Legislature(2013 - 2014)HOUSE FINANCE 519
03/25/2013 01:30 PM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| SB23 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 23 | TELECONFERENCED | |
| + | HB 74 | TELECONFERENCED | |
| + | TELECONFERENCED |
HOUSE FINANCE COMMITTEE
March 25, 2013
1:32 p.m.
1:32:31 PM
CALL TO ORDER
Co-Chair Stoltze called the House Finance Committee meeting
to order at 1:32 p.m.
MEMBERS PRESENT
Representative Alan Austerman, Co-Chair
Representative Bill Stoltze, Co-Chair
Representative Mark Neuman, Vice-Chair
Representative Mia Costello
Representative Bryce Edgmon
Representative Les Gara
Representative Lindsey Holmes
Representative Scott Kawasaki, Alternate
Representative Cathy Munoz
Representative Steve Thompson
Representative Tammie Wilson
MEMBERS ABSENT
Representative David Guttenberg
ALSO PRESENT
Luke Hopkins, Mayor, Fairbanks North Star Borough,
Fairbanks; John Davies, Deputy Finance Chair, Fairbanks
North Star Borough Assembly, Fairbanks.
PRESENT VIA TELECONFERENCE
Jerry Cleworth, Mayor, City of Fairbanks; Bryce Ward,
Mayor, City of North Pole; Lisa Herbert, Executive
Director, Fairbanks Chamber of Commerce, Fairbanks; Ron
Johnson, Self, Fairbanks; Bob Shefchik, Fairbanks Chamber
of Commerce, Interior Gas Utility, Fairbanks; Jim Dodson,
President, Fairbanks Economic Development Council,
Fairbanks; David Gardiner, Golden Valley Electric
Association, Fairbanks; Diane Hutchinson, Fairbanks North
Star Borough Assembly, Fairbanks; William McAmis, Self,
Fairbanks; Roger Burggraf, Self, Fairbanks; Derik T. Price,
Fountainhead Development Inc., Fairbanks; Dick Brickley,
Self, Fairbanks; Hank Bartos, Lowell Group, Fairbanks; Bill
St. Pierre, Self, Fairbanks; Jomo Stewart, Energy Project
Manager, Fairbanks Economic Development Corporation,
Fairbanks; Timothy Gunderson, Self, North Pole; Kenneth
Pugh, Equipment Source Inc., Anchorage; Bill Bailey,
Director, Public Relations, Fairbanks School District,
Fairbanks; Bob Hadjukovich, CEO, ERA Alaska Aviation,
Anchorage.
SUMMARY
CSSB 23(FIN)
AIDEA: LNG PROJECT; DIVIDENDS; FINANCING
CSSB 23(FIN) was HEARD and HELD in committee for
further consideration.
CS FOR SENATE BILL NO. 23(FIN)
"An Act relating to development project financing by
the Alaska Industrial Development and Export
Authority; relating to the dividends from the Alaska
Industrial Development and Export Authority;
authorizing the Alaska Industrial Development and
Export Authority to provide financing and issue bonds
for a liquefied natural gas production system and
natural gas distribution system; and providing for an
effective date."
1:34:53 PM
Representative Thompson explained that SB 23 provided
energy relief to the Interior of Alaska through development
of a liquefied natural gas (LNG) system on the North Slope.
The gas would be transported via trucks to the Interior. He
voiced that SB 23 would reduce energy costs by 50 percent
and kilowatt hours for electricity. The legislation would
significantly improve air quality in Fairbanks and bring
the city in compliance with pm 2.5 air quality standards
enforced by the Environmental Protection Agency (EPA).
Compliance eliminated the risk of losing federal
transportation funding. He added that the legislation had
potential to help other areas of the state. The plan was
financed through a loan package and a $50 million equity
investment by Alaska Industrial Development and Export
Authority (AIDEA).
1:37:38 PM
AT EASE
1:38:56 PM
RECONVENED
Co-Chair Stoltze OPENED public testimony.
JERRY CLEWORTH, MAYOR, CITY OF FAIRBANKS (via
teleconference), testified in favor of the legislation. He
commented that there was broad consensus in support of the
legislation. The city felt hopeful that the plan would
provide much needed energy relief to the region. He related
that the bill was financed through a series of loans
eventually repaid by the residents of Interior Alaska. He
noted that "opening up the conduit for gas" served as
"insurance" for South Central Alaska if its supply
constricted.
1:42:10 PM
BRYCE WARD, MAYOR, CITY OF NORTH POLE (via teleconference),
spoke in favor of the legislation. He thought that the plan
benefitted the entire state. The legislation "encouraged"
the development of the resource for in-state use. The plan
could extend to other areas of the state by providing
natural gas trucked or barged to other communities. He
listed the communities: Manley, Tok, Minto, Delta Junction,
Tanana, Beaver, and Fort Yukon. The project would enable
the state to develop its distribution system and build
demand for the eventual Trans-Alaska Pipeline System (TAPS)
gasline. He stated that the bill was an investment in the
future of the state and that a monetary return on
investment through loan repayment would occur as a result.
He anticipated lower energy costs and increased economic
development in the region. He urged the committee to look
at all aspects related to how the bill could help the state
as a whole.
LISA HERBERT, EXECUTIVE DIRECTOR, FAIRBANKS CHAMBER OF
COMMERCE, FAIRBANKS (via teleconference), testified in
support of the legislation. She relayed that she spoke on
behalf of a 700 member organization that was anxiously
awaiting the passage of the bill and lower cost energy.
Reducing the regions energy cost was the chambers highest
priority. A natural gas supply would improve air quality
and bring the North Star Borough in compliance with air
quality standards. The result would increase economic
growth. She stressed that the community could not wait any
longer for lower cost energy.
In response to a question by, Co-Chair Stoltze, Ms. Herbert
reported that 70 members responded to a chamber call to
action to testify in support of the bill.
RON JOHNSON, SELF, FAIRBANKS (via teleconference), spoke in
favor of the legislation. He reiterated support for a lower
cost energy supply in the region. He thought that energy
security was an issue with natural gas trucking and
distribution. He cautioned that the plan should address a
risk assessment to ensure a dependable supply of fuel to
homes and businesses. He wondered what would happen if
distribution of gas was interrupted during winter months.
He pointed out that fuel oil tanks provided a safe winter's
supply. Natural gas could not be stored to last through a
winter. He shared other concerns. He wondered what would
happen to existing fuel oil tanks once a conversion to
natural gas occurred. He asked whether people could still
use heating oil once gas trucking began. He wondered if an
ample work force existed to carry out the conversions and
whether the subsidy to convert from wood burning should
continue for natural gas. He was in favor of natural gas
but wanted to make sure the issues were thoroughly vetted.
Representative Wilson noted that some sections of the
Fairbanks North Star Borough would remain on oil and wood
heat. The bill would address more populated areas first.
She related that more natural gaslines would be built as
capacity increased; consequently, the workforce would build
gradually.
1:52:47 PM
BOB SHEFCHIK, FAIRBANKS CHAMBER OF COMMERCE, INTERIOR GAS
UTILITY, FAIRBANKS (via teleconference), testified in favor
of the legislation. He encouraged examination of the issues
discussed by the prior speaker. He relayed that SB 23
provided authorization for AIDEA to participate in the
development of the gas trucking project. The
administration's goal of providing natural gas to many
residents at a cost 50 percent less than diesel, as quickly
as possible, garnered wide-ranging support. He pointed to
the high cost of energy and the consequences of air quality
standards non- attainment; the impacts were real and
immediate. Interior residents collectively paid
approximately $400 million per year to heat homes and
businesses. He thought that the bill provided many benefits
including the loan repayment, conversion from a diesel
based energy economy to natural gas, return an estimated
$200 million of spendable income to the economy, and
compliance with air quality standards. Passage of the bill
would be the first step in breaking the region free from
the crippling effects of a diesel based economy. He added
that the energy security issue was real and called for mass
storage mechanisms in the borough for natural gas should an
interruption occur.
JIM DODSON, PRESIDENT, FAIRBANKS ECONOMIC DEVELOPMENT
COUNCIL, FAIRBANKS (via teleconference), spoke in favor of
the bill. He stated that the bill would help save an
estimated $250 million in heating costs on an annual basis
and providing additional economies in the region. He spoke
to the diversification of the economy, creation of jobs and
opportunities for Alaskans as results of the legislation.
Representative Gara believed there was overwhelming support
for the legislation by members of the committee.
DAVID GARDINER, GOLDEN VALLEY ELECTRIC ASSOCIATION,
FAIRBANKS (via teleconference), strongly supported the
legislation. Golden valley served over 100,000 Interior
residents. The project would allow the utility to burn
natural gas in its power plant with the potential to save
its members millions of dollars annually. The arrival of
LNG would lower pollution, reduce heating costs, provide
reduced propane costs for residents along the Yukon River,
and provide LNG to Anchorage in emergency shortages of
natural gas. The cooperative looked forward to assisting
AIDEA with expertise and facilitate completion of the
project as soon as possible. He urged the committee to
support the legislation.
Co-Chair Stoltze asked whether the association had passed
an official resolution on the issue. Mr. Gardiner replied
in the negative, but noted he could facilitate one if
needed.
2:01:13 PM
DIANE HUTCHINSON, FAIRBANKS NORTH STAR BOROUGH ASSEMBLY,
FAIRBANKS (via teleconference), spoke in support of the
legislation. She cited a resolution passed by the borough
(copy on file). She stated that lowering energy costs was
the boroughs top priority. The bill provided a short-term
solution and would build the infrastructure necessary to
accommodate gas when a gasline was in place. The borough
welcomed projects that would provide distribution to other
areas of the state. She stated that no community's economy
was unaffected by businesses closing due to adverse effects
of high energy costs. If businesses closed in Fairbanks a
ripple effect would be felt in surrounding villages and in
Anchorage and so on. She stated that the pm 2.5
noncompliance issue and subsequent penalties by the
Environmental Protection Agency (EPA) would help solve the
problem for Fairbanks and the state. Passage of the bill
would help the "residents breathe easier."
WILLIAM MCAMIS, SELF, FAIRBANKS (via teleconference),
stated support for the legislation. He concurred with all
of the previous testimony. He discussed the hardships that
high energy costs dealt the villages, which contributed to
the de-population of the rural areas. The price of fuel oil
in Fairbanks was raising and could cause decreased
population in the borough. He stressed the importance of
energy relief. He stated that federal highway funds would
be cut off because of non-compliance with the EPA air
standards. He urged for passage of the bill.
ROGER BURGGRAF, SELF, FAIRBANKS (via teleconference), spoke
in support of the bill. He pointed to high energy costs
that impacted the mining industry. He thought that LNG
trucking was a short-term solution to the problem. He had
been waiting since 1958 for Fairbanks to receive natural
gas. He discussed that diesel prices were killing
communities. He stressed that the EPA was "breathing down
the community's neck" because of air quality violations. He
did not believe a pipeline would reach the community any
time soon. He stressed the immediacy of the issue. Failure
to provide natural gas to the Interior within the next two
years would devastate the regional economy. He accentuated
that reasonable energy costs were paramount to a healthy
economy. He thanked the committee for its work on the bill.
2:10:37 PM
DERIK T. PRICE, FOUNTAINHEAD DEVELOPMENT INC., FAIRBANKS
(via teleconference), supported the legislation. He
remarked that Fountainhead owned several hotels in
Fairbanks and over a dozen large commercial buildings. The
business included a manufacturing company of oil field
services equipment. He noted that energy costs had a
significant impact on its production costs and impacted its
ability to compete with manufacturers outside Alaska. He
stated that increased availability to natural gas would
have a positive impact on the quality and cost of living.
DICK BRICKLEY, SELF, FAIRBANKS (via teleconference),
supported the legislation. He believed energy was critical
to the Interior of Alaska. The legislation would offer
substantial financial relief to the region and benefit the
entire state.
HANK BARTOS, LOWELL GROUP, FAIRBANKS (via teleconference),
spoke in favor of the legislation. He urged the legislature
to act quickly to adopt the legislation. He related
personal experience in the real estate business. People
were moving from the area due to high utility costs. He
discussed that residents could not afford to pay utility
bills and make house payments. The issue was driving
residents to use wood for heating, which triggered the air
quality problem. He believed the natural gas trucking plan
would solve all of the energy problems.
BILL ST. PIERRE, SELF, FAIRBANKS (via teleconference),
testified in favor of the bill. He related personal
business experience. The high energy costs and related
problems was not only a Fairbanks issue but affected the
millions of dollars of Anchorage assets invested in
Fairbanks. The high cost of energy was impacting the
investments. Many residents were leaving. He voiced that
the gas trucking plan would protect Anchorage investments
and would create other business opportunities.
JOMO STEWART, ENERGY PROJECT MANAGER, FAIRBANKS ECONOMIC
DEVELOPMENT CORPORATION, FAIRBANKS (via teleconference),
spoke in favor of the legislation. He stated that the bill
provided a "gateway" to the regions transition to an
affordable and cleaner energy source as well as to global
markets. Cheaper energy created a competitive advantage in
the marketplace. He pointed to additional savings for the
state as a result of the legislation. According to state
analysis that included polling state and federal agencies
related to fuel usage in the region, the state stood to
save $5 million to $7 million in public facilities.
Co-Chair Stoltze noted that the legislature was more
concerned with savings to residents and the economy as a
whole, but appreciated the information. He pointed to the
importance of educating residents of the entire state on
the issue. Some Alaskans feel the legislation was a
"subsidy" for Fairbanks. He wanted to support the Fairbanks
delegation.
2:20:12 PM
Representative Gara discussed that Southcentral Alaska had
also received subsidies; the legislators were sensitive to
needs of all areas of the state.
Co-Chair Stoltze remarked that "there were different ways
that different parts of the state do receive benefits."
TIMOTHY GUNDERSON, SELF, NORTH POLE (via teleconference),
testified in support of the bill. He shared personal
information related to his family. He commented that a
family member recently moved out of the state due to the
cost of energy. He concurred with all of the previous
testimony. He pointed to the additional benefit of propane
production as a by-product of LNG. He discussed that
approximately 30,000 gallons of propane per day would be
produced. Propane was much simpler to transport than
natural gas. Propane could be easily transported to
villages along the Yukon River to storage facilities and
reduce the costs of energy. He reported that the cost of
propane in Galena was $180 for 100 gallons. The cost was
$4.00 per gallon in Fairbanks. As a result of the natural
gas plan the price of propane in Fairbanks will drop to
$1.20 to $1.60 per gallon. He elaborated that the delivery
of propane to outlying areas was an economic benefit for
multiple areas of the state. He deduced that the lower cost
of an alternative fuel may drive the cost of heating oil
down due to competition. He detailed that Prudhoe Bay
natural gas was composed of 12 to 15 percent propane as a
byproduct. He thought that the relative ease of
transporting and utilizing propane in the villages posed a
major benefit for the villages as a result of the LNG
trucking plan.
KENNETH PUGH, EQUIPMENT SOURCE INC., ANCHORAGE (via
teleconference), testified in favor of the legislation. He
related that he worked for a company based out of
Fairbanks; the company used a significant amount of
electricity and heat for manufacturing North Slope
supplies. He was certain there were other similar entities
in the region that could continue to be competitive with
access to LNG. He stressed that the issue was a statewide
concern and that the entire state would benefit.
2:28:07 PM
BILL BAILEY, DIRECTOR, PUBLIC RELATIONS, FAIRBANKS SCHOOL
DISTRICT, FAIRBANKS (via teleconference), strongly
supported the legislation. He believed that the bill was
paramount to the economic health of the Interior region. He
pointed to the costs of heat and power for the 34 buildings
in the Fairbanks North Star School District. The district
had spent approximately $4 million on electricity and
burned 478, 517 gallons of fuel oil in the 2011-2012 school
year. He elaborated that the payback for the conversion to
natural gas for one school in the district was only two
years.
BOB HADJUKOVICH, CEO, ERA ALASKA AVIATION, ANCHORAGE (via
teleconference), spoke in support of the bill. He stated
that he was in the business of consuming fuel and realized
that when compared to the low costs of energy in Anchorage,
the Interior had a serious energy problem. He reported that
his businesses experienced an over 30 percent drop in
passenger traffic from the rural areas due to "dying
communities." He noted the strategic nature of Fairbanks in
relation to the state's transportation network and its
location to the North Slope. He wanted a way to make it
economical to live and operate there. Businesses cannot
compete with Anchorage or other areas. He encouraged
passage of SB 23.
LUKE HOPKINS, MAYOR, FAIRBANKS NORTH STAR BOROUGH,
FAIRBANKS, testified in support of the legislation. He
highlighted that an important element of the plan was that
the loans would be repaid. Fairbanks may not have the
highest home heating costs, but viewed the project as
providing relief to other communities as well via trucking.
He noted that the saving to the borough for public
facilities was $1.5 million at an estimated price of
natural gas of $15 Mcf (thousand cubic feet). The air
quality issue was a "major concern." The LNG gas trucking
plan was a major first step of a "viable state
implementation plan" to bring the borough into compliance
with the EPA air quality requirements. He thought the plan
would help satisfy the EPA demands. He pointed to the
importance of solving the air quality issue. He asked the
committee to report the bill from committee.
2:38:18 PM
JOHN DAVIES, DEPUTY FINANCE CHAIR, FAIRBANKS NORTH STAR
BOROUGH ASSEMBLY, FAIRBANKS, spoke in support of the
legislation. He agreed with all of the previous testimony.
He noted the high energy costs in the Interior estimated at
$600 million per year; space heating alone amounted to $200
million. Cutting space heating costs in half represented
substantial savings to rate payers. He reminded the
committee that project financing was primarily a loan
package repaid by the rate payer. He stated that the
investment offered a 20 percent annual pay back. The $15
Mcf price of natural gas was the equivalent cost of cord
wood selling for $250. He commented on the necessity to
maintain the $15 Mcf price for natural gas to encourage
residents to switch from burning wood and bring the pm 2.5
levels into compliance. He believed the issue was the most
important for the Interior of Alaska. He urged for swift
passage of the bill.
Representative Gara offered that low cost energy had
"eluded" many residents across the state especially in
rural Alaska. He asked how the legislation provided relief
for rural Alaska. Mr. Davies replied that the propane
option was the most likely option to provide energy relief
for Interior rural communities. The costs "penciled out."
Emerging technology that confined natural gas in
containers, CNG Tanks (compressed natural gas) were
"problematic." The costs were not "economically feasible."
He explained that if compressed gas was transported and
converted at a local facility it became economical in a
village wide setting.
Co-Chair Stoltze CLOSED public testimony. He noted that
Fairbanks consolidated its public testimony.
Representative Wilson announced that GVA (GVEA - Golden
Valley Electric Association) served a large portion of the
Interior. The legislation provided relief for electricity
in farther reaches of the Interior region. She knew that
other regions of the state had higher energy costs. She
hoped that serving the Fairbanks region was only the first
step in utilizing North Slope gas and would spread to other
areas of the state with higher energy costs. She stated
that for a "resource rich" state energy costs were
extremely high.
2:46:30 PM
Co-Chair Austerman requested a report from AIDEA on the
propane option and costs to consumers. He wondered whether
AIDEA performed analysis on utilizing propane for the plan.
Representative Kawasaki agreed that the project provided
the fastest way to get gas to the Interior. He noted the
plan was a "bridge project" and not the final project that
was necessary to benefit the entire state. He appreciated
the bills rapid passage through the legislature.
Representative Thompson guessed that providing energy
relief to the villages along the Yukon River had the
potential to reduce PCE (Power Cost Equalization). He
believed there would be cost savings to the state.
Co-Chair Stoltze mentioned a phone conversation with former
Representative Jay Ramras. He cited a statistic provided by
Mr. Ramras. He believed that Fairbanks was the largest
population in the world located at its latitude that ran on
diesel power.
Co-Chair Austerman asked for AIDEA to include the Alaska
Energy Authority's work in the report on propane.
Representative Gara restated that the project was a stopgap
measure. He believed the more time the state could gain
with short-term solutions the more time it had to make
smart decisions related to a gas pipeline project.
CSSB 23(FIN) was HEARD and HELD in committee for further
consideration.
Co-Chair Stoltze discussed the schedules for the following
day.
ADJOURNMENT
2:53:33 PM
The meeting was adjourned at 2:53 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB 23 City of Fairbanks Resolution.pdf |
HFIN 3/25/2013 1:30:00 PM |
SB 23 |