02/21/2014 03:15 PM House LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| Presentation: Alaska Lng Project - Memorandum of Understanding - Heads of Agreement | |
| HB230 | |
| HB300 | |
| HCR15 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| *+ | HB 230 | TELECONFERENCED | |
| *+ | HB 300 | TELECONFERENCED | |
| *+ | HCR 15 | TELECONFERENCED | |
| + | TELECONFERENCED |
ALASKA STATE LEGISLATURE
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
February 21, 2014
3:23 p.m.
MEMBERS PRESENT
Representative Kurt Olson, Chair
Representative Lora Reinbold, Vice Chair
Representative Mike Chenault
Representative Andy Josephson
MEMBERS ABSENT
Representative Bob Herron
Representative Charisse Millett
Representative Dan Saddler
COMMITTEE CALENDAR
PRESENTATION: ALASKA LNG PROJECT - MEMORANDUM OF UNDERSTANDING
- HEADS OF AGREEMENT
- HEARD
HOUSE BILL NO. 230
"An Act allowing the Alaska Industrial Development and Export
Authority to issue bonds for an oil or gas processing facility;
and creating the oil and gas infrastructure fund to finance
construction or improvement of an oil or gas processing
facility."
- HEARD & HELD
HOUSE BILL NO. 300
"An Act relating to air ambulance service providers, air
ambulance membership agreements, and regulation of air ambulance
service providers and air ambulance membership agreements by the
division of insurance; and providing for an effective date."
- HEARD & HELD
HOUSE CONCURRENT RESOLUTION NO. 15
Relating to the continuation of the Task Force on Unmanned
Aircraft Systems.
- HEARD & HELD
PREVIOUS COMMITTEE ACTION
BILL: HB 230
SHORT TITLE: AIDEA BONDS FOR PROCESSING FACILITIES
SPONSOR(s): REPRESENTATIVE(s) SEATON
01/21/14 (H) PREFILE RELEASED 1/10/14
01/21/14 (H) READ THE FIRST TIME - REFERRALS
01/21/14 (H) L&C, FIN
02/21/14 (H) L&C AT 3:15 PM BARNES 124
BILL: HB 300
SHORT TITLE: AIR AMBULANCE SERVICES
SPONSOR(s): REPRESENTATIVE(s) MUNOZ
02/05/14 (H) READ THE FIRST TIME - REFERRALS
02/05/14 (H) L&C
02/21/14 (H) L&C AT 3:15 PM BARNES 124
BILL: HCR 15
SHORT TITLE: TASK FORCE ON UNMANNED AIRCRAFT SYSTEMS
SPONSOR(s): REPRESENTATIVE(s) HUGHES
01/21/14 (H) READ THE FIRST TIME - REFERRALS
01/21/14 (H) L&C
02/21/14 (H) L&C AT 3:15 PM BARNES 124
WITNESS REGISTER
ANGELA RODELL, Commissioner
Department of Revenue (DOR)
Juneau, Alaska
POSITION STATEMENT: Presented the overview of the LNG Project-
Memorandum of Understanding - Heads of Agreement.
REPRESENTATIVE PAUL SEATON
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Testified as the prime sponsor of HB 230.
TED LEONARD, Executive Director
Alaska Industrial Development and Export Authority (AIDEA)
Anchorage, Alaska
POSITION STATEMENT: Testified and answered questions on HB 230.
MATT FONDER, Director
Anchorage Office
Tax Division
Department of Revenue (DOR)
Anchorage, Alaska
POSITION STATEMENT: Testified and answered questions on HB 230.
REPRESENTATIVE CATHY MUNOZ
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented HB 300 as prime sponsor.
GINGER BLAISDELL, Staff
Representative Shelley Hughes
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Testified on HCR 15 on behalf of
Representative Hughes, sponsor.
STEVE COLLIGAN, Member
Task Force on Unmanned Aircraft Systems
Wasilla, Alaska
POSITION STATEMENT: Testified during the discussion of HCR 15.
ACTION NARRATIVE
3:23:04 PM
CHAIR KURT OLSON called the House Labor and Commerce Standing
Committee meeting to order at 3:23 p.m. Representatives
Chenault, Reinbold, Josephson, and Olson were present at the
call to order.
^Presentation: Alaska LNG Project - Memorandum of Understanding
- Heads of Agreement
Presentation: Alaska LNG Project - Memorandum of Understanding
- Heads of Agreement
3:23:20 PM
CHAIR OLSON announced that the first order of business would be
a presentation: LNG Project - Memorandum of Understanding -
Heads of Agreement.
3:23:29 PM
ANGELA RODELL, Commissioner, Department of Revenue (DOR), stated
she would continue the presentation using the handout
distributed at the last hearing. At that hearing the department
reviewed the Heads of Agreement (HOA), noting the HOA provides
the framework and lays out the expectations of each of the
parties. In Article 5 of that agreement, the department
outlined the state's participation. Article 5.3 specifically
expresses the desire to have the state's participation in each
component of the project consistent with the state's gas share
of approximately 20 to 25 percent. She indicated that the
state's participation would require significant financial and
human resources.
COMMISSIONER RODELL said the department believes the path
forward is to take advantage of the partnership in existence
[slide 16]. The state's partnership with TransCanada Alaska
Development Inc. (TransCanada) under the Alaska Gasline
Inducement Act's (AGIA) framework and investments made by both
the state and TransCanada makes TransCanada a natural partner to
assist the state in moving this project forward. She offered
her belief that the state needs a partner in this project since
"at the end of the day" the state is a government with an
obligation to Alaskans to continue to provide a safe, prosperous
environment in which to live. The DOR will need to continue
collecting taxes, auditing taxpayers, processing permanent fund
dividend payments, and administering child support.
Additionally, a partner will bring expertise the state lacks.
She related that TransCanada is an independent pipeline company
with proven experience in getting pipelines built. Not only
that, but TransCanada has spent the last six years developing
and understanding the environment and challenges unique to
Alaska. As commissioner of DOR she has, in conjunction with
Commissioner Joe Balash, Department of Natural Resources,
determined it is in the best interest of the state to enter into
a Memorandum of Understanding (MOU) with TransCanada.
3:25:45 PM
COMMISSIONER RODELL reviewed the definition of an MOU, which
read [slide 16]:
A legal document outlining the terms and details of an
agreement between parties, including each parties'
requirements and responsibilities. The MOU is often
the first stage in the formation of a formal contract.
An MOU is far more formal than a handshake and is
given weight in a court of law should one party fail
to meet the obligations of the memorandum.
COMMISSIONER RODELL stated that the MOU with TransCanada
outlines the state's expectations of TransCanada's participation
in the midstream, but it will not be binding until the
legislature enacts enabling legislation.
3:26:22 PM
COMMISSIONER RODELL discussed key terms of the MOU [slide 17].
She explained that Exhibit C is the Alaska LNG Midstream
Services Agreement, which sets out the commercial terms under
which TransCanada shall operate and expand the midstream
components of the Alaska LNG project. She described the five
key terms of Exhibit C. First, the MOU provides a favorable
debt-to-equity ratio of 75/25 for ratemaking purposes which will
reduce the state's tariff. A lower tariff not only improves the
state's overall cash flow but allows the state to provide lower
cost gas to Alaskans. Second, the cash contributions by
TransCanada, as the project developer, will reduce the state's
exposure to cash calls and obligations until the pipeline is in
service. Third, improved value to the treasury happens when
considering the opportunity cost of utilizing the state's
capital, which not only earns six percent in the treasury, but
preserves the state's flexibility going forward in terms of how
the cash is used and what it is used for. Thus, the net present
value (NPV) is improved overall. Fourth, with respect to
expansions, TransCanada today committed to a 70/30 capital
structure. Fifth, with respect to gas to Alaskans, TransCanada
committed to at least five offtake points with distance
sensitive rates with three zones for delivery.
3:27:46 PM
COMMISSIONER RODELL highlighted where the state is today [slide
18]. First the state has the settlement at Point Thomson, which
has led to a workforce of almost 1,200 workers and the
development of core infrastructure to move oil and gas
resources. The state knows it has access to significant volumes
of gas needed that when combined with the gas resources in
Prudhoe Bay allows the state to enter into long-term sales
contracts. In 2011, the governor called for the various parties
to shift their focus to LNG and determine if they could align on
a project together. Work done by TransCanada and ExxonMobil
Alaska Production, Inc. under Alaska Gasline Inducement Act
(AGIA) and the Alaska Pipeline project, along with BP
Exploration Alaska and ConocoPhillips Alaska, Inc. under the
Denali project provided a foundation of the concept selection.
She identified concept selection as the process of undertaking
the research to determine if there is a project and what the
project would look like. This past October, that phase
concluded with the determination that an LNG project with a gas
treatment facility on the North Slope, 800 miles of pipeline and
an LNG plant and related marine facilities located in Nikiski
would be that project. This demonstrates above all else, that
when everyone combines forces, a project can be advanced.
3:29:20 PM
CHAIR OLSON referred to the 70/30 split and asked which
TransCanada entity committed to the terms. He recalled two
entities were involved in the project, including the parent
corporation and the new one.
COMMISSIONER RODELL answered that the parent company
[TransCanada Alaska Development, Inc.] signed the MOU.
3:30:03 PM
COMMISSIONER RODELL related that the state's investment of $330
million under Alaska Gasline Inducement Act (AGIA), $130 million
by TransCanada Alaska Development Inc. (TransCanada) and
ExxonMobil Alaska Production, Inc. as partners under AGIA.
Under the Denali project, BP Exploration (Alaska) Inc. and
ConocoPhillips Alaska, Inc. spent approximately $200 million.
At the end of April 14, if enabling legislation passes, the
project will move into preliminary Front-End Engineering and
Design (Pre-FEED) phase. Under this process, all AGIA and
Denali work will be contributed to the Alaska LNG project. The
state and TransCanada mutually agree to abandon AGIA at that
point. In the event the state decides not to move forward with
a partnership with TransCanada, the state will need to decide
whether it will want to buy balance of data produced by
TransCanada and ExxonMobil Alaska Production, Inc. in connection
with AGIA.
3:31:13 PM
REPRESENTATIVE JOSEPHSON asked for clarification on the $130
million for the balance of the AGIA funds. He was unsure about
the "divorce" since it suggests that TransCanada would agree to
mutual abandonment of AGIA even if the state doesn't partner
with TransCanada on the Alaska LNG line. He said he didn't hear
TransCanada testify to that aspect.
COMMISSIONER RODELL said the department has not had
conversations in the event that enabling legislature did not
pass or if the bill precludes TransCanada's participation going
forward. She said that TransCanada is prepared to work with the
state on unwinding TransCanada. They recognize that the FY 2015
budget does not contain any funding request and there will be no
further funding for the AGIA license going forward. It will be
a process of how the state evidences the end of AGIA; however,
the department has not had those conversations since the state
has been proceeding with the MOU.
3:33:17 PM
REPRESENTATIVE JOSEPHSON discussed the provisions of AGIA with
respect to the penalties and said he was not presently concerned
about staying in a 30-year relationship with TransCanada. He
pointed out that the legislative legal drafter's advice was that
the project is uneconomical because it's really designed to go
to Alberta, which is uneconomical. However, he said he was
unsure that TransCanada will just "let us off the hook if we cut
them $130 million." In other words, "We better be married." He
asked for further clarification.
COMMISSIONER RODELL answered that she doesn't represent
TransCanada so she cannot preclude any actions TransCanada or
the state are entitled to take.
3:34:19 PM
CHAIR OLSON remarked that the route to Alberta failed on three
different occasions so it is not a factor at this point in time
since it didn't "pencil out."
REPRESENTATIVE JOSEPHSON recalled testimony before the House
Resources Committee in which Mr. Bullock said that technically
AGIA is about Alberta and an "abandonment question" would
concern Alberta. He hoped some of these questions just become
academic questions.
3:34:58 PM
COMMISSIONER RODELL understood tremendous nuances exist with
respect to AGIA, and the Department of Law will ensure that the
administration walks this very carefully and follow what needs
to happen.
REPRESENTATIVE CHENAULT remarked that he has concerns about the
proposed Alaska LNG structure, but some of his concerns are also
about the AGIA structure. He said that the legislature cannot
get a determination from the DOL on what treble damages actually
means. As the legislature moves through this process some
pointed questions need to be asked to avoid the current AGIA
situation: not knowing the final costs to exit the process. He
acknowledged that he hasn't seen where anyone has said that
TransCanada is willing to "just sign off on the dotted line and
then let's move forward." He considers the Alaska LNG proposal,
[the HOA and MOU], as a partnership that has been developed
between the legislature, the administration, and TransCanada to
move forward, and if the state moves forward as proposed, the
state won't incur treble damages or the threat of treble
damages. He acknowledged that as this moves forward lots of
concerns exist.
3:36:49 PM
REPRESENTATIVE CHENAULT referred to slide 18 entitled "Where We
Are Today?" to the participation, with Alaska putting in $130
million, TransCanada putting in $130, and Denali's BP
Exploration Alaska and ConocoPhillips Alaska, Inc. "are looking
at $200 million." He said in the next phase the state will fund
$70 million. He asked what funding the "big three" and
TransCanada will be making.
COMMISSIONER RODELL answered that takes her to the next slide
[slide 19] entitled "What Happens if HB 277 Passes?" If the
process moves forward, the producers will put in between $348
and $327 million, depending on whether the state participates at
20 percent or 25 percent level. The estimated cost for Pre-
Front End Engineering & Design (Pre-FEED) over the next 12 to 18
months will be approximately $435 million. If the state
participates at 20 percent, the producers will pick up $348
million, which will be reduced to $327 million if the state's
share is 25 percent. The state's share of liquefaction is
between $35 and $43 million. TransCanada's portion would be
from $53 to $67 million for the midstream components.
3:38:40 PM
REPRESENTATIVE CHENAULT reiterated the participation figures for
the state being between $327 and $348 million. He offered his
belief that the governor has asked for about $70 million.
COMMISSIONER RODELL answered yes. She related her understanding
that the Alaska Gasline Development Corporation (AGDC) made
assumptions, which includes a contingency over cost of about 40
percent, including money for administrative staff and
consultants. She explained that as the process continues, the
fiscal note will also be refined.
3:39:44 PM
COMMISSIONER RODELL said that at the end of this period the
administration expects to have a series of contracts that will
be approved or not approved by the legislature. If the
legislature moves forward with the Alaska LNG project, the state
needs to decide whether to exercise the option TransCanada has
offered, which is to reimburse 40 percent of the project costs
as the project moves to the Pre-FEED stage. She offered her
belief that this allows the state the flexibility to not decide
if it is "all in" or not. Instead, the pre-FEED work can
advance and the state can make the decision later on how to
proceed. If the state wants to stop TransCanada's involvement
and take on 100 percent, the state will reimburse TransCanada
the development costs it fronted on behalf of the state through
the 12 to 18 month [Pre-FEED] period, plus interest at 7.1
percent.
3:41:08 PM
COMMISSIONER RODELL turned to slide 20 entitled "What Happens
after FEED?" This period consists of front end engineering and
design estimated to last two to three years at estimated total
cost of $1.8 billion dollars. Of that, the producers would take
on 1.35 and 1.44 billion dollars, the state liquefaction share
would range from $145 to $180 million. Additionally, the
state's share if it exercises the "take back" option will
increase from $145 to $180 million to $230 and $290 million.
TransCanada's share will range from $250 to $270 million, and if
the state exercises its option, TransCanada's share will range
from $130 to $160 million, which represents the 60 percent
differential. At the end of this period, the state would
determine if it has the approval of all parties to move forward
and begin construction. If yes, the state has the opportunity
to pay TransCanada's development costs and if the state comes in
at 40 percent would pay $183 million or if it could be as much
as $337 million if it takes on whole project costs to date plus
7.1 percent interest.
3:43:07 PM
COMMISSIONER RODELL summarized that the HOA and MOU provide
guidance on how the powers provided in HB 277 will be used
[slide 21]. At each stage in the project there are "off-ramps"
and decision points for legislative and public review.
Commitments by the state will be made commensurate with progress
of the project and commensurate with the other parties in the
Alaska LNG project.
3:43:32 PM
REPRESENTATIVE JOSEPHSON moved beyond the Pre-FEED to FEED
period to approximately three years from now. He asked whether
the project will end if the gas contracts with Asia don't
materialize.
COMMISSIONER RODELL answered yes. At the end of the FEED stage,
if the state decides to move forward, it must figure out how it
wants to finance its share, regardless of TransCanada's
participation. The state will have to invest a significant
portion of financing to meet the capital costs for construction.
For the purpose of simplicity, if the construction costs were
$10 billion and the state's funding $4 billion, the state would
need to decide how to raise the money and adjust for that. She
said that this is why the administration is taking steps by
including TransCanada in the partnership so the state does not
have to raise $10 billion in a time period when the DOR is
forecasting revenues today that cannot support a $10 billion
investment. Further, the state is trying to do other things to
provide capacity within the state's debt or liability, whether
that means moving $3 billion to the Public Employees' Retirement
System (PERS) and Teachers' Retirement System (TRS) trust fund
to create relief within the operating budget and on the state's
liability to demonstrate that the state can take on additional
debt 10 years down the road.
3:46:22 PM
The committee took an at-ease from 3:46 p.m. to 3:47 p.m.
HB 230-AIDEA BONDS FOR PROCESSING FACILITIES
3:47:27 PM
CHAIR OLSON announced that the next order of business would be
HOUSE BILL NO. 230, "An Act allowing the Alaska Industrial
Development and Export Authority to issue bonds for an oil or
gas processing facility; and creating the oil and gas
infrastructure fund to finance construction or improvement of an
oil or gas processing facility."
3:47:45 PM
REPRESENTATIVE PAUL SEATON, Alaska State Legislature, as the
prime sponsor, stated that HB 230 moves forward the strategy to
increase oil in the Trans-Alaska Pipeline System (TAPS) and
increase throughput. An impediment to increasing oil in TAPS
has been the difficulty in access to existing processing
facilities, including water and gas constraint within the
handling facilities. Also, companies want to reserve space for
their own product. This bill is to remove these impediments.
3:48:48 PM
REPRESENTATIVE REINBOLD moved to adopt the proposed committee
substitute, (CS) for HB 230 labeled 28-LS1053\U, Martin,
2/10/14, as the working document.
REPRESENTATIVE JOSEPHSON objected for the purpose of discussion.
3:49:16 PM
REPRESENTATIVE SEATON explained that HB 230 would expand the
Alaska Industrial Development and Export Authority (AIDEA). It
are limited to $400 million bonding authority for all of its
projects. He said that oil and gas processing facilities are
expensive, and HB 230 will allow AIDEA to issue up to $200
million in bonds to fund projects without additional legislative
authority. He said this relieves constraint in two ways.
First, it isn't clear under the statutes that AIDEA has
authority to finance oil and gas processing facilities. Second,
it removes the monetary restraint. If the legislature approves
this bonding, it provides authority on a timeline for commercial
operations and accelerates the production of oil from smaller
fields into the pipeline. He stated that the current $10
million limit, in effect, means AIDEA must come back to the
legislature for approval, which means sometimes waiting until
the legislature is in session. Thus, this bill would allow
AIDEA to issue bonds up to $200 million for oil and gas
processing equipment and renovations.
3:51:07 PM
REPRESENTATIVE SEATON explained that HB 230 also creates the
[Oil and Gas Infrastructure Fund to assist in financing oil and
gas processing facilities on the North Slope]. The legislature
may decide to appropriate funds rather than use a bonding
authority. Historically, the state has negotiated with AIDEA
between 10 to 12 percent on bonds so the state will make money
on these loans and the new fund will be the repository of the
earnings, which will be used for oil and gas projects. The
current AIDEA fund can be used for any economic development.
Thus, if the legislature wishes to target the extra bonding
authority, it can do so.
REPRESENTATIVE SEATON stated that the bill defines oil and gas
processing as taking gas molecules out of oil. Additionally, it
allows gas to liquid (GTL) by chemical conversion as opposed to
phase conversion under liquefied natural gas (LNG). This would
make GTL available, necessary due to emission control areas.
Currently the state must import ultra-low sulphur diesel, but it
can be made in Alaska. He pointed out one provision was added
to SB 21 by the House Resources committee last year; however, it
would have required a title change. Additionally, the bill
duplicates the oil and gas [processing facility] tax credit
section for construction or improvement of modules. This
language was included in SB 21 and the tax credit duplicated in
HB 230 to be sure the greatest opportunity for building modules
is in the state. Thus, if modules are manufactured in Alaska
the tax credit will apply. He offered to provide additional
information on the service industry tax credit.
3:54:54 PM
REPRESENTATIVE JOSEPHSON asked whether the sponsor agreed with
the addition of the tax credit language.
REPRESENTATIVE SEATON answered yes. He indicated that a portion
targets Alaska jobs and provides an incentive for building the
modules in Alaska. He pointed out that one smaller operator
could have resulted in more oil in the pipeline if they could
have obtained financing at commercially reasonable terms to
build the facilities in the Matanuska-Susitna valley and truck
them. He acknowledged a number of smaller outfits would be in
line to put oil in the pipeline. He pointed out that processing
facilities don't make money if the company is processing its own
oil. Thus, it's not a profit center so it is more difficult on
a business relationship to build processing facilities than it
is for companies to undergo exploration.
3:56:53 PM
REPRESENTATIVE JOSEPHSON suggested that the tax credit is
designated for smaller independents. He asked whether larger
companies can use the credits.
REPRESENTATIVE SEATON answered that nothing limits the tax
credits to smaller companies. He explained that these tax
credits are not designed for projects the size of LNG plants.
However, if there was the necessity for larger companies to
renovate facilities they could approach AIDEA. Typically, the
large producers generally have better access to capital than
smaller outfits and AIDEA performs due diligence. He deferred
to AIDEA with respect to due diligence.
3:58:23 PM
REPRESENTATIVE JOSEPHSON related his understanding that the
conventional wisdom is that access problems for existing
processing facilities are access problems for independents. It
seems fairly circular. He said the controversy is whether the
"big three" are allowing access so to allow them to benefit from
the credit seems to exacerbate it.
REPRESENTATIVE SEATON clarified that this tax credit is not for
production; instead it is a "qualified oil and gas service
industry expenditure credit." The tax credits would apply if
molecules are built in Alaska instead of Japan. This credit is
exactly the same as the credit approved in SB 21 to incentivize
building facilities in Alaska, creating jobs in Alaska, and
driving Alaska's economy. He said that the combination cannot
exceed $10 million a year. Thus, this provision does not
provide an additional credit. In the event that SB 21 is
repealed, it would still allow stimulation of Alaska hire and
building modules in Alaska, he said.
4:00:33 PM
REPRESENTATIVE JOSEPHSON withdrew his objection. There being no
further objection, Version U was before the committee.
REPRESENTATIVE CHENAULT commented that Representative Seaton is
a man of many hats. He explained that in terms of access to
facilities a limitation exists. He described the oil process,
such that when a field is developed the initial oil wells
produces significant oil, a little gas, and water. As time goes
on, the percentages change, and sometimes wells can produce up
to 95 percent water. He pointed out that sometimes even major
oil companies are limited by the capacity of the facility itself
and by composition changes as the wells age. He said that the
facilities are expensive to build and operate and agreed that
this bill is not a "bad" bill.
CHAIR OLSON acknowledged many people would agree with him.
4:02:55 PM
REPRESENTATIVE JOSEPHSON asked about the maximum tax credits.
TED LEONARD, Executive Director, Alaska Industrial Development
and Export Authority (AIDEA), deferred to the expertise of the
Department of Revenue (DOR) to respond the question.
4:03:41 PM
REPRESENTATIVE JOSEPHSON asked whether it would be at the
discretion of AIDEA's board on whether to issue bonds.
MR. LEONARD misunderstood the question, noting he thought that
he was asking about tax credits.
4:04:21 PM
REPRESENTATIVE JOSEPHSON wondered whether the financing was
statutorily mandated or if the board meets. He acknowledged
that the LNG trucking was mandated, but he was trying to
understand whether this bill would operate under the AIDEA
board's discretion.
MR. LEONARD responded that under AIDEA's current statutes, AIDEA
invests in projects through direct financing or owning a portion
of a project. The board goes through a due diligence phase and
during the review process on projects decides what type of
capital structure will work and if it will issue bonds for a
project. Under the current statue anything over $10 million is
subject to legislative approval prior to the board issuing
bonds. He explained that the authority by the legislature is
not a mandate, but rather the legislature grants authority to
issue bonds. The AIDEA still goes through its complete due
diligence phase. Before AIDEA would issue bonds, the AIDEA
board will first approve the project and per statute identify a
finance plan to repay the bonds. In reality this bill would
increase the authority to issue up to $200 million in bonds,
which avoids the necessity for AIDEA to request bonding
authorization from the legislature every time the board might
consider investing in a facility.
4:06:54 PM
REPRESENTATIVE JOSEPHSON said he was curious how generous the
credits could become; however, he certainly liked the policy.
4:07:56 PM
REPRESENTATIVE JOSEPHSON asked how much the state would forego
in taxing authority if the potential for tax credits were
issued.
MATT FONDER, Director, Anchorage Office, Tax Division,
Department of Revenue (DOR), admitted he has just seen Version U
containing the tax credits this afternoon. He offered his
belief that bonding and tax credits are separate issues.
Proposed Sec. 2 and AS 43.20, the corporate income tax section,
set forth a new credit for oil and gas processing facilities.
He viewed the bonding and the tax credit as separate issues.
4:08:54 PM
REPRESENTATIVE JOSEPHSON asked if he could predict how many
people could take advantage of these credits.
MR. FONDER answered that "at first blush" the way the language
appears it could include any company with an oil and gas
processing facility on the North Slope, any company that would
like to build one, and any company working on an oil and gas
processing facility. Thus, it could be an oil and gas producer
or service provider on any of those facilities.
REPRESENTATIVE JOSEPHSON said he didn't know what the answer is
but he thanked Mr. Fonder.
REPRESENTATIVE SEATON explained the tax credit mirrors existing
law. He stated that SB 21 passed the legislature last year with
this language - 10 percent of the qualified oil and gas service
industry expenditures during the tax year or $10 million,
whichever is less. This bill includes language that this
existing tax credit can't be combined. He reiterated that this
is not a new tax credit; he just wanted to make sure that no
matter what the outcome of the [upcoming] referendum is, that
the tax credit to stimulate production of facilities in Alaska
will remain the same and will remain in place.
4:10:55 PM
REPRESENTATIVE JOSEPHSON said that Representative Seaton was
clear. He related his understanding that the projections by the
Office of Management & Budget and DOR projects under SB 21 would
continue regardless of the outcome of the August referendum.
REPRESENTATIVE SEATON answered yes.
4:11:36 PM
CHAIR OLSON said he would keep public testimony open.
[HB 230 was held over.]
4:12:05 PM
The committee took a brief at-ease from 4:12 p.m. to 4:15 p.m.
HB 300-AIR AMBULANCE SERVICES
4:15:33 PM
CHAIR OLSON announced that the next order of business would be
HOUSE BILL NO. 300, "An Act relating to air ambulance service
providers, air ambulance membership agreements, and regulation
of air ambulance service providers and air ambulance membership
agreements by the division of insurance; and providing for an
effective date."
4:15:41 PM
REPRESENTATIVE CATHY MUNOZ, Alaska State Legislature, as prime
sponsor of HB 300, explained that this bill would allow popular
air ambulance membership programs to continue serving Alaskan
residents. She related a personal scenario in which her late
father was medevaced from Juneau two years ago and it saved his
life. These emergency transports are very expensive and can
cost $50,000 to $100,000 per flight. The membership program
allowed Alaskans to buy a membership, which served as the copay.
If a person was medevaced and used primary insurance, the copay
was waived if a person had a membership.
4:17:00 PM
CHAIR OLSON asked whether the membership would cover the entire
amount if the person did not have insurance.
REPRESENTATIVE MUNOZ answered that the person would need primary
insurance coverage in order purchase a membership.
4:17:34 PM
REPRESENTATIVE MUNOZ said she heard from 1,300 Juneauites who
were participants of Airlift Northwest. She indicated that
about three to four months ago, the Division of Insurance (DOI)
ruled that Airlift Northwest could not provide the [insurance]
service any longer since Airlift Northwest has specifically
reorganized its company under the University of Washington's
umbrella organization. In doing so, the program was no longer
eligible under the DOI's licensing requirements. Again, she has
heard from many constituents, of whom many are retirees worried
about losing the membership plan. This bill will allow
membership to continue. Passage of HB 300 would help 1,300
Juneauites, 460 individuals from Sitka, 450 from Wrangell, 330
from Ketchikan, and 200 in Petersburg. She explained the
figures are from one company that provides medvac services, but
there are other companies that can provide the service as well.
She noted letters of support in members' packets from the Alaska
Commission on Aging, the Southeast Alaska Fishermen's Alliance,
and residents of Skagway, Juneau, Ketchikan, and Sitka.
4:20:22 PM
REPRESENTATIVE MUNOZ stated that she has worked with the sponsor
in the Senate on a companion bill.
[HB 300 was held over.]
4:21:40 PM
The committee took an at-ease from 4:21 p.m. to 4:22 p.m.
HCR 15-TASK FORCE ON UNMANNED AIRCRAFT SYSTEMS
4:22:43 PM
CHAIR OLSON announced that the final order of business would be
HOUSE CONCURRENT RESOLUTION NO. 15, Relating to the continuation
of the Task Force on Unmanned Aircraft Systems.
4:23:07 PM
GINGER BLAISDELL, Staff, Representative Shelley Hughes, Alaska
State Legislature, on behalf of the sponsor of HCR 15,
Representative Shelley Hughes, explained that a legislative Task
Force on Unmanned Aircraft Systems [task force] was formed under
HCR 6 last legislative session to review regulations and
guidance regarding unmanned aircraft systems [UAS] and to
provide recommendations for a comprehensive state policy that
protects privacy and allows for public and private operations.
She said that most people are intrigued with unmanned aircraft,
but most are concerned with privacy. The concept of unmanned
aircraft is new and interesting, and each time the task force
met, a new development occurred. Every instance and scenario
was explored from the standpoint of how the use would happen and
if the public was well protected. The task force decided that
the instances were covered by statutes plus Alaska's
Constitution has strong personal protection provisions. It
isn't possible to determine how fast this industry is changing
and growing. For example, the initial questions covered such
items as search and rescue or wildlife management. She related
that she receives unmanned aircraft system news. The military
unmanned aircraft used for surveillance is approximately four
feet wide, called a razor, and costs $76,000. Today, a company
printed a razor in one day using a 3-D printer and loaded it
with android, and using free applications (apps), it can do the
same business and costs $2,000. The industry is changing fast,
she said.
4:26:23 PM
MS. BLAISDELL stated that Dubai's [Mohammed Al Gargawi, Minister
of Cabinet Affairs, at the Government Summit in Dubai in
February 2014,] has offered a $1 million award for anyone who
can devise a use for unmanned aerial systems to improve
government services. A sample video on the government website
showed a lady in her home ordering her driver's license by
computer and an unmanned aircraft flies to her home. A
fingerprint scan opens the door, she removes her driver's
license, and the unmanned aircraft flies away.
4:27:09 PM
MS. BLAISDELL stated that the University of Alaska Fairbanks
(UAF) engineering department created an unmanned aircraft that
fits into the palm of hand. These unmanned aircraft can be as
large as a 747 aircraft. She recently learned that two Global
Hawks fly in the South Pacific to monitor weather patterns.
Japan's [Defense Ministry reported that two American-operated
Global Hawks will be deployed from May to October to the U.S.
military facility at Misawa Air Base. The drones are used as a
high-altitude, long-endurance platform for surveillance and
security. They were used before in monitoring the Fukushima
nuclear plants after the leakage in March 2011]. She noted that
the Global Hawks are the size of 747s and the pilots operate
them from California, and the drones are flown around Guam and
Japan without the necessity of obtaining passports.
4:28:13 PM
MS. BLAISDELL said the task force was sensitive to privacy
concerns especially surrounding law enforcement activities. She
reported that HB 255 is currently before the House Judiciary
Standing Committee and deals with law enforcement issues. It
provides procedures, data retention, and community involvement.
The task force has a limited scope, and this resolution, HCR 15,
would extend the task force for three years until June 30, 2017,
which also coincides with the UAF test site. Thus, when the UAF
test site finishes its mission the task force will finish its
work, as well.
4:29:19 PM
MS. BLAISDELL discussed the "whereas" section of the resolution,
which lists all of the positives of using UAF. The UAF was
selected by the Federal Aviation Administration as one of six
test sites. She anticipated that this will result in a boom in
business and industry growth as well as being on the forefront
of some policy decisions on how unmanned aircraft can be used in
the U.S. The task force currently consists of seven members.
This resolution requests the same seven members be retained and
it adds two additional seats. The Department of Transportation
& Public Facilities (DOT&PF), the Department of Law (DOL), and
the Legislative Affairs Agency Legal Services thought it would
be helpful, in particular, since the federal point of contact is
with DOT&PF. The ninth position would be a public member since
all other task force members had affiliation with aircraft use.
4:30:51 PM
REPRESENTATIVE REINBOLD asked whether the task force has been
working with the Aerospace Board.
MS. BLAISDELL answered no. The task force originally had a
board of 15-17 members, but it was cut to seven since it was a
more manageable number, especially given any cost involvement.
This resolution recognizes the need for a public position and
DOT&PF position as the federal aviation connection.
4:31:53 PM
CHAIR OLSON asked whether the University of Alaska Fairbanks
competes with the private sector.
MS. BLAISDELL deferred to the director of the test site [UAF
Vice Chancellor Rosanne "Ro" Bailey, a retired Air Force
brigadier general] to address the relationship.
REPRESENTATIVE REINBOLD said Ms. Bailey is highly knowledgeable
on this subject.
4:32:50 PM
MS. BLAISDELL, referring to page 3, lines 2-14, which read, in
part:
(3) evaluating complaints and concerns expressed to
the task force;
(4) identifying potential privacy problems associated
with unmanned aircraft systems and determining whether
legislation is necessary to address them;
(5) considering recommendations for public education
related to unmanned aircraft systems;
MS. BLAISDELL said that the "resolved" clauses add new duties
and purposes of the task force. Resolve (3) would add language
that allows the public, businesses and government an avenue to
address their concerns. Right now there is nowhere for citizens
to direct their concerns, she explained. The UAF doesn't
typically receive comments that have little to do with the test
site purpose, so the task force provides a central way for all
citizens to participate. [Resolve (4)] "is to identify any
potential privacy problems, and so it give the task force an
opportunity to evaluate the concerns ... and see if we do need
to makes some changes in statute." Resolve (5) relates to
public education to help eliminate the fear, which generally
develops with new technology, she said. Additionally, the task
force can fulfill one of the duties of the UAF test site by
conducting public meetings and receiving public comments. It
also includes studying the issue and making recommendations to
the legislature [paragraphs (7)-(9)], she said.
MS. BLAISDELL stated that these clauses provide a great
opportunity for legislator involvement with professionals in the
business. She asked members to consider this resolution "with a
positive light."
4:35:29 PM
STEVE COLLIGAN, Member, Task Force on Unmanned Aircraft Systems,
stated that he is in the mapping and technology business. He
graduated from the UAF graduate program.
4:36:42 PM
CHAIR OLSON remarked that it isn't possible to hear the
testifier due to the poor audio. He offered to place Mr.
Colligan at the top of the list at the next hearing on HCR 15.
[HCR 15 was held over.]
4:37:11 PM
ADJOURNMENT
There being no further business before the committee, the House
Labor and Commerce Standing Committee meeting was adjourned at
4:37 p.m.