Legislature(2009 - 2010)HOUSE FINANCE 519
03/12/2009 08:30 AM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB44 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 44 | TELECONFERENCED | |
| + | TELECONFERENCED |
HOUSE FINANCE COMMITTEE
March 12, 2009
8:36 a.m.
8:36:33 AM
CALL TO ORDER
Co-Chair Stoltze called the House Finance Committee meeting
to order at 8:36 a.m.
MEMBERS PRESENT
Representative Mike Hawker, Co-Chair
Representative Bill Stoltze, Co-Chair
Representative Bill Thomas, Jr., Vice-Chair
Representative Allan Austerman
Representative Harry Crawford
Representative Anna Fairclough
Representative Les Gara
Representative Reggie Joule
Representative Mike Kelly
Representative Woodie Salmon
MEMBERS ABSENT
Representative Richard Foster
ALSO PRESENT
Tom Wright, Staff, Speaker of the House, Mike Chenault;
Laura Achee, Communications Director, Alaska Permanent Fund
Corporation; Representative Max Gruenberg
PRESENT VIA TELECONFERENCE
Harold C. Heinze, Chief Executive Officer, Alaska Natural
Gas Pipeline Authority (ANGDA); Bryan Butcher, Legislative
Liaison, Alaska Housing Finance Corporation (AHFC)
SUMMARY
HB 44
"An Act relating to investments applicable to
energy; authorizing the Alaska Permanent Fund
Corporation to make in-state energy project
investments; and authorizing certain public
corporations to issue bonds for energy projects."
HB 44 was heard and HELD in Committee for further
consideration.
8:37:17 AM
HOUSE BILL NO. 44
"An Act relating to investments applicable to energy;
authorizing the Alaska Permanent Fund Corporation to
make in-state energy project investments; and
authorizing certain public corporations to issue bonds
for energy projects."
TOM WRIGHT, STAFF, SPEAKER OF THE HOUSE, MIKE CHENAULT,
explained that HB 44 preauthorizes the Alaska Housing
Finance Corporation (AHFC) and the Alaska Natural Gas
Development Authority (ANGDA) to issue bonds for energy
related programs and projects. It also gives the
legislature approval for the Permanent Fund Corporation to
invest up to $1 billion for in-state energy projects.
Mr. Wright explained that the bill was introduced as an
effort to address the state's energy needs and to help
promote an in-state gasline. The original bill included the
Alaska Industrial Development and Export Authority, (AIDEA)
and the Alaska Energy Authority (AEA), but it was discovered
that they did not need bonding approval.
Mr. Wright continued to say that although the legislature
has authorized a number of these projects through AHFC and
has made appropriations to ANGDA, Speaker Chenault believes
it is time to progress these needs to a higher level. In
particular, the state's gas needs will not wait until a
TransCanada or Denali project is completed around 2020.
8:39:06 AM
Representative Austerman asked about Section 3 of the bill,
where AHFC is authorized to issue up to $100 million for
energy projects for homeowners. He wondered if that was
new. Mr. Wright reported that the weatherization project
and the home energy program were established a couple years
ago.
Representative Kelly inquired if AHFC would need funding for
those programs in FY10. Mr. Wright said no.
Representative Gara asked if the Permanent Fund Corporation
provision was still in the bill. Mr. Wright said it was.
Representative Gara opined that the Permanent Fund
Corporation should be considered a "pure" investment board
that invests when it is reasonable and prudent. He wondered
how Section 2 fits into that philosophy. Mr. Wright
maintained that HB 44 does not change the fact that the
Permanent Fund Corporation must still be prudent with
investments. The bill allows the Corporation to invest if
they so desire. Representative Gara argued that the bill is
unnecessary if there is no change. Mr. Wright clarified
that the bill would encourage the Corporation to look at
energy project investments. It is up to the Corporation to
determine whether or not to make the investments.
8:41:47 AM
HAROLD C. HEINZE, CHIEF EXECUTIVE OFFICER, ALASKA NATURAL
GAS PIPELINE AUTHORITY (ANGDA), testified in support of HB
44. He informed the Committee that ANGDA, under AS 41.41,
is authorized to issue bonds in support of a broad range of
projects related to North Slope natural gas and getting gas
to market in Alaska. He shared that ANGDA believes it has
something to contribute to in-state gas development and in-
state gas-powered energy and utilities that comes from the
concepts associated with a public/private partnership.
Most, if not all of the activities associated with gas
sources, transmission, and delivery systems in Alaska will
be done by the private sector. It is clear that in the
creation of infrastructure, especially for entry level
projects, the availability of public-backed financing offers
the consumer potential significant long-term advantages in
that the interest rates involved would be lower. One major
aspect of the planning is to look at facilitating the
building of pipelines, but also lowering costs to the
consumer.
Mr. Heinze suggested ideas related to bonding authority
that, if quickly brought forward, could result in cost-
savings to the consumer. For example, Fairbanks Natural Gas
has proposed building a liquid natural gas plant on the
North Slope and trucking gas to the Fairbanks area for use
in electric power and in the gas system. It may be
appropriate for ANGDA to become involved in the bonding, in
addition to AIDEA.
Mr. Heinze described a couple of ANGDA's projects. One is a
wholesale propane facility on the North Slope, which would
provide propane to the Fairbanks area, to the River
communities, and beyond. Bonding might be useful for two or
three aspects of this project in the range of $25 to $50
million each.
Mr. Heinze also spoke of the Natural Gas Supply Corporation,
a co-op that would work with the electric utility, a member-
owned facility. He said that ANGDA would help finance the
project through bonds. He listed potential aspects and
costs of the project.
8:48:45 AM
Mr. Heinze related that any spur line project during the
open season might require bonding of about $250 million.
Representative Gara voiced a concern about the bonding of
large projects. He wondered if the legislature would have
any say after the bonding authority was given to ANGDA. Mr.
Heinze reported that under current statute, ANGDA is free to
develop, initiate, and work on bonding for any of these
purposes. Upon completion, legislative approval must be
sought. In HB 44 there is a pre-authorization assumption.
It does not relieve the ANGDA board of any of their
responsibilities. He suggested that ANGDA works under high
visibility and would permit a more responsive timing on some
of these issues. The bill is intended to demonstrate a
commitment on the part of the legislature to moving forward
these kinds of in-state energy projects and places heavy
responsibility on the ANGDA Board in a fiduciary sense.
Representative Gara summarized that the bill does not alter
the prevision whereby ANGDA must seek legislative approval.
Mr. Heinze reiterated that the bill represents pre-approval
by the legislature. In response to further questioning by
Representative Gara, Mr. Heinze pointed out that ANGDA
already has bonding authority; the bill pre-authorizes
legislative approval.
8:52:38 AM
Representative Gara maintained that not all gas projects are
lucrative. Some may prove to be more expensive for
consumers. He was concerned that the bill could be
obligating consumers to an expensive project. Mr. Heinze
pointed out that the concept of bonding and selling bonds is
an excellent test of the commerciality of a proposal.
Bankers don't buy bonds unless there is a solid project.
There is an ANGDA-related statute that is clearly for the
purpose of protecting the public interest. He assured the
Committee that ANGDA has defended the consumer's interest
during past projects.
Representative Gara agreed that ANGDA has done an
outstanding job in the past.
8:55:00 AM
Representative Austerman asked if the pre-authorization for
$250 million was for all projects and if ANGDA would need
legislative approval to spend more than that amount. Mr.
Heinze explained that beyond $250 million, legislative
approval would be required.
Representative Kelly inquired how the good faith requirement
relates to bond backing by ANGDA. Mr. Heinze understood
that ANGDA has no ability to bind the full faith and credit
of the state of Alaska. He used the financing of Bradley
Lake as an example.
8:57:21 AM
Representative Kelly inquired about the role between ANGDA
and AEA. He gave a hypothetical example.
Mr. Heinze thought there were three realities that come into
play. He clarified that ANGDA's interest in working with
electrical utilities is strictly related to the gas supply
issue. Electric utilities are currently facing significant
problems. He stated that ANGDA believes there are some
opportunities for a cooperative effort. Studies indicate
that electric utilities lack credit to expand or procure a
longer term supply. Another aspect is that ANGDA is a
public corporation of the state and can work easily with
other agencies of the state such as AEA. He concluded that
ANGDA can provide help to electric utilities "through the
gas side".
Mr. Heinze spoke of the many opportunities to ensure the
interaction of public state corporations in public and
transparent ways. Each has a different focus in terms of
bonding. For example, AIDA tends to work with more
industrial-type people.
Representative Kelly asked what the result would be if ANGDA
and AEA come to a cross purpose. Mr. Heinze stressed that
bonds are not marketable if people can't make sense out of
the choices and alternatives. Representative Kelly asked if
there was a mechanism to address that situation. Mr. Heinze
explained that is no one person who looks at all of the
public corporations at the same time.
9:03:44 AM
Co-Chair Hawker assumed the gavel.
Co-Chair Hawker noted that under the existing ANGDA statute,
ANGDA has unlimited bonding ability and requires legislative
approval. He suggested that the bill does grant immediate
legislative approval for ANGDA to bond up to $250 million
for a specified list, but it is a limited segment of ANGDA's
overall corporate authority. Mr. Heinze responded that the
bill is intended to allow responsiveness on certain specific
topics that may be time-critical projects. It is a
restricted list. It does not eliminate the broader
authority granted in the original statute, which allows
bonding in amounts in excess of $250 million for a broader
array of purposes and requires legislative approval.
9:05:40 AM
Co-Chair Hawker requested more information about the limited
authority under the proposed legislation. He thought that
the projects mentioned in Mr. Heinze's previous testimony
went beyond the scope authorized under the proposed
legislation. He paraphrased from Section 4 of the bill. He
said that ANGDA is authorized to issue bonds to acquire gas
supply, to develop the Cook Inlet and Fairbanks markets, and
to plan, permit, and design gas transmission systems.
Co-Chair Hawker asked Mr. Heinze what he thought the meaning
of "develop the Cook Inlet and Fairbanks markets". Mr.
Heinze clarified that it meant "gas markets". Co-Chair
Hawker maintained that the bill does not say that. Mr.
Heinze got specific and named several projects: the
Fairbanks natural gas LNG plant, which would feed the
Fairbanks market during the development stage of the larger
pipeline; the wholesale propane facility on the North Slope
that would feed the Fairbanks and Interior market on an
interim basis; the gas supply co-op, in terms of storage.
9:08:30 AM
Co-Chair Hawker termed it broad-reaching authority. He
wondered how to interpret the bill in terms of "plan,
permit, and design gas transmission systems to mitigate
shortfalls and ensure energy sufficiency for Alaskans". He
concluded that the clause would limit ANGDA to planning,
permitting, and designing transmission systems, and not
authorize ANGDA to construct anything. Mr. Heinze clarified
that the private sector would be the builder-owner of
projects and ANGDA would be involved in the front end of the
process and in financing. He maintained that the
legislation is not intended for bonding to enable ANGDA to
become the owner of a project.
Co-Chair Hawker summarized that under this legislation,
ANGDA can acquire a gas supply, design the system, and then
hand ownership off to another entity. He inquired where the
revenue stream would be established that would make bonding
viable. Mr. Heinze replied that the revenue stream would
come after gas comes out of the ground, in partnership with
electric utilities, as a result of long-term use of the gas.
He explained that ANGDA would act as the financer allowing
the utilities a user discount through low interest
financing.
9:11:52 AM
Co-Chair Hawker concluded that the only real authority added
by the bill would be to allow ANGDA to bond in order to
become a commodities investor. He questioned the wisdom of
such legislation.
Mr. Heinze gave an example of the Beluga Gas Field, which is
one-third owned by Anchorage Municipal Light and Power, as
how ANGDA has successfully financed energy projects in the
past. He suggested that there could be similar future
projects; however, they must be fundamentally sound or no
bonds will ever be issued.
9:13:40 AM
Representative Gara wondered how Section 4 of the bill could
be rewritten. He maintained that not everyone who would
want to construct a pipeline has the consumer's best
interest at heart. He wished to try to avoid a contract
that obligates the consumer to higher-priced gas. He noted
that in the current language ANGDA must consider the
consumer's interest in two areas: energy sufficiency and
mitigating gas shortfalls. He pointed to lack of
legislative approval in the bill.
Mr. Heinze observed that he does not have suggestions at
this time. He countered that ANGDA has been doing work with
public/private partnerships for some time. He stressed that
ANGDA is interested in defining all the parameters of
public/private partnerships. He emphasized that it is key
to recognize that the private sector has an important role
to move forward and has different motives than the public
sector. He believed that the protection of the public
component is reasonably accomplished through the seven
public members of the ANGDA Board exercising their fiduciary
responsibilities. Also, most public/private approaches are
carefully viewed by financial institutions.
9:17:19 AM
Representative Kelly referred to the Greater Railbelt Energy
and Transmission Corporation (GRETC) that the governor has
proposed. He wondered if there were too many entities
involved now in the attempt to solve Railbelt energy
problems. He understood the need to solve energy problems
more efficiently.
Mr. Heinze emphasized that ANGDA does not see any of their
actions in opposition to proposed legislation related to
forming a super-utility. He believed that there is short-
term value for electric utilities to work together, achieve
market power, and deal with the issue of supply. He
suggested a traditional, farmer's co-op organization where
members make decisions on services. A responsiveness is
needed that can't be achieved through a larger approach.
There is no requirement for anyone to use any of the
services or bonds. He emphasized that ANGDA wants to
respond to the requests.
9:22:14 AM
Representative Kelly voiced concern that when too many
entities are involved, it hard to know who is in charge.
9:23:21 AM
BRYAN BUTCHER, LEGISLATIVE LIAISON, ALASKA HOUSING FINANCE
CORPORATION (AHFC), gave AHFC's perspective of the bill. He
related that AHFC is fine with the language in the bill. He
agreed with Mr. Wright's testimony that the bonding
authority included in the bill is not needed for FY10.
There are sufficient funds in the weatherization and home
energy rebate programs to make it through the fiscal year.
Co-Chair Hawker summarized the intent of Section 4 of the
bill: AHFC would be using the money to make grants for
energy efficiency loans for homeowners. Mr. Butcher said
the bill would allow AHFC to bond funds to continue the home
energy rebate program or the weatherization program. There
is also language that the dividend would be used for debt
service payments if AHFC were able to sell the bonds.
9:26:00 AM
Co-Chair Hawker stated that the borrowed money would be used
in a manner that did not generate any form of repayment.
The collateralization the bonding agency would be looking
for would be the ability to reduce the amount of AHFC
receipts back to the state. There would be a reduction in
money used in the budgeting process. Mr. Butcher agreed.
Co-Chair Hawker asked Mr. Butcher if he believed the bill
addresses the two aforementioned programs, even though they
are not specifically defined in the legislation. Mr.
Butcher said he did.
Co-Chair Hawker requested information about the section of
the bill that relates to the Alaska Permanent Fund
Corporation.
LAURA ACHEE, COMMUNICATIONS DIRECTOR, ALASKA PERMANENT FUND
CORPORATION, stated that she was available to answer
questions.
Co-Chair Hawker asked if the bill is in conflict with
current statutory requirements as they relate to the
management of the permanent fund. Ms. Achee thought there
was no conflict and the language was clear. She related
that a conversation with the sponsor clarified that the bill
is not an investment mandate. She characterized the
legislation as a statement of support if the Board would
choose to go in that direction. She recalled previous
testimony where some constituents believed the fund should
be invested in the gasline and others held the opposite
view. She emphasized that the board makes decisions for the
best investment of the fund.
9:29:14 AM
Co-Chair Hawker summarized that the language is permissive
but is not direct legislative interference with investment
policies of the Corporation. Ms. Achee agreed.
Co-Chair Hawker closed public testimony.
Co-Chair Hawker listed the three new zero fiscal notes from
the Department of Revenue. He reiterated that the bill
creates authority, but no future obligations. He questioned
if the fiscal notes were truly zero notes or if they should
be indeterminate fiscal notes.
Co-Chair Hawker requested an opinion by the state's debt
manager at a future meeting.
HB 44 was heard and HELD in Committee for further
consideration.
9:31:28 AM
ADJOURNMENT
The meeting was adjourned at 9:31 AM.
| Document Name | Date/Time | Subjects |
|---|---|---|
| AS 18.56.089.doc |
HFIN 3/12/2009 8:30:00 AM |
HB 44 |
| ANGDA comments on HB44 for 021709.doc |
HFIN 3/12/2009 8:30:00 AM |
HB 44 |
| Energy CS-Sectional.pdf |
HFIN 3/12/2009 8:30:00 AM |
HB 44 |
| Energy CS Sponsor Statement.pdf |
HFIN 3/12/2009 8:30:00 AM |
HB 44 |
| AS 37.13.120.doc |
HFIN 3/12/2009 8:30:00 AM |
HB 44 |
| HB44-DOR-AHFC-03-10-09.pdf |
HFIN 3/12/2009 8:30:00 AM |
HB 44 |
| HB44-DOR-GAO-03-11-09.pdf |
HFIN 3/12/2009 8:30:00 AM |
HB 44 |