03/04/2013 01:00 PM House RESOURCES
| Audio | Topic |
|---|---|
| Start | |
| HB4 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 4 | TELECONFERENCED | |
| + | TELECONFERENCED |
ALASKA STATE LEGISLATURE
HOUSE RESOURCES STANDING COMMITTEE
March 4, 2013
1:08 p.m.
MEMBERS PRESENT
Representative Eric Feige, Co-Chair
Representative Dan Saddler, Co-Chair
Representative Peggy Wilson, Vice Chair
Representative Mike Hawker
Representative Craig Johnson
Representative Kurt Olson
Representative Paul Seaton
Representative Geran Tarr
Representative Chris Tuck
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
SPONSOR SUBSTITUE FOR HOUSE BILL NO. 4
"An Act relating to the Alaska Gasline Development Corporation;
making the Alaska Gasline Development Corporation, a subsidiary
of the Alaska Housing Finance Corporation, an independent public
corporation of the state; establishing and relating to the in-
state natural gas pipeline fund; making certain information
provided to or by the Alaska Gasline Development Corporation and
its subsidiaries exempt from inspection as a public record;
relating to the Joint In-State Gasline Development Team;
relating to the Alaska Housing Finance Corporation; relating to
the price of the state's royalty gas for certain contracts;
relating to judicial review of a right-of-way lease or an action
or decision related to the development or construction of an oil
or gas pipeline on state land; relating to the lease of a right-
of-way for a gas pipeline transportation corridor, including a
corridor for a natural gas pipeline that is a contract carrier;
relating to the cost of natural resources, permits, and leases
provided to the Alaska Gasline Development Corporation; relating
to procurement by the Alaska Gasline Development Corporation;
relating to the review by the Regulatory Commission of Alaska of
natural gas transportation contracts; relating to the regulation
by the Regulatory Commission of Alaska of an in-state natural
gas pipeline project developed by the Alaska Gasline Development
Corporation; relating to the regulation by the Regulatory
Commission of Alaska of an in-state natural gas pipeline that
provides transportation by contract carriage; relating to the
Alaska Natural Gas Development Authority; relating to the
procurement of certain services by the Alaska Natural Gas
Development Authority; exempting property of a project developed
by the Alaska Gasline Development Corporation from property
taxes before the commencement of commercial operations; and
providing for an effective date."
- MOVED CSSSHB 4(RES) OUT OF COMMITTEE
PREVIOUS COMMITTEE ACTION
BILL: HB 4
SHORT TITLE: ALASKA GASLINE DEVELOPMENT CORP; RCA
SPONSOR(s): REPRESENTATIVE(s) HAWKER, CHENAULT
01/16/13 (H) PREFILE RELEASED 1/7/13
01/16/13 (H) READ THE FIRST TIME - REFERRALS
01/16/13 (H) RES, FIN
01/30/13 (H) SPONSOR SUBSTITUTE INTRODUCED
01/30/13 (H) READ THE FIRST TIME - REFERRALS
01/30/13 (H) RES, FIN
02/04/13 (H) RES AT 1:00 PM BARNES 124
02/04/13 (H) Heard & Held
02/04/13 (H) MINUTE(RES)
02/06/13 (H) RES AT 1:00 PM BARNES 124
02/06/13 (H) Heard & Held
02/06/13 (H) MINUTE(RES)
02/13/13 (H) RES AT 1:00 PM BARNES 124
02/13/13 (H) Heard & Held
02/13/13 (H) MINUTE(RES)
02/15/13 (H) RES AT 1:00 PM BARNES 124
02/15/13 (H) Heard & Held
02/15/13 (H) MINUTE(RES)
03/01/13 (H) RES AT 1:00 PM BARNES 124
03/01/13 (H) Heard & Held
03/01/13 (H) MINUTE(RES)
03/04/13 (H) RES AT 1:00 PM BARNES 124
WITNESS REGISTER
FRANK RICHARDS, Manager
Pipeline Engineering & Government Affairs
Alaska Gasline Development Corporation (AGDC)
Alaska Housing Finance Corporation (AHFC)
Department of Revenue (DOR)
Anchorage, Alaska
POSITION STATEMENT: Testified and answered questions related to
SSHB 4.
RENA DELBRIDGE, Staff
Representative Mike Hawker
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: On behalf of the joint prime sponsors,
answered questions related to SSHB 4.
KEN VASSAR, Legal Counsel
to Alaska Gasline Development Corporation (AGDC)
Birch, Horton, Bittner, & Cherot
Anchorage, Alaska
POSITION STATEMENT: On behalf of the Alaska Gasline Development
Corporation (AGDC), answered questions related to SSHB 4.
DARYL KLEPPIN, Manager
Commercial Team
Alaska Gasline Development Corporation (AGDC)
Alaska Housing Finance Corporation (AHFC)
Department of Revenue (DOR)
Anchorage, Alaska
POSITION STATEMENT: Testified related to SSHB 4.
DAN FAUSKE, President
Alaska Gasline Development Corporation (AGDC)
CEO/Executive Director
Alaska Housing Finance Corporation (AHFC)
Department of Revenue (DOR)
Anchorage, Alaska
POSITION STATEMENT: Testified related to SSHB 4.
CORI BADGLEY MILLS, Assistant Attorney General & Legislative
Liaison
Legislation & Regulations Section
Civil Division (Juneau)
Department of Law (DOL)
Juneau, Alaska
POSITION STATEMENT: Answered questions related to SSHB 4.
BONNIE HARRIS, Senior Assistant Attorney General
Oil, Gas & Mining
Civil Division (Anchorage)
Department of Law (DOL)
Anchorage, Alaska
POSITION STATEMENT: Answered questions related to SSHB 4.
BILL WARREN
Kenai, Alaska
POSITION STATEMENT: Testified during the hearing of SSHB 4.
REPRESENTATIVE MIKE CHENAULT
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: As joint prime sponsor, testified in regard
to SSHB 4.
ACTION NARRATIVE
1:08:27 PM
CO-CHAIR DAN SADDLER called the House Resources Standing
Committee meeting to order at 1:08 p.m. Representatives Hawker,
Johnson, Olson, Seaton, P. Wilson, Tarr, Feige, and Saddler were
present at the call to order. Representative Tuck arrived as
the meeting was in progress.
1:08:44 PM
HB 4-ALASKA GASLINE DEVELOPMENT CORP; RCA
1:08:56 PM
CO-CHAIR SADDLER announced that the only order of business is
SPONSOR SUBSTITUTE FOR HOUSE BILL NO. 4, "An Act relating to the
Alaska Gasline Development Corporation; making the Alaska
Gasline Development Corporation, a subsidiary of the Alaska
Housing Finance Corporation, an independent public corporation
of the state; establishing and relating to the in-state natural
gas pipeline fund; making certain information provided to or by
the Alaska Gasline Development Corporation and its subsidiaries
exempt from inspection as a public record; relating to the Joint
In-State Gasline Development Team; relating to the Alaska
Housing Finance Corporation; relating to the price of the
state's royalty gas for certain contracts; relating to judicial
review of a right-of-way lease or an action or decision related
to the development or construction of an oil or gas pipeline on
state land; relating to the lease of a right-of-way for a gas
pipeline transportation corridor, including a corridor for a
natural gas pipeline that is a contract carrier; relating to the
cost of natural resources, permits, and leases provided to the
Alaska Gasline Development Corporation; relating to procurement
by the Alaska Gasline Development Corporation; relating to the
review by the Regulatory Commission of Alaska of natural gas
transportation contracts; relating to the regulation by the
Regulatory Commission of Alaska of an in-state natural gas
pipeline project developed by the Alaska Gasline Development
Corporation; relating to the regulation by the Regulatory
Commission of Alaska of an in-state natural gas pipeline that
provides transportation by contract carriage; relating to the
Alaska Natural Gas Development Authority; relating to the
procurement of certain services by the Alaska Natural Gas
Development Authority; exempting property of a project developed
by the Alaska Gasline Development Corporation from property
taxes before the commencement of commercial operations; and
providing for an effective date."
1:09:42 PM
CO-CHAIR SADDLER advised that the committee will not review any
amendments which have not been prepared by Legislative Legal and
Research Services.
1:10:16 PM
REPRESENTATIVE HAWKER moved to adopt Amendment 2, labeled 28-
LS0021\O.34, Bullock, 3/2/13, which read:
Page 43, line 31, as amended by adopted amendment O.9:
Delete "on terms and conditions and"
Page 43, line 31, following "rates":
Insert "and containing provisions"
Page 43, line 31, following "tariff.":
Insert "For purposes of this subsection,
"provisions" are limited to those terms and conditions
that directly relate to the rate and are distinct from
the general operating terms and conditions of the
recourse tariff."
CO-CHAIR FEIGE objected for discussion purposes.
REPRESENTATIVE HAWKER explained proposed Amendment 2 addresses
the terms and conditions that were discussed by the committee on
[3/1/13].
1:11:18 PM
CO-CHAIR FEIGE removed his objection to the amendment. There
being no further objection, Amendment 2 was adopted.
1:11:40 PM
CO-CHAIR SADDLER moved to adopt Amendment 3, labeled 28-
LS0021\O.1, Bullock, 2/6/13, which read:
Page 6, line 25, following "construction.":
Insert "The procurement procedures must provide
for an Alaska veterans' preference that is consistent
with the Alaska veterans' preference in AS 36.30.175."
REPRESENTATIVE HAWKER objected for discussion purposes.
CO-CHAIR SADDLER explained proposed Amendment 3 allows for
veterans' bidder preference, which is only subsequent to the
Alaska bidder preference, and is for a 5 percent preference,
with a maximum value of $5,000. He pointed out that it already
exists in statute and said it could be beneficial for veterans
to obtain these contracts.
1:12:49 PM
REPRESENTATIVE HAWKER stated he has no problem with the context
of the proposed amendment, and pointed out that the proposed
bill contains exemptions for Alaska Gasline Development
Corporation (AGDC) from these procurement act preferences. He
suggested this be included with findings and intent, but said
thought could also be given to this during further iterations of
the proposed legislation.
REPRESENTATIVE HAWKER removed his objection to Amendment 3.
1:13:59 PM
FRANK RICHARDS, Manager, Pipeline Engineering & Government
Affairs, Alaska Gasline Development Corporate (AGDC), Alaska
Housing Finance Corporation (AHFC), Department of Revenue (DOR),
agreed the veterans' preference in the procurement code allows
for the aforementioned allowance. He pointed out that there are
few veterans with major construction or engineering companies.
1:14:34 PM
REPRESENTATIVE SEATON, addressing the point raised by
Representative Hawker, inquired whether this would be the only
bidder preference allowed in the proposed bill.
CO-CHAIR SADDLER explained the veterans' preference was a subset
of the Alaska preference, so there would be both an Alaska
bidder preference and a veterans' preference.
REPRESENTATIVE SEATON requested further clarification.
REPRESENTATIVE HAWKER deferred to his staff, Rena Delbridge.
1:15:42 PM
RENA DELBRIDGE, Staff, Representative Mike Hawker, Alaska State
Legislature, stated the current proposed legislation would allow
AGDC to write its own procurement procedures, although the bill
has an Alaska preference on page 3, lines 4-8.
REPRESENTATIVE SEATON asked if the definition for "competitive"
would be for the low bid, as there is not any mention for
dollars or percentages toward an Alaska preference.
MS. DELBRIDGE replied there is not a dollar amount, as the
proposed bill indicates the preference to Alaskans only if the
bid is competitive with non-Alaskans. She noted the importance
of keeping project costs under control, and stated that the most
responsible and competitive offering should be considered.
CO-CHAIR SADDLER asked if proposed Amendment 3 presumes an
Alaska bidder preference.
MS. DELBRIDGE offered her understanding that there is not an
Alaska bidder preference in the current proposed bill, and said
she is unclear whether the proposed amendment would insert this.
She reported that AGDC may or may not develop procurement
procedures for every type of contract that would enable a
bidding preference, as AGDC could sole source certain aspects.
"By the findings and intent language that is in the legislation
it sort of more broadly opens that, then, regardless of the
particular procurement or process, to an Alaska preference," she
said.
1:18:04 PM
The committee took an at-ease from 1:18 p.m. to 1:20 p.m.
1:20:25 PM
CO-CHAIR SADDLER sought to clarify whether the proposed bill
allows other bidder preferences, stating that the bill language
allows AGDC to craft its own procurement policies, while
proposed Amendment 3 would specifically allow a veterans'
preference as written in statute.
REPRESENTATIVE SEATON surmised that the typical Alaska bidder
preference is not written in the proposed bill.
CO-CHAIR SADDLER expressed agreement that there is not the
intent to have an additional separate Alaska bidder preference,
only the veterans' preference.
1:21:02 PM
REPRESENTATIVE HAWKER, directing attention to page 3, lines 4-18
of the proposed bill, stated that there is strong intent
language in the proposed bill for AGDC to procure its services
from Alaska owned businesses. He again removed his objection to
the proposed amendment.
REPRESENTATIVE P. WILSON [objected to the amendment and]
requested Representative Hawker to clarify whether he is saying
the amendment is unnecessary or that the amendment is needed
along with the intent language.
REPRESENTATIVE HAWKER replied that proposed Amendment 3 would
put in place "specific reference that the policies and
procedures governing procurement that AGDC must create their own
regulatory provisions pursuant to, on page 6, lines 24 and 25,
that the board of AGDC 'shall adopt and publish procedures to
govern the procurement by the corporation of supplies, services,
professional services, and construction.'" He said the
amendment further states that that process must include an
Alaska veterans' preference that is consistent with the
procurement provisions of AS 36.30.175.
1:23:05 PM
REPRESENTATIVE P. WILSON removed her objection to the amendment.
There being no further objection, Amendment 3 was adopted.
1:23:44 PM
REPRESENTATIVE JOHNSON moved to adopt Amendment 4, labeled 28-
LS0021\O.2, Bullock, 2/14/13, which read:
Page 2, lines 7 - 8:
Delete "relating to the Alaska Natural Gas
Development Authority; relating to the procurement of
certain services by the Alaska Natural Gas Development
Authority;"
Page 2, line 10, following "operations;":
Insert "repealing the establishment of the Alaska
Natural Gas Development Authority and making
conforming changes;"
Page 25, line 12:
Delete "new paragraphs"
Insert "a new paragraph"
Page 25, lines 13 - 14:
Delete all material.
Renumber the following paragraph accordingly.
Page 35, line 3, through page 38, line 9:
Delete all material.
Renumber the following bill sections accordingly.
Page 52, lines 6 - 7:
Delete "AS 41.41.030, 41.41.040, 41.41.050,
41.41.080, 41.41.100, and 41.41.990(4)"
Insert "AS 39.25.110(11)(G); AS 39.50.200(b)(57);
AS 41.41.010, 41.41.020, 41.41.030, 41.41.040,
41.41.050, 41.41.060, 41.41.070, 41.41.080, 41.41.090,
41.41.100, 41.41.110, 41.41.120, 41.41.130, 41.41.140,
41.41.150, 41.41.200, 41.41.300, 41.41.310, 41.41.320,
41.41.330, 41.41.340, 41.41.350, 41.41.360, 41.41.370,
41.41.380, 41.41.390, 41.41.400, 41.41.410, 41.41.450,
41.41.500, 41.41.900, and 41.41.990"
Page 52, line 8:
Delete all material and insert:
"* Sec. 24. Sections 1 and 5, 2002 Ballot Measure
No. 3, are repealed."
REPRESENTATIVE HAWKER objected for discussion purposes.
1:23:52 PM
REPRESENTATIVE JOHNSON explained that proposed Amendment 4 would
remove the Alaska Natural Gas Development Authority (ANGDA) from
the proposed bill. He directed attention to the special report
from the Division of Legislative Audit, Report Digest #04-30054-
10, titled "A Special Report on the Department of Revenue (DOR),
Alaska Natural Gas Development Authority (ANGDA), Selected
Operational Issues, October 8, 2010" [included in members'
packets]. He said the Division of Legislative Audit concluded
that ANGDA had conducted activities that stretched the
boundaries of its statutory authority, did not successfully
coordinate efforts with agencies pursuing a small diameter
pipeline, and that ANGDA should be considered for sunset after
resolution of uncertainties, as it was at the risk of outliving
its public purpose. While well intended, ANGDA has some baggage
that he does not want attached to this new venture.
1:25:11 PM
REPRESENTATIVE TARR noted that during the committee's discussion
of contracts, ANGDA was described as being a part of that. She
inquired how the proposed amendment would affect that in terms
of negotiating contracts going forward.
REPRESENTATIVE JOHNSON responded it was also discussed that
ANGDA certainly needs to do that but could form its own
marketing arm. He said he prefers that ANGDA form their own
than to be saddled with a "tarnished name" and a bad reputation.
REPRESENTATIVE TARR understood, then, that it would be AGDC that
would create the marketing arm and it would be considered
appropriate and AGDC would be able to negotiate contracts that
would be considered to be arms' length.
REPRESENTATIVE HAWKER requested Representative Tarr to clarify
her question.
REPRESENTATIVE TARR asked, if ANGDA is removed from the
relationship, would AGDC create a new subsidiary or would AGDC
create a marketing arm within the corporation to fulfill the
role previously designated to ANGDA.
REPRESENTATIVE HAWKER answered the proposed bill empowers AGDC
to create subsidiaries for necessary and appropriate purposes.
1:27:22 PM
CO-CHAIR SADDLER inquired whether there would be any loss of
assets.
REPRESENTATIVE HAWKER replied he had listened to concerns of the
committee as the proposed bill was discussed and subsequently
had his staff research the issue with various state agencies.
It was found that all of the ANGDA board terms had expired
without reappointment, that ANGDA had no employees, no office
space, and no debts or liabilities. According to the Department
of Revenue (DOR), all of the ANGDA work product/assets have been
either returned to ANGDA's contractors or retained by the State
Pipeline Coordinator office. He declared there is no continuing
necessity for this entity to remain in corporate existence.
1:29:00 PM
REPRESENTATIVE TUCK expressed his agreement with the Division of
Legislative Audit report. Drawing attention to the project
labor agreement language in the bill beginning on page 37, line
31, he advised he will be presenting an amendment for removal of
this language.
1:29:33 PM
REPRESENTATIVE HAWKER withdrew his objection to the Amendment 4.
There being no further objection, Amendment 4 was adopted.
1:30:29 PM
REPRESENTATIVE HAWKER moved to adopt Amendment 5, labeled 28-
LS0021\O.3, Bullock, 2/25/13, which read:
Page 1, line 1:
Delete "making"
Insert "establishing"
Page 1, lines 2 - 3:
Delete ", a subsidiary of the Alaska Housing
Finance Corporation,"
Insert "as"
Page 10, line 11:
Delete "may"
Insert "shall"
Page 12, line 22, through page 13, line 4:
Delete all material.
REPRESENTATIVE TARR objected for discussion purposes.
1:30:50 PM
MS. DELBRIDGE, speaking for the amendment's sponsor, explained
Amendment 5 is a housekeeping amendment. She noted the first
change on page 1, line 1, would delete "making" and insert
"establishing" in order to clarify that AGDC is not supposed to
be a subsidiary of Alaska Housing Finance Corporation (AHFC),
but is instead intended to be an independent public corporation
of the state. She said the second change, page 1, lines 2-3,
serves the same purpose. Directing attention to the third
change, page 10, line 11, which deals with confidentiality and
inner agency cooperation, she explained the change would give
the corporation access to information from state departments and
agencies. The last change, which would delete all the material
from page 12, line 22, through page 13, line 4, would remove the
international borrowing clause, which is an ability AGDC is not
expected to need.
1:32:32 PM
REPRESENTATIVE TARR asked whether removing the provision for
international borrowing would affect the project, as she
understands there is interest from international financiers.
MS. DELBRIDGE replied this deletion would have no impact on
foreign investment because it merely eliminates the ability for
AGDC to have foreign banks underwrite its bonds, which is not
anticipated as a necessity. Should the necessity arise, AGDC
could ask the legislature for that ability at that point in
time.
REPRESENTATIVE TUCK asked if there would be a problem with
leaving that provision in the proposed bill.
MS. DELBRIDGE responded the sponsor is trying to "keep the bill
as clean as possible." She said there is no intent to prohibit
foreign investment in an Alaska project; it would only prohibit
access to foreign capital markets to borrow money.
1:34:48 PM
CO-CHAIR SADDLER moved to adopt Conceptual Amendment 1 to
Amendment 5, as follows:
Page 10, line 17:
Delete "facilities and loans"
Insert "and facilities"
CO-CHAIR SADDLER explained that this would remove loans as an
action for the corporation. He reported he has already spoken
to the bill sponsor regarding this conceptual amendment.
Responding to Representative Tarr, recapped the proposed
conceptual amendment.
REPRESENTATIVE TARR asked why the language had been included in
the proposed bill.
MS. DELBRIDGE answered the language is a carryover from early
versions of House Bill 369, as there had been the potential for
a gasline subsidiary which would need to rely more heavily on
other state entities. She reported that AGDC does not feel it
necessary to have these loans since it is now proposing to be a
stand-alone corporation.
There being no further objection, Conceptual Amendment 1 to
Amendment 5 was adopted.
1:37:10 PM
REPRESENTATIVE TUCK, referring to the third change in proposed
Amendment 5 which would delete "may" and insert "shall", asked
whether a private entity would then have access to information
from state agencies if it bought the corporation.
MS. DELBRIDGE replied the provision would only apply to AGDC and
its access to the information.
REPRESENTATIVE TUCK inquired whether AGDC could be sold.
MS. DELBRIDGE replied that an asset developed by AGDC could be
sold; however, AGDC, as a public corporation, can only exist as
long as the state allows.
REPRESENTATIVE TUCK asked whether this proposed amendment would
only apply to AGDC, and would not apply to its subsidiaries.
MS. DELBRIDGE answered that this is her understanding.
1:38:41 PM
[Representative Tarr removed her objection to Amendment 5.]
There being no further objection, Amendment 5, as amended, was
adopted.
1:39:03 PM
REPRESENTATIVE HAWKER moved to adopt Amendment 6, labeled 28-
LS002\O.4, Bullock, 2/25/13, which read:
Page 1, lines 7 - 8:
Delete "relating to the price of the state's
royalty gas for certain contracts;"
Page 2, lines 20 - 23:
Delete "it is the policy of the state to make the
state's share of royalty natural gas available for
shipment in an in-state natural gas pipeline developed
by the Alaska Gasline Development Corporation;
(4)"
Page 13, lines 5 - 6:
Delete "; sale of natural gas by a subsidiary"
Page 13, line 6:
Delete "(a)"
Page 13, lines 20 - 26:
Delete all material.
REPRESENTATIVE TARR objected for discussion purposes.
MS. DELBRIDGE explained that proposed Amendment 6 would affect
the proposed bill in two places. First, it would delete the
legislative intent finding that it is "the policy of the state
to make the state share of royalty gas available for shipment in
an AGDC pipeline." The next affect would be in Section 3 of the
proposed bill, where the corporate powers and duties of AGDC are
listed, and would delete a provision that says a subsidiary of
AGDC and the commissioner of the Department of Natural Resources
(DNR) could work together to pledge, as necessary, the state's
royalty gas in order to honor the contracts and commitments made
by the subsidiary. She related that concerns were expressed
that both of these provisions could be construed to usurp the
ability of the DNR commissioner and the Alaska Royalty Oil and
Gas Development Advisory Board to dispose of the state's royalty
gas in the manner in which they see fit.
1:40:51 PM
REPRESENTATIVE TARR inquired whether the overall price would be
impacted.
MS. DELBRIDGE asked whether Representative Tarr is referring to
the royalty gas.
REPRESENTATIVE TARR offered her understanding that the overall
price of gas would be lower because of negotiation for the price
of royalty gas.
MS. DELBRIDGE replied there is nothing that would prohibit the
negotiation of that first, as the proposed amendment would
merely remove the presupposition that the commissioner would act
in any particular way related to the royalty gas, and would
allow for retention of full discretion to manage the royalty
gas, although the Alaska Royalty Oil and Gas Development
Advisory Board would still have to approve the contracts.
1:42:15 PM
REPRESENTATIVE TUCK requested further clarification of what
Amendment 6 would do and asked whether the DNR commissioner
would have definitions taken away and would have greater
autonomy to make decisions on what to do with the royalty gas.
MS. DELBRIDGE responded the proposed amendment would not take
anything away from the commissioner. The bill is structured to
pave the way for the commissioner to commit gas to contracts for
shipment in the pipeline. However, there was still some
ambiguity that was open to interpretation for any limitations to
the commissioner's discretion. Since this was not the intent of
the bill sponsor, these sections would be removed from the
proposed bill to ensure the full discretion of the commissioner
in managing the royalty gas.
1:43:33 PM
REPRESENTATIVE SEATON inquired whether it is the last sentence
that is problematic, which reads: "A pledge made under this
subsection shall be treated as a disposal of gas other than by
sale or exchange for purposes of AS 38.05.183."
MS. DELBRIDGE answered no one has expressed concern about that
sentence; the concern was for a situation that the commissioner
might retroactively be committing gas to a marketing subsidiary
that had already promised the gas to someone else.
1:44:15 PM
CO-CHAIR SADDLER asked whether the state would have any price
advantage with its royalty share, specifically for shipping it
in the pipeline.
MS. DELBRIDGE explained the state, if it chose to actually ship
its gas rather than sell it to a shipper, would be able to
negotiate a contract with AGDC similar to any other shipper.
She drew attention to the Regulatory Commission of Alaska (RCA)
provision which states that a contract between two state
entities for shipment on a gas pipeline is automatically just
and reasonable.
1:45:00 PM
REPRESENTATIVE TARR removed her objection to the Amendment 6.
There being no further objection, Amendment 6 was adopted.
1:45:25 PM
REPRESENTATIVE HAWKER moved to adopt Amendment 7, labeled 28-
LS0021\O.5, Bullock, 2/25/13, which read:
Page 45, line 28, through page 46, line 6:
Delete all material and insert:
"(c) Within 180 days after receiving an
application under this chapter, the commission shall
issue a contract carriage certificate authorizing, in
whole or in part, the operation, service,
construction, or acquisition covered by the
application to a qualified applicant if the commission
finds that the applicant is fit, willing, and able to
do the acts, perform the proposed service, and conform
to the provisions of this chapter and the requirements
of the commission, and that the proposed service,
operation, construction, extension, or acquisition, to
the extent authorized by the certificate, is or will
be required by the present or future public
convenience and necessity. The commission may, by
order, extend the 180-day period for considering an
application by the duration of a delay caused by the
failure of the applicant to provide additional
information reasonably required by the commission. If,
within the 180-day period and any extension of the
period for considering the application, the commission
fails to issue a contract carriage certificate and
does not make a finding that the applicant is not fit,
willing, and able under this subsection, the
application shall be considered approved and the
contract carriage certificate shall take effect
immediately."
REPRESENTATIVE TARR objected for discussion purposes.
MS. DELBRIDGE explained Amendment 7 responds to an omission from
the regulatory section, whereby the RCA is allowed 180 days for
a finding on a certificate of public convenience and necessity.
However, no default is included, so the proposed amendment would
provide a default to automatic approval if the RCA does not act
within the time frame. She clarified extensions are permitted
if requests for supporting information are not forthcoming from
the applicant.
1:46:21 PM
REPRESENTATIVE TARR offered her belief that the language that
would be deleted by proposed Amendment 7 would automatically
deny rather than approve.
MS. DELBRIDGE answered it does not address the actions if the
RCA fails to act.
REPRESENTATIVE TARR surmised the proposed amendment is just
slightly different language to accomplish the same thing.
MS. DELBRIDGE agreed.
REPRESENTATIVE TUCK offered his understanding that under the
current language an application would be automatically denied if
it was not granted within 180 days. He expressed concern for
adequate staffing for RCA to meet certain deadlines, although
RCA could grant an extension. He asked whether the proposed
amendment would continue to allow this.
REPRESENTATIVE HAWKER referred to line 11 of the amendment which
states that the commission may, by order, extend the 180-day
period for considering an application. He opined that this is a
very broad standard that will allow the RCA to collect enough
information.
1:49:14 PM
REPRESENTATIVE JOHNSON expressed his appreciation for proposed
Amendment 7 because the last thing wanted is for an applicant to
stall for 180 days and then automatically get approval.
1:49:37 PM
REPRESENTATIVE SEATON referred to page 46, lines 4-6, of the
proposed bill, which state that the "application must be denied
if the commission fails to find that the applicant is fit,
willing, and able under this subsection." He asked whether the
intent of Amendment 7 is to remove this.
MS. DELBRIDGE offered her belief the intent is to ensure that
the RCA's failure to act within 180 days goes to a default
approval as opposed to no action.
REPRESENTATIVE HAWKER confirmed that is the sponsors' intent.
REPRESENTATIVE SEATON inquired whether Amendment 7 would still
allow for an application to be denied if the applicant is not
fit, willing, or able.
MS. DELBRIDGE offered her belief that this is the sponsors'
intent and deferred to Representative Hawker.
REPRESENTATIVE HAWKER drew attention to line 6 of Amendment 7,
which states "if the commission finds that the applicant is fit,
willing, and able ...." This allows the RCA to determine if the
applicant is able and if s not, there is no affirmative
obligation that the applicant receive the contract carriage
certificate.
REPRESENTATIVE SEATON expressed his appreciation for this
clarification on the record.
REPRESENTATIVE HAWKER assured committee members that it is not
the sponsors' intent to in any way game the system.
1:52:11 PM
REPRESENTATIVE TARR asked whether continual extension is a
possibility and suggested a limit to the number of extension
periods.
MS. DELBRIDGE replied the commission could only extend the
period for the duration of the delay caused by an applicant not
providing the necessary required information; it does not
trigger another 180 day period. She referred to lines 11-12 of
Amendment 7, which state that the commission can extend the
period for consideration by the duration of the delay. She said
this offers a balance to the RCA to not allow an applicant to
delay and "run out the clock" while applying pressure to the RCA
to be responsive during the allocated time frame.
1:53:41 PM
REPRESENTATIVE SEATON presumed that even if the time period is
extended for the applicant to provide additional information,
the RCA will have sufficient time to analyze the submitted
materials.
REPRESENTATIVE HAWKER responded the language in Amendment 7 is
not the circumstance being described by Representative Seaton.
1:55:12 PM
REPRESENTATIVE TARR removed her objection to the Amendment 7.
There being no further objections, Amendment 7 was adopted.
1:55:33 PM
REPRESENTATIVE HAWKER moved to adopt Amendment 8, labeled 28-
LS0021\O.6, Bullock, 2/26/13, which read:
Page 12, line 13, following "pipeline.":
Insert "On the date that the in-state natural gas
pipeline project becomes operational, the corporation
shall make available to the public information that
would otherwise be exempt from public disclosure under
this subsection or (g) of this section, unless the
corporation determines that
(1) maintaining the confidentiality of the
information is necessary to protect the economic
interests of the corporation or the state; or
(2) disclosure of the information will
violate the terms of a confidentiality agreement or
other agreement to which the corporation is a party or
that is binding on the corporation."
REPRESENTATIVE SEATON objected for discussion purposes.
1:55:44 PM
MS. DELBRIDGE explained Amendment 8 is a response to concerns
for the accountability of the confidentiality provisions in the
proposed bill. The amendment would require that AGDC release
confidentially held information once a pipeline is operational,
provided the release will not adversely affect the economic
interests of the state and is not covered by third party
confidentiality agreements.
REPRESENTATIVE SEATON removed his objection to the Amendment 8.
There being no further objection, Amendment 8 was adopted.
1:56:48 PM
CO-CHAIR FEIGE moved to adopt Amendment 9, labeled 28-
LS0021\O.10, Bullock, 3/1/13, which read:
Page 9, following line 25:
Insert a new subsection to read:
"(b) Upon commencement of construction of an in-
state natural gas pipeline, the corporation shall
analyze potential natural gas pipelines connecting to
industrial, residential, or utility customers in other
regions of the state. If the corporation finds that a
natural gas pipeline analyzed under this subsection is
in the best interest of the state and can meet the
needs of industrial, residential, or utility customers
at commercially reasonable rates, the corporation
shall finance, construct, or operate the natural gas
pipeline as necessary. When developing or constructing
a connecting line, the corporation shall, to the
maximum extent feasible, use existing land,
structures, real or personal property, rights-of-way,
easements, or other interests in land acquired by the
corporation."
Reletter the following subsections accordingly.
REPRESENTATIVE HAWKER objected for discussion purposes.
1:57:00 PM
CO-CHAIR FEIGE explained the purpose of Amendment 9 is to define
for AGDC that, upon commencement of pipeline construction, AGDC
begin looking at how to connect other parts of the state to that
in-state gasline. It is his intention that this be directed at
wholesale customers, not for AGDC to analyze hooking up to
everybody's house all over Alaska, but simply to look at
particular regions that could benefit from the wholesale
shipment of gas through "whatever size pipeline" to address the
energy needs of those particular areas. For example, if a
pipeline comes down to Valdez, perhaps a connecting line from
Glennallen over to Palmer is a logical choice; if a line comes
down to the Point MacKenzie area, perhaps a line connecting the
ENSTAR grid over to the Glennallen area is logical. Once a main
line is constructed, AGDC should start looking at possible spur
lines to industrial users and as much of the state as possible.
REPRESENTATIVE TARR requested the sponsor to comment on whether
"upon commencement of construction" would come too late in the
process to accomplish the intended goals of the amendment. She
suggested that a more appropriate time would be "upon
commencement of design."
MS. DELBRIDGE offered her belief that the timing is perfect in
the proposed amendment, as AGDC will be 100 percent focused on
the gasline during the construction phase. Once the pipeline is
complete, opportunities will occur both immediately and many
years later for industrial users to look at other pipelines.
2:00:26 PM
CO-CHAIR FEIGE concurred with Ms. Delbridge. Putting it at the
point of construction eliminates any potential changes that
could occur up to that point because there could be several
iterations of pipeline design. Once construction is started, a
decision has been arrived at as to where the pipeline is going,
wherever that is, and that will be a much better point in the
engineering process for deciding where to make connections.
REPRESENTATIVE TARR expressed agreement for maximizing in-state
opportunities, and explained that her concern was for any
limitation to other opportunities during the design phase.
2:01:43 PM
REPRESENTATIVE SEATON requested clarification as to whether the
proposed amendment's intent is for completion of construction or
for commencement of construction.
MS. DELBRIDGE replied she misspoke; the amendment's intent is
for commencement of construction. After construction begins,
AGDC would be available to work on other aspects of the project.
2:03:24 PM
REPRESENTATIVE TUCK offered his belief that obtaining reasonable
commercial rates might be better achieved prior to commencement,
because upon commencement the volume should already be sold. He
therefore inquired whether looking at connections should be done
prior to commencement.
CO-CHAIR FEIGE responded that "commencement of construction
works out just fine." He said AGDC should be able to deal with
the relative volumes compared to the overall capacity of the
pipeline, as AGDC would be selling to specific customers.
REPRESENTATIVE TUCK expressed his support for the availability
of gas to Alaskans prior to any export.
2:05:07 PM
CO-CHAIR SADDLER drew attention to lines 5-7 of Amendment 9,
which state: "If the corporation finds that a natural gas
pipeline ... is in the best interest of the state ...." He
asked whether this is standard language and whether AGDC is
equipped to make this finding.
MR. RICHARDS answered that "in the best interest" is applicable
to AGDC as the corporation would analyze the potential needs,
including those of the citizens of the state.
REPRESENTATIVE TARR requested clarification that AGDC does have
the authority to make a best interest finding as written into
Amendment 9.
MR. RICHARDS deferred to a legal opinion as to whether AGDC has
that ability.
2:06:30 PM
KEN VASSAR, Legal Counsel to Alaska Gasline Development
Corporation (AGDC), Birch, Horton, Bittner, & Cherot, replied
that with the adoption of Amendment 9 AGDC would have the
authority to make this finding.
CO-CHAIR SADDLER questioned whether the language regarding
commencement or completion of construction is workable.
MR. RICHARDS responded it is workable language, saying that AGDC
is currently in the design phase of the project and it is
premature to make any determinations on other needs. He noted
that during open season anyone can request access to the
pipeline and said this is another decision point that AGDC
should make before it analyzes new access points.
CO-CHAIR SADDLER inquired whether Mr. Richards is saying that
during open season AGDC will entertain requests for buyers at
destinations other than the one main terminus of the spur line.
MR. RICHARDS answered that AGDC is currently in the design
process, and analyzing the routes from the North Slope to
Fairbanks and to the Cook Inlet. During open season, AGDC will
be able to identify the cost for shipment and operation of the
pipeline. This will be the point where it will become a viable
project for meeting the needs and intent for providing energy to
Alaskans, and it is after this point that it will be the time to
analyze other connection points. In further response, he
confirmed that upon commencement of construction is the best
time to begin the analysis.
2:08:38 PM
REPRESENTATIVE TARR asked how difficult it is to add additional
pipeline to the main pipeline at a later time.
MR. RICHARDS replied it is relatively easy under the current
plan for lean gas composition to design and construct take-offs
from the main pipeline. He explained more gas can be flowed
through the pipeline by adding additional compression, up to the
limitation set by the Alaska Gasline Inducement Act (AGIA) of
500 million cubic feet.
CO-CHAIR SADDLER expressed his understanding that the intent of
Amendment 9 is that AGDC make progress toward the mainline, and
after construction has commenced that AGDC is to determine
whether it will provide gas at other terminuses.
2:10:16 PM
REPRESENTATIVE HAWKER removed his objection to the Amendment 9.
There being no further objection, Amendment 9 was adopted.
2:10:40 PM
REPRESENTATIVE TARR moved to adopt Amendment 10, labeled 28-
LS002\O.13, Nauman/Bullock, 3/2/13, which read:
Page 1, line 4, following "fund;":
Insert "requiring legislative approval before
construction of an in-state natural gas pipeline
developed by the Alaska Gasline Development
Corporation;"
Page 10, following line 9:
Insert a new subsection to read:
"(e) The corporation may not begin to construct
an in-state natural gas pipeline before project
sanction and before receiving authorization by law to
proceed with the construction. In this subsection,
(1) "authorization by law" means a law
passed by the legislature and enacted into law or an
appropriation for the construction of the pipeline
that is not entirely vetoed;
(2) "sanction" means having financial
commitments that are adequate to proceed with the
construction of the in-state natural gas pipeline."
REPRESENTATIVES HAWKER objected for discussion purposes.
2:10:46 PM
REPRESENTATIVE TARR explained that Amendment 10 would maintain
the necessity for legislative approval before construction of
the in-state pipeline, and its significant financial obligation.
She referred to the original version, prior to the sponsor
substitute, which had stated a need for legislative approval,
but was subsequently removed by the sponsor substitute.
REPRESENTATIVE HAWKER said the language in the current bill is
quite precise and the pieces not included are unnecessary. The
reason for the structure of the proposed bill is to "foster and
move the state forward with one goal, and that is getting
Alaska's gas to the hands of Alaskans as soon as possible, at
the least possible cost." He stated he will be giving this same
response for each of the upcoming proposed amendments. He said
his major policy objectives are to present a market based
project supported by private sector commitments, reduce the risk
and cost of the project, and allow AGDC to be as efficient and
flexible as possible to represent Alaska's interest for any
project. He declared his respect for the separation of powers
between the legislative and executive branches in Alaska. He
offered his belief that history will validate his concern that
legislative micro-management has led to the failure of every
gasline development to date in Alaska. He offered his hope that
history will not repeat itself. He argued that the proposed
amendment is unnecessary as it is not possible to spend money in
Alaska without legislative approval.
MS. DELBRIDGE added that the sponsors object to Amendment 10
because any sanctioning necessary by the legislature will create
uncertainty for any potential customers and partners, and will
increase risk and uncertainty for AGDC.
2:15:58 PM
REPRESENTATIVE SEATON understood that the previous language in
the bill was reliant on state money to finance the pipeline, and
that it must still come back to the legislature for financing.
He asked for clarification that AGDC does not have the ability
to obligate the state without legislative approval.
MS. DELBRIDGE responded that the legislature retains the ability
to appropriate funding, and without an appropriation AGDC cannot
commit and involve itself in a project, other than to issue
revenue bonds.
2:17:09 PM
REPRESENTATIVE JOHNSON opined this needs to be a business
decision, not a political decision.
2:17:41 PM
REPRESENTATIVE P. WILSON stated that involvement of the
legislature raises a red flag of risk to a producer, so she will
be voting against Amendment 10.
2:18:06 PM
REPRESENTATIVE TUCK offered his support for Amendment 10, saying
the legislature has a fiduciary responsibility for the project.
Sixty percent of the non-governmental mega-projects throughout
the world have failed, he said. The legislature cannot rely on
the markets to make the best decisions, or a gas pipeline would
have already been started. Government needs to be involved and
the legislature must make solid decisions. The amendment will
allow for the legislature to sanction the project, something the
public wants. He argued the people of Alaska have elected the
legislature to make these decisions, not a five-member board.
2:19:21 PM
CO-CHAIR FEIGE understood the intent of Amendment 10, but said
if state money is going to be spent on a pipeline it is
incumbent upon the legislature to authorize the funding. The
legislature should not block any private investment in the
state, he continued, and Amendment 10 could be construed as a
roadblock. He said he does not support the amendment.
2:20:29 PM
REPRESENTATIVE TARR pointed out that a similar provision had
been in the Alaska Stranded Gas Development Act, which protected
the state from any bad decisions. She expressed her
appreciation for all the work done by the bill sponsors and
staff. She said the amendments that she is offering are to
ensure transparency, maximum benefit for Alaskans, and an
appropriate level of oversight. She reminded the committee that
AGDC could issue up to $8 billion in revenue bonds.
2:21:38 PM
MS. DELBRIDGE explained that any revenue bonds are limited to
only AGDC's backing, so the State of Alaska would not be on the
hook for any of them.
REPRESENTATIVE HAWKER added that only a general obligation bond
voted by the people of Alaska carried the full faith and credit
of the state.
REPRESENTATIVE TARR asked who would be responsible should AGDC
default on the bonds and would the state have a moral obligation
for payment.
MS. DELBRIDGE replied the moral obligation is for the capital
reserve fund that AGDC can create to back its interest payments
on those bonds. If AGDC created a capital reserve fund, then
the state's moral obligation within this legislation would be to
replenish whatever amount AGDC needs to draw out of that fund,
but it is not to simply back the bonds entirely.
REPRESENTATIVE TARR maintained her point that it could be a
substantial amount of money and therefore having some
legislative oversight is a good thing.
2:23:01 PM
CO-CHAIR SADDLER directed attention to line 18, page 2, of the
proposed bill, which states that development of the pipeline is
in the best interest of the state. He opined that placement of
any obstacle is contrary to the point of the bill.
2:23:30 PM
REPRESENTATIVE HAWKER maintained his objection to Amendment 10.
2:23:35 PM
A roll call vote was taken. Representatives Tarr and Tuck voted
in favor of Amendment 10. Representatives Johnson, Olson,
Seaton, P. Wilson, Hawker, Feige, and Saddler voted against it.
Therefore, Amendment 10 failed by a vote of 2-7.
2:24:31 PM
REPRESENTATIVE TUCK moved to adopt Amendment 11, labeled 28-
LS0021\O.18, Bullock, 3/2/13, which read:
Page 2, lines 1 - 2:
Delete "relating to procurement by the Alaska
Gasline Development Corporation;"
Page 2, lines 7 - 8:
Delete "relating to the procurement of certain
services by the Alaska Natural Gas Development
Authority;"
Page 6, line 18:
Delete "(a)"
Page 6, lines 24 - 25:
Delete all material.
Page 15, line 8:
Delete "the State Procurement Code and"
Page 15, line 10:
Delete "AS 36.30 (State Procurement Code) and"
Page 25, lines 12 - 16:
Delete all material.
Renumber the following bill sections accordingly.
Page 36, lines 14 - 15:
Delete "The procurement of services under this
subsection is exempt from AS 36.30, including
AS 36.30.015(d) and (f)."
Page 52, line 13:
Delete "sec. 8"
Insert "sec. 7"
Delete "sec. 9"
Insert "sec. 8"
Page 52, line 14:
Delete "sec. 10"
Insert "sec. 9"
Page 52, lines 14 - 15:
Delete "sec. 11"
Insert "sec. 10"
Page 52, line 16:
Delete "secs. 3 and 8 - 11"
Insert "secs. 3 and 7 - 10"
Page 52, line 17:
Delete "secs. 3 and 8 - 11"
Insert "secs. 3 and 7 - 10"
Page 52, line 19:
Delete "sec. 8"
Insert "sec. 7"
Delete "sec. 9"
Insert "sec. 8"
Page 52, line 20:
Delete "sec. 10"
Insert "sec. 9"
Page 52, lines 20 - 21:
Delete "sec. 11"
Insert "sec. 10"
REPRESENTATIVE JOHNSON objected for discussion purposes.
2:24:41 PM
REPRESENTATIVE TUCK stated Amendment 11 would keep the state
procurement code. He offered his belief that the state's
procurement code meets the needs of a pipeline project because
there is the ability to single source small and emergency
procurements and for flexible procurement. The procurement code
ensures the best price and the best deal and requires pre-
qualification for certain bids. He disagreed that a project
would be delayed because of the appeal process, saying it is
usually the bidders appealing if there is a problem with the bid
and in the past that has saved the state a lot of money.
MS. DELBRIDGE said the sponsors object to Amendment 11 because
the state procurement code is not written for a project of this
magnitude. She related that AGDC has concerns that the state
procurement code will create delays and cost the project more.
She noted AGDC was exempted from the state procurement code in
2010 with the passage of House Bill 369. The proposed bill
would transition the existing exemption from a subsidiary
corporation of AHFC created to do gaslines and moves it into
AGDC as its new stand-alone state corporation.
2:27:24 PM
REPRESENTATIVE TUCK added that 60-90 days is adequate for
solicitation for a major project. He said personnel would have
to be trained for any type of procurement, no matter what the
project, to ensure clarity and a fair, open process. He pointed
out that the state's procurement has been centralized for
maximum efficiency.
2:28:24 PM
REPRESENTATIVE TARR inquired whether the state procurement code
was in place when the Trans-Alaska Pipeline System (TAPS) was
built.
MS. DELBRIDGE replied she is unsure, but said that since it was
not a state entity that built TAPS, the private sector would not
have been subject to this code.
REPRESENTATIVE P. WILSON remarked she did not have much faith in
the state's procurement people and offered her belief that many
of the procurements were not the cheapest available.
REPRESENTATIVE TUCK responded the state does hundreds of
millions of dollars' worth of projects every year.
2:29:51 PM
REPRESENTATIVE HAWKER maintained his objection to Amendment 11.
2:29:56 PM
A roll call vote was taken. Representatives Tarr and Tuck voted
in favor of adopting Amendment 11. Representatives Johnson,
Olson, Seaton, P. Wilson, Hawker, Saddler, and Feige voted
against it. Therefore, Amendment 11 failed by a vote of 2-7.
2:30:58 PM
REPRESENTATIVE TARR moved to adopt Amendment 12, labeled 28-
LS0021\O.20, Bullock, 3/2/13, which read:
Page 46, lines 7 - 9:
Delete all material and insert:
"(d) A contract carriage certificate issued by
the commission
(1) shall require that a public utility in
the state have priority over other shippers if the
transportation capacity of an in-state natural gas
pipeline is reduced; and
(2) may include other reasonable terms and
conditions that are consistent with this chapter and
that are for the mutual benefit of the in-state
natural gas pipeline and the public."
REPRESENTATIVE HAWKER objected for discussion purposes.
2:31:08 PM
REPRESENTATIVE TARR explained Amendment 12 would ensure that in-
state gas would have priority with a contract carrier, which
would ensure the maximum benefit for Alaskans.
MS. DELBRIDGE said the sponsors object to Amendment 12 as there
is currently a provision in the proposed bill which directs the
RCA to ensure that the public utilities have the necessary gas
if there is an immediate threat for public safety, health, and
welfare. She pointed out that public utilities have an equal
standing for negotiation of terms with a contract carrier, and a
utility can request preferential treatment in its contract.
Responding to Representative Tarr, Ms. Delbridge said the public
utilities have an opportunity to negotiate the provisions in the
contracts for gas shipment in the pipeline to include
preferential treatment over other users, if necessary.
REPRESENTATIVE TARR requested an explanation of pre-subscription
agreements which do not include utilities, and asked whether the
utilities would be able to negotiate a preferential treatment
after the open season.
MS. DELBRIDGE answered that the rates and operating terms are
included within those agreements and that there are other
provisions which are not part of these terms. She offered as an
example a negotiable preference for a public utility should
there be a problem in the pipeline, provided that all the
similarly situated shippers have the same opportunity to
negotiate similar terms. She noted that the carrier has to
justify any provision that is not applicable to everyone.
2:35:21 PM
REPRESENTATIVED HAWKER maintained his objection to Amendment 12.
2:35:28 PM
A roll call vote was taken. Representatives Tarr and Tuck voted
in favor of the adoption of Amendment 12. Representatives
Johnson, Olson, P. Wilson, Hawker, Saddler, and Feige voted
against it. Therefore, Amendment 12 failed by a vote of 2-6.
2:36:23 PM
REPRESENTATIVE TARR moved to adopt Amendment 13, labeled 28-
LS0021\O.22, Bullock, 3/2/13, which read:
Page 12, following line 13:
Insert a new subsection to read:
"(i) Notwithstanding any contrary provision of
law, a contract to sell all or a portion of an in-
state natural gas pipeline is public information and
may be disclosed to the public."
REPRESENTATIVE HAWKER objected for discussion purposes.
REPRESENTATIVE TARR explained Amendment 13 is offered to
maintain transparency, oversight, and public disclosure.
2:36:56 PM
MS. DELBRIDGE stated the sponsors object to Amendment 13 in
large part due to its broadness, as the proposed amendment is
guessing the future and the relevance. She opined that future
contracts could have terms and conditions that are necessary to
keep confidential in order to protect re-sale values.
REPRESENTATIVE JOHNSON offered his belief that Amendment 13 has
absolutely no teeth, is totally unnecessary, and is "a waste of
good ink."
REPRESENTATIVE HAWKER said Amendment 13 would supersede all of
the confidentiality provisions, which could well compromise the
value of the state asset being sold on a commercial market. He
expressed his concern for the legislature trying to micro-manage
the future and to anticipate things that it has absolutely no
knowledge of right now. The proposed amendment "could do the
state incredible competitive harm, if we were attempting to
market something of value," he argued.
REPRESENTATIVE TUCK pointed out that the legislature is
attempting to get accurate information to make better decisions.
He noted that, although talented people have written the
proposed bill, there are also talented people elected to public
office who need accurate information to make better decisions.
2:39:31 PM
CO-CHAIR FEIGE observed that Amendment 13, as written, makes no
mention whether the state has an ownership interest in the
pipeline; therefore, any ownership would be subject to public
disclosure. He offered his belief that a requirement could be
introduced should the state take any ownership in the project.
He declared that the proposed amendment would be an obstacle to
any investors and stated he will vote against the amendment.
2:40:30 PM
REPRESENTATIVE HAWKER maintained his objection to Amendment 13.
2:40:39 PM
A roll call vote was taken. Representatives Tarr and Tuck voted
in favor of the adoption of Amendment 13. Representatives
Johnson, Olson, P. Wilson, Hawker, Saddler, and Feige voted
against it. Therefore, Amendment 13 failed by a vote of 2-6.
2:41:26 PM
REPRESENTATIVE TUCK moved to adopt Amendment 14, labeled 28-
LS0021\O.24, Nauman/Bullock, 3/2/13, which read:
Page 10, following line 9:
Insert a new subsection to read:
"(e) To the maximum extent permitted by law and
before the commencement of construction, the
corporation or its agent shall negotiate a project
labor agreement for the construction of the natural
gas pipeline. In this subsection, "project labor
agreement" means a comprehensive collective bargaining
agreement between the corporation or its agent and the
appropriate labor representatives to ensure expedited
construction with labor stability by employing
qualified residents of the state."
REPRESENTATIVE HAWKER objected for discussion purposes.
REPRESENTATIVE TUCK explained that Amendment 14 would reinstate
the project labor agreement language, similar to the Alaska Gas
Inducement Act (AGIA), so that the project would have a labor
agreement.
2:42:04 PM
REPRESENTATIVE HAWKER repeated that one of his policy objectives
as a sponsor of the bill is to deliver Alaska gas to Alaskans at
the least possible cost because that translates into what a
consumer will pay at the burner tip. Mandating the labor
agreements would increase that cost to consumers, he said. He
emphasized that this is not a statement of disrespect to
organized labor and added that there is room for Alaska's entire
workforce to go to work on this project. He declared his desire
to avoid any impediment to any segment of the workforce, or to
compromise the ability of AGDC to deliver a project at the least
possible cost. It is best to allow the market to prevail, which
will bring the greatest Alaska workforce into play and will
result in the lowest possible cost to consumers.
2:43:25 PM
REPRESENTATIVE TARR voiced her support for Amendment 14, stating
that this project should be for the maximum benefit to Alaskans,
and should not have the numerous out of state workers that TAPS
hired.
2:44:00 PM
REPRESENTATIVE TUCK declared it is an unknown that the cost
would increase. He reported that a class he attended for mega-
projects discussed project labor agreements and the related
success for mega-projects. The class instructors said
agreements offer consistency with the best trained workers. He
pointed out that the State of Alaska only has a 30-day
requirement for residency, whereas the U.S. Department of Labor
requires a year of residency to enroll in approved
apprenticeship programs. He maintained that the proposed
amendment would further guarantee the training of Alaskans for
this project, and would keep "the good ol' boy system out of
sending our workers up on this pipeline."
CO-CHAIR SADDLER asked if there is anything in the proposed bill
that would prohibit negotiation of a labor agreement.
MS. DELBRIDGE replied that there is nothing in proposed HB 4
that would prohibit a project labor agreement.
2:45:22 PM
REPRESENTATIVE TARR reminded the committee that this language
was repealed in a previous amendment and offered her support for
Amendment 14.
MS. DELBRIDGE clarified that the earlier language to the project
labor agreement was conforming language and did not make this
project subject to a project labor agreement.
2:45:58 PM
REPRESENTATIVE HAWKER maintained his objection to Amendment 14.
2:46:04 PM
A roll call vote was taken. Representatives Tarr and Tuck voted
in favor of the adoption of Amendment 14. Representatives
Johnson, Olson, P. Wilson, Hawker, Saddler, and Feige voted
against it. Therefore, Amendment 14 failed by a vote of 2-6.
2:46:46 PM
REPRESENTATIVE TUCK moved to adopt Amendment 15, labeled 28-
LS0021\O.25, Bullock, 3/2/13, which read:
Page 10, lines 24 - 26:
Delete "In this subsection, "state entity" means
a state department, authority, or other administrative
unit of the executive branch of state government, a
public university, or a public corporation of the
state."
Page 11, line 14, following "corporation":
Insert ", except that a successor in interest
that is not a state entity is liable for any
applicable appraisal or rental cost"
Page 12, following line 13:
Insert a new subsection to read:
"(i) In this section, "state entity" means a
state department, authority, or other administrative
unit of the executive branch of state government, a
public university, or a public corporation of the
state."
Page 24, following line 10:
Insert a new subsection to read:
"(c) Notwithstanding the exemption in (a) of
this section, a person that is not a state entity that
acquires property owned by the corporation shall pay
the taxes or assessments that would have otherwise
been due during the three calendar years preceding the
year of acquisition had the property not been exempt
under (a) of this section."
Page 51, line 28:
Delete "a new subsection"
Insert "new subsections"
Page 52, following line 5:
Insert a new subsection to read:
"(e) Notwithstanding the exemption in (d) of
this section, a person that is not a state entity that
acquires the natural gas pipeline project described in
(d) of this section shall pay the taxes that would
have otherwise been due during the three calendar
years preceding the year of acquisition had the
taxable property not been exempt under (d) of this
section."
REPRESENTATIVE HAWKER objected for discussion purposes.
2:47:01 PM
REPRESENTATIVE TUCK explained Amendment 15 would ensure that,
should the corporation or state entity be sold, any taxes waived
to local municipalities and governments would be back paid for
up to three years, and then municipal taxes would be instituted
going forward.
REPRESENTATIVE HAWKER said he calls Amendment 15 the "make the
consumers pay amendment." He repeated that the objective of the
proposed bill is to reduce project risk, to make the project
most efficient, and to deliver a project at the least possible
cost to Alaskans. He stated he cannot see any reason to put
into statute language that could impede the interest in the
private sector in this project or any language that would
necessarily increase the price of gas sold to Alaskans, which he
argued would occur should this amendment pass.
2:49:13 PM
REPRESENTATIVE JOHNSON asked where the money would come from to
pay the back taxes, as all the tariffs would be set.
REPRESENTATIVE TUCK replied it would come from the purchasers.
REPRESENTATIVE JOHNSON asked if that would increase the tariff
and cause the consumer to pay more.
REPRESENTATIVE TUCK responded that contracts would already be
secured, and, if the goal is to keep tariffs low, then the state
would maintain control.
CO-CHAIR SADDLER asked what would be the effect of this
amendment on the finances of any project.
2:50:36 PM
DARYL KLEPPIN, Manager, Commercial Team, Alaska Gasline
Development Corporation (AGDC), Alaska Housing Finance
Corporation (AHFC), Department of Revenue (DOR), said the impact
of retroactive taxation on the sale of a portion or the entire
pipeline would make the sale financially more difficult and
would lower the price due to the liability for the back taxes.
He offered his belief that the provisions would also make the
project more difficult to finance and result in higher interest
rates. In further response to Co-Chair Saddler, he agreed there
would also be a higher tariff rate.
2:51:38 PM
REPRESENTATIVE TARR offered her appreciation for Amendment 15,
saying its goal is to encourage the project to remain a state
entity because of the substantial investment. She offered an
example of a state asset that was sold and is still not
responsible for payment of any property tax.
2:52:41 PM
REPRESENTATIVE OLSON asked Mr. Fauske if he has seen anything
like this on a large project.
DAN FAUSKE, President, Alaska Gasline Development Corporation
(AGDC); CEO/Executive Director, Alaska Housing Finance
Corporation (AHFC), Department of Revenue (DOR), replied the ad
valorem tax would start after an initial waiver during the
construction period. He reported that initiating a previously
owed tax would make this extremely difficult.
2:53:34 PM
REPRESENTATIVE HAWKER maintained his objection to Amendment 15.
2:53:39 PM
A roll call vote was taken. Representatives Tarr and Tuck voted
in favor of the adoption of Amendment 15. Representatives
Johnson, Olson, P. Wilson, Hawker, Saddler, and Feige voted
against it. Therefore, Amendment 15 failed by a vote of 2-6.
2:54:23 PM
REPRESENTATIVE TARR moved to adopt Amendment 16, labeled 28-
LS0021\O.26, Bullock, 3/2/13, which read:
Page 1, lines 8 - 10:
Delete "relating to judicial review of a right-
of-way lease or an action or decision related to the
development or construction of an oil or gas pipeline
on state land;"
Page 31, line 28, through page 32, line 24:
Delete all material.
Renumber the following bill sections accordingly.
Page 50, lines 26 - 27:
Delete "Except as provided in AS 38.35.200(c), a"
Insert "A"
Page 53, line 29:
Delete "lines"
Insert "line"
Page 53, line 30:
Delete "(1)"
Page 54, lines 1 - 3:
Delete "carrier"; and
(2) AS 38.35.200 from "Judicial review of
decisions of commissioner on application" to "Judicial
review.""
Insert "carrier.""
REPRESENTATIVE HAWKER objected for discussion purposes.
2:54:34 PM
REPRESENTATIVE TARR explained Amendment 16 addresses judicial
review. She drew attention to a February 12 memorandum
[included in members' packets] from Legislative Legal and
Research Services addressing the issue of limiting judicial
review. She read from page 1, paragraph 1, of the memorandum:
"Although the legislature has the power to establish
jurisdiction for the courts under art. IV, sec. 1, Constitution
of the State of Alaska, what the legislature categorizes as an
issue of jurisdiction may be found by the courts to be a
violation under the separation of powers doctrine." She
declared that Amendment 16 attempts to ensure that the
separation of powers is not violated by returning to the
proposed bill Article IV, sec. 1, regarding judicial review.
2:58:10 PM
CORI BADGLEY MILLS, Assistant Attorney General & Legislative
Liaison, Legislation & Regulations Section, Civil Division
(Juneau), Department of Law (DOL), in response, said that the
Legislative Legal and Research Services memorandum for judicial
review expresses similar concerns to those of the Department of
Law (DOL). She opined that this could be decided in either
direction, should a ruling be necessitated by the courts. She
stated that DOL does not have a definitive opinion, and noted
that there are other places in statute where judicial review has
been limited. She expressed agreement with the memorandum.
2:59:23 PM
BONNIE HARRIS, Senior Assistant Attorney General, Oil, Gas &
Mining, Civil Division (Anchorage), Department of Law (DOL),
agreed with Ms. Badgley Mills that the Department of Law does
not have a conclusive answer for whether a court would accept
this. Generally, she said, the more restrictive a provision
toward the public having access to the courts the more likely
the court is to strike it down or not consider it. She said DOL
agrees with Legislative Legal and Research Services.
3:01:12 PM
REPRESENTATIVE HAWKER said the sponsors absolutely believe that
this is a reasonable manifestation of limitation on the judicial
review. This limitation falls within the overarching policy
objective of most efficiently moving a project forward, and of
minimizing project risk to every environmental organization and
person with an ax to grind, and everyone who does not agree with
what color the pipeline is, and who steps in simply to frustrate
and prevent a project from going forward on a timely basis.
Every time there is a delay, every time there is a legal
impediment, it costs money; every time it costs money that money
is going to have to be paid for by a consumer. The sponsors
want to err to the greatest extent possible on the side of the
consumer on an efficient completion of any pipeline project.
Both the Trans-Alaska Pipeline System (TAPS) and the Alaska
Gasline Inducement Act (AGIA) had similar provisions recognizing
that the public interest is a justification for reasonable
limits on judicial review. He said he therefore presumes that a
court looking at this will uphold the responsible level of
judicial review that is in this bill that the amendment proposes
to remove. He requested the committee to not approve this
amendment.
3:03:07 PM
REPRESENTATIVE TUCK stated he does not like the idea of getting
rid of all the checks and balances. Amendment 15 is a way of
keeping consumer and public protections in place, he said, and
he will be supporting it.
REPRESENTATIVE JOHNSON pointed out projects in Alaska that were
slowed down by lawsuits. He said he does not want that to
happen in the future and the proposed bill ensures that that is
not an option [with this project]. He reiterated that TAPS and
AGIA have this same kind of language.
3:04:15 PM
REPRESENTATIVE TARR maintained that if everything is done right
and in an efficient way there will never be a need to go to the
courts. She said she does not want to see a law passed that is
immediately open to challenge because of this provision. In an
attempt to prevent that from happening and to support the bill's
sponsors in this effort to be efficient and push this project
along, she is hoping Amendment 16 will pass.
REPRESENTATIVE JOHNSON said the state has done things right time
after time only to be sued and said there is no right when
people want to slow down or stop a project.
3:05:14 PM
REPRESENTATIVE JOHNSON maintained his objection to Amendment 16.
3:05:19 PM
A roll call vote was taken. Representatives Tarr and Tuck voted
in favor of the adoption of Amendment 16. Representatives
Hawker, Johnson, Olson, P. Wilson, Feige, and Saddler voted
against it. Therefore, Amendment 16 failed by a vote of 2-6.
3:06:06 PM
The committee took an at-ease from 3:06 p.m. to 3:25 p.m.
3:25:45 PM
REPRESENTATIVE TARR moved to adopt Amendment 17, labeled 28-
LS0021\O.32, Nauman/Bullock, 3/2/13, which read:
Page 5, line 15, following "meeting.":
Insert "The board may meet and transact business
if public notice of the time and location where the
meeting will be held has been given for seven days or
more."
Page 5, line 28:
Delete "A"
Insert "Except as provided in (d) of this
section, a"
Page 5, line 30, through page 6, line 1:
Delete all material and insert:
"(d) For purposes of this chapter, a meeting of
the board must be held in a single physical location
to authorize the issuance of corporate bonds or an
expenditure greater than $10,000,000."
Objection to the amendment was voiced by Representative Hawker
and Co-Chair Feige.
3:26:13 PM
REPRESENTATIVE TARR, speaking to Amendment 17, noted the
committee has discussed ensuring an efficient way for this
project to move forward without too many delays. At the same
time, she is concerned about transparency and oversight and
therefore she pursued several different ways that the board
could be expanded or could involve the legislature in decision
making. However, Legislative Legal and Research Services
informed her that because these board members would be
compensated it would be a constitutional violation for a
legislator to dually hold office and be compensated [as a board
member]. She came up with Amendment 17 to make these board
meetings more transparent. Drawing attention to page 5, line
30, of the bill, she pointed out that with just 24 hours' notice
the board can hold a meeting, which concerns her given the
significant decision making that could take place. Also, as the
bill is currently written, just three of the five members of the
board can make a decision and they can do it electronically.
She expressed her concern about the security of such a system
and whether it would prohibit impersonation of a board member.
That only three board members can meet over the phone does not
seem like enough opportunity for the public to be aware of what
is happening, she opined. Amendment 17 would provide seven
days' notice rather than just 24 hours because it would be
difficult for anyone to be tracking that closely or be able to
attend that meeting for information gathering purposes.
Amendment 17 would also require that the meeting be in person
for authorizing the issuance of corporate bonds or an
expenditure of over $10 million.
3:29:34 PM
REPRESENTATIVE HAWKER looped back to the overarching policy
objectives the sponsors have brought forth in this bill. He
said the first one is to keep AGDC or any project AGDC is
potentially involved in as insulated from political interference
as possible while maintaining adequate and appropriate
governance restrictions. The sponsors truly believe the
legislation before the committee provides that adequate
governance. Second, the sponsors want to make AGDC as efficient
and as flexible as possible to be responsive to facts and
circumstances. The inability to act quickly is tantamount to
paralysis, which does nothing but drive up costs and risk and,
at the end of the day, the consumer has to pay those costs. He
requested that Ms. Delbridge be allowed to provide more detail
about the state's open meetings law and how it relates to this
legislation.
3:30:56 PM
MS. DELBRIDGE clarified the provision for 24 hours' notice on
page 5 is an emergency provision that is only adequate for
meetings of the board at which the issuance of corporate bonds
is to be heard. The 24 hours' notice is not acceptable under
this bill for any other kind of board meeting. The board is
subject to the Open Meetings Act, page 13, line 27, Section
31.25.130, which requires "reasonable public notice" for all
meetings that are required to be open under this section. The
reasonable public notice is not specific in state statute for
any of these boards under the Open Meetings Act because
reasonable depends on the circumstances in part. If the board
has an action that it needs to take in an expedited manner and
only has 10 days advance of needing to do that, perhaps 10 days'
notice to the public or 7 days' notice is reasonable. If a
board is having a regularly scheduled quarterly meeting and
knows three months in advance that that is the case, two weeks
or more might be reasonable public notice. Some boards are
known to issue public notice of their meetings two months in
advance. The reasonable allows these boards and corporations of
the state under the Open Meetings Act to be flexible and to be
responsive to their duties and missions.
3:32:42 PM
MS. DELBRIDGE added that the 24 hour notice for bond issues is
an important provision for AGDC. She said AHFC believes it has
never had to give only 24 hours' notice for issuing bonds. But
sometimes there will be a regularly scheduled meeting in which
taking up a bond issuance is part of the meeting that is on the
agenda and a small flaw is found during the review or
circumstances might change while looking through that bond
issuance in the public meeting. There is the potential that the
bond folks need to come back literally the next day with a
refined package so that they can actually do the issuance that
they discussed at the meeting if there were any problems with
it. That also prevents any delays if this is an optimal time to
issue these bonds or the market circumstances are such that they
do need to get on with this quickly. Regarding a physical
meeting location, there is a potential that there will be
multiple bond issuances, perhaps in a short frame of time or a
long frame of time. Part of AGDC's ability to issue bonds in
this bill is that AGDC can decide whether it is one or more
series and how to do that to maximize the benefits to Alaskans
and to keep the project costs as low as possible. To ask that
the board meet physically in the same location for that could be
very difficult for a board that has this degree of
specialization and in such a fluid and dynamic environment as
bond issuances.
3:34:25 PM
REPRESENTATIVE TARR requested discussion in regard to having
just three people on the phone making that decision.
REPRESENTATIVE HAWKER responded it is a policy call. The
sponsors could have put 200 people on this board had they wanted
to make sure that nothing ever got done. The sponsors could
have put one person on the board and made it a very efficient
operation, but it was felt that a three member board was a
reasonable compromise specifically with the qualifications and
requirements that are being placed upon those members.
3:35:16 PM
REPRESENTATIVE HAWKER maintained his objection to Amendment 17.
3:35:21 PM
A roll call vote was taken. Representatives Tarr and Tuck voted
in favor of the adoption of Amendment 17. Representatives
Johnson, Olson, P. Wilson, Hawker, Feige, and Saddler voted
against it. Therefore, Amendment 17 failed by a vote of 2-6.
3:36:24 PM
REPRESENTATIVE TUCK moved to adopt Amendment 18, labeled 28-
LS0021\O.33, Nauman/Bullock, 3/2/13, which read:
Page 7, line 7:
Delete "personnel"
Insert "president, vice-president, director of
administrative services, and controller"
Page 32, lines 25 - 27:
Delete all material and insert:
"* Sec. 14. AS 39.25.110 is amended by adding a new
paragraph to read:
(44) the president, vice-president,
director of administrative services, and controller of
the Alaska Gasline Development Corporation."
Objection to the amendment was voiced by Representatives Hawker
and Johnson.
3:36:37 PM
REPRESENTATIVE TUCK explained Amendment 18 would exempt from the
State Personnel Act only the top four employees named in the
bill rather than exempting all employees.
MS. DELBRIDGE said the sponsors object to Amendment 18. The
exemption from the State Personnel Act is critical for all
personnel, she said, in particular for the rank file that AGDC
anticipates having, which includes engineers, environmentalists,
permitters, designers, and commercial analysts. It is likely
these people will need to be hired quickly as needed in highly
specially areas. She noted that also exempt from the State
Personnel Act are the Alaska Aerospace Corporation, AHFC, Alaska
Industrial Development and Export Authority (AIDEA), the
Permanent Fund Corporation, Alaska Railroad Corporation, and,
through its parent corporation, the Alaska Student Loan
Corporation.
3:38:07 PM
REPRESENTATIVE TARR supported Amendment 18, noting information
was recently distributed about executive salaries and some of
the individuals named by Ms. Delbridge are exempt from them.
She related that her constituents have expressed concern about
substantial salaries, some of which are $350,000 annually.
Amendment 18 would ensure there is some latitude given in terms
of the high level personnel and ensure reasonable pay.
3:38:58 PM
REPRESENTATIVE HAWKER maintained his objection to Amendment 18.
3:39:07 PM
A roll call vote was taken. Representatives Tarr and Tuck voted
in favor of the adoption of Amendment 18. Representatives
Olson, P. Wilson, Hawker, Johnson, Feige, and Saddler voted
against it. Therefore, Amendment 18 failed by a vote of 2-6.
3:39:52 PM
REPRESENTATIVE TUCK moved to adopt Amendment 19, labeled 28-
LS0021\O.35, Bullock, 3/2/13, which read:
Page 39, line 2:
Delete "AS 42.08.320(b) - (d)"
Insert "AS 42.08.320(b) - (e)"
Page 45, following line 13:
Insert a new subsection to read:
"(e) Notwithstanding (b)(1) of this section, the
commission may not find that a precedent agreement or
related contract is just and reasonable if the rate in
the precedent agreement or related contract is less
than the cost of providing the service."
Objection to the amendment was voiced by Representatives
Johnson, Hawker, Olson, and Feige.
REPRESENTATIVE TUCK recounted previous committee discussion
about how there can be agreements that are less than the sticker
price. Amendment 19 would set a floor, ensuring the state has a
fiduciary responsibility to Alaskans that it is not signing
agreements that are less than the state's operating costs.
3:40:26 PM
REPRESENTATIVE HAWKER said Amendment 19 does not recognize the
actual process that is undertaken when a project of this nature
is moved forward. The amendment language is unnecessary and
would insert financing risk, transaction risk, and project risk
as the project must work with all the stakeholders that would
ultimately become involved in the financing and execution of a
project. It would be telling regulators, such as the RCA, that
it cannot find something just and reasonable if the rate is less
than the cost of providing services. That is a second guess of
RCA's overarching objective which is to provide for the good of
the public. Approving a project that cannot even pay for itself
would be a horrible abrogation of the regulators own
responsibilities. At the very core of the regulator processes
is that standard of reasonableness, whether the regulators are
looking at the sponsors of a project or the contracts underlying
a project. If those contracts are not reasonable and those
stakeholders are not capable of performing in the best interests
of the state, the RCA's responsibility is to make those
judgments. Including this proposed language means it is
something regulators must interpret as to what legislators are
talking about, which inserts ambiguities and that is why the
sponsors would prefer not to include this provision in the bill.
3:43:09 PM
CO-CHAIR SADDLER said the amendment reminds him of the hapless
businessman who loses 1 percent on every transaction but makes
it up on volume - it does not quite make sense.
3:43:18 PM
REPRESENTATIVE TUCK realized the amendment language may be in
the wrong spot. He inquired of Ms. Delbridge as to whether this
section of the bill, page 45, line 13, is for all pipeline
contract carriers.
MS. DELBRIDGE replied yes, this would apply to all natural gas
contract carriers.
REPRESENTATIVE TUCK clarified this was not his intent with
Amendment 19. The amendment was intended just for AGDC so that
AGDC would operate in the positive and a project would not be
sanctioned that was below the floor. He said he did not mean to
set a floor for every pipeline project in the state of Alaska.
He therefore withdrew Amendment 19.
3:44:50 PM
REPRESENTATIVE TARR moved to adopt Amendment 20, labeled 28-
LS0021\O.37, Nauman/Bullock, 3/2/13, which read:
Page 8, line 15, following "(6)":
Insert "subject to the approval of the
legislature,"
Page 8, line 16:
Delete the first occurrence of "or"
Insert ";
(7) except as provided in (6) of this
subsection,"
Renumber the following paragraphs accordingly.
Page 13, line 14:
Delete "The"
Insert "Except as provided in AS 31.25.080(a)(6),
the"
Objection was voiced by Representatives Johnson, Hawker, Olson,
and Co-Chair Feige.
3:44:57 PM
REPRESENTATIVE TARR, speaking to Amendment 20, stated that upon
its completion the pipeline would be worth a large sum of money.
The potential exists for this asset to be sold by AGDC to
another private entity. The state has been involved in and
financed some projects that were not successful and that were
sometimes operated at a loss. When financing comes in for a
project it is because people expect it to be successful.
Amendment 20 would provide that if AGDC wants to sell the
pipeline to a private entity the sale would be subject to
legislative approval in an effort to provide maximum benefits to
Alaskans. With respect to the sponsors' goal of making this
project move forward in an efficient way and not bogging it
down, Amendment 20 would have no impact on the project moving
forward.
3:46:55 PM
REPRESENTATIVE HAWKER disagreed with the aforementioned
characterization of the amendment, saying it would also require
legislative approval for the disposal of part of a pipeline or
an asset, which reintroduces all of that political risk, project
risk, and uncertainty that goes with it for potential investors
and potential partners in a project. The sponsors' philosophy
is to give AGDC a job to do, to give AGDC the assets to do the
job, and to vest in AGDC the legislature's trust through a very
well managed organization to accomplish the task. Very specific
obligations for AGDC are being established for AGDC as an entity
to accomplish a very specific mission and to look out for the
best interests of the people of Alaska in accomplishing that
mission. It sets things up for failure if the legislature tries
to micro-manage and if the legislature is given the opportunity
to second guess responsible business decisions that are being
made. This has been a policy call, he continued; for example,
under House Bill 369 a great deal of authority was given to a
project development team at AHFC to let the team go forward
without legislative interference. Facts and very recent history
have demonstrated this effort is extremely well managed.
Nothing in SSHB 4 authorizes a project per se; rather, this bill
is about advancing the effort to get Alaska's gas in the hands
of Alaskans as quickly as possible at the least possible cost.
Provisions that create second guessing and uncertainty are not
needed and this amendment is unnecessary at this time.
3:49:40 PM
REPRESENTATIVE TARR allowed she can see the concern regarding
the disposal of part. She inquired whether the sponsor would
maintain the same concern if it was only the complete disposal
of the pipeline.
REPRESENTATIVE HAWKER responded he might have even more concern
about interfering in the economics of getting a pipeline moving
forward.
3:50:17 PM
REPRESENTATIVE TUCK maintained that with this corporation a lot
of public securities are being removed. This corporation is
being given the ability to acquire a lot of tremendous
advantages that would not normally be seen in the private
markets - eminent domain, clear path for right-of-ways, tax
exemptions, not as much public accountability as he feels
comfortable with, and no definition of what is the best interest
of Alaskans. If those tremendous assets being created by this
bill are going to be sold, there should be some legislative
oversight. Many irresponsible decisions have been made in the
past in private industry as well. It is better to have more
eyes on this than fewer eyes. He said he will be supporting the
amendment.
3:51:17 PM
CO-CHAIR FEIGE said Amendment 20 assumes that the state is an
owner of the pipeline project that goes forward, which has been
contemplated and perhaps it will come to that, at which time
[the legislature] can address how much inference as a potential
owner [the state] would like to have in the process. Under the
proposed bill, it is a project that will go out to the market
and the market will provide the capital that will build the
project. Putting something subject to the approval of the
legislature when the state does not have a direct fiscal
interest or even an ownership in the pipeline seems to be overly
restrictive.
3:52:26 PM
REPRESENTATIVE JOHNSON maintained his objection to Amendment 20.
3:52:39 PM
REPRESENTATIVE TARR stated Amendment 20 is not intended to slow
down any project because the amendment is intended to be at the
point where the project will be completed and the transfer of
ownership will be happening and will make sure that that is in
the best interest of the state.
3:53:04 PM
A roll call vote was taken. Representatives Tarr and Tuck voted
in favor of the adoption of Amendment 20. Representatives P.
Wilson, Hawker, Johnson, Olson, Feige, and Saddler voted against
it. Therefore, Amendment 20 failed by a vote of 2-6.
3:53:49 PM
CO-CHAIR SADDLER set aside Conceptual Amendments 2 and 3, saying
they were not properly vetted by Legislative Legal and Research
Services [as per committee policy].
REPRESENTATIVE TUCK noted mistakes were made by the amendment
drafters. He surmised that in the future the best thing to do
is to submit [the amendments as they are with the mistakes]. He
said he does not want to further limit any reasons to not accept
an amendment, so in the future he will submit amendments with
mistakes and then just do an amendment to the amendment,
although that would slow things down. He inquired as to the co-
chair's preference or intention is in this regard.
3:54:35 PM
CO-CHAIR SADDLER responded the intention, as established in the
first committee meeting, is to ensure that amendments are
presented to Legislative Legal and Research Services with enough
time for the work and vetting to be done that ensures the
language is correct and aligned to prevent conforming errors.
He said amending them in committee can be done, but getting
amendments into Legislative Legal and Research Services early
should avoid this kind of problem.
REPRESENTATIVE TUCK commented that this requirement is unusual
and new to this legislature, although not new to this committee.
He agreed that in the future he will submit them as written with
the errors.
CO-CHAIR SADDLER asserted that it is standard practice in other
committees.
CO-CHAIR FEIGE added that this policy was established early on
and said reasonable latitude was granted prior to this, but said
there has been plenty of warning about when bills would be heard
and when amendments would be issued. It is the responsibility
of committee members to get those amendments to Legislative
Legal and Research Services and the rest of the committee
members with sufficient notice and 24 hours is a reasonable
requirement.
3:55:56 PM
REPRESENTATIVE TUCK asked when conceptual amendments can and
cannot be offered; for example, is a conceptual amendment only
allowed when it is an amendment to an amendment.
CO-CHAIR SADDLER answered it will be the rule of the chair. He
said conceptual amendments are things that do not occur to a
person in advance and are not something that a person is trying
to get in through the back door. An amendment to an amendment
would be appropriate when something comes up during debate or
discussion. A totally brand new amendment might be considered,
but the preference is not to. For legislation that is large and
complicated, there must be the chance to think it over and
ensure that it conforms to the legislation.
3:56:44 PM
CO-CHAIR SADDLER resumed the public testimony that was opened on
2/15/13.
3:57:12 PM
BILL WARREN, a 61-year resident of Alaska, told the committee he
is a retired pipefitter who worked on the Trans-Alaska Pipeline
System. Noting the votes have been 2-6, he said he hopes the
committee is right. He recalled the Alaska Stranded Gas
Development Act under Governor Frank Murkowski, the Alaska
Natural Gas Development Authority (ANGDA), the Denali Project,
the Alaska Gasline Inducement Act (AGIA), and now the AGDC. He
said he really hopes that AGDC succeeds. He has a daughter
living in Fairbanks who cries while telling him it is almost
impossible to live there. He recalled that Governor Egan wanted
[the state] to own TAPS and opined that if the state had done
that it would be money ahead. The least possible cost is like
buying a Ford truck without a radio or a heater; the state can
do better than the least possible cost. A good job needs to be
done so that the state can be proud of it 100 years from now.
He pointed out that AGDC does not even have a route; the state
is in the same boat it was in 40 years ago. A route should be
able to be determined. For some reason, ENSTAR Natural Gas
Company and the powers that be want it down the Parks Highway.
He then noted that a deep draft tanker cannot make its way into
Cook Inlet. He urged that the pipeline be done the right way
and doing it the right way means starting now and building a
line to Fairbanks, likely a 24-inch high pressure line with no
open seasons. Alaska is not under a free market, it is a
monopoly. There is nothing wrong with state ownership of the
pipeline in partnership with a pipeline company.
4:00:32 PM
CO-CHAIR SADDLER closed public testimony after ascertaining no
one else wished to testify.
4:00:49 PM
CO-CHAIR SADDLER noted that intent language designed to get the
RCA to review the legislation was distributed earlier. However,
he continued, it may be somewhat problematic as this might not
be the kind of thing the RCA does ordinarily and the RCA may not
be able to meet the deadline for noticing its next available
meeting. Therefore, he withdrew his intent language and sought
commitment from the sponsors and cosponsors that they will send
SSHB 4, as amended, to the RCA with an accompanying letter
requesting the RCA provide technical review and feedback on the
legislation in as expeditious a manner as possible.
4:01:31 PM
REPRESENTATIVE HAWKER, as prime sponsor, replied that this is
exactly the appropriate methodology. When one approaches the
RCA there are a number of protocols to observe and that original
draft letter caused some unanticipated consequences. The
approach being suggested is exactly the right approach.
4:02:19 PM
CO-CHAIR SADDLER invited joint prime sponsor, Representative
Mike Chenault, to the witness stand and opened committee
discussion on SSHB 4.
4:03:05 PM
REPRESENTATIVE TUCK remarked he is unsure whether SSHB 4 is
premature or too late. Alaskans want a gas pipeline. It is a
little bit too late due to the AGIA process that is ongoing for
a large diameter pipeline. Alaskans would be best served with a
large diameter pipeline with outtakes to keep that cost as
minimal as possible, to prevent competing pipelines, and to
build only one pipeline. It is a little bit premature because
of the ongoing AGIA process as well as all the incentives that
have been given to the Cook Inlet. Cook Inlet has the
opportunity to serve the short-term needs in the hope of getting
the big line. There has been talk that maybe these two
pipelines can somehow get together, which is his hope. However,
he noted he is a bit uncomfortable with some of the provisions.
He does not want to give away too much, but at the same time he
understands the need to expedite. Part of frontend loading is
to ensure that there is public buy-in and that the stakeholders
and shareholders are aligned. He said he does not think SSHB 4
gets there because it is too quick to achieve public buy-in and
alignment. While he has concerns, he does appreciate having
something for delivering natural gas in case other things fail.
4:04:56 PM
REPRESENTATIVE SEATON offered his appreciation for the work done
on SSHB 4 and for the sponsors being so receptive to the
concerns brought forth by the committee. The sponsors did a
good job addressing the RCA concerns, which were problematic
earlier. The concern about confidentiality being for a period
of forever was addressed so that now when that confidentiality
is no longer required everything that can be will be publicly
released. The modifications made by the committee has made the
bill stronger, better, and more acceptable to people across the
state. The alignment is provided for in the structure of
coordination of this bill with the AGIA process. Moving forward
is what the committee needs to do. Not moving forward will not
progress the other line either. That there is an alternative is
what makes the process for a gasline much more viable, more
certain, and that there will be a commercially viable product.
4:07:22 PM
CO-CHAIR FEIGE opined that, regrettably, AGDC is still tied to
the concept of a bullet line - a line that goes directly from
the North Slope, through Fairbanks, to the Anchorage Bowl,
leaving out a significant section of his district. An excellent
framework has been created that someday may be combined with the
AGIA process, resulting in a true export line that can be
utilized for the benefit of the state and the people in his
district. However, on behalf of his district, he said he will
not currently support SSHB 4.
4:08:08 PM
REPRESENTATIVE JOHNSON stated that if a joint of pipe had been
laid for each meeting that has been held for getting energy to
Alaska, the globe could probably be circled. It is time to stop
talking, Alaskans demand it, and it is time to start doing
projects that are going to answer some of the questions that
Fairbanks has. If the legislators do not act on something in
this legislature to actually do something and quit talking about
it, no legislator deserves to be here in two years.
4:08:58 PM
REPRESENTATIVE TARR echoed her support for the hard work done by
the bill sponsors. As a new member she has been trying to get
up to speed and does not have the advantage of having worked on
this issue for the last several years. She said she is very
supportive of an effort going forward. However, her concern has
been to ensure maximum benefit for Alaskans with transparency
and oversight. She offered her hope that in the next committee
or on the floor there will be discussions to look at other ways
to address her concerns, which would help her know the state is
not going to get into a situation that obligates it to a failing
project, a situation in which the state has history. As has
been heard over the past several weeks, the oil and gas market
is a rapidly changing market and it is very hard to predict what
the circumstances will be even a few years forward.
4:10:31 PM
CO-CHAIR SADDLER related that his constituents have been asking
what the legislature is doing to provide affordable energy to
Alaskans. The answer is largely carried in this legislation.
As mentioned by Representative Seaton, there are two projects,
preceding and parallel, and that gives advantages and improves
the options. Alaska has lots of gas; it is just to deliver it.
Is it premature? Representatives from Fairbanks might say it is
not premature whatsoever. He appreciates that the market forces
will be allowed to operate and said the market forces will
respond to the changing market conditions better than any well-
intentioned legislative actions. He thanked the sponsors and
their staff for their years of work on this issue.
4:11:32 PM
REPRESENTATIVE MIKE CHENAULT, Alaska State Legislature, as a
joint prime sponsor, responded to whether this is premature or
too late by saying, "If you never start, you will never finish."
With regard to projects, pipelines, economics, he stated that
nowhere in the world that he is aware of would a 36-inch
pipeline running 800 miles ever be considered a small pipeline.
Alaskans for some reason have it in their minds that the only
pipeline that can ever be built is a 48-inch pipeline. Some
people have it in their mind that they are willing to do
anything they can to kill any viable project that is moving
forward. He reminded members that just a week ago the governor
received a letter from "the big three plus the pipeline
corporation" and they are talking about a 42-inch line. So, as
far as size, there is not a whole lot of difference. Regarding
comments about how millions of dollars have been invested in the
Cook Inlet to take care of the Southcentral gas grid, which he
agrees has been done, he noted that a few hours ago
ConocoPhillips Alaska, Inc. stated publicly that it is not going
to seek an extension on its liquefied natural gas (LNG) facility
for export. If Alaska had all the gas in the world in Cook
Inlet, Conoco would not be shutting down, nor would Agrium have
shut down a few years back.
4:14:09 PM
REPRESENTATIVE CHENAULT continued, saying that times change and
this is the only project that he and the other joint prime
sponsor see moving forward. Permits have been issued [to AGDC]
and he believes that [AGDC] is helping to spur the conversation
with "the big three producers" on the North Slope as far as a
project. He said he can hope that it goes and added that he
does not care whether it goes to Valdez, Cook Inlet, or even to
Bristol Bay. Alaska needs a long-term energy supply for the
Railbelt and that takes care of Fairbanks and a number of other
areas around the state. It provides opportunities that are not
currently had and that will not be had until a pipeline is
built. Opportunities include Donlin Creek Mine, which would
provide 1,500 jobs, as well as the opportunity to provide lower
cost energy to rural Alaskans. This project will not happen if
it is not economically viable. If the state cannot get buyers
and sellers together to make a deal in which they are willing to
invest billions of dollars of their money into a project for
which the return is 30 years, this project is not going to
happen. Representative Chenault said he will not say [the
project] is premature or too late, but the longer the state
waits the less opportunities there are for Alaskans to receive a
benefit from their resources. He thanked the committee for its
work on SSHB 4.
4:16:54 PM
REPRESENTATIVE HAWKER moved to report SSHB 4, as amended, out of
committee with individual recommendations and the accompanying
fiscal notes.
CO-CHAIR FEIGE objected.
4:17:16 PM
A roll call vote was taken. Representatives Tarr, Hawker,
Johnson, Olson, Seaton, P. Wilson, and Saddler voted in favor of
reporting SSHB 4, as amended, from committee. Representatives
Tuck and Feige voted against it. Therefore, CSSSHB 4(RES) was
reported out of the House Resources Standing Committee by a vote
of 7-2.
4:18:04 PM
ADJOURNMENT
There being no further business before the committee, the House
Resources Standing Committee meeting was adjourned at 4:18 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB04 Amendment O.34.pdf |
HRES 3/4/2013 1:00:00 PM |
HB 4 |
| HB04 Intent Language (RES).pdf |
HRES 3/4/2013 1:00:00 PM |
HB 4 |
| HB04 Amendments O.13,18,20,22,24-26,32-33,35,37,Concept2&3.pdf |
HRES 3/4/2013 1:00:00 PM |
HB 4 |