Legislature(2007 - 2008)BARNES 124
04/03/2007 03:00 PM House OIL & GAS
| Audio | Topic |
|---|---|
| Start | |
| HB177 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 177 | TELECONFERENCED | |
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.
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