Legislature(2013 - 2014)HOUSE FINANCE 519
04/01/2013 01:30 PM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB4 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| += | HB 4 | TELECONFERENCED | |
HOUSE FINANCE COMMITTEE
April 1, 2013
1:42 p.m.
1:42:39 PM
CALL TO ORDER
Co-Chair Stoltze called the House Finance Committee meeting
to order at 1:42 p.m.
MEMBERS PRESENT
Representative Alan Austerman, Co-Chair
Representative Bill Stoltze, Co-Chair
Representative Mark Neuman, Vice-Chair
Representative Mia Costello
Representative Bryce Edgmon
Representative Les Gara
Representative Lindsey Holmes
Representative Scott Kawasaki, Alternate
Representative Cathy Munoz
Representative Steve Thompson
Representative Tammie Wilson
MEMBERS ABSENT
Representative David Guttenberg
ALSO PRESENT
Representative Mike Chenault; Joe Dubler, Chief Officer
AGDC; Rena Delbridge, Staff, Representative Mike Hawker;
Representative Mike Hawker.
PRESENT VIA TELECONFERENCE
Stuart Goering, Department of Law, Anchorage; Dave Haugen,
Project Director, AGDC.
SUMMARY
CSSSHB 4(FIN)
IN-STATE GASLINE DEVELOPMENT CORP
CSSSHB 4(FIN), as amended was REPORTED out of
committee with a "do pass" recommendation and
with one new fiscal impact note from the House
Finance Committee for Fund Capitalization and one
new fiscal impact note from the House Finance
Committee for Various departments including
Department of Law, Department of Natural
Resources, Department of Environmental
Conservation, Department of Transportation and
Public Facilities, and Department of Commerce,
Community and Economic Development.
HOUSE BILL NO. 4
"An Act relating to the Alaska Gasline Development
Corporation; making the Alaska Gasline Development
Corporation, a subsidiary of the Alaska Housing
Finance Corporation, an independent public corporation
of the state; establishing and relating to the in-
state natural gas pipeline fund; making certain
information provided to or by the Alaska Gasline
Development Corporation exempt from inspection as a
public record; relating to the Joint In-State Gasline
Development Team; relating to the Alaska Housing
Finance Corporation; relating to judicial review of a
right-of-way lease or an action or decision related to
the development or construction of an oil or gas
pipeline on state land; relating to the lease of a
right-of-way for a gas pipeline transportation
corridor, including a corridor for a natural gas
pipeline that is a contract carrier; relating to the
cost of natural resources, permits, and leases
provided to the Alaska Gasline Development
Corporation; relating to procurement by the Alaska
Gasline Development Corporation; relating to the
review by the Regulatory Commission of Alaska of
natural gas transportation contracts; relating to the
regulation by the Regulatory Commission of Alaska of
an in-state natural gas pipeline project developed by
the Alaska Gasline Development Corporation; relating
to the regulation by the Regulatory Commission of
Alaska of an in-state natural gas pipeline that
provides transportation by contract carriage; relating
to the Alaska Natural Gas Development Authority;
relating to the procurement of certain services by the
Alaska Natural Gas Development Authority; exempting
property of a project developed by the Alaska Gasline
Development Corporation from property taxes before the
commencement of commercial operations; and providing
for an effective date."
1:42:55 PM
Co-Chair Stoltze stated that the committee's agenda would
address amendments to the legislation.
Co-Chair Austerman MOVED to ADOPT Amendment 2, 28-
LS0021\R.12, Bullock, 3/30/13 (copy on file):
Page 7, line 10, following "gas":
Insert ", including propane and other hydrocarbons
associated with natural gas other than oil,"
Page 7, line 12, following the second occurrence of
"gas":
Insert ", including propane and other hydrocarbons
associated with natural gas other than oil,"
Page 7, line 13, following "gas":
Insert ", including propane and other hydrocarbons
associated with natural gas other than oil,"
Page 7, line 16, following "gas":
Insert ", including propane and other hydrocarbons
associated with natural gas other than oil,"
Page 13, line 21, following "state":
Insert ", including the delivery of natural gas,
including propane and other hydrocarbons associated
with natural gas other than oil, to coastal
communities in the state,"
Co-Chair Stoltze OBJECTED for the purpose of discussion.
Co-Chair Austerman discussed the need to provide rural
areas the ability to seek alternative energy sources. He
pointed out page 13, line 21. He wished for the option to
transport fuel to coastal communities, allowing them to
benefit from the gasline, if the project proceeded to salt
water.
Co-Chair Stoltze intended to provide opportunities for the
bill sponsors and the Alaska Gasline Development
Corporation (AGDC) to speak to the amendments.
1:45:35 PM
REPRESENTATIVE MIKE CHENAULT, SPONSOR did not see a problem
with the amendment. The intention of the legislation was to
provide gas to all areas of Alaska. He wanted residents of
rural Alaska to know that their interests were heard.
Co-Chair Stoltze wished to keep the policy well
intentioned.
Representative Kawasaki asked if the amendment's language
would change the work project plan submitted by AGDC.
1:47:15 PM
JOE DUBLER, CHIEF FINANCIAL OFFICER, VICE PRESIDENT ALASKA
GASLINE DEVELOPMENT CORPORATION, stated that the
amendment's language would not affect the work plan. He
stated that the language was permissive and allowed AGDC to
make propane available to entities interested in
distributing propane or natural gas throughout the state.
Co-Chair Stoltze discussed the optimal goals of delivering
energy to Alaskans.
Representative Gara expressed concern that AGDC would not
remain true to the original plan. He recalled that the
elimination of the straddling plant lessened the cost of
the project. He recalled testimony that additional
infrastructure was necessary to ship propane to rural
Alaska using the river system.
1:49:04 PM
Mr. Dubler responded that the plan assumed that 3500
barrels per day of gas[BSW1] would be shipped down the
gasline, which equaled the current usage in the state. If
further interest in propane developed, a straddle plant
would be necessary in Fairbanks. The cost of the propane
would then reflect the cost of the straddling plant.
Representative Gara asked if consumers in rural Alaska
would then pay for the additional infrastructure. Mr.
Dubler replied yes.
Representative Wilson pointed out that a large part of the
Fairbanks Northstar Borough would not join the gas system.
She assumed that rural boroughs would benefit from the
language in Amendment 2[BSW2].
Mr. Dubler agreed. He stated that the Southcentral region
of the state had an operating LNG plant supplying
Fairbanks. The plant would have surplus capacity if
Fairbanks received natural gas via the instate gasline and
might be available for shipments to other parts of Alaska.
1:51:23 PM
Co-Chair Stoltze WITHDREW his OBJECTION.
Representative Kawasaki asked about the amendment's
reference to "coastal communities." He wondered about those
rural areas located on a road system, but not in a coastal
community.
Co-Chair Austerman responded that the amendment's concept
was forward-thinking regarding the uses for natural gas. He
mentioned the idea of burning LNG [liquid natural gas] in
ferries. He wished to lift restrictions to the agency if
other opportunities became available.
1:53:28 PM
Representative Kawasaki wondered if the use of the words
"coastal communities" might be restrictive in nature.
Representative Edgmon replied that HB 4 would provide
organized preparation for a gasline solution. He did not
view the amendment's language as restrictive.
Representative Gara expressed concern that the bill's
original promises included propane and one or two
straddling plants. He suggested that the reinstatement of
the plan would be cost prohibitive to the smaller
communities.
Mr. Dubler clarified that propane customers would have paid
for the straddle plants under the original configuration;
the cost of the propane would have reflected the straddle
plants.
Co-Chair Stoltze WITHDREW his OBJECTION. There being NO
further OBJECTION, Amendment 2 was ADOPTED.
1:56:48 PM
Co-Chair Stoltze MOVED to ADOPT Amendment 3, 28-
LS0021\R.15, Bullock, 4/1/13 (copy on file):
Page 47, line 9:
Delete "period not longer than six months"
Insert "for a period not longer than 90 days"
Representative Gara OBJECTED for discussion.
Co-Chair Stoltze explained the amendment. He stated that
the amendment eliminated a time period of months from the
legislation. The amendment reduced the time frame to a more
precise manner of specific days. He noted that discussions
with the administration yielded the opinion that this was
the preferred time frame.
Representative Gara asked if the reduction to 90 days
limited the time allowed for the Regulatory Commission of
Alaska (RCA) to determine the cost of transporting gas.
Representative Holmes stated that the 90-day[BSW3] change
would allow the RCA to review the recourse tariff and be
able to suspend it for 90 days upon motion or complaint to
conduct hearings and review.
2:00:05 PM
AT EASE
2:00:32 PM
RECONVENED
STUART GOERING, DEPARTMENT OF LAW, ANCHORAGE (via
teleconference), responded that the RCA reviewed the
original proposal and promised to follow the direction set
forth by the legislature. He saw the matter as a policy
call. While a longer time period allowed more process, a
90-day review period in addition to 90 days to adjudicate
was viewed as reasonable.
Representative Gara asked if the RCA could fairly set the
recourse tariff if the period was moved down from 6 months
to 90 days.
Co-Chair Stoltze viewed that two 90-day periods were better
than 30 days.
Mr. Goering responded that the second 90-day suspension
period provided an adequate amount of time for the parties
to conduct their adversarial process with the RCA as the
adjudicative body. He noted that the burden of shortening
the time falls as much on the parties presenting their
evidence. The process will be adjusted to allow time for
the parties to present evidence and for the commission to
make and issue a decision. He noted that the governor
supported the language embodied in Amendment 3.
Co-Chair Stoltze pointed out that the committee and
sponsors had not achieved concurrence on the issue, so he
wished to allow ample time for comments and concerns.
2:04:00 PM
RENA DELBRIDGE, STAFF, REPRESENTATIVE MIKE HAWKER,
explained that the sponsors were troubled with the addition
of the suspension period. The sponsors were willing to
extend the initial recourse tariff review period from 30
days to 90 days, which was represented in the finance CS.
The sponsor understood the RCA's desire to have additional
time to suspend a tariff, but both the 90-day and 180-day
time periods were problematic.
Co-Chair Stoltze noted that multiple possibilities were
suggested.
Representative Gara asked Mr. Goering if the RCA would have
enough time to protect the consumer's right to a reasonable
recourse tariff rate with the time period suggested by the
amendment.
Mr. Goering clarified that the initial review period
allowed RCA to talk to the pipeline carrier and work out
any filing issues. The suspension period was created for
controversies that remain after the 90-day review period
was completed. The 90-day suspension period was an
opportunity for the commission to allow interested parties,
such as shippers and rate payers to intervene in the action
to test the carrier's evidence. The issues during the 90-
day period were limited under the bill, as written.
Mr. Goering continued that the recourse tariff had some
specific standards for its review. The standards were found
on page 45 of the current CS. He mentioned specific
requirements of the commission that were narrower than the
usual pipeline and utility tariffs. In the case of the
amendment, the commission was asked to approve or deny the
tariff based on factors found in AS 42.08.350(b). The
review during the initial 90 days and the 90-day suspension
period was narrower than the time period typically provided
by the commission with respect to tariffs.
2:08:36 PM
Representative Gara wondered if the time suggested in the
Amendment 3 was adequate for determining a just and
reasonable rate. He asked if the time period was adequate
for evaluating whether the shipper's proposal for a tariff
met the statutory requirement. He asked if the statutory
requirement required a just and reasonable rate.
Mr. Goering replied that the standard for the commissions
review evaluated the terms and conditions of service. The
standard determined whether the terms and conditions were
unduly discriminatory and whether the rates were supported
by the supporting cost model. The criteria related to rates
of return and depreciation methodology. The bulk of service
was provided under contract, as opposed to under the
recourse tariff. In answer to Representative Gara's first
question, Mr. Goering stated that the process could be
adjusted to accommodate the amount of time available. If a
90-day period was allowed, the parties must be prepared to
present evidence sooner.
2:10:40 PM
Co-Chair Austerman pointed out that the language stated "no
longer than 90 days." He interpreted that the language did
not require the process to utilize all 90 days; it might be
completed more quickly.
Mr. Goering concurred. He stated that the entire suspension
period was optional. If, at the end of the 90-day review
period, the commission determined that there was no reason
to investigate the tariff further the rates would go into
effect on the dates specified in the tariff's filing. The
suspension period was optional. The commission was not
required to utilize the entire 90-day period to issue their
decision.
Co-Chair Stoltze noted that the amendment altered the time
period from 6 months to 90 days.
Representative Holmes expressed that the original time
period of 30 days was too fast, while the expansion
appeared reasonable to her.
A roll call vote was taken on the motion to adopt Amendment
3.
IN FAVOR: Wilson, Costello, Edgmon, Kawasaki, Holmes,
Munoz, Neuman, Thompson, Austerman, Stoltze
OPPOSED: Gara
The MOTION PASSED (10/1).
There being NO further OBJECTION, Amendment 3 was ADOPTED.
2:13:00 PM
Representative Kawasaki MOVED to ADOPT Amendment 4, 28-
LS0021\R.7, Nauman/Bullock, 3/28/13 (copy on file):
Page 1, line 3, following "fund;":
Insert "relating to a natural gas pipeline from Cook
Inlet to Fairbanks;"
Page 3, line 2:
Delete "and"
Page 3, line 12:
Delete "state."
Insert "state; and
(4) The Alaska Gasline Development Corporation
construct a natural gas pipeline to deliver Cook Inlet
natural gas to Fairbanks and other communities between
Cook Inlet and Fairbanks that do not have access to a
natural gas pipeline, as the first phase in the
development of an in-state natural gas pipeline."
Page 7, following line 11:
Insert a new paragraph to read:
"(2) notwithstanding (1) of this section, before
constructing a natural gas pipeline to serve the
Southcentral region of the state and other communities
of the state, the corporation shall construct a
natural gas pipeline to deliver Cook Inlet natural gas
to Fairbanks and other communities between Cook Inlet
and Fairbanks that do not have access to a natural gas
pipeline;"
Renumber the following paragraphs accordingly.
Page 10, following line 15:
Insert a new subsection to read:
"(f) Before constructing a natural gas pipeline to
serve the Southcentral region of the state and other
communities of the state, the corporation shall plan,
construct, and finance a natural gas pipeline to
deliver natural gas from Cook Inlet to Fairbanks and
to communities between Cook Inlet and Fairbanks that
do not have access to a natural gas pipeline."
Representative Wilson OBJECTED for discussion.
Representative Kawasaki stated that the amendment addressed
issues related to Fairbanks' diminished air quality and
high cost of energy. The amendment stated if AGDC were to
begin building a gasline, the priority ought to be
providing natural gas to Fairbanks. The amendment requested
prioritization of the Cook Inlet line to Fairbanks. He
projected that the discussed portion of the line would cost
$2 billion.
Representative Chenault spoke to the amendment. He stated
that the legislature must allow AGDC and the project to
determine the priorities. He understood the need for
natural gas in Fairbanks. A bill existed in the committee
to bring LNG to Fairbanks within the next two years. He
stated that the project in HB 4 was projected for 2019. He
understood the needs and concerns of Fairbanks, but he did
not believe that the legislature should direct AGDC in
its[BSW4] process. He did not support the amendment.
2:18:32 PM
Mr. Dubler stressed the importance of a compressor station
in the Cook Inlet area if the amendment were to pass. The
compressor station would incur an additional cost that
would not be recoverable for the entire pipeline upon
completion.
Representative Wilson understood that AGDC must choose the
most economical project. She wondered if the amendment
would slow the project.
Mr. Dubler responded that the proposed change would require
a rerouting of resources, which would potentially delay the
project.
Representative Wilson clarified that Fairbanks realized
that the LNG trucking solution was temporary. She assumed
that a south-to-north route had been vetted in the process
of project establishment.
Mr. Duber responded that the compressor station in Cook
Inlet was suggested as a solution to a south-to-north
route. The compressor station was not transferable to the
North Slope.
2:21:06 PM
Co-Chair Stoltze asked if the amendment would complicate
the regulatory process for the RCA.
Mr. Dubler responded that permits and the rights-of-way
were based on the premise that the gasline would bring gas
from the north to the south. Turning the gasline around
would require reapplication for those permits and rights-
of-way.
Representative Kawasaki asked about the AGDC pipe and its
construction along the route.
Mr. Dubler deferred the question to the project manager. He
pointed out the project's logistical challenges.
DAVID HAUGEN, PROJECT MANAGER, ALASKA GASLINE DEVELOPMENT
CORPORATION (via teleconference), asked Representative
Kawasaki to repeat the question.
Representative Kawasaki asked about the different points
along the gasline where construction would occur.
Mr. Haugen responded that the complicated project proposed
in HB 4 would have four separate spreads on the mainline,
with additional spread for the Fairbanks lateral. In each
case, the individual spreads would encounter seasonal
constraints. The scheduling process was elaborate. He
stated that results of the planning would be presented to
the legislature to further explain the planned execution of
the project.
2:25:12 PM
Representative Kawasaki disagreed with the statement that
the legislature did not want to direct AGDC in the building
or planning process. He believed that the legislators had
the capacity to contribute to the planning process.
A roll call vote was taken on the motion to adopt Amendment
4.
IN FAVOR: Gara, Kawasaki
OPPOSED: Holmes, Munoz, Neuman, Thompson, Wilson,
Costello, Edgmon, Austerman, Stoltze
The MOTION FAILED (2/9).
2:27:17 PM
Representative Gara MOVED to ADOPT Amendment 5, 28-
LS0021\R.4, Bullock, 3/28/13 (copy on file):
Page 35, line 26:
Delete "AS 42.08.320(b) - (d)"
Insert "AS 42.08.320(b) - (c)"
Page 42, lines 25 - 29:
Delete "(1) conclude that a precedent agreement or
related contract negotiated at arm's length between
the parties is just and reasonable unless the
commission finds that unlawful market activity
affected the rate or unfair dealing, such as fraud or
duress, affected the formation of the contract;
(2)"
Page 43, lines 6 - 15:
Delete all material.
Reletter the following subsection accordingly.
Page 43, line 16:
Delete "If a precedent agreement or related contract
is not arm's length, the"
Insert "The"
Page 43, lines 18 - 21:
Delete "normally applied under AS 42.06.140. If the
commission is reviewing a precedent agreement under
(c)(2) of this section, the commission may consider
the in-state natural gas pipeline carrier's approved
recourse tariff, including the cost data underlying
that tariff"
Insert "applied under AS 42.06.140"
Co-Chair Stoltze OBJECTED for discussion.
Representative Gara explained that the amendment addressed
costs that consumers would pay for natural gas. He
explained that transportation costs would comprise the
majority of consumer costs. He stated that the RCA
communicated to the pipeline company that they could have a
fair return on their tariff. He quoted AS 42.06.140
allowing the RCA the power to require just, fair, and
reasonable rates. A reasonable profit could be estimated at
10 to 14 percent. He stated that HB 4 removed that
standard.
Representative Gara stated that the consumer protection
agency's power to require a just and reasonable rate would
be eliminated and replaced by the language on page 43 of
the bill. He explained that page 43 outlined the process
following the establishment of the recourse tariff. The
parties would create their own rate, as stated on line 9.
The standard for setting the rate for consumers was not a
fair price. Instead, if the parties were not affiliated,
the price would go into effect, barring collusion. He
feared that the two parties would not have the consumer's
interest at heart. The pipeline builder would hope to earn
ample profits and were exempt from the rule stating that
rates must be just and reasonable.
2:31:05 PM
Representative Gara continued to elaborate on Amendment 5.
He stated that the passage of HB 4 would eliminate
competition for another project and allow a pipeline owner
to charge as much as they could get away with. He claimed
that the producer would also be able to charge an
exorbitant amount without an agency to determine the just
and reasonable rate. Amendment 5 requested that the
regulatory statute, AS 42.06.140 remain in place. He hoped
for Alaska consumers to pay just and reasonable rates.
Representative Gara noted that other states sometimes
relaxed the standards, which encouraged competition.
Competition would eliminate the need for the standard, but
Alaska required the regulations. Otherwise companies would
establish prices on their own and the prices would be
approved by the RCA unless collusion was proven. He stated
that monopolies led to high prices and without the statute
AS 42.06.140, the parties would pay more for natural gas.
He believed that the bill would be stronger with the added
protection of the statute.
Representative Gara explained that the language in
Amendment 5 restated the original statute.
2:34:42 PM
Ms. Delbridge responded that the sponsors were opposed to
the amendment. She clarified that the RCA would continue to
determine just and reasonable rates in the bill before the
committee. The language supporting her statement was found
multiple times on page 42 and 43. She noted the sponsor's
desire to ensure that rates were deemed just and
reasonable, however, the standard in the CS was different.
The new standard would honor the ability of two parties to
freely enter into an agreed upon price.
Ms. Delbridge continued that the RCA reviewed contracts at
a higher level. She mentioned the bill's checks and
balances designed to moderate the prices. She noted that
recourse tariff must have all costs disclosed. A reasonable
rate of return, capital structure, and depreciation method
would be set on the pipeline, which would prohibit the
massive profits and extraordinarily high prices. People
will be able to negotiate the rates for long-term shipping
contracts.
Ms. Delbridge pointed to page 51 of the bill where the
triennial reports were addressed. Upon pipeline completion,
the carrier must revisit the RCA to submit current cost
data. The RCA would then ensure that the rate of return
earned was allowable. If the rate of return was greater
than the allowable amount, the funds would be redirected to
a segregated operating reserve fund to address revenue
shortfalls in future years. The fund must equal 20 percent
of the annual average operating cost. Excess profit would
pay down rates of the contractual shipper.
Co-Chair Stoltze asked Mr. Goering to comment.
Mr. Goering did not have any remarks. He was available for
questions.
Representative Gara did not want people to get confused. He
explained that Ms. Delbridge discussed the recourse rate,
which would probably not apply. He directed attention to
page 43, line 8 of the legislation related to the recourse
tariff. He stated that page 9 clarified that the recourse
tariff was not enforceable. He questioned the applicable
standard, if a company chose not to use the recourse
tariff. If the parties were not affiliated, collusion was
the only applicable factor. He argued that the bill lacked
a requirement that the price be reasonable and fair for the
protection of consumers. The only standard, in that
circumstance, was that the parties did not engage in
illegal conduct.
He argued that the existing law stated that the price
should be just and reasonable according to the RCA. He
stressed that the project would result in a monopoly
pipeline and consumers would not have options. He agreed
with Ms. Delbridge's statements about the recourse tariff,
but he worried that companies were not mandated to use it.
2:41:37 PM
Representative Gara stated that the policy would lead to
higher gas prices for Alaskans. He believed that the
language in the CS did not hold the companies to just and
reasonable tariffs.
A roll call vote was taken on the motion to adopt Amendment
5.
IN FAVOR: Gara, Kawasaki
OPPOSED: Munoz, Neuman, Thompson, Wilson, Costello, Edgmon,
Holmes, Stoltze, Austerman
The MOTION FAILED (2/9).
2:43:08 PM
Representative Gara MOVED to ADOPT Amendment 6, 28-
LS002\R.10, Bullock, 3/30/13 (copy on file):
Page 1, line 3, following "fund;":
Insert "allowing the legislature to consider
disallowing an in-state natural gas pipeline
project;"
Page 10, following line 15:
Insert a new subsection to read:
"(f) The corporation or other person may not start
construction of an in-state natural gas pipeline
developed by the corporation without presenting
details of the project to the legislature. The
legislature shall have 60 days during a legislative
session to decide whether to disallow the project as
proposed."
Co-Chair Stoltze OBJECTED for discussion.
Representative Gara explained that the amendment allowed
for public notice of the gas pipeline project including 60
days during a legislative session to review the project. If
the legislature approved or failed to disapprove the
project, within the 60-day time period, the project would
continue as planned.
Representative Gara suggested that the state might be faced
with another gasline proposal in the future. He opined that
the limitations of the pipeline proposed in the bill might
be countered by another project utilizing a larger
pipeline. He stated that a larger pipeline would mean less
expensive gas for Alaskans.
2:48:47 PM
Representative Gara felt that a larger pipeline was in the
best interest of Alaskans. He pointed out that a larger
pipeline would lead to further exploration on the North
Slope, which would lead to joint oil and gas fields. He
proposed that better options might be available when the
project gets to open season. He believed that the public
had the right to review the project.
Co-Chair Stoltze appreciated the discussion.
2:50:03 PM
REPRESENTATIVE MIKE HAWKER, SPONSOR, believed that the
amendment grossly mischaracterized the bill. He opined that
the amendment implied that the bill would strategically
cause problems for the consumer by inflating costs for a
project that was not in the best interest of Alaskans. He
disagreed with the assumptions because many controls were
incorporated into the legislation.
Representative Hawker discussed the sponsors' objectives to
initiate a gasline project. He stated that every possible
project was halted by a government process and a changing
of directions. He mentioned the policy objective of
minimizing future government interference in the business
decisions required to move the project forward. A project
would move forward, under the proposed legislation if it
was backed by a market-based transaction. Statutory
obligations were provided for AGDC regarding their approach
to a market-based transaction. The obligation included
providing gas to Alaskans at the least possible cost.
Representative Hawker continued to explain that a viable
project would proceed only with backing from commitments
from third-party shippers. Without the commercial
transactions, the legislature had the opportunity to
revisit the projects. He opined that the state would
benefit from the initiation of an Alaska gasline project.
The state must invest money to support the design and
development of the project.
2:55:30 PM
Representative Hawker furthered that the legislature would
continue to have authority of spending. He heard further
mischaracterizations about the project and information
brought forward in the base case analysis. He stated that
the maximum price of gas was the price that the state would
pay to import LNG overseas. He pointed out that Alaskan
utilities were exploring the import options. The import
option was explored because utilities were concerned that
the project proposed in the legislation would not come to
fruition.
Representative Hawker suggested that interjecting delays,
politics, and market uncertainty also interjected
additional costs. With the proposed legislation, the
legislature would retain adequate checks and balances. He
pointed out that the passage of the bill would not
compromise a larger pipeline project. If a larger pipeline
project was proposed, AGDC would have an obligation to
proceed with the project.
2:59:31 PM
Vice-Chair Neuman spoke to the amendment. He pointed out
the first line "the corporation or other person may not
start construction of an in-state natural gas pipeline
developed by the corporation without presenting details of
the project." He pointed to page 10, subsection (e) of the
legislation and the mention of reports to the legislature
in the event of a firm transportation agreement. Without a
successful open season, the fiscal note would not extend
enough funds to proceed without revisiting the legislature.
He sincerely hoped that Alaska would have enough gas for
two pipelines.
3:01:53 PM
Representative Wilson asked if the amendment pertained only
to a private company wishing to fund the entire project.
Representative Hawker interpreted that the amendment spoke
about the corporation or other person moving forward with a
project. He believed that if the corporation were
successful and handed the project over to a private entity,
the project would require review from the legislature.
Representative Wilson asked about any company that would
fund the project if it was not deemed economical.
3:04:19 PM
Representative Chenault discussed the Stranded Gas
Development Act. He recalled that the Act required 20
percent ownership by the state. The project was projected
to cost $40 billion. He stated that the legislators had
responsibility for appropriating money beyond the funds
approved in the legislation.
3:05:34 PM
Representative Gara stated that the project would return to
the legislature if it required a state subsidy. He recalled
testimony by Mr. Dubler regarding realistic scenarios in
which AGDC would not require additional funding and
legislative oversight would cease. The public would then
cease to have input. He asked if a provision in the bill
stated otherwise.
Representative Gara pointed out the "prefinding" on page 37
stating that the project was in the state's best interest,
which was the last opportunity for legislative approval
barring the need for state subsidy.
3:07:14 PM
Representative Gara understood that the project would
return to the legislature if it required state subsidy. The
legislature must consider the issue. He noted Mr. Dubler's
testimony that AGDC might not require additional state
funding. If AGDC does not return to the legislature for
additional funding, the approval would not be necessary,
eliminating the avenue for public and legislative approval.
He pointed out page 37 and the claim that the project would
serve the state's best interest despite the fact that the
details were unknown.
Representative Gara wished for public review because of the
lack of consumer protection stating that the tariff must be
just and reasonable. He believed that parties would choose
appropriate gas prices if they were prepared for public and
legislative project review. He expressed concern that
passage of the bill would provide final legislative
approval for an unknown project.
3:09:17 PM
Co-Chair Stoltze discussed the painful agony of dealing
with the Stranded Gas Act in committee.
A roll call vote was taken on the motion to adopt Amendment
6.
IN FAVOR: Gara, Kawasaki
OPPOSED: Neuman, Thompson, Wilson, Costello, Edgmon,
Holmes, Munoz, Austerman, Stoltze
The MOTION FAILED (2/9).
Representative Gara MOVED amendment 7, 28-LS002\R.9,
Bullock, 3/29/13 (copy on file):
Page 1, line 3, following "fund;":
Insert "requiring legislative approval for the
transfer of certain interests in an in-state natural
gas pipeline project;"
Page 7, line 21, following "may":
Insert ", subject to (f) of this section,"
Page 8, line 10, following "(6)":
Insert "subject to (f) of this section,"
Page 10, following line 15:
Insert a new subsection to read:
"(f) The corporation may not enter into an agreement
with another person for joint ownership of an in-state
natural gas pipeline developed by the corporation or
transfer or otherwise dispose of all or part of an in-
state natural gas pipeline project developed by the
corporation without legislative approval."
Co-Chair Stoltze OBJECTED for discussion.
3:11:06 PM
Representative Gara discussed Amendment 7. He noted a
circumstance in the legislation where AGDC could transfer
the project to a private company. He noted representations
over the years where the tariff would reflect the state
investment allowing the consumers to benefit from it.
Amendment 7 would ensure that if the project was
transferred to a private party, the legislature would
participate. He planned to withdraw the amendment in
committee, but would bring it to the House Floor.
Representative Gara WITHDREW Amendment 7.
Ms. Delbridge clarified that AGDC could manage its assets
including transferring or disposing in conjunction with the
duty of bringing gas to Alaskans at the lowest possible
rates. The upfront investment made by the state could be
reflected in the tariffs with long-term contracts if they
were signed prior to transferring the project to the
private sector. During the transfer process, different
methods of negotiating the highest value at that point in
time for the state's investment existed. The bill allowed
the flexibility for determination of the highest value for
Alaskans.
Mr. Dubler added that AGDC was governed by a board of
directors appointed by the governor. Having the ability to
acquire and dispose of assets was enjoyed by most state
corporations without legislative approval.
3:13:25 PM
Representative Gara clarified Ms. Delbridge's statement
that AGDC must get gas to consumers at the lowest possible
rate, which he considered non-binding language. He stated
that the binding language on the tariff stated that just
and reasonable rates were not required. He asked about
binding language regarding delivery of gas at the lowest
possible rates.
Ms. Delbridge responded that the language found on page 7,
lines 4 through 17 was considered somewhat binding, "they
shall to the fullest extent possible advance this gas
pipeline and develop these gas pipelines in the future that
make gas available at the lowest possible rates." She
agreed with Mr. Dubler that the board of directors
represented commissioners of the state. The board was
accountable to the public. The legislation required greater
thresholds of votes on the board for a transfer or disposal
of property. She clarified that the recourse tariff must
meet particular standards, but negotiations would often be
lower, meaning that public utilities would get a better
deal than that approved by the RCA as the default tariff
price.
3:16:55 PM
Co-Chair Austerman discussed a new fiscal note dated
4/01/13, which changed the requested amount from $330
million to $225 million and adjusted the $225 million out
of the Alaska Housing Capital Corporation. An additional
$25 million would be derived from the capital budget for
the project.
Representative Gara understood that the appropriation of
$225 million from the Alaska Housing Capital Corporation
and the $25 million from the capital budget were from the
same funding source.
Co-Chair Stoltze explained the intent of retaining
sufficient funds to ensure forward progress for the bill.
He stated that the total appropriation was $250 million.
Co-Chair Austerman noted the discussion regarding the
desire for another approval from the legislature. He opined
that HB 4 allowed the opportunity to move forward with an
instate gasline. He stated that an additional $80 million
would be required to complete the remainder of the work. He
believed that further conversation would occur, possibly
regarding the supplemental budget.
3:19:55 PM
Vice-Chair Neuman MOVED to REPORT CSSSHB 4(FIN) out of
committee, as amended with individual recommendations and
the accompanying fiscal notes. Representative Gara OBJECTED
for discussion.
Representative Gara believed that despite his objections
and amendments, he advocated for moving ahead with the bill
and the project. His amendments were an effort to
communicate his point of view. He opined that gas
exploration in Cook Inlet might be advantageous. He
advocated for the governor's project, which included a
large-diameter pipeline. He noted that the extra income and
development along with a lower cost of gas made the large-
diameter pipeline appealing. He hoped that his statements
were not mischaracterized. He stressed that the state would
benefit from forward progress with multiple pipeline
options.
Representative Gara stated that he had not received a good
reason why the RCA could not retain its power to ensure
that the shipping price was just and reasonable. He argued
that the statement that the bill would result in the lowest
possible prices was a statement of purpose. He considered
language on page 43 of the bill binding language, which
specified that if the parties did not use the recourse
tariff set by the RCA they could come up with whatever
price for shipping they want.[BSW5] He stated that the bill
was drafted in a manner that did not protect consumer rates
as well as it could. He clarified that he did support a gas
pipeline project, but preferred a bill that was drafted in
the consumer's best interest.
Representative Gara WITHDREW his OBJECTION.
3:24:56 PM
Vice-Chair Neuman believed that Amendment 3 addressed the
issue by adding an additional 90 days if the recourse rates
were not agreed upon. He added that the proposed
legislation moved AGDC's project, while other projects and
opportunities for exploration were occurring in tandem.
Vice-Chair Neuman clarified the committee's intention to
adopt two [new] fiscal notes: one note with OMB component
number 3019 and a second note dated 4/1/13[the second note
did not include an OMB component number].
CSSSHB 4(FIN), as amended was REPORTED out of committee
with a "do pass" recommendation and with one new fiscal
impact note from the House Finance Committee for Fund
Capitalization and one new fiscal impact note from the
House Finance Committee for Various departments including
Department of Law, Department of Natural Resources,
Department of Environmental Conservation, Department of
Transportation and Public Facilities, and Department of
Commerce, Community and Economic Development.
3:27:17 PM
ADJOURNMENT
The meeting was adjourned at 3:27 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 4 Amendments 2 - 8.pdf |
HFIN 4/1/2013 1:30:00 PM |
HB 4 |
| HB 4 Legal Opinion AG.pdf |
HFIN 4/1/2013 1:30:00 PM |
HB 4 |
| HB 4 NEW FN Fund Capitalization.pdf |
HFIN 4/1/2013 1:30:00 PM |
HB 4 |
| HB 4 NEW FN Various 4-1-13.pdf |
HFIN 4/1/2013 1:30:00 PM |
HB 4 |
| HB 4 CS FIN FINAL.pdf |
HFIN 4/1/2013 1:30:00 PM |
HB 4 |