Legislature(2013 - 2014)HOUSE FINANCE 519
04/16/2014 08:30 AM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| SB178 | |
| SB169 | |
| SB138 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | SB 178 | TELECONFERENCED | |
| += | SB 169 | TELECONFERENCED | |
| += | SB 138 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | SB 191 | TELECONFERENCED | |
HOUSE FINANCE COMMITTEE
April 16, 2014
8:38 a.m.
8:38:21 AM
CALL TO ORDER
Co-Chair Stoltze called the House Finance Committee meeting
to order at 8:38 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 David Guttenberg
Representative Lindsey Holmes
Representative Cathy Munoz
Representative Steve Thompson
Representative Tammie Wilson
MEMBERS ABSENT
None
ALSO PRESENT
Brittany Hutchinson, Staff, Senator Bishop; Jane Pierson,
Staff, Representative Steve Thompson; Rudi Vonimhof,
President, Delta Leasing, Anchorage; Angela Rodell,
Commissioner, Department of Revenue; Michael Barber,
Assistant Attorney General, Department of Law; Senator
Cathy Geissel, Sponsor; Jill Lewis, Deputy Director,
Division of Public Health, Department of Health and Social
Services; Michael Pawlowski, Deputy Commissioner, Strategic
Finance, Department of Revenue; Joe Balash, Commissioner,
Department of Natural Resources.
PRESENT VIA TELECONFERENCE
Sam Robert Brice, Brice Companies, Fairbanks; Ryan
Peterkin, Magtec Alaska, Kenai; Doug Johnson, CFO, Tyler
Rental.
SUMMARY
CSSB 138(FIN) am
GAS PIPELINE; AGDC; OIL & GAS PROD. TAX
CSSB 138(FIN) am was HEARD and HELD in committee
for further consideration.
CSSB 169(FIN)
IMMUNIZATION PROGRAM; VACCINE ASSESSMENTS
HCSCSSB 169(HSS) was REPORTED out of committee
with a "do pass" recommendation and with one new
fiscal note from Fund Transfers for the
Department of Health and Social Services, one new
fiscal note from the Department of Health and
Social Services, one new indeterminate fiscal
note from the Department of Health and Social
Services, one previously published zero fiscal
note: FN4 (CED), and one previously published
indeterminate fiscal note: FN5 (ADM).
CSSB 178(FIN)
PASSENGER & REC. VEHICLE RENTAL TAX
CSSB 178(FIN) was HEARD and HELD in committee for
further consideration.
CSSB 191(FIN)
GENERAL OBLIGATION BOND FUND TRANSFER
CSSB 191(FIN) was HEARD and HELD in committee for
further consideration.
CS FOR SENATE BILL NO. 191(FIN)
"An Act relating to the authority of the Legislative
Budget and Audit Committee to approve the temporary
transfer of money from the general fund to
construction funds or accounts; and providing for an
effective date."
CS FOR SENATE BILL NO. 178(FIN)
"An Act relating to the passenger and recreational
vehicle rental taxes; and providing for an effective
date."
8:38:21 AM
BRITTANY HUTCHINSON, STAFF, SENATOR BISHOP, offered a brief
overview of the bill.
8:40:59 AM
Co-Chair Stoltze asked where the bulk of the rental tax
monies had been spent to date.
Ms. Hutchinson replied that she did not know.
8:41:14 AM
Co-Chair Stoltze asserted that the funds was one that had
been preyed upon by many interests.
Co-Chair Austerman discussed Page 1, line 5:
Sec. 43.52.010. Levy of passenger and recreational
vehicle rental tax.
Co-Chair Austerman understood that a person could fly to
Anchorage and rent a recreation vehicle for 30 days without
being subject to the rental tax.
Ms. Hutchinson replied in the affirmative.
Co-Chair Austerman surmised that the objective of the bill
was to exempt recreational vehicles from the tax.
Ms. Hutchinson replied that the main objective had been to
exempt passenger vehicles but that drafters had thought
that in order to better organize the statute recreational
vehicles should be included.
Co-Chair Austerman asserted that the addition of the
recreational vehicles created a stumbling block and muddied
the intent.
8:43:27 AM
Representative Wilson expressed her concern that the bill
would result in a loss of revenue.
Ms. Hutchinson responded that the Department of Revenue
(DOR), which had prepared the fiscal note, had noted a
minimal loss of revenue.
Co-Chair Stoltze asked for a projection of the range of
revenue loss.
Representative Wilson noted that the regulation had just
been changed, which had seemed to have cleared up any
misinterpretation of the statute. She maintained her
concern that if the bill passed the revenue loss to the
state would be significant.
8:45:35 AM
AT EASE
8:45:55 AM
RECONVENED
JANE PIERSON, STAFF, REPRESENTATIVE STEVE THOMPSON, thought
that the committee would have a greater understanding as to
why the bill existed if they listened to some public and
invited testimony. She said that she had worked for months
with the department in trying to craft and agreeable bill.
Co-Chair Stoltze agreed.
Co-Chair Stoltze OPENED public testimony.
8:48:12 AM
SAM ROBERT BRICE, BRICE COMPANIES, FAIRBANKS (via
teleconference), testified in support of the bill. He
stated that most of his company's vehicle rental use was on
the North Slope by producers and support companies on
private roads. He said that his facility was on a public
road at the end of the Dalton Highway, but 99 percent of
the rental activity of the vehicles was on the private oil
field roads. He relayed that often the length of the rental
term was unknown. He said that his company's liability went
back to 2010, the first year of light vehicle rental, they
paid $31,000 as not to incur further penalties. He believed
that the bill helped clarify the intent of the statue. He
thought that there was more work to be done with DOR so
that all parties were clear as to what was applicable to
the rental tax.
8:50:47 AM
Co-Chair Austerman asked whether the testifier's company
rented recreational vehicles. Mr. Brice replied no. Co-
Chair Austerman asked whether he had an opinion on
recreational vehicles being added to the bill. Mr. Brice
shared that his company mainly rented half-ton pick-ups
that were used on private roads.
8:51:26 AM
Co-Chair Stoltze asked if the recreational vehicles had
been added because they are one of two types of vehicles
taxed under current law.
Ms. Pierson replied yes. She noted that the recreational
vehicle rental fee was 3 percent.
Representative Costello asked how much back taxes were owed
to the state by Mr. Brice.
Mr. Brice replied that the amount was not disclosed. All
light vehicle rentals rented for less than 90 days would be
applicable. He stated that he went back and researched his
record in order to come up with the $31,000 of liability,
which the company had not collected because they had been
unaware that they were expected to collect the tax.
8:52:57 AM
Representative Gara asked whether Mr. Brice's business
would be effected if the exemption taxed rentals longer
than a 40 day period.
Mr. Brice replied that the days of rental were not as
important as was the interpretation concerning what kind of
vehicles met the requirement for vehicles that fell under
the tax. He reiterated that often the duration of the
vehicle rental was unknown until it was returned to the
business.
8:54:10 AM
RYAN PETERKIN, MAGTEC ALASKA, KENAI (via teleconference),
testified in support of the bill. He noted that he first
learned about the tax in 2013 when a criminal investigator
from DOR, accompanied by an armed enforcement officer,
arrived at his place of business at Prudhoe Bay and
informed him that he had been committing an enforceable,
criminal crime by not charging the vehicle rental tax. He
asserted that the department had not contacted him prior
about the tax and that, to that point, he had never known
of the tax. He stated if any of the vehicle rental
businesses on the slope had been charging the tax it would
have major competition between rental companies, which was
not the case. He said that he contacted the department in
an effort to correctly understand the tax code in order to
immediately implement the collection of the tax. He opined
that going through the process he found it difficult to
deal with the vagueness and lack of clarification from DOR
on the exemptions on the tax statute and regulations. He
listed several exemptions that needed clarification.
8:59:32 AM
Co-Chair Austerman asked if he rented recreational
vehicles.
Mr. Peterkin replied no.
9:00:08 AM
RUDI VONIMHOF, PRESIDENT, DELTA LEASING, ANCHORAGE,
testified in support of the legislation. The primary office
was located in Prudhoe Bay. He discussed communications
with DOR in 2010, which consisted of two letters explaining
that he did not feel that the tax applied to his customers
for various reasons. He stated that he sent the letters,
along with his leases, to the department and received no
reply. He relayed that the following interaction with DOR
included a raid by armed enforcement agents who confiscated
70 cases of paper files and company computers. He stated
that his company remained under investigation for
nonpayment of the vehicle rental tax. He stated that his
company cooperated with the department. He paid all back-
taxes even though they were never collected. He asserted
that no other equipment vendors on the slope had collected
the tax and he wished to clarify the issue with the
department. He believed that there was a disagreement on
whether Prudhoe Bay roads were considered public right-of-
way. He pointed out the negative impact on his business and
thought that the language in the bill would clarify the
exemptions.
9:09:59 AM
Co-Chair Austerman asked if he rented recreation vehicles.
Mr. Vonimhof replied no.
Representative Costello asked the amount he owed in back
taxes.
Mr. Vonimhof replied no. She stated that he wrote a check
in December 2012 for $13 thousand for three years of
pervious taxes that could potentially be applicable.
9:12:27 AM
DOUG JOHNSON, CFO, TYLER RENTAL (via teleconference),
testified in support of the bill. He stated that the rental
contracts were exempt from the current law because the
vehicles were never driven on the state highway. He
asserted that he had never received notice of the tax. He
shared that he had paid the tax with a protest. He hoped
that when the department responded back the issue would
simply be an audit issue. He did not believe that the
department should go after private companies. He thought
that the 28 days should remain in the legislation. He
relayed that he did not advertise to the tourist trade and
did not rent recreational vehicles.
9:16:08 AM
Co-Chair Stoltze CLOSED public testimony.
ANGELA RODELL, COMMISSIONER, DEPARTMENT OF REVENUE,
believed the bill recognized that taxes were to be applied
fairly and equitably and without discrimination. She said
that discussing the tax meant talking about the definitions
of: what is a passenger vehicle rental, what is a truck (if
done by weight), what is a sports utility vehicle (if done
by mileage) how will rentals in small communities be
effected, rental terms, and private roads versus public.
She believed that the current version of the bill was the
fairest and most complete that had been drafted. She
relayed that the department was unsure of the impact the
legislation would have on the state, but felt it would be
minimal.
9:19:36 AM
MICHAEL BARBER, ASSISTANT ATTORNEY GENERAL, DEPARTMENT OF
LAW, commented on the first two sentences of the letter of
intent drafted by the sponsor:
It is the intent of the Senate Finance Committee that
the passenger vehicle rental tax described in SB 178,
including the original law and the changes made by the
committee substitute, should not be applied to Alaskan
businesses doing business with other Alaskan
businesses.
The Department of Revenue (DOR) should not apply the
tax retroactively to businesses it determines should
be, or should have been, collecting the tax. However,
if DOR is able to determine a business collected the
tax but did not remit the tax to DOR, then DOR should
charge back taxes, penalties and/or interest on those
unpaid taxes.
Mr. Barber explained that the first sentence suggested that
Alaskan businesses in general were exempt from the tax,
which was not the case. He clarified that there was not
express exemption in current statute for Alaskan
businesses, and while Alaskan businesses were the primary
beneficiaries of the changes proposed in the bill, the
legislation would not create an exemption for Alaskan
businesses. He stated that if the intent was to exempt all
Alaskan businesses then it needed to be written into the
bill; however, he expressed serious concern that such an
action would violate the Dormant Commerce Clause of the
United States Constitution.
Co-Chair Stoltze asked whether the letter had been adopted
by the Senate. He noted that it appeared informal as it was
not on letterhead, which was unusual.
Mr. Barber understood that the letter had been attached to
the bill that was moved out of the Senate.
Representative Holmes asked whether the letter of intent
was attached to the bill that had passed on the Senate
Floor.
Mr. Barber replied in the affirmative.
Co-Chair Stoltze requested the record and the journal
minutes pertaining to the meeting where the bill was
passed.
9:23:12 AM
Representative Wilson asked if by changing the number of
rental days to 28, the original intent of the bill would be
honored.
Commissioner Rodell responded yes.
Representative Wilson asked if the lease went to a month-
to-month, rather than yearly, would the tax problem be
solved.
Commissioner Rodell replied that the bill did not change
the time range of the rentals, but that the department had
begun making changes including extensions of the original
contracts would be included in the time period of the
original contract. She said that the process had stopped
while the bill was in motion because it referenced the 90
days in the original legislation. She said that if the bill
were to pass the regulations would be amended to reflect
that any extensions of an original contract would be
included in the contract period for counting vehicle rental
tax exemptions.
9:25:01 AM
Co-Chair Austerman understood that if a recreational
vehicle was rented for more than 28 days then the tax would
not be implemented. He surmised that the objective of the
bill was to not impose the tax on businesses on the North
Slope that did not frequently use public roads. He
maintained confusion as to why recreational vehicles were
included in the legislation.
Commissioner Rodell believed that the recreation vehicle
exemption already applied to the 90 days, so it was rolled
into the new exemption in order to avoid creating two
separate exemptions. She said that this created an
administrative ease for DOR in terms of application.
Co-Chair Austerman understood that it would apply to a
vehicle rented at an airport that was driven for 28 days.
Commissioner Rodell replied yes.
Co-Chair Austerman said that the issue made it difficult
for him to support the bill.
9:27:28 AM
Representative Gara asked whether Mr. Barber was prepared
to speak to the possibility that the letter of intent could
unconstitutional in discriminating against non-Alaskan
businesses.
Mr. Barber clarified that not all Alaska businesses were
exempt from the tax, but had to meet exemptions currently
in statute. He said that an exemption for Alaskan
businesses would be facially discriminatory against
interstate commerce and would be subject to a high level of
scrutiny. He believed that the letter of intent would not
be applied unconstitutionally.
Representative Gara surmised that passing the letter would
not open the door for the bill to be attacked on
constitutional grounds.
Mr. Barber suggested that clarifying the letter of intent
would be beneficial before the bill's passage.
9:29:48 AM
Representative Munoz discussed the 10 percent charge on
passenger vehicles and the 3 percent charge on recreational
vehicles. She wondered what the overall revenue was for the
two taxes.
Commissioner Rodell replied that the total tax revenue was
approximately $8 million for FY13.
Representative Munoz asked if most of the revenue was from
recreational vehicles.
Commissioner Rodell replied that she did not know.
9:30:30 AM
Representative Munoz asked whether removing references in
the code to the passenger tax had been considered.
Commissioner Rodell replied no. She said that different
ways of more narrowly defining a passenger vehicle had been
discussed, but that the issue quickly became complicated.
Representative Munoz thought that the confusion surrounded
the utility vehicles and those used on the North Slope. She
thought that if reference from the passenger vehicle tax
could be removed in statute it would speak to the original
intent of the tax.
Co-Chair Stoltze thought that the department could look to
the hospitality industry for ways to set clearly demarcated
taxes. He requested further background from the department
concerning the collection of the tax.
9:32:57 AM
Commissioner Rodell replied that the department would
enforce the statutes as drafted. She stated that when the
department received information that individuals or
companies were not in compliance, investigation and
auditing was necessary. She stated that the mission of the
Department of Revenue was to collect taxes. She asserted
that businesses owners were responsible for knowing the
laws that governed the business. She felt that there had
been confusion regarding the tax passed in 2004.
9:35:20 AM
Co-Chair Austerman believed that the intention was to save
businesses money on certain things. He asked about simply
implementing an exemption strictly for oil or gas
development.
Commissioner Rodell replied no. She noted that the
department was relying on rental companies to collect the
tax on behalf of the state; the taxpayer was the individual
or company renting the vehicle. She asserted that it was
important to recognize the impositions that would be placed
on companies to guarantee that the audit was being
collected correctly.
9:36:54 AM
Co-Chair Stoltze asked for emails and notifications letters
that had been sent to companies in 2003 and 2004 for the
public record.
Commissioner Rodell agreed to provide the information.
CSSB 178(FIN) was HEARD and HELD in committee for further
consideration.
9:38:01 AM
AT EASE
9:40:03 AM
RECONVENED
CS FOR SENATE BILL NO. 169(FIN)
"An Act establishing in the Department of Health and
Social Services a statewide immunization program and
the State Vaccine Assessment Council; creating a
vaccine assessment account; requiring a vaccine
assessment from assessable entities and other program
participants for statewide immunization purchases;
repealing the temporary child and adult immunization
program; and providing for an effective date."
9:40:13 AM
SENATOR CATHY GEISSEL, SPONSOR, spoke to the graphic, "SB
169 Vaccine Assessment Program" (copy on file). The graphic
charted the various fund transfers that would occur as a
result of the vaccine assessment program. She turned
committee attention to another graphic, "SB 169 Statewide
Immunization Program"(copy on file), which emphasized that
the program was optional for all providers, with an
additional provision to opt out of the program within the
first 3 years. She said that one of the goals of the Alaska
Healthcare Commission was to purchase healthcare services
with public funds and the bill was a representation of that
goal. She stated that homeless teens and young adults would
benefit from the legislation. She added that community
healthcare clinics in rural Alaska would also benefit from
the bill.
9:45:41 AM
Senator Geissel discussed her response memo to
Representative Wilson's question in the last hearing (copy
on file):
Dear Finance Committee Members:
I was asked by Representative Tammy Wilson's aide how
many Alaskans would be affected of SB 169 fails and
received the below information from the Division of
Public Health. The impact would be huge:
Without SB169 and once HB310 funds fun out, providers
will have to purchase vaccine for 50 percent of the
children and 100 percent of the adults. That is
estimated to be about 310,000 individuals of which
80,000 are children and 230,000 are adults. This is
based on current population and immunization rates.
Only the 50 percent of children covered by federal
Vaccines for Children and a small number of high-risk
children and adults covered with other state and
federal funds will continue to receive state-supplied
vaccine.
In terms of dollars, without SB169, the providers'
share of vaccine spending will increase from about 50
percent currently to about 75 percent, or an extra $12
million, increasing from $23 million to $35 million.
This assumes immunization rates stay steady and that
providers continue to purchase vaccine for the insured
and uninsured.
Senator Giessel spoke to the cost of vaccinations. She
stated that the measles, mumps, rubella (MMR) vaccination
for children, under the Center for Disease Control (CDC)
purchasing plan, costs $20 per dose. She shared that
individual providers purchasing the same dosage on the open
market paid $56 per dose. She said that one adult vaccine
dose for pneumonia purchased through the CDC purchasing
would be $23; individual providers would pay $68. She
discussed the cost discrepancies for various vaccinations.
9:49:39 AM
Representative Wilson asked whether the current bill
version required mandatory participation after 3 years.
Senator Giessel replied that no one would be mandated to be
part of the program.
Representative Wilson understood that private insurance
companies would also have the ability to opt in, but that
the state was exempt.
Senator Giessel replied requests for the program from
insurance companies had led to the legislation.
9:51:22 AM
Representative Munoz asked if all providers would be
charged the same rate per vaccine.
Senator Giessel replied yes.
9:52:14 AM
Representative Holmes discussed the 5 fiscal notes attached
to the bill.
9:55:07 AM
JILL LEWIS, DEPUTY DIRECTOR, DIVISION OF PUBLIC HEALTH,
DEPARTMENT OF HEALTH AND SOCIAL SERVICES, stated that the
fiscal notes netted to zero because for every dollar that
was spent, there was a new dollar coming in of new
assessment fees. She directed committee attention to the
hand out, "SB 169 Vaccine Assessment Program." She
recommended comparing the first two fiscal notes side-by-
side. She said that the money would flow between the two
notes and net to zero. She stated that the first note was
for informational purposes only and likened to a deposit
slip from the bank, the "checking account" being the fiscal
note for epidemiology. She relayed that the $4 million from
note 2 would be subtracted under the fund source and would
be moved into an account outside of the department's
budget. She furthered that assessments would be collected
in advance from the assessable entities and the money would
be used to purchase additional vaccine.
9:59:57 AM
Representative Wilson surmised that there was no request
being made for new revenue.
Ms. Lewis replied in the affirmative.
10:01:32 AM
Representative Wilson said that the other figures in the
notes appeared in anticipation of the best mathematical
estimates.
Ms. Lewis said that there was a lot of math involved in
calculating and estimating the costs involved in the
program. She stated that entities would phase in during the
first 3 years and that some could opt out. She added that
there could be providers that might want to opt in for
vaccine that they would otherwise have to purchase on their
own.
Representative Wilson asked whether the change could have
negative impact on the department.
Ms. Lewis replied no. She acknowledged that federally
funded entities had additional obstacles, which had been
accounted for by allowing the 3 year phase in option.
Representative Holmes MOVED to REPORT HCS CSSB 169(HSS) out
of committee with individual recommendations and the
accompanying fiscal notes. There being NO OBJECTION, it was
so ordered.
HCS CSSB 169(HSS) was REPORTED out of committee with a "do
pass" recommendation and with one new fiscal note from Fund
Transfers for the Department of Health and Social Services,
one new fiscal note from the Department of Health and
Social Services, one new indeterminate fiscal note from the
Department of Health and Social Services, one previously
published zero fiscal note: FN4 (CED), and one previously
published indeterminate fiscal note: FN5 (ADM).
CS FOR SENATE BILL NO. 138(FIN) am
"An Act relating to the purposes, powers, and duties
of the Alaska Gasline Development Corporation;
relating to an in-state natural gas pipeline, an
Alaska liquefied natural gas project, and associated
funds; requiring state agencies and other entities to
expedite reviews and actions related to natural gas
pipelines and projects; relating to the authorities
and duties of the commissioner of natural resources
relating to a North Slope natural gas project, oil and
gas and gas only leases, and royalty gas and other gas
received by the state including gas received as
payment for the production tax on gas; relating to the
tax on oil and gas production, on oil production, and
on gas production; relating to the duties of the
commissioner of revenue relating to a North Slope
natural gas project and gas received as payment for
tax; relating to confidential information and public
record status of information provided to or in the
custody of the Department of Natural Resources and the
Department of Revenue; relating to apportionment
factors of the Alaska Net Income Tax Act; amending the
definition of gross value at the 'point of production'
for gas for purposes of the oil and gas production
tax; clarifying that the exploration incentive credit,
the oil or gas producer education credit, and the film
production tax credit may not be taken against the gas
production tax paid in gas; relating to the oil or gas
producer education credit; requesting the governor to
establish an interim advisory board to advise the
governor on municipal involvement in a North Slope
natural gas project; relating to the development of a
plan by the Alaska Energy Authority for developing
infrastructure to deliver affordable energy to areas
of the state that will not have direct access to a
North Slope natural gas pipeline and a recommendation
of a funding source for energy infrastructure
development; establishing the Alaska affordable energy
fund; requiring the commissioner of revenue to develop
a plan and suggest legislation for municipalities,
regional corporations, and residents of the state to
acquire ownership interests in a North Slope natural
gas pipeline project; making conforming amendments;
and providing for an effective date."
10:03:57 AM
MICHAEL PAWLOWSKI, DEPUTY COMMISSIONER, STRATEGIC FINANCE,
DEPARTMENT OF REVENUE, introduced the PowerPoint
presentation titled "Response to Question from
Representative Edgmon" (copy on file). He discussed Slide
2, which was an example of the opportunities that existed
for small-scale use of LNG:
"The CIRI Talkeetna Lodge is a 212 room Lodge
operating the the tourism season. FNG provides LNG
year round for heating, hot water and cooking. There
is 10,000 gallons of LNG storage on-site for
uninterrupted supply of natural gas. The Lodge
receives a delivery of LNG approximately every two
weeks."
Mr. Pawlowski relayed that very rough estimates by AEA put
the cost of equipment currently at $1,000,000. He said that
when discussing future deposits to the Affordable Energy
Fund it should be noted that the fund is for all energy
sources.
Mr. Pawlowski turned to Slide 3, "SB 138 Includes AEA
energy planning." He noted that the important issue related
to the affordable infrastructure and areas not directly on
the pipeline route. Section 69 of SB 138 directs the AEA,
in consultation with AGDC, AIDEA and DOR to prepare a plan
for developing infrastructure to deliver affordable energy
to areas of the state that are not expected to have direct
access to a North Slope natural gas pipeline.
10:08:15 AM
Representative Edgmon hoped that there was substance behind
the commitment to provide affordable energy to all parts of
the Alaska, and not just the more convenient areas of the
state. He wondered if there was a way to tie-in the
language in the bill to the existing language pertaining to
the energy policy in the uncodified state statutes.
10:09:24 AM
Mr. Pawlowski referred to Page 60, section 67 of the H
version of the bill. He believed that the uncodified law
existed as direction to the state, but a reference in the
section to the context of that policy could appropriate.
10:10:28 AM
Representative Edgmon requested a statement regarding the
offtake points exit points and expense.
10:11:30 AM
Mr. Pawlowski replied that the commitment of the offtake
points in the HOA was to look for the benefits for
Alaskans, with access to reliable and predicable supplies
of energy. He said that the trick would be the
affordability of access as distance became a factor. He
stated that it would need to be examined whether taking at
the offtake would be the best option, or whether a
localized energy solution would be a better option. He
assured the committee that both options would be pursued as
part of the development of the agreements. He said that the
commitment to the issue was deep and that the section put
the right tools in place to build on regional energy work
already being done by AEA.
10:12:30 AM
JOE BALASH, COMMISSIONER, DEPARTMENT OF NATURAL RESOURCES,
added that the department had contributed to the work
pertaining to the tap in points to the line. He said that
pre-installing the takeoff points during the initial build
would be cheaper. He relayed that the incremental costs
associated with a tap was approximately $1 million.
10:13:37 AM
Mr. Pawlowski interjected that in pervious gasline plans,
the offtake had potentially been expensive because of the
high natural gas liquids content in the proposed plan. He
asserted that the current plan involved very clean LNG gas
and did not require the expensive equipment necessary for
the stripping of liquids.
Representative Guttenberg assumed that a takeoff point in
Nikiski would have charges based upon the GTP, tariffs and
distance sensitive rates. He asked about the Asian market;
if the flow was backtracked to the middle of the pipeline,
the rate would be relevant to the takeoff point, and not
everything else downstream.
Mr. Pawlowski responded yes, and that the distinction was
critical. He added that under the MOU, the state had
already agreed to distance sensitive rates for the areas
along the pipeline in three zones: the Nanana Zone, the Big
Lake Zone, and the delivery to the LNG plant.
Representative Guttenberg asked how the Nanana Zone was
defined.
Commissioner Balash replied that the zone included
everything north of Nanana.
10:17:39 AM
Representative Wilson understood the benefits to the owners
and TransCanada, but she expressed discomfort with the
balance the energy issues in the interior and the bush. She
wished to better understand why the project was a good deal
for state residents.
Commissioner Balash replied that the transportation
infrastructure would provide a relatively low-cost means of
delivering the commodity either from the North Slope or
Cook Inlet. He said at that point options would be examined
and that the lowest cost option to get gas to the corridor
would be selected.
Commissioner Balash referred to Slide 2 from the Black and
Veatch presentation, "State Participation on AKLNG Project,
April 15, 2014"(copy on file). The slide showed at a $16
dollar commodity price in Asia the state's wellhead value
would be approximately $7/MMBtu. He said that taking the $7
price, adding the treatment plan cost of $2, adding the
pipeline cost to the interior of $1 would total $10 to get
gas to Fairbanks. He furthered that if natural gas was
priced a $6 in the Cook Inlet Basin, the backhaul rates,
negotiated with TransCanada in the MOU, would mean the
benefit of Cook Inlet pricing in Fairbanks without the
transportation cost. He predicted that as the market demand
in Cook Inlet grew, additional supplies would be proven,
and additional opportunities for smaller producers would
open up. He asserted that the same thing would occur on the
North Slope, as long as a viable third party mechanism was
maintained through the state's equity capacity in the
pipeline, there would be companies and operators with small
amounts of gas that would be looking to make in-state sales
and could be willing to sell their gas for less than $7. He
said that the biggest distinction between the project and
the TAPS scenario was that the states crude oil had to be
refined in order to make it useful; natural gas and methane
took very little refinement.
10:23:03 AM
Representative Wilson understood that all of the language
was in the bill.
Commissioner Balash replied that it was not in the bill. He
said that how transportation charges would be priced was in
the MOU with TransCanada. He said that in 2015 there would
be a piece of legislation approving the Firm Transportation
Services Agreement (FTSA) with the specific terms laid out.
Representative Wilson said she would prefer to see the
terms before voting on the legislation.
Co-Chair Stoltze discussed housekeeping.
10:24:58 AM
Mr. Pawlowski stated that he appreciated the guidance about
the technical amendments on the bill.
CSSB 138(FIN) am was HEARD and HELD in committee for
further consideration.
ADJOURNMENT
10:26:03 AM
The meeting was adjourned at 10:25 a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB 178 Amendment #1 Gara.pdf |
HFIN 4/16/2014 8:30:00 AM |
SB 178 |
| SB169 Vax Assess Fund diagram.pdf |
HFIN 4/16/2014 8:30:00 AM |
SB 169 |
| SB169PayerPyramid_15Apr2014.pdf |
HFIN 4/16/2014 8:30:00 AM |
SB 169 |
| SB169 without it.pdf |
HFIN 4/16/2014 8:30:00 AM |
SB 169 |
| Marks SB 138 Gara Response 041514.pdf |
HFIN 4/16/2014 8:30:00 AM |
SB 138 |
| SB 138 4.16.14 Presentation HFIN Edgmon Question.pdf |
HFIN 4/16/2014 8:30:00 AM |
SB 138 |
| SB 138 4.16.14 Resource Reports Required by Appendix A to Part 380 of FERC Regulations.pdf |
HFIN 4/16/2014 8:30:00 AM |
SB 138 |
| SB 138 enalytica - response to Rep Gara.pdf |
HFIN 4/16/2014 8:30:00 AM |
SB 138 |