Legislature(2013 - 2014)HOUSE FINANCE 519

03/21/2013 01:30 PM FINANCE

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                  HOUSE FINANCE COMMITTEE                                                                                       
                      March 21, 2013                                                                                            
                         1:37 p.m.                                                                                              
1:37:44 PM                                                                                                                    
CALL TO ORDER                                                                                                                 
Co-Chair Stoltze called the House Finance Committee meeting                                                                     
to order at 1:37 p.m.                                                                                                           
MEMBERS PRESENT                                                                                                               
Representative Alan Austerman, Co-Chair                                                                                         
Representative Bill Stoltze, Co-Chair                                                                                           
Representative Mark Neuman, Vice-Chair                                                                                          
Representative Mia Costello                                                                                                     
Representative Bryce Edgmon                                                                                                     
Representative Les Gara                                                                                                         
Representative David Guttenberg                                                                                                 
Representative Lindsey Holmes                                                                                                   
Representative Cathy Munoz                                                                                                      
Representative Steve Thompson                                                                                                   
Representative Tammie Wilson                                                                                                    
MEMBERS ABSENT                                                                                                                
ALSO PRESENT                                                                                                                  
Representative  Mike Chenault; Representative  Mike Hawker;                                                                     
Rena Delbridge, Staff, Representative Hawker; Sarah Fisher-                                                                     
Goad,   Executive   Director,   Alaska   Energy   Authority,                                                                    
Department of Commerce,  Community and Economic Development;                                                                    
Ted  Leonard,   Executive  director  of   Alaska  Industrial                                                                    
Development and Export  Authority; Representative  Isaacson;                                                                    
Nick Szymoniak, Project Economist, Alaska Energy Authority.                                                                     
PRESENT VIA TELECONFERENCE                                                                                                    
HB   4    IN-STATE GASLINE DEVELOPMENT CORP                                                                                     
          HB 4 was HEARD and HELD in committee for further                                                                      
SB  23    AIDEA: LNG PROJECT; DIVIDENDS; FINANCING                                                                              
          SB 23 was HEARD and HELD in committee for further                                                                     
1:38:01 PM                                                                                                                    
HOUSE BILL NO. 4                                                                                                              
     "An  Act relating  to  the  Alaska Gasline  Development                                                                    
     Corporation;  making  the  Alaska  Gasline  Development                                                                    
     Corporation,  a   subsidiary  of  the   Alaska  Housing                                                                    
     Finance Corporation, an  independent public corporation                                                                    
     of  the state;  establishing  and relating  to the  in-                                                                    
     state  natural   gas  pipeline  fund;   making  certain                                                                    
     information  provided  to  or  by  the  Alaska  Gasline                                                                    
     Development  Corporation exempt  from  inspection as  a                                                                    
     public record;  relating to the Joint  In-State Gasline                                                                    
     Development  Team;  relating   to  the  Alaska  Housing                                                                    
     Finance Corporation;  relating to judicial review  of a                                                                    
     right-of-way lease or an action  or decision related to                                                                    
     the  development  or  construction  of an  oil  or  gas                                                                    
     pipeline  on state  land; relating  to the  lease of  a                                                                    
     right-of-way   for   a  gas   pipeline   transportation                                                                    
     corridor,  including  a  corridor  for  a  natural  gas                                                                    
     pipeline that  is a contract  carrier; relating  to the                                                                    
     cost   of  natural   resources,  permits,   and  leases                                                                    
     provided    to   the    Alaska   Gasline    Development                                                                    
     Corporation;  relating  to  procurement by  the  Alaska                                                                    
     Gasline  Development   Corporation;  relating   to  the                                                                    
     review  by  the  Regulatory  Commission  of  Alaska  of                                                                    
     natural gas  transportation contracts; relating  to the                                                                    
     regulation by  the Regulatory  Commission of  Alaska of                                                                    
     an in-state  natural gas pipeline project  developed by                                                                    
     the  Alaska Gasline  Development Corporation;  relating                                                                    
     to  the  regulation  by the  Regulatory  Commission  of                                                                    
     Alaska  of  an  in-state   natural  gas  pipeline  that                                                                    
     provides transportation by  contract carriage; relating                                                                    
     to  the  Alaska   Natural  Gas  Development  Authority;                                                                    
     relating to the procurement  of certain services by the                                                                    
     Alaska  Natural  Gas Development  Authority;  exempting                                                                    
     property of  a project developed by  the Alaska Gasline                                                                    
     Development Corporation from  property taxes before the                                                                    
     commencement of commercial operations; and providing                                                                       
     for an effective date."                                                                                                    
1:40:20 PM                                                                                                                    
REPRESENTATIVE MIKE CHENAULT testified  that HB 4 would move                                                                    
Alaska  forward   by  utilizing  the  state's   natural  gas                                                                    
resource  for Alaskans.  He mentioned  HB 369,  which formed                                                                    
Alaska  Gasline  Development  Corporation (AGDC).  He  noted                                                                    
that AGDC  had been  tasked with revisiting  the idea  of an                                                                    
instate  gasline.  The  project  would  allow  gas  for  all                                                                    
Alaskans, at  a reasonable  price, under the  constraints of                                                                    
Alaska Gasline  Inducement Act (AGIA).  He stated  that AGDC                                                                    
recommended  the components  written  into HB  4 that  would                                                                    
allow for an open season to gather buyers and sellers.                                                                          
Representative  Chenault  spoke  to  the  need  to  increase                                                                    
revenue for  Alaska. He noted  that Alaskans had  waited for                                                                    
more  than 30  years for  an instate  gasline. He  mentioned                                                                    
some arguments  against the gasline,  including the  need to                                                                    
retain the  gas cap pressure  at Prudhoe Bay and  Kuparuk in                                                                    
an effort  to produce  more oil and  revenue for  Alaska. He                                                                    
stated that Alaska had opportunities  to move the gas off of                                                                    
the  North  Slope  without  disturbing  oil  production.  He                                                                    
shared that the  original design for the gasline  was a high                                                                    
pressure, 24  inch pipeline, which would  carry liquids from                                                                    
Prudhoe  Bay to  South  Central Alaska  and  was termed  the                                                                    
"bullet line."                                                                                                                  
Representative     Chenault    continued     that    further                                                                    
conversations yielded  a new  proposal for  a 36  inch, 1440                                                                    
PSI line  traversing 800 miles  to South Central  Alaska. He                                                                    
contended  that the  pipe  was not  small  when compared  to                                                                    
other gaslines  in the world.  He stressed that  the market,                                                                    
and not  the legislature,  would determine  the size  of the                                                                    
pipe and  the location of  gas delivery. He argued  that the                                                                    
legislature  could  continue to  hold  up  the only  gasline                                                                    
project moving  forward because  of the  belief that  it did                                                                    
not fit particular criteria, or  the legislature could leave                                                                    
it  up to  the people  who "know  what they  are doing."  He                                                                    
noted the  complexity of the  legislation and  its proposal.                                                                    
He explained that HB 4 allowed  AGDC the ability to hire the                                                                    
best  and brightest  consultants to  compose the  management                                                                    
team required  to bring the multiple  billion dollar project                                                                    
to the state.  He added that HB 4 was  the only project that                                                                    
had current state and federal  permits with the intention to                                                                    
move the projects forward.                                                                                                      
1:47:37 PM                                                                                                                    
Speaker Chenault  stated that an  expensive ad  campaign had                                                                    
arisen to  stop the project proposed  in HB 4. He  said that                                                                    
he understood  the concerns raised  by the  community behind                                                                    
the  ad campaign.  He stated  that their  main argument  was                                                                    
that  the gasline  was not  big enough.  He stated  that the                                                                    
project  was   constrained  by  AGIA,  and   at  some  point                                                                    
combining the projects  could be in order. He  referred to a                                                                    
letter  from  the  big  3  oil  producers  to  the  governor                                                                    
suggesting a  different diameter pipeline. He  said that the                                                                    
argument rested on  the difference between a 36  and 42 inch                                                                    
pipeline. He said  if Alaska wanted to build  a 48 pipeline,                                                                    
it could,  but someone would have  to pay for it.  He warned                                                                    
that the shippers and the buyers  would not pay for space in                                                                    
a pipeline  that they  were not going  to use.  He advocated                                                                    
for providing the proper tools  to corporations in an effort                                                                    
to move  the project forward. He  said that it was  time for                                                                    
the legislature  to get  out of  the way  and allow  for the                                                                    
project  to advance.  He stressed  that he  wanted the  most                                                                    
powerful  corporation   in  the  market  doing   the  states                                                                    
bidding. He relayed  that under AGDC the  project was shovel                                                                    
ready  and all  that they  needed were  the tools  to go  to                                                                    
1:51:05 PM                                                                                                                    
REPRESENTATIVE  MIKE  HAWKER  echoed  the  concerns  of  the                                                                    
previous testifier.  He lamented  that the  greatest problem                                                                    
across the  state was the  cost and availability  of energy.                                                                    
He asserted  that HB  4 was  about solutions;  short, medium                                                                    
and long-term  solutions to  Alaska's energy  challenges. He                                                                    
shared that  in the short-term  the Cook Inlet  Recovery Act                                                                    
had  provided  heat and  lights  in  that area  for  several                                                                    
years. He provided the example  of gas trucking as a medium-                                                                    
term solution for the interior. He  asserted that HB 4 was a                                                                    
bill  that  made  long-range   solutions  possible  for  all                                                                    
Alaskans. He  expressed his  frustration regarding  the lack                                                                    
of progress  on a  natural gas pipeline.  He noted  that the                                                                    
legislature  had addressed  the  lack of  progress with  the                                                                    
creation  of   AGDC  in  order   to  move  forward   with  a                                                                    
legislatively  sanctioned  process,  and  that  process  was                                                                    
embodied  in HB  4.  He  emphasized that  HB  4  was not  an                                                                    
alternative  to other  needed  solutions; particularly,  the                                                                    
Fairbanks Trucking Proposal. He  noted that the first policy                                                                    
objective of  the bill  was to deliver  gas to  Alaskans, as                                                                    
soon as  possible, and at  the least possible cost.  He said                                                                    
that  the policy  objective of  the bill  was to  reduce the                                                                    
project and financing risk, reduce  the cost, and ultimately                                                                    
reduce  consumer rates.  He  stressed that  HB  4 was  about                                                                    
taking care of Alaskans first.                                                                                                  
1:55:35 PM                                                                                                                    
Representative Hawker highlighted  the six policy principles                                                                    
that had been incorporated into the bill:                                                                                       
   · to minimize political influence                                                                                            
   · to base any pipeline project going forward on a                                                                            
     viable, commercial transaction; a market based                                                                             
     solution in the private sector                                                                                             
   · to make AGDC as efficient and flexible as possible                                                                         
   · to provide a strong and comprehensive regulatory                                                                           
   · to provide a strong governance framework with the                                                                          
     creation  of a  state agency  that can  efficiently and                                                                    
     effectively  operate,  while holding  AGDC  responsible                                                                    
     under   clear    statutory   mission    and   statutory                                                                    
   · to allow and support the development of future Alaska                                                                      
     oil and gas basins                                                                                                         
He stressed that  the bill had been carefully  crafted so as                                                                    
not to violate the terms of  AGIA. He recapped that HB 4 was                                                                    
a  balanced  approach  to  moving   a  project  forward  and                                                                    
equipped AGDC  for success  in the  endeavor. He  noted that                                                                    
the bill would  empower AGDC to shift  gears and participate                                                                    
in any other project, to  an appropriate degree, in order to                                                                    
help the state meet the  primary objective of delivering gas                                                                    
to  Alaskans. He  noted the  institutional controls  written                                                                    
into the  legislation in  order to  ensure that  any project                                                                    
going   forward  had   a  commercially   viable  transaction                                                                    
underwriting the project. He  explained that the legislative                                                                    
appropriative authority  over the state was  not compromised                                                                    
in  the legislation.  He emphasized  that AGDC  was mandated                                                                    
under  statute  to weigh  the  needs  and interests  of  the                                                                    
residents of the state when  making decisions that they must                                                                    
be  working to  deliver gas  to Alaskan's  at a  competitive                                                                    
2:00:29 PM                                                                                                                    
RENA  DELBRIDGE, STAFF,  REPRESENTATIVE  HAWKER, provided  a                                                                    
power point presentation, "An Alaska  Natural Gas Future for                                                                    
Alaskans."  She  spoke  to Slide  2,  "Legislature  in  2010                                                                    
charged  AGDC with  the  mission of  getting  Alaska gas  to                                                                    
    -Clean, reliable, reasonably priced in state energy                                                                         
     -Electric and home heating costs                                                                                           
     -Economic development for communities                                                                                      
     -Industrial development opportunities                                                                                      
2:02:16 PM                                                                                                                    
Ms. Delbridge continued to Slide 3, "House Bill 369 of 2012                                                                     
     1. Build a team under AHFC leadership                                                                                      
     2. Consolidate state's gas pipeline work to date                                                                           
     3. Fill in data gaps; decide optimal route                                                                                 
     4. Report back to the Legislature with a project plan                                                                      
2:03:04 PM                                                                                                                    
Ms. Delbridge turned to Slide 4, "AGDC delivered with the                                                                       
July 211 Project Plan":                                                                                                         
     -A pipeline for Alaskans is possible                                                                                       
     -An in-state line could deliver competitively priced                                                                       
     gas to major population centers                                                                                            
     -Project will require firm, long-term contracts for                                                                        
     pipeline capacity in order to support financing                                                                            
     -Legislative action required                                                                                               
2:03:53 PM                                                                                                                    
Ms. Delbridge discussed Slide 5:                                                                                                
    AGDC recommended legislation for the authority to:                                                                          
          -Determine pipeline ownership structure                                                                               
          -Work confidentially with private sector partners                                                                     
          -Operate as a contract carrier                                                                                        
          -Decide rates and tariff terms                                                                                        
     AGDC further needs the state to:                                                                                           
          -Waive property taxes and state land lease fees                                                                       
          -Provide sufficient funding and create a pipeline                                                                     
          -Limit judicial review                                                                                                
2:04:39 PM                                                                                                                    
Ms. Delbridge continued to Slide 6, "Now, House Bill 4":                                                                        
     -Provides further direction for AGDC                                                                                       
          -Transfers  existing  statute  from  HB  369/38.34                                                                    
          from Joint  Instate Gasline  Development Team/AHFC                                                                    
          subsidiary to AGDC                                                                                                    
          -Incorporates HB 9, from 2012                                                                                         
     -Provides the framework for AGDC to serve as Alaska's                                                                      
     natural gas pipeline corporation                                                                                           
     -Maximizes state's efforts in gas pipeline development                                                                     
     -Resolves regulatory uncertainties while supporting                                                                        
     future development of Alaska resources                                                                                     
     -Includes AGDC recommendations                                                                                             
     -Maintains momentum - delays hurt!                                                                                         
          -AGDC estimates $200 million per year inflation                                                                       
          -South-central    gas     supply    (and    costs)                                                                    
          increasingly uncertain                                                                                                
          -Fairbanks energy  costs and air quality  - no end                                                                    
          in sight                                                                                                              
          -Continuing expectation  for state to  offset high                                                                    
2:07:01 PM                                                                                                                    
Ms. Delbridge continued to Slide7, "Under House Bill 4,                                                                         
AGDC will":                                                                                                                     
     1. Continue work on the in-state pipeline                                                                                  
          -Requires sufficient shipper  support to finance a                                                                    
          -Target date: Gas flowing 2019                                                                                        
     2. Work with TransCanada and producers to align two                                                                        
          -Uncertain: no development commitment to date                                                                         
     3. Be prepared to participate in other frameworks                                                                          
          -For example, spur line                                                                                               
     4. Once a main line is complete, evaluate other                                                                            
     pipeline opportunities                                                                                                     
          -Lines off  the main line  connecting communities,                                                                    
          industrial development                                                                                                
          -Other stand-alone Alaska gas pipelines                                                                               
2:08:28 PM                                                                                                                    
Ms. Delbridge transitioned to Slide 8, "Establishes AGDC as                                                                     
Alaska's gas pipeline entity":                                                                                                  
     -Section 3;  transition language in Section  1, Section                                                                    
     -HB  4  moves  AGDC  from its  present  location  as  a                                                                    
     subsidiary of Alaska Housing  Finance, to a stand-alone                                                                    
     state corporation                                                                                                          
     -Locates AGDC  under Department of  Commerce, Community                                                                    
     and  Economic Development  for administrative  purposes                                                                    
     -AGDC  will  be  governed  by  a  5-member  board  with                                                                    
     expertise   in  relevant   fields,  appointed   by  the                                                                    
     governor, confirmed by the legislature                                                                                     
     -Provides clear transition language                                                                                        
2:10:20 PM                                                                                                                    
Ms. Delbridge continued to Slide 9, "Clearly states AGDC's                                                                      
purpose (Section 3)":                                                                                                           
     -To  advance an  instate gas  pipeline as  described in                                                                    
     the  July  2011  project plan,  with  modifications  as                                                                    
     appropriate, making gas  available to Fairbanks, South-                                                                    
     central,  and other  communities  in the  state at  the                                                                    
     lowest rates possible;                                                                                                     
     -To  develop pipelines  serving utility  and industrial                                                                    
     customers, at commercial reasonable rates;                                                                                 
     -To  develop  pipelines  offering commercial  rates  to                                                                    
     shippers and  that offer access for  shippers producing                                                                    
     gas in Alaska                                                                                                              
     -Once a  mainline is  complete, to  consider additional                                                                    
     pipelines  to   extend  the  reach  of   gas  to  other                                                                    
     communities, industrial users                                                                                              
2:11:46 PM                                                                                                                    
Ms. Delbridge continued to Slide 10, "Provides clear                                                                            
statutory abilities to AGDC to function as a corporation                                                                        
and to accomplish its purpose (Sec.3)":                                                                                         
     -Enter into ownership and operating partnerships                                                                           
     -Create subsidiaries, including  a subsidiary to market                                                                    
     -Issue revenue  bonds limited to AGDC's  own backing to                                                                    
     finance a pipeline                                                                                                         
     -Enter  into  confidentiality agreements  necessary  to                                                                    
     participate  with  private sector  shippers,  partners,                                                                    
     -Keep confidential  information like field  studies and                                                                    
     tariff models  that are assets  AGDC is  developing for                                                                    
     the state                                                                                                                  
     -Exercise the state's existing power of eminent domain                                                                     
2:14:56 PM                                                                                                                    
Ms. Delbridge spoke to Slide 11, "House Bill 4 also":                                                                           
     -Exempts  AGDC  from  the state  procurement  code  and                                                                    
     state personnel act (Section 3; and Sections 4 and 14)                                                                     
     * (AGDC  is currently exempt from  the procurement code                                                                    
     as an AHFC subsidiary (per HB 369 of 2010)                                                                                 
     -Exempts AGDC  from the  Executive Budget  Act (Section                                                                    
     -Applies  public  official  disclosure  rules  to  AGDC                                                                    
     board members (Section 15)                                                                                                 
Ms. Delbridge turned to Slides 12 and 13, "Maximizes                                                                            
state's efforts in gas pipeline development":                                                                                   
     •Additional  state   support  for  a  project   in  the                                                                    
     public's  interest will  help  reduce  delays and  keep                                                                    
     costs as low as possible                                                                                                   
     House Bill 4:                                                                                                              
     -Limits judicial  review of state  permitting decisions                                                                    
     and authorizations to avoid delays (Section 13)                                                                            
     -Directs DNR to waive annual  fees on a state right-of-                                                                    
     way lease for AGDC (Section 3; Section 12)                                                                                 
     -Waives state and local  property taxes during pipeline                                                                    
     construction (Section 22)                                                                                                  
     -Sunsets the Alaska  Natural Gas Development Authority,                                                                    
     per a 2010 Leg Audit recommendation                                                                                        
     -Requires  state   entities  to  cooperate   and  share                                                                    
     information with AGDC (Section 3)                                                                                          
     -AGDC  requests  receive   priority  (except  for  AGIA                                                                    
     -AGDC    and   state    entities    can   enter    into                                                                    
     confidentiality  agreements  if  necessary  to  protect                                                                    
     third-party information in the state's possession                                                                          
     -Calls  on the  state to  provide water,  sand, gravel,                                                                    
     and  other non-hydrocarbon  natural  resources to  AGDC                                                                    
     (Section 3)                                                                                                                
     -AGDC will  pay usual  prices; cost cannot  be included                                                                    
     in tariff base and passed on to pipeline shippers                                                                          
2:18:26 PM                                                                                                                    
Ms. Delbridge continued to Slide 14, "Resolves Regulatory                                                                       
     •Regulatory  uncertainties add  risk, which  adds costs                                                                    
     and can deter private  sector participation. AGDC needs                                                                    
     to  know  how  a  pipeline  will  be  regulated  before                                                                    
     soliciting private sector partners                                                                                         
     House Bill 4:                                                                                                              
     -Allows natural  gas pipelines  to operate  as contract                                                                    
     carriers  through changes  to the  Right-of-Way Leasing                                                                    
     Act  and   through  Regulatory  Commission   of  Alaska                                                                    
     -Reinforces  state  policy  that  pipelines  should  be                                                                    
     fair; offer  reasonable access to  new/future shippers;                                                                    
     and encourage  future development  of Alaska's  oil and                                                                    
     gas resources                                                                                                              
2:19:34 PM                                                                                                                    
Ms. Delbridge discussed Slide 15, "Why a contract                                                                               
     -Shippers  need  to  know  that   the  space  they  are                                                                    
     'reserving'  by signing  long-term commitments  will be                                                                    
     -Those firm, uninterruptible contracts  are the way gas                                                                    
     pipelines are financed                                                                                                     
     -The  future income  promised  through those  contracts                                                                    
     secures revenue bonds                                                                                                      
     -House  Bill  4  establishes  contract  carrier  status                                                                    
     while providing for expansions in the future                                                                               
2:21:07 PM                                                                                                                    
Ms. Delbridge continued to Slide 16, "Right of Way Leasing                                                                      
    •Section 11: Sections 6, 8, 9 and 10 are conforming                                                                         
    •Includes a set of covenants a lessee must agree to                                                                         
     •HB  4  modifies  covenants reflecting  common  carrier                                                                    
     principles, to allow for contract carriage                                                                                 
     •'Nuts and bolts' of covenants remain the same                                                                             
     •Contract carrier  covenants still require  a pipeline,                                                                    
     per  contractual  terms,  to provide  connections  with                                                                    
     other pipelines and facilities                                                                                             
     •Contract  carrier covenants  still require  expansions                                                                    
     on commercially reasonable terms                                                                                           
     •Contract  carrier covenants  still require  a pipeline                                                                    
     to ship without discrimination                                                                                             
2:22:57 PM                                                                                                                    
Ms. Delbridge spoke to Slide 17, "Regulatory Commission of                                                                      
Alaska oversight for a contract carrier gas pipeline":                                                                          
     •Section  21 is  new regulatory  chapter; Section18  is                                                                    
     related. Sections 19, 20, 5 are conforming)                                                                                
     •Mandates  a  baseline  package   of  rates  and  terms                                                                    
     (recourse tariff) available  to all interested parties,                                                                    
     and allows negotiations of final rates                                                                                     
     •Requires an RCA-approved initial recourse tariff                                                                          
     •Requires  RCA to  decide if  precedent agreements  are                                                                    
     'just and reasonable'                                                                                                      
     •Premise  is contracts  entered into  willingly by  two                                                                    
     parties  are  just and  reasonable  -  with checks  and                                                                    
     •Provides   certainty   and   protection   for   public                                                                    
2:25:43 PM                                                                                                                    
Ms. Delbridge continued to Slide 18, "Recourse tariff                                                                           
     -Supported by full cost study                                                                                              
     -Terms and conditions are 'not unduly discriminatory                                                                       
     -Rate  elements  are  reasonable -  return  on  equity,                                                                    
     capital structure, depreciation                                                                                            
     -Revisions  required  -   post  construction,  pre-open                                                                    
     -Triennial rate  review and operating reserve  fund for                                                                    
     excess ROR                                                                                                                 
     Precedent agreement review:                                                                                                
     -Are  contracts just  and  reasonable  as evidenced  by                                                                    
     arm's length transaction?                                                                                                  
     -Heightened scrutiny for affiliate relationships                                                                           
2:30:05 PM                                                                                                                    
Ms. Delbridge discussed the RCA section of the legislation                                                                      
on Slide 19:                                                                                                                    
     •Allows  confidential filing  of precedent  agreements;                                                                    
     requires public filing of final contracts                                                                                  
     •Requires a  CPCN (building permit) from  the RCA, with                                                                    
     special  terms  for  an AGDC  pipeline  reflecting  the                                                                    
     state-sanctioned mission                                                                                                   
     •Directs RCA to intervene  when a dispute threatens the                                                                    
     public health and safety                                                                                                   
     •Allows   contracts  to   include  dispute   resolution                                                                    
     methods that  give all shippers notice  and opportunity                                                                    
     to protect their interests                                                                                                 
     •Sets  standards  for  fair, accessible  open  seasons;                                                                    
     requires open seasons for new capacity/expansions                                                                          
     •Directs  RCA   to  oversee  open  seasons   and  field                                                                    
     •Sets   timelines  that   should  not   interfere  with                                                                    
     commercial processes                                                                                                       
2:33:15 PM                                                                                                                    
Co-Chair Stoltze requested a sectional analysis.                                                                                
Ms. Delbridge presented the sectional beginning with                                                                            
Section 1:                                                                                                                      
     Section 1 - Findings and Intent                                                                                            
          Corporation (AGDC) natural gas  pipeline is in the                                                                    
          best  interests of  the  state,  and required  for                                                                    
          public convenience and necessity.                                                                                     
          The  Regulatory Commission  of  Alaska (RCA)  uses                                                                    
          these standards in issuing a  building permit to a                                                                    
          project. Through this  section, the legislature is                                                                    
          making these findings on behalf of the RCA.                                                                           
          of Commerce,  Community and  Economic Development,                                                                    
          for  administrative  purposes only,  will  advance                                                                    
          AGDC's mission.                                                                                                       
          Establishing AGDC  as an independent  state entity                                                                    
          with a clear purpose and the statutory                                                                                
          authority to meet its mission  will make AGDC more                                                                    
          likely to succeed.                                                                                                    
          Alaska   Housing    Finance   Corporation   (AHFC)                                                                    
          subsidiary  to a  stand-alone corporation  will be                                                                    
          treated as  a repositioning and not  as creating a                                                                    
          new entity.                                                                                                           
          This intent  should prevent  the need  to dissolve                                                                    
          AGDC and re-create  it as a new  corporation; as a                                                                    
          transfer,  AGDC  will  need to  amend  bylaws  and                                                                    
          services,  labor,  products   and  resources  from                                                                    
          Alaska   businesses,   including   Alaska   Native                                                                    
          corporations  and  municipal  organizations,  when                                                                    
          prices are competitive.                                                                                               
          hire  Alaskans;  establish  hiring  facilities  in                                                                    
          Alaska; and use Department  of Labor and Workforce                                                                    
          Development systems.                                                                                                  
2:36:12 PM                                                                                                                    
Ms. Delbridge continued to Section 2:                                                                                           
     Section  2  (conforming)  deletes  from  AS  18.56.086,                                                                    
     Alaska Housing Finance  Corp, Creation of subsidiaries,                                                                    
     the  ability to  create  a pipeline  subsidiary. HB  4,                                                                    
     Section  3, establishes  AGDC as  a stand-alone  public                                                                    
     corporation of the state, so  it is no longer necessary                                                                    
     for AHFC  to have  a subsidiary corporation  related to                                                                    
     natural gas pipelines.                                                                                                     
2:37:56 PM                                                                                                                    
Ms. Delbridge shared Section 3, which was the statutory                                                                         
backbone of the new corporation:                                                                                                
     Section 3 (new corporation)  adds a new chapter, Alaska                                                                    
     Gasline  Development Corporation,  to  AS  31, Oil  and                                                                    
     This section is the statutory authority for the stand-                                                                     
     alone corporation.                                                                                                         
          Sec. 31.25.010, Structure,  establishes AGDC as an                                                                    
          independent  public  corporation   of  the  state,                                                                    
          located for administrative  purposes in DCCED, and                                                                    
          makes  provisions  for   asset  distribution  upon                                                                    
          Sec.  31.25.020,  Governing  body,  establishes  a                                                                    
          five-member    board    of   directors,    serving                                                                    
          staggered,    seven-year   terms.    Members   are                                                                    
          appointed by  the governor  and must  be confirmed                                                                    
          by  the legislature.  In making  appointments, the                                                                    
          governor shall  consider expertise in  natural gas                                                                    
          pipeline  construction,  operation and  marketing;                                                                    
          finance;  and  large project  management.  Members                                                                    
          may be  removed only for cause;  vacancies will be                                                                    
          filled in  the same  way as  original appointments                                                                    
          are made. Board  members receive $400 compensation                                                                    
          per  day  spent  on official  board  business,  in                                                                    
          addition to actual expenses.                                                                                          
          Sec.  31.25.030, Meetings  of  board, directs  the                                                                    
          board  to  annually   elect  officers;  defines  a                                                                    
          quorum  as a  majority  of  members; and  requires                                                                    
          meetings  at   least  once  every   three  months.                                                                    
          Electronic meetings are allowed.  For a meeting in                                                                    
          which  the board  authorizes a  bond issuance,  at                                                                    
          least  24  hours  public notice  is  required.  At                                                                    
          least three  board members are required  for major                                                                    
          votes, including  bond sales; sale  or disposition                                                                    
          of  assets;   determining  a   pipeline  ownership                                                                    
          structure;   and  participation   in  a   pipeline                                                                    
          Sec 31.25.035,  Minutes of meetings,  requires the                                                                    
          board to keep minutes.                                                                                                
2:40:04 PM                                                                                                                    
          Sec. 31.25.040, Administration  of affairs, allows                                                                    
          the  board to  manage the  assets and  business of                                                                    
          the corporation;  the board may adopt,  amend, and                                                                    
          repeal bylaws and regulations;  and the board will                                                                    
          delegate   corporation   administration   to   the                                                                    
          executive  director. Requires  the board  to adopt                                                                    
          formal   procedures  for   procurement  processes;                                                                    
          requires a preference for Alaska veterans.                                                                            
          Sec.  31.25.045, Executive  director, requires  an                                                                    
          executive director who is  appointed by and serves                                                                    
          at  the pleasure  of the  board. The  director may                                                                    
          not be a board member.                                                                                                
          Sec.   31.25.050,  Legal   counsel,  directs   the                                                                    
          corporation to retain legal counsel.                                                                                  
          Sec.  31.25.060, Employment  of personnel,  allows                                                                    
          the  board to  engage  professional and  technical                                                                    
          consultants, and allows  the executive director to                                                                    
          hire  corporation  employees   and  contract  with                                                                    
          consultants.   The    board   sets    duties   and                                                                    
          compensation for corporation personnel.                                                                               
          Sec.  31.25.065,   Personnel  exempt   from  State                                                                    
          Personnel  Act,   exempts  AGDC  from   the  State                                                                    
          Sec. 31.25.070,  Purpose, directs AGDC  to advance                                                                    
          an instate  natural gas  pipeline as  described in                                                                    
          AGDC's July 2011  project plan, with modifications                                                                    
          as  necessary, making  gas  available  as soon  as                                                                    
          practicable   to  Fairbanks,   South-central,  and                                                                    
          other communities  where possible; and  attempt to                                                                    
          develop  projects that  ship  and  deliver gas  at                                                                    
          commercially reasonable rates.                                                                                        
          Sec.  31.25.080,  Powers   and  duties,  lists  21                                                                    
          powers   of   the   corporation,   including   the                                                                    
          abilities  to  determine  pipeline  ownership  and                                                                    
          operating  structures;  plan,  finance,  construct                                                                    
          and  operate  a   pipeline  system;  lease,  rent,                                                                    
          acquire  and  manage  property;  exercise  eminent                                                                    
          domain; transfer  or dispose of  all or part  of a                                                                    
          pipeline  system; operate  as a  contract carrier;                                                                    
          conduct hearings;  sue and be sued;  adopt bylaws;                                                                    
          borrow money;  and invest  funds. Directs  AGDC to                                                                    
          analyze  other  connecting  lines  once  the  main                                                                    
          pipeline   is    under   construction.   Prohibits                                                                    
          development of a pipeline  that competes under the                                                                    
          terms  of   the  Alaska  Gasline   Inducement  Act                                                                    
          (AGIA).  Requires   publication  of   open  season                                                                    
          Sec.   31.25.090,   Confidentiality;   interagency                                                                    
          cooperation,  requires  state  agencies  to  share                                                                    
          information with AGDC;  requires state agencies to                                                                    
          cooperate  with AGDC  and  give  priority to  AGDC                                                                    
          requests,  except  for   requests  from  the  AGIA                                                                    
          coordinator;   and    directs   AGDC    to   avoid                                                                    
          duplicating  state  work   on  a  pipeline.  State                                                                    
          entities  must  provide non-hydrocarbon  resources                                                                    
          like  water,  sand and  gravel  to  AGDC at  usual                                                                    
          cost,  but those  costs may  not be  passed on  to                                                                    
          pipeline customers. DNR will grant AGDC a right-                                                                      
          of-way  lease at  no appraisal  or rental  cost if                                                                    
          certain  conditions   are  met;  the   fee  waiver                                                                    
          carries  with the  lease in  case  of a  transfer,                                                                    
          which must  be approved by the  commissioner. AGDC                                                                    
          may   enter   into  confidential   agreements   as                                                                    
          necessary,  including with  other state  entities;                                                                    
          information    covered   by    a   confidentiality                                                                    
          agreement is  not subject to disclosure  under the                                                                    
          Public  Records  Act.  AGDC may  also  keep  other                                                                    
          information  confidential,  including the  results                                                                    
          of  field  studies; technical  information;  trade                                                                    
          secrets;  and  commercial negotiations.  AGDC  may                                                                    
          waive confidentiality of  some information. Once a                                                                    
          gas  pipeline is  operational,  AGDC must  release                                                                    
          confidential information, providing  doing so does                                                                    
          not hurt  the state's economic interests  and does                                                                    
          not violate confidentiality agreements.                                                                               
          Sec.  31.25.100,  In-state  natural  gas  pipeline                                                                    
          fund,   establishes    the   instate-natural   gas                                                                    
          pipeline fund within AGDC and directs fund use.                                                                       
          Sec. 31.25.120, Creation  of subsidiaries; sale of                                                                    
          natural  gas  by  a  subsidiary,  allows  AGDC  to                                                                    
          create  subsidiary  corporations  to  meet  AGDC's                                                                    
          mission,  including  subsidiaries to  acquire  and                                                                    
          ship natural gas.                                                                                                     
          Sec.    31.25.130,    Administrative    procedure;                                                                    
          regulations, exempts AGDC from the Administrative                                                                     
          Procedure Act,  except for  the Open  Meetings Act                                                                    
          portion.  Provides  board   direction  related  to                                                                    
          bylaws,   regulations,   and  public   notice   of                                                                    
          Sec.   31.25.140,   Exemption   from   the   State                                                                    
          Procurement  Code and  the  Executive Budget  Act;                                                                    
          corporation   finances,  exempts   AGDC  and   its                                                                    
          subsidiaries from  the State Procurement  Code and                                                                    
          the  Executive  Budget  Act.  Requires  an  annual                                                                    
          independent  audit. AGDC  is  already exempt  from                                                                    
          the procurement  code as an AHFC  subsidiary; this                                                                    
          transitions  the exemption  to  AGDC  as a  stand-                                                                    
          alone corporation.                                                                                                    
2:44:23 PM                                                                                                                    
          Sec.  31.25.150, Federal  taxation of  interest on                                                                    
          bonds and bond  anticipation notes, provides that,                                                                    
          if  interest on  bonds  or  notes becomes  taxable                                                                    
          under  federal income  tax  laws, the  legislature                                                                    
          may pay off the principal and interest.                                                                               
          Sec.  31.25.160,  Bonds   and  notes,  allows  the                                                                    
          corporation  to issue  bonds and  notes in  one or                                                                    
          more  series,  limited  to the  corporation's  own                                                                    
          Sec.  31.25.170,  Independent  financial  advisor,                                                                    
          allows  the  corporation  to  retain  a  financial                                                                    
          advisor in  negotiating the private sale  of bonds                                                                    
          or notes to an underwriter.                                                                                           
          Sec.  31.25.180, Validity  of pledge,  declares as                                                                    
          valid and binding any pledge  of assets or revenue                                                                    
          of the corporation to payment or interest.                                                                            
          Sec.  31.25.190,  Capital  reserve  funds,  allows                                                                    
          AGDC to establish capital  reserve funds to secure                                                                    
          its  obligations,  and  directs  fund  management.                                                                    
          Requires  annual  reports   to  the  governor  and                                                                    
          Sec. 31.25.200,  Remedies, permits  enforcement of                                                                    
         rights by those holding AGDC obligations.                                                                              
          Sec.  31.25.210, Negotiable  instruments, declares                                                                    
          that obligations are promises  to pay an amount of                                                                    
          Sec.    31.25.220,   Obligations    eligible   for                                                                    
          investment,   AGDC   obligations   as   legitimate                                                                    
          Sec.  31.25.230,  Refunding  obligations,  permits                                                                    
          the   corporation   to  refund   obligations   and                                                                    
         provides direction for managing refunds.                                                                               
          Sec.  31.25.240,  Credit  of  state  not  pledged,                                                                    
          prohibits AGDC  from pledging the  state's credit.                                                                    
          AGDC obligations are limited to AGDC's backing.                                                                       
          Sec. 31.25.250, Limitation  on personal liability,                                                                    
          protects   corporation   officers  from   personal                                                                    
          Sec. 31.25.260,  Tax exemption, exempts  AGDC from                                                                    
          paying  state  and   local  taxes  on  corporation                                                                    
          property or property income.                                                                                          
          Sec. 31.25.270, Annual  report, requires an annual                                                                    
          report  to the  governor, legislature  and public,                                                                    
          including   an   independent   audited   financial                                                                    
          Sec. 31.25.390, Definitions.                                                                                          
2:47:55 PM                                                                                                                    
Ms. Delbridge continued:                                                                                                        
     Section  4  (procurement   code  exemption),  adds  new                                                                    
     paragraphs to AS 36.30.850(b), Public Contracts, State                                                                     
     Procurement   Code,   Application  of   this   chapter,                                                                    
     exempting  AGDC and  its  subsidiaries  from the  state                                                                    
     procurement  code.  The   exemption  is  reinforced  in                                                                    
     AGDC's statutes (HB 4 Section 3, 31.25.140).                                                                               
     Section  5  (RCA   accounting,  conforming)  amends  AS                                                                    
     37.05.146(c)(22),  Public  Finance,  Fiscal  Procedures                                                                    
     Act,  Definition of  program  receipts and  non-general                                                                    
     fund program receipts.                                                                                                     
     Section  6  (gas  or  electric  utilities,  conforming)                                                                    
     amends AS  38.05.180 (bb)(1), Public Land,  Alaska Land                                                                    
     Act, Oil and gas and  gas only leasing, to conform with                                                                    
     Section 11  creating covenants  specific to  a contract                                                                    
     carrier pipeline.                                                                                                          
     Section   7   (definitions)repeals  and   reenacts   AS                                                                    
     38.34.099, Public Land,  In-State Natural Gas Pipeline,                                                                    
     Definitions,  to refer  to the  definitions in  the new                                                                    
     31.25 (HB 4, Section 3).                                                                                                   
     Section 8  (right-of-way leases, conforming)  amends AS                                                                    
     38.35.100(d),  Public Land,  Right-of-Way Leasing  Act,                                                                    
     Decision  on application,  to  conform  to Section  11,                                                                    
     right-of-way leasing for a contract carrier.                                                                               
     Section 9  (right-of-way leases, conforming)  amends AS                                                                    
     38.35.120(a), Public Land, Right-of-Way Leasing Act,                                                                       
     Covenants required to be included  in lease, to conform                                                                    
     to  Section 11,  right-of-way  leasing  for a  contract                                                                    
2:50:08 PM                                                                                                                    
Ms. Delbridge continued with the sectional analysis:                                                                            
     Section 10 (right-of-way  leases, conforming) amends AS                                                                    
     38.35.120(b),  Public Land,  Right-of-Way Leasing  Act,                                                                    
     Covenants required to be included  in lease, to conform                                                                    
     to  Section 11,  right-of-way  leasing  for a  contract                                                                    
     Section  11 (contract  carrier  covenants)  adds a  new                                                                    
     section to AS 38.35,  Public Land, Right-of-Way Leasing                                                                    
     Act, to establish covenants for  a contract carrier gas                                                                    
     pipeline.  This section  does  not  alter the  existing                                                                    
     covenants in the Right-of-Way Leasing  Act for a common                                                                    
     carrier.  A   carrier  must  agree  to   abide  by  the                                                                    
     covenants  in order  to  receive  a state  right-of-way                                                                    
     lease. Of  14 existing  covenants for  common carriers,                                                                    
     11 also  apply to  a contract  carrier. The  others are                                                                    
     adapted to  reflect contract carrier  principles, while                                                                    
     retaining the  policy that  pipelines on  state rights-                                                                    
     of-way should encourage broader  development of oil and                                                                    
     gas    resources   by    expanding   when    commercial                                                                    
     opportunities exist  and shipping  without unreasonable                                                                    
     Section  12 (right-of-way  leases,  costs)  adds a  new                                                                    
     subsection to  AS 38.35.140, Public  Land, Right-of-Way                                                                    
     Leasing Act,  Payment of rental and  costs, requiring a                                                                    
     right-of-way lease  to be  issued at  no cost  to AGDC.                                                                    
     This  reinforces in  the Right-of-Way  Leasing Act  the                                                                    
     provision  in HB4,  Section  3 (31.25.090,  Interagency                                                                    
     cooperation;  confidentiality)  that leases  should  be                                                                    
     made at no rental fee/cost to AGDC.                                                                                        
     Section 13  (judicial review)  adds new  subsections to                                                                    
     AS  38.35.200, Public  Land, Right-of-Way  Leasing Act,                                                                    
     Judicial  review  of   decisions  of  commissioners  on                                                                    
     application, limiting  judicial review of  state lease,                                                                    
     permit   or  other   authorization  decisions.   Claims                                                                    
     challenging this  provision must  be brought  within 60                                                                    
     days  of the  effective  date of  HB  4; future  claims                                                                    
     alleging  a constitutional  violation  must be  brought                                                                    
     within  60 days  of the  action  and must  be filed  in                                                                    
     superior  court. The  court  may  not grant  injunctive                                                                    
     Section 14  (personnel act exemption) exempts  AGDC and                                                                    
     subsidiaries  from AS  39.25.110,  Public Officers  and                                                                    
     Employees,  State Personnel  Act, Exempt  service. This                                                                    
     exemption is reinforced in AGDC's corporate statutes.                                                                      
     Section  15 (public  officials  disclosures) makes  the                                                                    
     board of directors of AGDC  and subsidiaries subject to                                                                    
     public  official  financial   disclosure  rules  in  AS                                                                    
     39.50.200,   Public  Officers   and  Employees,   State                                                                    
     Personnel Act, Definitions.                                                                                                
     Section  16 (confidentiality)  amends AS  40.25.120(a),                                                                    
     Public   Records    and   Recorders,    Public   Record                                                                    
     Disclosures,  Public   records;  exemptions;  certified                                                                    
     copies, to exempt  eligible information and information                                                                    
     covered  by  an  AGDC  confidentiality  agreement  from                                                                    
     disclosure  under the  state Public  Records Act.  This                                                                    
     relates to  HB 4,  Section 3 (31.25.090)  allowing AGDC                                                                    
     to keep certain information confidential.                                                                                  
     Section 17  (RCA, conforming), amends  AS 42.04.080(a),                                                                    
     Public  Utilities  and  Carriers and  Energy  Programs,                                                                    
     Regulatory   Commission   of  Alaska,   Decision-making                                                                    
     procedures, to  allow the  RCA to  appoint a  panel for                                                                    
     hearing matters under the new  42.08. The RCA needs the                                                                    
     statutory  authority  to appoint  a  panel  and hear  a                                                                    
     matter  that  comes  before  them   under  one  of  two                                                                    
     existing  regulatory   statutes.  This  adds   the  new                                                                    
     regulatory chapter created in  HB 4, Section 21, 42.08,                                                                    
     so the RCA will be able  to act on matters that come up                                                                    
     under the new regulatory chapter.                                                                                          
     Section 18  (RCA review  of public  utility contracts),                                                                    
     amends  AS 42.05,  Public  Utilities  and Carriers  and                                                                    
     Energy  Programs,  Alaska Public  Utilities  Regulatory                                                                    
     Act, by adding  a new section related to  RCA review of                                                                    
     contracts entered  into by a  public utility  with AGDC                                                                    
     for  transportation   or  for  contracts   that  public                                                                    
     utilities   sign  to   purchase   gas   or  store   gas                                                                    
     transported   on  an   instate  natural   gas  pipeline                                                                    
     regulated  under 42.08.  Public utility  contracts with                                                                    
     AGDC  may include  a covenant  for public  utilities to                                                                    
     collect   rates   sufficient    to   meet   contractual                                                                    
     obligations.  Contracts  to  buy  or store  gas  to  be                                                                    
     shipped on  an instate  natural gas  pipeline regulated                                                                    
     under 42.08  must be submitted  to the RCA  before they                                                                    
     take effect. The RCA has  180 days to approve contracts                                                                    
     as presented  or, if  contracts are  found not  just or                                                                    
     reasonable,  to  disapprove  the  contracts.  Contracts                                                                    
     approved  are not  subject to  further RCA  review. The                                                                    
     RCA may  extend the 180  day review period if  a public                                                                    
     utility fails to  provide supplemental information that                                                                    
     is  available  to  the  public  utility.  This  section                                                                    
     provides  an  interface  between regulation  of  public                                                                    
     utilities,  and   regulation  of  a   contract  carrier                                                                    
     natural gas  pipeline. If the  RCA approves  a contract                                                                    
     involving  a  utility  and the  pipeline  carrier,  the                                                                    
     utility has  assurances it will  be able to  pass along                                                                    
     the costs in power rates.                                                                                                  
2:51:46 PM                                                                                                                    
Ms. Delbridge continued:                                                                                                        
     Section  19  (RCA   conforming)  amends  AS  42.05.711,                                                                    
     Public  Utilities  and  Carriers and  Energy  Programs,                                                                    
     Public Utilities Regulatory  Act, Exemptions, to exempt                                                                    
     a  pipeline  subject  to regulation  under  42.08  from                                                                    
     regulation under 42.05.                                                                                                    
     Section  20 (RCA  conforming) amends  AS 42.06,  Public                                                                    
     Utilities  and Carriers  and Energy  Programs, Pipeline                                                                    
     Act, by adding  a new section to article  7 exempting a                                                                    
     pipeline  subject   to  regulation  under   42.08  from                                                                    
     regulation under 42.06.                                                                                                    
Ms. Delbridge stated that Section 21 would create the new                                                                       
regulatory chapter for an in-state natural gas pipeline                                                                         
Representative  Hawker  understood  that the  sectional  was                                                                    
very  technical.  He  relayed   that  the  level  of  detail                                                                    
provided  in  the  presentation  could  be  limited  by  the                                                                    
2:52:09 PM                                                                                                                    
Co-Chair Stoltze requested that the presentation proceed                                                                        
with full details.                                                                                                              
Ms. Delbridge continued with Section 21:                                                                                        
     Section 21 (RCA natural  gas pipeline contract carrier)                                                                    
     adds  a new  chapter  to AS  42,  Public Utilities  and                                                                    
     Carriers  and Energy  Programs, to  create Chapter  08,                                                                    
     In-state Pipeline Contract  Carrier. Chapter 08 applies                                                                    
     to an  instate natural gas pipeline  providing contract                                                                    
     carriage, and exempts an  in-state natural gas pipeline                                                                    
     subject  exclusively to  federal jurisdiction.  The new                                                                    
     42.08   is   a   shift  from   traditional   cost-based                                                                    
     regulation,  and directs  the Regulatory  Commission of                                                                    
     Alaska   to   instead   evaluate   whether   negotiated                                                                    
     contracts are fair and  reasonable. Checks and balances                                                                    
     are included to set basic  rules ensuring fair and open                                                                    
     processes;  to promote  exploration and  development of                                                                    
     Alaska's gas basins; to protect  the public welfare; to                                                                    
     promote   accountability  to   Alaska  ratepayers;   to                                                                    
     protect  against rates  of return  in  excess of  those                                                                    
     allowed by the  RCA; to ensure access  for all affected                                                                    
     parties in pipeline disputes;  and to heighten scrutiny                                                                    
     for contracts entered into by affiliated parties.                                                                          
          Sec.    42.08.010,    Application   of    chapter;                                                                    
          exemption,  applies  this  chapter to  an  instate                                                                    
          natural  gas  pipeline   providing  service  as  a                                                                    
          contract carrier.  Exempts an instate  natural gas                                                                    
          pipeline    subject    exclusively   to    federal                                                                    
          Sec.  42.08.020,   Qualification  of   the  Alaska                                                                    
          Gasline    Development   Corporation;    findings,                                                                    
          determines   that   AGDC    is   financially   and                                                                    
          managerially  fit,  willing  and able  to  provide                                                                    
          service under 42.08. States  that an AGDC pipeline                                                                    
          is  required   for  the  public   convenience  and                                                                    
          necessity.  Directs the  RCA to  determine whether                                                                    
          any  entity applying  under  42.08 is  technically                                                                    
          fit,  willing  and  able.  The  findings  made  on                                                                    
          behalf of  the Regulatory Commission of  Alaska in                                                                    
          this  section are  findings that  the RCA  usually                                                                    
          needs  to  make  in issuing  a  pipeline  building                                                                    
          permit -  a Certificate of Public  Convenience and                                                                    
          Necessity. The advance findings  are not valid for                                                                    
          an  applicant other  than AGDC.  For AGDC  and any                                                                    
          applicant, the RCA will  need to determine whether                                                                    
          the  entity  is  technically  able  to  build  the                                                                    
         project and provide the service proposed.                                                                              
          Sec.   42.08.220,  General   powers  and   duties,                                                                    
          provides  enabling  direction  for the  RCA  under                                                                    
          42.08.   Requires    permits   for   construction,                                                                    
          interconnections,   expansions  and   abandonment.                                                                    
          Enables  the RCA  to  intervene  in disputes  that                                                                    
          where  not accounted  for  in contractual  dispute                                                                    
          resolution  mechanisms   and  that   threaten  the                                                                    
          public safety and welfare.  Prohibits the RCA from                                                                    
          requiring rates  or tariff regulations,  except as                                                                    
          provided  in  the  chapter,  and  from  conducting                                                                    
          further review of contracts approved under 42.08.                                                                     
          Provides  RCA access  to  the accounts,  financial                                                                    
          and property  records, and other  information held                                                                    
          by a  carrier, in order  for the RCA to  carry out                                                                    
          the regulatory processes in 42.08.                                                                                    
          Sec.    42.08.230,   Commission    decision-making                                                                    
          procedures, directs the RCA  to appoint a panel to                                                                    
          consider and  decide matters  under 42.08,  and to                                                                    
          expeditiously adjudicate matters.                                                                                     
          Sec.  42.08.240, Publication  of reports,  orders,                                                                    
          decisions  and regulations,  is  the standard  RCA                                                                    
          direction   for    publishing   reports,   orders,                                                                    
          decisions and regulations.                                                                                            
          Sec.  42.08.250,   Application  of  Administrative                                                                    
          Procedure Act, is the standard RCA exemption from                                                                     
          Administrative    Procedure    Act    adjudication                                                                    
          procedures.   Instead,   the  RCA's   adjudication                                                                    
          procedures   would   apply.   The  rest   of   the                                                                    
          Administrative  Procedures  Act still  applies  to                                                                    
          regulations adopted by the RCA.                                                                                       
          Sec.  42.08.260, Annual  report, requires  the RCA                                                                    
          to  include   in  its  annual   report  activities                                                                    
          related to 42.08.                                                                                                     
          Sec.  42.08.300,   Open  seasons,  sets   rules  a                                                                    
          carrier must  follow when holding an  open season.                                                                    
          Requires a carrier  include open season procedures                                                                    
          in   the  carrier's   approved  recourse   tariff.                                                                    
          Provides parameters for holding  an open season to                                                                    
          ensure  fairness and  openness for  all interested                                                                    
          potential  shippers,   including  advance  notice.                                                                    
          Requires  a carrier  to hold  an  open season  for                                                                    
          pipeline expansion  when the carrier  has received                                                                    
          requests for firm  service from potential shippers                                                                    
          that  would   enable  a   commercially  reasonable                                                                    
          expansion.  Provides   that  expansions   may  not                                                                    
          violate  the terms  of AGIA.  Allows a  carrier to                                                                    
          make  presubscription  agreements before  an  open                                                                    
          season begins.  Requires a  carrier to  award firm                                                                    
          transportation      service     without      undue                                                                    
          discrimination or  preference. Requires  a carrier                                                                    
          to file  revised recourse rates  before conducting                                                                    
          an open season.                                                                                                       
          Sec.  42.08.310, Transportation  service, provides                                                                    
          that  firm  service  can only  be  made  available                                                                    
          through  presubscription  agreements; in  an  open                                                                    
          season; or  through the recourse  tariff. Requires                                                                    
          a carrier  to offer  a recourse tariff  with rates                                                                    
          determined  on  a cost-of-service  basis;  permits                                                                    
          levelized  rates.  Allows   that  negotiated  firm                                                                    
          transportation   rates  may   be  different   from                                                                    
          recourse  rates.  Requires  a carrier  to  provide                                                                    
          interruptible  service  in  capacity not  used  in                                                                    
          firm service.                                                                                                         
          Sec.  42.08.320, Review  of  certain contracts  by                                                                    
          the commission,  requires a carrier to  submit all                                                                    
          precedent  agreements  and substantial  amendments                                                                    
          to the  RCA; precedent agreements with  other than                                                                    
          a public utility  may be kept under  seal. The RCA                                                                    
          has 180  days to  approve or  disapprove precedent                                                                    
          agreements  as  just   and  reasonable.  Sets  the                                                                    
          standard for determining if a  contract is made at                                                                    
          arm's  length and  allows additional  RCA scrutiny                                                                    
          of contracts made  between affiliated parties that                                                                    
          are  not  substantially  similar  to  transactions                                                                    
          made   between   unaffiliated  parties.   Approved                                                                    
          contracts are not subject to further review.                                                                          
          Sec.  42.08.330,  Contract  carriage  certificate,                                                                    
          requires a  certificate of public  convenience and                                                                    
          necessity  (CPCN) for  a  carrier  to construct  a                                                                    
          pipeline  and to  transport gas.  The RCA  has 180                                                                    
          days  to issue  a CPCN  once application  is made,                                                                    
          providing  that   the  applicant  is   found  fit,                                                                    
          willing   and  able   to   perform  the   services                                                                    
          proposed.  The RCA  may attach  conditions to  and                                                                    
          amend,  suspend   or  revoke  a   CPCN.  Operating                                                                    
          authority may  not be transferred and  service may                                                                    
          not be abandoned without RCA approval.                                                                                
          Sec.  42.08.340,   Filing  requirements;  recourse                                                                    
          tariffs, requires an  instate natural gas pipeline                                                                    
          carrier  to  file   a  complete  recourse  tariff,                                                                    
          including    rules,    regulations,   terms    and                                                                    
          conditions   pertaining   to  service,   and   all                                                                    
          contracts with shippers.                                                                                              
          Sec.   42.08.350,   Initial  or   revised   rates,                                                                    
          establishes  the RCA  review  process of  recourse                                                                    
          tariffs.  The  commission  must  verify  that  the                                                                    
          terms and  conditions of  services are  not unduly                                                                    
          discriminatory.  The commission  shall review  the                                                                    
          supporting cost  model and, weighing  the pipeline                                                                    
          project risks,  verify that  the return  on equity                                                                    
          is  within  a range  of  recent  decisions by  the                                                                    
          Federal Energy Regulatory  Commission (FERC); that                                                                    
          the  cost  model  uses a  reasonable  depreciation                                                                    
          method and economic life; and  that the cost model                                                                    
          uses  a  reasonable   capital  structure.  Defines                                                                    
          reasonable  as commonly  accepted or  used by  the                                                                    
          Regulatory  Commission  of   Alaska  or  by  FERC.                                                                    
          Provides 30 days  for the RCA to  issue a decision                                                                    
          on  an initial  recourse tariff,  and 90  days for                                                                    
          revised  recourse  tariffs.   Sets  standards  for                                                                    
          evaluating  revised recourse  rates. Requires  the                                                                    
          pipeline  to   provide  for  separate   rates  for                                                                    
          multiple   classes  of   service,  and   allows  a                                                                    
          reservation fee.                                                                                                      
          Sec.  42.08.360,   Uniform  system   of  accounts,                                                                    
          requires  a  carrier   regulated  under  42.08  to                                                                    
          maintain records  and accounts in  accordance with                                                                    
          the uniform system of accounts.                                                                                       
          Sec.  42.08.370,  Expansion;  dispute  resolution,                                                                    
          enables  contracts   to  provide   for  expansion,                                                                    
          unless  an expansion  would violate  the terms  of                                                                    
          the   Alaska   Gasline  Inducement   Act.   Allows                                                                    
          contracts  to  include  procedures  for  resolving                                                                    
          disputes;   requires   those  procedures   provide                                                                    
          notice  and  opportunity  to  participate  to  all                                                                    
          shippers and creditworthy potential shippers.                                                                         
2:57:20 PM                                                                                                                    
          Sec.    42.08.380,    Regulatory   cost    charge,                                                                    
          implements the  standard RCA assessment of  a user                                                                    
          fee  on regulated  entities;  includes  a cap  and                                                                    
          directs administration of the user fee.                                                                               
          Sec.  42.08.390, Effect  of chapter  on taxes  and                                                                    
          royalties,  declares that  nothing  in 42.08  will                                                                    
          change the  calculation of production taxes  or of                                                                    
          royalties due the state.                                                                                              
          Sec.  42.08.400,  Public   records,  requires  RCA                                                                    
          records  be available  to  the  public, except  as                                                                    
          provided  by  law.  Precedent agreements  will  be                                                                    
          kept confidential.  Firm transportation  and other                                                                    
          contracts will  be public, except  for information                                                                    
          that  the carrier  and the  RCA agree  could cause                                                                    
          competitive harm.                                                                                                     
          Sec. 42.08.410, Investigations,  allows the RCA to                                                                    
          investigate  matters in  42.08, and  maintains the                                                                    
          role  of   the  Department  of   Law's  Regulatory                                                                    
          Affairs and Public Advocacy section.                                                                                  
          Sec.   42.08.450,  Accounts;   records;  triennial                                                                    
          reports, provides  the RCA tools to  carry out its                                                                    
          regulatory duties,  including requiring  a carrier                                                                    
          to maintain  certain property records.  Requires a                                                                    
          carrier  to  keep  pipeline  accounts  located  in                                                                    
          Alaska. Requires  the carrier to file  a triennial                                                                    
          report with  updated cost study and  a calculation                                                                    
          of a  three-year average actual return  on equity.                                                                    
          Directs the  commission to  review the  cost study                                                                    
          and verify  the rate elements  previously reviewed                                                                    
          (depreciation,   capital   structure,  return   on                                                                    
          equity) are  the same  as previously  approved. If                                                                    
          rates  of  return  are higher  than  allowed,  the                                                                    
          carrier  must place  the  excess  in an  operating                                                                    
          reserve  fund,  to  be capped  at  20  percent  of                                                                    
          average  annual operating  costs; the  carrier may                                                                    
          draw on this account in  times of lower returns in                                                                    
          the  future. If  excess  continues  once the  fund                                                                    
          hits the  cap, the excess  must be used  to reduce                                                                    
          the pipeline's rates.                                                                                                 
          Sec.  42.08.510,  Designation of  service  agents,                                                                    
          requires an  instate natural gas  pipeline carrier                                                                    
          to file  a named, permanent resident  as its agent                                                                    
          (standard RCA provision).                                                                                             
          Sec.  42.08.520,  Effect  of  regulations,  states                                                                    
          that regulations  adopted by  the RCA  under 42.08                                                                    
          have the effect of law (standard RCA provision).                                                                      
          Sec. 42.08.530,  Judicial review  and enforcement,                                                                    
          makes  RCA final  orders subject  to standard  RCA                                                                    
          judicial review,  except in the  circumstances set                                                                    
          forth  in   HB  4,  Section  13,   addressing  the                                                                    
          development,  construction  and initial  operation                                                                    
          of a natural gas pipeline by AGDC.                                                                                    
          Sec.   42.08.540,  Joinder   of  actions,   allows                                                                    
          appeals to be joined  under applicable court rules                                                                    
          (standard   Regulatory    Commission   of   Alaska                                                                    
          Sec.   42.08.900,   Definitions,   defines   terms                                                                    
          standard  to  the RCA  (commission,  commissioner,                                                                    
          record) and  includes HB 4 terms  (instate natural                                                                    
          gas   pipeline,  instate   natural  gas   pipeline                                                                    
2:59:08 PM                                                                                                                    
Ms. Delbridge continued with the sectional analysis:                                                                            
     Section  22   (property  tax  exemption)  adds   a  new                                                                    
     subsection to  AS 43.56.020, Revenue and  Taxation, Oil                                                                    
     and   Gas   Exploration,    Production   and   Pipeline                                                                    
     Transportation Property  Tax, Exemptions,  exempting an                                                                    
     AGDC-owned  or financed  project from  state and  local                                                                    
     property taxes during construction.                                                                                        
     Section 23 (repealer) repeals 39 sections of statute.                                                                      
          State  Procurement   Code,  Application   of  this                                                                    
          chapter,  a prior  exemption  that  applied to  an                                                                    
          AHFC pipeline.                                                                                                        
          Natural  Gas  Pipeline,   Joint  In-State  Gasline                                                                    
          Development   Team;  38.34.040,   Duties  of   the                                                                    
          Development   Team;  38.34.050,   Cooperation  and                                                                    
          access  to information;  and 38.34.060,  Conflicts                                                                    
          of interest, all  of which were part of  HB 369 in                                                                    
          2010  and  relate  to the  Joint  Instate  Gasline                                                                    
          Development Team.                                                                                                     
          and   Employees,  State   Personnel  Act,   Exempt                                                                    
          Service,    related     to    ANGDA;     and    AS                                                                    
          39.50.200(b)(57),  Public Officers  and Employees,                                                                    
          Public     Official      Financial     Disclosure,                                                                    
          Definitions, related to ANGDA.                                                                                        
          Development  Authority:  AS 41.41.010  through  AS                                                                    
     Section 24 (repealer) repeals Sections  1 and 5 of 2002                                                                    
     Ballot  Measure No.  3, the  findings of  which are  no                                                                    
     necessary with the sunset of ANGDA.                                                                                        
     Section  25  (transition   and  intent)  expresses  the                                                                    
     legislative  intent that  the existing  state right-of-                                                                    
     way lease  between AGDC and  DNR is amended  to reflect                                                                    
     the  contract carrier  covenants  in HB  4 (the  Alaska                                                                    
     Constitution  bars the  Legislature  from passing  laws                                                                    
     that apply  retroactively to contracts in  place). Also                                                                    
     expresses intent for a smooth  transition for AGDC from                                                                    
     its status as a subsidiary of AHFC, to an independent                                                                      
     Specifically, this section includes:                                                                                       
          interfere with, delay or disrupt AGDC's work.                                                                         
          new  AGDC board  within 90  days of  the effective                                                                    
          board is  appointed; and  will cooperate  with the                                                                    
          new board in a smooth transition.                                                                                     
          in   placement   only,   and  will   not   require                                                                    
          dissolving AGDC and creating a new corporation.                                                                       
          and directors, continue  in-place while the boards                                                                    
          are transitioning.  This is not  explicitly stated                                                                    
          but rather is implied.                                                                                                
     Section 26 includes revisor's instructions.                                                                                
     Section 27 sets an immediate effective date.                                                                               
3:00:43 PM                                                                                                                    
Co-Chair Stoltze interjected that the bill spoke to the                                                                         
real intent of the legislation.                                                                                                 
Representative   Hawker    offered   to    provide   further                                                                    
information if necessary.                                                                                                       
HB 4 was HEARD and HELD in committee for further                                                                                
3:02:07 PM                                                                                                                    
AT EASE                                                                                                                         
3:13:11 PM                                                                                                                    
CS FOR SENATE BILL NO. 23(FIN)                                                                                                
     "An Act  relating to  development project  financing by                                                                    
     the   Alaska   Industrial    Development   and   Export                                                                    
     Authority; relating  to the  dividends from  the Alaska                                                                    
     Industrial    Development    and   Export    Authority;                                                                    
     authorizing  the  Alaska   Industrial  Development  and                                                                    
     Export Authority  to provide financing and  issue bonds                                                                    
     for  a  liquefied  natural gas  production  system  and                                                                    
     natural gas  distribution system; and providing  for an                                                                    
     effective date."                                                                                                           
3:13:30 PM                                                                                                                    
SARAH   FISHER-GOAD,  EXECUTIVE   DIRECTOR,  ALASKA   ENERGY                                                                    
AUTHORITY,  DEPARTMENT OF  COMMERCE, COMMUNITY  AND ECONOMIC                                                                    
DEVELOPMENT, stated  that the interior energy  plan proposed                                                                    
in SB  23 would  provide low cost,  North Slope  natural gas                                                                    
and  propane. She  testified  that the  bill  was a  finance                                                                    
package that  offered by the  governor to act as  a catalyst                                                                    
to  bring  the  liquefied  natural  gas  (LNG)  and  propane                                                                    
customers  together with  the  private  entities that  would                                                                    
construct and  operate an LNG  delivery system.  She relayed                                                                    
that  the partnership  and  project would  be  good for  the                                                                    
Alaska Industrial Development  and Export Authority, (AIDEA)                                                                    
and the  Alaska Energy Authority  (AEA). She shared  that SB                                                                    
23 would  provide AIDEA  with the  opportunity to  invest in                                                                    
the   project.  She   stated   that   AIDEA  was   currently                                                                    
investigating  full  project   feasibility  and  would  only                                                                    
utilize the  authorized tools  written into  the legislation                                                                    
if the project proved to  make economic sense. She said that                                                                    
the intention was  that AIDEA would take an  equity stake in                                                                    
the project, but would not  outright operate or build an LNG                                                                    
plant or  distribution system. She relayed  that the project                                                                    
was typical of other  public/private partnerships that AIDEA                                                                    
had been  involved in  for decades.  She furthered  that the                                                                    
governor's finance package was  intended to fund the initial                                                                    
capacity of the  project with future expansion  to be funded                                                                    
by private and community investment.                                                                                            
Co-Chair Stoltze  hoped that an  explanation of HB  74 could                                                                    
be integrated into the presentation.                                                                                            
Ms.  Fisher-Goad   began  the  presentation,  SB   23  AIDEA                                                                    
Development Project  Financing for  a Liquefied  Natural Gas                                                                    
Production and Distribution System."  She discussed Slide 3,                                                                    
"Project Goals":                                                                                                                
     • Provide lowest-cost energy to Interior Alaska                                                                            
     consumers as soon as possible                                                                                              
     • Get  gas first to  the Interior while  assuring long-                                                                    
     term access to gas  and propane from liquefaction plant                                                                    
     for all Alaskans                                                                                                           
     •  Utilize   private  sector  mechanisms  as   much  as                                                                    
Ms.   Fisher-Goad    continued   to   Slide    4,   "Project                                                                    
     • Natural gas will be  liquefied on the North Slope and                                                                    
     trucked to Interior Alaska                                                                                                 
     • Propane  will be  produced and delivered  to Interior                                                                    
     and Rural Alaskans                                                                                                         
     • Primary  LNG demand  anticipated to be  Fairbanks and                                                                    
     North Pole                                                                                                                 
     •  LNG will  be temporarily  stored and  re-gasified in                                                                    
     Interior Alaska                                                                                                            
     •  Natural  gas  distribution system  with  storage  to                                                                    
     supply natural gas for heating                                                                                             
3:20:12 PM                                                                                                                    
TED LEONARD,  EXECUTIVE DIRECTOR  OF AIDEA,  discussed Slide                                                                    
5, AIDEA  Project Analysis Process: Due  Diligence." He said                                                                    
that  the   funding  under  SB   23  would  come   from  the                                                                    
Sustainable  Energy  Transmission  and  Supply  Plan  (SETS)                                                                    
created by  the legislature.  He spoke to  the chart  on the                                                                    
slide which included 4 phases of the project:                                                                                   
     Phase 1 - Project Suitability Assessment                                                                                   
     Project Sponsor Submittals                                                                                                 
        · Proposed information                                                                                                  
        · Sponsor information                                                                                                   
        · Estimated costs and timeline                                                                                          
     AIDEA Process                                                                                                              
        · Is project consistent with AIDEA initiatives?                                                                         
        · What is project feasibility?                                                                                          
        · What   is    the   proponent's    experience   and                                                                    
        · Is AIDEA right source for financing?                                                                                  
        · Project Information Form                                                                                              
        · Suitability Report                                                                                                    
     AIDEA Decision Making                                                                                                      
        · Project Evaluation Committee                                                                                          
          o Authorization to go to Feasibility Analysis                                                                         
Mr. Leonard  relayed that  AIDEA had  completed Phase  1. He                                                                    
shared  that in  December 2012  AIDEA issued  a request  for                                                                    
information  (RFI)  for  working  on the  project,  and  had                                                                    
received  16  responses.  He  said   that  the  project  was                                                                    
suitable for AIDEA. He shared  that the mission of AIDEA was                                                                    
to  promote  economic  development  through  investment  and                                                                    
financing,  and  the  project would  do  both  for  interior                                                                    
Alaska.  He  believed that  the  project  would provide  for                                                                    
statewide development as the benefits  of LNG rippled across                                                                    
the state.                                                                                                                      
3:24:17 PM                                                                                                                    
Mr.  Leonard  relayed that  AIDEA  was  in  Phase 2  of  the                                                                    
Phase 2 - Feasibility Analysis                                                                                                  
Project Sponsor Submittals                                                                                                      
Business and financing plan                                                                                                     
Preliminary schedule                                                                                                            
Execution/development plan                                                                                                      
AIDEA Process                                                                                                                   
Is there  a complete  and attainable business  and financing                                                                    
Is there public support?                                                                                                        
What is the timing and status on project?                                                                                       
What are the risks?                                                                                                             
Reimbursement Agreement                                                                                                         
Term Sheet                                                                                                                      
Risk Analysis                                                                                                                   
AIDEA Decision Making                                                                                                           
Investment Committee                                                                                                            
Authorization to go to Deal Structuring and Due Diligence                                                                       
AIDEA Board                                                                                                                     
Approve Reimbursement Agreement                                                                                                 
Mr. Leonard said that AIDEA  had comprised a team of experts                                                                    
on permitting  and site  assessment from  engineering firms,                                                                    
as   well  as   MEI   Technologies,   experts  in   building                                                                    
liquefication facilities. He  stated that financial advisors                                                                    
had  been  brought in  to  determine  the financing  of  the                                                                    
project  facility and  to examine  the distribution  system.                                                                    
He believed that AIDEA and  ADA's ability to offer a finance                                                                    
package for  the project was  the reason they were  asked to                                                                    
participate. He  said that  the demand  would be  ready that                                                                    
would   support  a   production  facility,   and  that   the                                                                    
production facility would guarantee  that gas would be there                                                                    
once it  was time  to finance the  distribution system.   He                                                                    
reiterated that  AIDEA was in  Phase 2 and  that Feasibility                                                                    
and  Due Diligence  stage would  take  approximately two  to                                                                    
three more months.  He noted the additional  phases on Slide                                                                    
5, which  illustrated that  the board  would have  the final                                                                    
approval  to  move the  project  forward  based on  the  due                                                                    
diligence that AIDEA  and AEA would present.  He shared that                                                                    
the slide was  intended to illustrate how  important the due                                                                    
diligence process is to AIDEA and AEA.                                                                                          
Co-Chair  Stoltze  recognized that  Representative  Isaacson                                                                    
had joined the gallery.                                                                                                         
3:27:10 PM                                                                                                                    
Mr.   Leonard  discussed   Slide   6,  "Governor's   Finance                                                                    
Package":  He  noted  that the  appropriation  to  the  fund                                                                    
included three  separate legs: $150 million  in AIDEA bonds,                                                                    
$50 million  in capital appropriation from  the General Fund                                                                    
and $125 million in SETS capitalization.                                                                                        
3:28:01 PM                                                                                                                    
Mr.  Leonard discussed  slide 7,  "$50 Million  General Fund                                                                    
          •Give AIDEA the needed equity ownership share in                                                                      
          the North Slope LNG plant to ensure project is                                                                        
          •Directly reduce the price of natural gas to                                                                          
          utility customers                                                                                                     
     •How it Works                                                                                                              
          •AIDEA owns  $50 million share of  the plant. This                                                                    
          ownership stake will be an AIDEA asset                                                                                
          •AIDEA  will  not charge  a  return  on its  owned                                                                    
         share from LNG sales to utility customers                                                                              
          •AIDEA can  earn a return  from LNG sales  to non-                                                                    
         utility customers or a sale of the asset                                                                               
3:29:25 PM                                                                                                                    
Mr. Leonard discussed Slide 8, "$150 Million AIDEA Bond                                                                         
          •Provide  low cost  capital for  the build  out of                                                                    
          the natural gas distribution system                                                                                   
          •Make sure  the utility demand for  LNG is created                                                                    
          in order to ensure the  North Slope plant is fully                                                                    
     •How it Works                                                                                                              
          •AIDEA  floats  $150  million   in  bonds  as  the                                                                    
          distribution system is built out                                                                                      
          •The  bond   payments  are  incorporated   in  the                                                                    
          natural gas utility's rates                                                                                           
          •The State  of Alaska's  moral obligation  and the                                                                    
          capital reserve  fund reduces the  bond's interest                                                                    
          rate,  directly  lowering  the  utility  price  of                                                                    
          natural gas                                                                                                           
          •3% to 4.5% interest rate (depending on tax-                                                                          
          exempt  status of  component  financed and  market                                                                    
3:31:40 PM                                                                                                                    
Mr. Leonard discussed Slide 9, "$125 Million SETS                                                                               
          •Provide  flexible,  low  cost financing  for  the                                                                    
          North  Slope  LNG  plant and/or  the  natural  gas                                                                    
          distribution system                                                                                                   
          •The SETS fund  provides flexible repayment terms,                                                                    
          allowing  AIDEA   to  pursue  the   best  business                                                                    
          structure for utility customers                                                                                       
     •How it Works                                                                                                              
          •The  existing SETS  fund is  capitalized with  an                                                                    
          additional $125 million                                                                                               
          •The non-AIDEA owner(s)  of the infrastructure are                                                                    
          directly  loaned the  funds  with  an agreed  upon                                                                    
          payment plan                                                                                                          
          •The cost  of repaying  the SETS loan  is included                                                                    
          in the price of the LNG                                                                                               
          •3% interest rate (set by SB23)                                                                                       
3:32:34 PM                                                                                                                    
Mr.  Leonard  discussed  Slide   10,  "$30  Million  Storage                                                                    
          •Reduce the cost to build natural gas/LNG storage                                                                     
          •Directly reduce  the price utility  customers pay                                                                    
          for natural gas                                                                                                       
     •How it Works                                                                                                              
          •$15  million  tax   credit  for  each  qualifying                                                                    
          storage tank                                                                                                          
          •The project  is expected  to have  two qualifying                                                                    
          tanks totaling $30 million                                                                                            
          •The storage  credit was created  through previous                                                                    
          legislative action                                                                                                    
3:33:33 PM                                                                                                                    
Mr. Leonard  discussed Slide 11, "Potential  Finance Options                                                                    
for Initial Buildout." The slide  presented a pie-chart that                                                                    
broke down  potential finance options for  initial buildout.                                                                    
He noted  that the  capital structure  was similar  to other                                                                    
projects. He  pointed out  that there  were two  sections to                                                                    
the project; the  first was the LNG plant  and would require                                                                    
$220 million, the  second portion would be  $205 million and                                                                    
would cover regasification, storage and distribution.                                                                           
3:36:37 PM                                                                                                                    
Ms.  Fisher-Goad  presented  Slide 12,  "LNG  Lowers  Energy                                                                    
Expected Utility Price per Mcf                                                                                                  
•Wholesale LNG: $10.15                                                                                                          
•Natural Gas to home: $13.42-$17.00 per Mcf                                                                                     
•Delivered price  is equal  to $1.79 -  $2.27 per  gallon of                                                                    
fuel oil                                                                                                                        
Key Assumptions                                                                                                                 
•Initial costs associated with a 9 Bcf plant at start up                                                                        
•Snapshot in time, costs change with expansion                                                                                  
•LNG  plant  bifurcated  into  two  sections  (industry  and                                                                    
•$50  million  capital cost  reduction  applied  to 6.5  Bcf                                                                    
utility section                                                                                                                 
Ms.  Fisher-Goad  explained that  AEA  had  worked with  the                                                                    
Fairbanks  community and  various stakeholders  in order  to                                                                    
determine  the  best  targeted  rate  for  bringing  gas  to                                                                    
Fairbanks. She  said that some  of the  assumptions provided                                                                    
by private partners  had been considered as  well. She noted                                                                    
that the  slide showed  that the  anticipation was  that the                                                                    
LNG  would lower  energy  costs. She  stated  that the  plan                                                                    
would  be   bifurcated  into  two  sections;   industry  and                                                                    
utility,  with the  assumption  that  the equity  investment                                                                    
that was in  the capital budget would be applied  to the 6.5                                                                    
Bcf utility  section of  the plant,  which would  savings to                                                                    
residential heating customers.   She clarified that although                                                                    
AEA  was working  through the  cost assumptions  and as  the                                                                    
engineering teams continued to  refine their work, there was                                                                    
the  slight chance  that the  cost margin  could go  up, but                                                                    
actual costs would  not increase and there would  still be a                                                                    
50  percent decrease  in the  cost of  heating homes  in the                                                                    
3:40:17 PM                                                                                                                    
Ms. Fisher-Goad  discussed slide 13, "Heating  Energy Supply                                                                    
Comparison."  She   believed  that   the  slide   helped  to                                                                    
demonstrate the cost structure  of using different resources                                                                    
for  home heating.  She pointed  out that  electricity would                                                                    
need to  cheaper in  Fairbanks in order  to be  considered a                                                                    
heating source:                                                                                                                 
     Trucked LNG is the lowest-cost option for Interior                                                                         
     Alaska heating                                                                                                             
          •Electricity would need to be $0.04 - $0.06 per                                                                       
          kWh to compete with trucked LNG                                                                                       
          •Electricity would need to be much cheaper to                                                                         
          compete with fuel oil                                                                                                 
Co-Chair Stoltze requested further details on the possible                                                                      
savings to public utility costs for state and local                                                                             
Ms. Fisher-Goad replied that she would provide the                                                                              
3:41:59 PM                                                                                                                    
Ms. Fisher-Goad mentioned slide 14, "Household Heating                                                                          
     Typical Home Heating Savings                                                                                               
          • $2,900 - $3,750 annually                                                                                            
          •43% - 55% reduction in cost                                                                                          
     Key Assumptions                                                                                                            
          •Typical  Interior Alaska  household will  use 225                                                                    
          Mcf of  gas per year (equivalent  to 1,700 gallons                                                                    
          of fuel oil)                                                                                                          
          •Does  not  account  for expected  improvement  in                                                                    
          heating efficiency with natural gas                                                                                   
3:42:48 PM                                                                                                                    
Ms. Fisher-Goad discussed slide 15: "Air Quality":                                                                              
     Conversion to natural gas should reduce air pollutant                                                                      
     emissions in Fairbanks and North Pole                                                                                      
         •Will reduce overall emissions of PM 2.5                                                                               
          •Fairbanks is presently  a non-attainment area for                                                                    
          PM 2.5                                                                                                                
          •Potential public  health benefits of  natural gas                                                                    
          is substantial                                                                                                        
    Impact on Federal funding and economic development                                                                          
          •The non-attainment  area risks  losing Department                                                                    
          of  Transportation and  Public Facilities  funding                                                                    
          if  State fails  to submit  an attainment  plan to                                                                    
          •Federal  projects   in  the  area   face  funding                                                                    
          hurdles while area is non-attainment                                                                                  
          •Cleaner, healthier air  in Fairbanks will promote                                                                    
          economic development                                                                                                  
Ms. Fisher-Goad  relayed that the project  would help reduce                                                                    
air  pollutant  emission in  Fairbanks  and  the North  Pole                                                                    
area.  Currently, Fairbanks  was in  a non-attainment  area,                                                                    
which  put federal  funding  at risk.  She  stated that  the                                                                    
dollars that had been gathered  from the northern region DOT                                                                    
included $8-10  million in FMATS  that could be lost  and an                                                                    
additional  $6-8 million  of funding  in the  non-attainment                                                                    
area that was not in the FMATS area.                                                                                            
Ms. Fisher-Goad  continued to slide 16,  "Savings for Public                                                                    
     •Fairbanks North Star Borough School District expects                                                                      
     immediate and significant school heating cost savings                                                                      
          •Expect schools to pay back cost of converting in                                                                     
          less than two years                                                                                                   
          •8 schools will have immediate access to natural                                                                      
          gas, with more switching as the distribution                                                                          
          system builds out                                                                                                     
          •The first 8 schools will immediately save $25-                                                                       
          $60 thousand dollars a year in heating costs                                                                          
     •Other State and municipal buildings should experience                                                                     
     similar heating cost reductions                                                                                            
3:44:53 PM                                                                                                                    
Ms. Fisher-Goad  turned to slide  17, "Long Term Use  of LNG                                                                    
     LNG Plant will be used after gas pipeline                                                                                  
          •Plant can serve Rural Alaska before gas pipeline                                                                     
          is constructed                                                                                                        
          •Expect opportunity to sell LNG to new industrial                                                                     
          users both before and after pipeline                                                                                  
          •Information in chart is for demonstration only                                                                       
She explained that the users on  the left of the graph would                                                                    
be served  by the pipeline; however,  additional users could                                                                    
have  gas  trucked or  provided  on  the river  system,  new                                                                    
industrial development was also  anticipated. She noted that                                                                    
the facility was  modular and could be re-located  in a more                                                                    
convenient location. She noted  that AEA was working through                                                                    
the   rural   energy    program   to   determine   micro-LNG                                                                    
possibilities.  She  hoped that  the  fuel  source could  be                                                                    
expanded to serve as many communities as possible.                                                                              
3:47:05 PM                                                                                                                    
Ms. Fisher-Goad  discussed slide  18, "Project  Timeline and                                                                    
Milestones." She believed that  first gas could be delivered                                                                    
by then  end of the  calendar year 2015. She  mentioned that                                                                    
HB  74  included  a  direct  financing  program  of  AIDEAs,                                                                    
unrelated to the interior energy plan.                                                                                          
Co-Chair Stoltze requested further  detail about the linking                                                                    
of the two bills: SB 23 and HB 74.                                                                                              
Mr. Leonard  stated that there  was no true  linkage between                                                                    
the direct financing  portion of HB 74 and  the interior gas                                                                    
project in SB 23. He said  that the direct financing was one                                                                    
of the final tools that could be used by AIDEA.                                                                                 
3:49:04 PM                                                                                                                    
Co-Chair  Stoltze  asked  if   SB  23  contained  the  tools                                                                    
necessary to deliver gas by 2015.                                                                                               
Mr. Leonard replied in the affirmative.                                                                                         
3:49:34 PM                                                                                                                    
Co-Chair Austerman understood that  there would be a storage                                                                    
tank on the North Slope and another in Fairbanks.                                                                               
Mr.  Leonard replied  yes. He  furthered that  the Fairbanks                                                                    
storage would  be more costly  because it would  allowed the                                                                    
production  from  the  plant to  be  stable  throughout  the                                                                    
Co-Chair  Austerman queried  the  cost of  building the  two                                                                    
NICK  SZYMONIAK, PROJECT  ECONOMIST WITH  AEA, replied  that                                                                    
the  requested  $15 million  per  tank  would cover  only  a                                                                    
portion of the overall cost.                                                                                                    
Co-Chair Austerman asked for the  total cost of building the                                                                    
Mr. Szymoniak responded that the  tank in Fairbanks could be                                                                    
approximately $30  million at start  up, and could go  up to                                                                    
$70-$100 million, depending on the size of storage needed.                                                                      
3:52:04 PM                                                                                                                    
Vice-Chair  Neuman asked  whether  SETS  financing could  be                                                                    
used to expand gas availability in the Mat-Su area.                                                                             
Mr.  Leonard stated  that SETS  funds included  transmission                                                                    
lines for  natural gas  and other  facilities. He  said that                                                                    
under  the   SETS  fund  AIDEA  was   limited  to  providing                                                                    
financing for 35  percent of a project. He  relayed that the                                                                    
authorization  in the  bill allowed  AIDEA  to provide  more                                                                    
than 35 percent financing for this specific project.                                                                            
3:54:20 PM                                                                                                                    
Representative  Thompson   requested  further  clarification                                                                    
regarding the cash  grant; the $50 million  that AIDEA would                                                                    
have had  as an asset would  be reimbursed, and the  rest of                                                                    
the funding was through loans.                                                                                                  
Mr. Leonard responded  that the $275 million  was to provide                                                                    
AIDEA with  the ability  to provide direct  financing, which                                                                    
would all be  paid back through the purchase of  the gas. He                                                                    
added  that the  $50 million  was an  equity investment  and                                                                    
that  return on  the equity  investment would  occur through                                                                    
the industrial side of the stream.                                                                                              
3:56:31 PM                                                                                                                    
Representative   Gara   testified    in   support   of   the                                                                    
legislation. He wondered what  might prevent the subsidizing                                                                    
of another gasline through the legislation.                                                                                     
Mr. Leonard  stated that  the intention of  the bill  was to                                                                    
create  a production  facility to  provide LNG  for interior                                                                    
Alaska  with  the ability  to  extend  the resource  to  all                                                                    
Alaskans. He  stressed that the  pipeline would never  be at                                                                    
the size needed for an in-state pipeline.                                                                                       
Representative Gara  understood the intended  limitations of                                                                    
the project in  the bill, but wondered where  the bill spoke                                                                    
to the limitation of the plant size.                                                                                            
3:59:11 PM                                                                                                                    
Mr. Leonard stated that the  bill authorized AIDEA to invest                                                                    
up  to $275  million  into  the LNG  project.  He said  that                                                                    
existing statute  allowed for  AIDEA to  provide up  to one-                                                                    
third  of  the  financing  for a  project,  with  a  limited                                                                    
amount. He  stressed that the  bill was only a  catalyst for                                                                    
the 9  Bcf plant, and  if AIDEA wanted  to be involved  in a                                                                    
larger project it  could not be funded through  the SETS. He                                                                    
believed the intent of the legislation was clear.                                                                               
4:01:23 PM                                                                                                                    
Representative  Gara  thought   that  limitations  could  be                                                                    
written into the title in order to clarify intent.                                                                              
Mr.  Leonard  replied  that  AIDEA did  not  have  the  debt                                                                    
capacity to build a project the size of HB 4.                                                                                   
4:02:49 PM                                                                                                                    
Co-Chair  Austerman  understood  that   $50  million  was  a                                                                    
capital appropriation for AIDEA to invest in the project.                                                                       
Mr. Leonard said yes.                                                                                                           
4:03:32 PM                                                                                                                    
Ms. Fisher-Goad  pointed out that the  fiscal notes included                                                                    
all  of the  funding  pieces. She  turned  attention to  the                                                                    
summary  sheet attached  to the  fiscal  notes, which  would                                                                    
provide committee  members with  a clearer  understanding of                                                                    
the fiscal impact of the legislation.                                                                                           
Representative Edgmon was pleased  with the rural element of                                                                    
the legislation. He  queried the 30 year  payback period for                                                                    
the funding.                                                                                                                    
4:05:06 PM                                                                                                                    
Mr. Leonard  clarified that the  30 year payback  period was                                                                    
intended for  the SETS loan and  would be paid off  over the                                                                    
estimated life of the plant.                                                                                                    
Representative Edgmon asked about  the process of connecting                                                                    
gas to residential homes.                                                                                                       
Ms. Fisher-Goad  replied that estimates  had been  made that                                                                    
had promised savings to homeowners.                                                                                             
Representative  Edgmon  understood   that  the  numbers  for                                                                    
residential hook-up had  not been considered in  the 30 year                                                                    
Mr.  Leonard replied  no. He  added that  the funding  would                                                                    
provide   for  the   production   and  the   pipe  for   the                                                                    
neighborhood, but not for conversion.                                                                                           
4:07:58 PM                                                                                                                    
Representative Wilson asked about  the commercial aspect and                                                                    
how the university would fit in to the project.                                                                                 
Ms.  Fisher-Goad replied  that  the  university was  looking                                                                    
into  replacing their  existing coal  fueled, combined  heat                                                                    
and power  plant. She said  that AEA would continue  to work                                                                    
closely with  the university as  that project  advanced. She                                                                    
noted  that  staying with  coal  would  be cheaper  for  the                                                                    
university rather  than LNG. She  said that the 9  Bcf plant                                                                    
would  not be  particularly beneficial  to people  that were                                                                    
already able to enjoy lower cost fuel.                                                                                          
4:10:39 PM                                                                                                                    
Co-Chair Stoltze  noted that the  public testimony  would be                                                                    
taken during Monday's 1:30pm meeting.                                                                                           
Co-Chair Stoltze discussed further housekeeping.                                                                                
SB  23  was   HEARD  and  HELD  in   committee  for  further                                                                    
4:12:25 PM                                                                                                                    
The meeting was adjourned at 4:13 p.m.                                                                                          

Document Name Date/Time Subjects
HB4 Support letters.PDF HFIN 3/21/2013 1:30:00 PM
HB 4
HB4 Sponsor Statement - CS for SSHB4(RES) VersP.pdf HFIN 3/21/2013 1:30:00 PM
HB 4
HB4 Sectional CS for SSHB4 (RES) P.pdf HFIN 3/21/2013 1:30:00 PM
HB 4
HB4 Fact Sheet-CS for SSHB4 (RES) Vers. P.pdf HFIN 3/21/2013 1:30:00 PM
HB 4
HB4 Explanation of Changes - CS for SSHB4 (RES) P.pdf HFIN 3/21/2013 1:30:00 PM
HB 4
HB4 Support letters #2.PDF HFIN 3/21/2013 1:30:00 PM
HB 4
SB 23 Supporting Documents - AIDEAAEA Policy Presentation 3-21-2013.pdf HFIN 3/21/2013 1:30:00 PM
SB 23
SB 23 Supporting Documents - AIDEA Project Analysis Process 2-26-2013.pdf HFIN 3/21/2013 1:30:00 PM
SB 23
SB 23 Supporting Document - Interior Energy Plan.pdf HFIN 3/21/2013 1:30:00 PM
SB 23
SB 23 Assorted Letters of Support - 031413.pdf HFIN 3/21/2013 1:30:00 PM
SB 23
HB 4 Overview for H FIN March 21.pdf HFIN 3/21/2013 1:30:00 PM
HB 4
SB 23 Teamster Letter 3.21.13.pdf HFIN 3/21/2013 1:30:00 PM
SB 23