Legislature(2011 - 2012)HOUSE FINANCE 519

03/23/2012 09:00 AM FINANCE


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Bills Previously Heard/Scheduled TELECONFERENCED
+= HB 9 IN-STATE GASLINE DEVELOPMENT CORP TELECONFERENCED
Moved CSHB 9(FIN) Out of Committee
+= HB 64 PERMANENT MOTOR VEHICLE REGISTRATION TELECONFERENCED
Scheduled But Not Heard
+= HJR 16 CONST. AM: EDUCATION FUNDING TELECONFERENCED
Moved Out of Committee
                  HOUSE FINANCE COMMITTEE                                                                                       
                      March 23, 2012                                                                                            
                         9:05 a.m.                                                                                              
                                                                                                                                
                                                                                                                                
9:05:08 AM                                                                                                                    
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair Stoltze called the  House Finance Committee meeting                                                                    
to order at 9:05 a.m.                                                                                                           
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Bill Stoltze, Co-Chair                                                                                           
Representative Bill Thomas Jr., Co-Chair                                                                                        
Representative Anna Fairclough, Vice-Chair                                                                                      
Representative Mia Costello                                                                                                     
Representative Mike Doogan                                                                                                      
Representative Bryce Edgmon                                                                                                     
Representative Les Gara                                                                                                         
Representative David Guttenberg                                                                                                 
Representative Reggie Joule                                                                                                     
Representative Mark Neuman                                                                                                      
Representative Tammie Wilson                                                                                                    
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
None                                                                                                                            
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
Representative  Wes  Keller,  Sponsor;  Representative  Mike                                                                    
Hawker,  Co-Sponsor; Rena  Delbridge, Staff,  Representative                                                                    
Mike Hawker; Joe Dubler, Vice  President and Chief Financial                                                                    
Officer,   Alaska   Gasline  Development   Corporation   and                                                                    
Director  of Finance,  Alaska  Housing Finance  Corporation,                                                                    
Department of Revenue.                                                                                                          
                                                                                                                                
PRESENT VIA TELECONFERENCE                                                                                                    
                                                                                                                                
Larry  Persily,  Federal  Coordinator,  Alaska  Natural  Gas                                                                    
Projects, Federal Coordinator's Office, Washington D.C.                                                                         
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
HB 9      IN-STATE GASLINE DEVELOPMENT CORP                                                                                     
                                                                                                                                
          CSHB 9(FIN) was REPORTED out of committee with a                                                                      
          "do pass" recommendation and with one new fiscal                                                                      
          impact note from the Department of Revenue.                                                                           
                                                                                                                                
HJR 16    CONST. AM: EDUCATION FUNDING                                                                                          
                                                                                                                                
          HJR 16 was REPORTED out of committee with a "do                                                                       
          pass" recommendation and with one new fiscal                                                                          
          impact note from the Office of the Governor.                                                                          
                                                                                                                                
HB 64     PERMANENT MOTOR VEHICLE REGISTRATION                                                                                  
                                                                                                                                
          HB 64 was SCHEDULED but not HEARD.                                                                                    
                                                                                                                                
HOUSE JOINT RESOLUTION NO. 16                                                                                                 
                                                                                                                                
     Proposing amendments to the Constitution of the State                                                                      
     of Alaska relating to state aid for education.                                                                             
                                                                                                                                
9:06:04 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE WES  KELLER, SPONSOR,  discussed that  HJR 16                                                                    
put  before   the  voters  the  choice   to  allow  indirect                                                                    
assistance for students attending  private schools. The bill                                                                    
was  directed  at  the  Blaine   Amendment;  he  noted  that                                                                    
constitutional delegate  Vic Fischer called the  amendment a                                                                    
standard feature  of all western state  constitutions, which                                                                    
had been  implemented after a  vote failed to include  it in                                                                    
the U.S.  Constitution. He explained  that the bill  did not                                                                    
institute  any programs,  but allowed  the state  to develop                                                                    
programs  that would  provide indirect  aid  to students  in                                                                    
Alaska.                                                                                                                         
                                                                                                                                
Vice-chair Fairclough  moved the bill before  the committee.                                                                    
Representative Wilson OBJECTED for discussion.                                                                                  
                                                                                                                                
Representative Doogan asked for  detail related to a similar                                                                    
amendment that  had been  voted down  2 to  1 at  the Alaska                                                                    
Constitutional Convention.                                                                                                      
                                                                                                                                
Representative  Keller provided  an excerpt  from a  book by                                                                    
Vic Fischer related to the  issue. He informed the committee                                                                    
that after  Blaine Amendments had  been included  in western                                                                    
state constitutions  a proposed  amendment had  been offered                                                                    
to include  the words  "and indirect"  in the  language; the                                                                    
updated language  would have included a  prohibition against                                                                    
providing direct  and indirect assistance. He  read from the                                                                    
excerpt:                                                                                                                        
                                                                                                                                
     Proponents  of  the  proposed  amendment  stressed  the                                                                    
     importance  of  protecting   the  integrity  of  public                                                                    
     education while the opponents  argued for the provision                                                                    
     of services to the  individual students if otherwise in                                                                    
     keeping with the constitution.                                                                                             
                                                                                                                                
Representative  Keller  furthered  that  the  amendment  had                                                                    
failed 34  to 19.  He discussed that  support for  the issue                                                                    
had been  64 percent and 55  percent in two recent  polls in                                                                    
Alaska.  He  believed the  polls  were  consistent with  the                                                                    
objective proposed in HJR 16.                                                                                                   
                                                                                                                                
9:10:32 AM                                                                                                                    
                                                                                                                                
Co-Chair  Stoltze remarked  that  while  the polls  provided                                                                    
useful information,  the legislature was also  guided by the                                                                    
values of its members and other views.                                                                                          
                                                                                                                                
Representative  Wilson pointed  out that  HJR 16  would take                                                                    
the  issue  to  voters  for a  decision.  She  had  received                                                                    
letters  from   parents  of   special  needs   children  and                                                                    
explained that  some children in public  schools needed more                                                                    
than the  schools could  provide. The  bill would  allow the                                                                    
system to address  their needs in a  private school setting.                                                                    
She  stressed that  the  bill  was not  taking  a "shot"  at                                                                    
public  schools; she  felt it  allowed parents  to choose  a                                                                    
school based  on their  child's needs and  not on  what they                                                                    
could afford.  She believed  that the  "sad thing"  was that                                                                    
the  details   would  be  determined  (the   parameters  the                                                                    
department  would apply  and how  schools would  qualify for                                                                    
vouchers) if  voters passed the  issue. She stressed  that a                                                                    
significant  number of  single parents  could not  afford an                                                                    
option outside  of the  public school  system. She  spoke in                                                                    
support of providing voters with the choice.                                                                                    
                                                                                                                                
Representative   Gara   provided   information   about   the                                                                    
constitutional   history.  He   relayed   that  the   Alaska                                                                    
constitutional   delegates   [Jack]   Coghill   and   Rivers                                                                    
[Representative  Gara  subsequently  clarified that  he  had                                                                    
meant  delegate   Metcalf  instead   of  Rivers]   had  both                                                                    
expressed their  desire for a  free public  education system                                                                    
in   the   state.   He  read   a   statement   from   former                                                                    
Representative Coghill:                                                                                                         
                                                                                                                                
     I believe the  way our government was set  up 175 years                                                                    
     ago that  the founders  felt that public  education was                                                                    
     necessary to bring about a  form of educating the whole                                                                    
     child  for the  civic benefit  through the  division of                                                                    
     point of the  home taking a certain part  of the child,                                                                    
     the church taking a certain  part of his education, and                                                                    
     the government  or state through public  schools taking                                                                    
     the  other  part. I  feel  that  the intent  of  public                                                                    
     education is  primarily a state  function and  does not                                                                    
    belong to any private or any one particular group.                                                                          
                                                                                                                                
Representative Gara  read a statement from  delegate [Irwin]                                                                    
Metcalf:                                                                                                                        
                                                                                                                                
     There  are  16  states  that  have  sections  in  their                                                                    
     constitution preventing  public tax dollars  from being                                                                    
     spent for private schools in any way, shape, or form.                                                                      
                                                                                                                                
Representative  Gara read  from  the  constitution that  had                                                                    
been drawn in 1945:                                                                                                             
                                                                                                                                
     No money shall  ever be taken from  the public treasury                                                                    
     directly or  indirectly in aid  of any  church, sector,                                                                    
     denomination,  or religion;  or in  aid of  any priest,                                                                    
     preacher, minister, or teacher thereof as such.                                                                            
                                                                                                                                
Representative  Gara  expounded  that delegate  Metcalf  had                                                                    
been a "firm  believer in the complete  separation of church                                                                    
and state, especially with the  use of state money and state                                                                    
property."  He communicated  that the  delegates had  chosen                                                                    
not  to fund  private schools  for a  reason. He  elaborated                                                                    
that  once  there  was state  funding  of  private  schools,                                                                    
factions would develop in the  legislature; there would be a                                                                    
group  that   believed  private  school  funding   was  very                                                                    
important  and there  would be  a group  in favor  of public                                                                    
education.  He  opined  that support  for  public  education                                                                    
funding would be  lost because there would be a  rift in the                                                                    
legislature. He  did not fault  people for  having differing                                                                    
views on education; however, a  public education system kept                                                                    
people "all  in the same boat"  with the goal of  having the                                                                    
best public  schools possible. He  believed that  the result                                                                    
would be  a worse and  underfunded education system.  He had                                                                    
no  problem  with  people  attending  private  school;  many                                                                    
private schools  offered scholarships. He stressed  that the                                                                    
state  had  done  a   phenomenal  job  offering  alternative                                                                    
schools within  the public education  system. He  pointed to                                                                    
publicly  funded boarding  schools  and  charter schools  in                                                                    
larger Alaskan communities.                                                                                                     
                                                                                                                                
9:17:50 AM                                                                                                                    
                                                                                                                                
Representative Gara  pointed out  that public  education had                                                                    
been  improving.  Graduation  rates and  proficiency  scores                                                                    
were increasing because there had  been a significant amount                                                                    
of funds  invested in  public schools  in recent  years; the                                                                    
formula  had  been  adjusted that  he  felt  had  previously                                                                    
discriminated  against   rural  Alaska.  He   stressed  that                                                                    
funding  parity had  helped  rural  areas, children  needing                                                                    
special  education,  and  with Teachers'  Retirement  System                                                                    
(TRS) debt.  He believed the improvements  would be reversed                                                                    
if state funding  was extended to private  education; he did                                                                    
not support the legislation.                                                                                                    
                                                                                                                                
Representative  Joule  had   attended  a  Catholic  boarding                                                                    
school in high school and had  paid his own way. He believed                                                                    
he  had  gotten  the  best  education  that  he  could  have                                                                    
received.   He   expressed   frustration  related   to   the                                                                    
separation  between   church  and  state;  he   opined  that                                                                    
freedoms had  become so far  reaching that people  forget or                                                                    
prevent  the items  that are  important to  individuals from                                                                    
entering  the classroom.  He understood  respecting people's                                                                    
rights   and  responsibilities,   but   asked  "what   about                                                                    
respecting    everybody   else's."    He   understood    the                                                                    
opportunities that could  arise out of the bill,  but he had                                                                    
not seen  all of the  detailed information. He  wondered how                                                                    
many  students   would  be  counted  in   the  Base  Student                                                                    
Allocation  (BSA),  how  much additional  funding  would  be                                                                    
necessary,   how  much   the   transportation  costs   would                                                                    
increase,  etc. He  understood that  people wanted  to spend                                                                    
money on  education, but  there were  questions in  his mind                                                                    
that had been  unanswered. He believed a debate  on the bill                                                                    
on the  House floor would be  healthy, but he would  have to                                                                    
be convinced that it was the right thing to do.                                                                                 
                                                                                                                                
9:23:07 AM                                                                                                                    
                                                                                                                                
Representative Neuman  had spent  time at a  private school,                                                                    
but attended a  public high school. He believed  his time at                                                                    
the  private   Catholic  school  was  very   beneficial.  He                                                                    
discussed  that  the  school  had  provided  basic  academic                                                                    
courses  in addition  to religious  studies; he  had learned                                                                    
things in  Catholic middle  school that  were taught  in his                                                                    
senior  year  in  public  school.   He  discussed  the  home                                                                    
schooling of his own children.  He had chaired the education                                                                    
committee during his first two  years in office. He believed                                                                    
the education  system in Alaska was  not a one-size-fits-all                                                                    
system; he pointed  to rural schools with  10 students where                                                                    
the cost  could be $40,000  or $50,000 per student  per year                                                                    
and urban  schools that had  up to 1,400 or  1,500 students.                                                                    
He opined  that regional  learning centers  were "fantastic"                                                                    
and  would probably  be part  of Alaska's  future. He  asked                                                                    
what the funding to private  or Catholic school would be. He                                                                    
discussed the  BSA; correspondence programs were  80 percent                                                                    
of  the  base. He  wondered  whether  private schools  would                                                                    
receive  the base  allocation  if they  were  funded by  the                                                                    
state. He stated that schools  currently were trying to grow                                                                    
their  student population  in order  to  obtain more  funds;                                                                    
however, increased  student numbers  led to  overcrowding in                                                                    
the classrooms.  He believed the bill  would provide parents                                                                    
with more opportunities and would  put the decision in their                                                                    
hands. He stressed that Alaska  had many various educational                                                                    
opportunities   and  led   the   nation  in   correspondence                                                                    
programs.                                                                                                                       
                                                                                                                                
9:28:09 AM                                                                                                                    
                                                                                                                                
Representative  Neuman believed  that  it  was important  to                                                                    
give parents  a choice about their  children's education; he                                                                    
spoke in support  of the resolution because he  felt that it                                                                    
gave parents  the choice. He  opined that the  public school                                                                    
system was currently facing a  significant number of issues.                                                                    
He emphasized  that the  issue was about  what was  best for                                                                    
the kids.                                                                                                                       
                                                                                                                                
Representative Guttenberg recalled  a past conversation with                                                                    
constitutional  delegate Jim  Doogan who  had explained  why                                                                    
the issue  was a  "no." Mr.  Doogan had  been a  very active                                                                    
member of the  church and had explained that  once there was                                                                    
public  money in  a private  school the  door was  opened to                                                                    
control issues;  he had  wanted no part  of the  control and                                                                    
firmly  believed in  keeping his  church  separate from  the                                                                    
state for that reason. He  stated that parents currently had                                                                    
a choice  where their  children were educated;  the question                                                                    
was related  to who  paid for  the choices.  He had  gone to                                                                    
Hebrew school,  which had been  paid for by his  parents. He                                                                    
pointed  out  that  it  was  problematic  that  "when  money                                                                    
follows, control follows, and  budget issues follow." He was                                                                    
honored  to have  received the  information from  a delegate                                                                    
who  had been  a part  of  the decision  making process.  He                                                                    
relayed his opposition to the bill.                                                                                             
                                                                                                                                
9:33:53 AM                                                                                                                    
                                                                                                                                
Co-Chair  Stoltze relayed  that he  would vote  to move  the                                                                    
bill from committee. He discussed  that government had a way                                                                    
of "mucking things  up" in school systems. He  hated to risk                                                                    
ruining private schools that were  offered as an alternative                                                                    
to  public  education, but  he  supported  the bill  because                                                                    
philosophically he supported school choice.                                                                                     
                                                                                                                                
Representative Doogan stressed that  the issue should not be                                                                    
taken  lightly; even  passing the  bill from  committee with                                                                    
"no recommendation"  gave people information about  what the                                                                    
course of  the debate  would be. He  stressed that  he would                                                                    
not vote for the bill  for reasons beyond his father telling                                                                    
him not  to and not  only because  his father was  strong in                                                                    
his support  for private schools.  He discussed that  he had                                                                    
gone  to private  school  for 16  out of  18  years. He  was                                                                    
opposed  to  dividing people  up  based  on their  religious                                                                    
beliefs.  His   father  did  not  believe   that  the  civil                                                                    
institutions  should  use  religion to  make  decisions;  he                                                                    
believed there  should be a  clear line between the  two. He                                                                    
furthered that  the wording of the  constitutional statement                                                                    
on education read  that "no money shall be  paid from public                                                                    
schools for  the direct  benefit of  any religious  or other                                                                    
private  educational   institution."  He  opined   that  the                                                                    
statement could not be any clearer.                                                                                             
                                                                                                                                
Representative  Doogan believed  the  bill would  inevitably                                                                    
damage the system; he was  against allocating money based on                                                                    
people's religious  beliefs, economic situations,  or other.                                                                    
He did not agree with  a statement made by Co-Chair Stoltze;                                                                    
he  did  not  believe  that  the  obvious  failures  of  the                                                                    
education system  should be the  reason for  the legislature                                                                    
to  contemplate its  complete  dismantling.  He opined  that                                                                    
people in the  rich districts would get  together to improve                                                                    
their  educational  system  and   the  people  in  the  poor                                                                    
districts  would have  to deal  with  social, economic,  and                                                                    
other handicaps. He voiced strong opposition to the bill.                                                                       
                                                                                                                                
9:39:37 AM                                                                                                                    
                                                                                                                                
Representative  Doogan referenced  the quote  "I'm a  man of                                                                    
principle and my first principle is flexibility."                                                                               
                                                                                                                                
Co-Chair  Stoltze  interjected  that  the  quote  came  from                                                                    
former  U.S.  Senate  Minority  Leader  Everett  Dirksen  of                                                                    
Illinois.                                                                                                                       
                                                                                                                                
Representative Doogan  liked to  think he was  flexible, but                                                                    
he was  inflexible on  the issue. He  relayed that  he would                                                                    
vote against  passing the  bill from  committee. He  did not                                                                    
see the sense  in "inflaming the passions of  people" on the                                                                    
question.  He believed  that if  the  resolution passed  the                                                                    
outcome would be unknowable related  to an election and what                                                                    
would happen if  the issue became law. He  stressed that the                                                                    
flaws  of  the current  education  system  would be  nothing                                                                    
compared to  the fight that  would result if the  issue went                                                                    
to  the voters;  it  was  not possible  to  know what  would                                                                    
happen  if  state  funds  were  stripped  from  the  current                                                                    
educational system and allocated out in "unequal ways."                                                                         
                                                                                                                                
Co-Chair  Stoltze wanted  the record  to accurately  reflect                                                                    
his  prior  statement. He  communicated  that  there was  no                                                                    
pressure to  let the bill  move forward. He  understood that                                                                    
it was a serious issue.                                                                                                         
                                                                                                                                
Representative  Doogan clarified  that he  had not  meant to                                                                    
mischaracterize  any  prior   statements  made  by  Co-Chair                                                                    
Stoltze.  Co-Chair  Stoltze  was   glad  there  was  passion                                                                    
related to the issue.                                                                                                           
                                                                                                                                
Co-Chair  Thomas  noted  that  8 out  of  55  constitutional                                                                    
delegates had  been born  in Alaska;  he wondered  who could                                                                    
have  more passion  than a  person  born and  raised in  the                                                                    
state. He  noted that the  constitution had been  amended in                                                                    
the past and  that the resolution was not  the first attempt                                                                    
to  make an  amendment. He  stated that  it was  the state's                                                                    
ordained  right to  change the  constitution  if it  thought                                                                    
something was  wrong or flawed;  the issue may fail,  but he                                                                    
believed people  should have  the option to  vote on  it. He                                                                    
had  spoken  to family  members  about  the past  move  from                                                                    
Native  schools to  public schools;  people had  thought the                                                                    
education system  would fall  apart. He had  not been  a big                                                                    
proponent of the  resolution at first, but  he had reflected                                                                    
on his own children's education.  He wondered what was wrong                                                                    
with letting  parents choose where  their children  would be                                                                    
educated.  He  opined  that there  was  nothing  wrong  with                                                                    
religious schools; he had been  in church three or four days                                                                    
a week during his youth.                                                                                                        
                                                                                                                                
9:45:48 AM                                                                                                                    
                                                                                                                                
Co-Chair Thomas  remembered that he  had learned to  pray in                                                                    
Vietnam.  He  was in  support  of  moving  the bill  out  of                                                                    
committee  and  would probably  vote  for  it on  the  House                                                                    
floor.  He  noted  that the  Alaska  Federation  of  Natives                                                                    
supported the concept because they  wanted their children to                                                                    
have the ability to receive  a stellar education. He thought                                                                    
the  people should  decide. He  did not  want to  stifle the                                                                    
voice  of the  people. He  believed children  should receive                                                                    
the best  education possible. He discussed  his district and                                                                    
the school  options when he was  a youth. He would  vote for                                                                    
what he thought was right for the children.                                                                                     
                                                                                                                                
A  roll call  vote  was  taken to  report  the  bill out  of                                                                    
committee.                                                                                                                      
                                                                                                                                
IN FAVOR: Joule,    Neuman,   Wilson,    Costello,   Edgmon,                                                                    
Fairclough, Stoltze, Thomas                                                                                                     
OPPOSED: Guttenberg, Doogan, Gara                                                                                               
                                                                                                                                
The MOTION  PASSED (8-3). There being  NO further OBJECTION,                                                                    
it was so ordered.                                                                                                              
                                                                                                                                
HJR  16 was  REPORTED  out  of committee  with  a "do  pass"                                                                    
recommendation and with one new  fiscal impact note from the                                                                    
Office of the Governor.                                                                                                         
                                                                                                                                
9:49:38 AM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
9:50:05 AM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
HOUSE BILL NO. 9                                                                                                              
                                                                                                                                
     "An   Act   requiring   the  Joint   In-State   Gasline                                                                    
     Development   Team  to   report   to  the   legislature                                                                    
     recommended changes  to state law that  are required to                                                                    
     enable  or   facilitate  the  design,   financing,  and                                                                    
     construction  of an  in-state natural  gas pipeline  so                                                                    
     that the in- state  natural gas pipeline is operational                                                                    
    before 2016; and providing for an effective date."                                                                          
                                                                                                                                
9:55:27 AM                                                                                                                    
                                                                                                                                
LARRY  PERSILY,  FEDERAL  COORDINATOR,  ALASKA  NATURAL  GAS                                                                    
PROJECTS,  FEDERAL  COORDINATOR'S  OFFICE,  WASHINGTON  D.C.                                                                    
(via  teleconference), clarified  that  he did  not want  to                                                                    
tell   state  government   what  to   do  on   any  proposed                                                                    
legislation.  He  provided  a highlight  of  current  market                                                                    
conditions in Asia  and the Lower 48 related  to U.S. Liquid                                                                    
Natural  Gas  (LNG)  export   project  financing.  He  would                                                                    
provide  an  overview  of the  potential  for  LNG  exports,                                                                    
whether  LNG  prices  would remain  high  in  Asia,  whether                                                                    
Alaska could compete  on price, and whether  the U.S. market                                                                    
would   ever  recover.   Cheniere   Energy  (Cheniere)   was                                                                    
currently the only  company that had the  U.S. Department of                                                                    
Energy (DOE) approval  to export U.S. gas  to non-free trade                                                                    
nations  including China  and Japan;  8 other  projects were                                                                    
pending  while DOE  awaited a  study on  natural gas  export                                                                    
that  would look  at  how  it would  affect  the U.S.  Gross                                                                    
Domestic Product  (GDP), the  economy, consumer  prices, and                                                                    
other. He relayed  that Cheniere did not  currently have the                                                                    
Federal  Energy  Regulatory Commission  (FERC)  certificate;                                                                    
however,  it was  expected  to be  granted  shortly and  the                                                                    
company  hoped  to  begin construction  during  the  present                                                                    
year.                                                                                                                           
                                                                                                                                
Mr. Persily discussed that Cheniere  opened as an LNG import                                                                    
terminal  in 2008/2009  when people  believed that  the U.S.                                                                    
would  be short  of  natural  gas. The  plant  had a  "huge"                                                                    
import  terminal  that  had  the capacity  to  take  in  and                                                                    
distribute  4  billion  cubic feet  per  day;  however,  the                                                                    
market had changed and the  U.S. was not buying natural gas.                                                                    
As a result  the company's debt was downgraded  to junk. The                                                                    
company had looked  at higher prices in Asia  and decided to                                                                    
convert   to   a    dual-use   facility   by   incorporating                                                                    
liquefaction   and   shipping   into   its   receiving   and                                                                    
regasification  capabilities.  He  stressed  that  customers                                                                    
were needed for the success of a project.                                                                                       
                                                                                                                                
Mr. Persily  shared that Cheniere  had succeeded  in signing                                                                    
up  four   customers  (BP  Group,  Gail   India,  Korea  Gas                                                                    
Corporation,  and  Spain's  largest gas  and  power  utility                                                                    
company Gas Natural Fenosa) for  20 years at approximately 2                                                                    
billion cubic feet per day.  The first two production trains                                                                    
were scheduled  at Cheniere's Sabine Pass  terminal by 2016;                                                                    
the second two  were scheduled for 2017.  He elaborated that                                                                    
all   four   companies   had  signed   the   equivalent   of                                                                    
shipper/taker  pay contracts  that  were more  appropriately                                                                    
termed use-or-pay  contracts. The  companies had  all agreed                                                                    
to pay between  $2.25 and $3.00 per  million British Thermal                                                                    
Unit  (BTU) to  reserve liquefaction  capacity at  the plant                                                                    
for 20  years even  if they  did not  use it;  the contracts                                                                    
represented  binding  commitments  in   the  amount  of  $45                                                                    
billion over the 20 year  period. Cheniere had until the end                                                                    
of 2012  to get its  FERC certificate and financing  in line                                                                    
or  the  companies could  bail  out  on the  commitment.  He                                                                    
elaborated  that   the  only  way  the   company  could  get                                                                    
financing was through contracts  where another company would                                                                    
pay the debt. The contracts  called for the customers to buy                                                                    
gas  based  on U.S.  Henry  Hub  prices  plus a  15  percent                                                                    
upcharge  for   the  gas  that  would   be  consumed  during                                                                    
liquefaction.   He   detailed   that  the   costs   of   the                                                                    
liquefaction charge,  the price  of gas, and  the cost  of a                                                                    
tanker  traveling to  Asia would  be used  to determine  the                                                                    
cost in Asia;  a Henry Hub gas price of  $3.00 would mean an                                                                    
LNG price in  Asia of approximately $9.00; $6.00  gas in the                                                                    
U.S.  would   mean  a  price   of  about  $12.00   in  Asia.                                                                    
Historically LNG prices in Asia  had been tied to global oil                                                                    
prices, but the  Cheniere contract was tied  to U.S. natural                                                                    
gas  prices.   The  cost  of  the   liquefaction  plant  and                                                                    
improvements  would   be  approximately  $10   billion;  the                                                                    
company had obtained $2 billion  in private equity financing                                                                    
from  Blackstone and  would get  the rest  by issuing  debt.                                                                    
Cheniere would  accrue interest at approximately  17 percent                                                                    
on its construction financing.                                                                                                  
                                                                                                                                
Mr. Persily  reiterated that there were  eight other pending                                                                    
projects  in  the  U.S.  and  a  few  more  out  of  British                                                                    
Columbia.  He  stated  that  the  market  would  decide  the                                                                    
projects  that  would move  forward  and  that would  obtain                                                                    
financing; the market would not support 12 export projects.                                                                     
                                                                                                                                
Mr.  Persily  moved  on  to  address  the  Asian  market  in                                                                    
general. He detailed that Australia  currently had eight LNG                                                                    
export   projects  under   development,  which   represented                                                                    
approximately $180 billion.                                                                                                     
                                                                                                                                
10:02:43 AM                                                                                                                   
                                                                                                                                
Mr.  Persily detailed  that  the  Australian projects  would                                                                    
quadruple  the country's  export  capacity to  more than  10                                                                    
billion  cubic  feet per  day;  by  2017 the  country  would                                                                    
overtake  Qatar  as  the world's  leader.  Between  the  two                                                                    
countries   the  total   LNG   export   capacity  would   be                                                                    
approximately  21 billion  cubic feet  per day.  He detailed                                                                    
that in  2010 about 29  billion cubic  feet of LNG  had been                                                                    
exported/imported  internationally.   There  were  currently                                                                    
expansions,  new  projects,  and  developments  underway  in                                                                    
Indonesia,  Papua   New  Guinea,  Angola,  and   Russia.  He                                                                    
furthered that in Mozambique the  companies Anadarko and ENI                                                                    
had  announced discoveries  that totaled  60 trillion  cubic                                                                    
feet; the companies  were looking towards Asia  as an export                                                                    
market.  He pointed  out that  the projects  all represented                                                                    
competition,  but he  acknowledged that  the price  was very                                                                    
good  in Asia  at present.  Current spot  market prices  for                                                                    
April delivery  to Asia were  close to $16 per  million BTU,                                                                    
but  the  market was  waiting  to  see whether  Japan  would                                                                    
restart some  of its  nuclear plants.  He stressed  that the                                                                    
outcome could significantly impact long-term prices.                                                                            
                                                                                                                                
Mr.  Persily continued  that  the high  price  of energy  in                                                                    
Japan was  beginning to effect  behavior and  utilities were                                                                    
pushing back  looking for ways  to cut costs;  the executive                                                                    
director of Tokyo Gas Company  was quoted as saying "cutting                                                                    
raw material costs  is one of the major  goals." The company                                                                    
had  signed a  long-term  contract to  purchase  LNG from  a                                                                    
group project in Australia that  would turn coal-bed methane                                                                    
into LNG; the company executive  had reported that costs for                                                                    
coal-bed  methane were  significantly lower.  He pointed  to                                                                    
pushback in China and India;  the Chinese government set the                                                                    
natural gas price  at about $5, which had  worked okay until                                                                    
importers began  paying two to  three times the  amount. The                                                                    
Chinese government  was currently  testing the raise  of the                                                                    
cap to  $12 per million BTU  in two provinces; the  hope was                                                                    
that  it  would  spur   increased  domestic  production.  He                                                                    
explained that  at present China  produced about  80 percent                                                                    
of the gas it needs. The  prior year it had imported about 3                                                                    
billion  cubic feet  of  gas per  day;  split roughly  50/50                                                                    
between LNG and pipeline gas from Turkmekistan.                                                                                 
                                                                                                                                
10:05:52 AM                                                                                                                   
                                                                                                                                
Mr. Persily  relayed that in  January 2012 China  buyers had                                                                    
paid an average  of $10 per million BTU of  pipeline gas and                                                                    
a range of  $3.50 to $18 for  LNG (the low end  had been gas                                                                    
taken on old  contracts that had been signed  at good prices                                                                    
and the high  end was on current higher  prices). India also                                                                    
set its price  of gas and was instituting  pricing reform in                                                                    
order to spur  domestic production. He posed  the question -                                                                    
would there be  more domestic production in  India and China                                                                    
in the long-term  and how would the markets  react to higher                                                                    
prices.                                                                                                                         
                                                                                                                                
Mr. Persily  discussed that current  gas prices in  the U.S.                                                                    
were horrendous and were at  10-year lows; the situation was                                                                    
ugly  and was  worsening and  the country  could run  out of                                                                    
storage capacity  later in the year.  Most industry analysts                                                                    
believed  that eventually  supply  and  demand would  regain                                                                    
balance. He pointed to various  forecasts for long-term U.S.                                                                    
gas  prices:   Shell  projected  pricing  at   $6;  Anadarko                                                                    
expected gas to reach $5 to  $7 by 2016; Goldman Sachs saw a                                                                    
price recovery beginning in 2013;  Deloitte predicted gas at                                                                    
$6.50 in upcoming  years. He stressed that  the numbers only                                                                    
represented projections.  He believed it made  sense for any                                                                    
producer of  oil and gas in  Alaska to look at  all markets,                                                                    
but the  private money would  select the project  that would                                                                    
get built in the U.S. In  closing he shared that the risk in                                                                    
Alaska was great relating to  the extensive timeline it took                                                                    
to build in  the state, the cost, and  market volatility. He                                                                    
opined that  the state would have  to help with the  risk in                                                                    
some  way  or another  if  Alaska  ever  had a  sizable  gas                                                                    
project.                                                                                                                        
                                                                                                                                
Representative Gara asked for  verification that spot market                                                                    
sales  tended  to  be  higher  than  long-term  prices.  Mr.                                                                    
Persily responded that it depended  on demand, but typically                                                                    
a  premium  was  paid  for spot  market  sales  because  the                                                                    
commodity was not under contract.                                                                                               
                                                                                                                                
Representative  Gara surmised  that Alaska  could not  run a                                                                    
pipeline  on spot  market  prices. He  did  not believe  the                                                                    
state  could routinely  start and  stop  pipeline flow.  Mr.                                                                    
Persily  replied   that  the  liquefaction  plant   was  the                                                                    
problem;  the  plants  did not  run  well  "stop-and-go."  A                                                                    
revenue stream  was necessary in order  to obtain financing;                                                                    
long-term financing was needed.                                                                                                 
                                                                                                                                
Representative  Gara  asked  whether it  was  accurate  that                                                                    
Cheniere was  aiming at a  price of  $9 to $12.  He wondered                                                                    
whether  it was  a fair  benchmark for  the other  potential                                                                    
U.S. export facilities. Mr.  Persily responded that Cheniere                                                                    
was  not a  producer;  he likened  it to  a  toll road.  The                                                                    
company  did not  really  care  what the  price  of gas  was                                                                    
because it  would just make  money as the gas  moved through                                                                    
the  plant. He  added that  given the  pricing structure  it                                                                    
looked  like $3  U.S. gas  could  be delivered  in Japan  at                                                                    
about $9.  He remarked that  it would be interesting  to see                                                                    
if  DOE  allowed  another  export  project  and  if  another                                                                    
project could  obtain contracts.  He relayed that  the whole                                                                    
industry  was watching  to  determine  whether people  would                                                                    
want  gas priced  to Henry  Hub, which  was currently  lower                                                                    
than oil prices.                                                                                                                
                                                                                                                                
10:10:39 AM                                                                                                                   
                                                                                                                                
Representative Gara asked whether  it was possible to assume                                                                    
that if any of the other  eight companies working to get DOE                                                                    
approval for export would send gas out at a similar price.                                                                      
                                                                                                                                
Mr. Persily  believed that new  export plants would  have to                                                                    
compete on Cheniere's pricing  structure. He speculated that                                                                    
it  could  be different  for  a  producer; producers  moving                                                                    
their own gas would sell the  gas for as much as they could.                                                                    
He opined  that presently  many producers would  probably be                                                                    
happy  to sell  the  gas  at almost  any  price  due to  the                                                                    
current over supply  in the U.S. He shared  that there would                                                                    
be a significant amount of  uncertainty around pricing until                                                                    
a second  round of  contracts came forward  in the  U.S. and                                                                    
commitments were made.                                                                                                          
                                                                                                                                
Representative Gara  wondered how competitive gas  through a                                                                    
plant in  Alaska would be  on the Asian market.  He referred                                                                    
to the  ASAP report [Alaska  Stand Alone Gas  Pipeline] that                                                                    
showed the  tariff to Big Lake  for a 500 mcf  line would be                                                                    
$7.75. He surmised  that the report assumed $2  for the cost                                                                    
of gas on top of the $7.75.                                                                                                     
                                                                                                                                
Mr. Persily shared the same  recollection, but noted that he                                                                    
had not reviewed the report recently.                                                                                           
                                                                                                                                
Representative Gara  speculated that it would  be another $2                                                                    
in  local gas  distribution costs  to get  from Big  Lake to                                                                    
Nikiski or  another tidewater facility. Mr.  Persily did not                                                                    
believe  that the  cost would  be  that high  on the  Enstar                                                                    
system, but he had never priced the cost out.                                                                                   
                                                                                                                                
Representative  Gara asked  whether Mr.  Persily had  a more                                                                    
accurate  number. Mr.  Persily replied  that someone  in the                                                                    
room  or  Enstar  could probably  provide  a  more  accurate                                                                    
number. He added that unless  there was a liquefaction plant                                                                    
the gas would have to be moved by pipe to tidewater.                                                                            
                                                                                                                                
Representative Gara asked what  the cost of conditioning the                                                                    
gas at a liquefaction plant would add to the total cost.                                                                        
                                                                                                                                
Mr.  Persily   answered  that  it  was   very  difficult  to                                                                    
estimate. The price Cheniere was  charging was public and it                                                                    
was  a  fairly cost  effective  plant  because the  facility                                                                    
already  had   the  docks  and  storage   tanks  built.  The                                                                    
liquefaction costs  would depend  on the  size of  the plant                                                                    
and how much infrastructure needed  to be built. He believed                                                                    
that when Wood  MacKenzie had done its study  for the Alaska                                                                    
Gasline  Port Authority  the  prior year  for  a very  large                                                                    
liquefaction  plant at  Valdez (capable  of sending  out 2.7                                                                    
billion  cubic feet  per day)  liquefaction  costs had  been                                                                    
around $4; the study had  acknowledged that the number was a                                                                    
very rough estimate  and that the plant  was very expensive.                                                                    
Any company  looking to  get into the  LNG market  in Alaska                                                                    
would look at  the cost and the size of  the project to what                                                                    
the market  was willing  to pay;  if the  liquefaction costs                                                                    
were too  high the company would  have to figure out  how to                                                                    
reduce them.                                                                                                                    
                                                                                                                                
10:14:50 AM                                                                                                                   
                                                                                                                                
Co-Chair Thomas thought it would  be cheaper to get gas from                                                                    
Alaska  compared to  other locations  from around  the world                                                                    
including  British Columbia  and  Mexico.  He surmised  that                                                                    
shipping costs would be less expensive from Alaska to Asia.                                                                     
                                                                                                                                
Mr.  Persily agreed.  He relayed  that  tanker charges  from                                                                    
Alaska to Japan would be  significantly less than from Texas                                                                    
or Louisiana  to Japan even  with the expanded  Panama Canal                                                                    
open in 2014.  He had seen estimates that  the tanker charge                                                                    
could  be $1.50  to  $2.00 less  per  million BTU;  however,                                                                    
shippers/producers on the  Gulf of Mexico coast  had the gas                                                                    
at tidewater.  There would be  a cost of several  dollars to                                                                    
move the gas from Prudhoe  Bay to tidewater in Alaska, which                                                                    
would  wipe out  the savings  from the  shorter tanker  run.                                                                    
From Prudhoe  to port  in tidewater  plus the  tanker charge                                                                    
would  have  to  compete  with gulf  coast  facility  tanker                                                                    
charges and liquefaction costs.                                                                                                 
                                                                                                                                
Co-Chair Thomas remarked that that was his point.                                                                               
                                                                                                                                
Representative Gara  asked for  a tanker cost  estimate from                                                                    
Alaska to  Asia. Mr. Persily  had seen estimates  for tanker                                                                    
charges  from Alaska  of approximately  $1 or  slightly less                                                                    
per  million BTU.  He reiterated  that  tanker charges  were                                                                    
cheaper, but  the transportation  cost from the  North Slope                                                                    
needed to be added to the total cost.                                                                                           
                                                                                                                                
Representative  Gara  estimated   that  the  multiple  costs                                                                    
involved  equaled roughly  $15.75: $7.75  tariff; $2.00  gas                                                                    
price; Enstar  distribution cost  he estimated at  $1; $4.00                                                                    
liquefaction; and  $1 tanker costs.  He referenced  that the                                                                    
ASAP  study acknowledged  that its  cost estimates  could be                                                                    
off by  30 percent.  He wondered  how easy  it would  be for                                                                    
Alaska to get long-term contracts at roughly $16 gas.                                                                           
                                                                                                                                
Mr. Persily  replied that the  specific figures in  the ASAP                                                                    
report  were  not  shown in  current  dollars;  the  numbers                                                                    
assumed  some  inflation  and were  a  levelized  tariff  in                                                                    
dollars  of  the day  over  20  years  in the  pipeline.  He                                                                    
furthered  that it  was  possible that  LNG  prices in  Asia                                                                    
could also  inflate over time;  in the scenario  the current                                                                    
$13 to $15  would be higher over the next  20 years. Company                                                                    
marketing  departments gambled  on the  issues. He  surmised                                                                    
that Alaska  gas would always  tend to  be on the  high cost                                                                    
side because an 800-mile pipeline  with a tariff put the gas                                                                    
at a cost disadvantage with others.                                                                                             
                                                                                                                                
Representative Gara  asked whether  there was ample  time to                                                                    
determine  if a  large  pipeline could  be constructed  that                                                                    
would produce cheaper  gas, given what was  known about Cook                                                                    
Inlet reserves.  He noted that  the way the  legislation was                                                                    
written the  legislature could not  stop the  project unless                                                                    
state funds were required.                                                                                                      
                                                                                                                                
10:20:37 AM                                                                                                                   
                                                                                                                                
Mr. Persily  could not speculate  on the life  expectancy or                                                                    
exploration  success   in  Cook  Inlet.  He   remarked  that                                                                    
everyone would like  to see the biggest  possible project to                                                                    
move  the most  gas because  it would  provide the  cheapest                                                                    
energy to  Alaskans, but he could  not say how much  gas was                                                                    
available in  Cook Inlet or how  long it would last.  He was                                                                    
hopeful  that   exploration  work  in  the   area  would  be                                                                    
successful.                                                                                                                     
                                                                                                                                
Representative Gara  believed that  if the  gasline proposed                                                                    
in HB 9  was built that consumers would be  obligated to pay                                                                    
for the price and the gas  for a long period, given that the                                                                    
pipeline  shipper  would  not   build  without  a  long-term                                                                    
contract. He  wondered what about  the length of  a contract                                                                    
that may be required for Alaska consumers.                                                                                      
                                                                                                                                
Mr.  Persily could  not provide  a specific  answer, but  he                                                                    
explained  that   if  he  wanted   to  borrow  money   on  a                                                                    
development the  lenders would  want to know  that he  had a                                                                    
revenue stream  that would cover the  mortgage. For example,                                                                    
it would be necessary to convince  a lender that there was a                                                                    
15-year revenue stream that would  cover a 15-year mortgage.                                                                    
He  furthered that  it would  depend how  long the  debt was                                                                    
for, which would  dictate how long the contract  would be to                                                                    
use  the  pipe  to  produce  the  revenue  to  pay  off  the                                                                    
mortgage. The mortgage could be  stretched out over a number                                                                    
of  years with  lower  payments and  higher  interest or  it                                                                    
could be accelerated and paid off more quickly.                                                                                 
                                                                                                                                
10:23:20 AM                                                                                                                   
                                                                                                                                
Vice-chair  Fairclough clarified  that  the legislation  did                                                                    
not  specify the  size of  the pipeline.  She remarked  that                                                                    
cost estimates  and variables  discussed during  the meeting                                                                    
were a speculation.  She explained that the  bill provided a                                                                    
framework for  the project; the  bill required  economics, a                                                                    
safe construction, and other. She  stressed that none of the                                                                    
assertions made regarding the  project numbers were included                                                                    
in the bill.                                                                                                                    
                                                                                                                                
REPRESENTATIVE MIKE HAWKER, CO-SPONSOR, agreed.                                                                                 
                                                                                                                                
Co-Chair Stoltze thanked Mr. Persily for his time.                                                                              
                                                                                                                                
Representative  Gara   MOVED  to  ADOPT  Amendment   13  27-                                                                    
LS0075\K, which  would amend previously adopted  Amendment 3                                                                    
(copy on file):                                                                                                                 
                                                                                                                                
     Amendment 3, Page 2, line 26, after "commission."                                                                          
                                                                                                                                
     Insert:                                                                                                                    
                                                                                                                                
     "The  commission  may, by  order,  extend  the 180  day                                                                    
     review period by the duration  of any delay caused by a                                                                    
     public   utility's  failure   to  submit   supplemental                                                                    
     information that is available to the public utility."                                                                      
                                                                                                                                
Co-Chair Stoltze OBJECTED for discussion.                                                                                       
                                                                                                                                
Representative Gara explained Amendment  13 that would amend                                                                    
previously  adopted   Amendment  3.   He  had   worked  with                                                                    
Representative  Hawker and  staff to  reach a  compromise on                                                                    
what  would occur  if the  Regulatory  Commission of  Alaska                                                                    
(RCA) did not make a decision  in 180 days. The current bill                                                                    
included a provision specifying that  the lack of a decision                                                                    
by the  RCA within 180 days  was deemed to be  approval. The                                                                    
amendment addressed a  situation in which a  utility did not                                                                    
provide   the  necessary   information  to   the  Regulatory                                                                    
Commission  of Alaska,  which prevented  it from  making the                                                                    
decision  within   the  180-day  timeframe.   The  amendment                                                                    
reached a  middle ground  and allowed the  RCA more  time if                                                                    
the  utility   did  not  provide  the   information  to  the                                                                    
commission. A party could not  withhold information in order                                                                    
to beat the 180-day deadline.                                                                                                   
                                                                                                                                
Representative  Hawker concurred  and deferred  the response                                                                    
to his staff.                                                                                                                   
                                                                                                                                
10:26:46 AM                                                                                                                   
                                                                                                                                
RENA  DELBRIDGE, STAFF,  REPRESENTATIVE MIKE  HAWKER, agreed                                                                    
that  a  compromise  had been  reached;  the  sponsors  were                                                                    
comfortable with the amendment.                                                                                                 
                                                                                                                                
Co-Chair  Stoltze WITHDREW  his  OBJECTION.  There being  NO                                                                    
further OBJECTION, Amendment 13  was ADOPTED. He referred to                                                                    
the fiscal note.                                                                                                                
                                                                                                                                
Representative  Hawker   remarked  that  the   sponsors  had                                                                    
endeavored to  provide the committee with  the best possible                                                                    
resources.                                                                                                                      
                                                                                                                                
Vice-chair  Fairclough pointed  to  the  fiscal impact  note                                                                    
from the  Department of Revenue.  The note would  provide an                                                                    
allocation  to the  Alaska  Gasline Development  Corporation                                                                    
(ADGC) and  funded varying position counts  including, 22 in                                                                    
FY 13 (7 of which  were included in the governor's request),                                                                    
45 in FY 14, 48  in FY 15, 61 in FY 16, and  54 in FY 17 and                                                                    
FY  18. The  total cost  included  in the  governor's FY  13                                                                    
request was $3,629,400.                                                                                                         
                                                                                                                                
Representative Neuman  thought that Amendment 13  was worded                                                                    
incorrectly. Co-Chair  Stoltze would come back  to the issue                                                                    
after the fiscal note discussion.                                                                                               
                                                                                                                                
Representative  Gara asked  whether the  ADGC cost  estimate                                                                    
associated  with  the  legislation  was  approximately  $400                                                                    
million to get to project sanction.                                                                                             
                                                                                                                                
JOE  DUBLER, VICE  PRESIDENT  AND  CHIEF FINANCIAL  OFFICER,                                                                    
ALASKA  GASLINE  DEVELOPMENT  CORPORATION  AND  DIRECTOR  OF                                                                    
FINANCE, ALASKA  HOUSING FINANCE CORPORATION,  DEPARTMENT OF                                                                    
REVENUE, replied that the total  estimated cost for the pre-                                                                    
sanction activity  would be $400 million.  Approximately $30                                                                    
million  in  costs had  been  incurred  to date;  therefore,                                                                    
about $370 million in additional funds would be necessary.                                                                      
                                                                                                                                
Representative Gara  wondered why  the cost  was not  in the                                                                    
fiscal note.                                                                                                                    
                                                                                                                                
Mr.  Dubler  replied  that the  fiscal  note  included  $286                                                                    
million in  capital costs to  get through FEL 2  (i.e. stage                                                                    
2)  and an  open  season. Subsequently  ADGC  would need  an                                                                    
additional appropriation  to continue  the project  into its                                                                    
third and final phase (pending a successful open season).                                                                       
                                                                                                                                
Representative Gara  asked for verification that  the second                                                                    
appropriation would bring  the total up to  the $400 million                                                                    
figure. Mr. Dubler replied in the affirmative.                                                                                  
                                                                                                                                
Representative Guttenberg  pointed to a  graph on page  2 of                                                                    
the  fiscal  note  and wondered  whether  the  first  column                                                                    
should read  "FY12" instead of "FY13."  Mr. Dubler responded                                                                    
that  the  numbers were  for  FY  13  and were  intended  to                                                                    
conform to  page 1;  the $3.6 million  in the  second column                                                                    
was included in the governor's  request and the first column                                                                    
showed  the appropriation  requested for  the FY  13 capital                                                                    
budget.                                                                                                                         
                                                                                                                                
Representative  Gara  wondered  whether  he  could  ask  Mr.                                                                    
Dubler the questions  that Mr. Persily had not  been able to                                                                    
answer earlier  in the meeting  related to the  ASAP project                                                                    
cost estimates.                                                                                                                 
                                                                                                                                
Co-Chair Stoltze  asked whether  the questions  were related                                                                    
to the fiscal note.                                                                                                             
                                                                                                                                
Representative Gara replied that  the questions were related                                                                    
to the cost of the project.                                                                                                     
                                                                                                                                
10:31:55 AM                                                                                                                   
AT EASE                                                                                                                         
                                                                                                                                
10:33:44 AM                                                                                                                   
RECONVENED                                                                                                                      
                                                                                                                                
Co-Chair Stoltze brought attention back to the fiscal note.                                                                     
                                                                                                                                
Vice-chair Fairclough  clarified the  record related  to the                                                                    
Amendment 13. She explained that  the amendment was specific                                                                    
to Amendment 3 that had been previously adopted.                                                                                
                                                                                                                                
Vice-chair  Fairclough MOVED  to report  CSHB 9(FIN)  out of                                                                    
committee   with   individual    recommendations   and   the                                                                    
accompanying fiscal note.                                                                                                       
                                                                                                                                
Representative Gara  OBJECTED for discussion. He  pointed to                                                                    
page 310  of the ASAP  project plan. He understood  that the                                                                    
more preferable  scenario was the  500 mcf line.  Figure 3-3                                                                    
assumed  the export  of 250  mcf possibly  from Nikiski.  He                                                                    
referenced a tariff to Big Lake at $7.75.                                                                                       
                                                                                                                                
Mr. Dubler explained that the  3-3 used inflated dollars for                                                                    
the 500 mcf base case  estimated tariff. Figure 3-4 included                                                                    
current dollars  at $5.63. He  communicated that it  was not                                                                    
appropriate to compare the number with current dollars.                                                                         
                                                                                                                                
Representative  Gara  surmised   that  the  inflated  figure                                                                    
represented what  the tariff would  cost in the  future when                                                                    
the gas  was potentially  delivered. Mr. Dubler  answered in                                                                    
the affirmative; the  number reflected a 3  percent per year                                                                    
inflation rate.                                                                                                                 
                                                                                                                                
Representative  Gara   asked  for  verification   that  ADGC                                                                    
estimated a  $2 cost  for gas. Mr.  Dubler responded  in the                                                                    
affirmative.                                                                                                                    
                                                                                                                                
Representative  Gara asked  for the  ADGC cost  estimate for                                                                    
distribution from Big Lake to  tidewater. Mr. Dubler replied                                                                    
that the  only thing that  ADGC assumed  was the gas  to Big                                                                    
Lake.  The liquefaction  producer would  bring the  gas from                                                                    
Big Lake  to its  facility; the figure  was included  in the                                                                    
ADGC liquefaction process cost estimates.                                                                                       
                                                                                                                                
Representative  Gara  asked  what the  additional  increment                                                                    
would  be for  liquefaction and  transportation between  Big                                                                    
Lake and tidewater.                                                                                                             
                                                                                                                                
Co-Chair   Stoltze  asked   Mr.  Dubler   to  continue   the                                                                    
conversation with Representative  Gara outside of committee.                                                                    
Mr. Dubler replied in the affirmative.                                                                                          
                                                                                                                                
Representative  Doogan pointed  to FY  13 estimated  capital                                                                    
costs included in  the fiscal note and  wondered whether the                                                                    
$286 million figure plus $200  million that had already been                                                                    
appropriated   represented  the   total  cost.   Mr.  Dubler                                                                    
responded  in  the  negative. He  explained  that  the  $286                                                                    
million would  be the expenditure  of the $200  million plus                                                                    
some   additional   expenditures  submitted   by   different                                                                    
departments related  to work on  the project  (Department of                                                                    
Environmental    Conservation,    Department   of    Natural                                                                    
Resources,   Department   of   Transportation   and   Public                                                                    
Facilities, and other).                                                                                                         
                                                                                                                                
Representative  Doogan  thought  he  heard  a  $400  million                                                                    
figure referenced.                                                                                                              
                                                                                                                                
Mr. Dubler replied  that $400 million was  the total capital                                                                    
expenditure  estimate  that  would  be required  up  to  the                                                                    
sanction process; the $286 million  represented a portion of                                                                    
the $400 million figure.                                                                                                        
                                                                                                                                
Representative Doogan surmised that  the total cost would be                                                                    
the  $286 million  plus the  balance that  would reach  $400                                                                    
million.  Mr. Dubler  clarified  that the  balance would  be                                                                    
less the amount that had already been expended.                                                                                 
                                                                                                                                
10:39:20 AM                                                                                                                   
                                                                                                                                
Representative Wilson asked for  verification that the costs                                                                    
and tariffs would be divided  by users throughout the state.                                                                    
From  Dunbar to  Fairbanks  (including a  straddle plant  if                                                                    
needed) would  be paid by  the Fairbanks users.  From Dunbar                                                                    
to the end  location in Anchorage (plus a  straddle plant if                                                                    
needed)  would  be  paid by  Anchorage.  She  surmised  that                                                                    
Anchorage would  pay a tariff  of $9.63 and  Fairbanks would                                                                    
pay  $10.45,  which  represented  an  $0.82  difference  per                                                                    
million   BTU.  Currently   Fairbanks  was   paying  $23.35;                                                                    
therefore, it would see a  55 percent decrease in gas price.                                                                    
She believed there  would be a 66 percent  decrease the more                                                                    
the community "got off of heating oil."                                                                                         
                                                                                                                                
Mr.  Dubler  responded in  the  affirmative.  He added  that                                                                    
Anchorage would have a less  than 10 percent increase in the                                                                    
cost of gas. He stated that  the project would supply gas to                                                                    
Fairbanks and Anchorage for an indefinite amount of time.                                                                       
                                                                                                                                
Representative  Wilson recognized  that the  legislation was                                                                    
not  perfect,  but  she  believed  the  momentum  needed  to                                                                    
continue  on  the  framework  and  figures;  therefore,  she                                                                    
supported the  bill. She  communicated that  Fairbanks would                                                                    
watch  closely   to  ensure  that  the   figures  did  bring                                                                    
affordable gas to the community.                                                                                                
                                                                                                                                
Representative  Doogan  commented  that   he  had  not  been                                                                    
present for the prior night's  meeting due to health reasons                                                                    
and he expressed  intent to offer at least  one amendment on                                                                    
the House floor.                                                                                                                
                                                                                                                                
A roll call vote was taken  on the motion to report the bill                                                                    
out of committee.                                                                                                               
                                                                                                                                
IN  FAVOR:  Fairclough,  Joule,  Neuman,  Wilson,  Costello,                                                                    
Doogan, Edgmon, Stoltze, Thomas                                                                                                 
OPPOSED:  Gara, Guttenberg                                                                                                      
                                                                                                                                
The MOTION to  report the bill from  committee PASSED (9-2).                                                                    
There being NO further OBJECTION, it was so ordered.                                                                            
                                                                                                                                
CSHB 9(FIN) was  REPORTED out of committee with  a "do pass"                                                                    
recommendation and with one new  fiscal impact note from the                                                                    
Department of Revenue.                                                                                                          
                                                                                                                                
Co-Chair Thomas  highlighted that  the opportunity  to truck                                                                    
gas  to Tok,  Delta,  Haines,  or other  had  not ever  been                                                                    
mentioned in  the discussion.  He would  vote for  the bill,                                                                    
but  wanted people  to  understand that  there  was more  to                                                                    
Alaska than Anchorage, Fairbanks, and Mat-Su.                                                                                   
                                                                                                                                
Representative Guttenberg  remarked that he had  brought the                                                                    
issue up.                                                                                                                       
                                                                                                                                
Representative  Hawker  assured  Co-Chair  Thomas  that  the                                                                    
sponsors had been  prepared to respond to  the questions. He                                                                    
relayed  that a  significant  focus of  the  bill was  about                                                                    
establishing a backbone that would  provide a way to get the                                                                    
majority  of  the  gas  from the  North  Slope  reserves  to                                                                    
tidewater in  Southcentral. The bill  specifically empowered                                                                    
ADGC to bring  gas to any communities that  could be reached                                                                    
in an economically feasible way,  which included the propane                                                                    
project on the  Yukon River that the  Alaska Natural Gasline                                                                    
Development Authority  had worked  on. He  communicated that                                                                    
it would then  be up to the legislature to  develop a vision                                                                    
for  future development.  He  referenced  a Norwegian  model                                                                    
that used  a fleet  of compressed  natural gas  tankers that                                                                    
could work  off of  tidewater to provide  coastal deliveries                                                                    
around  the  state. He  stated  that  the legislature's  own                                                                    
vision was  the only limitation  on what could be  served in                                                                    
Alaska.                                                                                                                         
                                                                                                                                
Representative Edgmon agreed with the comments made by Co-                                                                      
Chair  Thomas.  He thanked  the  sponsor  for adding  intent                                                                    
language that  further clarified that the  application could                                                                    
be statewide in  nature. He believed that  natural gas would                                                                    
be  the  great equalizer  in  terms  of bringing  affordable                                                                    
energy to all areas of the state.                                                                                               
                                                                                                                                
Co-Chair Stoltze thanked the staff and committee for the                                                                        
hours spent on the legislation.                                                                                                 
                                                                                                                                
HOUSE BILL NO. 64                                                                                                             
                                                                                                                                
     "An   Act   relating   to   permanent   motor   vehicle                                                                    
    registration; and providing for an effective date."                                                                         
                                                                                                                                
HB 64 was SCHEDULED but not HEARD.                                                                                              
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
10:45:59 AM                                                                                                                   
                                                                                                                                
The meeting was adjourned at 10:45 AM.                                                                                          
                                                                                                                                
                                                                                                                                

Document Name Date/Time Subjects
HB009CS(RES)-NEW_DOR-AHFC-03-22-12 Attachment #2.pdf HFIN 3/23/2012 9:00:00 AM
HB 9
HB009CS(RES)-NEW FN DOR-AHFC-03-22-12.pdf HFIN 3/23/2012 9:00:00 AM
HB 9
HB009CS(RES)-DOR-AHFC-03-12-12 Attachment #1.pdf HFIN 3/23/2012 9:00:00 AM
HB 9
HB9 Amendment #13.pdf HFIN 3/23/2012 9:00:00 AM
HB 9
HJR16 Sponsor Handout.pdf HFIN 3/23/2012 9:00:00 AM
HJR 16