Legislature(2013 - 2014)HOUSE FINANCE 519

03/28/2013 09:00 AM FINANCE


Download Mp3. <- Right click and save file as

Audio Topic
09:04:52 AM Start
09:04:57 AM HB4
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+= HB 4 IN-STATE GASLINE DEVELOPMENT CORP TELECONFERENCED
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
                  HOUSE FINANCE COMMITTEE                                                                                       
                      March 28, 2013                                                                                            
                         9:04 a.m.                                                                                              
                                                                                                                                
9:04:52 AM                                                                                                                    
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair Stoltze called the House Finance Committee meeting                                                                     
to order at 9:04 a.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                                                                                                                  
                                                                                                                                
Bill Walker, City of Valdez; Representative Hawker; Speaker                                                                     
Mike Chenault.                                                                                                                  
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
HB   4    IN-STATE GASLINE DEVELOPMENT CORP                                                                                     
                                                                                                                                
          HB 4 was HEARD and HELD in committee for further                                                                      
          consideration.                                                                                                        
                                                                                                                                
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."                                                                                                                
                                                                                                                                
9:04:57 AM                                                                                                                    
                                                                                                                                
BILL  WALKER,  CITY  OF  VALDEZ,  presented  the  PowerPoint                                                                    
presentation:  "City  of  Valdez,  presentation  before  the                                                                    
House  Finance Committee"(copy  on file).  He stressed  that                                                                    
the  "right size  project" that  benefited  Alaska, not  the                                                                    
location, was  the highlight of  his presentation.  The city                                                                    
of Valdez supported the best  project for Alaska, regardless                                                                    
of  the  pipeline  destination. He  recounted  a  historical                                                                    
synopsis of gas pipeline efforts.                                                                                               
                                                                                                                                
9:09:15 AM                                                                                                                    
                                                                                                                                
Mr.  Walker  discussed Slide  2,  titled,  "Map with  Trans-                                                                    
Alaska Pipeline System (TAPS), El  Paso, and YPC." The slide                                                                    
depicted  the  map  of   Alaska  illustrating  the  pipeline                                                                    
routes. He  noted that much  effort was expended  to develop                                                                    
the El  Paso Pipeline all  American route from  tidewater to                                                                    
Point  Conception,  California.  When the  project  did  not                                                                    
materialize, the Yukon Pacific  Corporation (YPC) effort was                                                                    
created.  He  related  that  $100  million  in  funding  was                                                                    
obtained  to  begin the  permitting  process.  He turned  to                                                                    
Slide 3:                                                                                                                        
                                                                                                                                
     "Permits Previously Obtained for Gasline to Tidewater                                                                      
     by YPC."                                                                                                                   
                                                                                                                                
     Formed by Former Governors Bill Egan and Walter                                                                            
     "Wally" Hickel                                                                                                             
                                                                                                                                
     The following permits have previously been received                                                                        
     (now expired) for this project route and terminal                                                                          
     location:                                                                                                                  
                                                                                                                                
     o FERC Declaratory Order Regarding its TAGS                                                                                
       Jurisdiction                                                                                                             
     o Presidential Finding Approving Export of Alaska                                                                          
       Natural Gas                                                                                                              
     o Coastal Zone Consistency Determination                                                                                   
     o TAGS Project-Wide Final EIS                                                                                              
     o Ahtna Corporation Right of Way Agreement                                                                                 
     o Federal Pipeline ROW Grant                                                                                               
     o State of Alaska Conditional ROW Lease                                                                                    
     o DOE/OFE Authorization for Export of Natural Gas                                                                          
       (Order 350)                                                                                                              
     o DOE/OFE Confirmation of Order 350                                                                                        
     o Anderson Bay (LNG Terminal) Final EIS                                                                                    
     o FERC Authorization for Siting LNG/MT Facility                                                                            
     o Anderson Bay LNG/MT Facility Air Quality (PSD)                                                                           
       Permit                                                                                                                   
                                                                                                                                
Mr.  Walker noted  that the  YPC  founders made  significant                                                                    
progress, the  furthest to date, in  the permitting process.                                                                    
He reported  that the effort  ultimately failed  because YPC                                                                    
was not able to purchase the gas.                                                                                               
                                                                                                                                
Representative  Gara  asked  about   slide  2.  He  wondered                                                                    
whether the  YPC right of  way permits were still  valid for                                                                    
use with  the Alaska Gasline Development  Corporation (AGDC)                                                                    
negotiated right of  ways for a pipeline  terminus in Valdez                                                                    
or  Nikiski. Mr.  Walker  stated that  the  YPC permits  had                                                                    
expired. He added that the  collected data and the fact that                                                                    
the permits were obtained made the effort important.                                                                            
Mr. Walker turned to Slide 5:                                                                                                   
                                                                                                                                
     "Alaska North Slope LNG (Liquefied Natural Gas)                                                                            
     Sponsor Study Group."                                                                                                      
                                                                                                                                
     Formed in 1999                                                                                                             
                                                                                                                                
     Participants:                                                                                                              
                                                                                                                                
                                                                                                                                
                                                                                                                                
                                                                                                                                
                                                                                                                                
                                                                                                                                
     Formed for Sole Purpose of Evaluating 3 Routes to                                                                          
     Tidewater from North Slope                                                                                                 
     1. Richardson Highway to Valdez Marine Terminal                                                                            
     2. Richardson Highway to Glennallen then over to                                                                           
        Nikiski via Glenn Highway Route                                                                                         
     3. Parks Highway south to Nikiski                                                                                          
                                                                                                                                
     Conclusion of Study Group: Route most likely to be                                                                         
     permitted by federal/state agencies is the Richardson                                                                      
     Highway to the Valdez Marine Terminal route.                                                                               
                                                                                                                                
Mr. Walker stated  that the LNG Sponsor  Study Group focused                                                                    
solely  on  route  site  selection  and  the  likelihood  of                                                                    
successful  permitting.  The  effort  did not  result  in  a                                                                    
pipeline.  The  group  authored a  report  that  ranked  the                                                                    
different options.                                                                                                              
                                                                                                                                
9:14:18 AM                                                                                                                    
                                                                                                                                
Mr.  Walker  moved to  Slide  6:  "Map  with TAPS,  El  Paso                                                                    
Pipeline,  YPC, Alaska  LNG Study  Group,  AGPA, ANGDA,  and                                                                    
AGIA" The  slide depicted the  pipeline routes  and numbered                                                                    
them in successive  order as listed from  number one through                                                                    
seven.  He  noted that  the  Alaska  Gasline Port  Authority                                                                    
(AGPA)  was founded  by the  Fairbanks  North Star  Borough,                                                                    
North  Slope Borough  and  the City  of  Valdez. The  effort                                                                    
focused   on    cost   estimates   and    market   interest.                                                                    
Subsequently, the  Alaska Natural Gas  Development Authority                                                                    
(ANGDA) was  created via a  ballot initiative and  formed in                                                                    
statute in 2002. He pointed  out that the first six projects                                                                    
discussed were all in-state gas  lines. The seventh and last                                                                    
effort  was the  Alaska  Gasline Inducement  Act (AGIA).  He                                                                    
described  AGIA  as  an  out  of  state  gasline.  The  AGIA                                                                    
pipeline  originally planned  for two  terminus points:  one                                                                    
line  constructed   to  tidewater  and  another   ending  in                                                                    
Alberta.  The  development of  shale  gas  in the  lower  48                                                                    
states  prevented  the  Alberta  option  from  evolving.  He                                                                    
remarked that two open seasons  on the tidewater option were                                                                    
held.                                                                                                                           
                                                                                                                                
Representative  Wilson  questioned  whether  AGPA  held  any                                                                    
current  right   of  way  permits.  He   answered  that  the                                                                    
exclusive permit rights expired.                                                                                                
                                                                                                                                
Mr. Walker directed attention to Slide 7:                                                                                       
                                                                                                                                
     AGIA                                                                                                                       
                                                                                                                                
     Funded following $15 Million  of analysis, presented to                                                                    
     the legislature following a  several month long special                                                                    
     session  with  presentations   from  numerous  industry                                                                    
     recognized consultants.                                                                                                    
                                                                                                                                
                                                                                                                                
      licensee                                                                                                                  
                                                                                                                                
                                                                                                                                
      Million                                                                                                                   
                                                                                                                                
      gasline to Open Season to Tidewater                                                                                       
                                                                                                                                
      response from the Asian market                                                                                            
                                                                                                                                
Mr.  Walker  explained  that  AGIA  mandated  the  licensee,                                                                    
TransCanada/Foothills  Pipeline to  match (50  percent each)                                                                    
the State's  $300 million  share of the  costs to  reach the                                                                    
first open season  in July 31, 2010.  Other provisions under                                                                    
AGIA required  that the project  continue if the  first open                                                                    
season was not successful. The  state was responsible for 90                                                                    
percent of the  costs for moving forward  after a successful                                                                    
open season. He defined that  an "open season" culminated in                                                                    
cost estimates that determined the  contractual price of the                                                                    
shipped gas.                                                                                                                    
                                                                                                                                
Vice-Chair  Neuman  referred  to  the AGIA  open  season  in                                                                    
September 2012.  He understood that  the process was  a best                                                                    
interest  finding;  "significantly  different" than  a  true                                                                    
open season and that the  result was non-binding. Mr. Walker                                                                    
concurred. He  expressed that  the first  open season  was a                                                                    
binding  open  season  and  the  second  was  a  non-binding                                                                    
"solicitation of  interest". He  offered that  every project                                                                    
began with a  minimum level of interest  and progressed into                                                                    
binding agreements.                                                                                                             
                                                                                                                                
9:19:57 AM                                                                                                                    
                                                                                                                                
Vice-Chair Neuman indicated that  AGIA required that an open                                                                    
season take place every two  years. He stressed that an open                                                                    
season provided  for a binding  agreement and  the September                                                                    
2012 event  was nothing more  than an interest  finding. Mr.                                                                    
Walker agreed  but concluded that  the September  2012 event                                                                    
complied with the AGIA open season requirement.                                                                                 
                                                                                                                                
Representative  Holmes thought  that the  AGIA pipeline  was                                                                    
designed to travel through Canada.  She wondered how much of                                                                    
the  one  million  hours  of   engineering  work  was  spent                                                                    
exploring the  route to tidewater versus  Canada. Mr. Walker                                                                    
responded that  was difficult to  determine. The  first open                                                                    
season contained a posted tariff  to tidewater. He could not                                                                    
offer  a definitive  answer but  believed  there was  enough                                                                    
time to conclude with the binding open season in 2010.                                                                          
                                                                                                                                
Representative  Munoz asked  what a  "200 percent  response"                                                                    
was.  Mr.  Walker  instructed  the  committee  that  initial                                                                    
analysis concluded that a successful  LNG project required a                                                                    
certain amount of  volume to flow through  the pipeline. The                                                                    
breakeven  amount  was  2/bcf   (billion  cubic  feet).  The                                                                    
analysis was  figured at 2.7/bcf.  The AGIA  solicitation of                                                                    
interest  response  from  the   world's  largest  buyers  of                                                                    
natural gas added up to 5.5/bcf.                                                                                                
                                                                                                                                
Representative   Gara  asked   about  the   solicitation  of                                                                    
interest  in  2012.  He  asked  whether  the  terms  of  the                                                                    
solicitation of interest were  offered under conditions that                                                                    
were not  yet available.  Mr. Walker  stated that  terms and                                                                    
conditions  were  established  with  the  project  developer                                                                    
after  the   solicitation  of  interest.  He   reminded  the                                                                    
committee that an  open season was not about  buying gas but                                                                    
shipping  gas. The  problem  lied in  acquiring  gas at  the                                                                    
wellhead; the  reason AGIA held  a solicitation  of interest                                                                    
instead of a binding open season.                                                                                               
                                                                                                                                
9:25:09 AM                                                                                                                    
                                                                                                                                
He referenced Slide 8:                                                                                                          
                                                                                                                                
     "Results of September, 2012 Open Season."                                                                                  
     AGPA                                                                                                                       
     KOGAS (Korea)                                                                                                              
     POSCO (Korea)                                                                                                              
     GS Energy (Korea)                                                                                                          
                                                                                                                                
     PTT International Company, Ltd. (Thailand)                                                                                 
                                                                                                                                
     PGN LNG (Indonesia)                                                                                                        
     East-West Power Company Ltd. (Korea)                                                                                       
     2.8/bcf/d [billion cubic feet per day]                                                                                     
                                                                                                                                
     Resource Energy, Inc.                                                                                                      
     Japan Exploration Company, Ltd. (Japan)                                                                                    
     Idemitsu Kosan Company (Japan)                                                                                             
     JX Nippon Oil & Energy Corporation (Japan)                                                                                 
     Mitsubishi Gas Chemical Company, Inc.(Japan))                                                                              
     Nippon Telephone and Telegraph (Japan)                                                                                     
     2.7/bcf/d                                                                                                                  
                                                                                                                                
          5.5/bcf/d [Total]                                                                                                     
                                                                                                                                
Mr. Walker  detailed that during  the 2012 AGIA  open season                                                                    
the  buyers   expressed  interest  in   purchasing  specific                                                                    
volumes of natural  gas. He provided a  brief description of                                                                    
some  of the  Asian  companies: (1)  KOGAS  was the  largest                                                                    
purchaser of  LNG in the  world. (2)POSCO was the  top fifth                                                                    
largest steel manufacturer in  the world. (3)East-West Power                                                                    
Company Ltd. was a subsidiary  of PEPCO the largest national                                                                    
power generator in Korea.  He reported previous interactions                                                                    
with many of the Asian  companies and was "excited" to learn                                                                    
of  the response  to the  AGIA solicitation  of interest  in                                                                    
2012.  He remarked  that Resource  Energy,  Inc, a  Japanese                                                                    
consortium,  did  not have  a  preference  for a  designated                                                                    
pipeline  location. The  consortium recently  opened offices                                                                    
in Anchorage.  He met with  the company  representatives who                                                                    
expressed great interest in Alaskan LNG.                                                                                        
                                                                                                                                
Co-Chair Stoltze  asked what conclusions  were drawn  by the                                                                    
information in  the presentation. Mr. Walker  hoped to prove                                                                    
that there  was a  strong interest in  the market  place for                                                                    
Alaskan LNG.                                                                                                                    
                                                                                                                                
Representative Wilson  expressed confusion about  which plan                                                                    
he was  discussing and asked  for clarification.  Mr. Walker                                                                    
stated  that the  information  on slide  8  was relative  to                                                                    
AGIA. He wanted to  demonstrate that the opportunity existed                                                                    
to develop  a large volume  Alaskan line by some  entity. He                                                                    
had  no bias  towards  a particular  project.  He wanted  to                                                                    
highlight the opportunity that  currently existed for Alaska                                                                    
in market interest. He proposed swift action.                                                                                   
                                                                                                                                
9:30:44 AM                                                                                                                    
                                                                                                                                
Representative Wilson  expected that the  presentation would                                                                    
provide an  examination of  an alternate plan  to HB  4. She                                                                    
expressed interest in  the AGPA plan. She  asked whether his                                                                    
presentation  included an  alternate plan  supported by  the                                                                    
City  of  Valdez. Mr.  Walker  replied  that the  discussion                                                                    
would evolve.                                                                                                                   
                                                                                                                                
Representative   Costello   asked   who   Mr.   Walker   was                                                                    
representing at the  time of the discussions  with the Asian                                                                    
companies. Mr.  Walker replied that he  was representing the                                                                    
Alaska Gasline Port Authority.                                                                                                  
                                                                                                                                
Representative  Gara  asked   whether  the  Asian  companies                                                                    
expressed  interest  specifically  under  AGIA.  Mr.  Walker                                                                    
confirmed that the interest was submitted under AGIA.                                                                           
                                                                                                                                
Mr. Walker continued with Slide 9:                                                                                              
                                                                                                                                
     "Results of September 2012 Open Season"                                                                                    
                                                                                                                                
     Volume used by Wood Mackenzie in their LNG analysis -                                                                      
     2.7 bcf/d                                                                                                                  
                                                                                                                                
    •Volume nominated at September 2012 Open Season by                                                                          
      ASIAN Market - 5.5 bcf/d                                                                                                  
     •In-State Market - .25 bcf/d                                                                                               
                                                                                                                                
     Total: 5.75 bcf/d                                                                                                          
                                                                                                                                
Mr.  Walker  informed the  committee  that  5.9/bcf was  the                                                                    
largest volume  that can  flow through a  48 inch  pipe. The                                                                    
open season resulted  in interest in the full  volume of the                                                                    
pipeline.                                                                                                                       
                                                                                                                                
Mr.  Walker  offered  Slide  10, "Map  with  TAPS,  El  Paso                                                                    
Pipeline, YPC,  Alaska LNG Study  Group, AGPA,  ANGDA, AGIA,                                                                    
ASAP (HB 4)"  that depicted  an image of the proposed routes                                                                    
including the  routes under  HB 4, with  HB 4  designated as                                                                    
the eight project.                                                                                                              
                                                                                                                                
Mr. Walker turned to Slide 11:                                                                                                  
                                                                                                                                
        "Alaska's Energy & Fiscal Challenges"                                                                                   
                                                                                                                                
        1. Fiscal Cliff - 90%  Alaska revenues tied to oil                                                                      
        2. High Energy Cost - Interior / Statewide                                                                              
        3. Southcentral Gas Supply                                                                                              
                                                                                                                                
Mr. Walker moved to slide 12:                                                                                                   
                                                                                                                                
     Fiscal Cliff:                                                                                                              
                                                                                                                                
     Is There Any Revenue to Alaska From LNG Exports?                                                                           
                                                                                                                                
Mr. Walker  believed that  Alaskan LNG  was a  resource that                                                                    
offered the state a revenue base.                                                                                               
                                                                                                                                
Representative Thompson asked about  the Alaska Gasline Port                                                                    
Authority (AGPA).  He related that  the North  Slope Borough                                                                    
withdrew from  the agreement  some years  ago and  that some                                                                    
North Star  Borough assembly members  wanted to back  out of                                                                    
the  agreement.   He  asked  for  clarification   about  the                                                                    
direction of  the project  and who  was still  involved. Mr.                                                                    
Walker   confirmed  that   the   North   Star  Borough   was                                                                    
considering parting from AGPA.  He interjected that the AGPA                                                                    
mandate  was to  "build  or  cause to  be  built." The  port                                                                    
authority supported  any LNG  project that  was in  the best                                                                    
interest  of Alaska.  He believed  that  AGPA incited  ample                                                                    
interest in  Alaska LNG and  credited AGPA for  the response                                                                    
to the AGIA open seasons.                                                                                                       
                                                                                                                                
9:36:09 AM                                                                                                                    
                                                                                                                                
Representative Thompson understood  that the Fairbanks North                                                                    
Star  borough  stopped  contributing  to  AGPA.  Mr.  Walker                                                                    
related that  the last  payment made by  the Borough  was in                                                                    
2009.  The private  sector had  contributed the  majority of                                                                    
the port authority funding.                                                                                                     
                                                                                                                                
Representative  Wilson  questioned  why the  private  sector                                                                    
pulled its AGPA funding. Mr.  Walker voiced that the private                                                                    
sector  "lost  faith"  that Alaska  would  strive  to  bring                                                                    
natural  gas to  the market.  The private  sector ultimately                                                                    
believed that the gas was not attainable.                                                                                       
                                                                                                                                
Representative Wilson asked whether  the private sector lost                                                                    
faith  in  the  port  authority or  in  Alaska.  Mr.  Walker                                                                    
replied that  the private  sector wanted to  buy gas  at the                                                                    
wellhead and it had nothing to  do with AGPA. He pointed out                                                                    
that  the  leaseholder,  Exxon Mobil  did  not  engage  with                                                                    
Mitsubishi,  whose interest  in purchasing  natural gas  was                                                                    
solicited by AGPA.  Within  one months' time Mitsubishi made                                                                    
other arrangements outside of Alaska.                                                                                           
                                                                                                                                
Representative Wilson  thought that  it worked  backwards to                                                                    
find buyers  for something someone  else was not  willing to                                                                    
sell. Mr.  Walker responded that the  process was customary.                                                                    
Terms of  the lease  required that  leaseholders sell  to an                                                                    
offer with a reasonable expectation of profit.                                                                                  
                                                                                                                                
9:40:22 AM                                                                                                                    
                                                                                                                                
Representative  Gara  asked  whether the  leaseholders  were                                                                    
holding back from selling until  they can negotiate terms in                                                                    
their  best interest.  Mr. Walker  discerned  that based  on                                                                    
"letters to  the Governor", that was  a plausible conclusion                                                                    
in  regards to  a pipeline.  In addition,  he reported  that                                                                    
purchasers were willing  to buy natural gas  at the wellhead                                                                    
on a  fixed dollar amount  and agreed to participate  in the                                                                    
pipeline portion  of the  project. Yet,  there was  still no                                                                    
action by the leaseholders.                                                                                                     
                                                                                                                                
Mr. Walker briefly turned to the following slides                                                                               
                                                                                                                                
     Slide 13:                                                                                                                  
                                                                                                                                
          Does Alaska Make Money off LNG?"                                                                                      
                                                                                                                                
          From   and  economic   perspective,  Alaskan   LNG                                                                    
          exports are competitive,  viable across scenarios,                                                                    
          and could  generate between $220 and  $419 billion                                                                    
          for Alaska                                                                                                            
                                                                                                                                
     Slide 14:                                                                                                                  
                                                                                                                                
          "Can Alaska's LNG Compete?"                                                                                           
                                                                                                                                
          Access to currently  re-injected gas upstream puts                                                                    
          the  Alaska   LNG  liquefaction  project   in  and                                                                    
          economically  competitive   position  relative  to                                                                    
          others…                                                                                                               
                                                                                                                                
The  slide included  a graph  that demonstrated  Alaskan LNG                                                                    
exports  estimated  at  a   cost  structure  of  $8.50/MMBtu                                                                    
[million British thermal units] (2011 estimates)                                                                                
                                                                                                                                
     Slide 15:                                                                                                                  
                                                                                                                                
          "Can Alaska's LNG Compete?"                                                                                           
                                                                                                                                
          "…and  It competes  favorably  with both  proposed                                                                    
          Australian   and  other   North  American   export                                                                    
          facilities  which have  yet  to  reach FID  (Final                                                                    
          Investment Decision)                                                                                                  
                                                                                                                                
The  slide contained  a graph  comparing the  Alaskan $8.50/                                                                    
MMBtu  figure with  other projects  in  Australia and  North                                                                    
America and showed Alaska at the lowest price.                                                                                  
                                                                                                                                
Mr. Walker  expounded that  Wood Mackenzie,  the consultants                                                                    
who  conducted   the  study  used   the  AGIA   open  season                                                                    
information  and  the landed  costs  to  transport LNG  from                                                                    
Alaska   to   Japan   including  the   highest   costs   for                                                                    
liquefaction,  to come  to the  conclusion that  Alaskan LNG                                                                    
was competitive and profitable.                                                                                                 
                                                                                                                                
Vice-Chair Neuman  returned to Slide  14. He asked  where in                                                                    
the analysis  were the costs  to buy and build  the pipeline                                                                    
that was estimated  to cost $40 - $60 billion.  He asked for                                                                    
the amortization  of the  cost as well  as the  timeline for                                                                    
the investment.  Finally, he questioned how  the project was                                                                    
ultimately funded.  Mr. Walker  indicated that  the depicted                                                                    
transport tariff of $1.70/MMBtu was  the revenue used to pay                                                                    
off  the pipeline.  The timelines  were: (1)  ten years  for                                                                    
construction. (2) 30 years to pay off a pipeline.                                                                               
                                                                                                                                
Vice-Chair   Neuman  questioned   the  payoff   numbers  and                                                                    
wondered where  the money to  build the pipeline  would come                                                                    
from.  Mr. Walker  responded that  that the  consultant used                                                                    
AGIA figures  to determine the  payoff costs over  30 years.                                                                    
He  added that  besides  the  $1.70/MMBtu transport  tariff,                                                                    
$2.22/ MMBtu  [for Processing and Shrinkage]  and $.26/MMBtu                                                                    
[for  WH-Processing]  contributed  to   the  payoff  of  the                                                                    
pipeline  infrastructure.  He  elaborated that  the  use  of                                                                    
using tariffs over a 30  year period was common practice and                                                                    
was similar to the payoff of  a toll road. He continued that                                                                    
the   funding  for   megaprojects   typically  were   market                                                                    
generated. The financing was based  upon the strength of the                                                                    
market  place  and long  term  contracts.  He remarked  that                                                                    
financing was never the problem.  He mentioned a $55 billion                                                                    
LNG  project in  Australia under  current construction  that                                                                    
was one  third smaller than  the AGIA project.  He explained                                                                    
that  Alaska had  advantages over  Australia  with a  larger                                                                    
project  and a  colder climate,  which was  40 percent  more                                                                    
efficient. Alaska's location provided  low shipping costs at                                                                    
$.59/MMBtu  because  Alaska  was  closer to  the  market  as                                                                    
opposed to the Gulf coast  which costs $3.00/MMBtu. He noted                                                                    
that Norway shipped to the  Asian markets at higher shipping                                                                    
costs.  He believed  Alaska  had  significant benefits  over                                                                    
other locations.                                                                                                                
                                                                                                                                
9:48:05 AM                                                                                                                    
                                                                                                                                
Representative Holmes  asked whether  the costs  depicted in                                                                    
slide 14,  included the cost  of the gas. Mr.  Walker stated                                                                    
that it  did not. He explained  that the cost of  the gas at                                                                    
the wellhead was  added to the $8.50/MMBtu  and estimated at                                                                    
$5.50 to $7.50/MMBtu.                                                                                                           
                                                                                                                                
Representative Holmes  asked when  the Wood  Mackenzie study                                                                    
took place.  Mr. Walker  replied that  the study  took place                                                                    
July 27,  2011. Representative Holmes asked  whether changes                                                                    
in  the  market  place  occurred   since  then.  Mr.  Walker                                                                    
answered  that some  up or  down fluctuations  had occurred.                                                                    
The numbers  were based on  2.7/bcf billion feet and  if the                                                                    
project  was as  large as  5.5/bcf the  costs would  drop by                                                                    
half.                                                                                                                           
                                                                                                                                
Co-Chair  Austerman  commented   that  today's  natural  gas                                                                    
market would not  support what the Asian  market was willing                                                                    
to  pay in  2011. He  wondered if  the information  remained                                                                    
valid.                                                                                                                          
                                                                                                                                
Representative  Gara asked  about the  dis-insensitive rates                                                                    
contained  in  AGIA  for Alaskan  communities.  He  wondered                                                                    
whether the cost  of natural gas for Alaskans  would be less                                                                    
than  the $15.00/MMBtu  costs shipping  to Asia.  Mr. Walker                                                                    
stated  that   the  rate  for  Fairbanks   under  AGIA  dis-                                                                    
insensitive rate was $5.29/MMBtu.                                                                                               
                                                                                                                                
Co-Chair  Stoltze  requested  that   Mr.  Walker  share  his                                                                    
concerns  regarding   revenue  issues  and   consumer  costs                                                                    
associated with the legislation.                                                                                                
                                                                                                                                
Mr.  Walker   addressed  Slide   17:  "Post   Treatment  Gas                                                                    
Composition  Estimate." The  slide  contained  a chart  that                                                                    
compared the BTU Content per  cubic foot (pre LPG [liquefied                                                                    
petroleum gas]  extraction) of  the chemical  composition of                                                                    
lean  and rich  gas. He  elaborated that  "gas liquids"  had                                                                    
market value. He  worried that the gas  liquids would remain                                                                    
undeveloped.  Gas liquids  provided opportunities  for value                                                                    
added use within  Alaska. He noted that  the biggest benefit                                                                    
of Alaskan  LNG which  was lacking  in other  localities was                                                                    
its high BTU (British  Thermal Units) content containing gas                                                                    
liquids.                                                                                                                        
                                                                                                                                
Mr. Walker moved to Slide 18:                                                                                                   
                                                                                                                                
     "South central Gas Supply"                                                                                                 
                                                                                                                                
     Long Term Gas Supply Work Group                                                                                            
     Regulatory Commission of Alaska"                                                                                           
     Public Meeting October 24, 2012 9:00 AM                                                                                    
                                                                                                                                
Mr. Walker noted that a  utility consortium was aggressively                                                                    
exploring importing LNG into Cook Inlet.                                                                                        
                                                                                                                                
Mr. Walker turned to Slide 19:                                                                                                  
                                                                                                                                
     "Southcentral Gas Supply."                                                                                                 
                                                                                                                                
          YNo Southcentral gas shortfall percentages are                                                                       
             anywhere near 100%                                                                                                 
          YNot all gas in Southcentral goes away                                                                               
          YExploration activity is up                                                                                          
          YImport volume price blended with local gas                                                                          
             price                                                                                                              
                                                                                                                                
Mr.  Walker  related  that according  to  testimony  to  the                                                                    
Regulatory  Commission of  Alaska (RCA)  imported gas  could                                                                    
supplement a  possible supply shortfall  of Cook  Inlet LNG.                                                                    
The idea  was to blend a  10 to 20 percent  volume of higher                                                                    
cost  imported  LNG  to  the   $6.00  [MMBtu]  current  cost                                                                    
minimizing the cost increase to consumers.                                                                                      
                                                                                                                                
Mr. Walker directed attention to Slide 20:                                                                                      
                                                                                                                                
     "How Does HB 4 Solve Alaska's Energy/ Fiscal Crisis?"                                                                      
                                                                                                                                
          YRevenue to Alaska?  - NO                                                                                            
          YCost of Energy? Fairbanks [Lower] Southcentral                                                                      
             [Higher]                                                                                                           
                                                                                                                                
                                                                                                                                
          YBuilt in Time to Resolve Fairbanks/Southcentral                                                                     
             Energy Crisis? NO (2019-2020)                                                                                      
                                                                                                                                
          YLiquids for value added jobs? NO                                                                                    
          Y$400 million to be able to hold an Open Season                                                                      
            - same place AGIA was on July 2010                                                                                  
                                                                                                                                
Mr. Walker  expressed apprehensions over HB  4. He commended                                                                    
the  work that  was done  on the  in-state gasline,  but, he                                                                    
believed  that the  timing didn't  solve Interior  or South-                                                                    
central energy  problems. He added that  the project doesn't                                                                    
bring revenue  to the  state. He felt  the thickness  of the                                                                    
pipeline  design proscribed  a  higher volume  of gas  which                                                                    
contained more of the valuable  liquids. He exemplified that                                                                    
it was  illegal to  extract raw natural  gas liquids  out of                                                                    
Alberta. He felt that the  natural gas liquids that were not                                                                    
needed  for export  should be  extracted out  in Alaska  and                                                                    
value added.                                                                                                                    
                                                                                                                                
Mr. Walker pointed to Slide 21:                                                                                                 
                                                                                                                                
     "Options for Solving Energy Crisis"                                                                                        
                                                                                                                                
          YHB4 study to hold an Open Season in 2-3 years =                                                                     
             $400 Million                                                                                                       
          YFairbanks - LNG Trucking $250 Million = gas to                                                                      
             Fairbanks at $10.00-$12.00 range (2 years)                                                                         
          YSouthcentral - LNG Imports = $80 Million regas                                                                      
            for gas at $9-12 range (2-4 years)                                                                                  
          YTotal cost for Fairbanks / Cook Inlet solution                                                                    
             = $330 Million                                                                                                     
                                                                                                                                
Mr.  Walker  felt that  HB  4  was  the "wrong  project"  to                                                                    
advance. He added  that the cost to advance HB  4 to another                                                                    
open  season was  $400  million. He  opined  that the  money                                                                    
could  be better  spent solving  the Fairbanks  and Interior                                                                    
issues with other options in a more timely manner.                                                                              
                                                                                                                                
9:55:44 AM                                                                                                                    
                                                                                                                                
Mr. Walker turned to Slide 22:                                                                                                  
                                                                                                                                
     "Why Are We Ignoring the AGIA Open Season?"                                                                                
                                                                                                                                
          YAGIA Has Produced Volumes of Work Resulting                                                                         
             From Over 1 Million Hours of Engineering, Cost                                                                     
             Estimates, and Field Work.  Approximately $500                                                                     
             Million spent to date on Open Season.                                                                              
                                                                                                                                
          YWhen  the $400 Million is expended under HB4, it                                                                    
             would take us back exactly to where we were on                                                                     
             July 31, 2010 under AGIA.                                                                                          
                                                                                                                                
Mr. Walker  thought that AGIA  worked and brought  offers to                                                                    
the  table.  The  HB  4 project  was  constrained  by  AGIA;                                                                    
therefore  was not  a "whole  project." He  opined that  the                                                                    
state  should move  forward with  a complete  large diameter                                                                    
pipeline  to tidewater  that  benefitted  the entire  state,                                                                    
travelled to  tide water,  was able  to extract  natural gas                                                                    
liquids  and tied  to  a market  place.  He emphasized  that                                                                    
whatever project advanced must be  the right project for the                                                                    
entire state.                                                                                                                   
                                                                                                                                
Mr. Walker offered Slide 23:                                                                                                    
                                                                                                                                
     "A Way Forward."                                                                                                           
                                                                                                                                
     What Alaska Should be doing Rather Than Spending $400                                                                      
     Million to Begin Yet Another Open Season Process                                                                           
     (Third)                                                                                                                    
                                                                                                                                
          1. Engage  directly with  those companies  in Asia                                                                    
          that responded to the  AGIA Open Season (September                                                                    
          14, 2012)                                                                                                             
                                                                                                                                
          2. Engage  with AGIA licensee to  direct next step                                                                    
          in engaging with Asian market                                                                                         
                                                                                                                                
          3. Engage with North  Slope producers to determine                                                                    
          cost  of "fiscal  certainty" regarding  gasline to                                                                    
          determine if it is cheaper  for Alaska to own it -                                                                    
          built by the private sector now                                                                                       
                                                                                                                                
Mr.  Walker reported  that companies  that responded  to the                                                                    
AGIA open season contact him weekly  to ask why there was no                                                                    
response to its offers.                                                                                                         
                                                                                                                                
Mr. Walker reviewed Slide 24:                                                                                                   
                                                                                                                                
     "Conclusion"                                                                                                               
                                                                                                                                
     There is  no logical  reason to  spend $400  million to                                                                    
     begin a study for another  Open (Third) Season When the                                                                    
     last  one had  a 200  percent response  from the  Asian                                                                    
     market.                                                                                                                    
                                                                                                                                
Mr.  Walker continued  that not  only was  the $400  million                                                                    
cost  of HB  4  to advance  to a  redundant  open season  an                                                                    
issue,  the  development  of shale  gas  changed  the  world                                                                    
market. He thought that gas  was more abundant than markets.                                                                    
Time was  being wasted with  HB 4 instead of  "engaging with                                                                    
the  market"  and  advancing a  large  Alaskan  project.  He                                                                    
warned that enough  work was completed on AGIA  that lead to                                                                    
a successful open season. He  advised that if AGIA isn't the                                                                    
right project  the state should  negotiate a way out  so not                                                                    
to hinder the right project from moving forward.                                                                                
                                                                                                                                
Mr. Walker concluded with Slide 25:                                                                                             
                                                                                                                                
     "Conclusion"                                                                                                               
                                                                                                                                
     Risk to Alaska's Future?                                                                                                   
                                                                                                                                
     While  we begin  yet another  study process,  the Asian                                                                    
     market  signs  long-term  LNG contracts  with  projects                                                                    
     being built  in Australia, British Columbia,  U.S. Gulf                                                                    
     Coast, and Russia                                                                                                          
                                                                                                                                
Mr.  Walker believed  that the  legislation would  duplicate                                                                    
work  that already  culminated in  an open  season when  the                                                                    
emphasis  should  be placed  on  delivering  Alaskan gas  to                                                                    
market.                                                                                                                         
                                                                                                                                
Representative Wilson asked which  project he supported. She                                                                    
wondered what was stopping the  port authority from carrying                                                                    
out the consortium's project of  importing LNG using private                                                                    
sector  money. Mr.  Walker replied  that the  Port Authority                                                                    
was  not   advancing  the  LNG  import   project.  The  port                                                                    
authority  believed that  the import  project  was the  best                                                                    
option  for  the short  term.  He  noted that  AGPA  "always                                                                    
advocated for a  large volume line with an  economy of scale                                                                    
to benefit all  Alaskans." He reminded the  committee of the                                                                    
AGPA goal, "build or cause  be built." Therefore, AGPA would                                                                    
rather see  using the  AGDC talent  created in  HB 4  to use                                                                    
existing  work   to  further  a   large  volume   line  that                                                                    
benefitted  the  entire  state and  not  delay  another  two                                                                    
years.                                                                                                                          
                                                                                                                                
10:01:57 AM                                                                                                                   
                                                                                                                                
Representative Wilson  communicated that  Fairbanks believed                                                                    
that  the state  was  standing  in the  way  of advancing  a                                                                    
complete   AGPA   project,   but  she   learned   from   the                                                                    
presentation  that AGPA  wanted  the state  to  "get a  line                                                                    
built."  She asked  for  clarification.  Mr. Walker  offered                                                                    
that  the AGIA  process moved  ahead of  the port  authority                                                                    
project  and  accomplished  a  successful  open  season.  He                                                                    
claimed  that the  port authority  open  season process  was                                                                    
interrupted  by  a  North   Slope  producer  asking  Bechtel                                                                    
[Bechtel  Corporation] to  terminate  working  for AGPA.  He                                                                    
reiterated  that AGPA  held back  its  efforts because  AGIA                                                                    
appeared  to  be  moving forward.  The  port  authority  put                                                                    
"jurisdictional  interest"  aside  and recognized  the  AGIA                                                                    
effort; a  large volume project with  promising benefits for                                                                    
the entire state.   He maintained that the  $300 million for                                                                    
HB4 and  the efforts of  AGDC were better served  to advance                                                                    
AGIA;  a  project with  the  economy  of scale  that  better                                                                    
served the interests  of the market and  provided revenue to                                                                    
the state.                                                                                                                      
                                                                                                                                
Representative    Wilson   reiterated    her   request    on                                                                    
clarification   about  the   port  authority   project.  She                                                                    
maintained  that Fairbanks  was about  to make  an important                                                                    
decision   regarding   AGPA.   She  interpreted   from   the                                                                    
presentation that  AGPA had no current  project, but instead                                                                    
was  "cheerleading"  the  AGIA  plan. She  wondered  if  the                                                                    
community was misrepresented about  AGPA. She questioned his                                                                    
opposition to  the legislation. Mr. Walker  declared that no                                                                    
misrepresentation occurred.  The port authority  spent years                                                                    
establishing  a  relationship  with  the  market  that  AGPA                                                                    
brought  to the  AGIA open  season. He  maintained that  the                                                                    
port authority's role  accomplished cost estimates, obtained                                                                    
permits  and  brought  the market  interest  to  Alaska.  He                                                                    
commented that  the 2.7/bcf proposal by  Asian companies was                                                                    
"phenomenal." The  port authority  worked with  30 different                                                                    
companies  to  make  it  happen. The  market  was  the  most                                                                    
important  piece of  any project.  The market  paid for  the                                                                    
infrastructure   associated  with   a   project.  The   port                                                                    
authority worked in the best interest of Alaska.                                                                                
                                                                                                                                
10:07:00 AM                                                                                                                   
                                                                                                                                
Co-Chair Austerman  felt the presentation shed  light on the                                                                    
AGPA's and City of Valdez's  concerns. He shared the concern                                                                    
and understood  that a  large major  line produced  a profit                                                                    
and resulted  in better  prices for  the state.  He observed                                                                    
that BP, Conoco  Phillips, and Exxon were  not responding to                                                                    
the open  season. He  believed that  the producers  were not                                                                    
interested  due to  shale gas  development in  the lower  48                                                                    
states. The price  of natural gas was no longer  tied to the                                                                    
price of oil and was low.  He did not believe current market                                                                    
prices  could amortize  the cost  of  a $40  to $60  billion                                                                    
pipeline.  He supported  the  legislation.  He thought  that                                                                    
based on the current world market,  HB 4 was the only viable                                                                    
option today to  bring gas to Alaskans. He  agreed that many                                                                    
purchasers  were available  but did  not feel  market prices                                                                    
would  support a  large volume  project  in the  foreseeable                                                                    
future.                                                                                                                         
                                                                                                                                
Representative  Holmes concurred  with Co-Chair  Austerman's                                                                    
statements. She  understood the benefits  of a  large volume                                                                    
line  for   the  state.  She  felt   she  heard  conflicting                                                                    
direction in the presentation. She  asked what direction the                                                                    
state should  pursue. Mr.  Walker did  not subscribe  to the                                                                    
state's  wait and  see approach.  He argued  that the  state                                                                    
needed   to  assess   whether   AGIA   failed  or   required                                                                    
advancement.  He  felt  the  state could  not  "sit  on  the                                                                    
control of  the future of  the state  under AGIA and  not do                                                                    
anything." He  advised that the state  directly confront the                                                                    
leaseholders for a  response. He announced that  AGIA had an                                                                    
exit provision and advised that  the state seriously examine                                                                    
it. The state  needed to move on. He  emphasized that Alaska                                                                    
owned the resource. The leaseholders  did not have the legal                                                                    
right not  to sell at  the wellhead.  In other parts  of the                                                                    
world leaseholders  were required to develop  leases or risk                                                                    
losing the  lease. The  state should  not let  the producers                                                                    
voluntarily make the decision to  develop the leases or they                                                                    
will  procrastinate  until  it  suits a  best  interest.  He                                                                    
warned that the state must  take control of the situation or                                                                    
will remain  last in  line for  natural gas  development. He                                                                    
informed the  committee that prices  on a LNG  contract were                                                                    
locked in so  project risks were known. He felt  time was of                                                                    
the essence.                                                                                                                    
                                                                                                                                
10:14:50 AM                                                                                                                   
                                                                                                                                
Representative Holmes  asked if he advocated  that the state                                                                    
build a gasline.  Mr. Walker advocated that  the state build                                                                    
the  natural gas  pipeline in  partnership with  the private                                                                    
sector.                                                                                                                         
                                                                                                                                
Representative   Thompson   asked    about   the   [federal]                                                                    
Department  of  Energy's (DOE)  dismissal  of  the AGPA  LNG                                                                    
export  application.  He  relayed   that  the  DOE's  stated                                                                    
reasons were lack  of a plan for the pipeline  or plant. Mr.                                                                    
Walker explained  that AGPA was  the only group  pushing for                                                                    
an export  license. The  port authority  felt that  the AGIA                                                                    
process was developed  enough for an export  license but the                                                                    
DOE disagreed.  The port authority selected  a specific site                                                                    
for  the   terminal  but  the   DOE  wanted   more  specific                                                                    
information. In  addition, the  DOE required  gas contracts.                                                                    
He noted that the DOE invited  the group to reapply and AGPA                                                                    
was engaged  in the reapplication process.  He revealed that                                                                    
Alaska will lose  its export license on March  31, 2013. The                                                                    
state retained an export license since 1969.                                                                                    
                                                                                                                                
Co-Chair Stoltze announced that  he allowed the presentation                                                                    
in  order  to  offer  dissenting views  on  the  record.  He                                                                    
discerned  that  Alaska  can  only  build  one  natural  gas                                                                    
project. He asked  what would happen if Alaska  chose the HB                                                                    
4  project.  Mr.  Walker  asserted  that HB  4  was  a  mega                                                                    
project. The gasline  would be the largest  project built in                                                                    
the United  States. He  concurred that  there was  only room                                                                    
for one  mega project in  the state. As a  longtime advocate                                                                    
for a  gasline he felt  uncomfortable arguing against  HB 4.                                                                    
But, based  upon the  evidence he  feared that  Alaska would                                                                    
settle  for far  less  than  what we  were  entitled to.  He                                                                    
believed the sponsors were well intended.                                                                                       
                                                                                                                                
Co-Chair Stoltze  questioned whether it was  "worth settling                                                                    
for less or settling for  nothing." Mr. Walker answered that                                                                    
the project  did not provide  revenue to the state,  did not                                                                    
provide lower  energy costs and actually  increased the cost                                                                    
of  gas  in  Southcentral.   He  identified  less  expensive                                                                    
options   to  solve   the   immediate   energy  problem   in                                                                    
Southcentral  Alaska. He  concluded that  less was  probably                                                                    
not better than nothing.                                                                                                        
                                                                                                                                
10:21:42 AM                                                                                                                   
AT EASE                                                                                                                         
                                                                                                                                
10:22:38 AM                                                                                                                   
RECONVENE                                                                                                                       
                                                                                                                                
REPRESENTATIVE HAWKER appreciated  the presentation. He felt                                                                    
the  committee agreed  with  the  concerns and  frustrations                                                                    
expressed  by Mr.  Walker.  He recapped  that  AGIA was  not                                                                    
working, there was no forward  movement, and agreed that the                                                                    
state should  "go it alone."  He stressed that  the sponsors                                                                    
shared the  frustration. He was  concerned that  the private                                                                    
sector project  had languished. He  agreed that there  was a                                                                    
strong  Asian niche  market for  Alaskan  LNG. However,  his                                                                    
foremost  concern was  to meet  the in-state  Alaskan energy                                                                    
needs.  He commented  that  the City  of  Valdez spent  $900                                                                    
thousand  to  kill  HB  4 and  supposed  that  Mr.  Walker's                                                                    
presentation was  included in that amount.  He believed that                                                                    
the arguments  put forward  by Mr.  Walker were  exactly why                                                                    
the committee  should support the  bill. He  emphasized that                                                                    
the  sponsors intended  to  utilize the  talent  in AGDC  to                                                                    
benefit the entire  state. The bill was  designed to empower                                                                    
AGDC to  "build a brain  trust" that was responsible  to the                                                                    
citizens of  the state. He  reminded the committee  that the                                                                    
state  had  a  contractual obligation  to  TransCanada.  The                                                                    
state could  not easily leave the  contract. The legislation                                                                    
was written to allow AGIA  to move forward, but enabled AGDC                                                                    
to  move  a  viable  project forward  if  AGIA  failed.  The                                                                    
mechanisms  to  get out  of  AGIA  involved arbitration  and                                                                    
proof that  the project  was non-economical. He  deemed that                                                                    
would last ten years. He stressed  that HB 4 was in the best                                                                    
interest  of Alaska.  He hoped  that  the legislation  would                                                                    
evolve into a bigger project  and that HB 4 was "constrained                                                                    
by commitments  that the legislature  made in the  past" and                                                                    
hoped to work around them.                                                                                                      
                                                                                                                                
Representative  Hawker  countered  some of  the  conclusions                                                                    
drawn in the  presentation. He voiced that the  cost of Cook                                                                    
Inlet  gas was  already on  the  rise. He  relayed that  his                                                                    
local utility purchased  Cook Inlet gas this  winter at $22.                                                                    
Mcf (thousand cubic  feet). The sponsors were  aware that an                                                                    
Alaska in-state gasline will not  move forward unless it can                                                                    
"beat  the   price  of  importing  LNG."   He  reminded  the                                                                    
committee that  the $400 million  took the project  "all the                                                                    
way to  the project sanction."  He questioned the  claims by                                                                    
the  City of  Valdez. The  mayor stated  in a  press release                                                                    
that  the  AGIA  open  season in  2012  was  successful  and                                                                    
justified  moving forward  with  a large  volume gasline  to                                                                    
tidewater.  He believed  that  the open  season  was a  non-                                                                    
binding   expression  of   interest.  He   investigated  the                                                                    
statement and  questioned two of the  producers involved who                                                                    
could  not corroborate  the mayor's  statements. He  relayed                                                                    
the administration's  desire to move forward  with both AGIA                                                                    
and HB  4. He emphasized  that both were the  best prospects                                                                    
for the state.                                                                                                                  
                                                                                                                                
10:31:58 AM                                                                                                                   
                                                                                                                                
SPEAKER  MIKE CHENAULT,  believed  that Mr.  Walker had  the                                                                    
best intention for the state  of Alaska. He pointed out that                                                                    
all of  the previous gasline  projects listed on  the slides                                                                    
had failed. He  related that in discussions  with Alaska Oil                                                                    
and Gas Conservation Commission  (AOGCC), the volume of 5.5/                                                                    
bcf of  gas would not be  allowed to flow through  a Prudhoe                                                                    
Bay gasline. The  loss of oil revenue would  be greater than                                                                    
the amount of income gained  from that amount of natural gas                                                                    
production.  He   noted  that   Pt.  Thompson  was   not  an                                                                    
alternative   because  it   was  still   classified  as   an                                                                    
undetermined field and AOGCC would  not permit a high volume                                                                    
of production until the oil  field was classified. He agreed                                                                    
that the  volume of the gasline  in HB 4 should  be as large                                                                    
as possible;  it was limited  by current law and  AOGCC. The                                                                    
commission  was tasked  with  ensuring  Alaska received  the                                                                    
best value from  its resources. He understood  that a market                                                                    
in  ASIA   existed  but  was   changing.  He   thought  that                                                                    
relationships played  a big part  in contracts in  the Asian                                                                    
market, but  they only go  so far.  The energy cost  was the                                                                    
important  piece. The  state lost  historical LNG  contracts                                                                    
with Tokyo Light  and Power of Japan (BP  was providing less                                                                    
than  one  percent  of its  LNG  needs)  notwithstanding  an                                                                    
established relationship with the state.                                                                                        
                                                                                                                                
10:37:08 AM                                                                                                                   
                                                                                                                                
Speaker Chenault reiterated that the  cost of Cook Inlet gas                                                                    
was $22.  Mcf for  peak gas.  He wondered  why there  was so                                                                    
much concern  over a pipeline  that could offer  $9./Mcf for                                                                    
year  around  gas.  He  believed that  the  $9/Mcf  gas  was                                                                    
preferable to  $22/Mcf. He agreed  with Mr.  Walker's desire                                                                    
to construct the  largest volume pipeline. He  felt that the                                                                    
time  for waiting  for a  large diameter  line was  over. He                                                                    
declared that  if the state  ended up importing LNG  to meet                                                                    
its energy  needs then the state's  elected officials failed                                                                    
its  citizens in  our  commitment  to do  what  is best  for                                                                    
Alaska.  The "means  and mechanisms"  existed  to develop  a                                                                    
long term energy source for the citizens of the state.                                                                          
                                                                                                                                
Co-Chair Stoltze  was glad  that any  gas was  available for                                                                    
his  district  at  the coldest  peak  months  regardless  of                                                                    
price.   He  stated   that  the   consequences  of   no  gas                                                                    
availability were too severe.                                                                                                   
                                                                                                                                
Representative  Hawker  added  that no  gas  pipeline  would                                                                    
provide  an  immediate  solution.  He  related  that  short,                                                                    
medium, and  long range solutions  were necessary.  The Cook                                                                    
Inlet Recovery  Act (2010) that  provided for a  gas storage                                                                    
facility was an example of  an immediate short term solution                                                                    
that worked, but  was not enough for the long  term. The gas                                                                    
trucking legislation  [SB 23-AIDEA: LNG  PROJECT; DIVIDENDS;                                                                    
FINANCING]  would  not  provide  a long  term  solution.  He                                                                    
offered that  the long term  solution was Alaska's  vast gas                                                                    
supply from the North Slope.                                                                                                    
                                                                                                                                
10:41:33 AM                                                                                                                   
                                                                                                                                
Representative Gara recapped that  a large volume line would                                                                    
provide cheaper gas  and more export revenue.  He noted that                                                                    
AGIA limited the  size of other gaslines to .5  bcf or less.                                                                    
He wanted  to move ahead  with both projects.  He understood                                                                    
that the  governor was  making progress on  AGIA and  if the                                                                    
process  was   stalled  HB  4  was   another  mechanism.  He                                                                    
expressed   concern  with   the  language   of  HB   4.  The                                                                    
legislature  did not  have an  opportunity to  respond. With                                                                    
passage of  the bill,  the language  allowed the  project to                                                                    
move forward if additional  state funding was not necessary.                                                                    
Previous   legislation  such   as  the   Stranded  Gas   Act                                                                    
authorized final  legislative approval. He thought  that the                                                                    
state could "get  stuck" with the HB 4 project  if it proved                                                                    
undesirable  to the  state. He  questioned how  the sponsors                                                                    
felt about that outcome. Speaker  Chenault replied that HB 4                                                                    
and the  Stranded Gas Act  [Alaska Stranded  Gas Development                                                                    
Act,  1998] were  different. The  Stranded Gas  Act required                                                                    
that  Alaska  pay  for  20  percent  of  the  project  which                                                                    
amounted to approximately  $9 billion. He felt  that in that                                                                    
instance,   legislative   approval   was   appropriate.   He                                                                    
reiterated  that HB  4's total  cost to  the state  was $400                                                                    
million. He judged that at  the point of moving forward with                                                                    
contractual agreements the project was  best left out of the                                                                    
"political realm."                                                                                                              
                                                                                                                                
Representative  Hawker agreed  with  the  Speaker. He  noted                                                                    
that HB  4 provided  for state  involvement in  the process.                                                                    
The  legislation  built  in the  regulatory  structure  that                                                                    
allowed the  state to invest  in the project, but  only with                                                                    
legislative approval. He did not  feel that sending industry                                                                    
the  message that  the state  only  wanted private  industry                                                                    
development that  was state sanctioned was  the wrong policy                                                                    
call. He  wanted a state that  fostered economic development                                                                    
in the private  sector. He summarized that HB  4 contained a                                                                    
"plethora  of  checks and  balances  to  protect the  states                                                                    
interest  without compromising  the ability  of the  private                                                                    
sector to move forward" with efficiency.                                                                                        
                                                                                                                                
HB  4   was  HEARD  and   HELD  in  committee   for  further                                                                    
consideration.                                                                                                                  
                                                                                                                                
                                                                                                                                
10:50:27 AM                                                                                                                   
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
The meeting was adjourned at 10:50 a.m.                                                                                         

Document Name Date/Time Subjects
HB 4 Valdez Presentation to HFIN.pdf HFIN 3/28/2013 9:00:00 AM
HB 4