Legislature(2015 - 2016)BARNES 124

03/16/2015 03:15 PM LABOR & COMMERCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+= HB 123 ESTABLISH MARIJUANA CONTROL BOARD TELECONFERENCED
Heard & Held
+ HB 132 AGDC SUPPORT OF NATURAL GAS PROJECTS TELECONFERENCED
Heard & Held
                    ALASKA STATE LEGISLATURE                                                                                  
          HOUSE LABOR AND COMMERCE STANDING COMMITTEE                                                                         
                         March 16, 2015                                                                                         
                           3:16 p.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Kurt Olson, Chair                                                                                                
Representative Shelley Hughes, Vice Chair                                                                                       
Representative Jim Colver                                                                                                       
Representative Gabrielle LeDoux                                                                                                 
Representative Cathy Tilton                                                                                                     
Representative Andy Josephson                                                                                                   
Representative Sam Kito                                                                                                         
Representative Mike Chenault (alternate)                                                                                        
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                              
OTHER LEGISLATORS PRESENT                                                                                                     
                                                                                                                              
Representative Craig Johnson                                                                                                    
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
HOUSE BILL NO. 123                                                                                                              
"An  Act establishing  the Marijuana  Control  Board; relating  to                                                              
the powers  and duties  of the Marijuana  Control Board;  relating                                                              
to the  appointment, removal,  and duties of  the director  of the                                                              
Marijuana  Control  Board;  relating  to  the  Alcoholic  Beverage                                                              
Control Board; and providing for an effective date."                                                                            
                                                                                                                                
     - HEARD & HELD                                                                                                             
                                                                                                                                
HOUSE BILL NO. 132                                                                                                              
"An Act relating to the support of the Alaska liquefied natural                                                                 
gas project by the Alaska Gasline Development Corporation."                                                                     
                                                                                                                                
     - HEARD & HELD                                                                                                             
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
BILL: HB 123                                                                                                                  
SHORT TITLE: ESTABLISH MARIJUANA CONTROL BOARD                                                                                  
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR                                                                                    
                                                                                                                                
02/23/15       (H)       READ THE FIRST TIME - REFERRALS                                                                        
02/23/15       (H)       L&C, JUD, FIN                                                                                          
03/04/15       (H)       L&C AT 3:15 PM BARNES 124                                                                              
03/04/15       (H)       Heard & Held                                                                                           
03/04/15       (H)       MINUTE(L&C)                                                                                            
03/11/15       (H)       L&C AT 3:15 PM BARNES 124                                                                              
03/11/15       (H)       Heard & Held                                                                                           
03/11/15       (H)       MINUTE(L&C)                                                                                            
03/16/15       (H)       L&C AT 3:15 PM BARNES 124                                                                              
                                                                                                                                
BILL: HB 132                                                                                                                  
SHORT TITLE: AGDC SUPPORT OF NATURAL GAS PROJECTS                                                                               
SPONSOR(s): CHENAULT                                                                                                            
                                                                                                                                
03/02/15       (H)       READ THE FIRST TIME - REFERRALS                                                                        
03/02/15       (H)       RES, L&C                                                                                               
03/06/15       (H)       RES AT 1:00 PM BARNES 124                                                                              
03/06/15       (H)       Heard & Held                                                                                           
03/06/15       (H)       MINUTE(RES)                                                                                            
03/11/15       (H)       RES AT 1:00 PM BARNES 124                                                                              
03/11/15       (H)       Heard & Held                                                                                           
03/11/15       (H)       MINUTE(RES)                                                                                            
03/11/15       (H)       RES AT 6:00 PM BARNES 124                                                                              
03/11/15       (H)       Heard & Held                                                                                           
03/11/15       (H)       MINUTE(RES)                                                                                            
03/13/15       (H)       RES AT 1:00 PM BARNES 124                                                                              
03/13/15       (H)       Scheduled but Not Heard                                                                                
03/14/15       (H)       RES AT 1:00 PM BARNES 124                                                                              
03/14/15       (H)       -- Continued from 3/13/15 Meeting --                                                                   
03/16/15       (H)       L&C AT 3:15 PM BARNES 124                                                                              
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
MICAELA FOWLER, Legislative Liaison                                                                                             
Department of Commerce, Community & Economic Development (DCCED)                                                                
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Testified and answered questions on HB 123                                                               
on behalf of the administration.                                                                                                
                                                                                                                                
WES SCHACHT, Member                                                                                                             
Kachemak Cannabis Coalition                                                                                                     
Fritz Creek, Alaska                                                                                                             
POSITION STATEMENT:  Testified during the discussion of HB 123.                                                               
                                                                                                                                
MIKE TONGA                                                                                                                      
Homer, Alaska                                                                                                                   
POSITION STATEMENT:  Testified during the discussion of on HB                                                                 
123.                                                                                                                            
                                                                                                                                
RENA DELBRIDGE, Staff                                                                                                           
Representative Mike Hawker                                                                                                      
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:   Presented a sectional analysis  and answered                                                            
questions   on  HB   132   on  behalf   of   the  prime   sponsor,                                                              
Representative Chenault, and co-sponsor, Representative Hawker.                                                                 
                                                                                                                                
FRANK RICHARDS, P.E.; Vice President                                                                                            
Engineering & Program Management                                                                                                
Alaska Gas Development Corporation (AGDC)                                                                                       
Department of Commerce, Community & Economic Development (DCCED)                                                                
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:   Answered questions during the  discussion of                                                            
HB 132.                                                                                                                         
                                                                                                                                
RICK KOCH, City Manager                                                                                                         
City of Kenai                                                                                                                   
Kenai, Alaska                                                                                                                   
POSITION STATEMENT:  Testified in support of HB 132.                                                                          
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
3:16:32 PM                                                                                                                    
                                                                                                                                
CHAIR  KURT OLSON  called the  House Labor  and Commerce  Standing                                                            
Committee  meeting   to  order  at  3:16  p.m.     Representatives                                                              
Chenault,  Tilton,  Hughes,  Kito, Colver,  Josephson,  and  Olson                                                              
were  present  at  the  call  to  order.    Representative  LeDoux                                                              
arrived as the meeting was in progress.                                                                                         
                                                                                                                                
            HB 123-ESTABLISH MARIJUANA CONTROL BOARD                                                                        
                                                                                                                                
3:17:17 PM                                                                                                                    
                                                                                                                                
CHAIR OLSON  announced that the  first order of business  would be                                                              
HOUSE BILL  NO. 123,  "An Act establishing  the Marijuana  Control                                                              
Board;  relating  to  the  powers  and  duties  of  the  Marijuana                                                              
Control Board;  relating to the  appointment, removal,  and duties                                                              
of the  director of the Marijuana  Control Board; relating  to the                                                              
Alcoholic Beverage  Control Board; and providing  for an effective                                                              
date."                                                                                                                          
                                                                                                                                
3:18:30 PM                                                                                                                    
                                                                                                                                
MICAELA  FOWLER,  Legislative  Liaison,  Department  of  Commerce,                                                              
Community  &  Economic  Development  (DCCED),  on  behalf  of  the                                                              
administration,  stated that  HB 123 would  establish a  Marijuana                                                              
Control  Board  (MCB) that  would  be  parallel to  the  Alcoholic                                                              
Beverage  Control Board  (ABC  Board) served  by  the same  agency                                                              
staff  and executive  director.   She said that  Section 1  covers                                                              
the appointment  and removal of  the director, ensuring  that both                                                              
the ABC  Board and MCB  have authority  over the director.   There                                                              
has been some discussion  on what would happen if  one board voted                                                              
to remove  a director,  since the  appointee  is appointed  by the                                                              
Governor,  but cannot  be  removed by  the  governor except  under                                                              
extenuating circumstances.                                                                                                      
                                                                                                                                
3:19:47 PM                                                                                                                    
                                                                                                                                
CHAIR OLSON  suggested that  the Alaska  Public Office  Commission                                                              
(APOC) was an example of another board with similar provisions.                                                                 
                                                                                                                                
3:19:52 PM                                                                                                                    
                                                                                                                                
MS. FOWLER  offered that the  proposed director for  the Marijuana                                                              
Control Board (MCB)  might be addressed in a  committee substitute                                                              
since  the issue  of the  director  has not  yet been  determined.                                                              
She provided a  section-by-section analysis of the  bill.  Section                                                              
2  would  establish   the  Marijuana  Control  Board   (MCB)  with                                                              
designated  seats  not in  the  Alcoholic Beverage  Control  Board                                                              
(ABC  Board),  but  the  Title  4  [AS  04,  Alcoholic  Beverages]                                                              
rewrite  has  the  same reflections  of  seats,  including  adding                                                              
seats for  public safety and  public health representatives.   She                                                              
pointed out  that currently  the ABC Board  has a rural  seat, but                                                              
not  a public  health or  public safety  representative, which  is                                                              
important especially  in relation to  marijuana since it is  not a                                                              
substance the state  currently regulates, nor does  the state have                                                              
the  same  federal  guidelines  as  it  does  with  regulation  of                                                              
alcohol  since   marijuana  is  still  considered   illegal  under                                                              
federal  law.   Section 3  would  establish the  terms of  office,                                                              
including  powers, duties  of the board,  and enforcement  powers.                                                              
She said  the Alcoholic  Beverage Control Board  (ABC Board)  is a                                                              
quasi-judicial  agency, and  while that language  is not  included                                                              
in this version  of the bill,  it is the department's  intent that                                                              
the Marijuana Control  Board (MCB) would also be  a quasi-judicial                                                              
agency  and  the  enforcement  staff  in  the  Alcoholic  Beverage                                                              
Control  Board  (ABC  Board)  will   have  enforcement  and  peace                                                              
officer responsibilities.                                                                                                       
                                                                                                                                
MS.  FOWLER related  that  Section 4  would  amend the  initiative                                                              
language to refer  to the Marijuana Control Board  (MCB).  Section                                                              
6 would  add  the Marijuana  Control Board  (MCB) to  the list  of                                                              
boards served  by the DCCED.   Section 8 would  provide transition                                                              
language.                                                                                                                       
                                                                                                                                
3:21:50 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  COLVER  referred to  page  3 of  HB  123 to  board                                                              
member representation  and asked for further clarification  on the                                                              
number of designated seats.                                                                                                     
                                                                                                                                
MS.  FOWLER answered  that the  board  would be  comprised of  six                                                              
members, including  representatives of the general  public, public                                                              
safety,  public  health,  rural,   and  up  to  two  members  with                                                              
industry  experience,  and the  executive  director,  who is  also                                                              
included  even  though  the  executive director  would  not  be  a                                                              
voting  member of  the  board.   Thus it  would  be a  five-member                                                              
board with the sixth member being the executive director.                                                                       
                                                                                                                                
CHAIR OLSON  offered that to  qualify for  the last two  seats the                                                              
industry  member  would  either  be subject  to  felonies  or  not                                                              
living  in  Alaska,  so  finding   the  appropriate  language  for                                                              
industry  membership   is  something  the  committee   is  working                                                              
through.                                                                                                                        
                                                                                                                                
3:23:15 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   COLVER  related   his   understanding  that   the                                                              
Marijuana Control  Board (MCB)  would be  a six-member  board with                                                              
an ex-officio member.                                                                                                           
                                                                                                                                
MS.  FOWLER  replied  that  it  would  be  five  members  and  the                                                              
executive director,  who is not  considered an ex-officio  member.                                                              
She  explained  that  the  board composition  was  a  hard  fought                                                              
compromise  that came  from the  Title 4 revisions,  since  it was                                                              
felt that  the executive director  has a  fair amount of  power in                                                              
the ABC Board structure.   The ABC Board meets five  times a year,                                                              
but  the  work  is  carried out  by  the  executive  director  the                                                              
remaining time,  so for  that reason, the  Title 4 group  believed                                                              
that  the background  of the  executive director  should be  taken                                                              
into  consideration  when  determining  the  other  seats  on  the                                                              
board.                                                                                                                          
                                                                                                                                
3:24:19 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  COLVER  asked  whether   the  positions  could  be                                                              
designated  as rural  and public  health and  also tighten  up the                                                              
remaining  interests.  He  suggested that  besides the  designated                                                              
seat, only one seat is designated for a public member.                                                                          
                                                                                                                                
CHAIR  OLSON  anticipated  that a  proposed  committee  substitute                                                              
will be  forthcoming and  it will  address board composition  more                                                              
fully.                                                                                                                          
                                                                                                                                
3:25:19 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  LEDOUX asked  to  discuss the  fiscal  note.   She                                                              
wondered  if the  Marijuana Control  Board  (MCB) wasn't  created,                                                              
but  it was  left to  the Alcoholic  Beverage  Control Board  (ABC                                                              
Board), whether  the ABC Board  incur most  of the expenses.   She                                                              
assumed that the ABC Board would likely need additional staff.                                                                  
                                                                                                                                
MS. FOWLER stated  that the bill initially had a  zero fiscal note                                                              
and the Department  of Commerce, Community &  Economic Development                                                              
asked  for  funding in  its  base  budget  request.   Whether  the                                                              
function  falls  to  the Alcoholic  Beverage  Control  Board  (ABC                                                              
Board) or  to the  Marijuana Control  Board (MCB), the  department                                                              
will need additional  staff to implement the program.   She agreed                                                              
the  department will  need the  additional staff  members and  the                                                              
same costs will be incurred, regardless of the board structure.                                                                 
                                                                                                                                
3:26:50 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE LEDOUX  asked whether the costs would  be identical                                                              
or if additional costs will be incurred.                                                                                        
                                                                                                                                
MS. FOWLER answered that it would be a "wash."                                                                                  
                                                                                                                                
3:27:10 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  COLVER asked  how  the fee  structure will  offset                                                              
the costs and whether it would be by regulation or statute.                                                                     
                                                                                                                                
MS. FOWLER answered that it would be done by regulation.                                                                        
                                                                                                                                
3:27:41 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  KITO related  his understanding  that the  Title 4                                                              
rewrite will  be introduced as a  bill.  He asked  whether changes                                                              
to the  board composition  for the  Marijuana Control  Board (MCB)                                                              
will be  necessary to conform to  any changes the  legislature may                                                              
make  to  the   Alcoholic  Beverage  Control  Board   (ABC  Board)                                                              
composition.                                                                                                                    
                                                                                                                                
MS.  FOWLER  answered that  nothing  requires  the two  boards  to                                                              
match, although  the Department of Commerce, Community  & Economic                                                              
Development  (DCCED)   does  see   some  benefit  to   the  boards                                                              
matching,  but  it  would  not  necessarily  mean  revisiting  the                                                              
Marijuana Control  Board (MCB) composition.   She agreed  that the                                                              
department  anticipates that a  Title 4  rewrite will  come before                                                              
the legislature.                                                                                                                
                                                                                                                                
3:28:49 PM                                                                                                                    
                                                                                                                                
CHAIR OLSON asked to reopen public testimony on HB 123.                                                                         
                                                                                                                                
3:29:26 PM                                                                                                                    
                                                                                                                                
WES  SCHACHT, Member,  Kachemak  Cannabis  Coalition, offered  his                                                              
support  for a separate  board.   Even though  the substances  are                                                              
somewhat related, they are different in numerous ways, he said.                                                                 
                                                                                                                                
3:30:48 PM                                                                                                                    
                                                                                                                                
The committee took an at-ease from 3:30 p.m. to 3:32 p.m.                                                                       
                                                                                                                                
3:32:04 PM                                                                                                                    
                                                                                                                                
MIKE TONGA  wondered why  the legislature  was putting  together a                                                              
[board].    He  said he  recently  watched  the  [Senate]  Finance                                                              
Committee   take   up   several   amendments   that   related   to                                                              
"recreational stores."    His community would be  required to "opt                                                              
in" to have a  recreational store.  He expressed  concern that the                                                              
first  stores would  not  come on  line until  July  2016, but  it                                                              
would  come up at  the earliest  in the  August primary  election.                                                              
Given the 90  days it would take  to certify an election,  a store                                                              
could not open until mid-November.                                                                                              
                                                                                                                                
CHAIR  OLSON pointed  out that  he  is testifying  on a  different                                                              
bill  and the  bill  before  the committee  today  will  set up  a                                                              
framework for  the Marijuana Control  Board (MCB), which  does not                                                              
have  anything to  do  with the  bill  that was  taken  up by  the                                                              
Senate  Finance Committee.   He  suggested that  Mr. Tonga  submit                                                              
his comments in writing.                                                                                                        
                                                                                                                                
3:34:21 PM                                                                                                                    
                                                                                                                                
CHAIR OLSON,  after first  determining no  one wished  to testify,                                                              
closed public testimony on HB 123.                                                                                              
                                                                                                                                
[HB 123 was held over.]                                                                                                         
                                                                                                                                
3:34:26 PM                                                                                                                    
                                                                                                                                
The committee took an at-ease from 3:34 p.m. to 3:35 p.m.                                                                       
                                                                                                                                
          HB 132-AGDC SUPPORT OF NATURAL GAS PROJECTS                                                                       
                                                                                                                                
3:35:13 PM                                                                                                                    
                                                                                                                                
CHAIR OLSON  announced that the  final order of business  would be                                                              
HOUSE  BILL NO.  132,  "An  Act relating  to  the  support of  the                                                              
Alaska  liquefied  natural  gas  project  by  the  Alaska  Gasline                                                              
Development  Corporation."   [Before  the committee  was CSHB  123                                                              
(RES)].                                                                                                                         
                                                                                                                                
3:35:35 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  CHENAULT, speaking as  prime sponsor,  stated that                                                              
HB  132  affirms  the policy  direction  for  the  Alaska  Gasline                                                              
Development Corporation  (AGDC).  The legislature  set this policy                                                              
direction in 2013  when creating AGDC, and in  2014 when approving                                                              
AGDC's involvement  in the Alaska  Liquefied Natural  Gas Project,                                                              
(AK LNG) in conjunction with Senate Bill 138.                                                                                   
                                                                                                                                
REPRESENTATIVE  CHENAULT  said that  HB  132 recognizes  that  the                                                              
AGDC [Alaska Gasline  Development Corporation] is  already engaged                                                              
as  a partner  on behalf  of the  State of  Alaska in  the AK  LNG                                                              
Project,  which  is  the  project   most  likely  to  deliver  the                                                              
greatest  benefit to  Alaskans.   Because  the AK  LNG Project  is                                                              
most likely to  deliver the greatest benefits to  Alaskans, HB 132                                                              
ensures that the AGDC maintains its commitment to this project.                                                                 
                                                                                                                                
3:36:39 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  CHENAULT stated  his  belief that  this bill  does                                                              
not  allow  the  state  to  embark  on  a  duplicative,  competing                                                              
project, until the future of the AK LNG Project is more certain.                                                                
                                                                                                                                
REPRESENTATIVE  CHENAULT said that  under HB  132, the  AGDC would                                                              
be free to pursue  other projects at the earliest  of three dates;                                                              
first, if  a party  to the  AK LNG Project  withdraws;  second, if                                                              
the AK  LNG Project  proceeds into  the front-end engineering  and                                                              
design  (FEED)   phase,  and  third,   on  July  1,  2017.     The                                                              
legislation  further  recognizes  that  the state  is  prudent  to                                                              
maintain  its   back-up  plan,   the  ASAP  [Alaska   Stand  Alone                                                              
Pipeline]  project, in  case the  state's partners  in the  AK LNG                                                              
Project  fail  to  commit  to the  next  development  -  front-end                                                              
engineering  and design  (FEED)  phase.   Should  that occur,  the                                                              
AGDC will be poised  to re-solicit gas buyers and  gas sellers and                                                              
to  upgrade the  ASAP proposal  as supported  by the  market.   To                                                              
avoid  a  duplicative   or  competing  project,   the  legislation                                                              
prohibits use  of the  In-state Natural Gas  Pipeline Fund  to pay                                                              
for work  on a project  that would export  more gas than  it would                                                              
deliver instate.   This bill would  also require the AGDC  to have                                                              
the  written  consent   of  a  gas  owner  or   controller  before                                                              
attempting to  market that  entity's gas to  a third party.   Keys                                                              
to  megaproject  success  include  the  elimination  of  competing                                                              
objectives  and  the  alignment  of stakeholders  along  a  single                                                              
project.  With  the unprecedented momentum to date  of the aligned                                                              
Alaska Liquefied  Natural Gas [AK  LNG] Project,  having competing                                                              
projects  will increase risk  and uncertainty  that threatens  its                                                              
success.  This  legislation ensures that the AGDC  will retain the                                                              
course set by  the legislature in creating the  AGDC and providing                                                              
a framework  for the AGDC  to advance the  state's interests  as a                                                              
full participant in the AK LNG Project.                                                                                         
                                                                                                                                
3:39:24 PM                                                                                                                    
                                                                                                                                
RENA DELBRIDGE,  Staff, Representative  Mike Hawker,  Alaska State                                                              
Legislature,  on  behalf  of  the  prime  sponsor,  Representative                                                              
Chenault, and  co-sponsor, Representative  Hawker, stated  that HB                                                              
132 would temporarily  confine Alaska Gas Development  Corporation                                                              
(AGDC)  to work  on  the two  projects  that  the legislature  has                                                              
approved.  This  would maximize the chances of success  for the AK                                                              
LNG  Project while  maintaining a  viable state  backup option  to                                                              
deliver gas  to Alaskans  and be the  most responsible  steward of                                                              
the  state's money.   She  offered her  belief that  approximately                                                              
$180 million  remains in the  In-state Natural Gas  Pipeline Fund,                                                              
appropriated by  the legislature to  get the AGDC through  an open                                                              
season  process  for an  in-state  gasline.    She said  that  the                                                              
sponsors were  concerned that if  the funds are rerouted  to study                                                              
other options, it  could take away money to implement  an in-state                                                              
gas option for Alaskans.                                                                                                        
                                                                                                                                
3:40:41 PM                                                                                                                    
                                                                                                                                
MS.  DELBRIDGE  directed  attention  to  Section  1,  which  would                                                              
establish   the  Alaska  Gas   Development  Corporation   (AGDC)'s                                                              
purpose.   She turned to  page 3 to  Section 2, which  would place                                                              
temporary  restrictions  on  what   the  AGDC  can  do,  including                                                              
prohibiting  the  AGDC  from developing  a  natural  gas  pipeline                                                              
project  in  which  more  than half  the  gas  going  through  the                                                              
pipeline  would  be  destined  for   export.    It  would  further                                                              
prohibit AGDC's involvement  in an LNG Project  that competes with                                                              
the  AK LNG  Project  to  which AGDC  and  the state  are  already                                                              
contractually  committed.   These  prohibitions would  end at  the                                                              
earliest of  three dates:   first, if the  state or  other parties                                                              
withdrew  from AK LNG  partnership, the  AGDC's restriction  would                                                              
no  longer  be in  place;  second,  if  the  state and  the  other                                                              
parties  moved forward  to into  a FEED  [front-end engineering  &                                                              
design] decision,  which will  involve a  new level of  commitment                                                              
and new  level of  financial commitment;  and  third, the  July 1,                                                              
2017  date would  essentially represent  the final  date to  enter                                                              
into a FEED decision on the AK LNG Project.                                                                                     
                                                                                                                                
3:42:23 PM                                                                                                                    
                                                                                                                                
MS.  DELBRIDGE  directed  attention  to  Section  3,  which  would                                                              
prohibit the  AGDC from marketing  gas if  it does not  have title                                                              
to the  gas or written  consent from the  party that does  own and                                                              
control the gas.                                                                                                                
                                                                                                                                
MS. DELBRIDGE directed  attention to Section 4,  which would amend                                                              
the In-state Natural  Gas Pipeline Fund to prohibit  the AGDC from                                                              
using funds  for a project that  competes with the AK  LNG project                                                              
or for a natural  gas pipeline if the majority of  the gas goes to                                                              
export.  She  clarified that the aforementioned  restriction would                                                              
expire  at the end  of the  previously mentioned  dates, at  which                                                              
point  the AGDC  would potentially  be  able to  use the  In-state                                                              
Gasline Fund  for which  over 50  percent of  gas is intended  for                                                              
export project if the AK LNG has not gone through.                                                                              
                                                                                                                                
MS.  DELBRIDGE directed  attention  to Section  5, which  provided                                                              
definitions.     It  conforms  the  statutory  reference   in  the                                                              
definition of  "Alaska liquefied  natural gas project"  to reflect                                                              
the new subsection in AGDC's purpose to restrict the project.                                                                   
                                                                                                                                
3:43:30 PM                                                                                                                    
                                                                                                                                
MS.  DELBRIDGE  related  that  Section  6 would  add  a  new  term                                                              
"front-end  engineering  and design"  to definitions  under  AGDC,                                                              
commonly called  FEED.  She described  it as the  next development                                                              
phase  that  the  Alaska  LNG Project  is  bound  for,  she  said,                                                              
stating that  the language used  in the definition  replicates the                                                              
language in  the heads of  agreement (HOA)  - document for  the AK                                                              
LNG  Project  dated  1/14/2014,  between  Alaska  Gas  Development                                                              
Corporation (AGDC),  TransCanada, the State of  Alaska, ExxonMobil                                                              
Corporation,  ConocoPhillips  Alaska,  Inc.,  and  BP  Exploration                                                              
(Alaska)  Inc.   She  stated that  Section  7  would establish  an                                                              
effective date.                                                                                                                 
                                                                                                                                
3:44:11 PM                                                                                                                    
                                                                                                                                
CHAIR OLSON  asked whether  she could briefly  discuss the  AK LNG                                                              
gas issue.  She  suggested that they had a commitment  on the full                                                              
amount of the gas.                                                                                                              
                                                                                                                                
MS.  DELBRIDGE replied  that  the North  Slope  producers are  the                                                              
entities that  have the contractual  right to develop  and produce                                                              
the gas on the  leases that they have leased.   She said that when                                                              
the  state  produces   the  gas,  the  state  receive   a  royalty                                                              
percentage  that  it can  take  royalty-in-kind  (RIK)  as gas  or                                                              
royalty-in-value  (RIV) as  money.   She state  that under  AK LNG                                                              
and the  terms of Senate  Bill 138  that the legislature  approved                                                              
last year,  the state  and the  producers have  an opportunity  to                                                              
agree to  have the producers  pay production  taxes on the  gas as                                                              
gas.  For AK LNG  the state would have a physical  gas share of up                                                              
to 25 percent of  the gas coming through the AK  LNG Project.  She                                                              
said that  where the state's  25 percent  ownership in the  AK LNG                                                              
project  is derived,  that it  is  a share  commensurate with  the                                                              
amount of  gas that  the state would  then have  to ship  and fill                                                              
its   share  of   the   pipeline,   gas  treatment   plant   (GTP)                                                              
liquefaction plant  and be able to market.  Essentially  by moving                                                              
forward  with AK LNG,  which is  the project  the producers  would                                                              
like to  see materialize  - and  have essentially committed  their                                                              
gas  to   that  project   -  pending  the   Alaska  Oil   and  Gas                                                              
Conservation Commission  deciding how much  gas it will  allow the                                                              
producers to take  off of certain fields at what  point in time in                                                              
order to maximize ultimate recovery of all the oil and gas.                                                                     
                                                                                                                                
3:46:07 PM                                                                                                                    
                                                                                                                                
CHAIR  OLSON related  his  understanding  that the  aforementioned                                                              
oil and gas molecules can't be counted for a competing project.                                                                 
                                                                                                                                
MS. DELBRIDGE  answered that it  would be difficult  to understand                                                              
how  someone with  gas could  commit gas  and negotiate  contracts                                                              
for the sale of that gas under two different projects at once.                                                                  
                                                                                                                                
3:46:25 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  HUGHES  asked  for  the balance  of  the  In-state                                                              
Natural Gas  Pipeline Fund  and when did  she anticipate  it would                                                              
be needed by the AK LNG Project.                                                                                                
                                                                                                                                
MS. DELBRIDGE offered  her belief that the balance  in the fund is                                                              
approximately  $180 million.    She offered  to  double check  the                                                              
figures  and provide  them  in writing  tomorrow.   She  clarified                                                              
that the balance  in the fund was intended to take  the AGDC's in-                                                              
state  Alaska  Stand  Alone  Pipeline  (ASAP)  through  the  final                                                              
engineering  and class  3 estimates  that  are currently  wrapping                                                              
up,  which prepares  the  package  of transportation  services  it                                                              
would take to  people who want to  ship gas on the pipeline  in an                                                              
open  season.   Further, once  the open  season is  held and  firm                                                              
shipping  contracts are negotiated,  those  will be sufficient  to                                                              
provide financing  for that pipeline  construction going  down the                                                              
road,  so it is  not a  state subsidized  pipeline, but  something                                                              
that stands on those  long-term promises that have  gas to ship on                                                              
it.                                                                                                                             
                                                                                                                                
3:47:36 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HUGHES  wondered if  she misunderstood.   She asked                                                              
for further clarification  on whether those funds  might be needed                                                              
for  AK LNG,  noting  of course  the state  wouldn't  do the  ASAP                                                              
[Alaska Stand  Alone Pipeline].   She asked for the  earliest date                                                              
that the AK LNG project may need the funds.                                                                                     
                                                                                                                                
MS.  DELBRIDGE  answered that  the  AK  LNG  Project has  its  own                                                              
special   fund   created   under  the   Alaska   Gas   Development                                                              
Corporation  (AGDC).   She suggested  that  it would  be a  policy                                                              
call  for  the legislature  at  what  point  in time,  working  in                                                              
concert with  the AGDC that  one might  want to declare  the state                                                              
so  "certainly" moving  forward  on AK  LNG  that the  legislature                                                              
would be  willing to  take money  dedicated to  a backup  plan and                                                              
put  it  towards  that  project.   She  suggested  this  might  be                                                              
something the [legislature] may wish to deliberate on.                                                                          
                                                                                                                                
3:48:33 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  HUGHES related  her understanding  that in  moving                                                              
from Pre-FEED  to FEED  that the  state's portion  was about  $500                                                              
million.  She  said the state might  need the $180 million  in the                                                              
In-state Natural Gas Pipeline Fund balance.                                                                                     
                                                                                                                                
MS.  DELBRIDGE answered  that the  In-state  Natural Gas  Pipeline                                                              
Fund  balance  would be  a  potential  source  to support  its  25                                                              
percent share of  this project as it moves into FEED.   She agreed                                                              
that while  the AGDC  has been fully  representing the  state's 25                                                              
percent  on  the  liquefaction,  the  state  has  contracted  with                                                              
TransCanada  to manage  its 25 percent  on the  GTP and  pipeline.                                                              
She  highlighted that  the  state has  opportunities  to buy  back                                                              
about  40 percent of  that, which  would change  the dollar  value                                                              
the state  will need  going into  FEED.   Further, if  the state's                                                              
relationship  with TransCanada  were terminated,  that would  also                                                              
change the amount going in, she stated.                                                                                         
                                                                                                                                
3:49:58 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  KITO asked  for further clarification  on  the two                                                              
projects  and  how  or  when  the  projects  would  be  considered                                                              
mutually exclusive,  in terms  of moving volumes  of gas  from the                                                              
North Slope  to Southcentral.   He  asked whether the  information                                                              
gathered during the  FEED process and would be  useful information                                                              
for both  projects,  for example,  if one moved  forward a  little                                                              
ahead of the other.                                                                                                             
                                                                                                                                
MS. DELBRIDGE  offered her belief  that the information  is useful                                                              
and can go into  the Environmental Impact Statement  (EIS) body of                                                              
work and  can be valuable.   That being  said, she  suggested that                                                              
many  people  would agree  that  it  would  be unlikely  that  two                                                              
projects ever  go forward  for very long  past the FEED  decision.                                                              
She  said that  it is  a  very strong  commitment  by the  project                                                              
sponsors,  including  the  state  at  that  point,  in  which  the                                                              
parties are  signing up tentative customers  to buy gas.   At that                                                              
point, the  parties would be  moving forward, provided  that there                                                              
are no unexpected  major events, and would be expecting  to make a                                                              
final  investment  decision  and  start  building.   Some  of  the                                                              
potential  things  that  could  happen  include  commercial  risk,                                                              
market  risk, and  an inability  to negotiate  the final  purchase                                                              
agreement.   In addition there is  also regulatory risk,  which is                                                              
part of what  that front-end engineering and design  (FEED) period                                                              
is designed to iron  out.  She pointed out that  the sponsors have                                                              
understood that  it was  unlikely that the  state would  support a                                                              
different  project  once  it  has  made a  FEED  decision  on  any                                                              
project, she said.                                                                                                              
                                                                                                                                
3:52:07 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   KITO,  in   terms  of   marketing,  related   his                                                              
understanding that as  an owner of gas through the  AK LNG Project                                                              
the state will market  its gas with or without producers.   He was                                                              
unsure how  that would  work under a  fully owned state  pipeline,                                                              
but it seemed  to him if the  state owned the line and  was acting                                                              
as  the conduit  for  gas,  that the  state  would  not trying  to                                                              
market gas,  but will be transporting  the gas and it  would be up                                                              
to the  producers to market  their sale of  gas.  The  state would                                                              
be in  the situation  of providing  the pipeline  or the  conduit.                                                              
He asked whether that was correct.                                                                                              
                                                                                                                                
MS.  DELBRIDGE replied  that  Representative  Kito just  described                                                              
one of  the key differences  between the  in-state AK  LNG Project                                                              
and  ASAP yes;  state  would market  its 25  percent  gas, with  a                                                              
variety  of mechanisms  set up  to  do so.   She  said that  under                                                              
Senate Bill  138 the  legislature required that  if DNR  was going                                                              
to modify a  lease in a certain  way with one of the  producers to                                                              
keep from shifting  between royalty-in-kind (RIK)  and royalty-in-                                                              
value (RIV),  the companies  would have the  obligation to  go out                                                              
and market  the state's gas  on terms no  less than what  they are                                                              
getting  for their  gas, which represents  one  option.  She  said                                                              
there  are several  memorandums  of  understanding  that the  past                                                              
administration  and the  current administration  have signed  with                                                              
potential oversees  entities to open  the doors on  a relationship                                                              
to talk  about potential buyers  and markets.  The  administration                                                              
through the Department  of Natural Resources (DNR),  she believed,                                                              
has hired  a contractor  to help  build up  the state's  marketing                                                              
capacity to  assist them  in finding  the contracts, markets,  and                                                              
the buyers  through  AK LNG.   She said  that AGDC,  under AK  LNG                                                              
would  never take  actual  possession of  the  state's gas,  which                                                              
would be a DNR function with the Department of Revenue (DOR).                                                                   
                                                                                                                                
MS. DELBRIDGE  acknowledged that  he was correct  in terms  of the                                                              
ASAP  in-state  line, that  it  was  a transportation  service  or                                                              
infrastructure,  similar to  having  a trucking  company, but  the                                                              
company  never owns  the  product being  trucked.   She  explained                                                              
that  it  might be  the  producers  that  would  pay to  have  gas                                                              
transported in  another line, or  more likely, that  the producers                                                              
might sell  their gas before it  goes into a pipeline  and a third                                                              
party, such as a  utility or mine who wants to  move the gas would                                                              
pay to have it  shipped on that pipeline.  The  third option would                                                              
be what type  of unknown competition  might be out there  and what                                                              
the terms  would be,  which she  said she did  not know  in enough                                                              
detail to address.                                                                                                              
                                                                                                                                
3:55:24 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  KITO   asked  whether  the  state   has  competing                                                              
interests  to try  to collect  information in  the Pre-FEED  side,                                                              
but  also  in  terms  of  the  state   performing  the  Front  End                                                              
Engineering  and  Design (FEED),  how  different  will  an AK  LNG                                                              
Project versus an  ASAP Project be in terms of  most components of                                                              
design.  He  said it seemed that  the big difference would  be the                                                              
ultimate volume of  gas, since other items would  be similar, that                                                              
gas would  be moving from the  North Slope to Southcentral.   Thus                                                              
it seems  as though the  state could benefit  from having  some of                                                              
that work being done in the FEED phase, as well.                                                                                
                                                                                                                                
MS.  DELBRIDGE answered  that the  legislature  provided for  some                                                              
information  sharing between  the big  line and  AGDC's work  on a                                                              
different state  option, when the  legislature passed  Senate Bill                                                              
138 and in passing  House Bill 4, creating Alaska  Gas Development                                                              
Corporation  (AGDC).  It  was contemplated  that the two  projects                                                              
should work  together so that  the AGDC  would not be  wasteful or                                                              
redundant in  its use of state  resources.  She  acknowledged that                                                              
information  sharing agreements  are  in place  between the  state                                                              
and  the AK  LNG, but  also  between and  AK  LNG.   In fact,  she                                                              
offered her  belief that  several agreements  exist and  cover how                                                              
this  information is  shared and  what it  can be  used for  going                                                              
into  the future.    She recalled  that  some  concern was  raised                                                              
during last  week's AGDC board meeting  that the AGDC  was limited                                                              
to using that for  a non-competing type project.   She agreed that                                                              
the big  difference between the  two projects would be  the volume                                                              
of  gas shipped.   In  terms of  the  information and  engineering                                                              
that  happens in  FEED, it  may not be  as useful  as [the  state]                                                              
wants it  to be, in conjunction  with an in-state  alternative, if                                                              
the  in-state  alternative  was  geared  toward  shipping  smaller                                                              
volumes in-state.   She explained that a bigger  line that carries                                                              
more volume might  have a bigger diameter, but it  would require a                                                              
different  set  up  of  compression  stations  around  the  route.                                                              
Currently, there is  one that would be required for  the ASAP line                                                              
to get  gas off  the North  Slope to  Southcentral.   If that  was                                                              
increased for  export volumes, one might  add as many as  eight or                                                              
more  compressor  stations  around   the  route,  which  are  more                                                              
costly,  and  the  engineering  would  need  to  match  up.    She                                                              
concluded that  some can  be valuable, which  depends on  what the                                                              
state's final project looks like.                                                                                               
                                                                                                                                
3:58:46 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  HUGHES  asked  whether   the  information  sharing                                                              
agreements   that  was   currently   in  place   will  allow   for                                                              
information to  move back and  forth.   She further asked  if ASAP                                                              
becoming competitive  would prevent that and whether  it was based                                                              
on the diameter, volume, or both.                                                                                               
                                                                                                                                
MS.  DELBRIDGE  answered  that  the  agreements  are  confidential                                                              
agreements  so she  was not  privy to  the terms.   She  suggested                                                              
that  may   be  a  good  question   for  Alaska   Gas  Development                                                              
Corporation (AGDC).                                                                                                             
                                                                                                                                
3:59:22 PM                                                                                                                    
                                                                                                                                
FRANK  RICHARDS,  P.E.;  Vice  President,  Engineering  &  Program                                                              
Management,   Alaska    Gas   Development   Corporation    (AGDC),                                                              
Department   of  Commerce,   Community   &  Economic   Development                                                              
(DCCED), related  his understanding  that the question  related to                                                              
the  information  flow between  the  Alaska Stand  Alone  Pipeline                                                              
(ASAP) and the AK  LNG.  He stated that the  cooperation agreement                                                              
between  AGDC and the  AK LNG  partners was  to allow  information                                                              
flow  on engineering,  field efforts,  environmental,  regulatory,                                                              
and lands information  that both projects would be  able to use to                                                              
advance either project.   He said that the AGDC  was prohibited by                                                              
the agreement  from using information  received from  its partners                                                              
on AK LNG to  advance a project that has a volume  of greater than                                                              
500 million  standard cubic  feet per  day.   However, the  AK LNG                                                              
project  can  receive  information  from  Alaska  Gas  Development                                                              
Corporation  (AGDC)  and use  it  for advancement  of  the AK  LNG                                                              
project without any prohibition.                                                                                                
                                                                                                                                
4:00:39 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  COLVER asked  who would  control the  right-of-way                                                              
if two entities were pursuing the same alignment.                                                                               
                                                                                                                                
MR.   RICHARDS   answered   that  the   Alaska   Gas   Development                                                              
Corporation  (AGDC) has  received  a right-of-way  lease from  the                                                              
Department   of   Natural   Resources   as   prescribed   by   the                                                              
legislature.   Thus  the AGDC holds  that right-of-way.    He said                                                              
that the AGDC  has been working on the  supplemental Environmental                                                              
Impact  Statement  (EIS)  with  the US  Army  Corps  of  Engineers                                                              
(USACE).  The outcome  would likely be a record  of decision (ROD)                                                              
from the  Bureau of Land Management  (BLM), which would  grant the                                                              
AGDC the  federal right-of-way.   He commented  that the  AGDC has                                                              
been  working with  its partners  at AK  LNG to come  to a  common                                                              
alignment  from  the  gas conditioning  facility  at  Prudhoe  Bay                                                              
south  through the  Brooks Range,  across Minto  Flats, down  to a                                                              
point just  north of  the Susitna River  crossing.   The alignment                                                              
for  the ASAP  Project and  the  AK LNG  Project are  one and  the                                                              
same.   He characterized  the AGDC's  internal decision  to revise                                                              
its alignment as  revision 6.1.  The partners at  AK LNG have been                                                              
reviewing  the alignment  changes  internally  and will  hopefully                                                              
land on that as  well.  He recapped that the  ASAP project and the                                                              
AK LNG  Project both moved  separate alignments to  one alignment.                                                              
He  said that  the  AGDC  has advanced  with  right-of-way  leases                                                              
through the state.   He hoped that the AGDC would  receive it from                                                              
the federal  government; however, the  AGDC has not  moved towards                                                              
any right-of-way  on private  lands at this  point.  He  said that                                                              
the two differences  in the project  is that the ASAP  Project has                                                              
just completed  Front End  Engineering and  Design (FEED)  so that                                                              
project is  farther advanced in  terms of its engineering  efforts                                                              
whereas the  AK LNG Project is still  in  the pre-FEED  effort, he                                                              
said.                                                                                                                           
                                                                                                                                
4:03:10 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE COLVER  asked whether temperature or  soil monitors                                                              
are  in  place  to  delineate  permafrost  areas  in  the  current                                                              
environmental  phase  or whether  it  will  be  done in  the  next                                                              
phase.                                                                                                                          
                                                                                                                                
MR.  RICHARDS  answered that  the  AGDC  has done  extensive  geo-                                                              
technical  boreholes  specifically  in  areas  with  discontinuous                                                              
permafrost since  the issue the  pipelines will face are  areas in                                                              
which it anticipates  frost heave or settlement due  to the buried                                                              
pipeline.   He suggested that  warm permafrost areas  would likely                                                              
receive  those  challenges.    He  indicated  that  the  work  was                                                              
primarily  focused  south  of Livengood  since  the  producers  in                                                              
previous  pipeline iterations  had conducted  a tremendous  amount                                                              
of  work  from   Prudhoe  Bay,  down  the   Trans-Alaska  Pipeline                                                              
corridor to  Livengood.   He reported  that they held  significant                                                              
geotechnical information,  including ground temperatures.   He did                                                              
not wish  to duplicate  work, which is  where with the  initiation                                                              
of the cooperation  agreement with AK LNG, the AGDC  has been able                                                              
to receive  that information north  of Livengood.  He  offered his                                                              
belief  that the  AGDC currently  has  a very  good repository  of                                                              
geotechnical information.                                                                                                       
                                                                                                                                
4:04:54 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  JOSEPHSON  recalled  earlier  testimony  that  the                                                              
AGDC can't  use information it has  received from its  partners to                                                              
advance the  project beyond  500 Mcf.   He asked whether  the AGDC                                                              
could  advance  the  project  by  proving  it  had  received  that                                                              
knowledge independent  of those partners or whether  it would just                                                              
get too complicated.                                                                                                            
                                                                                                                                
MR.  RICHARDS  answered  that the  confidentiality  agreement  has                                                              
provisos   that  allow  for   openings  if   the  Alaska   Gasline                                                              
Inducement  Act  (AGIA) contracts  be  terminated.   He  said  the                                                              
cooperation  agreement  was  put  in place  prior  to  passage  of                                                              
Senate Bill  138 and  the AGIA contract  was still  in place.   He                                                              
stated that  the AGDC has the ability  to talk to its  partners in                                                              
terms  of using  information  for  another  iteration  of an  ASAP                                                              
[Alaska Stand Alone Pipeline Project].                                                                                          
                                                                                                                                
4:06:21 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  JOSEPHSON  stated  that subsection  (a)  says  the                                                              
date  the state  or another  party  withdraws.   He asked  whether                                                              
TransCanada  would   be  considered   another  party   under  this                                                              
definition of party.                                                                                                            
                                                                                                                                
MS. DELBRIDGE answered  that she would need to  check, and offered                                                              
to provide the information later.                                                                                               
                                                                                                                                
4:06:53 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  JOSEPHSON,  relative  to  subsection  (b),  stated                                                              
that this  bill reflects that  any anxiety about  competition from                                                              
a second  export project would  not be felt  as long as  Front End                                                              
Engineering  and Design  (FEED) was  being studied.   He  recalled                                                              
the use of "decision"  on Front End Engineering  and Design (FEED)                                                              
and asked whether that was the same thing as a study on FEED.                                                                   
                                                                                                                                
MS. DELBRIDGE  answered that  a FEED study  was how the  Front End                                                              
Engineering and Design  (FEED) period was referenced  in the Heads                                                              
of  Agreement (HOA),  which  was a  period  in which  the data  is                                                              
collected  that  enables  the  front-end  engineering  and  design                                                              
(FEED)  decision to  be made, at  which point,  the project  moves                                                              
forward  with a  contractual agreement  or agreements  as per  the                                                              
language in the  HOA.  She stated this was duplicated  in the bill                                                              
on page 5, Section  6, when it states that  "front-end engineering                                                              
and design"  means  a study that  includes ....."   She  suggested                                                              
that in  going back  to the three  dates in subparagraph  (A),(B),                                                              
and (C), that in  subparagraph (B) that the parties  need to enter                                                              
into contractual agreements to undertake that(FEED).                                                                            
                                                                                                                                
4:08:09 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  JOSEPHSON referred  to subsection  (b) that  talks                                                              
about  FEED, even  if  FID would  not  be accomplished,  but  FEED                                                              
would  be,  whether  the  sponsors will  be  comfortable  with  an                                                              
expansion   of   ASAP   as   originally    outlined   in   HB   4,                                                              
notwithstanding that FID had not been entered.                                                                                  
                                                                                                                                
MS.  DELBRIDGE  acknowledged  that she  understood  his  question.                                                              
She indicated  that the sponsor  has considered this  question and                                                              
brought  it up  several  times  to figure  out  whether  it was  a                                                              
comfort zone.   She  said it  really defies  logic that  the state                                                              
would  try  for  a  competing  project  in  which  the  state  was                                                              
investing the type  of money it would need to be  in the front-end                                                              
engineering and  design (FEED) process  under the AK  LNG Project.                                                              
She said it  would be very difficult  to figure out where  the gas                                                              
would  come from  since as  the  state would  move into  front-end                                                              
engineering  and  design  (FEED)  would have  committed  its  gas.                                                              
This the sponsor felt comfortable removing the restriction.                                                                     
                                                                                                                                
4:09:27 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  HUGHES  briefly  reviewed  the  recent  happenings                                                              
with  an  Alaska   gasline,  recalling  that   the  administration                                                              
announced  it would  consider  expanding  the Alaska  Stand  Alone                                                              
Pipeline  (ASAP), followed  by this  bill being  introduced.   She                                                              
asked for  a sense  of the  reaction of  investors and  the market                                                              
worldwide outside Alaska.                                                                                                       
                                                                                                                                
MS.  DELBRIDGE   answered  that  she   has  not  seen  a   lot  of                                                              
independent  news coverage  outside Alaska,  but she has  reviewed                                                              
trade  publications   that  perhaps   ran  the  Associated   Press                                                              
article.   She suggested  that regulators  have  picked up  on the                                                              
sudden  uncertainty.   For example,  Mr.  Richards referenced  the                                                              
SEIS  [Supplemental Environmental  Impact  Statement] that  Alaska                                                              
Gas  Development  Corporation (AGDC)  has  pending  before the  US                                                              
Army Corps  of Engineers  (USACE).   The UASCE  provided the  AGDC                                                              
notice  that  it  was  suspending  work through  the  end  of  the                                                              
legislative session.   She said  the USACE was unsure  whether the                                                              
SEIS it  has been working  relates to the  project the  state will                                                              
ultimately support.   The AGDC's SEIS relates to a  pipeline and a                                                              
gas treatment  plant [GTP] that ends  at Beluga and ties  into the                                                              
ENSTAR system.   The  announcement for  the potential  new project                                                              
was  clearly  one  designed  to   go  to  tidewater  and  involved                                                              
liquefaction component  that the  state would not  participate in;                                                              
however, this  is a pipeline that  feeds an LNG facility  so it is                                                              
unlikely that  the USACE and the  Bureau of Land  Management (BLM)                                                              
will  regulate that  route in  preparing  an Environmental  Impact                                                              
Statement (EIS)  in Alaska.  Instead,  it would likely  fall under                                                              
the Federal  Energy Regulatory  Commission's (FERC)  jurisdiction.                                                              
Thus she  could see  why the  US Army  Corps of Engineers  (USACE)                                                              
might  pull back  while  the state  figures  out what  it will  be                                                              
doing,  but  that  is the  type  of  regulatory  uncertainty  that                                                              
worries the  sponsors of  HB 132  in terms  of going forward  with                                                              
multiple projects.                                                                                                              
                                                                                                                                
4:12:15 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  HUGHES asked  whether she  has heard any  feedback                                                              
from potential buyers.                                                                                                          
                                                                                                                                
MS.  DELBRIDGE answered  that  she did  not  know.   She said  she                                                              
could imagine  what a  buyer might think  if was approached  twice                                                              
by two  fully supported State  of Alaska pipeline  projects, which                                                              
is  one reason  the sponsor  included in  the bill  that the  AGDC                                                              
can't market gas without written consent to market.                                                                             
                                                                                                                                
4:12:54 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   KITO   directed   attention  to   the   front-end                                                              
engineering and  design (FEED).  He  asked where the state  was at                                                              
in  terms of  making  a final  investment  decision  (FID) on  the                                                              
Alaska  Stand Alone  Pipeline (ASAP)  project.   He further  asked                                                              
for the  timing for  the AGDC  doing additional  work on  a larger                                                              
independent  line.   He  asked whether  it  would be  a couple  of                                                              
years before an FID would occur.                                                                                                
                                                                                                                                
MR. RICHARDS  answered that with  passage of Senate Bill  138, the                                                              
policy  decision was  that the  AK  LNG Project  was the  priority                                                              
project for  the state.   The AGDC has  been on schedule  with the                                                              
Alaska Stand  Alone Pipeline (ASAP)  project to essentially  be in                                                              
an open  season for ASAP.   With the  passage of Senate  Bill 138,                                                              
the  AGDC  considered  slowing  the  process  down  to  align  the                                                              
project to  the front-end engineering  and design  (FEED) decision                                                              
with the  AK LNG  Project.  The  AGDC has  revised its  work scope                                                              
and  work plans  for 2015  and early  2016 to  continue with  work                                                              
that is  necessary for the  field efforts, including  defining the                                                              
right-of-way,  considering  off-site material  sites,  considering                                                              
access  roads, considering  work on  the North  Slope for  the gas                                                              
conditioning  site,   but  the  AGDC   is  not  doing   the  heavy                                                              
engineering that  the AGDC  has just now  completed with  its FEED                                                              
effort.  The AGDC  has delayed its schedule and with  that the FID                                                              
decision,  or  project  sanction,   to  a  point  after  the  FEED                                                              
decision with  the AK  LNG Project,  he said.   With respect  to a                                                              
larger  independent   line,   the  AGDC's   board  gave   staff  a                                                              
resolution that  asked them to come  up with work plans  to define                                                              
scope,  schedule,  and  budget   on  two  concepts:    an  upsized                                                              
American National  Standards Institute (ANSI) class  600 size pipe                                                              
and  an  ANSI class  900  size  pipe, which  are  essentially  two                                                              
different pressure classes  for the pipe - one at  1480 pounds per                                                              
square inch  (ppsi) and the other  at 2,200 ppsi.  Thus  with more                                                              
pressure  the same  strength and  diameter of  pipe can flow  more                                                              
volumes.  The AGDC  has been developing these work  plans and cost                                                              
estimates to report back to the board in a few weeks.                                                                           
                                                                                                                                
4:15:48 PM                                                                                                                    
                                                                                                                                
CHAIR OLSON asked for the estimated cost of the study.                                                                          
                                                                                                                                
MR.  RICHARDS  answered   that  the  AGDC  is   "scratching  those                                                              
numbers" right now.                                                                                                             
                                                                                                                                
CHAIR OLSON asked for the source of the funding.                                                                                
                                                                                                                                
MR.  RICHARDS answered  that the  money  would come  from the  In-                                                              
state  Natural Gas  Pipeline  Fund since  it  represents the  sole                                                              
source of funding the AGDC has to advance the project.                                                                          
                                                                                                                                
CHAIR  OLSON  asked  for  further   clarification  that  the  fund                                                              
balance was approximately $180 million.                                                                                         
                                                                                                                                
MR. RICHARDS answered yes.                                                                                                      
                                                                                                                                
4:16:27 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  HUGHES,   referring  to  the  work   on  increased                                                              
pressure,  asked whether  it would  increase from  1.4 to  2.4 Bcf                                                              
[billion cubic  feet].  She asked  for a reminder of  the forecast                                                              
of the in-state need for gas.                                                                                                   
                                                                                                                                
MS.  DELBRIDGE  answered  that the  existing  in-state  need  will                                                              
between  200-250  million  cubic  feet  (MMcf),  or  substantially                                                              
less, but represents the cumulative need.                                                                                       
                                                                                                                                
4:17:31 PM                                                                                                                    
                                                                                                                                
CHAIR OLSON suggested it would depend on the time of year.                                                                      
                                                                                                                                
MS. DELBRIDGE agreed the volume fluctuates significantly for in-                                                                
state use depending on the season.                                                                                              
                                                                                                                                
4:17:45 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  HUGHES asked  whether the  1.4 and  2.4 Bcf  would                                                              
mean more than half for be for export.                                                                                          
                                                                                                                                
MS. DELBRIDGE  answered that she does  not know.  She  stated that                                                              
when the  AGDC was  originally looking at  the Alaska  Stand Alone                                                              
Pipeline  (ASAP),   there  was  the  potential  for   other  large                                                              
quantity end  users in the  Cook Inlet,  such as the  Agrium, Inc.                                                              
facility  or mining  projects could  cushion the  gap between  the                                                              
250 MMcf  in-state and the  500 MMcf per  day; however, to  get to                                                              
the volumes  for the  in-state option,  the AGDC  went out  to the                                                              
markets and  held something  called "an  expression of  interest,"                                                              
saying  the AGDC's  studies indicated  that the  state needs  gas,                                                              
the utilities  were considering  imports,  and the AGDC  suggested                                                              
it  could do  the  .5 Bcf  Alaska  Gasline Inducement  Act  capped                                                              
project.   The AGDC asked if  any commercial interest  existed and                                                              
it did, which provided  the basis for to move  forward under House                                                              
Bill 4.   In order to do  the in-state project  requires long-term                                                              
shipping commitments  from the market  to financially  support the                                                              
construction of that  project.  She offered her  belief that there                                                              
has not  been an additional "expression  of interest," and  if so,                                                              
it  was  not  noticed.    Instead,   she  suggested  that  it  was                                                              
direction from  the AGDC's board.   She said  it was not  clear in                                                              
the board  meeting why  these two classes  were selected  and what                                                              
other options have  been vetted and discussed.  She  was not aware                                                              
if some  new indicators from the  market that indicated  bigger or                                                              
more;  however, the  bill sponsors  remain concerned  that for  an                                                              
in-state  line will need  the same  gas a  larger line  will need.                                                              
She  stated at  this  point the  gas  is generally  committed  and                                                              
industry, with  the state  as a partner,  has been advancing  that                                                              
larger project.   She clarified  that it concerns the  sponsors to                                                              
add other concepts  into the mix, without analysis,  grounding, or                                                              
open  rationale  for doing  so  give  the potential  impacts,  for                                                              
example,  as seen  by  the US  Army  Corps of  Engineers'  (USACE)                                                              
decision  to wait  out  the legislative  session  prior to  moving                                                              
forward with  the SEIS, as  well as the  potential use of  the In-                                                              
state Natural Gas  Pipeline Fund dedicated for  an in-state energy                                                              
project being used to evaluate other options.                                                                                   
                                                                                                                                
4:20:33 PM                                                                                                                    
                                                                                                                                
CHAIR OLSON asked whether the AGDC's gas is of export quality.                                                                  
                                                                                                                                
MS.  DELBRIDGE  answered  that   the  AGDC's  Alaska  Stand  Alone                                                              
Pipeline  (ASAP) line was  for utility  grade gas.   Part  of what                                                              
was designed  with ASAP, was  a gas treatment  plant (GTP)  on the                                                              
North Slope that  pulls in the gas, removes impurities,  and flows                                                              
it down  the pipeline.   She said  this was  for a utility  grade,                                                              
which  requires a  different standard  of processing  than an  LNG                                                              
grade.    She  related  her  understanding  that  significant  re-                                                              
engineering of  a GTP could occur  to handle the LNG grade  gas if                                                              
that is in  fact the direction  that the AGDC's Board  directs the                                                              
AGDC to  take.  She  was unsure whether  that has been  made clear                                                              
by the board yet, and deferred to Mr. Richards.                                                                                 
                                                                                                                                
4:21:43 PM                                                                                                                    
                                                                                                                                
MS.  DELBRIDGE clarified  that the  question  revolved around  the                                                              
difference between  the utility grade natural gas  contemplated by                                                              
AGDC on the  ASAP and the  potential for an upgraded  project that                                                              
would  seem to  be carrying  export  volumes and  whether any  GTP                                                              
redesign  would be  necessary to  carry  gas destined  for an  LNG                                                              
facility.                                                                                                                       
                                                                                                                                
MR.  RICHARDS recalled  earlier  testimony that  the ASAP  project                                                              
was designed  using a  physically solvent  process to  essentially                                                              
treat gas on  the North Slope to  the utility grade as  opposed to                                                              
aiming process  most used in the  industry to produce  LNG quality                                                              
gas specifications.   The different  essentially is in  removal of                                                              
the  carbon  dioxide.   He  explained  that the  physical  solvent                                                              
process  brings the  gas to  an  approximate 3  percent while  the                                                              
aiming process  brings it to  approximately 50 parts  per million.                                                              
He said that  in the physical  solvent process some of  the higher                                                              
hydrocarbons  are kept  in the  physical  process so  some of  the                                                              
value of  hydrocarbon chain is  lost to the  market.  He  said the                                                              
LNG  market  would  like  to receive  higher  value  Btu  [British                                                              
thermal  units] content  than  a utility-grade  gas.   The  Alaska                                                              
Stand  Alone  Pipeline  (ASAP) was  originally  designed  to  meet                                                              
Alaska's  in-state  energy  needs  to  be  able  to  put  it  into                                                              
existing  utility systems,  such  as ENSTAR  Natural Gas  Company,                                                              
and the ASAP  Project gas stream  was designed to meet  the ENSTAR                                                              
specifications, which  would allow it flow into  the ENSTAR system                                                              
without any further gas conditioning downstream.                                                                                
                                                                                                                                
4:23:44 PM                                                                                                                    
                                                                                                                                
CHAIR  OLSON asked  whether it  would  be logical  to assume  that                                                              
when  the AGDC  provides  an estimate  on  the different  diameter                                                              
pipes it  will included estimated  costs for treating the  gas for                                                              
export grade.                                                                                                                   
                                                                                                                                
MR. RICHARDS stated  that the AGDC's board asked staff  to look at                                                              
the 36  inch diameter pipe for  two different pressure  classes to                                                              
provide for utility  grade gas.  He said that  staff will consider                                                              
whether the  physical solvent  process can  be up-scaled  to those                                                              
volumes, which  relates to  the train size  and what  is available                                                              
to meet those requirements.   He explained that getting  to an LNG                                                              
quality  specification   will  require  considering   a  different                                                              
processing  technology.    He  acknowledged   that  the  AGDC  can                                                              
provide that  information, but  the AGDC  is not currently  tasked                                                              
to do so.                                                                                                                       
                                                                                                                                
4:24:42 PM                                                                                                                    
                                                                                                                                
CHAIR OLSON  said he was unsure  how the legislature can  make any                                                              
comparisons, for example,  if 2 or 2.5 Bcf of gas  is flowing, but                                                              
the local consumption  is .25 Bcf, substantial excess  gas will be                                                              
available.   He said if  the costs to  export are not  known, that                                                              
the legislature is missing part of the equation.                                                                                
                                                                                                                                
MR. RICHARDS answered  that if the gas stream has  a higher carbon                                                              
dioxide  content would  be a  downstream processing  unit.   Thus,                                                              
the  state  would have  that  prior  to  entering into  an  export                                                              
facility.   He  indicated  the AGDC  has not  looked  at the  cost                                                              
component of that  to see if will be more costly  than having that                                                              
treatment  on  the   North  Slope,  but  that   could  be  another                                                              
alternative.  Last  week he heard Representative  Seaton suggested                                                              
that  some of  the richer  CO2 content  could be  used on  another                                                              
potential export customer.                                                                                                      
                                                                                                                                
4:25:55 PM                                                                                                                    
                                                                                                                                
CHAIR  OLSON  suggested  that  this might  be  considered  by  the                                                              
Alaska Gas Development Corporation's (AGDC) Board.                                                                              
                                                                                                                                
MR.  RICHARDS  stated   that  the  next  AGDC   Board  meeting  is                                                              
scheduled  for  April  9.    He  anticipated  providing  a  scope,                                                              
schedule,  and budget  to  do this  additional  analysis and  will                                                              
likely seek an earlier meeting.                                                                                                 
                                                                                                                                
4:26:27 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  JOSEPHSON referred  to the outer  date of  July 1,                                                              
2017.   He acknowledged  that the  governor expressed  some pretty                                                              
sharp dislike  of this  bill, he wondered  if the governor  signed                                                              
the  bill,  what  assurance  people  who  are  anxious  about  the                                                              
success of  the AK  LNG Project  have that  someone might  ask for                                                              
another year.   He  acknowledged that deadlines  have been  met in                                                              
the  recent  past,  but  he asked  what  confidence  he  has  that                                                              
between  now and  July  2017  that the  AK  LNG would  follow  the                                                              
schedule.                                                                                                                       
                                                                                                                                
MS.  DELBRIDGE  answered that  the  July  2017 date  provides  "an                                                              
absolute backstop."   Every  indication by  AK LNG, including  the                                                              
state's representative,  is that  things are  on track for  a FEED                                                              
decision early to  mid-2016.  She realized that  the sponsor group                                                              
hasn't come before  this committee, but they have  come before the                                                              
House  and   Senate  Resources   Committees  this  year,   clearly                                                              
indicating  that  the project  was  on  track  to reach  the  FEED                                                              
decision by the  March or April 2016.  She reiterated  that it was                                                              
an absolute backstop.   She stated that there isn't  any intent to                                                              
let negotiations string  on forever; however, the state  is a full                                                              
partner in  the AK LNG Project,  so the sponsors will  look to the                                                              
state and Deputy  Commissioner at Department of  Natural Resources                                                              
(DNR),  who serves  as the  lead  staff, to  give the  legislature                                                              
those indications as  to whether or not things are  stalled out or                                                              
if another  month will be  needed, or what  is happening  and what                                                              
confidence the  legislature can  have in that  working out  in the                                                              
way everyone is saying they intend for it to.                                                                                   
                                                                                                                                
4:28:59 PM                                                                                                                    
                                                                                                                                
CHAIR OLSON opened public testimony on HB 132.                                                                                  
                                                                                                                                
4:29:16 PM                                                                                                                    
                                                                                                                                
RICK KOCH,  City Manager, City of  Kenai, offered his  support for                                                              
HB 132 as  a prudent to move  forward the long awaited  project to                                                              
bring  Alaska's  bounty  of  gas  to Alaskans  and  to  the  world                                                              
markets.  He said  he has spent his career managing  the interests                                                              
of state  and municipal governments  and large scale  construction                                                              
projects in Alaska.   In doing so, he has gained  an understanding                                                              
of   just  how   difficult  it   is   to  develop   public-private                                                              
partnerships  (P3).   As a  former  member of  the Alaska  Gasline                                                              
Development  Authority (AGDA,  he  commended  the legislature  for                                                              
recognizing  and  addressing  the  inherent  difficulties  in  the                                                              
enabling  legislation, which  created the  Alaska Gas  Development                                                              
Corporation  (AGDC).     He  said   that  HB  132   would  provide                                                              
safeguards  in which  the state  can  move forward  in a  mutually                                                              
supportive  relationship  with  the major  North  Slope  producers                                                              
while  still protecting  the state's  interest  in an  alternative                                                              
project  in  the  event  Alaska  LNG  Project  does  not  come  to                                                              
fruition.    Years  of  effort have  been  expended  to  create  a                                                              
framework of trust  and cooperation, not unduly  influenced by the                                                              
political  whims of  the next election.   This  framework  must be                                                              
protected  by not introducing  opposing interest  and distrust  to                                                              
the project.   In  the event that  the state  and its  partners in                                                              
the Alaska  LNG Project  decide  not to pursue  construction  of a                                                              
large diameter gasline,  the state will have every  opportunity to                                                              
modify  the  scope  of the  Alaska  Stand  Alone  Pipeline  (ASAP)                                                              
Project  with the  benefit of  the  feasibility, engineering,  and                                                              
permitting data developed  by the Alaska LNG Project  and the ASAP                                                              
Project.    These  projects as  presently  developed  and  further                                                              
defined by HB  132 are Alaska's best opportunities  to realize the                                                              
long time  goal of  developing the treasure  trove of  natural gas                                                              
in Alaska's North Slope.                                                                                                        
                                                                                                                                
4:31:36 PM                                                                                                                    
                                                                                                                                
MR. KOCH, in  closing, stated that if three individuals  decide to                                                              
get  together and  build a  150,000 square-foot  grocery store  in                                                              
Kenai,  but during  that process  one  of the  partners tells  the                                                              
other  two he'd  like to  continue along  this path,  but that  he                                                              
will  also  consider  the same  project  on  the  same lot  or  an                                                              
adjacent lot  to see how  that will work  out.  He said  that just                                                              
the   inherent   fairness  that   is   required   in  a   business                                                              
relationship  would damage  the possibility  of success since  the                                                              
goals  may   be  diametrically   opposed   or  run  in   different                                                              
directions.    He  encouraged  the committee  to  move  this  bill                                                              
forward since it  has taken decades to reach this  point.  He said                                                              
that   this  project   was  being   managed   by  an   outstanding                                                              
corporation,  staffed with skilled  people.   He said that  he and                                                              
the City of Kenai are fully in support of HB 132.                                                                               
                                                                                                                                
4:32:59 PM                                                                                                                    
                                                                                                                                
CHAIR OLSON  stated that public  testimony will remain open  on HB                                                              
132.                                                                                                                            
                                                                                                                                
[HB 132 was held over.]                                                                                                         
                                                                                                                                
4:33:22 PM                                                                                                                    
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being  no further business  before the committee,  the House                                                              
Labor and  Commerce Standing  Committee meeting  was adjourned  at                                                              
4:33 p.m.                                                                                                                       

Document Name Date/Time Subjects
HB132 ver E.pdf HL&C 3/16/2015 3:15:00 PM
HB 132
HB132 Sponsor Statement.pdf HL&C 3/16/2015 3:15:00 PM
HB 132
HB132 Sectional Analysis.pdf HL&C 3/16/2015 3:15:00 PM
HB 132
HB132 Draft Proposed Blank CS ver P.pdf HL&C 3/16/2015 3:15:00 PM
HB 132
HB132 Summary of Changes Ver E to Ver P.pdf HL&C 3/16/2015 3:15:00 PM
HB 132
HB132 Fiscal Note-DCCED-AGDC-3-05-15.pdf HL&C 3/16/2015 3:15:00 PM
HB 132
HB132 Sectional Analysis ver P.pdf HL&C 3/16/2015 3:15:00 PM
HB 132
HB132 Letter-Gov to House 3-02-15.PDF HL&C 3/16/2015 3:15:00 PM
HB 132
HB132 Supporting Documents-Background-AGPA SOI Letter-9-14-2012 and Backup.pdf HL&C 3/16/2015 3:15:00 PM
HB 132
HB132 Supporting Documents-Mike Prax.pdf HL&C 3/16/2015 3:15:00 PM
HB 132
HB132 Opposing Documents-Lynn Willis-3-06-15.pdf HL&C 3/16/2015 3:15:00 PM
HB 132