Legislature(2013 - 2014)BARNES 124

03/11/2013 03:15 PM LABOR & COMMERCE


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03:25:46 PM Start
03:25:55 PM HB74
03:39:24 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+= HB 74 AIDEA: LNG PROJECT; DIVIDENDS; FINANCING TELECONFERENCED
Heard & Held
                    ALASKA STATE LEGISLATURE                                                                                  
          HOUSE LABOR AND COMMERCE STANDING COMMITTEE                                                                         
                         March 11, 2013                                                                                         
                           3:25 p.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Kurt Olson, Chair                                                                                                
Representative Mike Chenault                                                                                                    
Representative Bob Herron                                                                                                       
Representative Dan Saddler                                                                                                      
Representative Andy Josephson                                                                                                   
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative Lora Reinbold, Vice Chair                                                                                        
Representative Charisse Millett                                                                                                 
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
HOUSE BILL NO. 74                                                                                                               
"An Act  relating to development  project financing by  the Alaska                                                              
Industrial  Development  and  Export Authority;  relating  to  the                                                              
dividends  from  the  Alaska  Industrial   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."                                                                                   
                                                                                                                                
     - HEARD & HELD                                                                                                             
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
BILL: HB 74                                                                                                                   
SHORT TITLE: AIDEA: LNG PROJECT; DIVIDENDS; FINANCING                                                                           
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR                                                                                    
                                                                                                                                
01/16/13       (H)       READ THE FIRST TIME - REFERRALS                                                                        
01/16/13       (H)       L&C, FIN                                                                                               
02/08/13       (H)       L&C AT 3:15 PM BARNES 124                                                                              
02/08/13       (H)       Heard & Held                                                                                           
02/08/13       (H)       MINUTE(L&C)                                                                                            
03/04/13       (H)       L&C AT 3:15 PM CAPITOL 106                                                                             
03/04/13       (H)       ** Meeting will Recess and Reconvene at                                                                
03/05/13       (H)       L&C AT 8:00 AM BARNES 124                                                                              
03/05/13       (H)       -- Meeting Continued from 3/4/13 --                                                                    
03/11/13       (H)       L&C AT 3:15 PM BARNES 124                                                                              
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
SARA FISHER-GOAD, Executive Director                                                                                            
Alaska Energy Authority (AEA)                                                                                                   
Department of Commerce, Community & Economic Development (DCCED)                                                                
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Testified during the discussion of HB 74.                                                                
                                                                                                                                
MARK DAVIS, Deputy Director                                                                                                     
Alaska Industrial Development and Export Authority (AIDEA)                                                                      
Department of Commerce, Community & Economic Development (DCCED)                                                                
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Testified during the discussion of HB 74.                                                                
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
3:25:46 PM                                                                                                                    
                                                                                                                                
CHAIR  KURT OLSON  called the  House Labor  and Commerce  Standing                                                            
Committee  meeting   to  order  at  3:25  p.m.     Representatives                                                              
Saddler, Josephson,  Chenault, Herron,  and Olson were  present at                                                              
the call to order.                                                                                                              
                                                                                                                                
         HB 74-AIDEA: LNG PROJECT; DIVIDENDS; FINANCING                                                                     
                                                                                                                                
3:25:55 PM                                                                                                                    
                                                                                                                                
CHAIR OLSON  announced that  the only order  of business  would be                                                              
HOUSE  BILL  NO.  74, "An  Act  relating  to  development  project                                                              
financing  by   the  Alaska  Industrial  Development   and  Export                                                              
Authority; relating  to the dividends  from the Alaska  Industrial                                                              
and   Export   Authority;  authorizing   the   Alaska   Industrial                                                              
Development and  Export Authority  to provide financing  and issue                                                              
bonds for  a liquefied natural  gas production system  and natural                                                              
gas distribution system; and providing for an effective date."                                                                  
                                                                                                                                
3:27:01 PM                                                                                                                    
                                                                                                                                
SARA  FISHER-GOAD,  Executive Director,  Alaska  Energy  Authority                                                              
(AEA), Department  of Commerce,  Community & Economic  Development                                                              
(DCCED),   stated  the   fiscal   note  from   Alaska   Industrial                                                              
Development  and   Export  Authority  (AIDEA)  was   developed  in                                                              
conjunction  with   AEA  during   extensive  discussions   on  the                                                              
companion  bill   with  the   Division  of  Legislative   Finance.                                                              
Several things  were changed  from the  original fiscal  note, she                                                              
stated.   The fiscal note  prepared by AIDEA originally  described                                                              
revenues  to  AIDEA  and  AIDEA was  asked  to  reflect  potential                                                              
revenues  to  the  state  through  the  AIDEA's  dividend  program                                                              
rather than  to show revenues  direct to  AIDEA.  She  pointed out                                                              
that this fiscal  note also reflects revenues to AIDEA  in FY 2014                                                              
since the  dividend calculation for  AIDEA is calculated  from the                                                              
"base year"  and has a two-year  lag.  Thus the revenue  earned in                                                              
FY 2014 is reflected  in FY 2016, she said.   She highlighted this                                                              
was  the primary  adjustment  made to  the  original fiscal  note.                                                              
Additionally,  the fiscal  note  has an  attachment  that shows  a                                                              
comprehensive evaluation  of the fiscal  note with respect  to the                                                              
Interior   Energy   Plan   and  the   direct   financing   program                                                              
incorporated  into HB  74.   Further, AIDEA  has provided  another                                                              
fiscal   note   that  reflects   that   the   Sustainable   Energy                                                              
Transmission   and   Supply   Development    (SETS)   program   is                                                              
capitalized by  $125 million in  Governor's FY 14  budget request.                                                              
Specifically,   this  fiscal   note   was  added   to  reflect   a                                                              
comprehensive  view with  respect to  the different  parts of  the                                                              
financing  package related  to  the Interior  Energy  Plan.   Both                                                              
fiscal   notes   also  reflect   the   proposed   FY  14   capital                                                              
appropriation of $50  million to AIDEA.  Even  though she believed                                                              
she previously  addressed all  of this  in her earlier  PowerPoint                                                              
presentation  to the committee,  with respect  to the  program and                                                              
the bill,  she wanted  to explicitly  explain  this in the  fiscal                                                              
notes, as well.                                                                                                                 
                                                                                                                                
3:32:57 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  CHENAULT  asked  whether  this bill  would  expand                                                              
AIDEA's authority beyond  the trucking [of LNG to  Fairbanks].  He                                                              
clarified  that  he  is interested  in  whether  this  bill  would                                                              
allow,  for   instance,   the  state  to   finance  Brooks   Range                                                              
Petroleum's   [North  Slope]   project   without  any   additional                                                              
authorization from  [the legislature].   He further  asked whether                                                              
HB  74  would  allow  AIDEA  to  participate  in  ownership  of  a                                                              
processing  facility or to  finance any  other project  AIDEA does                                                              
not currently have authority to do.                                                                                             
                                                                                                                                
3:33:59 PM                                                                                                                    
                                                                                                                                
MARK  DAVIS, Deputy  Director, Alaska  Industrial Development  and                                                              
Export  Authority (AIDEA),  Department  of  Commerce, Community  &                                                              
Economic  Development (DCCED),  responded that  [Section 1]  of HB                                                              
74  provides  the  direct  financing capability  for  AIDEA.    He                                                              
assumed  the  question  was  directed   at  the  direct  financing                                                              
provisions,  which would  allow AIDEA  to use  funds from  AIDEA's                                                              
Revolving  Fund,  but AIDEA  currently  has  this authority.    He                                                              
explained that  AIDEA can own  or operate  a project -  to provide                                                              
project  financing  from [the  Revolving  Fund]  for a  project  -                                                              
without  having  to  have  an equity  ownership  in  the  project.                                                              
However, the same  definitions of project that  currently apply to                                                              
AS 44.88.172  (a) would still apply  so it doesn't  really broaden                                                              
AIDEA's  authority  for  the  types of  projects  it  would  fund;                                                              
instead [the bill] would only change the funding mechanism.                                                                     
                                                                                                                                
3:35:04 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE CHENAULT  understood that AIDEA can  currently fund                                                              
these projects without any new authority.                                                                                       
                                                                                                                                
MR. DAVIS  answered  that currently  if a project  comes within  a                                                              
definition  of a  project under  AIDEA's statutes  that meets  its                                                              
statutory  test,  AIDEA is  authorized  by  the board  to  provide                                                              
funds  from  AIDEA's  Revolving  Fund  to  own  or  operate  those                                                              
projects or a  portion of these projects.  For  example, Buccaneer                                                              
Energy's jack-up  rig, Endeavor,  project was [financed]  by using                                                              
AIDEA's Revolving  Fund as the  funding source without  going back                                                              
to the legislature, he said.                                                                                                    
                                                                                                                                
3:35:50 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  CHENAULT  asked whether  AIDEA  owns  part of  the                                                              
Endeavor  project.   He further  asked whether  this [bill]  would                                                              
allow AIDEA to own or control any part of a project.                                                                            
                                                                                                                                
MR.  DAVIS  answered that  HB  74  would  allow AIDEA  to  provide                                                              
financing without having  to own the project and  to avoid certain                                                              
liabilities, but  it would not eliminate AIDEA's  control over the                                                              
project.    He  clarified  that   the  project  financing  portion                                                              
represents a form  of control to achieve the goals  of the agency,                                                              
which is to  alleviate unemployment or assist  in natural resource                                                              
development.  Thus AIDEA would maintain control, he concluded.                                                                  
                                                                                                                                
3:36:36 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   CHENAULT  asked   whether  [AIDEA  assumes]   any                                                              
liability for the Endeavor project.                                                                                             
                                                                                                                                
MR.  DAVIS answered  that  an equity  owner  always has  potential                                                              
liability for tortious  conduct created by the chattel  - the hard                                                              
assets - but AIDEA  is a passive investor.  He  offered his belief                                                              
that this  exposure is limited; however,  it does exist.   He said                                                              
that engaging  in project financing  can eliminate these  types of                                                              
risks.                                                                                                                          
                                                                                                                                
3:37:21 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SADDLER asked  whether the  direct financing  is a                                                              
significant expansion  of [AIDEA's]  authority.  He  further asked                                                              
whether  this  authority  would  be limited  specifically  to  the                                                              
Interior Energy Plan.                                                                                                           
                                                                                                                                
MR.  DAVIS  answered  yes;  that   Section  10  is  an  uncodified                                                              
amendment  just  for this  project  and  it  does not  change  the                                                              
codified  structure  of  AIDEA's  statutes.  He  stated  that  the                                                              
direct financing portion  of the bill is a change  to the codified                                                              
statutes,  which  would apply  to  any  project that  AIDEA  could                                                              
currently  finance under  AIDEA's Revolving  Fund in AS  44.88.172                                                              
(a).                                                                                                                            
                                                                                                                                
REPRESENTATIVE SADDLER  understood this  would be an  expansion of                                                              
AIDEA's Revolving Fund.                                                                                                         
                                                                                                                                
MR. DAVIS  answered no;  the bill  does not  expand what  the fund                                                              
can be  used for since  the definitions  of what AIDEA  can invest                                                              
in  are  the same;  however,  it  will  change the  mechanism  for                                                              
financing.   Thus AIDEA  has not broadened  the types  of projects                                                              
at all - they are the same projects, he said.                                                                                   
                                                                                                                                
[HB 74 was held over.]                                                                                                          
                                                                                                                                
3:39:24 PM                                                                                                                    
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being  no further business  before the committee,  the House                                                              
Labor and  Commerce Standing  Committee meeting  was adjourned  at                                                              
3:39 p.m.                                                                                                                       
                                                                                                                                

Document Name Date/Time Subjects
HB74 Fiscal Note-DCCED-AIDEA-03-06-13.pdf HL&C 3/11/2013 3:15:00 PM
HB 74
HB74 Fiscal Note-DCCED-AIDEA-03-06-13B.pdf HL&C 3/11/2013 3:15:00 PM
HB 74
HB74 Draft Proposed Amendment.pdf HL&C 3/11/2013 3:15:00 PM
HB 74