Legislature(2007 - 2008)BARNES 124

03/22/2007 03:00 PM OIL & GAS


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03:08:28 PM Start
03:08:59 PM HB177
04:07:51 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+= HB 177 NATURAL GAS PIPELINE PROJECT TELECONFERENCED
Heard & Held
                    ALASKA STATE LEGISLATURE                                                                                  
             HOUSE SPECIAL COMMITTEE ON OIL AND GAS                                                                           
                         March 22, 2007                                                                                         
                           3:08 p.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Vic Kohring, Chair                                                                                               
Representative Kurt Olson, Vice Chair                                                                                           
Representative Nancy Dahlstrom                                                                                                  
Representative Jay Ramras                                                                                                       
Representative Ralph Samuels                                                                                                    
Representative Mike Doogan                                                                                                      
Representative Scott Kawasaki                                                                                                   
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
All members present                                                                                                             
                                                                                                                                
OTHER LEGISLATORS PRESENT                                                                                                     
                                                                                                                              
Representative Beth Kerttula                                                                                                    
Representative David Guttenberg                                                                                                 
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                              
HOUSE BILL NO. 177                                                                                                              
"An  Act   relating  to  the   Alaska  Gasline   Inducement  Act;                                                               
establishing   the  Alaska   Gasline   Inducement  Act   matching                                                               
contribution  fund; providing  for an  Alaska Gasline  Inducement                                                               
Act coordinator; making conforming  amendments; and providing for                                                               
an effective date."                                                                                                             
                                                                                                                                
     - HEARD AND HELD                                                                                                           
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
BILL: HB 177                                                                                                                  
SHORT TITLE: NATURAL GAS PIPELINE PROJECT                                                                                       
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR                                                                                    
                                                                                                                                
03/05/07       (H)       READ THE FIRST TIME - REFERRALS                                                                        
03/05/07       (H)       O&G, RES, FIN                                                                                          
03/06/07       (H)       O&G AT 3:00 PM BARNES 124                                                                              
03/06/07       (H)       -- MEETING CANCELED --                                                                                 
03/08/07       (H)       O&G AT 3:00 PM BARNES 124                                                                              
03/08/07       (H)       -- MEETING CANCELED --                                                                                 
03/13/07       (H)       O&G AT 3:30 PM HOUSE FINANCE 519                                                                       
03/13/07       (H)       Heard & Held                                                                                           
03/13/07       (H)       MINUTE(O&G)                                                                                            
03/15/07       (H)       O&G AT 3:00 PM BARNES 124                                                                              
03/15/07       (H)       Heard & Held                                                                                           
03/15/07       (H)       MINUTE(O&G)                                                                                            
03/19/07       (H)       O&G AT 8:30 AM CAPITOL 106                                                                             
03/19/07       (H)       Heard & Held                                                                                           
03/19/07       (H)       MINUTE(O&G)                                                                                            
03/20/07       (H)       O&G AT 3:00 PM BARNES 124                                                                              
03/20/07       (H)       Heard & Held                                                                                           
03/20/07       (H)       MINUTE(O&G)                                                                                            
03/21/07       (H)       O&G AT 5:30 PM SENATE FINANCE 532                                                                      
03/21/07       (H)       Heard & Held                                                                                           
03/21/07       (H)       MINUTE(O&G)                                                                                            
03/22/07       (H)       O&G AT 3:00 PM BARNES 124                                                                              
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
JOHN KATZ, Deputy Associate General Counsel                                                                                     
Office of General Counsel (OGC)                                                                                                 
Office of Energy Products                                                                                                       
Federal Energy Regulatory Commission (FERC)                                                                                     
Washington, D. C.                                                                                                               
POSITION STATEMENT:  Answered questions  during the hearing on HB                                                               
177.                                                                                                                            
                                                                                                                                
ROBERT J. CUPINA, Deputy Director                                                                                               
for Policy                                                                                                                      
Office of Energy Products                                                                                                       
Federal Energy Regulatory Commission (FERC)                                                                                     
Washington, D. C.                                                                                                               
POSITION STATEMENT:  Answered questions  during the hearing on HB                                                               
177.                                                                                                                            
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
CHAIR VIC KOHRING  called the House Special Committee  on Oil and                                                             
Gas meeting  to order  at 3:08:28  PM.   Representatives Samuels,                                                             
Doogan, Kawasaki, Olson, and Kohring  were present at the call to                                                               
order.    Representatives Ramras  and  Dahlstrom  arrived as  the                                                               
meeting   was  in   progress.     Representatives  Kerttula   and                                                               
Guttenberg were also in attendance.                                                                                             
                                                                                                                                
HB 177-NATURAL GAS PIPELINE PROJECT                                                                                           
                                                                                                                                
3:08:59 PM                                                                                                                    
                                                                                                                                
CHAIR KOHRING announced that the  only order of business would be                                                               
HOUSE  BILL NO.  177,  "An  Act relating  to  the Alaska  Gasline                                                               
Inducement Act;  establishing the  Alaska Gasline  Inducement Act                                                               
matching  contribution  fund;  providing for  an  Alaska  Gasline                                                               
Inducement  Act coordinator;  making  conforming amendments;  and                                                               
providing for an effective date."                                                                                               
                                                                                                                                
3:11:21 PM                                                                                                                    
                                                                                                                                
JOHN KATZ,  Deputy Associate General  Counsel, Office  of General                                                               
Counsel  (OGC),   Office  of  Energy  Products,   Federal  Energy                                                               
Regulatory Commission (FERC), informed  the committee that he and                                                               
Deputy  Director Cupina  are FERC  employees  and their  opinions                                                               
given at this hearing  are their own.  Mr. Katz  said that he and                                                               
Deputy   Director  Cupina   read  HB   177  and   did  not   find                                                               
inconsistencies  with the  statutes  that FERC  enforces or  with                                                               
FERC regulations.                                                                                                               
                                                                                                                                
3:12:03 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE DOOGAN recalled  previous testimony that described                                                               
a  set of  circumstances wherein  a licensee  is named,  the open                                                               
season is  unsuccessful, yet  a FERC certificate  is issued.   He                                                               
asked for confirmation of this possibility.                                                                                     
                                                                                                                                
ROBERT J.  CUPINA, Deputy Director  for Policy, Office  of Energy                                                               
Products,  Federal  Energy  Regulatory Commission  (FERC),  noted                                                               
that   the   FERC  certificate   could   be   issued  under   the                                                               
circumstances  described  by  Representative Doogan.    The  FERC                                                               
certificate policy statement does  not require a particular level                                                               
of  contract commitment.   In  addition, the  Alaska Natural  Gas                                                               
Pipeline  Act  of  2004  (ANGPA), includes  a  finding  of  need.                                                               
However, given  the scope of  this project and the  commitment of                                                               
resources involved, he said that he  thought it is better to have                                                               
shipper interest following the open season.                                                                                     
                                                                                                                                
                                                                                                                                
3:14:13 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE DOOGAN asked if a  successful applicant would have                                                               
to demonstrate the ability to finance the project.                                                                              
                                                                                                                                
3:14:47 PM                                                                                                                    
                                                                                                                                
DEPUTY  DIRECTOR  CUPINA  responded  that a  finance  exhibit  is                                                               
included in  the FERC application,  and financing is part  of the                                                               
proposal.  Most projects are represented by contracts, he added.                                                                
                                                                                                                                
3:15:15 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE DOOGAN stated that  the licensee would be required                                                               
to  indicate the  availability  of some  financing,  but not  the                                                               
completion of a successful open season.                                                                                         
                                                                                                                                
3:15:32 PM                                                                                                                    
                                                                                                                                
DEPUTY  DIRECTOR CUPINA  said yes,  but that  is not  the typical                                                               
application for a project of this size.                                                                                         
                                                                                                                                
3:15:46 PM                                                                                                                    
                                                                                                                                
MR.  KATZ noted  that  an open  season  without commitments  from                                                               
shippers  may  result  in  raising  the  possibility  that  other                                                               
entities would file challenges to the application.                                                                              
                                                                                                                                
3:16:20 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SAMUELS  recalled that AGIA allows  the successful                                                               
applicant five years after the open  season to get financing.  He                                                               
asked whether a FERC certificate can expire.                                                                                    
                                                                                                                                
3:17:13 PM                                                                                                                    
                                                                                                                                
DEPUTY DIRECTOR  CUPINA relayed that a  FERC certificate requires                                                               
the completion  of construction by a  certain date.  It  could be                                                               
justified,  he  said,  for  a  large  project  to  have  a  later                                                               
completion date as part of the agreement.                                                                                       
                                                                                                                                
REPRESENTATIVE SAMUELS  asked whether the FERC  certificate could                                                               
be  sold or  transferred  after  it is  issued,  and whether  the                                                               
certificate could be owned by the state.                                                                                        
                                                                                                                                
3:18:49 PM                                                                                                                    
                                                                                                                                
DEPUTY DIRECTOR  CUPINA answered that the  certificate would have                                                               
to  be vacated,  and new  applications from  potential successors                                                               
would need to be submitted to the commission.                                                                                   
                                                                                                                                
3:19:05 PM                                                                                                                    
                                                                                                                                
MR. KATZ  noted that FERC  and Congress do  not want to  create a                                                               
secondary  market for  certificates.   It  is  possible that  the                                                               
entity holding the certificate can be  bought or sold.  He opined                                                               
that, although  a state has  not held a FERC  certificate before,                                                               
the commission would consider state  ownership for the Alaska gas                                                               
pipeline project.                                                                                                               
                                                                                                                                
3:20:06 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SAMUELS referred  again to the transfer  of a FERC                                                               
certificate.  He  asked if a certificate is vacated  and sold for                                                               
a profit  by a  contract between  commercial entities,  will FERC                                                               
investigate or regulate that transaction.                                                                                       
                                                                                                                                
3:20:56 PM                                                                                                                    
                                                                                                                                
DEPUTY  DIRECTOR CUPINA  opined that  ANGPA does  not contemplate                                                               
that the  certificate will be  sold; therefore, a sale  would not                                                               
be permitted.                                                                                                                   
                                                                                                                                
3:21:21 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SAMUELS asked:                                                                                                   
                                                                                                                                
     If I  get to a  certificate owned by company  "A" after                                                                    
     the  certificate is,  is owned,  and  they now  partner                                                                    
     with  several people  but they  do not  buy, you  don't                                                                    
     have a  BP Conoco  consortium buying  Trans-Canada, but                                                                    
     they  want  to  join   the  consortium  that  owns  the                                                                    
     certificate. ... Without a  commercial deal between the                                                                    
     entities, after the certificate  has been issued, where                                                                    
     does that go, lead us to?                                                                                                  
                                                                                                                                
3:21:49 PM                                                                                                                    
                                                                                                                                
MR. KATZ responded  that most settlements are  reached before the                                                               
certificate is issued,  as in the example of  the dispute between                                                               
Kern River  Gas Transmission Company and  Mohave Pipeline Company                                                               
in California.                                                                                                                  
                                                                                                                                
3:22:29 PM                                                                                                                    
                                                                                                                                
DEPUTY DIRECTOR  CUPINA added that  the commission  will consider                                                               
acquisitions  of facilities  versus  acquisitions of  securities.                                                               
The fact  of one company  acquiring another  company's facilities                                                               
would mean that  the certificate would be  under the jurisdiction                                                               
of FERC.   However,  the acquisition  of another  company's stock                                                               
would not be under the jurisdiction of FERC.                                                                                    
                                                                                                                                
3:23:29 PM                                                                                                                    
                                                                                                                                
MR. KATZ  opined that if the  transfer of the certificate  was to                                                               
the  benefit  of  all  parties, the  commission  might  view  the                                                               
acquisition favorably.                                                                                                          
                                                                                                                                
REPRESENTATIVE DOOGAN questioned whether  FERC had an established                                                               
procedure to review  a company that purchases  a large percentage                                                               
of shares of stock from a FERC certificate holder.                                                                              
                                                                                                                                
3:24:53 PM                                                                                                                    
                                                                                                                                
DEPUTY DIRECTOR CUPINA acknowledged that  the creation of a joint                                                               
venture or a  partnership would need to be submitted  to FERC for                                                               
approval.   However, a  security acquisition or  merger is  not a                                                               
FERC matter.                                                                                                                    
                                                                                                                                
3:25:29 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE DOOGAN remarked:                                                                                                 
                                                                                                                                
     The  question I  am  trying  to get  to  is  this:   If                                                                    
     there's  a   FERC  procedure   for  dealing   with  the                                                                    
     situation  in  which  somebody   was  buying  into  the                                                                    
     company as  opposed to just  buying stock. ...  I would                                                                    
     imagine that  there would be  situations in  which FERC                                                                    
     would rule that that isn't allowed.                                                                                        
                                                                                                                                
3:26:06 PM                                                                                                                    
                                                                                                                                
DEPUTY DIRECTOR CUPINA recalled that  FERC action was required to                                                               
approve   the  formation   of  limited   partnerships  when   the                                                               
certificate  is passed  to  the  limited partners.    The new  or                                                               
combined entities  would need to  approach the commission  with a                                                               
request to amend  or revise the authorization to  reflect the new                                                               
arrangement.                                                                                                                    
                                                                                                                                
3:26:47 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  DOOGAN  observed  that  the  amendment  procedure                                                               
would not cause the original licensee to vacate the license.                                                                    
                                                                                                                                
3:27:31 PM                                                                                                                    
                                                                                                                                
MR.  KATZ   advised  the   committee  that   recommendations  for                                                               
hypothetical situations are difficult.                                                                                          
                                                                                                                                
DEPUTY  DIRECTOR  CUPINA referred  to  a  phrase in  ANGPA  which                                                               
declares that the certificate holder  must be able and willing to                                                               
fulfill the requirements of the certificate.                                                                                    
                                                                                                                                
3:27:42 PM                                                                                                                    
                                                                                                                                
CHAIR  KOHRING asked  about  the influence  FERC  holds over  the                                                               
regulation of Canadian companies.                                                                                               
                                                                                                                                
3:28:26 PM                                                                                                                    
                                                                                                                                
DEPUTY  DIRECTOR CUPINA  responded that  a Canadian  company that                                                               
holds  a  FERC  certificate  is  subject  to  FERC  jurisdiction.                                                               
However, if a  Canadian company is dealing  with Canadian assets,                                                               
FERC would have no jurisdiction.                                                                                                
                                                                                                                                
3:29:01 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GUTTENBERG  noted that a pipeline  passing through                                                               
Canada  will  be  subject  to   Canadian  regulation.    How  are                                                               
transitions for  expansion and capacity handled  between Canadian                                                               
and U. S. agencies.                                                                                                             
                                                                                                                                
3:29:41 PM                                                                                                                    
                                                                                                                                
DEPUTY DIRECTOR  CUPINA affirmed  that a pipeline  originating in                                                               
Alaska and traveling  through Canada will be  a relatively unique                                                               
situation.    However,  similar   projects  have  been  completed                                                               
successfully.  The FERC holds  a memorandum of understanding with                                                               
the [Canada]  National Energy Board (NEB)  regarding cross border                                                               
projects and  a complete exchange  of information  is guaranteed.                                                               
Although  the  FERC has  no  authority  over  the NEB,  there  is                                                               
motivation to work closely together, he said.                                                                                   
                                                                                                                                
3:30:23 PM                                                                                                                    
                                                                                                                                
MR. KATZ added  that the FERC, the NEB, and  the [Mexico] Comisin                                                               
Reguladora de  Energa (CRE) meet  tri-annually to  address common                                                               
issues.  He noted that previous pipelines have crossed borders.                                                                 
                                                                                                                                
3:31:26 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE DOOGAN  questioned the authority of  FERC over the                                                               
section of the pipeline located in Alaska.                                                                                      
                                                                                                                                
3:32:25 PM                                                                                                                    
                                                                                                                                
DEPUTY DIRECTOR  CUPINA stated that  FERC regulation  is required                                                               
because the gas in the pipeline is being transported interstate.                                                                
                                                                                                                                
3:32:34 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE DOOGAN asked:                                                                                                    
                                                                                                                                
     If, as has  been suggested, there would also  be on the                                                                    
     Alaskan  section of  the  pipeline,  authority for  the                                                                    
     Regulatory Commission  of Alaska  (RCA) to  be involved                                                                    
     in these matters, ... do  you have any kind of protocol                                                                    
     with the RCA on something like this?                                                                                       
                                                                                                                                
3:32:57 PM                                                                                                                    
                                                                                                                                
DEPUTY DIRECTOR  CUPINA replied that  FERC also has  a memorandum                                                               
of  understanding  with  the  RCA, so  a  relationship  has  been                                                               
established.   He added  that FERC  would have  jurisdiction over                                                               
the interstate  line and the  RCA may have jurisdiction  over the                                                               
[off-take] delivery lines.                                                                                                      
                                                                                                                                
3:33:47 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  DOOGAN observed  that a  pipeline could  be built                                                               
entirely  in  Alaska with  the  gas  terminating at  a  liquefied                                                               
natural  gas (LNG)  plant,  and asked  whether  FERC would  still                                                               
retain authority.                                                                                                               
                                                                                                                                
3:34:24 PM                                                                                                                    
                                                                                                                                
DEPUTY DIRECTOR  CUPINA indicted that  the gas will  primarily be                                                               
destined for the Lower 48 and not for foreign export.                                                                           
                                                                                                                                
3:34:49 PM                                                                                                                    
                                                                                                                                
MR. KATZ recalled an informal  opinion supporting Deputy Director                                                               
Cupina's statement.                                                                                                             
                                                                                                                                
3:35:08 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE DOOGAN remarked:                                                                                                 
                                                                                                                                
       So, if the gas were going to be liquefied and then                                                                       
      regassified and sold in the United States FERC would                                                                      
     have jurisdiction,  if it were strictly  for export you                                                                    
     wouldn't....                                                                                                               
                                                                                                                                
3:35:26 PM                                                                                                                    
                                                                                                                                
DEPUTY DIRECTOR CUPINA remarked:                                                                                                
                                                                                                                                
     Well, if  it, in the  first scenario it's going  to the                                                                    
     Lower  48,  therefore,  it's  in  interstate  commerce,                                                                    
     okay,  it's  FERC  jurisdictional. ...  FERC  also  has                                                                    
     jurisdiction  over facilities  involved in  export. ...                                                                    
     If it were an export facility,  like it was back in the                                                                    
     '80s  and early  '90s for  Yukon Pacific,  there was  a                                                                    
     determination  at  the time,  that  the  line from  the                                                                    
     North  Slope   down  to  the  terminal   was  not  FERC                                                                    
     jurisdictional.  But  the   terminal,  of  course,  was                                                                    
     jurisdictional.                                                                                                            
                                                                                                                                
3:36:27 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE DOOGAN surmised that FERC would have jurisdiction                                                                
over some portion of the project.                                                                                               
                                                                                                                                
3:36:38 PM                                                                                                                    
                                                                                                                                
DEPUTY DIRECTOR  CUPINA pointed out  that the U.S.  Department of                                                               
the  Interior  conducted an  environmental  impact  study on  the                                                               
Yukon  Pacific  pipeline  route   because  of  the  right-of-way.                                                               
However, he confirmed  that the project defined by  AGIA would be                                                               
FERC jurisdictional.                                                                                                            
                                                                                                                                
3:37:18 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SAMUELS remarked:                                                                                                
                                                                                                                                
     In  the  legislation   we've  got  several  rate-making                                                                    
     questions, there's  a prohibition on  negotiated rates,                                                                    
     there  is the  rolled-in  tariffs which  can't go  more                                                                    
     than 15  percent over the original  recourse rates. ...                                                                    
     [With]  a  presumption  of rolled-in  tariffs  and  the                                                                    
     pipeline entity, the mid-stream  entity has to approach                                                                    
     you with  this rate-making  methodology. ...  If Exxon,                                                                    
     Conoco, and BP,  if there is going to  be a rate-making                                                                    
     case, do  they all approach  you and say "no,  we think                                                                    
     this particular  one should be incremental"  ... What's                                                                    
     your process when there's a  dispute?                                                                                      
                                                                                                                                
3:39:01 PM                                                                                                                    
                                                                                                                                
DEPUTY DIRECTOR CUPINA  explained that the process  begins in the                                                               
certificate stage.  The initial  rates are set based on estimated                                                               
and  projected costs,  the debt  to  equity ratio,  and rates  of                                                               
return.   This initial rate, he  said, goes into the  tariff when                                                               
the pipeline begins operation.   If the pipeline company wants to                                                               
increase its rates  or initiate a pipeline  expansion there would                                                               
be a  FERC rate  change filing.   This filing  is often  before a                                                               
hearing judge, following the guidelines in the AGIA legislation.                                                                
                                                                                                                                
3:41:08 PM                                                                                                                    
                                                                                                                                
MR. KATZ added  that Section 5 of ANGPA directs  that any parties                                                               
or the  commission can decide that  the rates are not  proper and                                                               
recommend that the rates be reviewed.                                                                                           
                                                                                                                                
3:41:24 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SAMUELS  requested confirmation  that it is  not a                                                               
problem for  FERC to dictate  terms to the mid-stream  agency for                                                               
rates far in the future.                                                                                                        
                                                                                                                                
3:41:57 PM                                                                                                                    
                                                                                                                                
DEPUTY  DIRECTOR CUPINA  clarified that  FERC typically  does not                                                               
have a  problem with companies entering  into contracts; however,                                                               
FERC is  not bound by  those contracts.   The commission  can not                                                               
preclude a party from filing a  rate change claim with them, even                                                               
though it may have a contract  with the state agreeing to certain                                                               
rates.                                                                                                                          
                                                                                                                                
3:43:22 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SAMUELS then  asked, "How  do you  end up  with a                                                               
true base rate on the first day gas is shipped?"                                                                                
                                                                                                                                
3:43:54 PM                                                                                                                    
                                                                                                                                
DEPUTY   DIRECTOR  CUPINA   discussed   the   possibility  of   a                                                               
certificate holder  requesting to  amend the initial  rate before                                                               
pipeline  service  began.    This   is  another  opportunity  for                                                               
shippers  to  protest the  initial  rates,  he  said.   The  FERC                                                               
encourages  the parties  to settle  risk-sharing issues  prior to                                                               
certification.                                                                                                                  
                                                                                                                                
3:45:25 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SAMUELS asked, "How long  would it take to set the                                                               
base rate, once the gas is shipped, just on a typical pipeline?"                                                                
                                                                                                                                
3:46:26 PM                                                                                                                    
                                                                                                                                
DEPUTY DIRECTOR CUPINA  answered that the initial rate  is set in                                                               
the certificate  proceedings before the opening  of the pipeline.                                                               
When a change  is requested before service begins there  can be a                                                               
quick  response.   After  service begins,  he  advised, the  rate                                                               
change filing is a one year process.                                                                                            
                                                                                                                                
3:47:12 PM                                                                                                                    
                                                                                                                                
MR. KATZ agreed  that a Section 4 rate change  will take time, if                                                               
contested.                                                                                                                      
                                                                                                                                
3:47:30 PM                                                                                                                    
                                                                                                                                
CHAIR KOHRING referred  to the issue of abandonment.   What would                                                               
FERC's  response be  to  a licensee  that  abandons the  project,                                                               
before or after certification.                                                                                                  
                                                                                                                                
3:48:23 PM                                                                                                                    
                                                                                                                                
DEPUTY   DIRECTOR  CUPINA   informed  the   committee  that   the                                                               
commission would  accept notice of withdrawal  of the application                                                               
for certification.   Furthermore, after a  certificate is issued,                                                               
losses for not completing the  project are borne by the licensee.                                                               
Therefore, FERC would have no  basis to mandate completion of the                                                               
project.                                                                                                                        
                                                                                                                                
3:49:27 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SAMUELS  said,  "Does   the  $500  million  grant                                                               
automatically lower tariff?"                                                                                                    
                                                                                                                                
3:49:55 PM                                                                                                                    
                                                                                                                                
MR. KATZ said he was unsure.                                                                                                    
                                                                                                                                
3:50:19 PM                                                                                                                    
                                                                                                                                
DEPUTY DIRECTOR CUPINA stated that  initial rates are cost-based,                                                               
and  reflect the  reasonable costs;  if the  costs are  lower the                                                               
rates will be lower.                                                                                                            
                                                                                                                                
3:51:10 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   GUTTENBERG   questioned   how   pre-subscription                                                               
agreements affect the open season.                                                                                              
                                                                                                                                
3:51:52 PM                                                                                                                    
                                                                                                                                
DEPUTY DIRECTOR  CUPINA indicated  that, ideally, an  open season                                                               
begins  without  promises of  capacity.    However, to  launch  a                                                               
project  of  this size,  it  may  be  beneficial to  have  anchor                                                               
shippers.  Pre-subscriptions  will have to be a  matter of public                                                               
record, and  shippers with  interest at the  open season  must be                                                               
offered identical terms.                                                                                                        
                                                                                                                                
3:53:03 PM                                                                                                                    
                                                                                                                                
MR. KATZ  agreed that provisions  must ensure that  companies are                                                               
not eliminated or disadvantaged by pre-subscriptions.                                                                           
                                                                                                                                
3:53:25 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GUTTENBERG  asked, "Does this kind  of arrangement                                                               
exist anywhere else?"                                                                                                           
                                                                                                                                
3:53:37 PM                                                                                                                    
                                                                                                                                
MR. KATZ answered yes.                                                                                                          
                                                                                                                                
3:53:44 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  DOOGAN   asked  if  FERC  published   a  list  of                                                               
evaluation criteria for pipeline proposals.                                                                                     
                                                                                                                                
3:54:20 PM                                                                                                                    
                                                                                                                                
DEPUTY  DIRECTOR  CUPINA  suggested  that  the  committee  review                                                               
FERC's  1999 policy  statement that  contains  the components  of                                                               
costs,  and public  interest,  that FERC  seeks  to balance  when                                                               
considering an application.  However,  he added, every project is                                                               
case-specific.                                                                                                                  
                                                                                                                                
3:55:12 PM                                                                                                                    
                                                                                                                                
MR. KATZ noted that the commission's  policy is to let the market                                                               
decide whether  a pipeline should  be constructed,  provided that                                                               
the builder takes an appropriate risk.                                                                                          
                                                                                                                                
3:55:58 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE DOOGAN requested  that a copy of  FERC'S policy be                                                               
provided to the committee.                                                                                                      
                                                                                                                                
3:56:26 PM                                                                                                                    
                                                                                                                                
DEPUTY DIRECTOR CUPINA offered to provide a copy.                                                                               
                                                                                                                                
3:56:47 PM                                                                                                                    
                                                                                                                                
CHAIR KOHRING announced  that the task of  developing a committee                                                               
substitute  will  be  completed  by a  committee  of  the  whole,                                                               
instead of the previously identified subcommittee.                                                                              
                                                                                                                                
3:58:46 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SAMUELS  said, "If  we had  a licensee  today, how                                                               
fast  could  you have  an  open  season  done, working  with  our                                                               
licensee?"                                                                                                                      
                                                                                                                                
3:59:06 PM                                                                                                                    
                                                                                                                                
DEPUTY DIRECTOR CUPINA  expressed his belief that  180 days would                                                               
be sufficient.   The response to the licensee's  open season plan                                                               
would be  within 60 days.   He stressed  that the open  season is                                                               
not required to be completed  prior to field work, prefiling, and                                                               
application development.   He advised  that much of the  work can                                                               
happen simultaneously,  as long as  the open season  is completed                                                               
prior  to  the  completion  of   the  application  for  the  FERC                                                               
certificate.                                                                                                                    
                                                                                                                                
4:01:46 PM                                                                                                                    
                                                                                                                                
MR. KATZ added that FERC can  expedite the process if the parties                                                               
are amicable.                                                                                                                   
                                                                                                                                
4:02:36 PM                                                                                                                    
                                                                                                                                
DEPUTY DIRECTOR  CUPINA agreed that  the application  process can                                                               
be streamlined.                                                                                                                 
                                                                                                                                
4:02:59 PM                                                                                                                    
                                                                                                                                
CHAIR  KOHRING asked  for confirmation  that AGIA  does meet  the                                                               
Federal Energy Regulatory Commission requirements.                                                                              
                                                                                                                                
4:04:07 PM                                                                                                                    
                                                                                                                                
MR. KATZ confirmed that there is no conflict between AGIA and                                                                   
FERC regulations.                                                                                                               
                                                                                                                                
CHAIR KOHRING offered to transmit any changes in the bill to                                                                    
FERC for review.                                                                                                                
                                                                                                                                
[HB 177 was held in committee]                                                                                                  
                                                                                                                                
4:07:51 PM                                                                                                                    
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being no further business before the committee, the House                                                                 
Special Committee on Oil and Gas meeting was adjourned at 4:07                                                                  
p.m.                                                                                                                            

Document Name Date/Time Subjects