Legislature(2007 - 2008)BARNES 124

04/03/2007 03:00 PM OIL & GAS


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03:07:02 PM Start
03:07:29 PM HB177
04:21:35 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+= HB 177 NATURAL GAS PIPELINE PROJECT TELECONFERENCED
Moved CSHB 177(O&G) Out of Committee
                    ALASKA STATE LEGISLATURE                                                                                  
             HOUSE SPECIAL COMMITTEE ON OIL AND GAS                                                                           
                         April 3, 2007                                                                                          
                           3:07 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                                                                                                             
                                                                                                                                
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."                                                                                                             
                                                                                                                                
     - MOVED CSHB 177(O&G) OUT OF COMMITTEE                                                                                     
                                                                                                                                
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                                                                              
03/22/07       (H)       Heard & Held                                                                                           
03/22/07       (H)       MINUTE(O&G)                                                                                            
03/23/07       (H)       O&G AT 8:30 AM CAPITOL 106                                                                             
03/23/07       (H)       Heard & Held                                                                                           
03/23/07       (H)       MINUTE(O&G)                                                                                            
03/24/07       (H)       O&G AT 1:00 PM SENATE FINANCE 532                                                                      
03/24/07       (H)       -- Public Testimony --                                                                                 
03/26/07       (H)       O&G AT 8:30 AM CAPITOL 106                                                                             
03/26/07       (H)       Heard & Held                                                                                           
03/26/07       (H)       MINUTE(O&G)                                                                                            
03/27/07       (H)       O&G AT 3:00 PM BARNES 124                                                                              
03/28/07       (H)       O&G AT 7:30 AM CAPITOL 106                                                                             
03/28/07       (H)       Heard & Held                                                                                           
03/28/07       (H)       MINUTE(O&G)                                                                                            
03/28/07       (H)       O&G AT 8:30 AM CAPITOL 106                                                                             
03/28/07       (H)       Heard & Held                                                                                           
03/28/07       (H)       MINUTE(O&G)                                                                                            
03/29/07       (H)       O&G AT 3:00 PM BARNES 124                                                                              
03/29/07       (H)       Heard & Held                                                                                           
03/29/07       (H)       MINUTE(O&G)                                                                                            
03/30/07       (H)       O&G AT 8:30 AM CAPITOL 106                                                                             
03/30/07       (H)       Heard & Held                                                                                           
03/30/07       (H)       MINUTE(O&G)                                                                                            
03/31/07       (H)       O&G AT 1:00 PM BARNES 124                                                                              
03/31/07       (H)       -- MEETING CANCELED --                                                                                 
04/02/07       (H)       O&G AT 8:30 AM CAPITOL 106                                                                             
04/02/07       (H)       Heard & Held                                                                                           
04/02/07       (H)       MINUTE(O&G)                                                                                            
04/03/07       (H)       O&G AT 3:00 PM BARNES 124                                                                              
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
DON BULLOCK, Attorney                                                                                                           
Legislative Legal Counsel                                                                                                       
Legislative Legal and Research Services                                                                                         
Legislative Affairs Agency                                                                                                      
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Answered questions  during the hearing on HB                                                               
177.                                                                                                                            
                                                                                                                                
PATRICK GALVIN, Commissioner                                                                                                    
Department of Revenue (DOR)                                                                                                     
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Amswered 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 3:07:02 PM  .   Representatives Doogan,                                                             
Kawasaki,  Dahlstrom, Samuels,  and Kohring  were present  at the                                                               
call to order.   Representatives Ramras and Olson  arrived as the                                                               
meeting was in progress.                                                                                                        
                                                                                                                                
HB 177-NATURAL GAS PIPELINE PROJECT                                                                                           
                                                                                                                                
3:07:29 PM                                                                                                                    
                                                                                                                                
CHAIR KOHRING  announced that the  first 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."                                                                                               
                                                                                                                                
REPRESENTATIVE DOOGAN  informed the  committee that  a correction                                                               
must be  made to address  a conflict  between Amendments 2  and 6                                                               
that  were  adopted by  the  committee  on  April  2, 2007.    He                                                               
explained that  Amendment 2 changed  the wording for  a situation                                                               
in which  the state would  compensate the licensee, in  the event                                                               
of a  failed project,  by an amount  limited to  qualified costs.                                                               
Amendment  6,  however, eliminated  one  of  the scenarios  under                                                               
which the  state would  not pay.   Therefore, Amendment  6 amends                                                               
the bill as  it had been previously amended by  Amendment 2.  The                                                               
net  effect,  he  said,  and  the  intent  of  the  committee  by                                                               
approving Amendment  6, is  that the  state gets  the data  at no                                                               
cost.                                                                                                                           
                                                                                                                                
3:09:16 PM                                                                                                                    
                                                                                                                                
CHAIR KOHRING  asked for  the drafter to  porivde the  wording of                                                               
the correction.                                                                                                                 
                                                                                                                                
3:09:27 PM                                                                                                                    
                                                                                                                                
DON  BULLOCK, Attorney,  Legislative  Legal Counsel,  Legislative                                                               
Legal   and  Research   Services,  Legislative   Affairs  Agency,                                                               
informed the committee  that Amendment 2 allowed  for the payment                                                               
of qualified  costs that the  licensee has actually  incurred and                                                               
expended; Amendment 6 removed that  part of the section, although                                                               
with different wording.  He  reiterated that the sponsor's intent                                                               
is that all transfer of data will be at no cost to the state.                                                                   
                                                                                                                                
3:09:52 PM                                                                                                                    
                                                                                                                                
CHAIR  KOHRING  announced  that   the  record  will  reflect  the                                                               
correction.                                                                                                                     
                                                                                                                                
REPRESENTATIVE  DOOGAN moved  Amendment 9,  which read  [original                                                               
punctuation provided]:                                                                                                          
                                                                                                                                
     Page 7, line 30                                                                                                          
          Delete "and the coordinator"                                                                                        
                                                                                                                                
     Page 11, line 21                                                                                                         
          Delete "and the coordinator"                                                                                        
                                                                                                                                
REPRESENTATIVE SAMUELS objected.                                                                                                
                                                                                                                                
REPRESENTATIVE DOOGAN  noted that the  first line of  Amendment 9                                                               
should read  page 8,  line 30, instead  of page 7,  line 30.   He                                                               
then explained that Amendment 9  removes the coordinator from the                                                               
application  review  and   the  application  decision  processes.                                                               
Representative  Doogan said  that  he is  offering the  amendment                                                               
because the  bill is  unclear about the  appointment term  of the                                                               
coordinator.  In addition, the  coordinator's position is related                                                               
to working with state agencies and not the application process.                                                                 
                                                                                                                                
3:10:59 PM                                                                                                                    
                                                                                                                                
CHAIR KOHRING said that he supports the intent of Amendment 9.                                                                  
                                                                                                                                
3:11:09 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  DAHLSTROM confirmed  that the  administration has                                                               
approved of Amendment 9.                                                                                                        
                                                                                                                                
3:11:28 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SAMUELS removed his objection to Amendment 9.                                                                    
                                                                                                                                
CHAIR KOHRING announced that there being no further objection,                                                                  
Amendment 9 was adopted.                                                                                                        
                                                                                                                                
3:11:34 PM                                                                                                                    
                                                                                                                                
CHAIR KOHRING called the committee's attention to a new                                                                         
amendment referencing AS 43.90.180, and identified as Amendment                                                                 
20.                                                                                                                             
                                                                                                                                
3:12:02 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE DOOGAN moved Amendment 20, which read [original                                                                  
punctuation provided]:                                                                                                          
                                                                                                                                
          Sec. 43.90.180. Notice, review and comment. (a)                                                                     
     The commissioners  shall publish  notice and  provide a                                                                    
     60-day  period for  public review  and  comment on  all                                                                    
     applications determined complete under AS 43.90.140.                                                                       
                                                                                                                                
          (b) Applications received under this chapter are                                                                      
     not  public  records  and are  not  subject  to  public                                                                    
     disclosure  under  AS  40.25  until  the  commissioners                                                                    
     publish   notice   under   this  section.      However,                                                                    
     information that  the commissioners have  determined is                                                                    
     confidential under AS 43.90.150  may not be made public                                                                    
     even after  the notice is  published under (a)  of this                                                                    
     section,  except  as  provided  in AS  43.90.150.    If                                                                    
     information   is    held   confidential    under   this                                                                    
     subsection, the  applicant shall  provide a  summary of                                                                    
     the   withheld   information    satisfactory   to   the                                                                    
     commissioners  and the  commissioners  shall make  such                                                                    
     summary available to the public.                                                                                           
                                                                                                                                
          (c)  All information provided by applicants to                                                                      
     the   commissioners  under   this  chapter,   including                                                                  
     information  determined  to  be confidential  under  AS                                                                  
     43.90.150, will  be disclosed  by the  commissioners to                                                                  
     the  legislative auditor,  the director  of legislative                                                                  
     finance   and  their   agents   and  contractors,   and                                                                  
     legislators, provided the  person requesting disclosure                                                                  
     signs   an    appropriate   confidentiality   agreement                                                                  
     provided by the commissioners.                                                                                           
                                                                                                                                
REPRESENTATIVE SAMUELS objected.                                                                                                
                                                                                                                                
REPRESENTATIVE DOOGAN  stated that the citation  for Amendment 20                                                               
should actually be AS 43.91.60.                                                                                                 
                                                                                                                                
The committee took an at-ease from 3:12 to 3:13.                                                                                
                                                                                                                                
REPRESENTATIVE DOOGAN  noted his concern  about HB 177,  page 10,                                                               
following line 9,  regarding the legislative review  of the award                                                               
of the  license.  He  said that the administration  suggested the                                                               
language  of Amendment  20  and that  it will  allow  all of  the                                                               
information collected, after  the granting of the  license, to be                                                               
reported  to the  legislative officials  and  to legislators  who                                                               
have signed  a confidentiality agreement.   Representative Doogan                                                               
expressed his  belief that Amendment  20 is a  necessary addition                                                               
to HB 177.                                                                                                                      
                                                                                                                                
3:14:39 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SAMUELS  asked whether the amendment  called for a                                                               
deadline for submitting the information.                                                                                        
                                                                                                                                
3:15:03 PM                                                                                                                    
                                                                                                                                
PATRICK GALVIN,  Commissioner, Department of Revenue  (DOR), said                                                               
that Amendment 20 is placed  with the confidential notice section                                                               
of  the   bill.    The   administration's  intent  is   that  the                                                               
confidential information  will be  available at the  beginning of                                                               
the public  review and  not at the  beginning of  the legislative                                                               
review.                                                                                                                         
                                                                                                                                
3:15:54 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SAMUELS suggested  that  Amendment  20 should  be                                                               
treated as  a conceptual  amendment and  that the  state's intent                                                               
should be clarified.  He  then removed his objection to Amendment                                                               
20.                                                                                                                             
                                                                                                                                
3:16:11 PM                                                                                                                    
                                                                                                                                
CHAIR  KOHRING  announced  that   seeing  no  further  objection,                                                               
[Conceptual] Amendment 20 was adopted.                                                                                          
                                                                                                                                
REPRESENTATIVE RAMRAS  moved Conceptual Amendment 21,  which read                                                               
[original punctuation provided]:                                                                                                
                                                                                                                                
     Page 3, Line 30:                                                                                                           
     (2) provide a detailed description of:                                                                                     
          a.  the applicant;                                                                                                
          b.  all affiliates of the applicant;                                                                              
          c.  all partners or joint venturers or other                                                                      
     similar  entities participating  with the  applicant in                                                                
     the project or upon whom  the applicant intends to rely                                                                
     for completion of the proposed project;                                                                                
          d.  the information provided under this                                                                           
     subsection shall include the  nature of any affiliation                                                                
     as  well as  the nature  and extent  of commitments  by                                                                
     partners and  joint venturers  to the  proposed project                                                                
     that  will  allow  the commissioners  to  evaluate  the                                                                
     applicant's  readiness  and   ability  to  perform  the                                                                
     activities specified in the application.                                                                               
                                                                                                                                
     Renumber accordingly                                                                                                       
                                                                                                                                
REPRESENTATIVE SAMUELS objected.                                                                                                
                                                                                                                                
REPRESENTATIVE  RAMRAS  informed  the committee  that  Conceptual                                                               
Amendment  21  refers to  the  applicant's  alignment with  other                                                               
parties.  Conceptual Amendment 21  will require disclosure of the                                                               
license  applicant   and  its   affiliates,  partners   in  joint                                                               
ventures,  similar entities,  equity stakes,  and percentages  of                                                               
interest.  Representative  Ramras said that this  will inform the                                                               
legislature which group the potential applicant represents.                                                                     
                                                                                                                                
3:18:04 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SAMUELS asked for further clarification.                                                                         
                                                                                                                                
3:18:24 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  RAMRAS   explained  that  the   disclosure  would                                                               
include the   names, addresses, and percentages  of interest held                                                               
by  the members  of the  prevailing entity  or limited  liability                                                               
company (LLC).                                                                                                                  
                                                                                                                                
REPRESENTATIVE DAHLSTROM asked whether  the disclosure would also                                                               
include subsidiaries.                                                                                                           
                                                                                                                                
REPRESENTATIVE  RAMRAS said,  "Alignment is  what I'm  interested                                                               
in.  Who are we dealing with?"                                                                                                  
                                                                                                                                
3:19:03 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SAMUELS removed his objection.                                                                                   
                                                                                                                                
CHAIR KOHRING announced that there being no further objection,                                                                  
Conceptual Amendment 21 was adopted.                                                                                            
                                                                                                                                
3:19:15 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE RAMRAS moved Amendment 22, 25-GH1060\E.10,                                                                       
Bullock, 4/3/07, which read:                                                                                                    
                                                                                                                                
      Page 1, line 4, following "coordinator;":                                                                               
          Insert "establishing the gas utility revolving                                                                      
     loan fund;"                                                                                                              
                                                                                                                                
     Page 27, following line 26:                                                                                                
     Insert a new bill section to read:                                                                                         
        "*  Sec. 5.  AS 42.45  is amended  by  adding a  new                                                                
     section to read:                                                                                                           
          Sec. 42.45.025. Gas utility revolving loan fund.                                                                    
     (a) The gas utility  revolving loan fund is established                                                                    
     in the authority. The fund consists of                                                                                     
               (1)  appropriations made to the fund; and                                                                        
               (2)  repayments of principal and interest on                                                                     
     loans made under this section.                                                                                             
          (b)  The authority may make loans from the gas                                                                        
     utility   revolving   loan   fund  to   gas   utilities                                                                    
     certificated under  AS 42.05. A loan from  the fund may                                                                    
     be  made  only  for  the  purpose  of  constructing  or                                                                    
     extending new  gas service  into an  area of  the state                                                                    
     that a  gas utility  may serve  under a  certificate of                                                                    
     public   convenience   and   necessity   issued   under                                                                    
     AS 42.05. A  loan may be  made from  the fund to  a gas                                                                    
     utility if  the utility invests the  money necessary to                                                                    
     provide  service for  each  consumer  for whom  service                                                                    
     would be  provided by the construction  or extension of                                                                    
     gas service.                                                                                                               
          (c)  A loan from the gas utility revolving loan                                                                       
     fund  shall bear  an  annual rate  of  interest of  two                                                                    
     percent of the unpaid balance of the loan.                                                                                 
          (d)  When the authority makes a loan under this                                                                       
     section, the gas utility receiving the loan shall                                                                          
               (1)  in addition to the rates that it is                                                                         
     authorized to  charge, charge  the consumers  served by                                                                    
     the gas  service constructed or extended  with the loan                                                                    
     proceeds  an  amount  sufficient to  pay  the  interest                                                                    
     costs of the loan;                                                                                                         
               (2)  pay to the authority annually an amount                                                                     
     equal to                                                                                                                   
               (A)   interest of  two percent on  the unpaid                                                                    
     balance of the loan; and                                                                                                   
               (B)   payments on  the unpaid balance  of the                                                                    
     principal of the  loan for each new  consumer served by                                                                    
     the gas  service constructed or extended  with the loan                                                                    
     proceeds;  payments  on  the   unpaid  balance  of  the                                                                    
     principal of the loan shall be  made at a rate equal to                                                                    
     the difference  between the actual  cost of  making the                                                                    
     service  connection to  the consumers  and the  minimum                                                                    
     investment for  each consumer  required of  the utility                                                                    
     before a loan is made under (b) of this section.                                                                           
          (e)  The authority shall                                                                                              
               (1)   adopt  regulations  necessary to  carry                                                                    
     out the provisions of this section; and                                                                                    
               (2)   administer  the  gas utility  revolving                                                                    
     loan fund.                                                                                                                 
          (f)  Money in the gas utility revolving loan fund                                                                     
     may be  used by the legislature  to make appropriations                                                                    
     for costs of administering the fund.                                                                                       
          (g)  On June 30 of each fiscal year, the                                                                              
     unexpended  and unobligated  cash balance  of the  fund                                                                    
     that is attributable to loans  owned by the fund lapses                                                                    
     into the general fund.                                                                                                     
          (h)  In this section,                                                                                                 
               (1)     "consumer"  means   a  person   or  a                                                                    
     governmental  agency,  if  the person  or  governmental                                                                    
     agency requests and offers to  pay for gas service to a                                                                    
     facility or part of a facility;                                                                                            
               (2)  "facility" means  a structure capable of                                                                    
     receiving and using natural gas energy; and                                                                                
               (3)    "governmental agency"  includes,  with                                                                    
     respect  to  the  state  or  federal  government  or  a                                                                    
     municipal  government,  a  legislative body,  board  of                                                                    
     regents,   administrative   body,  board,   commission,                                                                    
     committee,  subcommittee,  authority, council,  agency,                                                                    
     public    corporation,   school    board,   department,                                                                    
     division,  bureau, or  other subordinate  unit, whether                                                                    
     advisory  or  otherwise,  of  the  state,  federal,  or                                                                    
     municipal government."                                                                                                     
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
     Page 28, line 7:                                                                                                           
          Delete all material and insert:                                                                                       
        "*  Sec.  8. The  uncodified  law  of the  State  of                                                                
     Alaska is amended by adding a new section to read:                                                                         
          CONDITIONAL EFFECT. AS 42.45.025, enacted by sec.                                                                     
     5  of this  Act, takes  effect  only if  a natural  gas                                                                    
     pipeline project  that provides for delivery  points in                                                                    
     the state receives a license under AS 43.90.                                                                               
        * Sec.  9. If sec.  5 of  this Act takes  effect, it                                                                  
     takes  effect  on  the  date  a  natural  gas  pipeline                                                                    
     project that provides for delivery  points in the state                                                                    
     receives a  license under AS 43.90, as  enacted by sec.                                                                    
     1 of this Act.                                                                                                             
        *  Sec. 10.  Except as  provided in  sec. 9  of this                                                                  
     Act,   this   Act   takes  effect   immediately   under                                                                    
     AS 01.10.070(c)."                                                                                                          
                                                                                                                                
REPRESENTATIVE SAMUELS objected.                                                                                                
                                                                                                                                
3:20:35 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  RAMRAS   informed  the  committee  that   HB  177                                                               
requires two open  seasons.  Firstly, an open  season occurs when                                                               
the producers  have an opportunity  to nominate gas into  the big                                                               
pipeline.   Secondly, when the  pipeline approaches  the off-take                                                               
points, the nearby communities must  nominate a certain amount of                                                               
gas into  their communities.   Representative Ramras  pointed out                                                               
that Southcentral is  the only region in the state  that is fully                                                               
gasified.   Fairbanks,  he  noted,  has a  modest  amount of  gas                                                               
utility infrastructure  for 1,000  residential customers  and the                                                               
other  three   off-take  points   have  yet  to   be  determined.                                                               
Representative  Ramras  said  that  he  is  concerned  about  the                                                               
considerable  cost  of  installing  the  pipes  necessary  for  a                                                               
community   to  nominate   gas  when   the  opportunity   arises.                                                               
Amendment 22 will  create a low interest,  revolving, gas utility                                                               
loan  fund that  will remain  unfunded until  needed.   This loan                                                               
fund will ensure  that the communities are gas  ready even though                                                               
the  gas  pipeline  installation  is  uneconomic  for  the  local                                                               
utility.  He  noted that Fairbanks is scheduled  for another rate                                                               
increase  and, after  waiting four  years  for gas,  the cost  of                                                               
amortization will pass to the existing  rate base or to the local                                                               
utility.  Representative  Ramras relayed that this  problem is of                                                               
primary  concern  to  the  commissioners  of  the  Department  of                                                               
Revenue  (DOR), the  Department of  Natural Resources  (DNR), and                                                               
the  Department of  Commerce,  Community  & Economic  Development                                                               
(DCCED).   He said that he  wanted to ensure that  AGIA addresses                                                               
the need to develop supply lines for the Alaska off-take points.                                                                
                                                                                                                                
3:25:01 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SAMUELS  asked who  the  "authority"  is that  is                                                               
referred to in the amendment.                                                                                                   
                                                                                                                                
3:25:17 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  RAMRAS  responded  that  the loan  fund  will  be                                                               
administered by the Alaska Energy Authority.                                                                                    
                                                                                                                                
3:25:38 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SAMUELS  stated that  he did not  want to  put one                                                               
community in a political battle  with another.  He requested more                                                               
information on the amendment from the administration.                                                                           
                                                                                                                                
3:26:45 PM                                                                                                                    
                                                                                                                                
DON  BULLOCK, Attorney,  Legislative  Legal Counsel,  Legislative                                                               
Legal and  Research Services, Legislative Affairs  Agency, as the                                                               
drafter, informed  the committee  that the language  of Amendment                                                               
22 is  based on  the Rural  Electrification Revolving  Loan Fund.                                                               
He added  that the fund will  be established on the  day that the                                                               
license is issued.                                                                                                              
                                                                                                                                
3:28:01 PM                                                                                                                    
                                                                                                                                
PATRICK  GALVIN,  Commissioner,   Department  of  Revenue  (DOR),                                                               
stated  that   the  administration   has  no  objection   to  the                                                               
amendment.   However, he  expressed his  concern that  adding too                                                               
much to  AGIA may detract from  the main purpose of  the bill and                                                               
he cautioned against  including potentially controversial, albeit                                                               
worthy, issues.                                                                                                                 
                                                                                                                                
3:29:43 PM                                                                                                                    
                                                                                                                                
CHAIR KOHRING indicated his support of the amendment.                                                                           
                                                                                                                                
3:29:57 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  KAWASAKI also  cautioned  against burdening  AGIA                                                               
with details.                                                                                                                   
                                                                                                                                
REPRESENTATIVE SAMUELS removed his objection to Amendment 22.                                                                   
                                                                                                                                
3:30:55 PM                                                                                                                    
                                                                                                                                
CHAIR KOHRING  announced that there  being no  further objection,                                                               
Amendment 22 was adopted.                                                                                                       
                                                                                                                                
REPRESENTATIVE RAMRAS  moved Conceptual Amendment 23,  which read                                                               
[original punctuation provided]:                                                                                                
                                                                                                                                
     P.8, L.16                                                                                                                  
          Insert a new paragraph to read:                                                                                       
               (16)commit to offer at reasonably commercial                                                                     
     terms to  an agency of  the state authorized  to invest                                                                    
     state money  a fractional nonvoting  ownership interest                                                                    
     in the  project no less  than 5% of the  Alaska portion                                                                    
     of the project.                                                                                                            
                                                                                                                                
     Renumber the following paragraph accordingly.                                                                              
                                                                                                                                
CHAIR KOHRING objected.                                                                                                         
                                                                                                                                
3:31:38 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  RAMRAS  told  the  committee  that  the  previous                                                               
administration ascertained  that the  citizens of Alaska  want to                                                               
own an interest  in the gas pipeline.   He noted that  one of the                                                               
largest  Native   Corporations  or  the  Alaska   Permanent  Fund                                                               
Corporation (APFC)  is an  entity large  enough to  withstand the                                                               
time and risk  associated with participation in the  project.  By                                                               
limiting  Alaska's  interest  to  the  portion  of  the  pipeline                                                               
located in Alaska, Representative  Ramras estimated an investment                                                               
cost of $500 million would  be sufficient to purchase a one-fifth                                                               
to one-eighth percentage  of the project.   This investment would                                                               
give the  APFC, for example,  an opportunity to participate  in a                                                               
project  with estimated  investment return  of 12  percent to  14                                                               
percent.                                                                                                                        
                                                                                                                                
3:34:42 PM                                                                                                                    
                                                                                                                                
COMMISSIONER  GALVIN  stated  that the  administration  does  not                                                               
oppose the purchase of a percentage  of the gas pipeline by APFC.                                                               
However, adding this obligation on  the lessee adds an additional                                                               
requirement that  the lessee  must hold  a certain  percentage of                                                               
the ownership  for an investor  without knowing the terms  of the                                                               
investment.   He advised the  committee that there is  nothing in                                                               
AGIA that prevents future investment  from an entity of the state                                                               
and  after  the project  comes  to  fruition the  possibility  of                                                               
investing can be explored.   Commissioner Galvin recommended that                                                               
the  committee  not include  this  mandatory  requirement in  the                                                               
bill.                                                                                                                           
                                                                                                                                
3:37:12 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SAMUELS  suggested placement  of this  language in                                                               
the  application  criteria  as  an unweighed  factor.    He  also                                                               
objected to Conceptual Amendment 23.                                                                                            
                                                                                                                                
3:38:11 PM                                                                                                                    
                                                                                                                                
COMMISSIONER GALVIN clarified that  the evaluation criteria meets                                                               
two factors:  net present  value to the  state and  likelihood of                                                               
success.   Ownership of the pipeline  by a state entity  does not                                                               
fit the parameters of the  evaluation criteria, he explained.  He                                                               
assured the committee  that the idea of the  amendment has merit,                                                               
and supported  the concept  that, if  submitted as  a part  of an                                                               
application, Alaskan  involvement in  the project will  be looked                                                               
upon favorably.                                                                                                                 
                                                                                                                                
3:40:16 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE DOOGAN remarked:                                                                                                 
                                                                                                                                
     I'm trying to understand how  this would work.  So, the                                                                    
     permanent fund would  say we want to buy  5 percent ...                                                                    
     They're  not  actually  buying  the  pipe,  right?  ...                                                                    
     They're actually becoming a part  of whatever entity is                                                                    
     going to build the pipe....                                                                                                
                                                                                                                                
COMMISSIONER GALVIN  answered that  it be an  ownership interest,                                                               
at the outset of the project, so they would own the pipe.                                                                       
                                                                                                                                
3:41:17 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE DOOGAN observed  that [APFC] would own  a piece of                                                               
the company that  owned the pipe, which means  that cost overruns                                                               
would be paid  by investors according to the  percentage of their                                                               
equity investment.                                                                                                              
                                                                                                                                
3:42:08 PM                                                                                                                    
                                                                                                                                
COMMISSIONER GALVIN  replied that the question  of ownership adds                                                               
complexity to the  AGIA legislation.  He pointed  out that owners                                                               
can participate  in many ways and  the present terms in  AGIA try                                                               
to avoid  slowing the  project down  and creating  potential side                                                               
conflicts over  providing reasonable commercial terms  to a state                                                               
entity.                                                                                                                         
                                                                                                                                
3:43:09 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  RAMRAS  acknowledged   that  the  legislation  is                                                               
already complex.   This  amendment creates  a fixed  variable and                                                               
AGIA's  requirement of  reasonable  commercial  terms allows  the                                                               
interpretation  of   the  value  of  various   investments.    He                                                               
remarked:                                                                                                                       
                                                                                                                                
     ...  the permanent  fund division,  which  is ...  what                                                                    
     entity I mean by Amendment  number 23, is the permanent                                                                    
     fund division, would give  all Alaskans the opportunity                                                                    
     to own a part of the  pipe, with a guaranteed return of                                                                    
     between  12  and  14   percent,  irregardless  of  cost                                                                    
     overruns  because we've  covered  in previous  meetings                                                                    
     the mechanism  for the debt  and the  equity financing.                                                                    
     ... Whoever enjoys  a portion of the  pipe ownership is                                                                    
     pretty darn  happy. ... The  bill, without this,  is no                                                                    
     more  or  less  complex.  ...  My  intent  is,  as  the                                                                    
     drafter, is  to allow for  670,000 Alaskans to  enjoy a                                                                    
     fractional ownership and a fixed  rate of return. ... I                                                                    
     believe that it will  be other variables that determine                                                                    
     whether or not AGIA succeeds.                                                                                              
                                                                                                                                
3:47:30 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE DOOGAN observed that the  70 percent to 30 percent                                                               
debt  to equity  ratio for  the construction  of the  pipeline is                                                               
spelled out in the bill.                                                                                                        
                                                                                                                                
3:48:21 PM                                                                                                                    
                                                                                                                                
COMMISSIONER GALVIN clarified  that the 70 percent  to 30 percent                                                               
ratio  is the  ratio  that the  tariff will  be  based upon,  not                                                               
necessarily the debt to equity ratio for financing the project.                                                                 
                                                                                                                                
REPRESENTATIVE  DOOGAN  said,  "So, this  would  not  necessarily                                                               
reduce  the return  to the  people who  would otherwise  own this                                                               
share of the corporation."                                                                                                      
                                                                                                                                
3:49:15 PM                                                                                                                    
                                                                                                                                
COMMISSIONER GALVIN remarked:                                                                                                   
                                                                                                                                
     ... Assuming  that the project  is financed  based upon                                                                    
     some  other  maximization  of return  for  the  overall                                                                    
     entity;  they would  come  up with  their  own debt  to                                                                    
     equity  ratio for  that.   With this  requirement, they                                                                    
     would  have to  give a  portion of  the equity  side of                                                                    
     that to the permanent fund,  for example, so that would                                                                    
     reduce the available equity for the remainder entity.                                                                      
    ...   It   would   affect,   ultimately,   the   return                                                                     
     opportunity of the remaining equity holders.                                                                               
                                                                                                                                
3:49:37 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  OLSON  asked   Commissioner  Galvin  whether  the                                                               
permanent fund has limits on investments by type and amount.                                                                    
                                                                                                                                
3:49:54 PM                                                                                                                    
                                                                                                                                
COMMISSIONER  GALVIN  answered  that   the  limitations  are  not                                                               
necessarily  based  on  a  dollar factor,  but  on  a  percentage                                                               
related to diversification  and the percentage of  ownership.  He                                                               
noted  that  limitations  and   ownership  investments  are  also                                                               
determined  by the  investors, not  just by  the language  in the                                                               
amendment.   However, the amendment  does create a  closed market                                                               
and a level of uncertainty.                                                                                                     
                                                                                                                                
3:51:52 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  RAMRAS  concluded  that Conceptual  Amendment  23                                                               
will  not  stop  AGIA  and  that the  fixed  rate  of  return  is                                                               
attractive  to potential  investors.   Alaskans want  to own  the                                                               
pipeline  and   this  amendment  represents  a   viable  idea  to                                                               
accomplish that goal without diminishing  the rights of Alaska as                                                               
a sovereign entity  and without the creation of  a state pipeline                                                               
company.   He expressed his regret  that Alaskans do not  have an                                                               
ownership role in the Trans-Alaska  Pipeline System.  He repeated                                                               
his strong support of the amendment.                                                                                            
                                                                                                                                
3:54:05 PM                                                                                                                    
                                                                                                                                
MR. BULLOCK  pointed out  the value  in identifying  the agencies                                                               
that  may  want  to  invest  in  the  project  and  that  certain                                                               
corporations, like APFC,  may be able to  participate without the                                                               
amendment.   He suggested that,  under the  conceptual amendment,                                                               
the committee  may want  to specify the  amount, rather  than the                                                               
percentage, of the investment.                                                                                                  
                                                                                                                                
3:55:27 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  RAMRAS  observed  that the  permanent  fund  owns                                                               
stock  in ExxonMobil  Corporation  (ExxonMobil)  and pointed  out                                                               
that this  has not  caused problems for  the citizens  of Alaska.                                                               
He stressed  that the concept  of the amendment can  be finalized                                                               
by subsequent  committees as  the bill  progresses, and  that the                                                               
pipeline  is  a  desirable  investment  for  the  permanent  fund                                                               
division.                                                                                                                       
                                                                                                                                
3:56:55 PM                                                                                                                    
                                                                                                                                
CHAIR  KOHRING  agreed that  the  amendment  can be  improved  by                                                               
further review.   He asked Mr. Bullock to give  his opinion about                                                               
placing the  amendment in the  evaluation criteria section  of HB                                                               
177.                                                                                                                            
                                                                                                                                
3:57:24 PM                                                                                                                    
                                                                                                                                
MR. BULLOCK confirmed  that the amendment does not  relate to the                                                               
evaluation criteria.  He suggested  that the requirement could be                                                               
included in  the project  list of promises  with the  addition of                                                               
qualifying language to ensure that  the liability does not follow                                                               
the interest.                                                                                                                   
                                                                                                                                
3:58:46 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   SAMUELS   maintained   his  objection   to   the                                                               
amendment.   He suggested  that, at  a later  date, a  program to                                                               
allow  individuals to  invest their  permanent fund  dividends in                                                               
the pipeline may be appropriate.                                                                                                
                                                                                                                                
3:59:51 PM                                                                                                                    
                                                                                                                                
CHAIR  KOHRING  acknowledged Representative  Ramras's  compelling                                                               
argument  for the  amendment.   He then  expressed his  continued                                                               
opposition to state ownership of  the gas pipeline and called for                                                               
a vote.   A roll call  vote was taken.   Representatives Kawasaki                                                               
and   Ramras  voted   in  favor   of  Conceptual   Amendment  23.                                                               
Representatives  Doogan, Olson,  Dahlstrom, Samuels,  and Kohring                                                               
voted against it.   Therefore, Conceptual Amendment  23 failed by                                                               
a vote of 2-5.                                                                                                                  
                                                                                                                                
4:01:25 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   OLSON  expressed   his  desire   to  work   with                                                               
Representative Ramras on improvements to the failed amendment.                                                                  
                                                                                                                                
4:01:37 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE RAMRAS  moved Conceptual Amendment 24,  which read                                                               
[original punctuation provided]:                                                                                                
                                                                                                                                
     P. 16, L. 13   Delete "exemption"                                                                                          
                    Insert "exemptions"                                                                                         
                                                                                                                                
     P. 20, L. 27   (b)  For  the   five  years  immediately                                                                    
     following commencement  of commercial operation  of the                                                                    
     project,  20  percent  of  the   gas  described  in  AS                                                                    
     43.90.300  is  exempt  from  the  state's  tax  on  the                                                                    
     production gas.                                                                                                            
                                                                                                                                
REPRESENTATIVE SAMUELS objected.                                                                                                
                                                                                                                                
REPRESENTATIVE  RAMRAS  expressed  his   concern  that  the  $500                                                               
million inducement  is not guarranteed  to attract  the producers                                                               
to nominate their gas at the  open season.  He said that, despite                                                               
the value of the upstream  commodity, the state needs to increase                                                               
the value  of the inducements  for the producers.   Putting aside                                                               
the question of  constitutionalty, it is in  the state's interest                                                               
to   induce  gas   to  the   open  season   by  offering   fiscal                                                               
predictabilty.    Representative   Ramras  said  that  Conceptual                                                               
Amendment 24 authorizes  a 20 percent discount  on the production                                                               
gas  tax  for  five  years  after  commercial  operation  of  the                                                               
pipeline  begins.   Although the  tax rate  is unknown,  the five                                                               
year discount  will provide  an element  of fiscal  certainty for                                                               
the producers.                                                                                                                  
                                                                                                                                
4:05:40 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE DOOGAN  relayed his  opposition to  the amendment,                                                               
not  because  of  the  proposed  method, but  because  it  is  an                                                               
incentive  through  taxes.    He  expressed  his  view  that  the                                                               
incentives to build  the gas pipeline should be  by reductions of                                                               
royalty, not tax, revenues.                                                                                                     
                                                                                                                                
4:06:51 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SAMUELS  recalled last year's discussions  of this                                                               
topic  and  opined that  the  legislature  will continue  lengthy                                                               
debate on the  tax rate.  He  said that the topic is  a key issue                                                               
of  debate  and  that  he appreciated  Representative  Ramas  for                                                               
offering the  amendment, although the  issue will not  be settled                                                               
at this meeting.                                                                                                                
                                                                                                                                
4:08:39 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   RAMRAS   reiterated   his  desire   to   provide                                                               
meaningful tax inducements for participation  in the open season.                                                               
He then withdrew Conceptual Amendment 24.                                                                                       
                                                                                                                                
4:09:42 PM                                                                                                                    
                                                                                                                                
CHAIR KOHRING  recognized staff members and  representatives from                                                               
the administration  and thanked  them for their  hard work  on HB                                                               
177.    He  then  moved  Amendment  25,  25-GH1060\M.2,  Bullock,                                                               
4/12/07, which read [original punctuation provided]:                                                                            
                                                                                                                                
     Page 13, line 7:                                                                                                           
          Delete "becomes law"                                                                                                  
          Insert "passes the legislature within 90 calendar                                                                     
     days  after the  last  date a  presiding  officer of  a                                                                    
     house of the legislature  receives a determination from                                                                    
     the commissioners under AS 43.90.180"                                                                                      
                                                                                                                                
REPRESENTATIVE SAMUELS objected.                                                                                                
                                                                                                                                
CHAIR  KOHRING   informed  the   committee  that   the  Committee                                                               
Substitute   (CS),   25-GH1060\E,  Bullock,   3/30/07,   language                                                               
regarding the  change in the  time limit,  from 36 to  24 months,                                                               
will  limit  the  opportunity  for   potential  applicants.    In                                                               
addition,  previous  testimony has  supported  the  need for  the                                                               
longer  period  of  time.     Therefore,  Chair  Kohring  offered                                                               
Amendment 25 that will reinstate the 36 month time period.                                                                      
                                                                                                                                
4:12:19 PM                                                                                                                    
                                                                                                                                
COMMISSIONER  GALVIN  assured the  committee  that  the 36  month                                                               
outer time frame gives as  much opportunity for a successful open                                                               
season  as possible.   He  noted that  a shorter  time frame  may                                                               
result in less  than complete applications.  Within  the 24 month                                                               
to  36  month  range  applicants  can  determine  for  their  own                                                               
purposes  the appropriate  length of  time needed.   Commissioner                                                               
Galvin stressed that the applicants  can shorten the time needed;                                                               
however,  they will  not be  able  to go  beyond 36  months.   In                                                               
addition, the time  requested by the applicant  will be evaluated                                                               
with the other criteria.                                                                                                        
                                                                                                                                
4:14:15 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SAMUELS removed his objection.                                                                                   
                                                                                                                                
CHAIR KOHRING  announced that there  being no  further objection,                                                               
Amendment 25 was adopted.                                                                                                       
                                                                                                                                
4:14:45 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE RAMAS  recognized Chair Kohring and  his staff for                                                               
their assistance during the hearings.                                                                                           
                                                                                                                                
4:15:54 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  DOOGAN thanked  Chair Kohring  and the  committee                                                               
for the lack  of political partisanship during the  hearings.  He                                                               
expressed  his  hope  that the  atmosphere  of  cooperation  will                                                               
continue throughout the debate on HB 177.                                                                                       
                                                                                                                                
4:16:56 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   SAMUELS  expressed   his  appreciation   of  the                                                               
administration's work  on the bill.   He told the  committee that                                                               
his concerns  and questions  remain about why  the state  can not                                                               
get  an  equity share  from  the  $500  million inducement.    In                                                               
addition, he said that he felt  there is a need for more research                                                               
on the regulations  for the Canadian portion of the  project.  He                                                               
then remarked:                                                                                                                  
                                                                                                                                
     I  fear, that  I  pick  a partner,  and  that 11  years                                                                    
     later,  I   picked  the   wrong  partner   and  they're                                                                    
     leveraging me.  ... If  we get a  partner, at  a failed                                                                    
     open season,  who just turns  to us and says  "Boy, you                                                                    
     have to  get me the gas."   Then we're ...  the ones on                                                                    
     the  outs.   So,  I  will  continue  to listen  to  the                                                                    
     debates.  ... Those  are some  of the  concerns that  I                                                                    
     still have.  ... The bill has  to pass ... and  we have                                                                    
     to work with the administration, I realize that...                                                                         
                                                                                                                                
4:19:44 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  OLSON thanked  Chair Kohring  for his  leadership                                                               
during the hearings.                                                                                                            
                                                                                                                                
4:20:05 PM                                                                                                                    
                                                                                                                                
CHAIR KOHRING  thanked the committee members  for their important                                                               
roles in the movement of a historic bill.                                                                                       
                                                                                                                                
4:20:46 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE DAHLSTROM  moved to report CSHB  177, 25-GH1060\E,                                                               
Bullock,    3/30/07   out    of    committee   with    individual                                                               
recommendations and  the accompanying fiscal notes.   There being                                                               
no objection, CSHB 177(O&G) was reported out of committee.                                                                      
                                                                                                                                
4:21:35 PM                                                                                                                    
                                                                                                                                
ADJOURNMENT                                                                                                                   
There being no further business before the committee, the House                                                                 
Special Committee on Oil and Gas meeting was adjourned at 4:21                                                                  
p.m.                                                                                                                            
                                                                                                                                

Document Name Date/Time Subjects