Legislature(2001 - 2002)
04/18/2001 05:09 PM House O&G
| Audio | Topic |
|---|
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE SPECIAL COMMITTEE ON OIL AND GAS
April 18, 2001
5:09 p.m.
MEMBERS PRESENT
Representative Scott Ogan, Chair (via teleconference)
Representative Hugh Fate, Vice Chair
Representative Fred Dyson
Representative Mike Chenault
Representative Vic Kohring
Representative Gretchen Guess
MEMBERS ABSENT
Representative Reggie Joule
COMMITTEE CALENDAR
CS FOR SENATE BILL NO. 121(RES)
"An Act adding, for purposes of the Alaska Right-of-Way Leasing
Act, a definition of 'substantial change' as applied to an
amended right-of-way lease application; and providing for an
effective date."
- MOVED CSSB 121(RES) OUT OF COMMITTEE
CS FOR SENATE BILL NO. 158(RES) am
"An Act directing the commissioner of revenue to prepare a
report to the legislature relating to the state's participation
in owning or financing a gas pipeline project; and providing for
an effective date."
- MOVED HCS CSSB 158(O&G) OUT OF COMMITTEE
PREVIOUS ACTION
BILL: SB 121
SHORT TITLE:RIGHT-OF-WAY LEASING ACT
SPONSOR(S): SENATOR(S) LEMAN
Jrn-Date Jrn-Page Action
02/27/01 0520 (S) READ THE FIRST TIME -
REFERRALS
02/27/01 0521 (S) RES, FIN
03/16/01 (S) RES AT 3:30 PM BUTROVICH 205
03/16/01 (S) Heard & Held
MINUTE(RES)
03/30/01 (S) RES AT 3:30 PM BUTROVICH 205
Meeting Canceled
04/02/01 (S) RES AT 3:30 PM BUTROVICH 205
04/02/01 (S) Moved CS(RES) Out of
Committee
MINUTE(RES)
04/03/01 0920 (S) RES RPT CS 4DP SAME TITLE
04/03/01 0920 (S) DP: TORGERSON, TAYLOR,
PEARCE, KELLY
04/03/01 0920 (S) FN1: ZERO(DNR)
04/09/01 1032 (S) FIN REFERRAL WAIVED REFERRED
TO RULES
04/09/01 (S) FIN AT 9:00 AM SENATE FINANCE
532
04/09/01 (S) Scheduled But Not Heard
04/10/01 1047 (S) RULES TO CALENDAR 4/10/01
04/10/01 1049 (S) READ THE SECOND TIME
04/10/01 1049 (S) RES CS ADOPTED UNAN CONSENT
04/10/01 1049 (S) ADVANCED TO THIRD READING
UNAN CONSENT
04/10/01 1049 (S) READ THE THIRD TIME CSSB
121(RES)
04/10/01 1049 (S) PASSED Y17 N3
04/10/01 1050 (S) EFFECTIVE DATE(S) SAME AS
PASSAGE
04/10/01 1053 (S) TRANSMITTED TO (H)
04/10/01 1053 (S) VERSION: CSSB 121(RES)
04/10/01 (S) RLS AT 10:45 AM FAHRENKAMP
203
04/11/01 0949 (H) READ THE FIRST TIME -
REFERRALS
04/11/01 0949 (H) O&G, RES
04/18/01 (H) O&G AT 5:00 PM CAPITOL 124
BILL: SB 158
SHORT TITLE:REPORT:STATE PARTICIPATE IN NAT GAS PIPE.
SPONSOR(S): RESOURCES
Jrn-Date Jrn-Page Action
03/23/01 0785 (S) READ THE FIRST TIME -
REFERRALS
03/23/01 0785 (S) RES, FIN
03/28/01 (S) RES AT 3:30 PM BUTROVICH 205
03/28/01 (S) Moved CS(RES) Out of
Committee
MINUTE(RES)
03/29/01 0855 (S) RES RPT CS 6DP 1NR SAME TITLE
03/29/01 0856 (S) DP: TORGERSON, TAYLOR,
HALFORD, PEARCE,
03/29/01 0856 (S) KELLY, ELTON; NR: LINCOLN
03/29/01 0856 (S) FN1: (REV)
04/06/01 0974 (S) FIN RPT CS(RES) 6DP 3NR
04/06/01 0974 (S) DP: DONLEY, KELLY, AUSTERMAN,
OLSON,
04/06/01 0974 (S) LEMAN, WILKEN; NR: GREEN,
HOFFMAN,
04/06/01 0974 (S) WARD
04/06/01 0974 (S) FN1: (REV)
04/06/01 (S) FIN AT 9:00 AM SENATE FINANCE
532
04/06/01 (S) Moved Out of Committee
MINUTE(FIN)
04/09/01 1013 (S) RULES TO CALENDAR 4/9/01
04/09/01 1017 (S) READ THE SECOND TIME
04/09/01 1017 (S) RES CS ADOPTED UNAN CONSENT
04/09/01 1018 (S) AM NO 1 OFFERED BY WARD
04/09/01 1018 (S) AM TO AM 1 UNANIMOUS CONSENT
04/09/01 1018 (S) AM NO 1 AS AMENDED ADOPTED
Y12 N8
04/09/01 1019 (S) ADVANCED TO THIRD READING
UNAN CONSENT
04/09/01 1019 (S) READ THE THIRD TIME CSSB
158(RES) AM
04/09/01 1019 (S) PASSED Y20 N-
04/09/01 1019 (S) EFFECTIVE DATE(S) SAME AS
PASSAGE
04/09/01 1032 (S) TRANSMITTED TO (H)
04/09/01 1032 (S) VERSION: CSSB 158(RES) AM
04/09/01 (S) RLS AT 10:45 AM FAHRENKAMP
203
04/10/01 0917 (H) READ THE FIRST TIME -
REFERRALS
04/10/01 0917 (H) O&G, RES, FIN
04/18/01 (H) O&G AT 5:00 PM CAPITOL 124
WITNESS REGISTER
ANNETTE KREITZER, Staff
to Senator Loren Leman
Alaska State Legislature
Capitol Building, Room 516
Juneau, Alaska 99801
POSITION STATEMENT: Presented SB 121 on behalf of the sponsor.
JAMES E. EASON, Lobbyist
for Foothills Pipe Lines Ltd.
8611 Leeper Circle
Anchorage, Alaska 99504
POSITION STATEMENT: Testified in support of SB 121 on behalf of
Foothills Pipe Lines Ltd.
SENATOR JOHN TORGERSON
Alaska State Legislature
Capitol Building, Room 427
Juneau, Alaska 99801
POSITION STATEMENT: As chairman of the Senate Resources
Standing Committee, sponsor, presented SB 158.
LARRY PERSILY, Deputy Commissioner
Department of Revenue
P.O. Box 110405
Juneau, Alaska 99811-0405
POSITION STATEMENT: Clarified that Amendment 2 to CSSB 158(RES)
would return the fiscal note to $215 [thousand]; stated personal
support for the amendment.
ACTION NARRATIVE
TAPE 01-29, SIDE A
Number 0001
VICE CHAIR HUGH FATE, chairing the meeting, called the House
Special Committee on Oil and Gas meeting to order at 5:09 p.m.
Members present at the call to order were Representatives Fate,
Ogan (via teleconference), Dyson, and Kohring. Representatives
Chenault and Guess arrived as the meeting was in progress.
SB 121 - RIGHT-OF-WAY LEASING ACT
Number 0090
VICE CHAIR FATE announced the first item of business, CS FOR
SENATE BILL NO. 121(RES), "An Act adding, for purposes of the
Alaska Right-of-Way Leasing Act, a definition of 'substantial
change' as applied to an amended right-of-way lease application;
and providing for an effective date."
Number 0129
ANNETTE KREITZER, Staff to Senator Loren Leman, presented SB 121
on behalf of the sponsor. She requested that Jim Eason
[lobbyist on behalf of Foothills Pipe Lines Ltd.] join her at
the witness table. She then explained that Senator Leman wants
to remove real and potential roadblocks to the commercialization
of Alaska's North Slope gas. Therefore, SB 121 provides a
definition of the term "substantial change" as used in AS
38.35.050(c), which reads:
(c) Any amendment to an application filed under
this section which constitutes a substantial change in
the application is subject to all provisions of this
chapter applying to an original application.
MS. KREITZER pointed out that currently whether an amendment to
a pipeline is or isn't a substantial change is decided by the
Department of Natural Resources (DNR) on a case-by-case basis.
The concern isn't that, but is the challenge to that decision on
a case-by-case basis in which the court would make the decision
instead of its being a policy [decision] of the department.
MS. KREITZER noted that the following would be consistent with
existing department policy, and under SB 121 would constitute a
substantial change that would require restarting the entire
process: a 10 percent net increase in state acreage beyond what
was in the original application; using less-effective
environmental or safety-mitigation measures than proposed in the
original application; or proposing a fundamental change in the
route as proposed in the original application.
Number 0284
MS. KREITZER drew attention to page 2 of the bill, suggesting
that the language about the acreage not included in the 10
percent net increase may be somewhat confusing. She reminded
members that if it is a 10 percent net increase in state acreage
beyond what was in the original application, it would be a
"substantial change" under this bill. However, not included
would be acreage attributed to an amendment to an existing
right-of-way lease across federal lands originally issued by the
federal government - regardless of whether the state or federal
government administers the land - or land under a federal right-
of-way grant that is transferred to the state for
administration.
MS. KREITZER explained the reason for the foregoing exceptions.
When there are right-of-way leases across federal and state
lands, federal rights-of-way are, by law, 50 feet plus the
amount of the improvement - typically about 80 feet. By
contrast, state rights-of-way are 100 to 150 feet, and most of
the North Slope rights-of-way are 150 feet. This provision
allows for alignment of those rights-of-way without making them
subject to the 10 percent net increase.
MS. KREITZER concluded by saying SB 121 provides an increased
measure of certainty and will minimize unnecessary challenges
and delays in processing, approving, and issuing right-of-way
leases.
Number 0432
JAMES E. EASON, Lobbyist for Foothills Pipe Lines Ltd.,
testified in support of SB 121, noting that [he and the company]
had worked closely with the sponsor to draft legislation that
would meet the requirements of DNR's pipeline office as well as
comport with what they believe to be the traditional criteria
that the department looks to in determining whether an amendment
to an application is or is not considered substantial.
MR. EASON agreed that the concern is not with the commissioner
or the pipeline office; instead, lacking a definition of
"substantial change" for the purposes of the statute, the courts
ultimately will make that decision on a case-by-case basis, if a
project has a high enough profile so that someone challenges a
decision by the commissioner or the pipeline office regarding
whether a change is substantial. Mr. Eason suggested that is
not in the best interest of either the state or a company trying
to commercialize gas on behalf of the state. He encouraged
adoption of the policy suggested by the bill, as well as the
definitions, in order to give guidance to the court, the
commissioner, and the commissioner's staff in processing and
adjudicating applications.
Number 0555
VICE CHAIR FATE asked whether anyone else wished to testify;
there was no response.
REPRESENTATIVE OGAN remarked that the bill has some of the most
common-sense, unambiguous language he has seen. He suggested it
is timely and that it should be moved from committee.
Number 0641
REPRESENTATIVE DYSON made a motion to move CSSB 121(RES) from
committee with individual recommendations and the zero fiscal
note. There being no objection, CSSB 121(RES) was moved out of
the House Special Committee on Oil and Gas.
SB 158 - REPORT:STATE PARTICIPATE IN NAT GAS PIPE.
VICE CHAIR FATE announced the final item of business, CS FOR
SENATE BILL NO. 158(RES) am, "An Act directing the commissioner
of revenue to prepare a report to the legislature relating to
the state's participation in owning or financing a gas pipeline
project; and providing for an effective date."
Number 0802
SENATOR JOHN TORGERSON, Alaska State Legislature, came forward
as the chairman of the Senate Resources Standing Committee,
sponsor of SB 158. He explained that he'd had SB 158 introduced
in order to have a study on whether the state should have any
sort of equity ownership in a pipeline, if and when one is
built. The "meat" of the bill, on page 2, stipulates some of
the desired reporting, then goes on to look at the state's
financial position and whether this creates additional risk
regarding the state's creditworthiness, for example.
SENATOR TORGERSON pointed out that on page 3, the bill directs
the commissioner of [the Department of] Revenue to enter into a
contract with a qualified person or firm; on [lines] 11-13,
because the contract is to be done immediately, it excludes that
from the competitive sealed-bid process. In addition, paragraph
(b)(2) directs the commissioner to report to the chairs of the
standing committees [that have legislative jurisdiction over
natural resources ... or their designees] to provide the data
available to make the report.
SENATOR TORGERSON also alluded to paragraphs (b)(3) and (b)(4),
which stated that the commissioner shall provide progress
reports to the chairs of the standing committees at intervals of
no more than 60 days, and shall prepare and deliver a
comprehensive report with final recommendations. He noted that
the report is to be done by January 31, 2002.
Number 1002
REPRESENTATIVE OGAN thanked Senator Torgerson for presenting the
bill. He explained that his own thinking has changed over the
years about state ownership of a gas pipeline, through becoming
more familiar with the constitution and the fact that the state
owns the subsurface rights to the resources of the state, making
the resources basically publicly owned. He mentioned ambiguity
surrounding the oil pipeline and said he is more interested in
at least exploring the opportunity on the gas pipeline project.
He asked Senator Torgerson to comment.
SENATOR TORGERSON said he agrees, but won't be sure until he
sees the report whether the state should take an equity
interest. At the time of the oil pipeline, he said few people
thought state ownership was a good idea. However, there is a
lot of discussion today that the state should at least be at the
table for its 12.5 percent royalty interest; he suggested
perhaps 12.5 percent is what the state should own in the
pipeline, in order to be at the bargaining table and to be
informed regarding tariffs, for example, which now are
confidential. He expressed hope that the report generated by SB
158 will answer all the questions about whether it is a good or
bad idea.
SENATOR TORGERSON noted that there was a similar report in 1982;
it was a $27-billion project, and the recommendation was that
the state not get involved, "but that maybe we would issue what
they called 'senior debt' or maybe a guaranteed debt, in case
there [were] overruns on the pipeline and other things." Times
have changed, however, and he said people are looking at the
history of TAPS [Trans-Alaska Pipeline System] and thinking
perhaps [the state] should have been part of that. He pointed
out that there are many more possibilities for in-state usage of
natural gas than for oil, so it opens a lot of avenues. He
emphasized the need for the report in order to make some of
those determinations.
Number 1235
REPRESENTATIVE OGAN asked Senator Torgerson whether he had
thought about modifying the bill to study possible state
ownership up to a point, like for the "hub" concept being
considered currently. He said it appears to be drafted for
ownership of the entire pipeline; he asked whether that is how
Senator Torgerson envisions this being studied or whether there
would be enough latitude for the chairs to ask that the report
be broken out more than one way, such as ownership to a point
"where everybody connects," from which the pipeline would
continue,
SENATOR TORGERSON replied:
First of all, I believe that any ownership would only
go to our borders; so it wouldn't be the entire line,
but it could be everything within the borders, if that
was determined ... that that's what we wanted to do.
In my thinking, we should be able to take the report,
and the components that are generated by that report,
and either back in or extend it to any degree we'd
like to, such as if ... the hub's in Fairbanks or Big
Delta, and that's as far as we want to own it, that
could very well be something that we could
mathematically back into, once we take the components
that are generated by the report.
I believe that for a lot of in-state usage and excess
capacity in the line, we may have to pay for that.
And ... that may be dead space for a while, until we
find some in-state usage. But, again, we don't know
until ... we have all this taken care of. But I
didn't really put "hub" in here for that reason, that
"owning all or a portion of the project" [page 2, line
5] pretty well covers, I think, the latitude that I
want the department to have.
SENATOR TORGERSON, in further response, surmised that once the
state finally decides to be a part-owner, there will be further
studies, at least through the administration and other
economists, "to grind out numbers" before signing on the dotted
line; he said he himself would need that. It would require
another bill, he suggested, which would entail a lot of research
in order to create authority or ownership, as well as agreements
with the producers. This is just the first step, he concluded.
Number 1462
REPRESENTATIVE DYSON drew attention to Amendment 1, submitted by
Representative Ogan, which read [punctuation added]:
Page 3, line 17:
Delete "standing"
Page 3, line 22:
Delete "standing"
[There were two versions; the corrected version added the
handwritten portion relating to page 3, line 22.]
REPRESENTATIVE DYSON asked Senator Torgerson whether he intended
to preclude the participation of the House Special Committee on
Oil and Gas in the process.
Number 1564
SENATOR TORGERSON noted that the bill [page 3, lines 18-19] says
"standing committees ... or their designees". He stated, "It
was not to preclude anything else." Senator Torgerson specified
that he had seen the proposed amendment and had no objection to
it, but added that "or designees" is wide-open to anybody
appointed to do it.
REPRESENTATIVE DYSON suggested that if Representative Ogan, as
chairman of the House Special Committee on Oil and Gas, was
comfortable with it, the leadership would add the committee to
prevent the bill from having to go to a conference committee,
for example.
REPRESENTATIVE DYSON then referred to page 2, beginning at line
8, and asked Senator Torgerson whether he intended to preclude
the investigation of using the permanent fund corpus as a
financing vehicle.
Number 1564
SENATOR TORGERSON answered, "No, I just didn't list it." He
referred to [page 2, lines 10-12], which says "issue debt ... in
[another] appropriate form". He stated, "The recommendations
could be anything." He added that he wouldn't recommend paying
cash for it upfront.
REPRESENTATIVE DYSON indicated investing in this project might
be a better investment [for the permanent fund than investing in
stocks, which had declined in value recently].
SENATOR TORGERSON responded:
I didn't think it necessary for us to do that. If we
want to pay cash for it, that's a legislative decision
down the road a ways, and certainly ... the governor
would have the right to veto that. But ... I don't
think you'll see a recommendation to just throw cash
on the table.
Now, it may be that a GO [general obligation] bond,
you're actually pledging the assets of the state, so
any GO bond, we're actually pledging the permanent
fund because it is an asset of the state. ... And that
is going to give us ... probably a higher bond rating
because we do have that; of course, we have no debt,
either ....
REPRESENTATIVE DYSON mentioned another option, forming a new
corporation and having the permanent fund owning some or a lot
of the stock. He then asked, "So, on the record, this bill does
not preclude exploring that option?"
SENATOR TORGERSON replied, "No."
Number 1741
REPRESENTATIVE OGAN made a motion to adopt Amendment 1 [text
provided previously].
REPRESENTATIVE DYSON objected in order to ask Representative
Ogan whether he'd heard Senator Torgerson indicate he didn't
believe Amendment 1 was necessary because there could be a
designee of the standing committee.
REPRESENTATIVE OGAN said he had heard that, and expressed
confidence that the House Resources Standing Committee wouldn't
have a problem designating the House Special Committee on Oil
and Gas. However, this puts the committee in the loop without
having to go through the designation process. He said it just
means that the committees being reported to will be the Senate
Resources Standing Committee, the House Resources Standing
Committee, and the House Special Committee on Oil and Gas.
REPRESENTATIVE DYSON removed his objection.
Number 1795
VICE CHAIR FATE asked whether there was any further objection.
There being no objection, Amendment 1 was adopted.
Number 1805
VICE CHAIR FATE brought attention to Amendment 2, also submitted
by Representative Ogan, which read:
Page 3, lines 1 - 7:
Delete all material
The language being deleted by Amendment 2 read:
6) consistent with the constitutional authority
that requires provision for "the utilization,
development, and conservation of all natural resources
belonging to the state . . . for the maximum benefit
of its people," state participation under (1), (2), or
(5) of this subsection would ensure or materially
contribute to natural gas development and distribution
within the state by installation of additional
pipeline facilities connecting to population centers
in the state, thereby supplying the energy base
required for the state's long-term economic
development.]
REPRESENTATIVE OGAN brought to the committee's attention that
the above language, inserted by an amendment on the Senate
floor, had resulted in a substantial fiscal note; he said the
fiscal note looks inflated. He said he doesn't disagree with
the language, but "population centers" is somewhat ambiguous;
Bethel, for example, is a population center in its region. He
said it is a "no brainer" that it would happen if there were a
pipeline built down the southern route.
VICE CHAIR FATE announced that the additional amount is
$375,000; the fiscal note started at $215 [thousand] and is now
up to $590 [thousand].
REPRESENTATIVE OGAN, noting that Senator Torgerson had voted
against the Senate floor amendment, asked, "What are we going to
get for 300,000 bucks?"
VICE CHAIR FATE expressed his own concern that it may legislate
the distribution of gas into areas that may not be practical
now. In addition, it cuts out private industry; usually, the
market will dictate where the gas will go, and people who can
make a profit will take the gas there. He noted that on the
House side, a study is in its final stages, and it looks
promising that some entrepreneur in the private sector will
undertake that project. He said [the section] isn't applicable
at every point, especially in rural Alaska; other than the way
it is structured, however, he had no problem with it. He added
that things may be demanded of the state, which perhaps is the
reason for the escalation of the fiscal note.
Number 2016
SENATOR TORGERSON said everyone wants gas in all the
communities, but it just doesn't fit in the bill; that is why he
opposed it on the floor. He told members:
This is a bill that looks at financing and whether or
not the state should take participation in financing,
not a bill on routes, and not a bill on additional
pipelines to try to supply routes somewhere. That's
an engineering question and a financing question. And
that's why the fiscal note is so high.
SENATOR TORGERSON indicated the Department of Revenue would have
to hire an engineer to determine what will be built, including
details, and then have to come up with a number to determine
whether the state should be part of that, as far as building it
or owning it. He said it is a great piece of legislation for
another bill, "once you get things figured out," but just
doesn't fit into this bill.
Number 2053
REPRESENTATIVE DYSON expressed concern about the time left in
this session. He asked whether, if this committee deleted the
section, that would cause problems on the Senate floor.
SENATOR TORGERSON said he didn't know. He reiterated that it
didn't belong in the bill to begin with, then suggested the
language perhaps could be fixed by making it a financing study,
which would be germane to the bill, rather than an engineering
study. "You can't use population center," he added, concurring
with Representative Ogan.
REPRESENTATIVE DYSON replied that if Amendment 2 were moved, he
would support it.
REPRESENTATIVE OGAN suggested that amending the language back
out of the bill at least would draw attention to it. He said it
is important legislation and emphasized the need to pass it this
session. He then said he wanted the record to clearly reflect
that [Amendment 2] is in no way discouraging the development
[and distribution] of gas to these areas.
Number 2236
REPRESENTATIVE OGAN made a motion to adopt Amendment 2 [text
provided previously]. There being no objection, Amendment 2 was
adopted.
Number 2269
LARRY PERSILY, Deputy Commissioner, Department of Revenue,
testified briefly via teleconference. He sought confirmation
that Amendment 2 would take out the Senate floor amendment, then
agreed that the fiscal note would return to the original amount
of $215 [thousand]. He commented, "That's fine. We were not
excited about becoming engineers." In response to a question
regarding whether it could be interpreted that the
administration supports the amendment, Mr. Persily stated, "You
[can] interpret that I support the amendment."
Number 2340
REPRESENTATIVE DYSON made a motion to move CSSB 158(RES) am, as
amended, out of committee with individual recommendations and a
fiscal note of $215 [thousand].
VICE CHAIR FATE thanked the sponsor, then announced that the
bill was moved from the committee.
REPRESENTATIVE KOHRING pointed out that he hadn't heard Vice
Chair Fate ask whether there was any objection. He said he'd
been going to object, but instead would address it on the House
floor.
[There being no objection, HCS CSSB 158(O&G) was moved out of
the House Special Committee on Oil and Gas.]
ADJOURNMENT
There being no further business before the committee, the House
Special Committee on Oil and Gas meeting was adjourned at 5:45
p.m.
| Document Name | Date/Time | Subjects |
|---|