02/16/2004 01:35 PM House RES
| Audio | Topic |
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+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE RESOURCES STANDING COMMITTEE
February 16, 2004
1:35 p.m.
MEMBERS PRESENT
Representative Nancy Dahlstrom, Co-Chair
Representative Beverly Masek, Co-Chair
Representative Cheryll Heinze, Vice Chair
Representative Carl Gatto
Representative Bob Lynn
Representative Nick Stepovich
Representative Kelly Wolf
Representative Beth Kerttula
Representative David Guttenberg
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
SPONSOR SUBSTITUTE FOR HOUSE BILL NO. 296
"An Act making an appropriation to the Alaska Natural Gas
Development Authority; and providing for an effective date."
- MOVED SSHB 296 OUT OF COMMITTEE
HOUSE BILL NO. 341
"An Act relating to the dive fishery management assessment."
- SCHEDULED BUT NOT HEARD
PREVIOUS COMMITTEE ACTION
BILL: HB 296
SHORT TITLE: APPROP: NATURAL GAS DEVELOPMENT AUTHORITY
SPONSOR(s): REPRESENTATIVE(s) CROFT
05/02/03 (H) READ THE FIRST TIME - REFERRALS
05/02/03 (H) O&G, RES, FIN
01/20/04 (H) SPONSOR SUBSTITUTE INTRODUCED
01/20/04 (H) READ THE FIRST TIME - REFERRALS
01/20/04 (H) O&G, RES, FIN
02/10/04 (H) O&G AT 1:00 PM CAPITOL 124
02/10/04 (H) Moved SSHB 296 Out of Committee
02/10/04 (H) MINUTE(O&G)
02/11/04 (H) RES AT 2:00 PM CAPITOL 124
02/11/04 (H) <Pending Referral>
02/12/04 (H) O&G RPT 4DP 1DNP 1NR
02/12/04 (H) DP: HEINZE, CRAWFORD, KERTTULA,
02/12/04 (H) MCGUIRE; DNP: KOHRING; NR: HOLM
02/16/04 (H) RES AT 1:00 PM CAPITOL 124
WITNESS REGISTER
REPRESENTATIVE ERIC CROFT
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Testified as sponsor of SSHB 296.
HAROLD HEINZE, Chief Executive Officer
Alaska Natural Gas Development Authority
Anchorage, Alaska
POSITION STATEMENT: During discussion of SSHB 296, discussed
ANGDA's history and participation in the gas line.
STEVEN B. PORTER, Deputy Commissioner
Office of the Commissioner
Department of Revenue
Juneau, Alaska
POSITION STATEMENT: During discussion of SSHB 296,
characterized ANGDA as a very effective tool and participant in
the overall process.
ROBERT VALDATTA, Member
City Council
City of Seward
Seward, Alaska
POSITION STATEMENT: During discussion of SSHB 296, offered an
opinion regarding the possible route of a proposed pipeline.
NELS ANDERSON
Dillingham, Alaska
POSITION STATEMENT: Urged the committee to approve SSHB 296.
DOROTHY ANDERSON
Dillingham, Alaska
POSITION STATEMENT: During discussion of SSHB 296, urged the
committee to support the request of the funds necessary to
perform the feasibility study.
PAUL FUHS, Volunteer Lobbyist
for Backbone 2
Anchorage, Alaska
POSITION STATEMENT: Testified in support of SSHB 296.
ACTION NARRATIVE
TAPE 04-4, SIDE A
Number 0001
CO-CHAIR BEVERLY MASEK called the House Resources Standing
Committee meeting to order at 1:35 p.m. Representatives Masek,
Dahlstrom, Heinze, Wolf, Gatto, Lynn, Guttenberg, and Kerttula
were present at the call to order. Representative Stepovich
arrived as the meeting was in progress
HB 296-APPROP: NATURAL GAS DEVELOPMENT AUTHORITY
CO-CHAIR MASEK announced that the first order of business would
be SPONSOR SUBSTITUTE FOR HOUSE BILL NO. 296, "An Act making an
appropriation to the Alaska Natural Gas Development Authority;
and providing for an effective date."
Number 0198
REPRESENTATIVE ERIC CROFT, Alaska State Legislature, speaking as
sponsor of SSHB 296, explained that SSHB 296 is a funding bill
for the Alaska Natural Gas Development Authority (ANGDA), which
was formed by a voter initiative that received an overwhelmingly
favorable vote. He said he believes it reflects an Alaskan
interest in inquiring into whether the state should have any
ownership interest in the [gas pipeline]. He said there's a lot
that the state can bring. This bill doesn't mandate state
participation, rather it is the funding mechanism for the state
to explore, develop, and know whether a [gas pipeline] would
make sense, he said. Representative Croft said ANGDA was given
$150,000 of start-up money six months after its formation and
was given an additional $250,000 about a year after its
formation. He said ANGDA is coming up on its statutory deadline
to issue a report to the legislature and to the people regarding
the benefits it can bring.
REPRESENTATIVE CROFT said he thought the benefits of ANGDA's
participation could be extraordinary. He said ANGDA is focused
on bringing benefits in terms of profit as well as access to
natural gas. He explained that access to natural gas would help
with exploration for companies that explore in Alaska to get
their gas into the pipeline. Furthermore, access for Alaskans
to have natural gas to heat their homes and to fuel industry.
One of the key components of any state's long-term economic
future is a stable supply of affordable energy and is what runs
economies. He said it would be a great shame and an irony if
Alaska, with its great energy wealth, held back its economic
development, particularly in Southcentral, because of a lack of
cheap natural gas. He remarked, "It also can help lower the
cost of service for the producer-owned or the MidAmerica[n]
owned or any real combination of ... owners by applying the
federal tax benefits." He said [ANGDA's participation] can
lower the amount of the tariff and the cost of service, and
significantly lower the cost of the entire project.
Representative Croft said, with this bill, it isn't too late to
give ANGDA the appropriate amount of funding to carry forward
its voter-approved mission and make an informed decision with
regard to the role Alaska should take in this. He highlighted
the bipartisan support SSHB 296 has. Representative Croft
remarked, "It's probably the most significant economic decision
this state will face in the next 20 years, and we should make an
informed one."
Number 0521
REPRESENTATIVE STEPOVICH asked what exactly the money would go
toward.
REPRESENTATIVE CROFT explained that this discussion pertains to
a $15 billion project and whether [the state] should, and to
what extent, have participation in it. The question is whether
[the state] should invest in this project itself or whether [the
state] should simply have [ANGDA] extend tax-free benefits and
other benefits. Those are major economic choices, he said. As
Harold Heinze [Chief Executive Officer, Alaska Natural Gas
Development Authority] testified [at a prior hearing], any
business entity would spend much more than [$2.15 million]
analyzing the risks and benefits of such a project.
Representative Croft explained that [$2.15] million would go
towards market studies and legal analysis with regard to how far
that tax benefit extends, so the [state] is very sure of it.
Various studies, some preliminary engineering, marketing, and
legal analysis is key to the state determining what role [ANGDA]
should play, he said.
REPRESENTATIVE CROFT said [the state] does not want to make a
$15 billion decision without being sure that it's conferring
some benefits, "so this would prevent us from making, possibly,
a great mistake." Furthermore, he said this money would allow
[the state] to reap a tremendous benefit if it does make sense.
He said he believes this is money well spent whether it prevents
the state from making the wrong decision or allows it to make
the right decision on a $15 billion project that has the
possibility of [earning] billions for the state.
Number 0684
CO-CHAIR MASEK said the House Finance Committee is the
appropriate committee to deal with the [financial] impact [of
the bill] and with the appropriations being requested.
Therefore, she asked members to abstain from asking any fiscal
questions.
Number 0709
REPRESENTATIVE GATTO pointed out that there are a few other
issues. For example, the tankers for this [project] have not
been built, which involves The Jones Act and thus makes it more
difficult. Furthermore, [the state] does not have the pipe,
which he understands has to be designed because [it is
necessary] to "develop a certain strength [of pipe] that
currently is not developed yet." He said there are certain
things in the future that the state would have to do, and this
[legislation] directs [the state] to "a place where we arrive"
and decide it is time to build tankers and design, develop, and
build pipe, and "design to get a workforce." He asked if this
is what the $2.15 million will do.
Number 0786
REPRESENTATIVE CROFT said Representative Gatto is quite right
with regard to the availability of the necessary pipe. He
related his understanding that the pipe that doesn't exist is
for the "6 bcf high capacity line". He said answering those
questions is very important, as is answering The Jones Act
question of whether [the state] can ship to Mexico, where it's
technically not going "U.S. to U.S." Representative Croft
remarked, "If we have the hull, my understanding is [The] Jones
Act just requires that the hull, not the entire (indisc.)
[tanker be constructed in the U.S.]." Although Mr. Heinze gave
an excellent presentation before the House Finance Committee
regarding some of the ways [The Jones Act] would be
accommodated, questions remain regarding the tax benefit, The
Jones Act restrictions, preliminary engineering, and some of the
market confirmations. Representative Croft said [SSHB 296]
allows [the state] to make a very important decision on an
informed basis.
Number 0903
REPRESENTATIVE GATTO asked how long gas would flow given the
pipe diameter, the size of the gas field, and the internal
pressures.
REPRESENTATIVE CROFT replied that there is 35 trillion in known
reserves and there are estimates that there is another like
amount. However, it's a difficult question to answer because
natural gas has only recently been searched for on the North
Slope. All of the natural gas that has been found has been
accidentally found while looking for oil, he mentioned. He said
[the state] has never had the opportunity [to search for natural
gas] because it has never had a "ready place" to commercialize
it. With regard to the known reserves at 2 bcf "we're talking
about 20 years". However, most oil industry observers think
there is a tremendous amount more out there.
Number 0978
REPRESENTATIVE LYNN asked how the passage of this bill would
impact negotiations on the potential highway route for which
negotiations are now occurring. He asked if it would be "a plus
or a minus."
REPRESENTATIVE CROFT replied that he thought it would be a plus
in that ANGDA has evolved its thinking to some extent, in that
ANGDA views itself more as an adjunct, an assistant to any of
these projects. For example, he said "doing one portion of it
for them; doing a spur line for them; having a way for their tax
exempt status to lower the cost of service for any
participants." He remarked, "More and more I think the
administration and the authority are seeing their primary value
as ways to help whatever project goes forward."
Number 1052
REPRESENTATIVE STEPOVICH said his understanding is ANGDA is
taking on a different role than previously planned with the
other inclusions of MidAmerican and the producers, and that
there will be an "incentive almost for these guys creating the
incentive."
REPRESENTATIVE CROFT said he didn't want to imply that ANGDA had
abandoned its original role, a stand-alone model, because ANGDA
will still be investigating whether it makes sense to do it
alone. However, in light of the two major applications the
state has, ANGDA is seriously considering how it can help those
other applications as well. Representative Croft explained that
it is thought that ANGDA could significantly lower the cost for
a private entity or a collection of private entities wanting to
do this because ANGDA's tax exempt status and its ability to do
things that private industry is unable to do. The applications
haven't taken away the need for ANGDA, but have forced it to re-
evaluate its role, which is a significant role that needs to be
investigated.
Number 1143
REPRESENTATIVE STEPOVICH asked if there is support from [the
producers and from MidAmerican] for ANGDA to obtain this money.
REPRESENTATIVE CROFT said that he didn't know. However, he
pointed out that to date there hasn't been opposition or support
from them, which he interpreted to mean that they have
considered it the legislature's decision. Representative Croft
informed the committee that MidAmerican has expressed interest
in the ways in which the state might assist.
REPRESENTATIVE HEINZE remarked that she viewed this as a vote
from the people rather than whether the producers sanctioned it
or not. She referred to the Petroleum News article [in Volume
9, Number 7] which discusses the shift in ANGDA. The article
specifies that the administration has recommended that it's time
to stop planning stand-alone LNG and rather [ANGDA] should
review spur lines from the Interior bringing gas to Southcentral
Alaska, which would supplement declining Cook Inlet supplies, as
well as a smaller line to tide water at Valdez. Representative
Heinze suggested that [the committee] needs to review [this
legislation] with regard to what is being redefined.
REPRESENTATIVE CROFT pointed out that one of the ways to
maintain tax exempt status and add value to the project is to
take a portion of it, an element of cost of it, with the reduced
cost of service. The aforementioned reduces the overall cost of
the entire project. Representative Croft informed the committee
that the administration has expressed interest in raising [the
appropriation] to $3 million and have it go through the
Department of Revenue. In response to the aforementioned
notion, Representative Croft said that he didn't know.
Number 1372
HAROLD HEINZE, Chief Executive Officer, Alaska Natural Gas
Development Authority (ANGDA), began by noting that the
committee packet should include written testimony from him. Mr.
Heinze said that he would like to focus on the legislature's
role as the policy maker with regard to resources. He reminded
the committee that ANGDA was created by initiative and given a
mission to play a role in bringing North Slope gas to market,
particularly in LNG projects out of Prince Williams Sound with a
spur line into the Cook Inlet area. The initiative merely
mandated that ANGDA study the aforementioned project and make
some determination with regard to its feasibility. Mr. Heinze
said that the initiative [forming ANGDA] was formulated and
passed fairly overwhelming because Alaskans were frustrated and
wanted something to happen. Furthermore, there was a feeling
that the benefits to Alaska and Alaskans wasn't being fully
understood. The aforementioned led to the formation of ANGDA,
the board of which has focused on benefits to Alaska.
MR. HEINZE informed the committee that ANGDA has been working in
three major areas, which are consistent with the mandate of the
initiative. First, ANGDA has to understand the basic business
structure. Although ANGDA was created as a public corporation
of the state, no one specified how it would be put together. He
characterized [ANGDA] as an expression of the owner-state
notion. Second, ANGDA has spent much energy identifying and
understanding all the benefits that such a project could bring
to Alaska and Alaskans. In the past many have made decisions on
resource development based on the rate of return or the number
of dollars that flow to the state treasury. However, [this
legislation] proposes a much broader look with regard to what
this holds for Alaska, which is what ANGDA hopes will occur as a
matter of policy. Third, numbers, schedules, and project
designs and cost have been worked on. Mr. Heinze highlighted
that "market" has been a key question. However, he recognized
that there are some competitive issues.
Number 1714
MR. HEINZE said that the requested funding does satisfy the 11
elements listed in the ballot measure. Although ANGDA hopes to
receive the stranded gas applications, absent those ANGDA has to
proceed on its own. Since those applications have been
received, ANGDA's board met and decided that for the next few
months it would be willing to change its priority in order to
make its work fit with the state's total effort to work with the
stranded gas applications. Mr. Heinze noted that the committee
packet should include copies of the letters he wrote to the two
different applicant groups. He characterized the letters as
open-ended with regard to how the authority might work to
enhance the project. He specified that ANGDA believes it can
help with the work and possibly lower the cost of service, which
is ANGDA's business model. He highlighted that ANGDA is in the
business of lowering the cost of service rather than making a
profit. Furthermore, ANGDA believes it has ideas with regard to
making the sponsors' projects even better.
MR. HEINZE returned to the policy matter and pointed out that
the committee will ultimately be the focal point with regard to
decisions that have to be made. He mentioned that there need to
be some comparison points. Mr. Heinze announced that ANGDA is
happy to work with the administration with regard to getting the
North Slope gas to market.
Number 1844
MR. HEINZE said that he was comfortable that the $2.5 million
will be wisely spent to provide information the committee will
need when making decisions on proceeding. From a policy
standpoint, ANGDA doesn't visualize the state investing or
determining in a financial sense whether this project goes
forward. The private markets, he opined, will provide the
investment funds for this project. The aforementioned is
important because in the past the state has had difficulty
making good economic decisions. Mr. Heinze specified that
[ANGDA] is going to look to the market place to determine
whether the project is appropriate in an economic sense. Still,
the state shouldn't only accept an economic view by the resource
leasers. If ANGDA can define a project or a way in which to
make the project work, the [legislature] needs to understand
that in order to determine how the state wants to proceed and
the role it may want to play. The aforementioned decision at
the state level will involve the legislature, the governor, the
ANGDA board, and the people of Alaska. Mr. Heinze said that
ANGDA feels that it's important to provide a good piece of work
from which everyone can make judgment.
Number 2002
REPRESENTATIVE KERTTULA turned attention to the February 13,
2004, memorandum from Mr. Heinze to the producers, which
specifies that the "... Beaufort Sea alternative route might
become possible if North Slope gas was available to Alaskans
...." She inquired as to how that might be possible.
MR. HEINZE explained that he was trying to indicate to the
producers that in one case [ANGDA's] project shares the first
530 miles with the [producer's] project down the highway.
Therefore, there are some interactions that could be mutually
beneficial. Mr. Heinze specified that he was trying to indicate
that although one of the producers has shown a preference for
the "over the top" route, he understood the application from the
producers to be route neutral. Mr. Heinze related his belief
that Alaska has so violently opposed that route because it
doesn't "do anything" for Alaska. Therefore, he suggested that
ANGDA's project or some scale of it might make Alaska feel good
about its North Slope gas reserve and how Alaskans are tied into
it. Once the aforementioned is accomplished, then it would seem
there would be the ability to review alternatives with a
different eye.
Number 2119
REPRESENTATIVE STEPOVICH asked if the lower cost of service Mr.
Heinze spoke of would be passed on to the consumer.
MR. HEINZE explained that when ANGDA reviews the billions
invested and the high rate of return on those by a taxable
organization, the tariffs required are fairly high. For
example, when the state builds a road there is no profit
objective and very low interest bonding is utilized. The
calculations done by ANGDA indicate that the difference between
the tariff levels is very large. In the case of the broad
economics of these projects, [the tariff levels] make a
tremendous difference with regard to whether a project is
economic or not. He informed the committee that ANGDA has made
no determination with regard to what exactly will be attempted
in that area. Furthermore, tax, bonding, and funding experts
have been hired to review what combination would result in lower
cost of service. In this case, discounting the cost of service
by 25-30 percent would be extraordinarily significant. Such
discounts are possible based on the business structure.
Number 2225
REPRESENTATIVE HEINZE recalled testimony Mr. Heinze gave at
another committee meeting. She recalled that he said that when
he was president of ARCO he would've spent $50 million to get
answers. Therefore, she questioned whether the $2 million for
this will produce the same quality of answers.
MR. HEINZE acknowledged that $2-$2.5 million is a lot of money.
However, in terms of the first steps toward a multi-billion
dollar project, [those] in the private sector would be willing
to pay far more than $2.5 million in order to ensure that a good
first decision is made. He reminded the committee that after
spending $2.5 million [the state] may choose to walk away, and
therefore it's worth a lot to make sure the decision is correct.
Mr. Heinze pointed out that a better decision is being obtained
with the $2.5 million because there is about three decades of
work from various groups that have reviewed these projects.
Furthermore, much information and input is being donated from
various entities. Mr. Heinze reiterated that $2-$2.5 million is
a lot of money, although it's a small amount compared with the
magnitude of the decision.
REPRESENTATIVE STEPOVICH asked if [ANGDA's supplemental funding
request] will be wasted money if these two other projects come
on line.
Number 2486
STEVEN B. PORTER, Deputy Commissioner, Office of the
Commissioner, Department of Revenue, posed a situation in which
the state is the owner of the land on the North Slope and the
state leases the land to the oil companies. After the lessee
produces a product, it's [the lessee's] job to get the product
to market. Getting the product to market can be accomplished in
a number of different ways such as via trucks within the
lessee's own system. Another alternative is to hire a major
trucking firm to move the product to market. The aforementioned
is the situation in which MidAmerican finds itself.
Furthermore, a company can hire a lot of independents [to move
the product to market]. Mr. Porter noted that ANGDA could
actually build the pipeline for the majors. However, what
usually happens is that the major trucking companies will
[compete] for the major trunk lines and won't service any of the
communities in between while the independents will service all
of the communities in between. Mr. Porter said that [the
department] sees the need for ANGDA to do exactly that. He
agreed with Mr. Heinze that ANGDA needs to be focused on in-
state gas benefits because there is not a substantial amount of
interest in the spur lines from any of the major players.
Therefore, the hope is that ANGDA would identify the [in-state
gas] benefits, bring them to the table, and compliment the
entire process. Mr. Porter said he views ANGDA as a very
effective tool and participant in the overall process.
Number 2603
REPRESENTATIVE GATTO inquired as to what would happen if the
entire appropriation is spent but only half of the goal is
reached.
MR. PORTER noted that [the department] is recommending that [the
ANGDA supplemental funding] be increased from $2.15 million to
$3 million. Mr. Porter pointed out that the state is
negotiating with two separate Stranded Gas Development Act
applications and ANGDA is reviewing feasibility, which overlaps.
Many of the issues the [state] needs to address, ANGDA does as
well. Therefore, the desire is to make efficient use of the
money so that the question is answered once, not twice.
MR. PORTER turned to Representative Gatto's question. If the
[department] has underestimated [the supplemental funding] but
has truly spent the money wisely, then [the department] should
return [to the legislature to request additional funds]. Mr.
Porter pointed out that the oil and gas industry spent close to
$100 million evaluating the pipeline going through the Alaska
Highway and over $10 million evaluating the LNG line process.
Although this request for $2.15 million scratches the surface,
it provides [the state] with the opportunity to understand
feasibility. In order to do the aforementioned, money needs to
be available to answer the questions in the negotiations on the
stranded gas side. However, those questions aren't readily
apparent until the negotiations take place. Mr. Porter recalled
Governor Murkowski's speech that specified that the highest
priority is to protect the interest of the state. Therefore,
whatever funding that requires should be funded. The
[department] believes that it will require $3 million [to
protect the interest of the state].
Number 2766
REPRESENTATIVE KERTTULA asked if [the department] has, through
reciprocal confidentiality agreements, been able to review any
of the studies that the producers have done.
MR. PORTER pointed out that the Stranded Gas Development Act
contemplated that and thus the Act states that the [state] has
the right to request such information. The hope is that the
producers will cooperate. The more cooperation from the
producers, the less cost for the state to participate, he
highlighted. In further response to Representative Kerttula,
Mr. Porter said he would keep the committee abreast of the
process.
Number 2812
REPRESENTATIVE HEINZE drew attention to [Volume 9, Number 7] of
the Petroleum News, which quotes Mr. Porter as follows: "We're
not talking about ANGDA doing its own thing anymore. We see the
authority as part of a team." The article goes on to specify
that the team, which has already started negotiations with the
two applicants, would include the Department of Revenue, the
Department of Law, and the Department of Natural Resources.
REPRESENTATIVE HEINZE asked if there is a [contingency plan] if
the two applicants don't move forward in say six months from
now.
MR. PORTER explained that ANGDA has a statutory responsibility
to evaluate and provide a development plan to the legislature
with regard to the feasibility of taking a pipe from Prudhoe Bay
to Valdez. The aforementioned obligation didn't change rather
[the department] has recommended that ANGDA take the pieces of
ANGDA's responsibility that can compliment the current process
and place them at the forefront of the evaluation. Mr. Porter
specified that [the department] would continue to perform its
entire obligation per the statute and the [department] would
continue to support ANGDA in that. He noted that ultimately
ANGDA will provide that information to the legislature.
REPRESENTATIVE HEINZE inquired as to the next step if the
applicants decide not to move forward.
MR. PORTER turned to ANGDA's process which will determine
whether a LNG project is economically feasible. If the
[applicants don't move forward] after the state has determined,
through its research, that there [the project is] economically
[feasible], then the [department] would return to the
legislature and ask whether the legislature/state wants to fund
a project. However, the aforementioned is several options down
the road.
MR. PORTER emphasized that the funding is critical and
important, as is the timeliness of it. He informed the
committee that there are contracts with ANGDA that cannot be let
because there aren't the funds to move the projects forward.
Therefore, the sooner the money is available, the faster the
contracts can go out.
TAPE 04-4, SIDE B
REPRESENTATIVE GUTTENBERG inquired as to the difference in the
product that will be received from a $3 million appropriation
versus a $2.15 million appropriation.
MR. PORTER specified that the additional funds are funds that
may be necessary for negotiations under the Stranded Gas
Development Act. Under those negotiations, there may be a
number of issues that arise for which the state would need
expertise in order to participate effectively in the
negotiations.
Number 2914
ROBERT VALDATTA, Member, City Council, City of Seward, suggested
that the Prudhoe gas line could be built to Glennallen and from
there it could be go to Wasilla. He noted that there is a line
on the back of Beluga out of Wasilla and two lines in the
Seward-Anchorage area. In the meantime, the infrastructure
would be in and [the state] could sell the gas and make money
from it while planning what to do next.
CO-CHAIR MASEK requested that Nels Anderson, a former Senator,
come forward.
Number 2868
NELS ANDERSON explained that he, as a Yupik Eskimo, is
interested in a gas pipeline from the North Slope to Valdez
because the North Slope gas is a known resource. Furthermore,
Article 8, Section 1 of the Alaska State Constitution specifies:
"It is the policy of the State to encourage the settlement of
its land and the development of its resources by making them
available for maximum use consistent with the public interest."
He also pointed out that Article 8, Section 2 of the Alaska
State Constitution specifies: "The legislature shall provide
for the utilization, development, and conservation of all
natural resources belonging to the State, including land and
waters, for the maximum benefit of its people." He explained
that he raised the constitutional aspect of this because it was
the impetus behind proposition 2, which over 140,000 people
signed and approved. Mr. Anderson said he knew, as did others,
that this would be a phased process in that there would be a
political process, a funding process, and then a planning
process that would review benefits and risk analysis. He
mentioned that he was a sponsor of proposition 2, and therefore
he said he is pleased that the committee is reviewing the
financing that is necessary to move the state where it needs to
be in order to decide whether this project makes fiscal sense.
MR. ANDERSON informed the committee that those in Bristol Bay
see [the gas line] as a potential source of low cost energy, new
jobs, and new revenue to the state treasury that could help fund
local schools, the university in the area, and life and health
safety programs. Most importantly, Mr. Anderson related that
those in Bristol Bay view this as the start of a viable state
gas industry that could be beneficial to all Alaskans well into
the future. In closing, Mr. Anderson urged the committee to
approve SSHB 296.
Number 2705
DOROTHY ANDERSON informed the committee that she is a 30-year
resident of Dillingham who participated in and voted for the
All-Alaska gas line initiative project. She urged the
legislature to follow through on the process and to support the
request of the funds necessary to perform the feasibility study.
Ms. Anderson related that she believes this is a way for all of
Alaska to benefit from the state's resources. She said she
hoped that [this legislation] doesn't get "watered down" because
the possibilities need to be known.
Number 2643
PAUL FUHS, Volunteer Lobbyist for Backbone 2, informed the
committee that Backbone 2 is in support of SSHB 296. He said
that one of the most critical elements that will be derived from
this legislation is information, which is critical in making
decisions. Mr. Fuhs pointed out that the committee packet
should include a document from him entitled, "Alaska's Strategic
Interest in North Slope Gas Development", which he urged the
committee to read. Mr. Fuhs related that Backbone 2 believes
that the gas line is Alaska's fiscal plan, and therefore it
should be built as soon as possible. With regard to the
Stranded Gas Development Act applications, he urged the
committee to review those as he viewed "this" as an opportunity
for Alaska to have some negotiating leverage. "If these
companies want tax breaks from Alaska and they want us to give
back the benefits that we would normally receive, we think
Alaska ought to at least be able to negotiate a gas supply for
our project, a project that Alaskans voted for," he said. He
noted that he was encouraged by MidAmerican's application. In
conclusion, Mr. Fuhs encouraged the committee to move SSHB 296
from committee.
Number 2511
CO-CHAIR MASEK, upon determining no one else wished to testify,
closed public testimony.
REPRESENTATIVE GUTTENBERG commented that SSHB 296 is a good
bill. The product from this legislation will enhance the
feasibility of moving the project along as well as the ability
of the state to successfully negotiate with whomever is building
a line. Representative Guttenberg indicated interest in making
an amendment [to increase the supplemental funding request to $3
million].
The committee took a brief at-ease.
CO-CHAIR DAHLSTROM remarked that this is a matter of policy and
the House Finance Committee will address the many fiscal issues
involved.
Number 2435
CO-CHAIR DAHLSTROM moved to report SSHB 296 out of committee
with individual recommendations and the accompanying fiscal
notes. There being no objection, it was so ordered.
ADJOURNMENT
There being no further business before the committee, the House
Resources Standing Committee meeting was adjourned at 2:35 p.m.
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