Legislature(2013 - 2014)HOUSE FINANCE 519

03/25/2013 01:30 PM FINANCE


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01:32:31 PM Start
01:34:53 PM SB23
02:53:33 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+= SB 23 AIDEA: LNG PROJECT; DIVIDENDS; FINANCING TELECONFERENCED
Heard & Held
-- Public Testimony --
+ HB 74 AIDEA: LNG PROJECT; DIVIDENDS; FINANCING TELECONFERENCED
Scheduled But Not Heard
<Pending Referral>
+ Bills Previously Heard/Scheduled TELECONFERENCED
                  HOUSE FINANCE COMMITTEE                                                                                       
                      March 25, 2013                                                                                            
                         1:32 p.m.                                                                                              
                                                                                                                                
1:32:31 PM                                                                                                                    
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair Stoltze called the  House Finance Committee meeting                                                                    
to order at 1:32 p.m.                                                                                                           
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Alan Austerman, Co-Chair                                                                                         
Representative Bill Stoltze, Co-Chair                                                                                           
Representative Mark Neuman, Vice-Chair                                                                                          
Representative Mia Costello                                                                                                     
Representative Bryce Edgmon                                                                                                     
Representative Les Gara                                                                                                         
Representative Lindsey Holmes                                                                                                   
Representative Scott Kawasaki, Alternate                                                                                        
Representative Cathy Munoz                                                                                                      
Representative Steve Thompson                                                                                                   
Representative Tammie Wilson                                                                                                    
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative David Guttenberg                                                                                                 
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
Luke   Hopkins,  Mayor,   Fairbanks   North  Star   Borough,                                                                    
Fairbanks;  John  Davies,  Deputy Finance  Chair,  Fairbanks                                                                    
North Star Borough Assembly, Fairbanks.                                                                                         
                                                                                                                                
PRESENT VIA TELECONFERENCE                                                                                                    
                                                                                                                                
Jerry  Cleworth,  Mayor,  City  of  Fairbanks;  Bryce  Ward,                                                                    
Mayor,  City   of  North   Pole;  Lisa   Herbert,  Executive                                                                    
Director,  Fairbanks  Chamber  of Commerce,  Fairbanks;  Ron                                                                    
Johnson,  Self, Fairbanks;  Bob Shefchik,  Fairbanks Chamber                                                                    
of Commerce,  Interior Gas  Utility, Fairbanks;  Jim Dodson,                                                                    
President,    Fairbanks   Economic    Development   Council,                                                                    
Fairbanks;   David   Gardiner,    Golden   Valley   Electric                                                                    
Association,  Fairbanks; Diane  Hutchinson, Fairbanks  North                                                                    
Star  Borough  Assembly,  Fairbanks; William  McAmis,  Self,                                                                    
Fairbanks; Roger Burggraf, Self,  Fairbanks; Derik T. Price,                                                                    
Fountainhead  Development  Inc., Fairbanks;  Dick  Brickley,                                                                    
Self, Fairbanks; Hank Bartos,  Lowell Group, Fairbanks; Bill                                                                    
St. Pierre,  Self, Fairbanks;  Jomo Stewart,  Energy Project                                                                    
Manager,   Fairbanks   Economic   Development   Corporation,                                                                    
Fairbanks;  Timothy  Gunderson,  Self, North  Pole;  Kenneth                                                                    
Pugh,  Equipment   Source  Inc.,  Anchorage;   Bill  Bailey,                                                                    
Director,  Public  Relations,   Fairbanks  School  District,                                                                    
Fairbanks;  Bob  Hadjukovich,   CEO,  ERA  Alaska  Aviation,                                                                    
Anchorage.                                                                                                                      
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
CSSB 23(FIN)                                                                                                                    
          AIDEA: LNG PROJECT; DIVIDENDS; FINANCING                                                                              
                                                                                                                                
          CSSB 23(FIN) was HEARD and HELD in committee for                                                                      
          further consideration.                                                                                                
                                                                                                                                
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."                                                                                                           
                                                                                                                                
1:34:53 PM                                                                                                                    
                                                                                                                                
Representative  Thompson  explained   that  SB  23  provided                                                                    
energy relief to the Interior  of Alaska through development                                                                    
of a liquefied natural gas  (LNG) system on the North Slope.                                                                    
The gas would be transported  via trucks to the Interior. He                                                                    
voiced that  SB 23 would  reduce energy costs by  50 percent                                                                    
and kilowatt  hours for  electricity. The  legislation would                                                                    
significantly  improve air  quality in  Fairbanks and  bring                                                                    
the city  in compliance  with pm  2.5 air  quality standards                                                                    
enforced  by  the  Environmental  Protection  Agency  (EPA).                                                                    
Compliance   eliminated   the   risk   of   losing   federal                                                                    
transportation funding.  He added  that the  legislation had                                                                    
potential to  help other  areas of the  state. The  plan was                                                                    
financed through  a loan  package and  a $50  million equity                                                                    
investment  by  Alaska  Industrial  Development  and  Export                                                                    
Authority (AIDEA).                                                                                                              
                                                                                                                                
1:37:38 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
1:38:56 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
Co-Chair Stoltze OPENED public testimony.                                                                                       
                                                                                                                                
JERRY    CLEWORTH,   MAYOR,    CITY   OF    FAIRBANKS   (via                                                                    
teleconference), testified  in favor of the  legislation. He                                                                    
commented that there  was broad consensus in  support of the                                                                    
legislation.  The  city felt  hopeful  that  the plan  would                                                                    
provide much needed energy relief  to the region. He related                                                                    
that  the  bill  was  financed through  a  series  of  loans                                                                    
eventually repaid  by the residents  of Interior  Alaska. He                                                                    
noted  that  "opening up  the  conduit  for gas"  served  as                                                                    
"insurance"  for   South  Central   Alaska  if   its  supply                                                                    
constricted.                                                                                                                    
                                                                                                                                
1:42:10 PM                                                                                                                    
                                                                                                                                
BRYCE WARD, MAYOR, CITY OF  NORTH POLE (via teleconference),                                                                    
spoke in favor of the  legislation. He thought that the plan                                                                    
benefitted  the entire  state. The  legislation "encouraged"                                                                    
the development of  the resource for in-state  use. The plan                                                                    
could  extend  to other  areas  of  the state  by  providing                                                                    
natural  gas  trucked or  barged  to  other communities.  He                                                                    
listed the communities: Manley,  Tok, Minto, Delta Junction,                                                                    
Tanana,  Beaver, and  Fort Yukon.  The project  would enable                                                                    
the  state  to develop  its  distribution  system and  build                                                                    
demand for the eventual  Trans-Alaska Pipeline System (TAPS)                                                                    
gasline. He  stated that the  bill was an investment  in the                                                                    
future  of  the   state  and  that  a   monetary  return  on                                                                    
investment through  loan repayment would occur  as a result.                                                                    
He  anticipated lower  energy costs  and increased  economic                                                                    
development in  the region. He  urged the committee  to look                                                                    
at all aspects related to how  the bill could help the state                                                                    
as a whole.                                                                                                                     
                                                                                                                                
LISA  HERBERT,  EXECUTIVE  DIRECTOR,  FAIRBANKS  CHAMBER  OF                                                                    
COMMERCE,  FAIRBANKS  (via   teleconference),  testified  in                                                                    
support of  the legislation. She  relayed that she  spoke on                                                                    
behalf  of  a 700  member  organization  that was  anxiously                                                                    
awaiting  the passage  of the  bill and  lower cost  energy.                                                                    
Reducing the  regions energy cost  was the  chambers highest                                                                    
priority.   A natural gas  supply would improve  air quality                                                                    
and  bring the  North Star  Borough in  compliance with  air                                                                    
quality  standards.  The   result  would  increase  economic                                                                    
growth. She stressed  that the community could  not wait any                                                                    
longer for lower cost energy.                                                                                                   
                                                                                                                                
In response to a question  by, Co-Chair Stoltze, Ms. Herbert                                                                    
reported  that 70  members responded  to a  chamber call  to                                                                    
action to testify in support of the bill.                                                                                       
                                                                                                                                
RON JOHNSON, SELF, FAIRBANKS  (via teleconference), spoke in                                                                    
favor of the legislation. He  reiterated support for a lower                                                                    
cost energy  supply in  the region.  He thought  that energy                                                                    
security  was  an  issue  with   natural  gas  trucking  and                                                                    
distribution. He  cautioned that  the plan should  address a                                                                    
risk assessment  to ensure  a dependable  supply of  fuel to                                                                    
homes  and  businesses. He  wondered  what  would happen  if                                                                    
distribution of  gas was  interrupted during  winter months.                                                                    
He pointed out that fuel  oil tanks provided a safe winter's                                                                    
supply. Natural  gas could not  be stored to last  through a                                                                    
winter.  He shared  other concerns.  He wondered  what would                                                                    
happen  to existing  fuel  oil tanks  once  a conversion  to                                                                    
natural gas  occurred. He asked  whether people  could still                                                                    
use heating oil  once gas trucking began. He  wondered if an                                                                    
ample work  force existed to  carry out the  conversions and                                                                    
whether  the subsidy  to convert  from  wood burning  should                                                                    
continue for  natural gas.  He was in  favor of  natural gas                                                                    
but wanted to make sure the issues were thoroughly vetted.                                                                      
                                                                                                                                
Representative  Wilson  noted  that  some  sections  of  the                                                                    
Fairbanks North  Star Borough would  remain on oil  and wood                                                                    
heat.  The bill  would address  more populated  areas first.                                                                    
She related  that more  natural gaslines  would be  built as                                                                    
capacity increased; consequently,  the workforce would build                                                                    
gradually.                                                                                                                      
                                                                                                                                
1:52:47 PM                                                                                                                    
                                                                                                                                
BOB SHEFCHIK,  FAIRBANKS CHAMBER  OF COMMERCE,  INTERIOR GAS                                                                    
UTILITY, FAIRBANKS (via  teleconference), testified in favor                                                                    
of the legislation. He encouraged  examination of the issues                                                                    
discussed  by  the prior  speaker.  He  relayed that  SB  23                                                                    
provided  authorization  for  AIDEA to  participate  in  the                                                                    
development    of   the    gas    trucking   project.    The                                                                    
administration's  goal  of  providing natural  gas  to  many                                                                    
residents at a cost 50  percent less than diesel, as quickly                                                                    
as possible,  garnered wide-ranging  support. He  pointed to                                                                    
the high cost of energy  and the consequences of air quality                                                                    
standards  non-  attainment;  the   impacts  were  real  and                                                                    
immediate.    Interior     residents    collectively    paid                                                                    
approximately  $400  million  per  year to  heat  homes  and                                                                    
businesses. He thought that the  bill provided many benefits                                                                    
including  the  loan  repayment, conversion  from  a  diesel                                                                    
based  energy economy  to natural  gas, return  an estimated                                                                    
$200  million  of  spendable  income  to  the  economy,  and                                                                    
compliance with  air quality standards. Passage  of the bill                                                                    
would be  the first  step in breaking  the region  free from                                                                    
the crippling  effects of a  diesel based economy.  He added                                                                    
that the energy security issue  was real and called for mass                                                                    
storage mechanisms in the borough  for natural gas should an                                                                    
interruption occur.                                                                                                             
                                                                                                                                
JIM  DODSON,   PRESIDENT,  FAIRBANKS   ECONOMIC  DEVELOPMENT                                                                    
COUNCIL, FAIRBANKS  (via teleconference), spoke in  favor of                                                                    
the  bill.  He stated  that  the  bill  would help  save  an                                                                    
estimated $250 million  in heating costs on  an annual basis                                                                    
and providing  additional economies in the  region. He spoke                                                                    
to the diversification of the  economy, creation of jobs and                                                                    
opportunities for Alaskans as results of the legislation.                                                                       
                                                                                                                                
Representative Gara believed  there was overwhelming support                                                                    
for the legislation by members of the committee.                                                                                
                                                                                                                                
DAVID   GARDINER,   GOLDEN  VALLEY   ELECTRIC   ASSOCIATION,                                                                    
FAIRBANKS  (via  teleconference),   strongly  supported  the                                                                    
legislation.  Golden  valley  served over  100,000  Interior                                                                    
residents.  The  project would  allow  the  utility to  burn                                                                    
natural gas  in its power  plant with the potential  to save                                                                    
its  members millions  of dollars  annually. The  arrival of                                                                    
LNG  would lower  pollution, reduce  heating costs,  provide                                                                    
reduced propane  costs for residents along  the Yukon River,                                                                    
and  provide  LNG to  Anchorage  in  emergency shortages  of                                                                    
natural  gas. The  cooperative looked  forward to  assisting                                                                    
AIDEA  with  expertise  and  facilitate  completion  of  the                                                                    
project  as soon  as  possible. He  urged  the committee  to                                                                    
support the legislation.                                                                                                        
                                                                                                                                
Co-Chair Stoltze  asked whether  the association  had passed                                                                    
an official  resolution on the  issue. Mr.  Gardiner replied                                                                    
in  the  negative, but  noted  he  could facilitate  one  if                                                                    
needed.                                                                                                                         
                                                                                                                                
2:01:13 PM                                                                                                                    
DIANE  HUTCHINSON, FAIRBANKS  NORTH  STAR BOROUGH  ASSEMBLY,                                                                    
FAIRBANKS  (via teleconference),  spoke  in  support of  the                                                                    
legislation. She  cited a resolution  passed by  the borough                                                                    
(copy on  file). She stated  that lowering energy  costs was                                                                    
the boroughs  top priority. The  bill provided  a short-term                                                                    
solution  and would  build the  infrastructure necessary  to                                                                    
accommodate gas  when a  gasline was  in place.  The borough                                                                    
welcomed projects  that would provide distribution  to other                                                                    
areas of the  state. She stated that  no community's economy                                                                    
was unaffected by businesses closing  due to adverse effects                                                                    
of high  energy costs. If  businesses closed in  Fairbanks a                                                                    
ripple effect would  be felt in surrounding  villages and in                                                                    
Anchorage  and   so  on.   She  stated   that  the   pm  2.5                                                                    
noncompliance   issue  and   subsequent  penalties   by  the                                                                    
Environmental Protection  Agency (EPA) would help  solve the                                                                    
problem for  Fairbanks and  the state.  Passage of  the bill                                                                    
would help the "residents breathe easier."                                                                                      
                                                                                                                                
WILLIAM  MCAMIS,   SELF,  FAIRBANKS   (via  teleconference),                                                                    
stated support  for the legislation.  He concurred  with all                                                                    
of the  previous testimony. He discussed  the hardships that                                                                    
high energy  costs dealt the villages,  which contributed to                                                                    
the de-population of the rural  areas. The price of fuel oil                                                                    
in  Fairbanks   was  raising   and  could   cause  decreased                                                                    
population  in the  borough. He  stressed the  importance of                                                                    
energy relief.  He stated that  federal highway  funds would                                                                    
be  cut  off because  of  non-compliance  with the  EPA  air                                                                    
standards. He urged for passage of the bill.                                                                                    
                                                                                                                                
ROGER BURGGRAF, SELF,  FAIRBANKS (via teleconference), spoke                                                                    
in  support of  the bill.  He pointed  to high  energy costs                                                                    
that  impacted  the mining  industry.  He  thought that  LNG                                                                    
trucking was  a short-term solution  to the problem.  He had                                                                    
been  waiting since  1958 for  Fairbanks to  receive natural                                                                    
gas.   He  discussed   that  diesel   prices  were   killing                                                                    
communities. He  stressed that the  EPA was  "breathing down                                                                    
the community's neck" because of  air quality violations. He                                                                    
did not  believe a  pipeline would  reach the  community any                                                                    
time soon. He  stressed the immediacy of  the issue. Failure                                                                    
to provide natural  gas to the Interior within  the next two                                                                    
years would  devastate the regional economy.  He accentuated                                                                    
that  reasonable energy  costs were  paramount to  a healthy                                                                    
economy. He thanked the committee for its work on the bill.                                                                     
                                                                                                                                
2:10:37 PM                                                                                                                    
                                                                                                                                
DERIK  T. PRICE,  FOUNTAINHEAD  DEVELOPMENT INC.,  FAIRBANKS                                                                    
(via   teleconference),   supported  the   legislation.   He                                                                    
remarked   that  Fountainhead   owned   several  hotels   in                                                                    
Fairbanks and over a dozen  large commercial buildings.  The                                                                    
business  included  a  manufacturing company  of  oil  field                                                                    
services  equipment.  He  noted  that  energy  costs  had  a                                                                    
significant impact on its production  costs and impacted its                                                                    
ability  to compete  with manufacturers  outside Alaska.  He                                                                    
stated  that increased  availability  to  natural gas  would                                                                    
have a positive impact on the quality and cost of living.                                                                       
                                                                                                                                
DICK   BRICKLEY,  SELF,   FAIRBANKS  (via   teleconference),                                                                    
supported the  legislation. He believed energy  was critical                                                                    
to  the  Interior of  Alaska.  The  legislation would  offer                                                                    
substantial financial  relief to the region  and benefit the                                                                    
entire state.                                                                                                                   
                                                                                                                                
HANK BARTOS,  LOWELL GROUP, FAIRBANKS  (via teleconference),                                                                    
spoke in favor of the  legislation. He urged the legislature                                                                    
to  act  quickly  to  adopt   the  legislation.  He  related                                                                    
personal  experience in  the  real  estate business.  People                                                                    
were  moving from  the area  due to  high utility  costs. He                                                                    
discussed  that residents  could not  afford to  pay utility                                                                    
bills  and  make  house  payments.  The  issue  was  driving                                                                    
residents to use  wood for heating, which  triggered the air                                                                    
quality problem.  He believed the natural  gas trucking plan                                                                    
would solve all of the energy problems.                                                                                         
                                                                                                                                
BILL  ST.  PIERRE,  SELF,  FAIRBANKS  (via  teleconference),                                                                    
testified  in  favor  of  the   bill.  He  related  personal                                                                    
business  experience.  The  high energy  costs  and  related                                                                    
problems was  not only  a Fairbanks  issue but  affected the                                                                    
millions  of   dollars  of  Anchorage  assets   invested  in                                                                    
Fairbanks.  The  high  cost  of  energy  was  impacting  the                                                                    
investments.  Many residents  were leaving.  He voiced  that                                                                    
the gas  trucking plan  would protect  Anchorage investments                                                                    
and would create other business opportunities.                                                                                  
                                                                                                                                
JOMO  STEWART, ENERGY  PROJECT  MANAGER, FAIRBANKS  ECONOMIC                                                                    
DEVELOPMENT  CORPORATION,  FAIRBANKS  (via  teleconference),                                                                    
spoke in favor  of the legislation. He stated  that the bill                                                                    
provided  a  "gateway"  to  the  regions  transition  to  an                                                                    
affordable and  cleaner energy source  as well as  to global                                                                    
markets. Cheaper  energy created a competitive  advantage in                                                                    
the marketplace.  He pointed to  additional savings  for the                                                                    
state as  a result  of the  legislation. According  to state                                                                    
analysis that  included polling  state and  federal agencies                                                                    
related  to fuel  usage in  the region,  the state  stood to                                                                    
save $5 million to $7 million in public facilities.                                                                             
                                                                                                                                
Co-Chair  Stoltze  noted  that   the  legislature  was  more                                                                    
concerned with  savings to  residents and  the economy  as a                                                                    
whole, but  appreciated the information.  He pointed  to the                                                                    
importance  of educating  residents of  the entire  state on                                                                    
the  issue.  Some  Alaskans  feel   the  legislation  was  a                                                                    
"subsidy" for Fairbanks. He wanted  to support the Fairbanks                                                                    
delegation.                                                                                                                     
                                                                                                                                
2:20:12 PM                                                                                                                    
                                                                                                                                
Representative Gara  discussed that Southcentral  Alaska had                                                                    
also received  subsidies; the legislators were  sensitive to                                                                    
needs of all areas of the state.                                                                                                
                                                                                                                                
Co-Chair Stoltze  remarked that  "there were  different ways                                                                    
that different parts of the state do receive benefits."                                                                         
                                                                                                                                
TIMOTHY  GUNDERSON, SELF,  NORTH POLE  (via teleconference),                                                                    
testified  in  support  of  the  bill.  He  shared  personal                                                                    
information  related  to his  family.  He  commented that  a                                                                    
family member  recently moved  out of the  state due  to the                                                                    
cost  of  energy. He  concurred  with  all of  the  previous                                                                    
testimony. He  pointed to the additional  benefit of propane                                                                    
production  as  a  by-product  of  LNG.  He  discussed  that                                                                    
approximately  30,000 gallons  of propane  per day  would be                                                                    
produced.  Propane  was  much   simpler  to  transport  than                                                                    
natural  gas.   Propane  could  be  easily   transported  to                                                                    
villages  along the  Yukon River  to storage  facilities and                                                                    
reduce the  costs of  energy. He reported  that the  cost of                                                                    
propane in  Galena was  $180 for 100  gallons. The  cost was                                                                    
$4.00 per  gallon in Fairbanks.  As a result of  the natural                                                                    
gas  plan the  price of  propane in  Fairbanks will  drop to                                                                    
$1.20 to $1.60  per gallon. He elaborated  that the delivery                                                                    
of propane  to outlying  areas was  an economic  benefit for                                                                    
multiple areas of the state.  He deduced that the lower cost                                                                    
of an  alternative fuel  may drive the  cost of  heating oil                                                                    
down  due  to  competition.  He detailed  that  Prudhoe  Bay                                                                    
natural gas  was composed of 12  to 15 percent propane  as a                                                                    
byproduct.   He   thought   that  the   relative   ease   of                                                                    
transporting and  utilizing propane in the  villages posed a                                                                    
major  benefit for  the  villages  as a  result  of the  LNG                                                                    
trucking plan.                                                                                                                  
                                                                                                                                
                                                                                                                                
KENNETH   PUGH,  EQUIPMENT   SOURCE  INC.,   ANCHORAGE  (via                                                                    
teleconference), testified  in favor of the  legislation. He                                                                    
related  that  he   worked  for  a  company   based  out  of                                                                    
Fairbanks;  the   company  used  a  significant   amount  of                                                                    
electricity   and  heat   for   manufacturing  North   Slope                                                                    
supplies. He  was certain there were  other similar entities                                                                    
in the  region that  could continue  to be  competitive with                                                                    
access to  LNG. He stressed  that the issue was  a statewide                                                                    
concern and that the entire state would benefit.                                                                                
                                                                                                                                
2:28:07 PM                                                                                                                    
                                                                                                                                
BILL  BAILEY, DIRECTOR,  PUBLIC RELATIONS,  FAIRBANKS SCHOOL                                                                    
DISTRICT,    FAIRBANKS   (via    teleconference),   strongly                                                                    
supported  the legislation.  He believed  that the  bill was                                                                    
paramount to the economic health  of the Interior region. He                                                                    
pointed to the costs of heat  and power for the 34 buildings                                                                    
in the  Fairbanks North Star  School District.  The district                                                                    
had  spent  approximately  $4  million  on  electricity  and                                                                    
burned 478, 517 gallons of  fuel oil in the 2011-2012 school                                                                    
year. He elaborated  that the payback for  the conversion to                                                                    
natural  gas for  one school  in the  district was  only two                                                                    
years.                                                                                                                          
                                                                                                                                
BOB HADJUKOVICH,  CEO, ERA  ALASKA AVIATION,  ANCHORAGE (via                                                                    
teleconference),  spoke in  support of  the bill.  He stated                                                                    
that he was  in the business of consuming  fuel and realized                                                                    
that when compared to the  low costs of energy in Anchorage,                                                                    
the Interior had a serious  energy problem. He reported that                                                                    
his  businesses  experienced  an  over 30  percent  drop  in                                                                    
passenger  traffic  from  the  rural  areas  due  to  "dying                                                                    
communities." He noted the strategic  nature of Fairbanks in                                                                    
relation  to  the  state's transportation  network  and  its                                                                    
location to  the North  Slope. He  wanted a  way to  make it                                                                    
economical  to live  and  operate  there. Businesses  cannot                                                                    
compete  with  Anchorage  or   other  areas.  He  encouraged                                                                    
passage of SB 23.                                                                                                               
                                                                                                                                
LUKE   HOPKINS,  MAYOR,   FAIRBANKS   NORTH  STAR   BOROUGH,                                                                    
FAIRBANKS,  testified  in  support of  the  legislation.  He                                                                    
highlighted that an  important element of the  plan was that                                                                    
the  loans  would be  repaid.  Fairbanks  may not  have  the                                                                    
highest  home  heating  costs, but  viewed  the  project  as                                                                    
providing relief to other communities  as well via trucking.                                                                    
He  noted  that  the  saving   to  the  borough  for  public                                                                    
facilities  was  $1.5  million  at  an  estimated  price  of                                                                    
natural  gas  of $15  Mcf  (thousand  cubic feet).  The  air                                                                    
quality issue  was a "major  concern." The LNG  gas trucking                                                                    
plan   was  a   major  first   step  of   a  "viable   state                                                                    
implementation plan"  to bring  the borough  into compliance                                                                    
with the EPA  air quality requirements. He  thought the plan                                                                    
would  help  satisfy the  EPA  demands.  He pointed  to  the                                                                    
importance of  solving the air  quality issue. He  asked the                                                                    
committee to report the bill from committee.                                                                                    
                                                                                                                                
2:38:18 PM                                                                                                                    
                                                                                                                                
JOHN  DAVIES, DEPUTY  FINANCE  CHAIR,  FAIRBANKS NORTH  STAR                                                                    
BOROUGH  ASSEMBLY,  FAIRBANKS,  spoke   in  support  of  the                                                                    
legislation. He  agreed with all of  the previous testimony.                                                                    
He noted the high energy  costs in the Interior estimated at                                                                    
$600 million per year; space  heating alone amounted to $200                                                                    
million.  Cutting space  heating costs  in half  represented                                                                    
substantial  savings   to  rate  payers.  He   reminded  the                                                                    
committee  that  project  financing  was  primarily  a  loan                                                                    
package  repaid  by  the  rate payer.  He  stated  that  the                                                                    
investment offered  a 20  percent annual  pay back.  The $15                                                                    
Mcf price  of natural  gas was the  equivalent cost  of cord                                                                    
wood  selling for  $250. He  commented on  the necessity  to                                                                    
maintain  the $15  Mcf price  for natural  gas to  encourage                                                                    
residents to switch  from burning wood and bring  the pm 2.5                                                                    
levels into compliance.  He believed the issue  was the most                                                                    
important for  the Interior  of Alaska.  He urged  for swift                                                                    
passage of the bill.                                                                                                            
                                                                                                                                
Representative  Gara  offered  that   low  cost  energy  had                                                                    
"eluded"  many  residents  across the  state  especially  in                                                                    
rural Alaska.  He asked how the  legislation provided relief                                                                    
for  rural  Alaska.  Mr. Davies  replied  that  the  propane                                                                    
option was the  most likely option to  provide energy relief                                                                    
for Interior  rural communities.  The costs  "penciled out."                                                                    
Emerging   technology   that   confined   natural   gas   in                                                                    
containers,   CNG  Tanks   (compressed  natural   gas)  were                                                                    
"problematic." The  costs were not  "economically feasible."                                                                    
He  explained that  if compressed  gas  was transported  and                                                                    
converted  at a  local facility  it became  economical in  a                                                                    
village wide setting.                                                                                                           
                                                                                                                                
Co-Chair  Stoltze CLOSED  public  testimony.  He noted  that                                                                    
Fairbanks consolidated its public testimony.                                                                                    
                                                                                                                                
Representative  Wilson announced  that  GVA  (GVEA -  Golden                                                                    
Valley Electric  Association) served a large  portion of the                                                                    
Interior.  The legislation  provided relief  for electricity                                                                    
in farther  reaches of  the Interior  region. She  knew that                                                                    
other  regions of  the state  had higher  energy costs.  She                                                                    
hoped that serving  the Fairbanks region was  only the first                                                                    
step in utilizing North Slope  gas and would spread to other                                                                    
areas  of the  state with  higher energy  costs. She  stated                                                                    
that  for   a  "resource  rich"  state   energy  costs  were                                                                    
extremely high.                                                                                                                 
                                                                                                                                
2:46:30 PM                                                                                                                    
                                                                                                                                
Co-Chair  Austerman requested  a  report from  AIDEA on  the                                                                    
propane option  and costs to consumers.  He wondered whether                                                                    
AIDEA performed analysis on utilizing propane for the plan.                                                                     
                                                                                                                                
Representative  Kawasaki agreed  that  the project  provided                                                                    
the fastest  way to get  gas to  the Interior. He  noted the                                                                    
plan was a  "bridge project" and not the  final project that                                                                    
was necessary  to benefit the  entire state.  He appreciated                                                                    
the bills rapid passage through the legislature.                                                                                
                                                                                                                                
Representative  Thompson   guessed  that   providing  energy                                                                    
relief  to  the  villages  along the  Yukon  River  had  the                                                                    
potential  to  reduce  PCE  (Power  Cost  Equalization).  He                                                                    
believed there would be cost savings to the state.                                                                              
                                                                                                                                
Co-Chair Stoltze mentioned a  phone conversation with former                                                                    
Representative Jay Ramras. He  cited a statistic provided by                                                                    
Mr.  Ramras.  He believed  that  Fairbanks  was the  largest                                                                    
population in the world located  at its latitude that ran on                                                                    
diesel power.                                                                                                                   
                                                                                                                                
Co-Chair  Austerman asked  for AIDEA  to include  the Alaska                                                                    
Energy Authority's work in the report on propane.                                                                               
                                                                                                                                
Representative Gara restated that  the project was a stopgap                                                                    
measure.  He believed  the more  time the  state could  gain                                                                    
with  short-term solutions  the  more time  it  had to  make                                                                    
smart decisions related to a gas pipeline project.                                                                              
                                                                                                                                
CSSB 23(FIN)  was HEARD  and HELD  in committee  for further                                                                    
consideration.                                                                                                                  
                                                                                                                                
Co-Chair Stoltze  discussed the schedules for  the following                                                                    
day.                                                                                                                            
                                                                                                                                
ADJOURNMENT                                                                                                                   
2:53:33 PM                                                                                                                    
                                                                                                                                
The meeting was adjourned at 2:53 p.m.                                                                                          
                                                                                                                                
                                                                                                                                

Document Name Date/Time Subjects
SB 23 City of Fairbanks Resolution.pdf HFIN 3/25/2013 1:30:00 PM
SB 23