Legislature(2011 - 2012)BARNES 124
02/22/2011 10:15 AM House ECON. DEV., TRADE & TOURISM
| Audio | Topic |
|---|---|
| Start | |
| HJR15 | |
| Presentation(s): "getting Alaskans' Gas to Alaskans in the Shortest Amount of Time While Maximizing an Export Opportunity," by David Gottstein | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HJR 15 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| + | 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 |
HJR 15 |
| HJR 15 - Arctic Caucus Proceedings.pdf |
HEDT 2/22/2011 10:15:00 AM |
HJR 15 |
| HJR 15 - Sponsor Statement.pdf |
HEDT 2/22/2011 10:15:00 AM |
HJR 15 |
| EDT - Gottstein slides 2.22.11.ppt |
HEDT 2/22/2011 10:15:00 AM |