Legislature(2013 - 2014)
04/17/2014 09:06 PM House FIN
| Audio | Topic |
|---|---|
| Start | |
| SB138 | |
| Amendments | |
| SB194 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE FINANCE COMMITTEE
April 17, 2014
9:06 p.m.
9:06:57 PM
CALL TO ORDER
Co-Chair Stoltze called the House Finance Committee meeting
to order at 9:06 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 David Guttenberg
Representative Lindsey Holmes
Representative Cathy Munoz
Representative Steve Thompson
Representative Tammie Wilson
MEMBERS ABSENT
None
ALSO PRESENT
Senator Peter Micciche; Michael Pawlowski, Deputy
Commissioner, Strategic Finance, Department of Revenue; Joe
Balash, Commissioner, the Department of Natural Resources;
Susan Pollard, Oil, Gas, and Mining Section, Department of
Law; Genevieve Wojtusik, Staff, Senator Lesil McGuire;
Roberta Graham, Assistant Commissioner, Department of
Commerce, Community and Economic Development; Bill Peddler,
Alaska Tourism Association.
PRESENT VIA TELECONFERENCE
Kathleen Martin, Self, Cooper Landing; Ed Martin, self,
Cooper Landing; Ed Sniffen, Department of Law, Anchorage;
Al Nagel, Department of Labor and Workforce Development,
Anchorage.
SUMMARY
SB 74 UNIVERSITY OF ALASKA BUILDING FUND
SB 74 was SCHEDULED but not HEARD.
CSSB 138(FIN) am
GAS PIPELINE; AGDC; OIL & GAS PROD. TAX
HCSCSSB 138(FIN) was REPORTED out of committee
with a "do pass" recommendation and with one new
fiscal note from the Department of Commerce,
Community and Economic Development, one new
fiscal note from the Department of Transportation
and Public Facilities, one new fiscal note from
the House Finance Committee, two new fiscal notes
from the Department of Revenue, one new fiscal
note from the Department of Natural Resources,
and one previously published fiscal note: FN16
(CED).
SB 193 CONTRACTORS: BONDS; LICENSING
SB 193 was HEARD and HELD in committee for
further consideration.
CSSB 194 (FIN)
TOURISM MARKETING BOARD
HCS CSSB 194(L&C) was REPORTED out of committee
with a "do pass" recommendation and with one new
zero fiscal note from the Department of Commerce,
Community and Economic Development and one
previously published fiscal note: FN2 (LEG).
CSSB 195(FIN)
POSTSECONDARY EDUCATION LOANS/GRANTS
CSSB 195(FIN) was SCHEDULED but not HEARD.
SJR 23 CONST. AM: STUDENT LOAN DEBT
SJR 23 was SCHEDULED but not HEARD.
[Note: The following meeting was broken up into two
separate documents. For the conclusion of the meeting see
April 18, 2014 12:00 a.m. minutes.]
CS FOR SENATE BILL NO. 138(FIN) am
"An Act relating to the purposes, powers, and duties
of the Alaska Gasline Development Corporation;
relating to an in-state natural gas pipeline, an
Alaska liquefied natural gas project, and associated
funds; requiring state agencies and other entities to
expedite reviews and actions related to natural gas
pipelines and projects; relating to the authorities
and duties of the commissioner of natural resources
relating to a North Slope natural gas project, oil and
gas and gas only leases, and royalty gas and other gas
received by the state including gas received as
payment for the production tax on gas; relating to the
tax on oil and gas production, on oil production, and
on gas production; relating to the duties of the
commissioner of revenue relating to a North Slope
natural gas project and gas received as payment for
tax; relating to confidential information and public
record status of information provided to or in the
custody of the Department of Natural Resources and the
Department of Revenue; relating to apportionment
factors of the Alaska Net Income Tax Act; amending the
definition of gross value at the 'point of production'
for gas for purposes of the oil and gas production
tax; clarifying that the exploration incentive credit,
the oil or gas producer education credit, and the film
production tax credit may not be taken against the gas
production tax paid in gas; relating to the oil or gas
producer education credit; requesting the governor to
establish an interim advisory board to advise the
governor on municipal involvement in a North Slope
natural gas project; relating to the development of a
plan by the Alaska Energy Authority for developing
infrastructure to deliver affordable energy to areas
of the state that will not have direct access to a
North Slope natural gas pipeline and a recommendation
of a funding source for energy infrastructure
development; establishing the Alaska affordable energy
fund; requiring the commissioner of revenue to develop
a plan and suggest legislation for municipalities,
regional corporations, and residents of the state to
acquire ownership interests in a North Slope natural
gas pipeline project; making conforming amendments;
and providing for an effective date."
9:07:03 PM
^AMENDMENTS
9:08:04 PM
Co-Chair Stoltze MOVED to ADOPT Amendment 1, 28-
GS2806\H.47, Bullock, 4/17/14 by Co-Chair Stoltze, Co-Chair
Austerman, and Representative Gara by request of the
governor (copy on file).
Page 15, lines 20 - 21:
Delete "with any member of the legislature"
Page 17, line 22:
Delete "with any member of the legislature"
Page 18, line 5:
Delete "in"
Insert "to"
Delete "agent"
Insert "entity"
Page 18, lines 7 - 8:
Delete ", if the commissioner determines that the
North Slope natural gas project is not making adequate
progress toward a final investment decision,"
Page 18, line 8, following "state":
Insert "or an entity of the state"
Page 18, line 9, following "state":
Insert "or an entity of the state"
Page 18, line 10, following "state":
Insert "or an entity of the state"
Page 18, lines 10 - 11:
Delete "may not be on terms that are more restrictive
than the terms that are applicable for access by"
Insert "must be on the same or substantially similar
terms applicable to"
Page 34, line 18, following "by the":
Insert "average"
Page 34, line 19, following "the gas":
Insert "produced by the producer from the lease during
the month,"
Page 34, line 23, following "If the":
Insert "credit or"
Page 34, line 27, following "by the":
Insert "average"
Page 34, line 28, following "the gas":
Insert "produced by the producer from the lease during
the month,"
Page 35, line 12:
Delete "(1) flared, released, or allowed to escape
and, under AS 43.55.020(e),"
Insert "that, under AS 43.55.020(e), is"
Page 35, lines 14 - 17:
Delete "; or
(2) used in the operation of a lease or property in
the state in drilling for or producing oil or gas, or
for repressuring and, under AS 43.55.020(e),
considered as gas produced from a lease or property
for the purpose of AS 43.55.011 - 43.55.180"
Page 36, line 15:
Delete "due under this chapter"
Page 57, line 8, following "of the":
Insert "following locations: the"
Page 57, line 13, following "the":
Insert "following locations: the"
Page 57, line 16, following "after":
Insert "completion of"
Page 57, line 19, following "the":
Insert "following locations: the"
Page 60, line 23:
Delete "and"
Page 60, following line 23:
Insert a new paragraph to read:
"(4) the costs, benefits, and risks associated with
building a pipeline with a mainline diameter larger
than 42 inches, including the effect of the increased
diameter on compression, fuel, and other costs; the
anticipated allocation of the cost of an increased
diameter among project participants and the options
for and effects of the state or participants in the
project funding the increased diameter; a
quantification of the potential benefits from the
increased diameter that may include increased
exploration activity and increased royalties and taxes
from additional production transported in the
increased capacity; and whether natural gas
transported in the additional capacity is likely to be
produced from federal or state land; and"
Renumber the following paragraph accordingly
Representative Wilson OBJECTED for discussion.
9:08:21 PM
MICHAEL PAWLOWSKI, DEPUTY COMMISSIONER, STRATEGIC FINANCE,
DEPARTMENT OF REVENUE, discussed the amendment. He stated
that the amendment clarified language in the House
Resources Committee. He began with page one of the
amendment. He noted the first two changes on lines 2 and 5,
which clarified the relationship between the department and
the legislative branch. The deletion of the words, "with
any member of the legislature" provided clarification that
the administration may share individually with consultants,
staff and agents of the legislature as well as with members
of the legislature individually. He noted the effective
dates, which were changed in two places in the legislation.
He pointed to line 5, page 18 of the legislation and the
deletion of the word "in" and the insertion of the word
"to" recognizing the contract to which the state is a party
or an agent of the state is a party. He pointed out the
deletion of the word "agent" on the same line, to be
replaced with the word "entity."
9:10:22 PM
Mr. Pawlowski continued with page 18 of the legislation,
lines 7 through 8 addressing the rights and access to data
under the Alaska Liquefied Natural Gas (AKLNG) project by
the state or by an entity of the state. The amendment
proposed the deletion of the words "if the commissioner
determines that the North Slope Natural Gas project is not
making adequate progress toward a final investment
decision." The following changes were consistent with the
addition of "or an entity of the state" on page 18, lines 8
and 9 following "the state."
Mr. Pawlowski continued with the deletion of the words "may
not" on page 10 to 11 and inserted "must be on the same or
substantially similar terms applicable to." The amendment
recognized that access to data happened early in the
project. When the state was an investor, access was on the
same and substantially similar terms to the other parties
in the agreement, immediately upon entering the project.
Mr. Pawlowski addressed the next change on page 34 of the
"tax as gas" section of the legislation. He moved to page
34; line 18, following the words "by the" the word
"average" was inserted. The insertion of the word "average"
recognized that taxes were paid on a monthly basis, and the
clarifying word helped the department understand the use of
the average gross value at the point of production for each
unit.
Mr. Pawlowski mentioned the addition on page 34, line 19 of
the words "produced by the producer from the lease during
the month." The intent was to clarify that the gas
discussed was the producer's gas rather than royalty or tax
gas. Page 34, line 23 addressed the words "credit or
refund" eliminating the words "credit or" allowing for
consistency in the section. The same clarification was seen
on page 34, line 27 with the use of the word "average." He
noted that page 35 applied to "where tax as gas does not"
option. The change deleted the words "flared, released or
allowed to escape" and inserting the direct statutory
reference. In the event of an accident, the tax due would
be paid in value in the regular form of money because the
gas could not be accounted for in a traditional way. He
stated that page 35; lines 14 through 17 deleted the
ambiguous language regarding taxable gas.
9:14:57 PM
Mr. Pawlowski continued with page 36, line 15. The
reference "due under this chapter" in the education credit
was deleted from the language. A credit may not be used
against the tax as gas. He pointed to page 57 and the
definition of the point of production. The department
viewed the amendment as clarifying on lines 6 through 24.
The section created three categories for the point of
production for gas. In each of the three sections on page
3, lines 5-15 of the amendment the words "following
locations" were inserted. Page 60, line 23 eliminated an
errant "and" while inserting a new section at the request
of the Department of Natural Resources.
9:18:17 PM
Mr. Pawlowski stated that the amendment's last change was
to renumber the following sections accordingly.
Co-Chair Stoltze stated that the additional bills on the
schedule would not be heard in the evening's meeting.
9:18:58 PM
Representative Gara MOVED to AMEND Amendment 1 with
Amendment 2 to Amendment 1, 28-GS2806\H.51, Bullock,
4/17/14 by Representative Gara (copy on file).
TO: Amendment H.47 to HCS CSSB 138(RES)
Page 3, line 27, of the amendment, following
"activity":
Insert "by parties and nonparties to the project"
Representative Holmes OBJECTED for discussion.
Representative Gara explained that the amendment to the
amendment regarding the report for future expansion on page
3. He wished to ensure that the report involved expansion
that was accessible to independent companies. After the
word "activity" the words "by parties and nonparties to the
project" was added.
Mr. Pawlowski determined that the amendment to the
amendment was consistent with the dialog and supported the
underlying amendment.
Representative Holmes withdrew her OBJECTION. There being
NO OBJECTION, it was so ordered.
Amendment 2 to amendment 1 was ADOPTED. Amendment 1, as
amended was before the committee.
9:21:41 PM
Co-Chair Stoltze MOVED to ADOPT Amendment 3 to Amendment 1,
28-GS2806\H.52, Bullock, 4/17/14 (copy on file).
TO: Amendment H.47 to HCS CSSB 21(RES) CSSB 138(RES)
Page 2, following line 6, of the amendment:
Insert new material to read:
"Page 18, line 12:
Delete "the"
Insert "a""
Representative Costello OBJECTED for discussion.
Mr. Pawlowski discussed the amendment to the amendment that
was specific to the North Slope natural gas project and
changed the word "the" to "a." The amendment was supported
by the department.
Representative Costello WITHDREW her OBJECTION.
Amendment 3 to amendment 1 was ADOPTED. Amendment 1, as
amended was before the committee.
Representative Holmes suggested that the amendment be
considered conceptual due to the error in quotation marks
around "a."
9:23:55 PM
Representative Gara asked about amendment 3 to amendment 1.
He understood the intention to apply the language to a gas
pipeline. He wondered if the project discussed might not be
the project implemented.
9:24:17 PM
JOE BALASH, COMMISSIONER, THE DEPARTMENT OF NATURAL
RESOURCES, explained that the law of general application
allowed for the use of "a" because more than one project
may be eligible for the provisions of law.
Representative Wilson WITHDREW her OBJECTION. There being
NO OBJECTION, it was so ordered. Amendment 1 as amended was
ADOPTED.
9:25:19 PM
Representative Holmes MOVED to ADOPT Amendment 3, 28-
GS2806\H.39, Bullock, 4/16/14 by Co-Chair Stoltze, Co-Chair
Austerman, Vice-Chair Neuman, Representative Wilson,
Representative Edgmon, Representative Costello,
Representative Thompson, Representative Guttenberg and
Representative Gara (copy on file).
Page 60, following line 5:
Insert a new bill section to read:
"* Sec. 66. Section 1(b), ch. 11, SLA 2013, is
amended to read:
(b) It is the intent of the legislature that
(1) the Alaska Gasline Development Corporation, in
its new placement as an independent public corporation
of the state, shall be treated for all purposes as the
transfer of a corporation within the state and not as
the creation of a new entity by the State of Alaska;
(2) the Board of Directors of the Alaska Gasline
Development Corporation commit to governing the Alaska
Gasline Development Corporation so as to affect
positively as many Alaskans as possible, including
those in rural and coastal communities, and to extend
opportunities for all Alaskans to benefit from the
natural gas resources of the state, including propane
and associated gas-related hydrocarbons other than
oil;
(3) to the maximum extent permitted by law, in
developing a natural gas pipeline, the Alaska Gasline
Development Corporation shall procure services, labor,
products, and natural resources from qualified
businesses located in the state, including
organizations owned by Alaska Natives and municipal
organizations directly affected by the project, if
those persons are competitive;
(4) the Alaska Gasline Development Corporation and an
Alaska liquefied natural gas project as defined in AS
31.25.390 shall, to the maximum extent permitted by
law,
(A) hire qualified residents from throughout the
state for management, engineering, construction,
operations, maintenance, and other positions for a
natural gas pipeline project;
(B) establish hiring facilities in the state or use
existing hiring facilities in the state; and
(C) use, as far as practicable, the job centers and
associated services operated by the Department of
Labor and Workforce Development and an Internet-based
labor exchange system operated by the state; and
(5) the Alaska Gasline Development Corporation and
its subsidiaries shall wind up and dissolve when no
bonds, notes, or other obligations are outstanding and
the Alaska Gasline Development Corporation or a
subsidiary of the Alaska Gasline Development
Corporation is no longer engaged in the development,
financing, construction, or operation of an in-state
natural gas pipeline."
Renumber the following bill sections accordingly.
Page 65, line 23:
Delete "72"
Insert "73"
Page 65, line 26:
Delete "secs. 73 and 74"
Insert "secs. 74 and 75"
Co-Chair Stoltze OBJECTED for discussion.
Representative Holmes discussed the intent language in last
year's HB 4 related to the creation of Alaska Gasline
Development Corporation (AGDC). She appreciated the
language related to instate hire and training. She stated
that instate hire was important for both construction and
operations. The language also mentioned hiring facilities,
job centers and the need for AGDC and the state to take an
active role in ensuring that the incredible job training
was available to Alaskans. She mentioned that the amendment
was clarifying and the drafting required additional
efforts. She wished to clarify AGDC's role in the AKLNG
project.
9:27:25 PM
Representative Holmes MOVED to ADOPT Amendment 1 to
Amendment 3, by Representative Holmes.
Page 1, Line20:
Delete:
"and"
After "Corporation" add: "in its participation
in"
Page 1, Line 21:
After "AS 31.25.390" add "or a natural gas
pipeline"
Co-Chair Stoltze OBJECTED for discussion.
Representative Holmes discussed the amendment to amendment
3. She explained that line 20 would read: "the Alaska
Gasline Development Corporation in its participation in an
Alaska Liquefied Natural Gas Project as defined in AS
31.25.390 or a Natural Gas Pipeline shall to the maximum
extent permitted by law" continuing with language related
to hiring qualified Alaskans, establishing hiring
facilities in the state and using job centers located in
Alaska.
9:28:27 PM
There being NO OBJECTION, it was so ordered. Amendment 1 to
Amendment 3 was adopted. Amendment 3, as amended was before
the committee.
Representative Gara asked about the Alaska-hire provisions.
He wished to ensure that the provisions applied to the
project whether or not it was affiliated with AGDC.
Commissioner Balash replied that the Alaska LNG project as
contemplated in the Heads of Agreement (HOA) had applicable
provisions. He pointed to Article 11 of the HOA.
Representative Gara appreciated the department's
explanation.
Commissioner Balash replied that the provisions would apply
to an Alaska LNG project.
Representative Gara asked whether or not AGDC was involved.
Commissioner Balash replied yes.
9:30:34 PM
Representative Guttenberg noted that some communities would
be altered before the pipe was ordered. He stated that 1000
jobs related to operation and maintenance would be created
by the project. He wished to ensure that the qualified
employees had continued opportunities for the longer
lasting jobs.
Mr. Pawlowski replied that other amendments in the packet
built the foundation. He stressed that many jobs would
become available with the advent of the LNG facility. The
manufacturing facility was great with harbor and maritime
related employment opportunities that would further develop
communities and support families.
9:32:33 PM
Representative Holmes discussed line 23 stating that AGDC
shall hire qualified residents from throughout the state
for management, engineering, construction, operations,
maintenance and other positions. She appreciated the
language.
9:33:06 PM
Co-Chair Stoltze asked if the amendment was consistent with
the operations and desires of the administration.
Commissioner Balash replied yes.
Representative Wilson WITHDREW her OBJECTION. Amendment 3
as amended was ADOPTED.
9:33:42 PM
Representative Holmes MOVED to ADOPT Amendment 4, the
Alaska State Legislature Letter of Intent for SB 138
prepared by Representative Holmes, Representative Munoz Co-
Chair Austerman, Representative Thompson, Representative
Edgmon, Representative Costello and Representative Gara.
Letter of Intent for SB 138
It is the intent of the Alaska State Legislature that
the Alaska LNG project honor the commitments, as
copied below, made in "Article 11: Alaska Hire and
Content:, agreed to in the Heads of Intent Agreement
by and among the Administration of the State of
Alaska, Alaska Gas-line Development Corporation,
TransCanada Alaska Development Inc., ExxonMobil Alaska
Production Inc., ConocoPhillips Alaska, Inc., through
construction of the project.
ARTICLE 11: ALASKA HIRE and CONTENT
11.1 For the Alaska LNG Project, the Alaska LNG
Parties will, within the constraints of law:
a. Employ Alaska residents and contract with Alaska
businesses to the extent they are qualified,
available, ready, willing and cost competitive;
b. Use, as far as practicable, job centers and
associated services operated by the State
Department of Labor and Workforce Development;
c. Participate with the State Department of Labor
and Workforce Development to update the training
plan for an LNG export project including main
operations;
d. Advertise for available positions locally and
use, as far as practicable, Alaska job service
organizations to notify the Alaska public; and
e. Work with the State Department of Labor and
Workforce Development and other organizations to
provide training.
11.2 Prior to construction, the Alaska LNG Parties
commit to negotiate in good faith project labor
agreements for the Alaska LNG Project.
Representative Wilson OBJECTED for discussion.
Representative Holmes discussed the letter of intent which
removed Article 11 (negotiated language related to local
hire) from the HOA. The language was identical to that
drafted by the Senate Finance Committee. She wished for the
legislature's endorsement of the intent. The letter
pertained to the employment of Alaskan residents and
business. The letter addressed job centers and the update
of training plans by the Department of Labor and Workforce
Development and negotiating in good faith for project labor
agreements. The letterhead used was that of the Alaska
State Legislature.
Co-Chair Stoltze stated that the amendment was sponsored by
Representative Holmes, Representative Munoz, Representative
Thompson, Co-Chair Austerman, Representative Edgmon,
Representative Costello and Representative Gara.
9:35:15 PM
Vice-Chair Neuman clarified that the letter of intent
pertained to all Alaskan companies, whether union or
nonunion.
Representative Holmes agreed.
Representative Guttenberg clarified that the letter of
intent would be advanced to the legislature as a whole.
Co-Chair Stoltze agreed that the letter would be addressed
on the House Floor.
9:36:23 PM
There being NO OBJECTION, it was so ordered. Amendment 4
was ADOPTED.
9:36:45 PM
Co-Chair Austerman MOVED to ADOPT Amendment 5, 28-
GS2806\H.27, Bullock, 4/15/14 by Representative Wilson,
Representative Costello, Representative Holmes,
Representative Edgmon, Vice-Chair Neuman, Representative
Thompson, Representative Gara, and Representative
Guttenberg (copy on file).
Page 18, following line 15:
Insert a new subsection to read:
"(c) A proposed agreement or contract associated with
a North Slope natural gas project must provide the
means for allocating infrastructure costs between the
state and other parties in the project. The allocation
must take into consideration the extent to which
infrastructure is used by the project and used by the
public and the difference between the normal expected
or actual life-cycle costs for the infrastructure as
used by the project and the expected or actual life-
cycle costs of the same infrastructure if subject only
to general public use. The proposed agreement or
contract may not require the state to pay
infrastructure costs that are directly related to the
project and not designed for general public use in a
proportionate amount that is greater than the state's
share of participation in the project."
Co-Chair Stoltze OBJECTED for discussion.
9:36:59 PM
Co-Chair Austerman discussed Amendment 5. He noted that the
outcome of discussions regarding the concerns of the
infrastructure development and improvements that would
occur around the North Slope natural gas project. The
concern was related to the responsibility for improvements.
The amendment pointed to various costs and whether the
state or the industry retained the responsibility for them.
9:38:30 PM
Representative Gara distributed answers provided by the
consultants. He explained that the amendment's importance
was highlighted by the varying estimation of costs for
infrastructure. He had asked Enalytica about the state
share of the pipeline; the net present was reduced by
greater payments of infrastructure costs. He hoped that the
administration would consider the amendment seriously. A
loss of 5 to 10 percent of the net present value of the
pipeline resulting from full responsibility for the
pipeline's construction was a serious consideration.
9:40:03 PM
Co-Chair Stoltze WITHDREW his OBJECTION. There being NO
OBJECTION, it was so ordered. Amendment 5 was ADOPTED.
9:40:34 PM
Vice-Chair Neuman MOVED to ADOPT Amendment 6, 28-
GS2806\H.54 by Vice-Chair Neuman, Representative Thompson,
Representative Wilson and Representative Guttenberg.
Page 2, line 17, following "fund;":
Insert "requiring the Department of Transportation and
Public Facilities to evaluate the design and
construction of a bridge across the Yukon River;"
Page 60, following line 6:
Insert a new bill section to read:
"* Sec. 67. The uncodified law of the State of
Alaska is amended by adding a new section to read:
INFRASTRUCTURE. The Department of Transportation and
Public Facilities shall, in consultation with the
Alaska Gasline Development Corporation, evaluate the
design and construction of a new, separate bridge
across the Yukon River that would accommodate both
vehicular traffic and a gas pipeline resulting from an
Alaska liquefied natural gas project."
Renumber the following bill sections accordingly.
Page 65, line 23:
Delete "72"
Insert "73"
Page 65, line 26:
Delete "secs. 73 and 74"
Insert "secs. 74 and 75"
Co-Chair Stoltze OBJECTED for discussion.
Vice-Chair Neuman explained that the amendment replacement
addressed the order of language regarding the Department of
Transportation and Public Facilities and AGDC. He believed
that the new order with the department listed prior to AGDC
invited the department to the table in a different way and
placed them in the title. He pointed out that the amendment
was co-sponsored by Representative Thompson and
Representative Wilson. He noted that the department and
AGDC would evaluate the design and construction of a new
separate bridge across the Yukon River. He suspected that
the language would prove important in the upcoming process.
He pointed out the Department of Transportation and Public
Facilities' concern with the issue. The current bridge was
37 years old and suspended the oil pipeline. A new bridge
was necessary to support both transportation and
infrastructure. He mentioned concerns stated by the
National Security Agency related to the two pipelines'
proximity.
9:44:27 PM
Mr. Pawlowski appreciated the amendment's sponsor, which he
opined built upon the previous amendment. The
administration supported the amendment.
Representative Wilson WITHDREW her OBJECTION. There being
NO OBJECTION, it was so ordered. Amendment was 6 was
ADOPTED.
9:45:17 PM
Vice-Chair Neuman MOVED to ADOPT Amendment 7, 28-
GS2806\H.55, Nauman/Bullock, 4/17/14 by Vice-Chair Neuman
Representative Thompson, Representative Wilson,
Representative Holmes, Representative Gara and
Representative Costello (copy on file).
Page 2, line 17, following "fund;":
Insert "requiring the Department of Transportation and
Public Facilities to evaluate certain bridges and
infrastructure related to an Alaska liquefied natural
gas project;"
Page 60, following line 6:
Insert a new bill section to read:
"* Sec. 67. The uncodified law of the State of
Alaska is amended by adding a new section to read:
INFRASTRUCTURE. The Department of Transportation and
Public Facilities shall, in consultation with the
Alaska Gasline Development Corporation and the
Department of Natural Resources, evaluate existing
bridges and infrastructure and bridges and
infrastructure constructed to accommodate a gas
pipeline resulting from an Alaska liquefied natural
gas project and determine whether the bridge or
infrastructure could also be constructed for
transportation uses, including vehicular traffic."
Renumber the following bill sections accordingly.
Page 65, line 23:
Delete "72"
Insert "73"
Page 65, line 26:
Delete "secs. 73 and 74"
Insert "secs. 74 and 75"
Co-Chair Stoltze OBJECTED for discussion.
9:45:41 PM
Vice-Chair Neuman stated that the replacement amendment
changed the order of the Department of Transportation and
Public Facilities and AGDC as in amendment 6. He stated
that the amendment's co-sponsors included Representative
Holmes, Representative Thompson, Representative Wilson,
Representative Costello and Representative Gara. He
appreciated the committee's support for the amendment that
addressed other bridges and infrastructure in the
pipeline's transportation route. He noted multiple bridges
existing both large and small and the pipeline producers
must work with the Department of Transportation and Public
Facilities in a coordinated effort.
9:48:15 PM
Co-Chair Stoltze stated that the co-sponsors were not
listed on the replacement amendments.
Representative Wilson WITHDREW his OBJECTION. There being
NO OBJECTION, it was so ordered. Amendment 7 was ADOPTED.
9:50:07 PM
Representative Edgmon MOVED to ADOPT Amendment 8, 28-
GS2806\H.31, Nauman/Bullock, 4/16/14 by Co-Chair Stoltze,
Co-Chair Austerman, Representative Munoz, Representative
Costello, Representative Wilson, Representative Thompson,
Representative Holmes, Vice-Chair Neuman, Representative
Gara and Representative Guttenberg (copy on file).
Page 62, line 14, following "shall":
Insert ", after considering the state energy policy
under AS 44.99.115 and sec. 1, ch. 82, SLA 2010,"
Co-Chair Stoltze OBJECTED for discussion.
9:50:20 PM
Representative Edgmon discussed amendment 8 that connected
section 69 of the bill related to a plan created by the
Alaska Energy Authority to the energy policy currently in
statute. The Alaska Energy Policy developed in 2010 in
uncodified law was far more expansive in terms of the
state's overall approach to providing energy to all corners
of Alaska.
9:51:00 PM
Representative Gara clarified that the amendment included
communities located in rural areas and off of the road
system.
Representative Edgmon agreed. He stated that the Alaska
Energy Policy took great pains to include all areas
including residential, commercial and industrial.
Co-Chair Stoltze appreciated the clarification and
commitment to rural energy and statewide needs.
Co-Chair Stoltze WITHDREW his OBJECTION. There being NO
OBJECTION, it was so ordered. Amendment 8 was ADOPTED.
9:52:58 PM
AT EASE
9:55:16 PM
RECONVENED
Representative Thompson MOVED to ADOPT Amendment 9, 28-
GS2806\H.46, Nauman/Bullock, 4/17/14 by Representative
Thompson and Representative Wilson and Vice-Chair Neuman
(copy on file).
Page 18, line 14:
Delete "a payment in lieu of"
Insert "the"
Co-Chair Stoltze OBJECTED for discussion.
Representative Thompson discussed amendment 9 related to
page 18, line 14 of the bill. He noted the elimination of
"a payment in lieu of" and the insertion of the word "the."
The language would affect the North Slope Borough, the
Fairbanks North Star Borough, the Mat-Su Borough and the
municipality of Anchorage. The language would prevent
changes to property taxes.
9:56:25 PM
Representative Wilson echoed the comments made by
Representative Thompson. She stated that support for the
change was received by constituents.
Vice-Chair Neuman stated that the Mat-Su region would also
be in alignment with the amendment.
Co-Chair Stoltze WITHDREW his OBJECTION. There being NO
OBJECTION, it was so ordered. Amendment 9 was ADOPTED.
9:57:33 PM
Co-Chair Stoltze MOVED to ADOPT Amendment 10 28-
GS2806\H.36, Bullock, 4/16/14 (copy on file) by Co-Chair
Stoltze, Co-Chair Austerman, Representative Wilson,
Representative Costello, Representative Munoz,
Representative Thompson, Representative Edgmon and Vice-
Chair Neuman (copy on file).
Page 36, line 23:
Delete "a state operated"
Insert "
(A) a [STATE OPERATED]"
Delete ","
Insert "in the state that offers programs approved by
the United States Department of Veterans Affairs and
the Alaska Commission on Postsecondary Education;
(B)"
Page 36, line 25:
Delete ", and"
Insert "; or
(C)"
Representative Costello OBJECTED for discussion.
Co-Chair Stoltze explained that SB 193 and SB 194 would be
heard tonight with time.
9:58:41 PM
Co-Chair Stoltze stated that amendment 10 deleted state
operated" and added "in the state that offers programs
approved by the United States Department of Veterans
Affairs and the Alaska Commission on Postsecondary
Education." He stressed that the approval by both entities
allowed for a strong standard of professional certification
and requirements for accountability.
9:59:52 PM
Vice-Chair Neuman appreciated amendment 10. He stated that
the Northern Industrial Training program worked in the
northern region to provide additional opportunities. He
noted reports on the lack of workforce and he wished to
allow for many opportunities for the training of Alaskans.
Co-Chair Stoltze stated that private entities were adaptive
and responsive to employer's needs. He noted that the area
of education provided choice.
10:00:59 PM
Representative Costello WITHDREW her OBJECTION.
Representative Gara asked if the amendment was in addition
to a credit eliminated earlier in the meeting.
Co-Chair Stoltze responded that the amendment addressed
eligibility for training programs.
Representative Gara noted the credit mentioned on line 15.
Representative Thompson stated that credits were not
eliminated.
Co-Chair Stoltze discussed the bicameral process.
Amendment 10 was ADOPTED.
10:02:30 PM
Co-Chair Stoltze MOVED to ADOPT Amendment 11, 28-
GS2806\H.42, Bullock, 4/16/14 by Co-Chair Stoltze,
Representative Thompson, Representative Edgmon and
Representative Holmes (copy on file).
Page 5, lines 1 - 5:
Delete all material.
Renumber the following bill sections accordingly.
Page 15, line 29:
Delete "sec. 19"
Insert "sec. 18"
Page 20, line 9:
Delete "sec. 23"
Insert "sec. 22"
Page 24, line 11:
Delete "sec. 34"
Insert "sec. 33"
Page 28, line 4:
Delete "sec. 37"
Insert "sec. 36"
Page 36, line 13:
Delete "sec. 45"
Insert "sec. 44"
Page 61, line 4:
Delete "sec. 30"
Insert "sec. 29"
Page 62, line 6:
Delete "sec. 30"
Insert "sec. 29"
Page 63, line 11:
Delete "sec. 30"
Insert "sec. 29"
Page 63, line 16:
Delete "sec. 19"
Insert "sec. 18"
Page 63, line 18:
Delete "sec. 19"
Insert "sec. 18"
Page 65, line 23:
Delete "Sections 1 - 19, 22, 23, 30 - 34, 36, 37, 45,
47, and 63 - 72"
Insert "Sections 1 - 18, 21, 22, 29 - 33, 35, 36, 44,
46, and 62 - 71"
Page 65, line 25:
Delete "Section 46"
Insert "Section 45"
Page 64, line 26:
Delete "secs. 73 and 74"
Insert "secs. 72 and 73"
Representative Costello OBJECTED for discussion.
Co-Chair Stoltze discussed amendment 11 and the language
inserted related to eligibility to serve on the gasline
development board.
Representative Costello WITHDREW her OBJECTION. There being
NO OBJECTION, it was so ordered. Amendment 11 was ADOPTED.
10:03:25 PM
Representative Gara MOVED to ADOPT Amendment 13, 28-
GS2806\H.43, Bullock, 4/17/14 (copy on file).
Page 18, following line 15:
Insert a new subsection to read:
"(c) An agreement or contract in which the state or
an agent of the state is a party that is negotiated
under AS 38.05.020(b)(11) must include principles
based on commercially reasonable terms for delivering
natural gas to public utilities in the state when the
demand for natural gas by the utilities exceeds the
amount of the state's royalty natural gas and natural
gas delivered to the state as payment of tax that is
being transported in the North Slope natural gas
project."
Representative Wilson OBJECTED for discussion.
10:04:23 PM
Representative Gara discussed amendment 13. He stated that
Alaska would commit the natural gas in the beginning of the
pipeline for instate use and export. The instate demand may
grow, but the gas would be committed to an Asian entity. If
a growth occured in instate demand, more gas would be
necessary. The amendment stated that with commercially
reasonable terms, the state could obtain additional natural
gas for instate use. He stated that Mr. Marks viewed that
the amount of gas used in the state would be minimal and he
could not envision a scenario where the necessary gas would
not be available on the North Slope. If difficulty
obtaining gas occurred, Alaskans would pay more.
10:05:49 PM
Representative Holmes MOVED Conceptual Amendment 1 to
Amendment 13.
Page 18, following line 15:
Insert a new subsection to read:
"(c) An agreement or contract to which the state or
an entity of the state is a party that is negotiated
under AS 38.05.020(b)(11) must include principles
based on commercially reasonable terms for delivering
natural gas to public utilities in the state when the
demand for natural gas by the utilities exceeds the
amount of the state's royalty natural gas and natural
gas delivered to the state as payment of tax that is
available in a North Slope natural gas project."
Representative Wilson OBJECTED for discussion.
She discussed the conceptual amendment that would delete
the word "in" and replace it with "to" and delete the word
"agent" and replace it with "entity that is conforming to
the changes made earlier in amendment 1." She pointed to
lines 7 and 8 of the amendment where the words "being
transported" were deleted and replaced with the word
"available." On line 8, the word "the" was deleted and
replaced with the word "a." She read the amendment. She
suggested that amendment 13 discussed natural royalty gas
of the state when that gas may have already been committed
to instate or out of state purchasers. She wished to
clarify the issue related to the obligation of royalty gas
available.
10:08:01 PM
Mr. Pawlowski opined the conceptual amendment to amendment
13 achieved the underlying intent of the amendment in a way
that would protect the administration and allow guidance
for negotiation. He appreciated the efforts of
Representative Holmes and Representative Gara for their
work with the administration on the issue of long-term
delivery of gas to Alaskans.
10:08:56 PM
Representative Wilson WITHDREW her OBJECTION. There being
NO OBJECTION, it was so ordered. Amendment to amendment 13
was ADOPTED. Amendment 13, as amended was before the
committee.
Vice-Chair Neuman stated that the amendment did not make
sense to him. He read the amendment.
Mr. Pawlowski replied that the issue related to long-term
contracts providing certainty for the state to finance and
enter into the project. He noted the question of future
principles governing the use of gas if additional amounts
were required for state use. He stressed the amended end of
the sentence that was important.
10:10:49 PM
Vice-Chair Neuman asked Commissioner Balash about the
wholesale price of gas out of Cook Inlet. He wondered if
less expensive gas deliverable from the North Slope to the
pipeline would create different market conditions.
10:11:53 PM
Commissioner Balash stated that he did not have the answer
to the question yet. He stated that the pricing of gas as a
commodity including transport was not yet possible. He
guessed that North Slope gas would be more expensive than
Cook Inlet gas. Cook Inlet gas would not have the cost of
transportation and treatment that the North Slope gas would
incur. The success of exploration efforts in Cook Inlet
would help answer the question. He noted that the price of
gas would continue to rise with the consent decree signed
by the Attorney General. The cost of exploration and
development would drive the market price for natural gas in
Cook Inlet. He found it difficult to predict that Cook
Inlet gas would remain at a lower price than that found on
and transported from the North Slope.
10:14:01 PM
Vice-Chair Neuman expressed concern about the final
investment decision. He suspected that contracts would be
difficult to obtain until after a completed open season for
an AKLNG project. He thought that exploration in Cook Inlet
would prove difficult without the certainty of contracts.
Commissioner Balash replied that Hilcorp Energy Company was
seeking a rolling four-year contract with their public
utility customers. He expected that the prospect of long-
term gas supply from AKLNG would encourage Hilcorp to offer
longer term contracts to their customers.
Vice-Chair Neuman agreed with the assessment offered by the
commissioner. He agreed that the arrangement would benefit
the consumers and utility companies in South Central, but
not for the producers.
Commissioner Balash relayed that those producers would be
forced to compete.
10:17:03 PM
Co-Chair Stoltze asked for further considerations.
Representative Wilson WITHDREW her OBJECTION. There being
NO OBJECTION, it was so ordered. Amendment 13 as amended
was ADOPTED.
10:18:01 PM
Co-Chair Stoltze MOVED to ADOPT Amendment 2, 28-
GS2806\H.50, Bullock, 4/17/14 by Co-Chair Stoltze, Co-Chair
Austerman and Representative Gara by Request of the
Governor (copy on file).
Page 19, line 13, following "gas":
Insert "or gas delivered to the state under AS
43.55.014"
Page 20, line 2:
Delete "the"
Insert "a"
Page 20, line 6:
Delete "and"
Page 20, line 7:
Delete the second occurrence of "the"
Insert "a"
Page 20, line 8, following "term":
Insert "; and
(4) the lessee or an affiliate of the lessee has
committed to purchase, dispose of, or market the
state's royalty gas taken in kind and gas delivered to
the state under AS 43.55.014 on the same or
substantially similar terms as the lessee or an
affiliate of the lessee sells, disposes of, or markets
the lessee's gas"
Page 20, line 9, through page 21, line 12:
Delete all material.
Renumber the following bill sections accordingly.
Page 24, line 11:
Delete "sec. 34"
Insert "sec. 32"
Page 28, line 4:
Delete "sec. 37"
Insert "sec. 35"
Page 36, line 13:
Delete "sec. 45"
Insert "sec. 43"
Page 61, line 4:
Delete "sec. 30"
Insert "sec. 28"
Page 62, line 6:
Delete "sec. 30"
Insert "sec. 28"
Page 63, line 11:
Delete "sec. 30"
Insert "sec. 28"
Page 65, line 23:
Delete "23, 30 - 34, 36, 37, 45, 47, and 63 - 72"
Insert "28 - 32, 34, 35, 43, 45, and 61 - 70"
Page 65, line 25:
Delete "Section 46"
Insert "Section 44"
Page 65, line 26:
Delete "secs. 73 and 74"
Insert "secs. 71 and 72"
Representative Wilson OBJECTED for discussion.
10:18:25 PM
Commissioner Balash discussed the amendment seeking to
reconcile sections 23, 24 and 25 found on page 19 of the
bill. The amendment sought to combine the three sections
with one effective date.
Co-Chair Stoltze MOVED to ADOPT amendment 1 to amendment 2
by Co-Chair Stoltze and Co-Chair Austerman.
Page 1 line17, following "has"
Delete: "committed"
Insert: "offered"
Representative Holmes OBJECTED for discussion.
10:21:37 PM
Commissioner Balash wished for consistency regarding
language related to terms offered by the producers. By
switching the language to "offered" an acceptance of an
offer would precede any commitment.
10:22:34 PM
Mr. Pawlowski added that the commissioner could propose the
disposition of royalty, but the legislation would bring the
disposition back to the legislature for approval.
10:23:01 PM
Representative Holmes WITHDREW her OBJECTION. Amendment 1
to amendment 2 was adopted. Amendment 2, as amended was
before the committee.
Representative Gara discussed his support of the amendment.
Co-Chair Stoltze noted the three sponsors.
Representative Wilson WITHDREW her OBJECTION. There being
NO OBJECTION, it was so ordered. Amendment 2 as amended
was adopted.
10:24:37 PM
Representative Gara MOVED to ADOPT Amendment 12, 28-
GS2806\H.40, Nauman\Bullock, 4/16/14 by Representative Gara
(copy on file).
Page 18, following line 15:
Insert a new subsection to read:
"(c) An agreement or contract negotiated under AS
38.05.020(b)(11) or other agreement or contract in
which the state is a party and that is associated with
a North Slope natural gas project may allow all
parties the benefit of equalized capital costs that
result from the expansion of the project. However, the
agreement or contract must provide for an expansion to
transport additional natural gas produced from a lease
or property subject to the tax levied under AS
43.55.011(e) that may increase the average capital
cost for each 1,000 cubic feet of natural gas above
the level before the expansion; however, the cost of
the expansion may not increase the equalized capital
costs for a party that does not participate in the
expansion above the highest capital cost for each
1,000 cubic feet of natural gas before the expansion."
Representative Wilson OBJECTED for discussion.
Representative Gara described amendment 12 as a "rolled-in
rates" amendment. He stated that the agreement between the
state and the producers allowed for an economical reduction
of shipping prices for all parties. All of the parties
shared in the reduction. If the pipeline was not large
enough, then expansion through the prohibitively expensive
process of looping would be required. The amendment would
allow all parties to share in a reduced shipping cost. He
believed that the benefit should continue if prices
increased. Looping would not allow for extra gas in the
pipeline if one party was forced to bear the full cost. He
was advised by Mr. Meyer about the proposal and was
informed that the arrangement was fair and equitable. He
opined that the change was necessary if the state expanded
the pipeline in a way that would allow for great
exploration and employment opportunities in Alaska.
10:28:48 PM
Commissioner Balash stated that the administration was
opposed to the amendment as it conflicted with the terms
stated in the HOA. He noted that the North America based
project was fundamentally different from an LNG project. He
discussed a scenario with four steps related to the cost to
transport and expansion. He believed that a party
participating in one of the later steps with long-term
contracts selling gas as LNG, would incur higher rates in
the long run. He agreed with the sentiment of the
amendment, but argued that latecomers to the project would
suffer. He sought a policy that served both the state and
the public. He opined that flexibility would be beneficial.
Establishing the best pipe diameter initially would solve
the concerns addressed by a rolled-in rate policy.
10:32:34 PM
Vice-Chair Neuman agreed that the changing rates were
unknown. He stated that the debt equity ratio would
continue to change.
Commissioner Balash concurred.
10:33:46 PM
Representative Costello asked how the unregulated nature of
the project impacted the amendment. She understood that the
amendment was attractive, but the project's unregulated
nature diminished the appeal.
Commissioner Balash replied that the amendment was crafted
to match up with the HOA due to its tie with capital costs.
He explained that a large portion of the pipeline rates
were driven by the fuel gas consumed by the infrastructure.
Fuel gas requirements would increase as compression was
added to the pipeline system.
10:35:54 PM
Representative Gara stated his attempts to work with the
administration on the issue for a commitment in the
contract allowing for production of additional gas on the
North Slope. He discussed the potential for a larger
pipeline. He recalled a comment by Co-Chair Austerman
regarding the value in a larger pipeline to accommodate
expansions. He disagreed with the argument that consumers
would be negatively affected by the amendment, because
extra gas in the pipeline would allow for greater state
revenue to subsidize the cost of natural gas for consumers.
If the pipeline was expanded through looping, the expense
would ultimately fall on the consumers.
A roll call vote was taken on the motion.
IN FAVOR: Gara
OPPOSED: Neuman, Thompson, Wilson, Costello, Edgmon,
Guttenberg, Holmes, Munoz, Austerman, Stoltze
The MOTION FAILED (1/10).
10:40:39 PM
Representative Gara MOVED to ADOPT Amendment 14, 28-
GS2806\H.29, Nauman/Bullock, 4/16/14 by Representative Gara
(copy on file).
Page 18, line 3:
Delete "a new section"
Insert "new sections"
Page 18, following line 15:
Insert a new section to read:
"Sec. 38.05.024. Prohibited agreement or contract term
relating to the tax on oil production. An agreement or
contract negotiated under AS 38.05.020(b)(11) or other
agreement or contract in which the state is a party
and that is associated with a North Slope natural gas
project may not include a provision that reduces the
tax levied on oil production under AS 43.55.011 or
that requires compensation to a producer for future
changes in the tax levied on oil production under AS
43.55.011."
Co-Chair Stoltze OBJECTED for discussion.
10:41:14 PM
Representative Gara discussed the recent proposals for
gaslines in Alaska where the three major oil producers
demanded a provision to lock-in oil tax rates for 25 years.
The amendment ensured that the parties did not negotiate a
lock-in of oil tax rates and removed the leverage the oil
companies might have as favorable terms are negotiated. The
state would make compromises if the industry attempted to
lock-in rates. The amendment would allow for a much
stronger negotiating position over the next two years.
Commissioner Balash opposed amendment 14. He appreciated
the sentiments of the sponsor and had no intention of
locking-in specific oil tax rates. He stated that the
amendment's language was written in a way that would
preclude the state from addressing matters that might be an
indirect consequence with regard to the production tax
system. The administration expected the oil business to
remain healthy and carry the costs associated with natural
gas production on the North Slope and especially at Prudhoe
Bay and Point Thompson. The costs would be considered lease
expenditures under the production tax system.
10:45:34 PM
Commissioner Balash continued with description of the Pt.
Thompson agreement as it related to field costs. When the
production tax system recognized upstream costs, the need
for an upstream cost allowance would not be sought under
the leases. If the legislature were to switch back to a
gross tax system for oil, the door to resolve upstream gas
costs would open. The matter would require contemplation
in the agreements, but the amendment's language would
preclude that contemplation.
Vice-Chair Neuman attempted to envision the future where
less and less oil was produced in Alaska. He hoped that the
state would find new reserves. He saw the potential for a
future agreement with the producers for greater pipeline
capacity. He informed the committee that he would not
support the amendment.
10:49:34 PM
Representative Guttenberg noted the significant
relationship between oil and gas. He believed that the
amendment allowed a discussion about the important issue.
If the committee ignored the option, future commissioners
and legislators might be challenged with the decision
making process.
Representative Gara responded to Vice-Chair Neuman's
comments regarding changing future circumstances. He
stressed that the amendment was unrelated to the concerns.
He advocated for the flexibility to adjust to real world
circumstance. The amendment would not prevent the state
from partnering with industry. The legislature and the
public would continue to make those decisions. The
provision would prevent the industry from demanding that
the state lock in oil tax rates. The amendment would
prevent industry from inserting a provision in a state
negotiated contract related to penalties for changing oil
taxes. He believed that the industry should not be allowed
to lock in oil tax rates as part of the gas pipeline
agreement.
Representative Wilson maintained her OBJECTION.
A roll call vote was taken on the motion.
IN FAVOR: Gara, Guttenberg
OPPOSED: Thompson, Wilson, Costello, Edgmon, Holmes, Munoz,
Neuman, Stoltze, Austerman
The MOTION FAILED (2/9).
Representative Gara MOVED to ADOPT Amendment 15, 28-
GS2806\H.22, Bullock, 4/15/14 by Representative Gara (copy
on file).
Page 18, following line 15:
Insert a new subsection to read:
"(c) An agreement or contract in which the state or an
agent of the state is a party that provides for the
midstream transportation by a third party of natural
gas received by the state as royalty or payment of tax
may not require the state to reimburse the third party
an amount for funds used during construction that is
calculated using a rate that is more than one percent
higher than the five-year constant maturity treasury
rate reported by the federal reserve as of the date
the agreement or contract is terminated. In this
subsection, "midstream" means that part of a North
Slope natural gas project that is upstream of a
natural gas liquefaction facility."
Co-Chair Stoltze OBJECTED for discussion.
10:55:10 PM
Representative Gara explained the amendment. He noted that
the contract with TransCanada allowed for a beneficial
term; the state would pay their costs if the project did
not go forward as planned. He stated that TransCanada had a
free ride because they would receive money back from a
failed project with an additional 7.1 percent interest.
TransCanada would receive a guaranteed profit. He quoted
Roger Marks, Legislative Consultant, Legislative Budget and
Audit Committee "in my judgment, the rate of interest for
repaying TransCanada in the event the project is not
sanctioned should be tied to the yield on five year
treasury bills on the date of the enabling legislation." He
noted that the rate was 1.6 percent at the time of the
hearing. He agreed with Mr. Marks that the 7.1 percent
profit in addition to repayment for the investment was too
great.
10:57:59 PM
Commissioner Balash opposed the amendment as a
contradiction of a material term in the Memorandum of
Understanding (MOU). He wondered if the purpose of the
amendment was to undo the agreement with TransCanada or to
lead to renegotiation. He deemed a renegotiation process
complex.
10:59:17 PM
Mr. Pawlowski reiterated the broad spectrum of the
relationship with TransCanada in the terms agreed upon. He
noted that the Alaska Gasline Inducement Act (AGIA) license
required reimbursement of TransCanada for expenditures made
by TransCanada. He noted approximately $100 million worth
of valuable work contributed by TransCanada to the project.
The recovery of costs would occur through the pre-feed
period. During the time period, the state would have the
right to terminate the relationship with TransCanada with
90 day notice for any reason. The state had the benefit of
the work and expertise, and the focus on an interest rate
fundamentally misunderstood the relationship with
TransCanada. He argued that the terms were consistent with
those drafted with other pipeline companies in other
projects. The deal with TransCanada involved the
contribution of previous data, momentum, expertise and the
ability for this or the next legislature to evaluate the
relationship at the end of 2015. The development costs
compensated TransCanada reasonably.
11:01:34 PM
Co-Chair Austerman asked about negotiations related to the
7.1 percent.
Commissioner Balash replied that the return on equity
received by TransCanada was 12 percent if the project
proceeded to construction. He stated that the corporate
cost of capital was higher than the 7.1 percent. He stated
that the 7.1 percent was derived through examination of the
capital structure employed on the project during the
construction phase. The cost of capital during construction
was 7.1 percent.
11:03:08 PM
Mr. Pawlowski added that the discussion began with the
commercial terms of 70/30 established by TransCanada and
approved by the legislature. The state granted the AGIA
license further down in the negotiations.
11:03:51 PM
Representative Gara explained that he had no motive to
disrupt the arrangement with TransCanada. He stated that
TransCanada had a record of building more pipelines in
North America than any other company at fewer cost overruns
than the producers. As a partner, TransCanada was a great
pipeline builder. He had no motive to eliminate
TransCanada. He stated the motive to enable the state to
receive a fair deal. He stated that TransCanada would not
take a loan out to pay costs, but would use cash on hand
instead. He opined that the state was leveraged by
TransCanada because they had the potential AGIA lawsuit
against Alaska.
11:06:16 PM
Representative Wilson maintained her OBJECTION.
A roll call vote was taken on the motion.
IN FAVOR: Gara, Guttenberg
OPPOSED: Wilson, Costello, Edgmon, Holmes, Munoz, Neuman,
Thompson, Austerman, Stoltze
The MOTION FAILED (2/9).
11:07:28 PM
Representative Gara WITHDREW Amendment 16, 28-GS2806\H.21,
Bullock, 4/15/14 by Representative Gara (copy on file).
Representative Gara MOVED to ADOPT Amendment 17, 28-
GS2806\H.5, Bullock, 4/12/14 by Representative Gara (copy
on file).
Page 18, following line 15:
Insert a new subsection to read:
"(c) An agreement or contract in which the state or an
agent of the state is a party that provides for
transportation by a third party of natural gas
received by the state as royalty or payment of tax may
not require the state to reimburse the third party for
more than 40 percent of the development costs incurred
by the third party plus an amount for funds used
during construction if the agreement or contract is
terminated. The agreement or contract must describe
the development costs that are subject to
reimbursement and the rate or other method for
determining the allowance for funds used during
construction."
Representative Wilson OBJECTED for discussion.
Representative Gara explained the amendment related to
repayment of only 40 percent of TransCanada's costs if
necessary. The goal of the amendment was to create a more
equitable relationship between the state and TransCanada.
He noted that TransCanada was the only party in the
contract that would get their investment back. He pointed
out that the state was allowed to buy up to 40 percent of
TransCanada's share of the facilities. He saw the benefit
to TransCanada to be reimbursed for 40 percent of their
costs when all other investors would bear 100 percent of
their costs.
Representative Gara WITHDREW Amendment 17.
11:10:09 PM
Representative Gara MOVED to ADOPT Amendment 18, 28-
GS2806\H.28, Bullock, 4/16/14 by Representative Gara (copy
on file).
Page 18, following line 15:
Insert a new subsection to read:
"(c) A proposed agreement or contract related to the
construction or operation of a North Slope natural gas
project must include a severability provision to
require that the remaining terms of the agreement or
contract will continue to apply if a final decision by
a court of competent jurisdiction finds that a part of
the agreement or contract that relates to royalties,
production taxes, payment of tax or royalty with gas
rather than payment in value, property taxes, or other
fiscal terms is unconstitutional."
Representative Wilson OBJECTED for discussion.
11:10:24 PM
Representative Gara discussed amendment 18. He noted that
if a term was declared unconstitutional, the amendment
would ensure that the entity could not remove them from the
contract. He did not wish to reward a party that negotiated
an unconstitutional provision with the ability to leverage.
The provision would provide protection with a common
mechanism. The courts would not enforce uncontainable
terms. The amendment sought to protect the state from being
leveraged by the majors if a provision was declared
unconstitutional.
11:12:21 PM
Commissioner Balash opposed the amendment. He explained
that the complete agreement was not yet established. He
agreed that close attention must be paid to the agreements.
Severability provisions would likely be considered. He
noted that every party would attempt to mitigate an
assortment of risks. He spoke to the importance of fall-
back provisions in the event of an adverse court decision.
He stated that he recognized that the agreement and
statutory language would be difficult to contend with
because of the limit to specific issues addressed. He noted
that some solutions would be commercial as opposed to
fiscal.
11:16:02 PM
Representative Holmes agreed that the severability clauses
existed in most agreements. She anticipated that the
agreements would have those clauses. She took issue with
the amendment language because of the reference to a
limiting provision related to a payment of tax or royalty
with gas rather than a payment in value. She supported the
use of severability clauses in the contracts, but would
value greater nuance in their language.
11:18:28 PM
Mr. Pawlowski appreciated the insights expressed by
Representative Holmes. He stated that the adoption of
amendment 1 allowed the opportunity and responsibility to
engage the legislature over the next two years as the
agreements evolve.
11:19:56 PM
Representative Guttenberg asked about the difference
between the severability clause in statute and the one in
the contract.
Mr. Pawlowski replied that the amendment required
severability clause use for each of the scenarios listed.
The technicality of each clause was deferred to the
Department of Law.
Representative Guttenberg asked if different types of
severability clauses and contracts might be employed. He
asked if the amendment provided for only one kind of
severability clause.
11:21:47 PM
Commissioner Balash interpreted that the clause must be
included, but others could be employed as well.
Mr. Pawlowski requested testimony from the Department of
Law.
11:22:52 PM
SUSAN POLLARD, OIL, GAS, AND MINING SECTION, DEPARTMENT OF
LAW, discussed the statutory provision on severability as
compared to contractual provisions on severability. She
agreed that contract employed a variety of methods to
address particular provisions in a contract. The choice
would depend on the party's transactions and intent. The
statutory provision applied to a statute but not a
contract. A court must review a particular statute and the
severability provision to determine whether the statutory
provision could proceed.
11:24:48 PM
Representative Gara wished to eliminate worry about a
contractual provision declared unconstitutional. The
statute was unrelated to a contract provision declared
unconstitutional by the courts.
Ms. Pollard stated that the statute would apply to
legislation as opposed to contracts between private
parties.
11:25:30 PM
Representative Gara recalled that contracts normally
included a severability clause. The clause was not
automatically included in the contract. The point of the
amendment was to eliminate the need to fight for the
severability clause because the statute would remove the
option as a negotiating point. He pointed out that
negotiation with the major oil companies could prove
difficult. If a term was deemed unconstitutional via the
amendment, the parties involved would proceed through
negotiation.
11:28:01 PM
Representative Wilson maintained her OBJECTION.
A roll call vote was taken on the motion.
IN FAVOR: Gara, Guttenberg
OPPOSED: Costello, Edgmon, Holmes, Munoz, Neuman,
Thompson, Wilson, Austerman, Stoltze
The MOTION FAILED (2/9).
11:29:19 PM
AT EASE
11:37:14 PM
RECONVENED
Vice-Chair Neuman MOVED to ADOPT Amendment 19 by Vice-Chair
Neuman (copy on file).
Page 23, line 1:
Following the words: "means a project to produce"
Insert the words: "or transport"
Representative Wilson OBJECTED for discussion.
Vice-Chair Neuman discussed the amendment. He pointed to
page 23, line 1, paragraph, 27 of section 30. He noted
three different definitions describing the project. One
definition was "a project to produce natural gas." He noted
that amendment 19 would add the words "or transport" after
the word "produce" leading to "North Slope natural gas
project means a project to produce or transport natural gas
from a state oil or gas." He referred to page 5 in the HOA,
and the project components including the LNG plant, gas
treatment pipelines, the treatment plant, Prudhoe Bay gas
transmission line and Point Thompson unit gas transmission
line. He wished to better describe the full project
including the pipelines through the clarifying amendment.
11:39:20 PM
Mr. Pawlowski appreciated the amendment. He stated that the
underlying problem with reference to the North Slope
natural gas project. He agreed that the addition of "or
transport" to the definition would allow the application of
a non-production related project. He stated that the detail
had been missed by the administration and multiple
legislative committees. He appreciated Vice-Chair Neuman's
attention to detail.
11:40:09 PM
Representative Wilson WITHDREW his OBJECTION. There being
NO OBJECTION, it was so ordered. Amendment 19 was ADOPTED.
Co-Chair Stoltze MOVED to ADOPT Amendment 20 28-
GS2806\H.53, Bullock, 4/17/14 by Co-Chair Stoltze and Co-
Chair Austerman by request of the governor.
Page 1, before line 1, of the amendment:
Insert new material to read:
"Page 2, line 12:
Delete "interim advisory board"
Insert "advisory planning group""
Page 4, following line 1, of the amendment:
Insert new material to read:
"Page 61, lines 7 - 8:
Delete "INTERIM ADVISORY BOARD"
Insert "ADVISORY PLANNING GROUP"
Page 61, line 8:
Delete "interim advisory board"
Insert "advisory planning group"
Page 61, line 9:
Delete "AS 44.19.028"
Insert "AS 44.19.145"
Page 61, line 10:
Delete " board"
Insert "planning group"
Page 61, line 15:
Delete "board"
Insert "planning group"
Representative Gara OBJECTED for discussion.
Mr. Pawlowski discussed amendment 20. He pointed to page 61
of the legislation related to an interim advisory board. He
discussed the property tax issues and needs related to the
project. He noted that lines 18 and 19 of amendment 20
matched the statutory authority in the governor's
administrative order, which necessitated a change in
terminology from interim advisory board to advisory
planning group.
11:42:02 PM
Representative Thompson asked about the municipal advisory
group listed by the governor. He believed that the group
lacked important contributors such as the City of Fairbanks
and the City of North Pole. He noted that construction
workers would inhabit both cities during their time off. He
wished to have the communities included in the discussion
so that the pre-construction impact dollars could obtain
adequate consideration.
Mr. Pawlowski appreciated the information. He mentioned
that the advisory group's meetings were public, open and
transparent. He agreed with the concern about the attention
needed to understand the social impacts of the project. He
mentioned the demands on all of the communities and noted
the administration's commitment to working with all of the
interested groups to bring the best information forward.
11:43:44 PM
Representative Thompson discussed public safety issues
including the police, fire department and emergency medical
technicians (EMT). He stressed the need to consider public
safety organizations prior to the construction process.
Vice-Chair Neuman appreciated the comments made by
Representative Thompson.
11:44:36 PM
Representative Gara asked about the amendment on page 1. He
did not understand the reference to "before line 1."
11:45:16 PM
Mr. Pawlowski stated that the amendment was drafted as an
amendment to amendment 1, which was adopted earlier in the
meeting.
Representative Gara asked if page 2, line 12 and page 61,
lines 7 and 8 would be changed by the amendment.
Mr. Pawlowski concurred.
11:45:59 PM
Representative Gara stated that the name of the group
changed from interim advisory board to advisory planning
group. He was unsure about location of the term "advisory
planning group" in the statute.
Mr. Pawlowski replied that the reference was to the
statutory authority used by the governor to issue the
administrative order.
Representative Gara clarified that the administrative order
initiated an advisory planning group.
Mr. Pawlowski concurred.
11:47:09 PM
Co-Chair Stoltze stated that amendment 20 would amend
amendment 1.
Representative Wilson withdrew her OBJECTION. There being
NO OBJECTION, it was so ordered. Amendment 20 was ADOPTED.
Co-Chair Stoltze explained that the bill's fiscal notes
would be discussed in the next day's meeting.
Representative Gara noted that information regarding the
relative state share of the project compared to other
jurisdictions was not provided to the committee. He wished
to see the information on the House Floor before a final
decision was made on the bill.
Commissioner Balash replied that he would provide
clarification in the morning.
11:49:26 PM
Vice-Chair Neuman MOVED to REPORT HCSCSSB 138(FIN) out of
committee with individual recommendations and the
accompanying fiscal notes.
HCSCSSB 138(FIN) was REPORTED out of committee with a "do
pass" recommendation and with one new fiscal note from the
Department of Commerce, Community and Economic Development,
one new fiscal note from the Department of Transportation
and Public Facilities, one new fiscal note from the House
Finance Committee, two new fiscal notes from the Department
of Revenue, one new fiscal note from the Department of
Natural Resources, and one previously published fiscal
note: FN16 (CED).
11:53:05 PM
AT EASE
11:56:26 PM
RECONVENED
CS FOR SENATE BILL NO. 194(FIN)
"An Act creating the Alaska Tourism Marketing Board;
and relating to tourism marketing."
11:56:32 PM
GENEVIEVE WOJTUSIK, STAFF, SENATOR LESIL MCGUIRE introduced
herself.
11:57:47 PM
ROBERTA GRAHAM, ASSISTANT COMMISSIONER, DEPARTMENT OF
COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT, testified
that the bill formalized the relationship between the
industry and the department. She stated that the department
supported the legislation and she offered to answer
questions. She noted that 21 members would be appointed by
the governor as proposed by the leading trade association.
She stated that the bill would allow the board to work with
the department on the marketing of Alaska as a travel
destination. She mentioned a fiscal note for $3000
representing the two meetings required in the bill.
11:59:30 PM
BILL PEDDLER, ALASKA TOURISM ASSOCIATION, testified that
the industry supported the bill. Since 1988, a formalized
statutory relationship was established between the Alaska
travel industry and the state. The relationship suffered a
few years ago, and the need to formalize the relationship
was again deemed necessary.
Representative Wilson stated that the board had 21 members.
She wondered if quorums might be difficult to obtain.
Mr. Peddler replied that the bill required a quorum
including one member from each region of the state and a
minimum of nine voting members attending. He stated that a
quorum was never difficult to obtain as the subject was a
passionate one amongst all the industry members.
Representative Wilson stated that she participated in a
similar group as an assembly member. She appreciated the
legislation.
Representative Munoz asked about the benefit of the
statute.
Ms. Graham replied that the marketing committee of the
Alaska Travel Industry Association (ATIA) was affiliated
with the trade association. She stated that the qualified
trade association was in statute.
[Note: Meeting continued in minutes dated 4/18/14 12:01
a.m.]
11:59:59 PM
| Document Name | Date/Time | Subjects |
|---|