Legislature(1999 - 2000)
02/21/2000 01:10 PM House RES
| Audio | Topic |
|---|
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE RESOURCES STANDING COMMITTEE
February 21, 2000
1:10 p.m.
MEMBERS PRESENT
Representative Bill Hudson, Co-Chair
Representative Beverly Masek, Co-Chair
Representative John Cowdery, Vice Chair
Representative John Harris
Representative Carl Morgan
Representative Ramona Barnes
Representative Jim Whitaker
Representative Reggie Joule
MEMBERS ABSENT
Representative Mary Kapsner
COMMITTEE CALENDAR
HOUSE JOINT RESOLUTION NO. 54
Relating to urging the exclusion of national forests in Alaska
from President Clinton's proposal for withdrawal of roadless
areas in the national forest system.
- MOVED HJR 54 OUT OF COMMITTEE
HOUSE BILL NO. 206
"An Act relating to the migratory game bird conservation tag, to
a nonresident combined sport fishing and hunting license, to the
nonresident military small game and sport fishing license, to
applications for certain licenses, tags, and permits issued by
the Department of Fish and Game, and to duplicate crewmember
licenses."
- MOVED CSHB 206(RES) OUT OF COMMITTEE
HOUSE BILL NO. 164
"An Act relating to electronic application for and issuance of
licenses, permits, and tags issued by the Department of Fish and
Game; to violations regarding a license, permit, or tag applied
for or issued electronically; and providing for an effective
date."
- MOVED CSHB 164(RES) OUT OF COMMITTEE
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; ASSIGNED TO SUBCOMMITTEE
PREVIOUS ACTION
BILL: HJR 54
SHORT TITLE: EXCLUDE AK NATL FORESTS FROM ROADLESS POL
Jrn-Date Jrn-Page Action
2/09/00 2145 (H) READ THE FIRST TIME - REFERRALS
2/09/00 2145 (H) RES
2/16/00 (H) RES AT 1:00 PM CAPITOL 124
2/16/00 (H) Heard & Held
2/16/00 (H) MINUTE(RES)
2/18/00 (H) RES AT 1:00 PM CAPITOL 124
2/18/00 (H) Heard and Held
2/18/00 (H) MINUTE(RES)
2/21/00 (H) RES AT 1:00 PM CAPITOL 124
BILL: HB 206
SHORT TITLE: FISH AND GAME LICENSES & TAGS
Jrn-Date Jrn-Page Action
4/21/99 899 (H) READ THE FIRST TIME - REFERRAL(S)
4/21/99 900 (H) RES, FIN
2/09/00 (H) RES AT 1:00 PM CAPITOL 124
2/09/00 (H) Bill Postponed
2/16/00 (H) RES AT 1:00 PM CAPITOL 124
2/16/00 (H) Scheduled But Not Heard
2/18/00 (H) RES AT 1:00 PM CAPITOL 124
2/18/00 (H) Heard and Held
2/18/00 (H) MINUTE(RES)
2/21/00 (H) RES AT 1:00 PM CAPITOL 124
BILL: HB 164
SHORT TITLE: FISH & GAME LICENSING BY ELECTRONICS
Jrn-Date Jrn-Page Action
3/29/99 601 (H) READ THE FIRST TIME - REFERRAL(S)
3/29/99 601 (H) RES, JUD
3/29/99 601 (H) 2 ZERO FISCAL NOTES (F&G, LAW)
3/29/99 601 (H) GOVERNOR'S TRANSMITTAL LETTER
2/16/00 (H) RES AT 1:00 PM CAPITOL 124
2/16/00 (H) Scheduled But Not Heard
2/18/00 (H) RES AT 1:00 PM CAPITOL 124
2/18/00 (H) Heard and Held
2/18/00 (H) MINUTE(RES)
2/21/00 (H) RES AT 1:00 PM CAPITOL 124
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
1/27/00 (H) O&G AT 10:00 AM HOUSE FINANCE 519
1/27/00 (H) Heard & Held
1/27/00 (H) MINUTE(O&G)
2/01/00 (H) O&G AT 10:00 AM CAPITOL 17
2/01/00 (H) Heard & Held
2/01/00 (H) MINUTE(O&G)
2/10/00 (H) O&G AT 10:00 AM CAPITOL 17
2/10/00 (H) Heard & Held
2/10/00 (H) MINUTE(O&G)
2/15/00 (H) O&G AT 10:00 AM CAPITOL 17
2/15/00 Text (H) -- Meeting Canceled --
2/17/00 Text (H) O&G AT 10:00 AM CAPITOL 17
2/17/00 Text (H) Moved CSHB 290(O&G) Out of Committee
2/17/00 Text (H) MINUTE(O&G)
2/21/00 Text (H) RES AT 1:00 PM CAPITOL 124
WITNESS REGISTER
REPRESENTATIVE BILL WILLIAMS
Alaska State Legislature
Capitol Building, Room 502
Juneau, Alaska 99801
POSITION STATEMENT: Testified as the sponsor of HJR 54.
REPRESENTATIVE JOHN HARRIS
Alaska State Legislature
Capitol Building, Room 110
Juneau, Alaska 99801
POSITION STATEMENT: Testified as the sponsor of HB 206 and
introduced the proposed committee substitute.
GERON BRUCE, Legislative Liaison
Office of the Commissioner
Alaska Department of Fish and Game (ADF&G)
P.O. Box 25526
Juneau, Alaska 99802-5526
POSITION STATEMENT: Provided information on HB 164.
JOHN MANLY, Legislative Aide
for Representative John Harris
Alaska State Legislature
Capitol Building, Room 110
Juneau, Alaska 99801
POSITION STATEMENT: Explained the changes in the proposed
committee substitute for HB 206.
LORALI MEIER, Staff
to Representative Beverly Masek
Alaska State Legislature
Capitol Building, Room 126
Juneau, Alaska 99801
POSITION STATEMENT: As committee aide to the House Resources
Standing Committee, introduced HB 290 and discussed the
amendments made in CSHB 290(O&G).
MICHAEL HURLEY, ARCO Alaska Incorporated
and Manager, Alaska North Slope Liquid Natural Gas sponsor
group
700 G Street
Anchorage, Alaska 99501
POSITION STATEMENT: Testified on HB 290.
MIKE BARNHILL, Assistant Attorney General
Oil, Gas & Mining Section
Civil Division
Department of Law
P.O. Box 110300
Juneau, Alaska 99811-0300
POSITION STATEMENT: Testified on HB 290 and outlined the
concerns of the Administration.
ROSS COEN
Alaska Forum for Environmental Responsibility
P.O. Box 82718
Fairbanks, Alaska 99708
POSITION STATEMENT: Testified on HB 290 and pointed out some
environmental concerns.
NAN THOMPSON, Commissioner
Regulatory Commission of Alaska (RCA)
Department of Community & Economic Development
1016 West Sixth Avenue
Anchorage, Alaska 99501-1963
POSITION STATEMENT: Testified on HB 290.
ACTION NARRATIVE
TAPE 00-12, SIDE A
Number 0001
CO-CHAIR HUDSON called the House Resources Standing Committee
meeting to order at 1:10 p.m. Members present at the call to
order were Representatives Hudson, Masek, Cowdery, Harris,
Morgan, Whitaker and Joule. Representative Barnes arrived as the
meeting was in progress.
HJR 54 - EXCLUDE AK NATL FORESTS FROM ROADLESS POL
Number 0249
CO-CHAIR HUDSON announced that the first order of business would
be HOUSE JOINT RESOLUTION NO. 54, relating to urging the
exclusion of national forests in Alaska from President Clinton's
proposal for withdrawal of roadless areas in the national forest
system. [Testimony had been heard at previous meetings.]
REPRESENTATIVE BILL WILLIAMS, Alaska State Legislature, sponsor
of HJR 54, thanked the committee for hearing the resolution. He
indicated HJR 54 is very important for what is left of the timber
industry in Alaska. Ten years 10 years and over $13 million have
been spent to create the Tongass Land Management Plan (TLMP) and
now President Clinton's roadless policy would "lock up"
approximately another 40 million acres in the United States.
Representative Williams said one of the problems is uncertainty
as to what areas will be designated as roadless. Alaska probably
has the best forest practices in the United States. Furthermore,
the Alaska National Interest Lands Conservation Act (ANILCA)
states that the President cannot take any more lands out of
Alaska without first taking it before Congress. He noted that
Governor [Knowles] supports the resolution.
REPRESENTATIVE COWDERY stated that he is in support of HJR 54.
Number 0561
REPRESENTATIVE HARRIS indicated he is in strong support of HJR
54, which addresses the fact that there has been an economic
downturn in the state from a loss of forest-product jobs.
REPRESENTATIVE COWDERY made a motion to move HJR 54 out of
committee with the attached zero fiscal note. There being no
objection, HJR 54 moved out of the House Resources Standing
Committee.
HB 206 - FISH AND GAME LICENSES & TAGS
Number 0719
CO-CHAIR HUDSON announced that the next order of business would
be HOUSE BILL NO. 206, "An Act relating to the migratory game
bird conservation tag, to a nonresident combined sport fishing
and hunting license, to the nonresident military small game and
sport fishing license, to applications for certain licenses,
tags, and permits issued by the Department of Fish and Game, and
to duplicate crewmember licenses."
REPRESENTATIVE JOHN HARRIS, Alaska State Legislature, sponsor of
HB 206, noted that there had been some concerns with the sections
of the bill dealing with nonresident military and retired
military persons. It also required formerly exempt holders of
the $5 license fee for disabled veteran licenses to register in
the national migratory bird harvest information program. He
indicated those concerns were taken care of in the proposed
committee substitute (CS), Version I [adopted as a work draft at
the previous hearing]. He noted that the bill also changes the
term "waterfowl" to the phrase "migratory game bird" with regard
to conservation tags, to comply with federal wording.
REPRESENTATIVE BARNES indicated that she did not have the
proposed committee substitute in front of her.
[HB 206 was taken up again following the hearing on HB 164.]
Number 1040
CO-CHAIR HUDSON called an at-ease at 1:24 p.m. He called the
meeting back to order at 1:25 p.m.
HB 164 - FISH & GAME LICENSING BY ELECTRONICS
CO-CHAIR HUDSON announced that the next order of business would
be HOUSE BILL NO. 164, "An Act relating to electronic application
for and issuance of licenses, permits, and tags issued by the
Department of Fish and Game; to violations regarding a license,
permit, or tag applied for or issued electronically; and
providing for an effective date." [HB 164 had been heard
previously.]
REPRESENTATIVE BARNES made a motion to adopt the amendment
offered by the Alaska Department of Fish & Game, which read:
Page 1, line 8:
Following "surcharge":
Insert "not to exceed existing compensation to
vendors or three dollars, whichever is less"
CO-CHAIR HUDSON asked whether there were any objections. There
being none, the amendment was adopted.
REPRESENTATIVE BARNES indicated that her other concern with HB
164 was the attached zero fiscal note.
Number 1315
GERON BRUCE, Legislative Liaison, Office of the Commissioner,
Alaska Department of Fish and Game, explained that there was some
language added to the analysis of the fiscal note.
REPRESENTATIVE BARNES made a motion to move HB 164, as amended,
from committee with individual recommendations and the attached
amended zero fiscal note; she asked for unanimous consent. There
being no objection, CSHB 164(RES) moved from the House Resources
Standing Committee.
HB 206 - FISH AND GAME LICENSES & TAGS
Number 1527
CO-CHAIR HUDSON returned the committee's attention to HOUSE BILL
NO. 206, "An Act relating to the migratory game bird conservation
tag, to a nonresident combined sport fishing and hunting license,
to the nonresident military small game and sport fishing license,
to applications for certain licenses, tags, and permits issued by
the Department of Fish and Game, and to duplicate crewmember
licenses." [HB 206 had been heard previously during the
meeting.]
CO-CHAIR HUDSON reminded members that before the committee
[already adopted] was the proposed CS for HB 206, version 1-
LS0858\I, Utermohle, 2/16/00. He asked that Representative
Harris's staff outline the changes between the original bill and
Version I.
Number 1586
JOHN MANLY, Legislative Aide for Representative John Harris,
Alaska State Legislature, speaking on behalf of the sponsor,
explained that in Version I, Section 3 was repealed and
reenacted, so that it does not appear that a benefit for disabled
veterans is being taken away, which is how it appeared in the
original version of the bill. In addition, the term
"registration" has been inserted throughout Version I so that an
individual can register under the federal migratory bird harvest
information program.
Number 1858
REPRESENTATIVE BARNES made a motion to move CSHB 206 out of
committee with individual recommendations and the attached fiscal
note; she asked for unanimous consent. There being no objection,
CSHB 206(RES) moved out of the House Resources Standing
Committee.
HB 290 - STRANDED GAS PIPELINE CARRIERS
CO-CHAIR HUDSON announced that the next order of business would
be 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." [HB 290 was sponsored by the
House Resources Standing Committee. Before the committee was
CSHB 290(O&G).]
Number 1973
LORALI MEIER, Staff to Representative Beverly Masek, Alaska State
Legislature, speaking as the committee aide to the House
Resources Standing Committee, presented the sponsor statement:
As you know, before any North Slope natural gas
pipeline project can proceed, certain amendments to
existing statutes are required. The committee
substitute for House Bill 290, [Version G], amended in
[the House Special Committee on] Oil and Gas, will
amend the Pipeline Act [AS 42.06] to define a North
Slope natural gas pipeline consistent with existing
state statute.
This bill will clarify that the Regulatory Commission
of Alaska [RCA] has authority to regulate only the
intrastate transportation of North Slope natural gas
through the natural gas pipeline. Regulation of export
quantities will be regulated by the federal government.
CSHB 290(O&G) defines a fair, predictable and timely
process to identify and dedicate intrastate capacity in
a North Slope natural gas pipeline before one is
constructed, and it establishes the criteria for needed
pipeline system expansions to accommodate increased
demand for in-state gas supply.
CSHB 290(O&G) also will amend the Public Utilities Act
[AS 42.05] to clarify that a North Slope natural gas
pipeline is exempt from the requirement of operating
as a public utility. Finally, the Right-of-Way Leasing
Act [AS 38.35] will be amended to limit the requirement
of common carriage for North Slope natural gas pipeline
systems to the transportation of intrastate gas volumes
only.
CSHB 290(O&G) also defines the types of intrastate
transportation services that will be available in a
North Slope gas pipeline system. Collectively, these
changes are intended to provide greater certainty and
predictability in the regulation of North Slope natural
gas pipeline systems. This increased certainty will
increase the marketability of Alaska's North Slope
natural gas and hopefully will facilitate expedited
construction of a pipeline and related facilities
necessary to transport Alaska's North Slope natural gas
to market.
The changes made in the Oil & Gas Committee [CSHB
290(O&G)] I will address now. There were five
amendments. The first amendment changed all references
from stranded gas to North Slope natural gas. This
amendment will apply only to undeveloped natural gas on
the North Slope, to be sure that this bill would not
affect any other ... natural gas throughout the state,
such as in Cook Inlet.
The second amendment was offered because of concerns
brought up by committee members in the previous
committee of referral [House Special Committee on Oil &
Gas], as well as the Administration and the Regulatory
Commission of Alaska. This amendment removes the
requirement for a take-or-pay contract for local
distribution companies, also called LDCs; an example
would be Enstar or the Fairbanks Natural Gas Company.
The third amendment affects AS 38.05.182 by requiring
the commissioner of the Department of Natural Resources
to consider whether the royalty oil and gas taken in
kind may be necessary to meet the state's present and
projected intrastate, domestic and industrial needs.
It further requires the commissioner to obtain
legislative approval, by law, prior to excepting the
state's royalty in kind or in value. ...
The fourth amendment was meant to take care of concerns
by the RCA on expansion requirements. Before an
expansion of the pipeline can be made, the RCA must
make its determination stating that the requirements
must not impose undue financial burden on the carrier
or its customers. It also sets into law the
requirement that the cost may be borne by the person
making the request.
And the fifth amendment was adopted to address concerns
from Nan Thompson, who is the commissioner of the
Regulatory Commission of Alaska. She stated that the
RCA wanted the legislature to set the tariff
methodology for the gas pipeline in statute.
REPRESENTATIVE COWDERY asked whether HB 290 determines the points
for the pipeline.
Number 2271
MICHAEL HURLEY, ARCO Alaska Incorporated, and Manager, Alaska
North Slope Liquid Natural Gas (LNG) Sponsor Group, replied:
No, it doesn't. It should apply equally to any
terminus or pipeline system throughout the state. It
simply clarifies jurisdiction between the intrastate
and the export.
REPRESENTATIVE COWDERY asked whether the tariff of the pipeline
would be regulated.
MR. HURLEY specified that the tariff for the intrastate movement
of the pipeline would be regulated by the RCA. He then read his
testimony into the record:
We appreciate the opportunity today to express our
views on the House Special Committee on Oil and Gas
committee substitute for HB 290.
For the last year and a half, the sponsor group,
comprised of ARCO Alaska, BP Amoco, Foothills Pipe
Lines Ltd., Phillips Petroleum and Marubeni Corporation
....
REPRESENTATIVE BARNES interjected that there was a misstatement
of fact in Mr. Hurley's opening statement, because he had said BP
Amoco and the other entities have worked together for the last
year and a half; however, she believes that BP Amoco just joined
the sponsor group.
MR. HURLEY indicated that Representative Barnes was correct: BP
Amoco had joined the sponsor group in December. He continued:
For the last year and a half, ARCO Alaska, Foothills
Pipe Lines Ltd., Phillips Petroleum and the Marubeni
Corporation have been actively pursuing the development
of a new design for a market-viable LNG export project.
Crucial to the viability of this project is the
development of a commercial regulatory regime, which
will provide the regulatory certainty our long-term
customers require. Additionally, this bill was
designed to meet the needs of the state and federal
regulators for adequate access and commercial
oversight.
As originally envisioned, HB 290 was intended to
accomplish three goals: first, to provide clarity
about the regulatory jurisdiction of the Regulatory
Commission of Alaska (RCA) with respect to an LNG
export project, which would also supply intrastate gas
transportation needs; second, to limit the current
common-carriage provisions in the Right of Way Leasing
Act and the Pipeline Act for an LNG export project to
intrastate gas transportation; and third, to develop a
fair and equitable process for determining intrastate
capacity needs for the system.
The current committee substitute before you, in large
measure, accomplishes those goals, but has raised
several concerns that limit our support for the current
CS.
Section 1 of the CS addresses gas royalty issues
between the state and gas producers, which are outside
of the commercial regulatory structure for an LNG
export project. And while these issues may, or may
not, be legitimate policy questions for the state, we
believe their inclusion in this legislation detracts
from the clarity and certainty of commercial regulation
this legislation was designed to achieve. Thus, we
would respectfully suggest that this section be deleted
from this bill, and if warranted, considered in
independent legislative action.
The second section of the CS deals with the Right of
Way Leasing Act, and is only intended to clarify that
the current statutory common-carriage requirement
should apply only to intrastate gas shipments.
The third and fourth sections of the CS clarify that a
North Slope natural gas pipeline system's intrastate
shipments would be regulated under the Pipeline Act (AS
42.06), rather than under the Utilities Act (AS 42.05).
In Section 5, a new subsection is added to the Pipeline
Act creating procedures, within RCA's existing pipeline
certification process, for determining the amount of
pipeline capacity which should initially be set aside
for intrastate transportation.
That process sets out distinct criteria for capacity
for Local Distribution Companies (LDCs), which must
submit their gas purchase contracts to the RCA under
current regulations, and for large industrial gas
users, who must provide written commitments to
transport intrastate gas volumes, supported by take-or-
pay purchase commitments with stranded gas producers.
Likewise, in Section 6 of the CS, expansions of a
stranded-gas pipeline may be ordered by the commission
only if such requests for additional intrastate
capacity are supported by firm commitments.
Section 7 allows the RCA to consider allowing a
reservation or similar charge for firm intrastate
transportation in the intrastate tariff, which it must
approve.
Section 8 of the CS, which was added to the bill in the
House Special Committee on Oil and Gas, requires that
intrastate tariffs be designed as if the pipeline were
regulated under the Public Utilities Act. We believe
that this requirement creates a regulatory hybrid which
reduces the clarity and certainty intended in this
legislation.
Contrary to popular belief, the underlying statutory
requirements for tariffs under both the Public
Utilities Act and the Pipeline Act are the same. AS
42.05.381(a), under the Public Utilities Act, and AS
42.06.370(a), under the Pipeline Act, both impose the
identical requirement that tariff rates be "just and
reasonable."
We believe that the appropriate time for the detailed
determination of what should or should not be allowed
in an intrastate tariff will be when filed tariffs are
before the RCA for its consideration as to whether they
are just and reasonable. And we believe that the RCA
has the flexibility under their current statutory
standard to protect the public interest. Thus, we
would respectfully suggest that this section be deleted
from this bill because it needlessly creates
uncertainty about the intended regulatory regime.
Finally, Section 9 of the bill adds several definitions
of terms referred to in other sections of the bill, in
an effort to increase the clarity and understanding of
the other sections.
In summary, we believe Sections 1 and 8 of the CS
should be removed from the bill. They detract from the
intent of providing clarity in the regulatory regime
for the project.
I would like to thank the co-chairs and the committee
for your sponsorship of this important piece of
legislation, and for this opportunity to express our
views on the House Oil and Gas committee substitute for
HB 290, and I'd be happy to address any questions at
this time, or at your convenience.
Number 2664
CO-CHAIR MASEK said:
Before we start with questions from the committee, I
would like to ask you to address a few concerns that
have been brought to my attention. My staff received a
phone call on Friday afternoon from another possible
project sponsor. There have been questions as to the
motives of the ANS Sponsor Group regarding the
exclusion of the Marine Terminal Facilities and the LNG
plant from the Right of Way Leasing Act. Further, they
said the ANS Sponsor Group is trying to avoid oversight
from the Joint Pipeline Office (JPO), and indicated
that HB 290 in its current form would cause a
disadvantage to a project they are working on.
It was my understanding that ... before any North Slope
natural gas pipeline project could proceed, certain
amendments to existing statutes are required, and that
all potential project sponsors would benefit from the
changes addressed in HB 290. ... Have you attempted to
coordinate efforts with other potential project
sponsors on the effects of HB 290?
MR. HURLEY replied that they have, and their intent was to make
the project applicable to any project that was going to try and
move natural gas from the North Slope for export. He suggested
that clarifying the jurisdictional issues between the federal and
RCA jurisdictions is best handled in-state, [by] the legislature.
He indicated that they have begun discussion with the Port
Authority and Yukon Pacific Corporation. He pointed out that
none of the discussions he has had with anyone, including the
Port Authority that morning, have indicated that there is any
problem.
Number 2824
REPRESENTATIVE BARNES asked Representative Masek is she could
identify a sponsor that has not come forward with its concerns.
CO-CHAIR HUDSON said that those types of issues really need to be
put in writing, because he believes that what they are discussing
is landmark legislation.
MS. MEIER agreed with Co-Chair Hudson, saying she believes that
it would be beneficial if the groups that have concerns would
come forward and work with them on possible changes. She
referred to Representative Barnes' question and indicated that
the phone call she received Friday was from the Yukon Pacific
Corporation.
REPRESENTATIVE BARNES said she believes the groups that have
concerns should present their concerns in writing to the
committee staff. She asked Mr. Hurley how Sections 1 and 8 got
into the bill.
TAPE 00-12, SIDE B
Number 2983
MR. HURLEY said [begins midspeech because of tape change], "...
as an amendment."
REPRESENTATIVE BARNES wondered if it was due to testimony before
the committee or was just someone's idea.
MR. HURLEY replied that he believes it was from the chairman. He
continued that with respect to Section 8, which deals with the
tariff methodology, it is his understanding that Section 8 was
brought up before the committee initially by Nan Thompson and the
Regulatory Commission of Alaska.
REPRESENTATIVE BARNES referred to Mr. Hurley's testimony
regarding the belief that this requirement creates a regulatory
hybrid that reduces the clarity and certainty intended in this
legislation. She indicated that she assumes Mr. Hurley's belief
is that clarity and certainty existed prior to the time Section 8
was added. She asked him whether she is correct in thinking
that.
MR. HURLEY responded that they had discussions with Nan Thompson
as the bill was being heard in the House Special Committee on Oil
& Gas, and she brought forward several concerns that were dealt
with in Amendments 2 and 3. He indicated that there was some
concern about there being a hybrid, and they made some changes to
make sure that it was much clearer in "common carriage" than in
"public utility." He explained that Nan Thompson had one
additional concern about the tariff methodology that went in as
an amendment as well. Therefore, with the changes made by
Amendments 2 and 3, they thought it was much clearer that the
pipeline was to be regulated under the Pipeline Act, and what
made it a hybrid was the addition of Section 8, which was [added
by] Amendment 5.
Number 2845
MIKE BARNHILL, Assistant Attorney General, Oil, Gas & Mining
Section, Civil Division, Department of Law, commended the efforts
of the sponsor group and all others who are working toward
bringing the commercialization of North Slope natural gas to a
reality. He indicated that the Administration supports the
efforts. He also noted that the Administration has several
concerns with HB 290 in its present form.
REPRESENTATIVE BARNES asked if those concerns were in writing.
MR. BARNHILL replied that the concerns he was about to outline
are basically the same, with a few additions, as the ones
outlined by Roger Marks in the written testimony he submitted.
CO-CHAIR HUDSON asked Mr. Barnhill if he had testified before the
House Special Committee on Oil & Gas.
MR. BARNHILL replied yes.
CO-CHAIR HUDSON wondered if any of their changes were
incorporated during the deliberations in the House Special
Committee on Oil & Gas.
MR. BARNHILL responded that the additional concerns were
essentially with Section 1, which is a product of the
recommendations by the House Special Committee on Oil & Gas. He
continued that there are four concerns that the Administration
had expressed in that committee, and those are identified in the
written testimony by Roger Marks. There is one additional
concern, with respect to Section 1. He said he would be happy to
provide it in writing and to address the committee at a later
date.
REPRESENTATIVE BARNES stated, "Madam Chair, I have no objection
to hearing him now, but I don't want him coming down here anymore
without written testimony."
MR. BARNHILL explained that Section 1 is a change to the Alaska
Lands Act with respect to royalty in kind. He indicated that the
Department of Natural Resources (DNR) had asked him to share with
the committee its concerns. First, the department is concerned
that Section 1 creates a significant change to how royalty in-
kind contracts are handled. The remaining concerns, already
pointed out by Roger Marks, are these: The purpose of Section 2
is to clarify that the export portion of the North Slope natural
gas pipeline will not be a common carrier. The Administration
supports this effort and does not desire that the export portion
of the pipeline be a common carrier.
MR. BARNHILL said there are two issues raised by the specific
language, as proposed, that are of concern to the Administration.
The first is the use of the term "North Slope natural gas
pipeline carrier," which is now defined in the last section of
the bill. He explained that this definition - on page 9 of the
committee substitute - excludes marine terminal facilities; the
Administration is concerned that the exclusion creates an
unnecessary ambiguity in the Right of Way Leasing Act, which
explicitly includes marine terminal facilities. Under the Right
of Way Leasing Act, the Joint Pipeline Office currently regulates
marine terminal facilities such as the one in Valdez. Mr.
Barnhill reported that the Department of Law, Yukon Pacific
Corporation and the sponsor group are working closely to find
language that would be suitable to all parties. Although no
agreement has been reached yet, Mr. Barnhill believes there is
language which all three parties can find agreeable.
MR. BARNHILL said the second concern in Section 2 is that it
requires the intrastate portion of the natural gas pipeline to
act as a common carrier. He provided some background. Gas lines
in this country typically act as contract carriers, not common
carriers. That is because a common carrier must accept a
shipment of gas that is tendered to it whether it has the
capacity to handle that shipment or not; the way that it handles
that is by prorating the already committed shipments on the line.
For the Trans-Alaska Pipeline System (TAPS) it is not a problem,
because the pipeline is big enough to handle all the oil that is
tendered to it. For an intrastate gas pipeline in Alaska,
however, there might not be sufficient capacity for intrastate
use.
Number 2538
REPRESENTATIVE BARNES interjected:
On that point, it seems to me, if memory serves me
correctly, the whole point of this bill, then, was to
make sure that we could sign contracts - or whoever the
person was developing the gas - sign contracts for
export, knowing that there would be capacity within the
line to carry that export. And it seems to me what
you're saying here is that this really negates the
whole premise of having this section in here that
allows -- or for us passing a bill which says that we
will meet contracts in a timely manner.
MR. BARNHILL responded:
I'm not going to go so far as to say it negates it, but
I believe that it introduces an unnecessary ambiguity
into the system, and I think it is of extreme concern
to the state that we resolve this.
REPRESENTATIVE BARNES agreed.
CO-CHAIR HUDSON asked whether Mr. Barnhill is specifically
referring to Version G [CSHB 290(O&G)], which requires the
pipeline to operate as a common carrier.
MR. BARNHILL replied yes.
CO-CHAIR MASEK clarified that the language is on page 3, line 5.
Number 2449
MR. BARNHILL indicated that in 1997 the governor had commissioned
a North Slope natural gas commercialization task force. One of
the conclusions that they came to was that the gas pipeline
should not be a common-carrier pipeline, but a contract-carrier
pipeline. He pointed out that they appreciate the efforts of the
sponsor group to make sure that the export section of the
pipeline is not a common-carrier pipeline, but he doesn't believe
that it goes far enough.
MR. BARNHILL stressed the need to squarely address whether or not
the intrastate section of the pipeline should be a common
carrier. In Section 3, page 5, line 13, it excludes the North
Slope natural gas pipeline from the Public Utilities Act (AS
42.05). He explained that his original understanding for the
exclusion was the perception that the Public Utilities Act and
the Pipeline Act were different; therefore, he was surprised to
hear from the sponsor group that the rate-making methodology
under each Act is the same. He indicated that he is unclear as
to why, at the outset, the exclusion is in the bill if the rate-
making methodology is the same. The concern of the
Administration is that the differences between the Public
Utilities Act and the Pipeline Act are carefully looked at, to
ensure that if the North Slope natural gas pipeline is excluded
from the Public Utilities Act, it is done with a full
understanding of what is being lost and gained.
Number 2212
MR. BARNHILL addressed the four concerns outlined by Roger Marks
in his written testimony dated February 1, 2000. The first
concern has to do with local jurisdictions committing in advance
to secure pipeline capacity without knowing what the cost will
be, especially if the gas-purchase contracts are also not in
place. The second concern has to do with allocation of capacity
between intrastate and export use in the event of shortages or
excesses of capacity. The third concern has to do with exclusion
of the pipeline from the Public Utilities Act and subjection to
the Pipeline Act, and they are still analyzing the extent to
which the differences between the two may be material. The
fourth concern has to do with the exclusion of marine terminal
facilities from the Right of Way Leasing Act.
REPRESENTATIVE WHITAKER referred to Section 1 and asked whether
the commissioner is concerned with regard to the following
language:
Before taking any action with regard to the taking and
disposition of royalties on oil and gas, the
commissioner shall submit a proposed determination to
take royalty to the legislature ...
and
If the legislature does not approve the proposed
determination, the commissioner may not implement the
determination as submitted.
MR. BARNHILL indicated that the commissioner's office did not
share with him any substantive concerns.
REPRESENTATIVE WHITAKER surmised that there is a "separation of
powers" issue. He explained that his concern, in introducing
that amendment, was that they protect the legislature's purview
and oversight.
[Co-Chair Masek asked Mr. Hurley to respond to Mr. Barnhill's
concerns.]
Number 2050
MR. HURLEY indicated that the Administration has maintained these
four concerns for some time. He referred to the first concern,
having to do with precommitting capacity usage for intrastate
volumes without knowing what the price is going to be; he
explained that it was essentially addressed in the amendments
that were taken up in the House Special Committee on Oil & Gas.
He pointed out that they are trying to lower the bar for the
communities that are going to be getting gas along the system, so
that they don't have to commit to big take-or-pay contracts as
long as they are providing residential and commercial use. He
explained that the fear the sponsor group had was with large
industrial uses that would have space built and then have their
financing fall through; therefore, they have kept the bar high
for large industrial uses.
MR. HURLEY said the question as to what the remaining tariffs
will ultimately be depends on the cost of the system. He pointed
out that the second concern that the Administration raised was
with the allocation of capacity between in-state and export [use]
during shortages. He explained that in situations involving
shortages, there are certain requirements under federal statute
for export use to be cut back to meet in-state use. He noted
that the Regulatory Commission of Alaska should be able to handle
intrastate volumes.
REPRESENTATIVE BARNES asked how they plan to deal with the
contracts they have with purchasers of gas during shortages.
MR. HURLEY explained that in the event of shortages, most of the
contracts will have force majeure clauses, meaning it will not be
the fault of the LNG company if it is unable to get gas from the
producers because of an operational upset or catastrophic event.
REPRESENTATIVE BARNES stated that she could understand if there
were an operational upset or catastrophic event, but she was
referring to export use being cut back to meet in-state use.
Number 1812
MR. HURLEY clarified that the export contracts would be under the
force majeure clause. He referred to the third concern, having
to do with the marine terminal and the Right of Way Leasing Act,
and indicated they are trying to work on that, to come up with
something reasonable. He pointed out that their intent for
removing the marine terminal from the definition of the system
was to take care of the current Right of Way Leasing Act
requirement that there be contract carriage for any right-of-way
lease. He noted that they were only trying to exclude that
terminal and that LNG plant, because the LNG plant will be
dedicated for export. If it were under common carriage, it would
be open for people to come in and force the sale of LNG in the
state, which is not necessarily what the plant will be designed
for. He added that the ability for someone to set up an LNG
plant and get gas from the system and provide LNG in-state is not
impinged upon.
REPRESENTATIVE BARNES said she believes that if they exclude the
marine terminals and the integrated plant, facilities and
equipment, then they are excluding a large portion of what should
be at the end of the line, as it relates to an LNG project. She
said she is not comfortable with the language.
MR. HURLEY replied that he is aware of that concern, and they are
trying to work out some of the language to make that clear. He
explained that all they are trying to do is to make sure the
plant is not under common carriage.
REPRESENTATIVE BARNES explained that she just wants to make sure
that there is a plant at the end of the line.
MR. HURLEY indicated he wants that as well. He further stated
that the fourth concern is a jurisdictional issue between the
Public Utilities Act and the Pipeline Act. The sponsor group
believes that the Pipeline Act, which was designed for a trunk
line wholesale oil and gas pipeline movement, was more
appropriate than the Public Utilities Act, which was designed for
direct sales to consumers. He pointed out that the sponsor group
does not anticipate, at this time, to be selling gas from the
pipeline to individual consumers along the way; they did not want
to step on the toes of local distribution companies like Enstar
and Fairbanks Natural Gas.
REPRESENTATIVE BARNES said it seems that he is correct on that
point, but wondered if they also regulate oil under the Public
Utilities Act.
MR. HURLEY clarified that they regulate it under the Pipeline
Act.
Number 1476
ROSS COEN, Alaska Forum for Environmental Responsibility,
testified via teleconference from Fairbanks. He addressed one
point having to do with the marine terminal exemption. He
referred to page 9, Section 9, paragraph (16), where it defines
"North Slope natural gas pipeline" to specifically exclude marine
terminal facilities, including pollution control equipment. He
said that as he reads it, while individual state agencies will
retain the regulatory authority on a marine terminal, the
regulation could not occur under the Joint Pipeline Office; from
a purely environmental standpoint, therein lies his concern. It
has come to his attention that the exemption is motivated purely
by the economics of the proposed gas line.
MR. COEN proposed that there be whatever provisions are necessary
for the project to be economically feasible, but that the bill be
amended to specifically include full regulatory authority over
pipelines and facilities by the Joint Pipeline Office, in order
to have the necessary level of environmental safeguards,
regulation and oversight. He said he would have difficulty
believing that the entire project and its economic feasibility
hinge entirely on whether the Joint Pipeline Office retains
regulatory authority.
REPRESENTATIVE BARNES indicated she is under the impression that
if the committee corrects what Mr. Coen has recommended, then the
Alaska Forum for Environmental Responsibility will be in support
of the gas line.
MR. COEN said he is not sure he would go so far as to say that
they would throw their full endorsement behind the gas line;
however, if the gas line were to be built, then they would seek
to have it be built in the most environmentally responsible
manner possible.
REPRESENTATIVE BARNES said she would like to think that anything
they do will be in the most environmentally sensitive manner
possible. She would also like to think that if the committee
makes the recommended changes, they will have his [Mr. Coen's]
and the Alaska Forum for Environmental Responsibility's
wholehearted support of the gas line.
MR. COEN indicated that when and if that happens, they will talk.
NAN THOMPSON, Commissioner, Regulatory Commission of Alaska
(RCA), Department of Community & Economic Development, testified
via teleconference from Anchorage. She explained that the
purpose of her testimony is not to support or oppose HB 290, but
to clarify the standards that the RCA will be called upon to
require if the bill passes. When the bill was introduced in the
House Special Committee on Oil & Gas, that committee identified
some areas of confusion between utility and common-carrier
regulation that she thought could potentially create problems for
potential intrastate users and problems for the RCA as regulators
in understanding which standards to apply.
MS. THOMPSON pointed out that the three concerns that she
originally had identified - relating to initial access standards,
expansions and tariff methodology - were clarified with
amendments introduced in the House Special Committee on Oil &
Gas. She explained that the amendment relating to tariff
methodology was a good idea, because there are significant
differences between the way they regulate pipelines and
utilities. The statutes are different, but the more significant
differences are in the case law that has been applied
interpreting those statutes and the theory under which rates are
designed. Utility rates are set by the RCA, using elements in a
rate base, allocating that fairly over time, and allowing a
return. The utility has to approve that all of the rate-based
elements and all of the costs which they are going to include in
their basic rates are ones that they need to incur in order to
deliver the service.
MS. THOMPSON pointed out that pipeline tariffs generally do not
require the same degree of certainty and proof. An important
difference for Alaska is that there is not nearly as much case
law on pipeline tariff methodology. Most of the major pipeline
tariffs in Alaska have been approved by agreement. The rates are
negotiated between the major users and the pipeline owners
themselves are approved for the same degree of finding of "just
and reasonable" as for all the elements of a tariff. The reason
that is a problem is not because it necessarily creates unfair
rates, but because it would create less certainty for a potential
intrastate user. Those intrastate users need to have some idea
of what they are going to be charged for transportation, in order
to decide if they want to take advantage of this opportunity to
use gas from this line. She indicated that [RCA] is not going to
be able to tell those users what the rate will be before they
start; however, if [RCA] tells them that it is a utility tariff
methodology, they will have the formula and, therefore, will be
able to determine, within some range, what the result will be.
MS. THOMPSON respectfully disagreed with Mr. Hurley that it
creates some ambiguity. She said she believes it resolves an
ambiguity that was in the original bill as to which tariff
methodology they should use. She clarified that some gas lines
in the state are regulated as utilities; the owners of those gas
lines have chosen to be regulated as utilities. She pointed out
that Representative Barnes was correct that no oil pipelines are
regulated as utilities.
Number 0879
REPRESENTATIVE BARNES wondered if Marathon also has some of those
lines.
MS. THOMPSON replied that Marathon's Cook Inlet pipeline is
regulated as a utility for tariff purposes.
Number 0835
REPRESENTATIVE WHITAKER requested clarification on whether HB 290
is intended for in-state uses to utilize a utility methodology
for determining rates.
MS. THOMPSON affirmed that.
REPRESENTATIVE WHITAKER requested clarification on whether the
determinant for the rate-making methodology is public interest.
MS. THOMPSON answered, "That is correct."
REPRESENTATIVE WHITAKER suggested that what they have determined,
then, is that it is in the public's best interest to have the
public interest as the highest priority as a determinant for rate
making.
MS. THOMPSON said that is correct. She pointed out that the
public interest is an important consideration in looking at
utility rates. Under both the Pipeline Act and the Public
Utility Act, a "just and reasonable" standard is applied; under
both, a fair return is required. She indicated that under a
utility tariff methodology, it would provide an in-state user
with predictable rates.
Number 0722
REPRESENTATIVE WHITAKER stated that the intent of the changes to
HB 290 was to do just that. He indicated that it is incorrect to
say that what they intended was to have the pipeline company act
as a utility.
REPRESENTATIVE BARNES said she appreciates where Representative
Whitaker is coming from. She indicated she is a supporter of in-
state use of a portion of the natural gas from the North Slope,
because she believes there is plenty of gas for both. She added
that it is also important not to mix the export and the in-state
use, and they have to be careful in the legislation in how they
draft that.
Number 0546
CO-CHAIR MASEK stated:
In reviewing the record of the hearings before the
previous committee of referral for CSHB 290(O&G), it
became clear that several issues were raised by the
Administration in its testimony as "preliminary" or
"tentative" concerns. It is also clear that the
Administration's preliminary concerns represented
issues raised by a number of different departments and
agencies, including the Departments of Natural
Resources, Revenue, and Law, as well as the State
Pipeline Coordinator's Office and the Regulatory
Commission of Alaska.
What is not clear from the record is which of those
concerns have been resolved by the amendments adopted
in the previous committee. As I said when this
committee decided to sponsor this legislation, I
believe this is a very important bill that can advance
Alaska's interest in developing an export project for
its vast North Slope natural gas reserves. Therefore,
it is my hope that we can resolve any real concerns or
issues surrounding this bill in the committee.
To avoid that result, I am asking the Administration
representatives who have continuing concerns - those
individuals who called the committee's staff last
Friday - to express their new-found concerns, and the
committee's staff to meet with representatives of the
ANS-LNG Sponsor Group in an informal working group to
see if those concerns can be resolved. I ask these
parties [to] coordinate with committee staff, Ms.
Lorali Meier, to set up whatever meetings or
teleconferences may be necessary, over the next two
days, to identify and resolve outstanding concerns.
I am also asking the parties to work with Ms. Meier,
and to bring me any proposed amendments for resolved
issues and a list of outstanding issues by Thursday of
this week. This effort is [in] no way intended to
substitute for this committee's thorough review and
discussion of CSHB 290(O&G). Rather, it is intended to
provide needed clarity as to what outstanding issues
the committee [needs to] consider. Committee members,
as well as the public, will have ample opportunity to
address their concerns - including previously raised or
new concerns and issues - in subsequent hearings on the
bill.
CO-CHAIR MASEK appointed a subcommittee consisting of
Representatives Hudson, Joule and Barnes. She requested that
Representative Barnes chair the subcommittee. [HB 290 was held
over.]
ADJOURNMENT
Number 0169
CO-CHAIR MASEK adjourned the House Resources Standing Committee
meeting at 2:45 p.m.
| Document Name | Date/Time | Subjects |
|---|