Because                                                               
the state retains only the last  stage of ownership, it will have                                                               
built a  pipeline with  less risk and  provided gas  to Alaskans,                                                               
without competing with  the private sector.  The  benefits to the                                                               
state are:   avoid high energy  costs; avoid great risk;  get gas                                                               
to Alaskans in six to eight  years; put the future on the state's                                                               
timeframe; force the energy community  to act; add volumes to gas                                                               
and oil pipelines;  remove risk to explorers;  empower the Alaska                                                               
Oil  & Gas  Conservation Commission;  provide reliable  energy to                                                               
rural Alaska; sell  gas to Hawaii; strengthen  the economy; avoid                                                               
long-term fiscal  decay; ensure a  supply of gas.   Regarding the                                                               
complex issue of  pricing tariffs, Mr. Gottstein  advised that an                                                               
economist  may  look at  charging  ratepayers  higher rates  than                                                               
would  public policymakers;  however, reducing  the costs  to the                                                               
utilities makes economic sense.                                                                                                 
                                                                                                                                
11:51:02 AM                                                                                                                   
                                                                                                                                
CHAIR HERRON asked Mr. Gottstein  why Tony Palmer, Vice-President                                                               
of TransCanada Alaska, would meet with him.                                                                                     
                                                                                                                                
MR. GOTTSTEIN  explained Mr. Palmer recognizes  that he supported                                                               
the AGIA  process, and he  gave several reasons for  his support.                                                               
Also,  Mr. Palmer  is aware  that  Mr. Gottstein  is a  long-time                                                               
activist in Alaska politics.                                                                                                    
                                                                                                                                
11:52:01 AM                                                                                                                   
                                                                                                                                
CHAIR  HERRON  asked for  the  reaction  to his  presentation  in                                                               
Fairbanks.                                                                                                                      
                                                                                                                                
11:52:53 AM                                                                                                                   
                                                                                                                                
MR. GOTTSTEIN said  the reaction from those who take  the time to                                                               
listen is  positive, and he  asked that his suggestion  be vetted                                                               
and considered.   In  conclusion, he  said the  state has  a huge                                                               
challenge, but there is also  an opportunity for prosperity if it                                                               
takes this portion of the risk.                                                                                                 
                                                                                                                                
11:53:50 AM                                                                                                                   
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being no further business before the committee, the House                                                                 
Special Committee on Economic Development, International Trade                                                                  
and Tourism meeting was adjourned at 11:53 a.m.                                                                                 

Document Name Date/Time Subjects
HJR 15 - Alaska Arctic Caucus - PNWER.pptx HEDT 2/22/2011 10:15:00 AM
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HJR 15 - Arctic Caucus Proceedings.pdf HEDT 2/22/2011 10:15:00 AM
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EDT - Gottstein slides 2.22.11.ppt HEDT 2/22/2011 10:15:00 AM