Legislature(1999 - 2000)
02/01/2000 10:05 AM House O&G
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE SPECIAL COMMITTEE ON OIL AND GAS
February 1, 2000
10:05 a.m.
MEMBERS PRESENT
Representative Jim Whitaker, Chairman
Representative Fred Dyson
Representative Joe Green
Representative John Harris
Representative Brian Porter
Representative Allen Kemplen
Representative Tom Brice
Representative Hal Smalley
MEMBERS ABSENT
Representative Gail Phillips
COMMITTEE CALENDAR
HOUSE BILL NO. 290
"An Act relating to stranded gas pipeline carriers and to the
intrastate regulation by the Regulatory Commission of Alaska of
pipelines and pipeline facilities of stranded gas pipeline
carriers."
- HEARD AND HELD
PREVIOUS ACTION
BILL: HB 290
SHORT TITLE: STRANDED GAS PIPELINE CARRIERS
Jrn-Date Jrn-Page Action
1/14/00 1924 (H) READ THE FIRST TIME - REFERRALS
1/14/00 1924 (H) O&G, RES, FIN
1/14/00 1924 (H) REFERRED TO O&G
2/1/00 (H) O&G AT 10:00 AM CAPITOL 124
WITNESS REGISTER
ROGER MARKS, Petroleum Economist
Department of Revenue
P.O. Box 110410
Juneau, Alaska 99811-0410
POSITION STATEMENT: Testified on HB 290.
JEFF LANDRY, Assistant Attorney General
Commercial Section
Civil Division (Anchorage)
Department of Law
1031 West Fourth Avenue, Suite 200
Anchorage, Alaska 99501-1994
POSITION STATEMENT: Testified on HB 290.
NAN THOMPSON, Commissioner/Chair
Regulatory Commission of Alaska
Department of Community and Economic Development
1016 West Sixth Avenue
Anchorage, Alaska 99501-1963
POSITION STATEMENT: Testified on HB 290.
BRADLEY EVANS, System Dispatch Manager
Golden Valley Electric Association
P.O. Box 71249
Fairbanks, Alaska 99707
POSITION STATEMENT: Testified on HB 290.
KEITH HAND, Chief Financial Officer
Fairbanks Natural Gas
3408 International Way
Fairbanks, Alaska 99701
POSITION STATEMENT: Testified on HB 290.
MICHAEL HURLEY, Commercial Regulatory Manager
Alaska North Slope Gas Commercialization Sponsor Group
ARCO Alaska, Inc.
700 G. Street, Anchorage, Alaska 99811-0300
POSITION STATEMENT: Testified on HB 290.
ACTION NARRATIVE
TAPE 00-8, SIDE A
Number 0030
CHAIRMAN JIM WHITAKER called the House Special Committee on Oil
and Gas meeting to order at 10:05 a.m. Members present at the
call to order were Representatives Whitaker, Dyson, Green,
Harris, Porter, Kemplen, Brice and Smalley.
HB 290 - STRANDED GAS PIPELINE CARRIERS
CHAIRMAN WHITAKER announced that the committee would again
discuss HOUSE BILL NO. 290, "An Act relating to stranded gas
pipeline carriers and to the intrastate regulation by the
Regulatory Commission of Alaska of pipelines and pipeline
facilities of stranded gas pipeline carriers."
CHAIRMAN WHITAKER reminded members that, in his opinion, it is a
necessary piece of legislation because it will determine the
method of regulation of a natural gas pipeline. The bill also
deals with pipeline access for North Slope producers, the
availability of natural gas to Alaskan communities, and the
availability of natural gas to Alaskan industry. He said the
committee's task is to ensure that the method by which these
determinations are made is equitable and in the state's best
interest. "Simply put," he said, "this is a big deal, and we,
this committee, need do it right."
Number 0204
ROGER MARKS, Petroleum Economist, Department of Revenue,
presented a preliminary analysis by the Administration on HB 290.
This analysis included input from the Department of Law, the
Department of Revenue, the Department of Natural Resources (DNR),
the DNR State Pipeline Coordinator's office, and the Department
of Community and Economic Development's Regulatory Commission of
Alaska. In his prepared remarks, Mr. Marks said:
In-state use of gas would be a very valuable benefit of
an Alaska North Slope Liquefied Natural Gas (LNG)
project. However, if the gas is commercialized, most
of its volume will be for export, and the financing of
this multi-billion dollar project will require
establishment of long-term contracts with buyers.
A set amount of pipeline capacity will need to be
reserved for contractual obligations. At the same
time, the economics of the proposed export projects
appear to be financially marginal. Project sponsors
cannot afford to take North Slope gas to market if they
have to bear the cost of pre-investing to provide
substantial excess capacity if there were a risk the
capacity would not be used. To do so could affect the
economics such that there would be no project and no
one would get gas.
Whereas it is straightforward to arrange for a pipeline
capacity and gas supplies for intrastate use before
construction starts, attaining pipeline capacity after
operation begins may be difficult and expensive.
Consequently, the question of how to allocate space and
gas needs to be addressed before the line is built.
What this bill does is provide a possible way to reduce
the potential gas supply risks perceived by the foreign
market, facilitating the marketing of the gas while
providing a mechanism for communities to procure gas.
The Administration supports this broad intent.
This said, the bill raises some complex issues that
could have significant long-term impacts. Some of
these include: (1) local jurisdictions committing in
advance to secure pipeline capacity without knowing
what the cost will be, especially if the gas purchase
contracts are not also in place - there may be,
however, mechanisms available to reduce risk to buyers
without unduly harming the pipeline sponsors; (2)
allocation of capacity between intrastate and export
use in the event of shortages or excesses of capacity;
(3) exclusion of the pipeline from the Alaska Public
Utility Regulatory Policies Act and subjection to the
Pipeline Act, and at the same time mixing common
carrier provisions with utility provisions and what the
law of unintended consequences might be as a
consequence.
Number 0388
MR. MARKS continued:
We are still analyzing the extent to which the
differences between the two may be material and the
chair of the Regulatory Commission of Alaska, Nan
Thompson, will address this. Exclusion of marine
terminal facilities from the Right of Way Leasing Act
may affect the ability of the state to lease state land
for such facilities and oversee land management. It
could also affect intrastate shipments of LNG, should
they be desired.
Thus, we are not yet sufficiently comfortable with the
measures in HB 290 to endorse them at this time. The
multi-agency team will continue to analyze the bill and
to provide recommendations to the legislature.
MR. MARKS said he was available to answer questions, and that
Jeff Landry, Assistant Attorney General, Commercial Section,
Civil Division (Anchorage), Department of Law, was standing by to
address legal questions that might arise.
Number 0479
REPRESENTATIVE GREEN inquired about the ongoing multi-agency
review team to which Mr. Marks had referred. He asked if the
committee could "get a feel for how the Administration is going
on this."
MR. MARKS replied that by a reasonable date, the review team
could accommodate the committee on that.
REPRESENTATIVE GREEN said he was not trying to put undue pressure
on them. However, as this is a sine die year, the committee
needs the input as quickly as possible if the legislature is to
move the legislation through.
CHAIRMAN WHITAKER asked if the agency group would be amenable to
a reasonable request with regard to time.
MR. MARKS said the agency group would.
CHAIRMAN WHITAKER asked him to define "reasonable."
MR. MARKS indicated that the agency group could get back to the
committee by the end of the week. At that time, the agency group
would let the committee know when the analysis would be complete.
Number 0603
CHAIRMAN WHITAKER stated that sooner was better than later.
However, he was not going to allow the committee to be pressured
into moving a bill through that might not be as good as it should
be. He said it was his intention that the committee would move
HB 290 through and that it would pass the legislature this year
in its best possible form.
Number 0648
REPRESENTATIVE KEMPLEN referred to Mr. Marks' statement that the
economics of the proposed export projects could be financially
marginal. He asked if he was making that statement with
reference to both of the proposed LNG projects.
MR. MARKS said yes. Both export projects face big marketing
challenges. In response to Representative Kemplen's request for
elaboration, Mr. Marks explained that the gas exported as LNG is
going to go into the East Asian market, probably to Japan, Taiwan
and Korea. If one looks at the projections of increasing demand
for LNG over the next 10 years, an Alaskan project producing 7-14
million tons per year would have to capture about 80 percent of
the incremental demand between now and 2010. That is a big
marketing challenge, and Alaskans are competing with a many other
jurisdictions that are closer to the market. These other
jurisdictions have existing projects that are up and running, and
the cost of adding incremental supply is cheaper than starting
from scratch, as Alaska is doing.
CHAIRMAN WHITAKER said there are those, including himself, who
think that the incremental demand of market share is more on the
order of 20 percent. There also are many who would disagree with
the assertion that an Alaskan project is "starting from scratch."
The infrastructure is in place with the exception of an 800-mile
pipeline, but it is not a green field project. Furthermore, the
gas is available and the reserves are known.
Number 0812
REPRESENTATIVE KEMPLEN asked about Mr. Marks' reference to local
jurisdictions committing in advance to secure pipeline capacity,
and saying that there may be mechanisms available to address
risks to buyers. He asked if the Department of Revenue analysts
had reason to expect that such mechanisms might be forthcoming.
MR. MARKS said those mechanisms are just rough ideas that have
not yet been explored in depth. The agency task force questions
whether this bill would be the appropriate venue for
institutionalizing those mechanisms. As an example of a
mechanism, if a community did not want to pre-commit without
knowing the price, it might be possible for the carrier and the
community to negotiate some sort of price ceiling in exchange for
a risk premium. If the pipeline sponsors thought they could get
the gas to Fairbanks for $1.50, the community could agree to sign
on for $1.70. In that case, if it cost $1.80, Fairbanks would
pay $1.70; if it cost $1.50, Fairbanks would pay $1.70. With
this mechanism, Fairbanks would know what it is paying. And if
the actual price were to be only $1.20, it might be possible to
negotiate something like a 20 cent price premium over the actual
cost, so the community would pay $1.40 up to a maximum of $1.70.
Another possible mechanism, used in the Lower 48, is called an
incentive rates of return. The less it costs sponsors to build
the project, the higher the rate of return they receive on their
capital through the tariff mechanism.
CHAIRMAN WHITAKER asked Mr. Marks to repeat the explanation of
the incentive rate of return.
MR. MARKS explained that the incentive rate of return gives the
project sponsors an incentive to bring the cost down. The lower
the cost, the higher the rate of return. And that way, everybody
wins. Sponsors receive a higher rate of return, but since the
costs are low, the capital costs are lower, and the purchaser of
the gas pays a lower price for it.
Number 0990
NAN THOMPSON, Commissioner/Chair, Regulatory Commission of
Alaska (RCA), Department of Community and Economic Development,
said that the RCA agrees with Mr. Marks' comments. She explained
that the purpose of her testimony was neither to support nor
oppose the bill, but to highlight some of the issues raised by
the current draft of the bill in hopes the committee will be able
to address them. Although she does not believe that any of the
issues are unsolvable, they are issues this committee should
carefully consider.
MS. THOMPSON said she is not concerned about wording in Section 1
that limits RCA authority to the intrastate portion of the
pipeline. That is true now as a matter of law for all the other
pipelines in the state, she said. She does not view it as either
necessary or harmful; she characterized the provision as
redundant of current law.
Number 1060
MS. THOMPSON told members that she has two concerns. One deals
with the creation of a hybrid entity, something between a common
carrier and a utility. It was her understanding that the goal of
the bill's sponsors was to create certainty in the regulatory
environment so that investors would be certain of recovering that
investment. She expressed concern that the bill, as currently
drafted, does not accomplish that goal because it has taken a
middle road between common carrier and utility regulation. There
is an established body of law that tells regulators how to
administer a pipeline as either a common carrier or a utility,
she explained. Common carrier pipelines are required to take all
the product offered, and if the demand is greater than the
available space, an allocation is made on a pro-rata basis among
shippers. There also is a body of law that tells regulators how
to make a decision about expansion of capacity.
MS. THOMPSON explained that regulators use somewhat different
standards and principles for allocating space if a pipeline is a
utility. In that case, they use public interest standards and
allow utilities to recover the cost of increasing capacity under
tariffs. Basically, there is a body of law that tells regulators
how to operate under either circumstance.
MS. THOMPSON said HB 290 creates a kind of hybrid. It
specifically says this pipeline will not be a utility and it
calls it a common carrier, but then it alters some of the
existing case law about common carriers. Ms. Thompson surmised
that the bill drafters did so because they want more certainty in
the environment. Her concern is that by treading new ground,
they are not accomplishing the goal of creating certainty. She
suggested that the bill drafters and the committee should
determine whether the intrastate portion of the pipeline should
be regulated as a common carrier, a utility, or a new hybrid with
a new scheme of regulation. Call it that, she said, and give
regulators some clear rules on how to administer; allocate the
space between competing users. It is a policy decision for the
committee to decide how regulators determine which of the
intrastate can use space on the pipeline.
Number 1192
MS. THOMPSON turned to her second concern, regarding how HB 290
will treat and allow use by intrastate users. It has been [the
RCA's] role, as a regulatory agency in looking at pipelines, to
protect the interests of intrastate users and make sure that
folks who want access to products going through pipelines in the
state have a chance to do that. She did not believe the bidding
mechanism similar to the one used for gas pipelines in the Lower
48 would be realistic for some of the communities along the
pipeline, specifically some of the smaller users who might truly
benefit from being able to get gas from this line.
MS. THOMPSON pointed out that Mr. Marks had discussed some
pricing alternatives that could allow communities the
opportunity to bid. The basic problem is that the community
would have to project its need far into the future and make a
financial commitment based on a rate that has not yet been
determined, and therefore, might be more than a small community
could afford to pay. She suggested that there might be a way to
group those users together or to use a different pricing
mechanism that could minimize the uncertainty on both sides.
Another alternative is to define a fixed percentage of the line
that is going to be intrastate and figure out a way to guarantee
to the bill's sponsors that [the defined percentage] would be
used or made available for export, and then to have the RCA
allocate that. Ms. Thompson urged the committee to carefully
consider both of the concerns she had articulated.
Number 1292
REPRESENTATIVE GREEN said both concerns Ms. Thompson raised had
been discussed with other testifiers and that creating a hybrid
would lead right into her second concern. He asked Ms. Thompson
if it might be workable to allocate a percentage or an amount of
the gas to intrastate users. He said shippers on the Trans-
Alaska Pipeline System (TAPS) line allocate percentages to the
various owners. He also asked Ms. Thompson what she, as a
regulator, would do if 10 percent were allocated as intrastate
and the balance were being shipped, and the intrastate demand
increased to the point that additional compression would be
required to meet their needs, but not those of the Outside users.
He further asked: Should there be something included in the bill
that would allow for expansion to satisfy the intrastate need if
it does not adversely affect the interstate portion?
MS. THOMPSON restated Representative Green's question, to her
understanding: If it is decided to allocate a certain percentage
of the pipeline capacity to the intrastate [market], should there
be a provision to increase that capacity and fairly allocate the
cost of that increase in case intrastate needs increase in the
future? She said the answer would be yes. How [the RCA] would
allocate that and would allocate costs depends, again, on whether
[the RCA] is regulating it as a common carrier or a utility.
There is a body of utility regulatory law that tells [the RCA]
how to do that. Future expansion of intrastate need is something
the committee needs to consider.
Number 1457
REPRESENTATIVE KEMPLEN recalled Ms. Thompson's concern about a
hybrid that may create uncertainty. He asked whether the
regulatory commission would be the entity that would have to
answer questions growing out of that environment of uncertainty.
MS. THOMPSON replied that the answer to the question would depend
on what authority the bill gives to the RCA. If the bill gives
regulators the authority to resolve questions, but a question
arises in an uncertain area of law and the legislation has not
clearly define what the RCA is to do, the commission's decision
is likely to be appealed or the question will likely be taken to
court or to the Federal Energy Regulatory Commission (FERC). Her
concern is that lack of a clear definition will result in delays
as people take their interpretations to court. It is not that
creating some kind of hybrid is necessarily a bad idea - that may
be the best solution in this case - but if that is what the
committee decides to do, she thinks it is important to clearly
define what it is doing. Calling the hybrid a common carrier,
when it really is not in some important respects, is what is
creating the confusion.
CHAIRMAN WHITAKER asked Mr. Landry to comment on that
JEFF LANDRY, Assistant Attorney General, Commercial Section,
Civil Division (Anchorage), Department of Law, answered via
teleconference. He agreed with Ms. Thompson, saying the
commission obviously has only the authority that the legislature
gives it, and the clearer the legislature can be regarding the
authority given to the agency, the better off the agency will be.
Number 1600
REPRESENTATIVE KEMPLEN asked if there were any other instances in
the utility business or pipeline industry where there are two
distinct categories for use of a product like this. Or is Alaska
really treading new ground?
MS. THOMPSON said she did not know of any other state that has
regulated an interstate and an intrastate portion differently.
She said most pipelines in the Lower 48 are regulated very
differently from those in Alaska.
Number 1746
BRADLEY EVANS, System Dispatch Manager, Golden Valley Electric
Association, Fairbanks, was the next to testify. In prepared
remarks, he said:
Golden Valley Electric Association supports the work of
everyone involved and development of the gas pipeline
that would potentially deliver gas to the Interior. We
represent 37,000 consumers who are potential users of
the pipeline through our cooperative association. As
such, we have concern over development of the
legislation governing the access, capacity,
allocations, and charges for intrastate use of the gas
pipeline and other issues of interstate use that may
impact those concerns.
Specifically, our concerns are the methods used for
allocation of capacity in access to the line, the
methodology for rate design. We favor an approach that
would be based on a cost-causer, cost-payer - versus a
postage stamp - rate design.
We believe that the Regulatory Commission of Alaska
should have some review status of the design of the
line such that intrastate users needs are fairly met in
the overall design of the pipeline. We think that the
jurisdiction of the commission should include
interstate matters as they impact the rate access
design [for] intrastate users.
And, finally, we ask for an opportunity to provide more
input after we study the pipeline issues and the
Pipeline Act as it specifically relates to public
interest standards versus those under which we operate.
We are in favor of the intentions of this legislation,
but have concern over the current form and would like
to withhold our endorsement until some of those
concerns are addressed.
Number 1835
REPRESENTATIVE DYSON speculated that in the future, if gas
becomes available at a reasonable rate, Golden Valley Electric
Association would begin the conversion of its gas or power
generation to gas turbines.
MR. EVANS said that was a good assumption. But everything is
based on price, and the association has a limit on what it would
pay for gas and making the conversion to turbines. The
conversion is a simple matter, since all of the association's
combustion turbine units are designed for dual-fuel use, and
other plants also could be converted with a bit more effort.
REPRESENTATIVE DYSON asked if the association would use its
existing steam turbines and just fire the boilers differently.
MR. EVANS replied that would be possible, but the first task
would be to convert the combustion turbines to gas, because they
are rated for dual fuel and can be run on gas.
REPRESENTATIVE DYSON asked whether, if the gas pipeline project
were to materialize quickly, in three to four years, it would
affect Golden Valley's's decisions about the Healy Clean Coal
Project.
MR. EVANS indicated he chose not to hypothesize regarding that.
REPRESENTATIVE KEMPLEN asked Ms. Thompson if she thought the RCA
should have some say in the design of the facility,
MS. THOMPSON said the RCA's goal is to assure that intrastate
users have access and that there is adequate capacity for
intrastate use, but she was not sure that doing so would require
involvement in the design process.
Number 1965
REPRESENTATIVE GREEN asked Mr. Evans if a Golden Valley Electric
Association decision to use gas would be driven entirely by price
or to some degree by environmental concerns.
MR. EVANS said it would be better environmentally to use natural
gas, but that the question asked was a difficult one to answer.
He suggested that it came down to whether consumers would be
willing to pay a premium for fuel that would reduce air
contamination.
Number 2040
KEITH HAND, Chief Financial Officer, Fairbanks Natural Gas,
Fairbanks, was the next witness. He said:
I'd like to say I represent the current and future
users of natural gas in the Interior. The Interior
citizens and all Fairbanks Natural Gas employees are
strong advocates of the development of a natural gas
pipeline, naturally. And I hope that we soon see North
Slope gas delivered to the Interior. We have just
become familiar with this bill and have not actually
spent a great deal of time analyzing it. But we do
understand and applaud the effort to advance this
foundational framework for the proposed pipeline
project.
However, with that said, we do have some concerns with
the bill in its current state, and I think these have
been mentioned by several people already. But based on
a limited review, we have the following comments.
Obviously, the biggest issues to come to the table has
been the pricing of these intrastate rates. What kind
of scheme is envisioned? Is it going to be a pro rata,
mileage-based scheme; a postage stamp, rate pricing
scheme; or a fixed rate from Prudhoe down to Valdez
with Interior customers paying a fraction because the
gas they buy has been transported just part of the way?
That is an issue that needs to be dealt with.
Another big issue, obviously, is allocation of the
capacity between the intrastate gas and the gas for
export abroad. Directly related to that is an issue
that might be unique to Fairbanks Natural Gas, the
local distribution companies, and the communities that
use space heating. The Interior faces a seasonally
peaking demand, a swing of three to one between winter
and summer consumption. Granted, volumes like those
used for space heating are not that great an overall
percentage of the whole pipeline [capacity], but that
percentage that Fairbanks Natural Gas will be using
will really vary during the season because of space
heating, so we need to put some thought at this time
into measures that will assure that we can handle the
winter season without being charged for excess capacity
during the summer. What kind of cost structure can we
institute without having an overly burdensome cost to
pass on to the consumer?
We would also like to be sure that the intrastate gas
consumers have adequate representation during the
planning and design phases, and we are not sure if that
will be delegated to the RCA, but some review is
justified to meet the concerns of intrastate gas
consumers ahead of time before we get to the final
construction phase.
Overall we are in favor of the intentions of the bill
and the direction in which it is heading at this time,
but we need to withhold our support of the bill in its
current form. However, we are optimistic that an
equitable solution is possible, and that all parties
involved can have a good outcome. We are looking
forward to resolving all of the issues that are out
there.
Number 2201
CHAIRMAN WHITAKER asked Michael Hurley to come forward,
explaining that Mr. Hurley had been deeply involved in the
original authoring of the bill.
MICHAEL HURLEY, Commercial Regulatory Manager, Alaska North Slope
Gas Commercialization Sponsor Group, ARCO Alaska, Inc.,
Anchorage, said:
There are issues out there that need to be dealt with.
If they were not important issues, we would not be in
front of the legislature. In our view, as we look
toward trying to build this regulatory regime and set
it in place, we are looking at trying to make sure that
we satisfy the known needs of the intrastate users. We
recognize that [issue] is out there. You heard some
concerns mentioned about things that need to be
addressed, and perhaps it might help if I walk through
those briefly.
With respect to local jurisdictions having access to
gas, we fully expect that local jurisdictions will have
access to gas. One of the concerns that we had when we
were originally drafting the legislation was that we
did not want to be in the position of a public utility,
and one of the reasons we drafted it the way we did was
that we did not want to be selling to the public.
There [already] are companies that do that, including
Enstar Natural Gas Company, Fairbanks Natural Gas, and
Golden Valley Energy Association. One of the reasons
we set up the exemption from the Public Utilities Act
was that we believed that we would be better served
operating as a common carrier in the kind of
jurisdiction that common carriage has within the RCA.
We did not want to be trying to usurp the business of
the existing local distribution companies.
MR. HURLEY continued:
We did get into an odd situation and it may have
caused the confusion that comes up around common
carriage versus the Public Utilities Act because
in the effort to try to determine the initial
capacity that the pipeline needs to have
available, in the initial bill, what we decided to
do was rather than fix a number (because then we
would spend all of our time arguing over what the
number was), we tried to set in place a process
overseen by the RCA that would ... [ends midspeech
because of tape change.]
TAPE 00-8, SIDE B [Numbers run backward]
MR. HURLEY continued:
... criteria, and if that has blurred the lines
between common carriage and public utility
regulation -- I was going to say I am sorry that
happened, but I guess I am not; it may need to be
done that way. Our concern is going to be to make
sure that the gas commitments that we build in up
front are real gas needs, and not speculative
industrial projects or speculative uses that are
not really there, because if you get into a
situation where additional capacity that is not
being used is built, then someone ends up having
to pay for it. Either it falls onto the export
[customer] or, if you are in a true common
carriage situation, the other intrastate users end
up picking it up. So we were trying to blend
something that we thought would be useful in this
type of unique project.
Number 2308
MR. HURLEY, in response to Representative Green, confirmed that
the bill drafters intended any blurring to be in the planning
phase rather than later on, in the regulatory phase.
REPRESENTATIVE SMALLEY commented that there is some wording in
the bill that the committee will have to address.
MR. HURLEY said Section 4 of the bill sets up a process to
clarify the jurisdiction of the RCA.
REPRESENTATIVE SMALLEY indicated interest in examining the bill
in relation to Ms. Thompson's concern about dedicating
percentages for local use.
Number 2232
REPRESENTATIVE KEMPLEN asked where the bill addresses expanding
pipeline capacity.
MR. HURLEY said Section 5 deals with expansions and the RCA's
ability under current law to order expansions. Mr. Hurley also
clarified a question that had arisen in a committee meeting the
previous week. The maximum capacity of a 30-inch pipeline has
been estimated by engineers to be about 2.5 bcf a day. He
addressed concerns about growing needs throughout the state by
saying that he believes the project can accommodate needed
expansions.
REPRESENTATIVE KEMPLEN asked Mr. Hurley to explain how an
expansion would work.
MR. HURLEY replied that an expansion for intrastate use would
come under the common carrier system.
REPRESENTATIVE KEMPLEN inquired about expansion for interstate
use.
MR. HURLEY explained that export use is regulated by the United
States Department of Energy (DOE) Office of Fossil Energy, and
that is the reason for setting up a jurisdictional split in the
proposed legislation.
REPRESENTATIVE KEMPLEN asked about a hypothetical increase in
demand for natural gas for export.
MR. HURLEY said the Department of Energy would have approval
authority over increasing exports, and exports could not be
increased to an extent that would impinge on intrastate use. The
RCA would be regulating the intrastate gas, and they will tell
pipeline sponsors how much room is needed for intrastate use;
however, the export piece of it is regulated by the federal
government.
REPRESENTATIVE KEMPLEN referred to the concerns raised by Ms.
Thompson about creating a hybrid between a common carrier and a
utility.
MR. HURLEY explained that regarding gas for intrastate use, there
are differences between the ways in which public utilities and
common carriers are regulated, and there may be some blending
going on between those two in the bill.
Number 1942
CHAIRMAN WHITAKER observed that the day's discussion had pointed
out that there are some questions that have not been answered.
One option would be to form a subcommittee, but he was hesitant
to do so without additional input that is forthcoming from Cook
Inlet users.
REPRESENTATIVE SMALLEY asked if it would be possible to have
printed testimony from the individuals who had testified.
CHAIRMAN WHITAKER said that he would make sure that all
information is sent to the interested parties.
REPRESENTATIVE GREEN wondered if the Administration's feedback
might be available by February 10.
MR. MARKS said he could not promise a complete review by then.
CHAIRMAN WHITAKER pointed out that the committee's actions need
not be contingent upon the Administration completing its review,
since the bill has other committees of purview and the
Administration has veto power.
REPRESENTATIVE GREEN said he concurred, but this committee might
be the best one in which to address whatever points the
Administration may raise. He added, "What we don't want to have
happen is to go down the track and get derailed because of
something that we might have been able to solve early on."
CHAIRMAN WHITAKER said that was a good point.
REPRESENTATIVE BRICE said he thought the committee needed to
clarify the language within the bill. He voiced support for
setting up a working group to do a quick mark-up of the bill,
making recommendations to the committee about how to clarify some
of the questions that have been raised.
CHAIRMAN WHITAKER said he appreciated that suggestion, but the
committee first needs additional input, particularly from Cook
Inlet users, and he would be hesitant to have decisions made
without that input.
REPRESENTATIVE BRICE concurred. [HB 290 was held over.]
ADJOURNMENT
There being no further business before the committee, the House
Special Committee on Oil & Gas meeting was adjourned at 11:07
a.m.
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