Legislature(1997 - 1998)

03/31/1998 02:16 PM RES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
HOUSE RESOURCES STANDING COMMITTEE                                             
March 31, 1998                                                                 
2:16 p.m.                                                                      
                                                                               
                                                                               
MEMBERS PRESENT                                                                
                                                                               
Representative Bill Hudson, Co-Chairman                                        
Representative Scott Ogan, Co-Chairman                                         
Representative Beverly Masek, Vice Chair                                       
Representative Ramona Barnes                                                   
Representative Fred Dyson                                                      
Representative Joe Green                                                       
Representative William K. (Bill) Williams                                      
Representative Irene Nicholia                                                  
Representative Reggie Joule                                                    
                                                                               
MEMBERS ABSENT                                                                 
                                                                               
All members present                                                            
                                                                               
OTHER HOUSE MEMBERS PRESENT                                                    
                                                                               
Representative Mark Hodgins                                                    
                                                                               
COMMITTEE CALENDAR                                                             
                                                                               
HOUSE BILL NO. 393                                                             
"An Act relating to contracts with the state establishing payments             
in lieu of other taxes by a qualified sponsor or qualified sponsor             
group for projects to develop stranded gas resources in the state;             
providing for the inclusion in such contracts of terms making                  
certain adjustments regarding royalty value and the timing and                 
notice of the state's right to take royalty in kind or in value                
from such projects; relating to the effect of such contracts on                
municipal taxation; and providing for an effective date."                      
                                                                               
     - HEARD AND HELD                                                          
                                                                               
(* First public hearing)                                                       
                                                                               
PREVIOUS ACTION                                                                
                                                                               
BILL: HB 393                                                                   
SHORT TITLE: DEVELOP STRANDED GAS RESOURCES                                    
SPONSOR(S): RULES BY REQUEST OF THE GOVERNOR                                   
                                                                               
Jrn-Date    Jrn-Page           Action                                          
 2/11/98      2280     (H)  READ THE FIRST TIME - REFERRAL(S)                  
 2/11/98      2281     (H)  OIL & GAS, FINANCE                                 
 2/11/98      2281     (H)  2 FISCAL NOTES (DNR, REV)                          
 2/11/98      2281     (H)  GOVERNOR'S TRANSMITTAL LETTER                      
 2/19/98               (H)  O&G AT 11:00 AM CAPITOL 124                        
 2/19/98               (H)  MINUTE(O&G)                                        
 2/24/98               (H)  O&G AT 10:00 AM CAPITOL 124                        
 2/24/98               (H)  MINUTE(O&G)                                        
 2/26/98               (H)  O&G AT 10:00 AM CAPITOL 124                        
 2/26/98               (H)  MINUTE(O&G)                                        
 3/03/98               (H)  O&G AT 10:00 AM CAPITOL 124                        
 3/03/98               (H)  MINUTE(O&G)                                        
 3/05/98               (H)  MINUTE(O&G)                                        
 3/09/98      2578     (H)  RES REFERRAL ADDED                                 
 3/10/98               (H)  O&G AT 10:00 AM CAPITOL 124                        
 3/10/98               (H)  MINUTE(O&G)                                        
 3/12/98               (H)  O&G AT 10:00 AM CAPITOL 124                        
 3/12/98               (H)  MINUTE(O&G)                                        
 3/19/98               (H)  O&G AT 10:00 AM CAPITOL 124                        
 3/19/98               (H)  MINUTE(O&G)                                        
 3/24/98               (H)  O&G AT 10:00 AM CAPITOL 124                        
 3/24/98               (H)  MINUTE(O&G)                                        
 3/24/98               (H)  O&G AT  5:00 PM CAPITOL 124                        
 3/24/98               (H)  MINUTE(O&G)                                        
 3/26/98               (H)  O&G AT 10:00 AM CAPITOL 124                        
 3/26/98               (H)  MINUTE(O&G)                                        
 3/26/98               (H)  O&G RPT PROPOSED COMMITTEE SUBSTITUTE              
                            O&G NT & ATTACHED AM 1DP 5NR DP:                   
                            HODGINS; NR: BUNDE, OGAN, ROKEBERG,                
                            BRICE, KEMPLEN                                     
 3/26/98      2750     (H)  2 FISCAL NOTES (DNR, REV) 2/11/98                  
 3/26/98               (H)  RES AT  1:00 PM CAPITOL 124                        
 3/26/98               (H)  MINUTE(RES)                                        
 3/28/98               (H)  RES AT  1:00 PM CAPITOL 124                        
 3/28/98               (H)  MINUTE(RES)                                        
 3/31/98               (H)  RES AT  1:00 PM CAPITOL 124                        
                                                                               
WITNESS REGISTER                                                               
                                                                               
GEORGE FINDLING, Business Development Advisor                                  
    for the Gas Commercialization Group                                        
ARCO Alaska, Incorporated                                                      
P.O. Box 100360                                                                
Anchorage, Alaska 99510                                                        
Telephone:  (907) 263-4174                                                     
POSITION STATEMENT:  Provided testimony in support of HB 393.                  
                                                                               
BEVERLY MENTZER, Alaska Gas Commercialization Manger                           
Exxon Company, USA                                                             
P.O. Box 2180                                                                  
Houston, Texas 77252                                                           
Telephone:  (713) 656-6145                                                     
POSITION STATEMENT:  Provided testimony in support of HB 393.                  
                                                                               
RICK GLOVER, Attorney                                                          
Legislative Legal and Research Services                                        
Legislative Affairs Agency                                                     
130 Seward Street, Suite 409                                                   
Juneau, Alaska 99801-2105                                                      
Telephone:  (907) 465-2450                                                     
POSITION STATEMENT: Dafter of HB 393.  Provided testimony and                  
                    answered questions of the committee members on             
                    HB 393.                                                    
                                                                               
JOHN SHIVELY, Commissioner                                                     
Department of Natural Resources                                                
400 Willoughby Avenue                                                          
Juneau, Alaska 99801-1724                                                      
Telephone:  (907) 465-2400                                                     
POSITION STATEMENT:  Provided testimony on HB 393.                             
                                                                               
DAVID BROOKS, Manager - Alaska Gas                                             
BP Exploration (Alaska) Incorporated                                           
900 East Benson Boulevard                                                      
Anchorage, Alaska 99519                                                        
Telephone:  (907) 564-4201                                                     
POSITION STATEMENT:  Provided testimony on HB 393.                             
                                                                               
JEFF LOWENFELS, President and CEO                                              
Yukon Pacific Corporation                                                      
1049 West 4th Avenue                                                           
Anchorage, Alaska 99501                                                        
Telephone:  (907) 265-3100                                                     
POSITION STATEMENT:  Provided testimony in support of HB 393.                  
                                                                               
JIM SYKES (PH)                                                                 
(Address not provided)                                                         
Telephone:  (Not provided)                                                     
POSITION STATEMENT:  Provided testimony on HB 393.                             
                                                                               
ACTION NARRATIVE                                                               
                                                                               
TAPE 98-39, SIDE A                                                             
Number 001                                                                     
                                                                               
CO-CHAIRMAN SCOTT OGAN called the House Resources Standing                     
Committee meeting to order at 2:16 p.m.  Members present at the                
call to order were Representatives Ogan, Masek, Barnes, Dyson, and             
Joule. Representatives Green, Hudson, Williams and Nicholia arrived            
at 2:16 p.m.; 2:30 p.m.; 2:34 p.m., and 2:44 p.m., respectively.               
HB 393 - DEVELOP STRANDED GAS RESOURCES                                        
                                                                               
CO-CHAIRMAN OGAN announced the only order of business today was                
House Bill No. 393, "An Act relating to contracts with the state               
establishing payments in lieu of other taxes by a qualified sponsor            
or qualified sponsor group for projects to develop stranded gas                
resources in the state; providing for the inclusion in such                    
contracts of terms making certain adjustments regarding royalty                
value and the timing and notice of the state's right to take                   
royalty in kind or in value from such projects; relating to the                
effect of such contracts on municipal taxation; and providing for              
an effective date."                                                            
                                                                               
CO-CHAIRMAN OGAN stated there is a proposed committee substitute               
for HB 393, version 0-GH2006\P, Glover, 3/30/98.                               
                                                                               
CO-CHAIRMAN OGAN explained the first change is on page 7, line 2,              
"or holds permits that the department determines are essential to              
construct and operate a qualified project;".  The language says                
"or" now in order to elevate permit holders to the table.  It used             
to be (D) in the criteria in version 0-GH2006\L, page 7, line 5.               
It was moved up to the first paragraph for emphasis.                           
                                                                               
CO-CHAIRMAN OGAN announced that Representative Green has joined the            
meeting.                                                                       
                                                                               
CO-CHAIRMAN OGAN stated the second change is on page 15, line 23.              
The language now says, "is qualified to register to vote in this               
state and qualifies for a resident fishing, hunting, or trapping               
license under AS 16".  The drafter did not change it the way he                
envisioned it so there is an amendment.  He wanted the person to be            
a "registered voter" and to "qualify" for a resident fishing,                  
hunting, or trapping license.  The previous bill required a person             
to have a fishing, hunting, or trapping license.  "I'm sure the                
Department of Game would love to have the extra revenue.  I'm not              
sure it's appropriate to require someone to have a fishing or                  
hunting license to be qualified as a resident."  The residency                 
description in Title 16 is pretty tight and appropriate to use in              
the bill.                                                                      
                                                                               
CO-CHAIRMAN OGAN stated the third and final change is on page 26,              
lines 15-18, "Nothing in this chapter prohibits or limits the                  
legislature from soliciting or negotiating contract offers or                  
proposals that provide for the periodic payments or adjustments                
described in this section."  The language puts the legislature in              
the loop and if things aren't going well with the administration it            
doesn't prohibit the legislature from appointing a special                     
committee to negotiate a contract.                                             
                                                                               
Number 112                                                                     
                                                                               
REPRESENTATIVE RAMONA BARNES stated she understands where Co-                  
Chairman Ogan is going with the addition, but contracts for natural            
resources and things of that nature have to come out of the                    
commissioner of natural resources or revenue and be presented to               
the legislature for action.  She suggested asking someone from                 
Legislative Legal Services for clarification.                                  
                                                                               
Number 120                                                                     
                                                                               
REPRESENTATIVE REGGIE JOULE wondered if there is going to be an                
opportunity to hear from folks about the proposed changes.                     
                                                                               
CO-CHAIRMAN OGAN replied certainly.                                            
                                                                               
Number 141                                                                     
                                                                               
REPRESENTATIVE BARNES made a motion to adopt the proposed committee            
substitute for HB 393, version 0-GH2006\P, Glover, 3/30/98, for                
consideration.  There being no objection, it was so adopted.                   
                                                                               
Number 150                                                                     
                                                                               
REPRESENTATIVE JOE GREEN asked Co-Chairman Ogan whether he plans to            
take any proposed amendments before or after the testimony.  He has            
one amendment.                                                                 
                                                                               
Number 156                                                                     
                                                                               
CO-CHAIRMAN OGAN replied he would like to wait until after the                 
testimony.                                                                     
                                                                               
Number 163                                                                     
                                                                               
REPRESENTATIVE BARNES asked that the amendments be distributed to              
the committee members for review.                                              
                                                                               
Number 184                                                                     
                                                                               
GEORGE FINDLING, Business Development Advisor for the Gas                      
Commercialization Group, ARCO Alaska, Incorporated, testified in               
Juneau.  The testimony he gave in the House Oil and Gas committee              
in regards to ARCO's gas commercialization plan and how HB 393                 
supports the plan is still applicable today.                                   
                                                                               
Number 210                                                                     
                                                                               
REPRESENTATIVE BARNES pointed out to Mr. Findling that this is not             
the House Oil and Gas committee so either give testimony or make it            
available to the committee members.                                            
                                                                               
MR. FINDLING provided copies of his testimony from the House Oil               
and Gas committee to the committee members.                                    
                                                                               
REPRESENTATIVE BARNES stated since the committee members have not              
had the privilege of hearing his testimony could Mr. Findling                  
present a brief overview.                                                      
                                                                               
MR. FINDLING stated the testimony from November 12, 1997 indicates             
a four-point work plan for advancing gas commercialization by                  
reducing project costs; developing a viable project structure;                 
developing a viable market; and pursuing federal and state fiscal,             
regulatory, and commercial matters.  The testimony also references             
gas-to-liquids (GTL) technology, the development in that area and              
how it plays as a dark horse in its plans.  The testimony from                 
February 24, 1998 layouts how HB 393 fits into the overall plan of             
ARCO.                                                                          
                                                                               
Number 280                                                                     
                                                                               
REPRESENTATIVE BARNES asked Mr. Findling whether he is familiar                
with the Pedro H. van Meurs study.                                             
                                                                               
MR. FINDLING replied, "Yes."                                                   
                                                                               
REPRESENTATIVE BARNES asked Mr. Findling whether he believes the               
study is as valid today as when it was presented to the legislature            
over one year ago.                                                             
                                                                               
MR. FINDLING replied yes in general the study is still valid.  "I              
don't know--maybe some of the particulars might be different,                  
but...."                                                                       
                                                                               
REPRESENTATIVE BARNES asked Mr. Findling like what particulars                 
might be different.                                                            
                                                                               
MR. FINDLING replied, "I say, I don't know."                                   
                                                                               
REPRESENTATIVE BARNES asked Mr. Findling whether it is ARCO's                  
position that it is presently working to develop a liquid natural              
gas (LNG) project including a pipeline from the North Slope to                 
Valdez.                                                                        
                                                                               
MR. FINDLING replied yes the base development plan that ARCO is                
pursuing right now is an LNG project.  The basic assumptions are a             
gas pipeline from Prudhoe Bay to Valdez, liquefy it, then ship it              
to Far East markets.                                                           
                                                                               
REPRESENTATIVE BARNES asked Mr. Findling, to his knowledge, when               
the contracts in Asia expire - generally - for the gas presently               
being supplied from the field.                                                 
                                                                               
MR. FINDLING replied he does not have that knowledge at his                    
fingertips.  He would be speculating if he tried to recite contract            
expiration dates.                                                              
                                                                               
REPRESENTATIVE BARNES stated in earlier testimony he said he is                
familiar with the Pedro van Meurs report.  Now, he says he does not            
have the general knowledge found in Mr. van Meurs' report of the               
time frame of the gas to the marketplace.                                      
                                                                               
MR. FINDLING replied he understood the question to be of the                   
expiration date.  The general perception of the marketplace is that            
supply and demand are in balance through the year 2005 and a little            
bit beyond.  Demand starts to exceed supply significantly starting             
in the year 2007.                                                              
                                                                               
REPRESENTATIVE BARNES asked Mr. Findling where he came up with a               
2007 time frame.                                                               
                                                                               
MR. FINDLING replied market supply and demand, and projects are not            
his areas of expertise.  He is trying to convey a general sense of             
what he understands.  The company could bring somebody down, if                
that is the area of emphasis she would like to hear about.                     
                                                                               
REPRESENTATIVE BARNES stated it comes as no shock to Mr. Findling              
or anyone else in the room the immense importance of the time frame            
that makes Alaska gas marketable in the world.  She wants to know              
precisely why throughout the testimony on developing gas on the                
North Slope over the last one and a half years, when Dr. van Meurs             
has clearly said the gas must be in the marketplace by 2005, the               
oil companies say 2007.  The contracts with Korea and Japan will               
expire in the year 2004.                                                       
                                                                               
MR. FINDLING replied perhaps the best thing would be to get a more             
specific answer.                                                               
                                                                               
REPRESENTATIVE BARNES stated she will await his answer.                        
                                                                               
CO-CHAIRMAN OGAN asked Mr. Findling when he might have the answer.             
                                                                               
MR. FINDLING replied he would put a request in immediately.  It                
should not be too long.                                                        
                                                                               
CO-CHAIRMAN OGAN announced Co-Chairman Hudson and Representative               
Williams joined the meeting sometime ago.                                      
                                                                               
REPRESENTATIVE FRED DYSON suggested using his phone in his office              
to see if someone could testify via telephone today.                           
                                                                               
MR. FINDLING stated he could certainly do that.                                
                                                                               
REPRESENTATIVE JOULE stated if Mr. Findling can't find somebody now            
the committee will be reconvening at 5:00 p.m. today.                          
                                                                               
Number 365                                                                     
                                                                               
BEVERLY MENTZER, Alaska Gas Commercialization Manger, Exxon                    
Company, USA, testified in Juneau.  Exxon is committed to                      
commercializing gas on the North Slope.  It represents over one-               
half of its gas reserves.  It will take a combination of fiscal and            
regulatory modifications, favorable market terms, and significant              
cost reductions for a North Slope project to be competitive and                
commercially viable.  Exxon has been and continues to devote a                 
significant amount of its technical and financial resources on its             
efforts.  Exxon supports the bill.  It provides reasonable                     
guidelines and boundaries for the development of a fiscal contract.            
It keeps key options open for the state to maximize the value of               
its gas resources.  It does not contain a specific fiscal term or              
mandates the method for commercialization.  It provides the                    
opportunity for input from the legislature, the affected                       
municipalities, and the public during the contract development                 
stage.  It appropriately requires legislative review and                       
authorization of any fiscal contract.  The passage of the bill is              
a necessary step in the process of developing appropriate fiscal               
terms for the life of a gas project.  Such a fiscal contract could             
increase the competitiveness of a gas project while maintaining the            
long-term fiscal interest of Alaska.                                           
                                                                               
Number 390                                                                     
                                                                               
REPRESENTATIVE BARNES stated Ms. Mentzer's position in the past has            
also indicated that the year 2007 is the most viable date for                  
Alaska's gas to enter the marketplace.                                         
                                                                               
MS. MENTZER replied that is true.                                              
                                                                               
REPRESENTATIVE BARNES asked Ms. Mentzer what she basis the year                
2007 on.                                                                       
                                                                               
MS. MENTZER replied Exxon has looked at supply and demand forecasts            
of companies and governments currently involved in the LNG                     
business.  The information said that supply and demand in the Far              
East region is in balance through at least the year 2005.  "Now,               
there's a wide range of variation between base-case, low-side,                 
high-side forecasts from each of those consultants or governments.             
And, so, if you focus on 2010, for example, the data said that it              
might range from a low demand of 2 million ton to a high near 50,              
averaging in the 25 to 30 million ton range.  And, that's due to               
variations and assumptions that can be made due to economic growth             
in the different regions, which obviously is always the prediction             
not knowing until the time occurs."  Exxon has also looked at the              
projects developing in the marketplace and saw about 90 million                
tons of projects competing with the increasing gap between the                 
supply and demand.  Therefore, Exxon can say that the year 2007 is             
a viable option for a target.  Exxon won't know exactly until it is            
out in the market and sees what is actually happening.  There are              
other sensitivities in addition to just economic growth.  Some                 
countries are deregulating their power markets and independent                 
power producers are being allowed to come in to bid, which would               
also bring more competition for liquid fuels.  There are gross                 
projections for the construction of nuclear plants.  There are                 
issues on CO2 admissions.  Japan's government has also requested               
its power cost be reduced by 20 percent.  In the mist of all of                
those factors and uncertainties, the year 2007 is a realistic                  
representation of what might be possible for Alaska.                           
                                                                               
Number 442                                                                     
                                                                               
REPRESENTATIVE BARNES asked Ms. Mentzer whether Exxon has a report             
that disagrees with Dr. van Meurs' report.                                     
                                                                               
MS. MENTZER replied she does not remember Dr. van Meurs picking a              
date in his report.                                                            
                                                                               
REPRESENTATIVE BARNES replied, "I do very clearly."  She said, "In             
that particular scenarios, that to make our gas project financially            
feasible, we must be able to put 15 million metric tons a year into            
the marketplace.  And that to be able to do that with all the                  
competing market--with all the competing projects in the world                 
which Exxon owns several.  Do you not?"                                        
                                                                               
MS. MENTZER replied, "Correct."                                                
                                                                               
REPRESENTATIVE BARNES further stated, "With all those competing                
projects that we in fact have to have Alaska's gas into the                    
marketplace to fill that window to make it financially feasible.               
Is that not what van Meurs said, or am I mis-quoting him?"                     
                                                                               
MS. MENTZER replied that is not her recollection of what he said.              
                                                                               
REPRESENTATIVE BARNES stated she will get the report.  She asked               
Ms. Mentzer whether she is familiar with the 15 million metric tons            
per year.                                                                      
                                                                               
MS. MENTZER replied, "I'm familiar with that."                                 
                                                                               
REPRESENTATIVE BARNES further stated van Meurs then goes into                  
listing any number of projects that compete with Alaska's gas                  
project.  She asked Ms. Mentzer whether that is true.                          
                                                                               
MS. MENTZER replied Dr. van Meurs analyzed all of the potential                
projects.                                                                      
                                                                               
REPRESENTATIVE BARNES stated for Alaska to be able to compete in               
the marketplace it has to be there and have 15 million metric tons             
per year.  She asked Ms. Mentzer whether she is familiar with that.            
                                                                               
MS. MENTZER replied, "That's right."                                           
                                                                               
REPRESENTATIVE BARNES stated it is based on the expiration date of             
the contracts.  "And what you just said about the expanding or                 
contracting economies in Asia, I think, we all know that they have             
a contracting economy.  Do we not?  Are we not bailing out Korea to            
'x' number of billion dollars?  There's a real downturn in the                 
economy in Japan and all over Asia so that we can not expect that              
they're going to be expanding at any rate of expansion that would              
allow for more gas than what van Meurs spoke about.  Are we?"                  
                                                                               
MS. MENTZER replied Exxon expects the economies to continue to                 
grow, but not at the same pace.                                                
                                                                               
REPRESENTATIVE BARNES replied, "Based on what?"  She asked Ms.                 
Mentzer to bring to the committee members the information that                 
Exxon basis her reply on.                                                      
                                                                               
CO-CHAIRMAN OGAN asked Ms. Mentzer whether she happens to have that            
information available.                                                         
                                                                               
MS. MENTZER replied not at the moment.                                         
                                                                               
CO-CHAIRMAN OGAN asked Ms. Mentzer when the committee can expect               
that information.                                                              
                                                                               
MS. MENTZER replied she will let him know as soon as she can tell              
him when to expect it.                                                         
                                                                               
CO-CHAIRMAN OGAN announced that Representative Nicholia has joined             
the meeting.                                                                   
                                                                               
CO-CHAIRMAN OGAN called on Rick Glover from Legislative Legal                  
Services.                                                                      
                                                                               
REPRESENTATIVE BARNES referred to page 26, lines 15-18 that reads              
as follows:                                                                    
                                                                               
     "Sec. 43.82.650.  Contracts developed by the legislature.                 
     Nothing in this chapter prohibits or limits the                           
     legislature from soliciting or negotiating contract                       
     offers or proposals that provide for the periodic                         
     payments or adjustments described in this section."                       
                                                                               
REPRESENTATIVE BARNES asked Mr. Glover to walk the committee                   
members through what the section refers to.  It is her                         
understanding that the legislature, as the policy making group of              
the state, does not negotiate contracts within the purview of the              
commissioner of natural resources or revenue.                                  
                                                                               
RICK GLOVER, Attorney, Legislative Legal and Research Services,                
Legislative Affairs Agency, stated it is a separation of powers                
problem.  It is intended to state that the application process                 
described in the rest of the bill is not exclusive.  It doesn't                
preclude the legislature from doing these things, from soliciting              
or negotiating contract offers.  That's as far as it goes.  If the             
legislature attempted to execute those contracts, then there is the            
possibility of a separation of power.                                          
                                                                               
REPRESENTATIVE BARNES stated, if the legislature attempted to                  
operate this section, then it could be held unconstitutional.                  
                                                                               
MR. GLOVER replied the actions of the legislature in attempting to             
execute and negotiate contracts would be unconstitutional, not the             
section.                                                                       
                                                                               
REPRESENTATIVE BARNES asked Mr. Glover how long has he been with               
the Legislative Affairs Agency.                                                
                                                                               
MR. GLOVER replied since October of 1997.                                      
                                                                               
REPRESENTATIVE BARNES asked Mr. Glover whether he has had an                   
occasion to study the minutes of the constitutional convention.                
                                                                               
MR. GLOVER replied, "I have to some extent."                                   
                                                                               
REPRESENTATIVE BARNES referred to a memo written by Mr. Glover                 
dated March 30 that indicates the bill does not comply with Article            
IX, Section 1, "Taxing Power," that reads as follows:                          
                                                                               
     "The power of taxation shall never be surrendered.  This                  
     power shall not be suspended or contracted away, except                   
     as provided in this article."                                             
                                                                               
REPRESENTATIVE BARNES asked Mr. Glover whether he has studied the              
minutes of the constitutional convention that relate to taxing                 
power.                                                                         
                                                                               
MR. GLOVER replied, "I haven't run across those particular minutes             
of--for that particular section of the constitution, no."                      
                                                                               
REPRESENTATIVE BARNES said, "Well than, I would suggest to you that            
before you write this in the bill again or in any other document,              
that you go and specifically research what the framers of our                  
constitution said as they relate to the legislature being able to              
contract or to suspend taxes as it relates to the development of               
projects.  Because there is a very definite section of the                     
constitution, no, minutes that relate particularly to that section.            
I particularly don't want to see anything else handed out like this            
until you have thoroughly researched it.  And, if you don't have               
the documents available to you, I'll get them for you."                        
                                                                               
Number 563                                                                     
                                                                               
REPRESENTATIVE BILL WILLIAMS asked Mr. Glover to explain where he              
was coming from in writing the letter.                                         
                                                                               
MR. GLOVER stated he was concerned about the plain text of the                 
constitution.  The words indicate that the legislature is not to               
suspend or surrender taxing power in a way that future legislatures            
cannot re-enact a tax.  He was also concerned about the types of               
contracts that would be contemplated by the bill.  Certain taxes               
would be prohibited from being reimposed in the future by contract             
because, if such a tax was enacted, it would impair an obligation              
of a contract - another constitutional issue.                                  
                                                                               
REPRESENTATIVE WILLIAMS stated he is very concerned about this                 
portion of the bill because it may fall under the separation of                
powers issue.  It is similar to a board member soliciting contracts            
which is no way to run a business.                                             
                                                                               
REPRESENTATIVE BARNES asked Mr. Glover whether he is familiar with             
the MAPCO contracts.                                                           
                                                                               
MR. GLOVER replied he is familiar with a pending contract for the              
disposal of royalty oil and gas.                                               
                                                                               
REPRESENTATIVE BARNES asked Mr. Glover whether he is familiar with             
the Northstar contract.                                                        
                                                                               
MR. GLOVER replied only tangentially.                                          
                                                                               
REPRESENTATIVE BARNES asked Mr. Glover whether he is familiar with             
the Tesoro contract.                                                           
                                                                               
MR. GLOVER replied, "No."                                                      
                                                                               
REPRESENTATIVE BARNES said, "Well, I suggest that before you put               
out any more opinions that relate to taxation and contracting that             
you go take a look at how we have done this in the past."                      
                                                                               
MR. GLOVER stated he understands that there is litigation                      
pending....                                                                    
                                                                               
REPRESENTATIVE BARNES said, "I...I...on one of them just one that's            
Northstar.  And for your information we're gonna win."                         
                                                                               
CO-CHAIRMAN OGAN called on Commissioner John Shively from the                  
Department of Natural Resources.                                               
                                                                               
Number 620                                                                     
                                                                               
JOHN SHIVELY, Commissioner, Department of Natural Resources, stated            
the department doesn't see a problem with the first two amendments.            
It opposes the amendment that allows the legislature to                        
independently negotiate contracts.  It is unprecedented.                       
                                                                               
REPRESENTATIVE BARNES asked Commissioner Shively whether he hired              
Pedro van Meurs.                                                               
                                                                               
COMMISSIONER SHIVELY replied he did not.  The Administration did.              
                                                                               
REPRESENTATIVE BARNES asked Commissioner Shively whether he stands             
behind the report provided to the legislature last year.                       
                                                                               
COMMISSIONER SHIVELY replied, "We think that report provided                   
valuable information to us and to the legislature."                            
                                                                               
REPRESENTATIVE BARNES asked Commissioner Shively whether a lot was             
paid for it.                                                                   
                                                                               
COMMISSIONER SHIVELY replied, "I assume so.  I don't know how                  
much."                                                                         
                                                                               
REPRESENTATIVE BARNES asked Commissioner Shively whether it came               
out of his budget.                                                             
                                                                               
COMMISSIONER SHIVELY replied, "No."                                            
                                                                               
REPRESENTATIVE BARNES asked Commissioner Shively whether he has                
heard anything that would make the gas viable on the world market              
beyond the year 2005 when the contracts expire in the Pacific Rim              
countries.                                                                     
                                                                               
COMMISSIONER SHIVELY replied he has heard discussions with people              
in the industry that there could be other dates.  Some believe it              
is a window for further opportunities, and some believe it is a                
door.                                                                          
                                                                               
REPRESENTATIVE BARNES asked Commissioner Shively whether there has             
been an updated report by van Meurs or anybody else to his                     
knowledge.                                                                     
                                                                               
COMMISSIONER SHIVELY replied there hasn't been an update to that               
report to his knowledge.                                                       
                                                                               
REPRESENTATIVE BARNES asked Commissioner Shively whether the date              
2005 is like "pulling a rabbit out of a hat."                                  
                                                                               
COMMISSIONER SHIVELY replied the date has always been an issue for             
discussion.  There are people who feel very strongly about the date            
and others who feel differently.  He doesn't know whether it is                
like pulling a rabbit out of a hat, however.                                   
                                                                               
REPRESENTATIVE BARNES stated if Commissioner Shively really wanted             
to develop the project that he would work as expeditiously as                  
possible to get the gas into the world marketplace.                            
                                                                               
COMMISSIONER SHIVELY replied, "Obviously we should work                        
expeditiously.  We've put a fair amount of effort in trying to meet            
that lofty goal."                                                              
                                                                               
REPRESENTATIVE BARNES stated she has been trying to help him.                  
                                                                               
COMMISSIONER SHIVELY replied, "We recognize that you're trying to              
help us."                                                                      
                                                                               
Number 671                                                                     
                                                                               
CO-CHAIRMAN OGAN recessed the meeting until 5:00 p.m.                          
                                                                               
CO-CHAIRMAN OGAN called the meeting back to order at 5:07 p.m.                 
                                                                               
TAPE 98-39, SIDE B                                                             
Number 000                                                                     
                                                                               
CO-CHAIRMAN OGAN explained he has some letters from ARCO in                    
response to Representative Barnes' questions earlier.                          
                                                                               
CO-CHAIRMAN OGAN recognized Representative Hodgins and asked him to            
join the committee members at the table.                                       
                                                                               
Number 055                                                                     
                                                                               
DAVID BROOKS, Manager - Alaska Gas, BP Exploration (Alaska)                    
Incorporated, testified in Juneau.  The bill addresses the issue of            
the commercialization of the gas reserves on the North Slope.                  
Today in Prudhoe Bay, there is some 25 trillion cubic feet (tcf) of            
gas.  The United States Geological Survey (USGS) suggests that                 
there could be in excess of another 100 tcf of gas yet to be found             
on the North Slope.  The proven and yet to be found reserves amount            
to another oil field at least the size of Prudhoe Bay.  It                     
represents a very large commercial price for BP, the state, and                
people of Alaska, if we can find economical ways to get the gas to             
the market in some form or another.  BP is taking the issue of                 
commercialization of those gas resources very seriously and                    
continues to dedicate resources to explore routes to commercialize             
it.  The gas commercialization report published in January is a                
very sound and professional review of the challenges surrounding               
the commercialization of the gas.  The bill is the next logical                
step recommended in the report.                                                
                                                                               
MR. BROOKS further stated that today some seven and one-half                   
billion cubic feet of gas is produced.  The majority is used in                
enhanced oil recovery initiatives.  BP has estimated that the                  
initiatives have increased the oil recovery reserves by two billion            
barrels, and about 40 percent of Prudhoe Bay's oil production is               
attributed to enhanced oil recovery and gas injection techniques.              
At $16 per barrel of crude oil, the additional production generates            
some $400 million a year for the state.  BP believes that the bill             
is important for the state and development of stranded gas.                    
However, it is only enabling legislation; it does not commit the               
state to anything other than to enter into negotiations.  It                   
creates options and as such BP supports it.                                    
                                                                               
MR. BROOKS further stated BP's perception today is that the gas in             
Prudhoe Bay cannot competitively be brought to the market.  The                
bill creates an option for the discussion of the North Slope gas               
and any other gas that might be found in the future.  The bill also            
leaves open the route to the commercialization of that gas.  The               
bill is applicable to both an LNG and GTL projects.  Although                  
today, neither are commercially viable, but BP hopes that one or               
two or both will be at sometime in the future.  They are not                   
mutually exclusive.                                                            
                                                                               
MR. BROOKS further stated the bill creates an option, an                       
opportunity for a qualified sponsor of a qualified project to enter            
into negotiations with the state and to define a fiscal contract               
specific to a project.  The contract will be subject to the                    
approval of the legislature which will define the taxes and the                
extent to which it intends to bind future legislatures to the                  
fiscal treatment of the projects.  The bill provides an opportunity            
to address the fiscal risks.  The bill is also balanced in that it             
considers other issues important to the people in the state.  The              
project sponsor is responsible for maximizing the use of Alaskan               
labor and contracts, something which BP strongly supports.  The                
bill incorporates a process by which the communities can assure                
themselves that they are being fairly treated in the negotiations              
and distribution of taxes.                                                     
                                                                               
MR. BROOKS further stated, in conclusion, the bill creates options             
for the state to generate value from the enormous amount of gas on             
the North Slope.  The bill gives nothing away; it only allows for              
negotiations to take place.  BP urges the committee members to                 
leave the bill as it is and to not turn it into a gas pipeline                 
bill.  BP also urges the committee members to reconsider the sunset            
clause.  It closes off options for the future.  BP recommends that             
the sunset clause be deleted.                                                  
                                                                               
Number 214                                                                     
                                                                               
REPRESENTATIVE BARNES asked Mr. Brooks whether he enjoyed his trip             
to Taiwan.                                                                     
                                                                               
MR. BROOKS replied, "Yes."                                                     
                                                                               
REPRESENTATIVE BARNES asked Mr. Brooks where he got the figure 25              
tcf.                                                                           
                                                                               
MR. BROOKS replied it is the published figure of the reserves for              
Prudhoe Bay.                                                                   
                                                                               
REPRESENTATIVE BARNES stated all of the published reports that she             
has seen say at least 31 tcf of known reserves, and another 11 tcf             
off Point Thompson.                                                            
                                                                               
MR. BROOKS replied the 25 tcf is the figure published for Prudhoe              
Bay.  There is perhaps another five tcf available in Point                     
Thompson, and there are much larger reserves that have yet to be               
found.  The USGS thinks there could be up to another 100 tcf                   
available on the North Slope.                                                  
                                                                               
REPRESENTATIVE BARNES asked Mr. Brooks whether the gas on the North            
Slope is being used to re-enhance the recovery of oil.                         
                                                                               
MR. BROOKS replied, "Yes."                                                     
                                                                               
REPRESENTATIVE BARNES asked Mr. Brooks, if the project is to go                
forward in a timely manner, is there enough gas to re-inject into              
oil without any substantial problems to Prudhoe Bay's oil recovery.            
                                                                               
MR. BROOKS replied the gas commercialization report published by               
the state shows there will be oil loss by producing gas through an             
LNG or any other type of project, but the economics of a total                 
system show that an LNG project would adequately compensate for any            
oil losses.                                                                    
                                                                               
REPRESENTATIVE BARNES asked Mr. Brooks how much of the oil does BP             
own under contract in Prudhoe Bay.                                             
                                                                               
MR. BROOKS replied BP owns 55 percent of the oil in Prudhoe Bay.               
                                                                               
REPRESENTATIVE BARNES asked Mr. Brooks if the state is to go                   
forward with a gas production project would BP own the same portion            
of gas.                                                                        
                                                                               
MR. BROOKS replied BP's share of the gas is approximately 20                   
percent.                                                                       
                                                                               
REPRESENTATIVE BARNES asked Mr. Brooks whether BP is economically              
interested in pursuing a gas pipeline with the vigor that others               
might have.                                                                    
                                                                               
MR. BROOKS replied, "I can assure you that BP is working the option            
of commercializing gas very hard.  It owns 20 percent of a very                
large reserve up there, and it believes there is a lot of value, if            
that gas can be brought to market economically."                               
                                                                               
REPRESENTATIVE BARNES stated the rate of return is dependent upon              
the ramp-up speed of a gas project, and a long-distance gas                    
pipeline.  The quicker the pipeline can be filled with production              
the higher the rate of return.  She asked Mr. Brooks whether that              
is correct.                                                                    
                                                                               
MR. BROOKS replied, "Yes."                                                     
                                                                               
REPRESENTATIVE BARNES asked Mr. Brooks, if we were able to get the             
gas to the marketplace with a relatively short ramp-up period,                 
whether there would be a higher rate of return for ARCO than BP.               
                                                                               
MR. BROOKS replied he has difficulty answering the question.  He is            
not privy to ARCO's economics.                                                 
                                                                               
REPRESENTATIVE BARNES stated all we have to do is look at how much             
of the gas ARCO owns versus BP.                                                
                                                                               
MR. BROOKS stated, from an economic point of view, if BP and the               
other company invested proportionately in a project according to               
their equity shares of gas the rate of return would be exactly the             
same.  BP would have a smaller proportion.                                     
                                                                               
REPRESENTATIVE BARNES asked Mr. Brooks whether leaving the gas in              
the ground as long as possible is in the best interest of BP in the            
long-term.                                                                     
                                                                               
MR. BROOKS replied it is not in BP's long-term interest.  It is the            
interest of BP to try and commercialize the gas as efficiently and             
quickly as possible.                                                           
                                                                               
REPRESENTATIVE BARNES asked Mr. Brooks whether he is familiar with             
the gas contracts held in Asia and their expiration in the year                
2004.                                                                          
                                                                               
MR. BROOKS replied, "Yes."                                                     
                                                                               
REPRESENTATIVE BARNES asked Mr. Brooks whether he is aware that in             
order to have an economically viable contract the state must have              
contracts in place by the year 2005.                                           
                                                                               
MR. BROOKS replied he is not aware of that.                                    
                                                                               
REPRESENTATIVE BARNES stated somebody should give Mr. Brooks the               
reports.                                                                       
                                                                               
REPRESENTATIVE BARNES stated the reports say the state needs to                
have the gas in the marketplace by the year 2005 because the                   
smaller projects around the world, primarily owned by BP and Exxon,            
will "nibble to death" the Alaska project.  She asked Mr. Brooks               
whether he is familiar with the term "nibble to death" in van                  
Meurs' report.                                                                 
                                                                               
MR. BROOKS replied, "Yes."                                                     
                                                                               
REPRESENTATIVE BARNES asked Mr. Brooks whether he agrees with it.              
                                                                               
MR. BROOKS replied around the year 2005 some contracts will                    
terminate - the Arun projects in Indonesia.  Those contracts supply            
a range of Japanese electrical and gas companies, and a Korean gas             
company.  BP understands that it is Pertamina's objective to take              
the buyers from the Arun project and supply them through a mixture             
of two more Indonesian projects - an expansion of the Bontang                  
project and a new project in Irian Jaya.  Over the years the market            
will grow creating a supply gap that will be available to Alaska or            
any other competitive project.                                                 
                                                                               
REPRESENTATIVE BARNES referred to the nibble-to-death concept, and             
asked Mr. Brooks whether there are plenty of other projects to                 
displace Alaska, if it can't get its gas to the marketplace.                   
                                                                               
MR. BROOKS replied, "Yes."  There are perhaps 100 million tons of              
potential LNG supply, including expansion projects in Malaysia, the            
Middle East, and Australia; and green field projects in Indonesia,             
Malaysia III, and Alaska.  There is about 50 million tons of demand            
through the years 2010 to 2015.                                                
                                                                               
REPRESENTATIVE BARNES stated the whole premise is that Alaska has              
to get its gas into the market place in a timely manner, otherwise             
it stands the risk of getting nibbled to death.  Each company                  
testifies about an expanding market, when there is nothing to base             
it on due to the present Asian economy.  She asked Mr. Brooks                  
whether the only way for gas to be supplied to China is for a                  
company to develop gas facilities there.                                       
                                                                               
MR. BROOKS replied China is a potential market.  Its energy demand             
is currently supplied by coal.  There are companies looking at LNG             
imports into China.  BP is working with the Chinese government to              
look at two LNG terminals in southern China.  It will be a case of             
not only developing the terminals, but the power stations and the              
reticulation systems.  China is opening up to those sorts of                   
investments and looking for LNG, but it is starting conservatively.            
China wants to test it first and if it works it will expand it in              
due course, but it would be well after the year 2010.                          
                                                                               
REPRESENTATIVE BARNES stated there is no guarantee that China is a             
potential market because there is other gas that could displace                
Alaska.  She asked Mr. Brooks whether the expanding markets in                 
Korea, Japan and Taiwan are contracting rather than expanding.                 
                                                                               
MR. BROOKS replied BP has gas exploration offices in Tokyo, Seoul,             
China, and Taiwan.  BP views Korea as a problem.  Its economy is               
contracting, but most expect it to come out of its financial                   
problems in three years and return to its 6 to 7 percent growth                
rate.  Therefore, in about three to five years Korea could start               
thinking about additional LNG imports.                                         
                                                                               
MR. BROOKS further stated Japan has been in a depression since                 
1991.  Japan committed to a lot of LNG at the end of 1989 through              
Malaysia and the Middle East.  Currently, it has a little bit of               
LNG indigestion:  low growth rates, low demand, but high LNG.                  
                                                                               
MR. BROOKS further stated Taiwan has not been affected by the                  
financial crisis in Asia.  It still imports six million tons a year            
of LNG.  By around the year 2015....                                           
                                                                               
REPRESENTATIVE BARNES stated BP went to Taiwan on March 28, 1998               
and gave a presentation to several Taiwanese companies at which                
time BP said that the earliest it could get Alaska gas to the                  
market is the year 2010, and most likely not until the year 2015.              
BP was very specific about the dates.  She said, "I have lots of               
contacts with those folks so when somebody from Alaska or a company            
in Alaska opens their mouth, it comes back to me pretty fast."  She            
is concerned about what the dates mean to the buying markets.                  
                                                                               
MR. BROOKS replied BP tries to present to everybody around the                 
world an honest view of what it believes the prospects are.  "It's             
is BP's view that an Alaskan LNG project will best suit the market             
in the year 2010, 2015.  That is a combination of the fact that it             
is a very difficult project to do as identified in the gas                     
commercialization report.  The project is not yet competitive.  And            
when you put that together with the problems of reduced LNG demand             
in Southeast Asia all of those things begin to suggest 2010, 1015.             
It may change.  This is something--a reason we have these meetings             
in different parts of the world.  It's so we can meet with people              
in the market to put out toe in the water to find out what is                  
happening.  The next change--the next review of that we're going to            
have in the middle of year when the Japanese have done their next              
years energy forecast.  Those dates may change, but as of today, BP            
believes that 2010, 2015 is a reasonable time line for an Alaskan              
LNG project."                                                                  
                                                                               
REPRESENTATIVE BARNES stated the committee should set the sunset               
date back so that BP would have a shorter time frame.  It makes no             
difference that the state is guaranteeing through legislation that             
it wants to work towards making this a financially viable project.             
"I think because of BP and primarily EXXON and other projects                  
around the world, and your interest which is stuck into this bill,             
in 'new technology' which would, in my opinion, a whole different              
taxing regime that we would supply through this piece of                       
legislation."  This is a very serious project.                                 
                                                                               
Number 550                                                                     
                                                                               
REPRESENTATIVE WILLIAMS asked Mr. Brooks how big of an employer is             
Alaska in the world gas market.                                                
                                                                               
MR. BROOKS replied because of the size of the capital investment BP            
would have to produce 14 million tons of LNG a year, approximately             
one-quarter of the gas market today.  An LNG project on the North              
Slope would make Alaska a very big player, and would place a lot of            
LNG gas into the market.  He can't think of any project that has               
started at 14 million tons.  "Alaska is going for 14 million tons              
and needs to ramp it up that start and go from zero to 14 million              
tons and to ramp it up to get the economics to work in about six               
years.  And, that is a major challenge for an Alaskan LNG project."            
                                                                               
REPRESENTATIVE WILLIAMS asked Mr. Brooks how would Alaska raise the            
economic side and where is the market.                                         
                                                                               
MR. BROOKS replied at the moment the market is in Japan and Korea.             
There is a small market in China and one developing in India.  They            
don't help, however.  They might increase some of the opportunity              
and reduce some of the nibbling referred to earlier.  Taiwan is a              
possible market, but it is small and growing in small proportions.             
It is also another 1,300 miles from Alaska which would require                 
additional ships and increase the cost of a project.                           
                                                                               
MR. BROOKS further replied it is hard to control the price of gas              
because it is linked to oil prices.  Therefore, the way to make an             
LNG project economical, "is to aggressively undertake a whole                  
series of work programs to cut the cost of the project."                       
                                                                               
REPRESENTATIVE WILLIAMS asked Mr. Brooks once Alaska gets into the             
gas marketplace whether it will be the largest gas provider in the             
world.                                                                         
                                                                               
MR. BROOKS replied it would be one of the largest.  The largest at             
the moment is Indonesia.                                                       
                                                                               
REPRESENTATIVE WILLIAMS asked Mr. Brooks how far along is                      
Indonesia.                                                                     
                                                                               
MR. BROOKS replied the project in Indonesia - Arun - is running out            
of gas.  The contracts will run out around the year 2005.  The                 
Bontang project is producing eight LNG trains (3 millions tons).               
It might build another train that would take some of the contracts             
from the Arun project.                                                         
                                                                               
REPRESENTATIVE WILLIAMS stated he is concerned about the nibbling              
mentioned earlier.  He wondered whether Alaska could control some              
of the nibbling because it would be so big.                                    
                                                                               
MR. BROOKS stated Alaska has a lot of advantages as an LNG                     
supplier.  The gas is prudent.  Everybody knows it is there.                   
Alaska has a stable political environment.  However, it would                  
require an 800-mile pipeline across some very difficult terrain.               
There is no other LNG project that has that challenge before it.               
If the challenge could be overcome, the cost of the project reduced            
to make it competitive, then Alaska could compete with the                     
"nibblers" by edging them out.                                                 
                                                                               
REPRESENTATIVE WILLIAMS asked Mr. Brooks whether the gas companies             
are thinking of any innovative ways to get Alaska's gas to the                 
marketplace.                                                                   
                                                                               
MR. BROOKS replied there needs to be an engineering program that               
would aggressively take the cost out of the project.  Last week in             
Girdwood, BP held a workshop with EXXON, ARCO, Yukon Pacific, and              
other people from around the world, who had expertise in building              
and operating a gas pipeline, for ideas on how to build a gas                  
pipeline.  Many ideas were presented and BP is in the process of               
reviewing each one.  In addition, BP is also looking at brining a              
pipeline to the northern side of Cook Inlet instead of Valdez                  
thereby cutting out the Chugach Mountains.  It is an attractive                
idea because it would save money.  It would also bring the pipeline            
closer to the Anchorage area where there is a significant gas                  
market that would help with the cost of the project.                           
                                                                               
REPRESENTATIVE WILLIAMS asked Mr. Brooks whether he has heard that             
the route to Anchorage could save five years.                                  
                                                                               
MR. BROOKS replied he has not heard that.                                      
                                                                               
CO-CHAIRMAN OGAN called for a brief at ease.                                   
                                                                               
TAPE 98-40, SIDE A                                                             
Number 000                                                                     
                                                                               
CO-CHAIRMAN OGAN called the meeting back to order and called on                
Jeff Lowenfels from the Yukon Pacific Corporation.                             
                                                                               
JEFF LOWENFELS, President and CEO, Yukon Pacific Corporation,                  
testified in Juneau.  Yukon Pacific is in favor of the bill.  The              
committee prior to the House Resources committee has done quite a              
bit of work on the bill, as well as the gas commercialization team             
and other legislators.  The bill beyond everything else                        
demonstrates that Alaska is a good host country for an LNG project.            
Other countries help their companies compete which is what the bill            
does for an Alaskan project.  People need to know that there has               
been a lot of work done on this project already.  Yukon Pacific                
spent at least three years trying to go to Cook Inlet before going             
to Valdez.  A preliminary environmental impact study was done by 23            
federal and state agencies and they concluded that it is not a                 
viable option.  Order Number 350 from the Department of Energy                 
rejected all options other than the Valdez option.  There are some             
serious flaws in the Cook Inlet option.  Fault lines and two virgin            
pieces of territory - Susitna and Minto Flats - would have to be               
crossed.  The Castle Mountain Fault runs virtually through the                 
entire area.  It would not meet United States regulations for                  
safety and there is no property on the Kenai side sufficient enough            
to put in an LNG facility.                                                     
                                                                               
Number 078                                                                     
                                                                               
REPRESENTATIVE HODGINS asked Mr. Lowenfels whether it means that               
there couldn't be a spur line to Cook Inlet.                                   
                                                                               
MR. LOWENFELS replied, "No."  There could be a spur line to Cook               
Inlet, but there couldn't be an LNG facility on the north side of              
Cook Inlet.  A spur line is a "no brainer."  It can and should be              
done.                                                                          
                                                                               
REPRESENTATIVE HODGINS asked Mr. Lowenfels whether the hang-up                 
would be the LNG facility.                                                     
                                                                               
MR. LOWENFELS replied that would be one of the hang-ups.  A                    
pipeline would also impact Denali National Park and Preserve, the              
Minto and Susitna Flats, and cross several fault lines.                        
                                                                               
REPRESENTATIVE HODGINS asked Mr. Lowenfels whether a spur line                 
would come from Glennallen rather than the Fairbanks area and                  
follow the railroad.                                                           
                                                                               
MR. LOWENFELS replied, "Probably."  A route couldn't follow the                
railroad because of Denali National Park and Preserve.                         
                                                                               
REPRESENTATIVE HODGINS asked Mr. Lowenfels what size could a spur              
line be from Glennallen to Cook Inlet be.                                      
                                                                               
MR. LOWENFELS replied it could be any size to meet the needs.  The             
needs have been identified between 300 to 500 million cubic feet a             
day - a pipeline one-quarter of the size that is being discussed               
for the main line.  It could be put in with the minimum amount of              
controversy.  It would be a buried pipeline.                                   
                                                                               
Number 134                                                                     
                                                                               
REPRESENTATIVE BARNES stated when the legislature first started                
discussing a gas project a pipeline was proposed to cross western              
Alaska.  She thought it was a delay tactic because of the time it              
takes to get permits.  She asked Mr. Lowenfels how many years would            
it take to permit a project for a new route.                                   
                                                                               
MR. LOWENFELS replied, if it could be done, it would take a minimum            
of five to eight years.                                                        
                                                                               
REPRESENTATIVE BARNES stated, according to BP, that would increase             
the time frame to the years 2020 or 2023.                                      
                                                                               
MR. LOWENFELS replied, "Well, you could be."                                   
                                                                               
REPRESENTATIVE BARNES asked Mr. Lowenfels whether he knows how many            
ships are available in the world to take the gas from Valdez to the            
points of use.                                                                 
                                                                               
MR. LOWENFELS replied there are no ships available.                            
                                                                               
REPRESENTATIVE BARNES stated she was recently visited by the                   
Japanese Consulate in Washington, D.C. who wanted to know if the               
state was interested in ships.  Essentially, anyone that is                    
interested in supplying ships to take gas is feasible.                         
                                                                               
MR. LOWENFELS replied that's correct.  At least fourteen ships                 
would be needed at 14 million tons.                                            
                                                                               
REPRESENTATIVE BARNES stated she would give Mr. Lowenfels the name             
of the person interested.                                                      
                                                                               
Number 188                                                                     
                                                                               
CO-CHAIRMAN OGAN asked Mr. Lowenfels whether he would be willing to            
commit the permits to the gas producers as an equity partner.                  
                                                                               
MR. LOWENFELS replied, "We've always said yes and the answer is                
still yes."                                                                    
                                                                               
CO-CHAIRMAN OGAN asked Mr. Lowenfels what level of engineering and             
cost estimating would be necessary before an offer could be made to            
the Asian market.                                                              
                                                                               
MR. LOWENFELS replied, according to conversations with buyers, the             
only area where there is a large cost question is the pipeline                 
itself.  It has been estimated at $6 billion.  Its technological               
twin, the Alliance Pipeline from northern Canada to Chicago, would             
come out four and one-half times higher on a per mile basis.                   
Alaska's terrain might be worse, but it is not that much more                  
worse.  Alaska might have to ship things differently, but it is not            
that much different.  It is clear to Yukon Pacific and to the                  
buyers it spoke with that the state should be concentrating on                 
lowering the cost estimates of a pipeline.  "And the number that is            
kicked around is about $20 million and probably, maybe six months              
to do that.  Once that number is in hand it is pretty easy for the             
markets to understand wether this project is going to be a $15                 
billion project or a $10, $11, or $12 billion project.  That's the             
area that needs to be worked on, not the LNG facility, not the                 
conditioning plant, not the ships."                                            
                                                                               
CO-CHAIRMAN OGAN asked Mr. Lowenfels whether, in his opinion, it               
could be done in the time line that is laid out in the bill.                   
                                                                               
MR. LOWENFELS replied, "We believe so."  It is very important to               
have a goal out there.  There is no questions that there will be               
other projects that will get into the marketplace.  These markets              
need gas.  They might as well get it from Alaska.  "The sooner this            
project can be available to the marketplace, the safer we all will             
be.  There is high risk in waiting."                                           
                                                                               
REPRESENTATIVE BARNES asked Mr. Lowenfels whether he thinks it is              
necessary to get Alaska gas to the marketplace by the year 2005,               
2007, 2010, or 2015.                                                           
                                                                               
MR. LOWENFELS replied 2005 is the goal that the state should be                
shooting for, and it should never deviate from it.  "I've never                
seen ever seen anybody sell something by standing up and saying                
'we're not going to be ready in time when the market needs it.'                
That's not the American way.  That's certainly not the Alaskan                 
way."  He hasn't heard anybody say that starting a project in the              
year 2005 is too early.  It might be too early for one specific                
market, but because the state needs to ramp up quickly, it needs to            
get into the market quickly.  In Taiwan, there are two companies               
that will take gas in the year 2005.  Japan will take seven to nine            
million tons in the year 2007.  In Korea, because of the delay in              
their economy, it is on a 2005 time frame.  "Why would we possibly             
want to tell the competition we're not going to be ready so you                
guys go ahead and take the market.  It's just idiotic and certainly            
not the American way of doing business."                                       
                                                                               
REPRESENTATIVE BARNES said, "If we had something firm that would               
cause these companies to want to not only buy this gas, but invest             
in it, wouldn't it be the one thing that would cause people to do              
this to see that we were able to negotiate contracts with companies            
to be able to finance this project."                                           
                                                                               
MR. LOWENFELS replied it is a very important point.  That's what               
host countries do, and that's why this bill has all the potential              
in the world to show that the state is as good as any other host               
country, if not better.                                                        
                                                                               
Number 285                                                                     
                                                                               
REPRESENTATIVE JOULE asked Mr. Lowenfels to explain the term "ramp-            
up."                                                                           
                                                                               
MR. LOWENFELS replied, since not all gas can go to the marketplace             
on the first day, there would be a series of LNG trains.  There                
would be about three distinct trains that might take five years                
from the first sale.  It would be nice to sell about an additional             
four and one-half to five million tons every 18 months in a series             
of trains.                                                                     
                                                                               
REPRESENTATIVE JOULE asked Mr. Lowenfels whether the optimum would             
be around 14 to 15 million tons.                                               
                                                                               
MR. LOWENFELS replied for the first phase of the project.  Once a              
pipeline is in, there wouldn't be a problem anymore because a                  
project would be in place that could beat the economics of any                 
other expansion project on the face of the earth.                              
                                                                               
REPRESENTATIVE JOULE asked Mr. Lowenfels how long would it take the            
state to get to the 14-million-ton mark, assuming a start date in              
the year 2005.                                                                 
                                                                               
MR. LOWENFELS replied about four to five years.                                
                                                                               
REPRESENTATIVE JOULE asked Mr. Lowenfels whether the discussion                
about hitting the year 2010 would be in-line, but not the full                 
swing.                                                                         
                                                                               
MR. LOWENFELS replied there is a big difference between hitting the            
year 2010 with the first million than with the fourteenth million.             
He said, "Why would we ever want to let anybody else get in front              
of us?  Why would we ever be afraid of having too much of the                  
market?  We're Alaskans and that's the way we do things.  We go                
after as much as we can get.  We do it as best way we possibly can.            
And I think that's what this helps us do."                                     
                                                                               
REPRESENTATIVE WILLIAMS stated each company has a different reason             
for entering into the marketplace.  He asked Mr. Lowenfels how much            
money the Yukon Pacific Corporation has in the project today.                  
                                                                               
MR. LOWENFELS replied $100 million.  The CSX Corporation has $20               
billion worth of assets.  He has been working on a gas pipeline                
project for 15 years.  He has his life into this project.  He                  
doesn't know where the other companies get their numbers, but he               
can say where he gets his numbers.  He has met with the buyers for             
the past six years.  He knows their gas demands.  If the gas wasn't            
there, CSX would have kicked Yukon Pacific out a long time ago.  He            
said, "Our interests, I think, align directly with the state's                 
interests."  There is at least 50 million tons of demand and 100               
million tons of supply.                                                        
                                                                               
REPRESENTATIVE WILLIAMS replied the state would also want to get as            
much for its gas as it could.  The state is sitting in a good                  
position because the gas isn't going anywhere.                                 
                                                                               
MR. LOWENFELS stated the problem is that the gas might not go                  
anywhere for a long time, when there is a market out there today.              
                                                                               
REPRESENTATIVE WILLIAMS stated he doesn't want the state to get                
pushed into selling its gas because somebody has invested $100                 
million into a potential project.  He wants to make sure that the              
market is there and that the gas can be retrieved economically.                
                                                                               
MR. LOWENFELS stated he understands that the state wants to get its            
economic rent.                                                                 
                                                                               
REPRESENTATIVE WILLIAMS stated he doesn't want the state to get                
pushed into a project.                                                         
                                                                               
MR. LOWENFELS replied, "We are definitely pushing this project.  We            
think the time has gone.  The time is now.  And everyday we wait,              
that delays this project, is a potential that that gas will sit in             
the ground for the next 100 years."                                            
                                                                               
Number 396                                                                     
                                                                               
CO-CHAIRMAN BILL HUDSON asked Mr. Lowenfels to provide to him                  
information on Alaska's technological twin he mentioned earlier.               
For example:  Whose paying for it?  What's going through it?  Where            
is it running to?                                                              
                                                                               
Number 401                                                                     
                                                                               
REPRESENTATIVE BARNES asked Mr. Lowenfels whether the problem of               
stranded gas in the ground is because gas is continually being                 
found and projects are being developed all over the world, and                 
unless Alaska isn't able to get into the market, it might never get            
the gas out of the ground.                                                     
                                                                               
MR. LOWENFELS replied, "Correct."  The gas on the North Slope was              
suppose to go to the to the Lower Forty-Eight states in 1983.  The             
project that he is sponsor of was suppose to go to the marketplace             
in 1997, but Middle East companies took the market because Alaska              
wasn't ready.  And somebody else will take this market because                 
people need electricity.                                                       
                                                                               
REPRESENTATIVE BARNES asked Mr. Lowenfels whether part of the                  
equation is the opening up of Russia and its gas potential.                    
                                                                               
MR. LOWENFELS replied, "Absolutely."  In fact, there are two                   
projects in Sakhalin that are competing directly with Alaska.  He              
said, "There's no reason why we ought to let the Russians sell the             
gas in front of the Alaskans, none."                                           
                                                                               
CO-CHAIRMAN OGAN stated Alaska used to have 100 percent of the                 
market with Kenai LNG.                                                         
                                                                               
MR. LOWENFELS stated Alaska has about 1.5 percent of the market                
now.  If the North Slope was up and running, the state would have              
about 14 to 15 percent of the share, a very respectable share.                 
                                                                               
Number 436                                                                     
                                                                               
JIM SYKES (PH) testified via teleconference in Anchorage.  We hope             
that this bill will enable an opportunity, but he has some serious             
questions.  The legislature has the constitutional obligation to               
ensure that Alaskans get a fair share of it nonrenewable oil and               
gas resources.  By the year 2010 crude oil demands will outstrip               
production by ten billion barrels which means prices will go up.               
We are concerned about the following:  no discussions about the                
downside risks, the payments in lieu of taxes, and ensuring a                  
competitive environment free from anti-trust.                                  
                                                                               
MR. SYKES stated the van Meurs report was written prior to the                 
Asian financial crisis.  It is also possible that large amounts of             
gas could flood the world marketplace after Alaska's project came              
online creating a low price for gas.  The impetus in HB 393 for the            
state to take less when the gas prices are low and more when they              
are high is a true risk for the citizens of Alaska.  The world does            
not need Alaskan gas.  Arun has 35 projects the size of Alaska.                
The main question is, what is the state prepared to give up to make            
a gas pipeline project feasible?  The idea has been on the horizon             
for over 20 years now, and if it is profitable, it probably would              
have been built by now.                                                        
                                                                               
MR. SYKES further stated that since the bill doesn't specify                   
whether the project will be LNG or GTL, he is reminded that                    
according to Dr. van Meurs a gas pipeline would yield about $75 to             
$80 billion in taxable products - natural gas.  The large                      
corporations believe that natural gas could leave about $15 billion            
in taxable gas liquids.  The $15 billion is about one-sixth the                
price of natural gas.  If diesel is made, it would be extremely                
profitable by the petroleum companies because it is not currently              
taxed by the state.  According to Dr. van Meurs, GTL would be a                
back-stop opportunity if a pipeline project did not materialize.               
There is a lot to consider how the natural resources directly                  
affect the economic benefits to the state.                                     
                                                                               
MR. SYKES further stated the two tier system in version "L" would              
still leave open the question of whether periodic payments to                  
municipalities would be adequate to compensate for the real cost of            
providing services associated with the influx of workers.  There is            
also the question of whether a community should go into                        
indebtedness to benefit a for-profit corporation which may or may              
not succeed.                                                                   
                                                                               
MR. SYKES further said the state has left an estimated $4.5 to $9.2            
billion in royalties and taxes in return for the extraction of                 
petroleum resources.  It would have raised the permanent fund to               
the neighborhood of $30 billion instead of where it is today.  The             
state has not demonstrated its ability to adequately regulate the              
oil industry for the maximum benefit of its citizens.  The                     
legislature should be aware that there are anti-trust actions                  
before the Federal Energy Regulatory Commission on Occidental                  
Petroleum Corporation.  Before the courts in Alaska there is                   
Maritime Endeavor v. Alyeska (ph).  He suggested reading a book                
titled, The Big Squeeze.  It offers a compelling history in Alaska             
of its settlements.                                                            
                                                                               
CO-CHAIRMAN HUDSON explained to Mr. Sykes that the committee is                
operating off of version "P."                                                  
                                                                               
Number 568                                                                     
                                                                               
REPRESENTATIVE IRENE NICHOLIA asked Mr. Sykes whether he supports              
the bill in its current form.                                                  
                                                                               
MR. SYKES replied having not seen version "P" he can't say.  He was            
working off of version "L."  We felt that the payments in lieu of              
taxes and boundaries for negotiations needed some work.  We felt               
that the Administration was given an enormous amount of leeway to              
negotiate something that would not be open to public scrutiny.                 
                                                                               
CO-CHAIRMAN HUDSON called on David Brooks from BP Exploration                  
(Alaska) Incorporated again.                                                   
                                                                               
Number 585                                                                     
                                                                               
REPRESENTATIVE BEVERLY MASEK stated she is not totally convinced               
that this is the time for the bill.  She is not against building a             
gas pipeline.  She asked Mr. Brooks whether it is wise now to                  
pursue incentives to develop the stranded gas, or should the state             
rely more on market conditions to determine when such a project                
should be developed.                                                           
                                                                               
Number 595                                                                     
                                                                               
MR. BROOKS replied it is necessary for a series of conditions to               
come together at one time for an LNG project to move forward.  The             
competition in the Middle East, Malaysia and Indonesia negotiate               
specific fiscal regimes with their developers.  The recommendation             
of the gas commercialization report was to try to create a level               
playing field in order to negotiate a fiscal regime with the                   
sponsors in due course.  The bill, in its present form, offers an              
opportunity for somebody to negotiate a contract with the                      
administration, under closely defined conditions.  The timing of               
negotiations will always be defined by the economic prospects.  It             
creates an option for Alaska to have that discussion at sometime in            
the future when somebody believes the project is viable.                       
                                                                               
Number 620                                                                     
                                                                               
REPRESENTATIVE MASEK stated she is concerned that the legislature              
would react by accepting a contract that would give away more than             
normally, if the economy was depressed for example.  She feels the             
state has a lot of time to look at the issue and it should not                 
hurry.  She is not against developing a gas pipeline, however.                 
                                                                               
Number 643                                                                     
                                                                               
REPRESENTATIVE JOULE asked Mr. Brooks whether getting the ball                 
rolling through legislation would help the state get to the point              
it needs to be for the ramp-up process to meet the potential market            
demands.                                                                       
                                                                               
MR. BROOKS replied the ramp-up is a mixture of technical and                   
commercial constraints.  There are technical constraints because               
LNG plants can only be build so fast.  Buyers in Tokyo and Korea               
take gas in small parts.  The electric companies being built in                
those countries would have to match when they think gas will come              
to the market in order to import LNG, and the state would have to              
build its train to match it.  The shorter the ramp-up the better,              
but there has not been a project in the world that has put 14                  
million tons of gas into the marketplace on a five-year ramp-up.               
He worked on an Australian LNG project that put six million tons in            
a five- to six-year ramp-up.  It would be a huge challenge.                    
                                                                               
TAPE 98-40, SIDE B                                                             
Number 012                                                                     
                                                                               
REPRESENTATIVE BARNES asked Mr. Brooks whether BP has committed to             
put another $6 billion into the Australian project.                            
                                                                               
MR. BROOKS replied BP holds one-sixth of the shares in the                     
Australian project.  There are plans to expand the project.  He                
could not comment on the overall cost of the project, but doubts it            
would $6 billion.                                                              
                                                                               
REPRESENTATIVE BARNES explained she read an article that indicated             
BP has committed an additional $6 billion into the project.                    
                                                                               
REPRESENTATIVE BARNES stated presently the amount of gas that goes             
into the market each year is about two and one-half million tons               
which is why it is important for Alaska to get into that "window of            
opportunity."  In order for a gas project to be economically                   
viable, Alaska would have to put 15 million metric tons per year               
into the market.  The ramp-up would be over a three year time                  
period.                                                                        
                                                                               
MR. BROOKS stated the market is pretty flat at the moment.                     
                                                                               
REPRESENTATIVE BARNES stated the study by Dr. van Meurs reported               
that currently the total Pacific LNG market is increasing at two               
and one-half million tons per year, and many projects compete in               
the marketplace.  This is why the state needs to get 15 million                
metric tons into the marketplace with a three-year ramp-up.                    
                                                                               
REPRESENTATIVE BARNES asked Mr. Brooks whether the ships would be              
part of the cost of building a project.                                        
                                                                               
MR. BROOKS replied, "Absolutely."                                              
                                                                               
REPRESENTATIVE BARNES asked Mr. Brooks, if the ships were pulled               
out of the equation and someone else owned them, would it lower the            
cost of a project.                                                             
                                                                               
MR. BROOKS replied either the sellers provide the ships or the                 
buyers provide the ships.  The Japanese prefer that the sellers                
provide the ships, and the Koreans prefer that the buyers provide              
the ships.  It would be part of the commercial negotiations.                   
According to BP, there would be two pipelines - one would go from              
Prudhoe Bay to the LNG plant and one that would go across the state            
to the sea.  BP prefers to sell on a next-ship basis thru the                  
sellers owning the ships.  "We have investigated all different ways            
of acquiring those ships.  At the end of the day what happens is               
you take those ships on long-term charter, if you have a contract              
with a buyer for 25 years, you've got to contract with the ship for            
25 years.  So, you make it a sales contract with a ship owner, and             
normally in those charter parties there is no (indisc.) clause so              
you cannot--if the plant blows up you still got to pay for the                 
ships.  And, if you go to accounting rules that is required in                 
places like America and international accounting rules, you'll find            
that if you take a ship on long-term charter, you actually have to             
capitalize it so the capital of a ship on a 25 year charter would              
still go against the balance sheets of the companies who are                   
sponsoring the projects."                                                      
                                                                               
REPRESENTATIVE BARNES stated she doesn't know much about ships, but            
intends to learn about them.                                                   
                                                                               
REPRESENTATIVE BARNES said, "Now, when we first started this                   
discussion, my good friends from EXXON tried to do a snow job on me            
with a western pipeline.  And, no permitting, or course, has been              
done for that.  And, today, you've come along with a whole brand               
new different pipeline route that no permitting has been done on.              
And, so by my calculations here and what I've been told, we could              
end up with an extension of five to eight years of building this               
because there is no permitting.  So, who, when did this new route              
come along when in fact we already have a pipeline corridor.  You              
already know how to build a line in that corridor because we've                
built on.  So, why in the world would we even think of building a              
different one when you would have to spend what the gentleman, Mr.             
Lowenfels, testified CSX has spent $100 million.  Why in the world             
would we want to spend another $100 million when that would be                 
figured in to the bottom line?"                                                
                                                                               
MR. BROOKS replied BP has done a lot of work on the pipeline route             
together with Exxon and ARCO.  BP has looked at brining a pipeline             
down along the oil pipeline, building a terminal in Valdez, and                
selling the gas to Japan and Korea.  BP has been able to reduce the            
cost estimates from $15 billion to $12 billion.  According to the              
gas commercialization report, $12 billion would not be economical              
at the current price of gas.  The answer is to try and find a way              
to cut the cost of a project to make it more economical.  Unless               
the cost is brought down, it's going to be very difficult to                   
market.                                                                        
                                                                               
REPRESENTATIVE BARNES replied the bill isn't needed then to give               
tax breaks if the cost only needs to brought down to $12 billion.              
                                                                               
MR. BROOKS stated the report said that even at $12 billion a                   
project would not be economical.  The big cost of a project is the             
pipeline.  There has to be innovative ways to built it to bring the            
cost down and to make the project economical.                                  
                                                                               
Number 209                                                                     
                                                                               
CO-CHAIRMAN HUDSON made a motion and asked unanimous consent to                
adopt Amendment 1, version 0-GH2006\P.1, Glover, 3/30/98, that                 
reads as follows:                                                              
                                                                               
     TO:  CSHB 393(RES), Draft Version "P"                                     
                                                                               
     Page 15, line 23:                                                         
                                                                               
          Delete "qualified to register to vote in this                        
          state"                                                               
                                                                               
          Insert "register to vote under AS 15"                                
                                                                               
CO-CHAIRMAN OGAN stated Amendment 1 changes the verbiage from                  
qualified to register to vote to register to vote.                             
                                                                               
REPRESENTATIVE WILLIAMS objected for discussion purposes.  He                  
doesn't want to tell somebody to vote.  That shouldn't be held                 
against somebody.  "What kind of a country are we giving and taking            
somebody's right away."                                                        
                                                                               
REPRESENTATIVE WILLIAMS withdrew his objection.                                
                                                                               
CO-CHAIRMAN OGAN asked for further objection.  There being no                  
further objection, Amendment 1 was so adopted.                                 
                                                                               
Number 250                                                                     
                                                                               
REPRESENTATIVE GREEN made a motion to adopt Amendment 2 that reads             
as follows:                                                                    
                                                                               
     TO:  CSHB 393(RES), Draft Version "P"                                     
                                                                               
     Page 2, Line 12                                                           
                                                                               
          after "(5) INSERT "Alaskans may desire a portion of                  
          the gas from a transportation project for in-state                   
          uses, however,"                                                      
                                                                               
     Page 2, Line 14                                                           
                                                                               
          after "...infrastructure for..."                                     
                                                                               
          DELETE "at least                                                     
                                                                               
          INSERT "approximately'                                               
                                                                               
REPRESENTATIVE GREEN stated the first part of the amendment                    
indicates that there might be a strong desire for instate use.                 
                                                                               
REPRESENTATIVE GREEN stated the second part of the amendment keeps             
the focus on the next ten years.                                               
                                                                               
CO-CHAIRMAN OGAN asked whether there is any objection to Amendment             
2.  There bing no objection, it was so adopted.                                
                                                                               
REPRESENTATIVE BARNES referred to page 26, lines 15 and 18 -                   
"Nothing in this chapter prohibits or limits the legislature from              
soliciting or negotiating contract offers or proposals that provide            
for the periodic payments or adjustments described in this                     
section."  She stated that the legislature has established the                 
revenue and natural resources department and if it truly wants to              
get into the negotiation process it can by taking back some of the             
powers given to those departments.  However, the legislature                   
doesn't want to get into that business.  It is appropriate that a              
contract is negotiated and brought to the legislature, but this                
language should not be in the bill.                                            
                                                                               
REPRESENTATIVE BARNES made a motion and asked unanimous consent to             
delete the language on page 26, lines 15-18 - "Sec. 43.82.650.                 
Contracts developed by the legislature.  Nothing in this chapter               
prohibits or limits the legislature from soliciting or negotiating             
contract offers or proposals that provide for the periodic payments            
or adjustments described in this section."                                     
                                                                               
Number 296                                                                     
                                                                               
REPRESENTATIVE DYSON asked Representative Barnes what would be lost            
by leaving the language in.                                                    
                                                                               
REPRESENTATIVE BARNES replied there is no guarantee that anybody in            
the legislature will be here in the future.  People are not real               
good at looking at the history of things, and the state could get              
into serious trouble with language like this.  "We could have a                
legislature that feels that it's in their purview to go out and                
start negotiating contracts prior to the time that they would have             
changed the powers and duties of the commissioner of natural                   
resources and prior to the time that they'd change the duties of               
the commissioner of revenue and thus it would become a separation-             
of-powers question."                                                           
                                                                               
REPRESENTATIVE DYSON replied respectfully, so what.  History proves            
that nothing we can do will preclude dumb things by succeeding                 
legislators.                                                                   
                                                                               
Number 330                                                                     
                                                                               
CO-CHAIRMAN OGAN asked whether there is any further objection.                 
There being no further objection, it was so adopted.                           
                                                                               
Number 334                                                                     
                                                                               
CO-CHAIRMAN HUDSON made a motion and asked unanimous consent to                
move proposed committee substitute HB 393, version 0-GH2006\P,                 
Glover, 3/30/98, as amendment, with individual recommendations and             
the attached fiscal note(s).                                                   
                                                                               
Number 339                                                                     
                                                                               
REPRESENTATIVE BARNES objected.  The bill has been before the House            
Resources committee for a very abbreviated period of time.                     
Traditionally, the standing committee should have some time to work            
on a bill that comes from a special committee.  "The stranded gas              
language that relate to gas-to-liquid--I know very little about                
gas, but if I understand what little I know is that if you change              
gas to liquid you lose a large component of the gas.  It becomes               
once it is converted into a tar-like substance.  And, thus you are             
losing considerable amount of revenue that were it not turned into             
a tar-like substance before it would be transmitted down the gas               
line, the existing pipeline, that if it were sent through a natural            
gas pipeline you would have all those component parts that would be            
taken out at the other end and converted to all the different uses.            
So, having this rubbery-like substance that you end up putting back            
into the ground or disposed of in some other manner, that is part              
of the resource of the gas.  But, I think it is not in the interest            
of the state.  I do not think it is in the interest of the state               
just to say this is a 'stranded gas bill' and I'm sure that                    
Representative Green knows a lot more about this than I do being an            
expert in the field of oil and gas.  But, I feel there has been an             
awful lot of pressure put on this committee to move a bill without             
doing the work on it that needs to be done in the area of gas-to-              
liquids, in the area of the whole taxation structure because the               
taxing structure are the economics of gas-to-liquids is entirely               
different than that of sending gas down a pipeline.  All of those              
things should be looked at.  All of the issues that I have raised              
today with my limited knowledge of...The time frame needs to be                
addressed in this bill of when this gas needs to get into the                  
market.  We've got a sunset date in here, but today we've heard BP             
ask for a longer time frame.  And to me, the shorter time frame you            
give to somebody with the carrot, the better of you're going to be             
because if they want that carrot bad enough then they're going to              
march forward and participate and take a hold of the economics of              
the whole situation."                                                          
                                                                               
Number 396                                                                     
                                                                               
CO-CHAIRMAN OGAN called for a brief at ease.                                   
                                                                               
CO-CHAIRMAN OGAN called the meeting back to order.                             
                                                                               
Number 400                                                                     
                                                                               
CO-CHAIRMAN HUDSON withdrew his motion in deference to additional              
information that would be beneficial to some folks before moving               
the bill out of the committee.                                                 
                                                                               
Number 404                                                                     
                                                                               
CO-CHAIRMAN OGAN announced the bill will be held over until                    
Thursday, April 2, 1998, in order to get more information on LTG               
and how a tax regime affects it.                                               
ADJOURNMENT                                                                    
                                                                               
Number 419                                                                     
                                                                               
CO-CHAIRMAN OGAN adjourned the House Resources Standing Committee              
meeting at 7:10 p.m.                                                           

Document Name Date/Time Subjects