Legislature(1997 - 1998)

03/26/1998 10:05 AM O&G

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
       HOUSE SPECIAL COMMITTEE ON OIL AND GAS                                  
                   March 26, 1998                                              
                     10:05 a.m.                                                
                                                                               
                                                                               
MEMBERS PRESENT                                                                
                                                                               
Representative Mark Hodgins, Chairman                                          
Representative Scott Ogan                                                      
Representative Norman Rokeberg                                                 
Representative Joe Ryan                                                        
Representative Con Bunde                                                       
Representative Tom Brice                                                       
Representative J. Allen Kemplen                                                
                                                                               
MEMBERS ABSENT                                                                 
                                                                               
All members present                                                            
                                                                               
COMMITTEE CALENDAR                                                             
                                                                               
HOUSE BILL NO. 393                                                             
"An Act relating to contracts with the state establishing payments             
in lieu of other taxes by a qualified sponsor or qualified sponsor             
group for projects to develop stranded gas resources in the state;             
providing for the inclusion in such contracts of terms making                  
certain adjustments regarding royalty value and the timing and                 
notice of the state's right to take royalty in kind or in value                
from such projects; relating to the effect of such contracts on                
municipal taxation; and providing for an effective date."                      
                                                                               
     - MOVED CSHB 393(O&G) OUT OF COMMITTEE                                    
                                                                               
(* First public hearing)                                                       
                                                                               
PREVIOUS ACTION                                                                
                                                                               
BILL: HB 393                                                                   
SHORT TITLE: DEVELOP STRANDED GAS RESOURCES                                    
SPONSOR(S): RULES BY REQUEST OF THE GOVERNOR                                   
                                                                               
Jrn-Date    Jrn-Page           Action                                          
02/11/98      2280     (H)  READ THE FIRST TIME - REFERRAL(S)                  
02/11/98      2281     (H)  OIL & GAS, FINANCE                                 
02/11/98      2281     (H)  2 FISCAL NOTES (DNR, REV)                          
02/11/98      2281     (H)  GOVERNOR'S TRANSMITTAL LETTER                      
02/19/98               (H)  O&G AT 11:00 AM CAPITOL 124                        
02/19/98               (H)  MINUTE(O&G)                                        
02/24/98               (H)  O&G AT 10:00 AM CAPITOL 124                        
02/24/98               (H)  MINUTE(O&G)                                        
02/26/98               (H)  O&G AT 10:00 AM CAPITOL 124                        
02/26/98               (H)  MINUTE(O&G)                                        
03/03/98               (H)  O&G AT 10:00 AM CAPITOL 124                        
03/05/98               (H)  MINUTE(O&G)                                        
03/09/98      2578     (H)  RES REFERRAL ADDED                                 
03/10/98               (H)  O&G AT 10:00 AM CAPITOL 124                        
03/10/98               (H)  MINUTE(O&G)                                        
03/12/98               (H)  O&G AT 10:00 AM CAPITOL 124                        
03/12/98               (H)  MINUTE(O&G)                                        
03/19/98               (H)  O&G AT 10:00 AM CAPITOL 124                        
03/19/98               (H)  MINUTE(O&G)                                        
03/24/98               (H)  O&G AT 10:00 AM CAPITOL 124                        
03/24/98               (H)  MINUTE(O&G)                                        
03/24/98               (H)  O&G AT  5:00 PM CAPITOL 124                        
03/24/98               (H)  MINUTE(O&G)                                        
03/26/98               (H)  O&G AT 10:00 AM CAPITOL 124                        
                                                                               
WITNESS REGISTER                                                               
                                                                               
MR. PAT CARTER, Legislative Assistant                                          
  to Representative Hodgins                                                    
Alaska State Legislature                                                       
Capitol Building, Room 110                                                     
Juneau, Alaska  99801                                                          
Telephone:  (907) 465-2283                                                     
POSITION STATEMENT:  Testified on CSHB 393(O&G).                               
                                                                               
ACTION NARRATIVE                                                               
                                                                               
TAPE 98-28, SIDE A                                                             
Number 0001                                                                    
                                                                               
CHAIRMAN MARK HODGINS called the House Special Committee on Oil and            
Gas meeting to order at 10:05 a.m.  Members present at the call to             
order were Representatives Hodgins, Ogan, Rokeberg and Brice.                  
Representatives Kemplen, Ryan and Bunde arrived at 10:06 a.m.                  
                                                                               
HB 393 - DEVELOP STRANDED GAS RESOURCES                                        
                                                                               
Number 0035                                                                    
                                                                               
CHAIRMAN HODGINS announced the committee would hear HB 393,"An Act             
relating to contracts with the state establishing payments in lieu             
of other taxes by a qualified sponsor or qualified sponsor group               
for projects to develop stranded gas resources in the state;                   
providing for the inclusion in such contracts of terms making                  
certain adjustments regarding royalty value and the timing and                 
notice of the state's right to take royalty in kind or in value                
from such projects; relating to the effect of such contracts on                
municipal taxation; and providing for an effective date."  He                  
stated that he hoped to move the bill out today.  He stated that               
the committee is working on CSHB 393(O&G), 0-GH2006\B.  He stated              
that the committee has dealt with Amendments 1-13 and now has                  
Amendments 14-17 before the committee.  He stated that there is an             
additional amendment to replace the gas-to-liquids (GTL) language              
but in order to consider that amendment, there needs to be a motion            
to rescind the committee's actions at the previous meeting.                    
                                                                               
Number 0064                                                                    
                                                                               
REPRESENTATIVE CON BUNDE made a motion to rescind Amendment 3 0-               
GH2006\B.8, which read:                                                        
                                                                               
     Page 2, lines 8-11:                                                       
                                                                               
          Delete all material.                                                 
                                                                               
     Renumber the following paragraphs accordingly.                            
                                                                               
     Page 2, lines 23-28:                                                      
                                                                               
          Delete all material.                                                 
                                                                               
          Insert "tankers;"                                                    
                                                                               
Number 0093                                                                    
                                                                               
REPRESENTATIVE JOE RYAN stated that it would not bother him at all             
if the committee rescinded all his amendments and went back to the             
version of the bill that was amended by the committee and                      
Representative  Rokeberg.  He stated that he did not plan on                   
offering his other amendments.                                                 
                                                                               
Number 0100                                                                    
                                                                               
CHAIRMAN HODGINS stated that there is already a motion on the                  
table.                                                                         
                                                                               
Number 0120                                                                    
                                                                               
CHAIRMAN HODGINS called for a brief at ease at 10:15 a.m.                      
                                                                               
Number 0120                                                                    
                                                                               
CHAIRMAN HODGINS called the meeting back to order at 10:18 a.m.  He            
asked if there was an objection to the motion.                                 
                                                                               
REPRESENTATIVE ALAN KEMPLEN objected for purposes of discussion.               
He asked why the committee felt it is necessary to rescind                     
Amendment 3.                                                                   
                                                                               
Number 0155                                                                    
                                                                               
REPRESENTATIVE ROKEBERG responded that the reason for rescinding               
Amendment 3 is to talk about the merits of the amendment.                      
                                                                               
REPRESENTATIVE BUNDE stated that there is no requirement in the                
legislative process for anyone to explain why they choose to vote              
one way or another on any item.                                                
                                                                               
Number 0165                                                                    
                                                                               
REPRESENTATIVE KEMPLEN removed his objection.                                  
                                                                               
Number 0172                                                                    
                                                                               
CHAIRMAN HODGINS asked if there were any further objections.  He               
stated that Amendment 3 is now back in front of the committee.                 
                                                                               
REPRESENTATIVE ROKEBERG made a motion to amend Amendment 3 to read:            
                                                                               
     Page 2, lines 8-11:                                                       
                                                                               
          Delete all material.                                                 
                                                                               
     Renumber the following paragraphs accordingly.                            
                                                                               
Number 0185                                                                    
                                                                               
REPRESENTATIVE SCOTT OGAN objected.  He stated that at the last                
meeting there was some discussion to include GTL technology.  He               
suggested that the idea of the bill is to provide an incentive and             
to defer various taxes to help a liquefied natural gas (LNG)                   
pipeline project be economical.  GTL technology would not require              
building a new pipeline or new infrastructure.  He stated that he              
is supportive of getting whatever technology is needed to get the              
gas developed, however he believed that it is a separate issue.  He            
stated that when the state has a viable GTL project, then they                 
could come before the legislature.  He stated that the bill is                 
about building LNG facilities and the impact of taxes.  He stated              
that he objects to the GTL language being added back into the bill.            
                                                                               
Number 0242                                                                    
                                                                               
REPRESENTATIVE ROKEBERG stated that he agrees with everything that             
Representative Ogan has said, however, he felt that it would be                
premature to remove what is only intent language from the                      
legislation without further debate by the entire House and Senate              
on the issue.  He stated that it is up to the industry to make                 
their case before this legislature.  He stated that it would not be            
prudent for this legislature to do something that would send a                 
negative signal to the industry that the state of Alaska is or                 
isn't interested in the GTL technology, when in the long run this              
technology may be very important to Alaska.  He explained that the             
requirement in the legislation for legislative review, the review              
of whatever administration is in place and the contract that                   
results from this legislation, is going to have extraordinary                  
public scrutiny.  He stated that he believed that the whole tax and            
incentive regime for an LNG project is going to be entirely                    
different for a GTL project.  However, he felt it would be                     
premature to send a negative message to the industry and that is               
why he has brought Amendment 3 up.                                             
                                                                               
Number 0280                                                                    
                                                                               
REPRESENTATIVE BUNDE stated that he has a broader view of the bill.            
It is an attempt to develop the gas field on the North Slope and               
one way is through the pipeline and the other way is through GTL               
technology.  He stated that if he were to follow the reasoning of              
waiting for technology to be further developed, then he could argue            
that there be not any incentives for the pipeline until there are              
definite markets available.  He stated that this is a preparatory              
bill and he would like to be able to market gas in all forms.  He              
stated that he has yet to see that it is economically viable to                
build a pipeline, even with the bill.  He asserted that the                    
legislature needs to do all they can to extend the life of the                 
existing pipeline and a GTL option for the use of stranded gas                 
would extend the lifeline of the existing pipeline.  Therefore, he             
stated he supports Amendment 3.                                                
                                                                               
Number 0306                                                                    
                                                                               
REPRESENTATIVE KEMPLEN stated that there are distinct differences              
which relate to the process.  He stated that by allowing the                   
language to remain in the bill it is giving permission to the                  
administration to negotiate a contract with the private sector for             
GTL technology and when the contract is negotiated it will come to             
the legislature for approval.  He stated that there is a contract              
now with Mapco and there has been concerns raised by various                   
members of the state to the structure of that contract.  He stated             
that it is a yes or no issue for the approval.  He stated that                 
there will be economic development and jobs due to the expansion of            
the Mapco refinery, so it is important for it to proceed but that              
is not to say that the contract is perfect.  He explained that for             
the legislature to not have input into the development of a                    
contract, that is using a public resource, is not prudent.  It is              
important for a legislature to be able to have a say and be able to            
adjust the contracts if the merit is proven.  He stated that if                
this language was to remain in the bill, it would say to the                   
industry that they could negotiate everything they want to.  The               
GTL technology is continually being updated to be economically                 
viable.  He questioned if it would need fiscal regime adjustments.             
He stated that the purpose of the bill is to provide a mechanism               
for the construction of the LNG pipeline.  He stated that it would             
be prudent for the legislature to keep its options open in terms of            
the GTL technology and if adjustments are needed in the fiscal                 
regime, then at that point, the players should come before the                 
legislature and make their case for it.                                        
                                                                               
Number 0405                                                                    
                                                                               
CHAIRMAN HODGINS stated that the idea behind the bill to get the 4             
trillion cubic feet of gas to market and receive revenue from the              
sale of those resources.  He stated that various technologies and              
ways need to be weighed.  It is enabling legislation to produce a              
contract.  He stated that there are a lot of hoops that the GTL                
technology needs to jump through in order for it to be considered.             
He asserted that there has been testimony that the GTL technology              
has not been viable at this time but there is the possibility that             
it could and it should not be excluded.  He stated that the                    
original language regarding the GTL technology had already been                
toned down and Amendment 3 is not giving license to the                        
administration to start pumping GTLs through the pipeline.                     
                                                                               
Number 0447                                                                    
                                                                               
REPRESENTATIVE OGAN stated that he is going to vote to get the                 
language out of the bill because he wanted to send the message that            
the legislature is interested in having a LNG pipeline built and               
did not want to send a mixed signal or give a reason to delay the              
building of a gas pipeline.                                                    
                                                                               
Number 0455                                                                    
                                                                               
CHAIRMAN HODGINS stated that this bill is not a pipeline bill, it              
is a bill to establish payments in lieu of other taxes by a                    
qualified sponsor group for projects to develop stranded gas                   
resources in the state.                                                        
                                                                               
Number 0465                                                                    
                                                                               
CHAIRMAN HODGINS called for a roll call vote on the amendment to               
Amendment 3.  A roll call vote was taken.  Representatives Brice,              
Bunde, Rokeberg and Hodgins voted in favor of the motion.                      
Representatives Kemplen and Ogan voted against the motion. The                 
amendment to Amendment 3 passed.                                               
                                                                               
REPRESENTATIVE ROKEBERG made a motion to adopt Amendment 3 as                  
amended.                                                                       
                                                                               
Number 0505                                                                    
                                                                               
CHAIRMAN HODGINS asked if there was an objection.  Hearing none,               
Amendment 3, as amended, is adopted.                                           
                                                                               
Number 0509                                                                    
                                                                               
CHAIRMAN HODGINS stated that the sponsor of the additional                     
amendments removed those amendments.  He stated that he would like             
to have the committee move CSHB 393(O&G) 0-GH2006\L.                           
                                                                               
Number 0515                                                                    
                                                                               
REPRESENTATIVE BRICE asked if the version L incorporated the                   
amendment.  He believe that proper motion would be to move CSHB
393(O&G) 0-GH2006\B, as amended.                                               
                                                                               
Number 0523                                                                    
                                                                               
REPRESENTATIVE ROKEBERG made a motion to move CSHB 393(O&G) version            
B, 0-GH2006, as amended, with individual recommendations and                   
attached fiscal note.                                                          
                                                                               
Number 0530                                                                    
                                                                               
CHAIRMAN HODGINS asked if there was an objection. Hearing none,                
CSHB 393(O&G) version B, 0-GH2006, as amended was moved out of the             
House Special Committee on Oil and Gas.                                        
                                                                               
Number 0540                                                                    
                                                                               
MR. PAT CARTER, Legislative Assistant to Representative Hodgins,               
stated that by moving CSHB 393(O&G) version B, 0-GH2006, as                    
amended, it will not be able to be heard in the House Resources                
Standing Committee this afternoon, because there will not be a                 
final version done.  He stated that CSHB 393(O&G), version L,                  
reflects all the amendments up to the conclusion of the meeting on             
March 24, 1998.  He recommended that Amendment 3 be attached to                
CSHB 393(O&G) version L.                                                       
                                                                               
Number 0547                                                                    
                                                                               
REPRESENTATIVE ROKEBERG made a motion to rescind the motion to move            
CSHB 393(O&G) version B, 0-GH2006, as amended.                                 
                                                                               
CHAIRMAN HODGINS asked if there was an objection.  Hearing none,               
CSHB 393(O&G) version B, 0-GH2006, as amended was rescinded.                   
                                                                               
Number 0560                                                                    
                                                                               
REPRESENTATIVE ROKEBERG made a motion to move CSHB 393(O&G) version            
L, 0-GH2006, before the committee.                                             
                                                                               
CHAIRMAN HODGINS asked if there was an objection.  Hearing none,               
CSHB 393(O&G) version L, 0-GH2006 was so moved.                                
                                                                               
Number 0566                                                                    
                                                                               
REPRESENTATIVE ROKEBERG made a motion to adopt Amendment 1 before              
the committee, which read:                                                     
                                                                               
     Page 2, line 19, following "tankers":                                     
                                                                               
          Insert "although experimental research is being conducted            
     other alternative technologies such as gas to liquids, this               
     technology is not yet commercially viable; if this research               
     results in a commercially viable technology, and after                    
     economic analysis by the state of the application of this                 
     technology, it is shown that local or state tax or regulatory             
     changes are necessary to commercialize an Alaska project using            
     this technology, then this technology may be considered in                
     regard to this legislation."                                              
                                                                               
Number 0572                                                                    
                                                                               
CHAIRMAN HODGINS asked if there was an objection.  Hearing none,               
Amendment 1 was adopted.                                                       
                                                                               
Number 0576                                                                    
                                                                               
REPRESENTATIVE ROKEBERG made at motion to move CSHB 393(O&G)                   
version L, 0-GH2006, as amended, with individual recommendations               
and the attached fiscal note.                                                  
                                                                               
CHAIRMAN HODGINS asked if there was an objection.  Hearing none,               
CSHB 393(O&G) version L, 0-GH2006, as amended, moved out of the                
House Special Oil and Gas Committee.                                           
                                                                               
Number 0580                                                                    
                                                                               
CHAIRMAN HODGINS stated that he hoped to create a lot of jobs for              
Alaskans and bring a lot of revenue into the state's coffers.                  
                                                                               
ADJOURNMENT                                                                    
                                                                               
Number 0585                                                                    
                                                                               
CHAIRMAN HODGINS adjourned the House Special Committee on Oil and              
Gas meeting at 10:40 a.m.                                                      
                                                                               

Document Name Date/Time Subjects