Legislature(2007 - 2008)BARNES 124

04/17/2007 01:00 PM RESOURCES


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01:05:40 PM Start
01:05:57 PM HB177
02:45:43 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+= HB 177 NATURAL GAS PIPELINE PROJECT TELECONFERENCED
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
                    ALASKA STATE LEGISLATURE                                                                                  
               HOUSE RESOURCES STANDING COMMITTEE                                                                             
                         April 17, 2007                                                                                         
                           1:05 p.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Carl Gatto, Co-Chair                                                                                             
Representative Craig Johnson, Co-Chair                                                                                          
Representative Vic Kohring                                                                                                      
Representative Paul Seaton                                                                                                      
Representative Peggy Wilson                                                                                                     
Representative Bryce Edgmon                                                                                                     
Representative David Guttenberg                                                                                                 
Representative Scott Kawasaki                                                                                                   
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative Bob Roses                                                                                                        
                                                                                                                                
OTHER LEGISLATORS PRESENT                                                                                                     
                                                                                                                              
Representative Anna Fairclough                                                                                                  
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
HOUSE BILL NO. 177                                                                                                              
"An  Act   relating  to  the   Alaska  Gasline   Inducement  Act;                                                               
establishing   the  Alaska   Gasline   Inducement  Act   matching                                                               
contribution  fund; providing  for an  Alaska Gasline  Inducement                                                               
Act coordinator; making conforming  amendments; and providing for                                                               
an effective date."                                                                                                             
                                                                                                                                
     - HEARD AND HELD                                                                                                           
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
BILL: HB 177                                                                                                                  
SHORT TITLE: NATURAL GAS PIPELINE PROJECT                                                                                       
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR                                                                                    
                                                                                                                                
03/05/07       (H)       READ THE FIRST TIME - REFERRALS                                                                        
03/05/07       (H)       O&G, RES, FIN                                                                                          
03/06/07       (H)       O&G AT 3:00 PM BARNES 124                                                                              
03/06/07       (H)       -- MEETING CANCELED --                                                                                 
03/08/07       (H)       O&G AT 3:00 PM BARNES 124                                                                              
03/08/07       (H)       -- MEETING CANCELED --                                                                                 
03/13/07       (H)       O&G AT 3:30 PM HOUSE FINANCE 519                                                                       
03/13/07       (H)       Heard & Held                                                                                           
03/13/07       (H)       MINUTE(O&G)                                                                                            
03/15/07       (H)       O&G AT 3:00 PM BARNES 124                                                                              
03/15/07       (H)       Heard & Held                                                                                           
03/15/07       (H)       MINUTE(O&G)                                                                                            
03/19/07       (H)       O&G AT 8:30 AM CAPITOL 106                                                                             
03/19/07       (H)       Heard & Held                                                                                           
03/19/07       (H)       MINUTE(O&G)                                                                                            
03/20/07       (H)       O&G AT 3:00 PM BARNES 124                                                                              
03/20/07       (H)       Heard & Held                                                                                           
03/20/07       (H)       MINUTE(O&G)                                                                                            
03/21/07       (H)       O&G AT 5:30 PM SENATE FINANCE 532                                                                      
03/21/07       (H)       Heard & Held                                                                                           
03/21/07       (H)       MINUTE(O&G)                                                                                            
03/22/07       (H)       O&G AT 3:00 PM BARNES 124                                                                              
03/22/07       (H)       Heard & Held                                                                                           
03/22/07       (H)       MINUTE(O&G)                                                                                            
03/23/07       (H)       O&G AT 8:30 AM CAPITOL 106                                                                             
03/23/07       (H)       Heard & Held                                                                                           
03/23/07       (H)       MINUTE(O&G)                                                                                            
03/24/07       (H)       O&G AT 1:00 PM SENATE FINANCE 532                                                                      
03/24/07       (H)       -- Public Testimony --                                                                                 
03/26/07       (H)       O&G AT 8:30 AM CAPITOL 106                                                                             
03/26/07       (H)       Heard & Held                                                                                           
03/26/07       (H)       MINUTE(O&G)                                                                                            
03/27/07       (H)       O&G AT 3:00 PM BARNES 124                                                                              
03/28/07       (H)       O&G AT 7:30 AM CAPITOL 106                                                                             
03/28/07       (H)       Heard & Held                                                                                           
03/28/07       (H)       MINUTE(O&G)                                                                                            
03/28/07       (H)       O&G AT 8:30 AM CAPITOL 106                                                                             
03/28/07       (H)       Heard & Held                                                                                           
03/28/07       (H)       MINUTE(O&G)                                                                                            
03/29/07       (H)       O&G AT 3:00 PM BARNES 124                                                                              
03/29/07       (H)       Heard & Held                                                                                           
03/29/07       (H)       MINUTE(O&G)                                                                                            
03/30/07       (H)       O&G AT 8:30 AM CAPITOL 106                                                                             
03/30/07       (H)       Heard & Held                                                                                           
03/30/07       (H)       MINUTE(O&G)                                                                                            
03/31/07       (H)       O&G AT 1:00 PM BARNES 124                                                                              
03/31/07       (H)       -- MEETING CANCELED --                                                                                 
04/02/07       (H)       O&G AT 8:30 AM CAPITOL 106                                                                             
04/02/07       (H)       Heard & Held                                                                                           
04/02/07       (H)       MINUTE(O&G)                                                                                            
04/03/07       (H)       O&G AT 3:00 PM BARNES 124                                                                              
04/03/07       (H)       Moved CSHB 177(O&G) Out of Committee                                                                   
04/03/07       (H)       MINUTE(O&G)                                                                                            
04/04/07       (H)       O&G RPT CS(O&G) NT 3DP 2NR 2AM                                                                         
04/04/07       (H)       DP: RAMRAS, DOOGAN, OLSON                                                                              
04/04/07       (H)       NR: SAMUELS, KAWASAKI                                                                                  
04/04/07       (H)       AM: DAHLSTROM, KOHRING                                                                                 
04/04/07       (H)       O&G AT 8:30 AM CAPITOL 106                                                                             
04/04/07       (H)       -- MEETING CANCELED --                                                                                 
04/05/07       (H)       O&G AT 3:00 PM BARNES 124                                                                              
04/05/07       (H)       -- MEETING CANCELED --                                                                                 
04/10/07       (H)       RES AT 1:00 PM BARNES 124                                                                              
04/10/07       (H)       Heard & Held                                                                                           
04/10/07       (H)       MINUTE(RES)                                                                                            
04/11/07       (H)       RES AT 1:00 PM BARNES 124                                                                              
04/11/07       (H)       Heard & Held                                                                                           
04/11/07       (H)       MINUTE(RES)                                                                                            
04/12/07       (H)       RES AT 1:00 PM BARNES 124                                                                              
04/12/07       (H)       Heard & Held                                                                                           
04/12/07       (H)       MINUTE(RES)                                                                                            
04/13/07       (H)       RES AT 1:00 PM BARNES 124                                                                              
04/13/07       (H)       Heard & Held                                                                                           
04/13/07       (H)       MINUTE(RES)                                                                                            
04/14/07       (H)       RES AT 1:00 PM BARNES 124                                                                              
04/14/07       (H)       Heard & Held                                                                                           
04/14/07       (H)       MINUTE(RES)                                                                                            
04/16/07       (H)       RES AT 1:00 PM BARNES 124                                                                              
04/16/07       (H)       Heard & Held                                                                                           
04/16/07       (H)       MINUTE(RES)                                                                                            
04/17/07       (H)       RES AT 1:00 PM BARNES 124                                                                              
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
DAVID KEANE, Vice President of Policy and Corporate Affairs                                                                     
BG North America, Caribbean and Global LNG                                                                                      
BG Group                                                                                                                        
Houston, Texas                                                                                                                  
POSITION STATEMENT:  During hearing on HB 177, described BG                                                                     
Group's activities as an integrated gas major, testified in                                                                     
general support of HB 177, and suggested modifications.                                                                         
                                                                                                                                
CATHERINE FOERSTER, Commissioner                                                                                                
Alaska Oil and Gas Conservation Commission (AOGCC)                                                                              
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  During hearing on HB 177, explained the                                                                    
process and procedures of the AOGCC regarding the determination                                                                 
of allowable gas off-take and answered questions.                                                                               
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
CO-CHAIR  CARL   GATTO  called   the  House   Resources  Standing                                                             
Committee  meeting  to  order at  1:05:40  PM.    Representatives                                                             
Gatto,  Johnson, Kawasaki,  Kohring, Wilson,  Seaton, Guttenberg,                                                               
and Edgmon were  present at the call to order.   Also present was                                                               
Representative Fairclough.                                                                                                      
                                                                                                                                
HB 177-NATURAL GAS PIPELINE PROJECT                                                                                           
                                                                                                                                
1:05:57 PM                                                                                                                    
                                                                                                                                
CO-CHAIR GATTO announced  that the first order  of business would                                                               
be HOUSE  BILL NO. 177,  "An Act  relating to the  Alaska Gasline                                                               
Inducement Act;  establishing the  Alaska Gasline  Inducement Act                                                               
matching  contribution  fund;  providing for  an  Alaska  Gasline                                                               
Inducement  Act coordinator;  making  conforming amendments;  and                                                               
providing  for an  effective date."   [Before  the committee  was                                                               
CSHB 177(O&G).]                                                                                                                 
                                                                                                                                
1:06:17 PM                                                                                                                    
                                                                                                                                
DAVID KEANE, Vice  President of Policy and  Corporate Affairs, BG                                                               
North  America,   Caribbean  and  Global  LNG,   BG  Group  (BG),                                                               
explained that  BG was  formed through  a series  of "de-mergers"                                                               
which   established  BG   as  "basically   the  exploration   and                                                               
production arm" of  what used to be British Gas.   He referred to                                                               
slide 3 of a PowerPoint presentation  and explained that BP is an                                                               
integrated  gas  major,  which  means   it  is  involved  in  the                                                               
exploration, production, transportation, and  sale of natural gas                                                               
and other  hydrocarbons worldwide.   He relayed  that BG  is more                                                               
interested in exploring for gas than for oil.                                                                                   
                                                                                                                                
1:12:01 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  GATTO asked  whether  BG processes  oil  or whether  it                                                               
sells its oil to another party.                                                                                                 
                                                                                                                                
MR. KEANE replied  that BG sells oil to third-parties  and has no                                                               
refining  capabilities.    He   explained  that  exploration  and                                                               
production  activities bring  BG to  Alaska.   BG is  the largest                                                               
supplier  of liquefied  natural  gas to  the  United States,  and                                                               
supplied 49.8  percent of imports to  the U.S. in 2006,  he said.                                                               
The company is a  "top 20 UK company" that is  traded on both the                                                               
London and the  New York stock exchange and has  a current market                                                               
capitalization of around  $45 billion.  The company  is active in                                                               
approximately   25   countries   and  has   approximately   6,000                                                               
employees.                                                                                                                      
                                                                                                                                
1:13:58 PM                                                                                                                    
                                                                                                                                
MR. KEANE  explained that BG's  business strategy  is pictorially                                                               
represented by slide 4.  As  an integrated gas major, BG explores                                                               
for natural  gas and finds ways  to connect that gas  to markets.                                                               
He explained that future plans  for Alaska include exploration in                                                               
the Foothills  area of the  North Slope.   He explained  that gas                                                               
resources worldwide  are becoming harder  to find and tend  to be                                                               
in  areas   without  natural  markets;   therefore  it   is  more                                                               
convenient to  liquefy the gas  for shipment to areas  with large                                                               
and  liquid markets.   BG  focuses on  markets in  North America,                                                               
Europe,  India, and  South America  and is  involved in  the off-                                                               
shore production of  natural gas in the United  Kingdom, he said.                                                               
He  explained that  the company's  LNG activities  are worldwide,                                                               
referring to the map on slide 7.                                                                                                
                                                                                                                                
1:17:12 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  GATTO  asked  whether   BG  is  considering  converting                                                               
Alaska's  gas to  LNG, or  whether it  is considering  a pipeline                                                               
project only.                                                                                                                   
                                                                                                                                
MR.  KEANE   replied  that  at   present  BG  is  open   to  both                                                               
suggestions.  Currently the company  is interested in making sure                                                               
that there  is a  pipeline, he explained.   He  characterized the                                                               
LNG option as "interesting" and opined  that BG is not opposed to                                                               
considering it.                                                                                                                 
                                                                                                                                
1:17:57 PM                                                                                                                    
                                                                                                                                
MR.  KEANE reviewed  his  company's LNG  portfolio  and told  the                                                               
committee that  its capacity at  Lake Charles and Elba  Island in                                                               
the  Southeastern  U.S. have  expanded  in  recent years  despite                                                               
hurricanes which  caused some loss  of production.   He explained                                                               
that up until recently, gas has  tended to stay within its region                                                               
of production.  The global gas  trade is now evolving so that gas                                                               
is shipped more globally.  He  opined that this trend may require                                                               
Alaska's gas  to compete  with other suppliers  to sell  its gas.                                                               
He offered  that this growing  competition makes it  important to                                                               
continue to  move forward and  focus on getting a  pipeline built                                                               
from Alaska.                                                                                                                    
                                                                                                                                
1:22:04 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GUTTENBERG  asked  for  more  detail  as  to  the                                                               
industry  trends  from  local  markets   to  a  more  global  gas                                                               
industry, referring to slides 8 and 9.                                                                                          
                                                                                                                                
MR.  KEANE explained  that recently  the global  gas market  "was                                                               
very isolated" and  that gas produced in North  America tended to                                                               
stay in  the region.  However,  the way gas is  sold worldwide is                                                               
"changing quite dramatically" due in  part to BG's activities, he                                                               
opined.   He explained that  BG was involved  in around 25  to 30                                                               
percent of spot  sales of gas to the Far  East from production in                                                               
Trinidad and Egypt.  He offered  that demand for gas in the Lower                                                               
48 is increasing at 1 to  2 percent annually, while production is                                                               
relatively flat.   He set forth his belief that  at some point in                                                               
time,  the  demand for  gas  is  going to  have  to  be met  from                                                               
somewhere.   He  said that  due to  BG's interest  in Alaska,  it                                                               
would like  to see  a method  of getting  gas from  the Foothills                                                               
area of the North Slope to the Lower 48.                                                                                        
                                                                                                                                
MR. KEANE reviewed information which  shows BG as the largest LNG                                                               
importer to the U.S.  from 2003 to 2006.  He  said BG believes in                                                               
managing and  controlling its  own ships  and currently  owns six                                                               
vessels and  controls 14 others  through charters.   He explained                                                               
that they have orders in for additional ships.                                                                                  
                                                                                                                                
1:25:21 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GUTTENBERG  asked  about   the  location  of  LNG                                                               
receiving terminals in  the U.S.  He asked  whether the receiving                                                               
points on  the U.S. West  Coast are operating below  capacity and                                                               
how gas gets to the receiving points in the Midwestern U.S.                                                                     
                                                                                                                                
MR. KEANE explained that the arrows  on slide 9 of the PowerPoint                                                               
do  not  represent  terminals,  rather the  arrows  are  to  show                                                               
general supply coming from the other markets to the U.S. market.                                                                
                                                                                                                                
CO-CHAIR  GATTO asked  if BG  has ever  had to  re-flag a  tanker                                                               
initially flagged  in the United States,  and if so, how  easy or                                                               
difficult that procedure is.                                                                                                    
                                                                                                                                
MR. KEANE stated BG has not had  to try and re-flag a tanker, and                                                               
he does  not know  if that  procedure is difficult.   He  did say                                                               
that  the   BG's  new  ships   would  be  "state  of   the  art",                                                               
environmentally sound, and fuel efficient.                                                                                      
                                                                                                                                
1:27:45 PM                                                                                                                    
                                                                                                                                
CO-CHAIR GATTO asked  what happens if there is a  fire or a other                                                               
serious incident  whereby a pressure  tanker bursts  and releases                                                               
its contents at an enormous rate.   He asked about this situation                                                               
at the dock or at sea.                                                                                                          
                                                                                                                                
MR. KEANE responded  that LNG is not transported  or stored under                                                               
high  pressure, but  under  perhaps two  pounds  of pressure  for                                                               
venting purposes.   The reason  the gas  is liquid is  because it                                                               
has been super-cooled  to around -250° Fahrenheit.   He said that                                                               
in the  past 40 or so  years of LNG marine  transportation, there                                                               
has never  been a serious  accident where  a major loss  of cargo                                                               
has occurred.   He told  members that LNG  is not as  volatile as                                                               
other carbon products that are imported to the United States.                                                                   
                                                                                                                                
[Co-Chair Gatto turned the gavel over to Co-Chair Johnson.]                                                                     
                                                                                                                                
1:30:02 PM                                                                                                                    
                                                                                                                                
MR. KEANE explained  that BG will be exploring  2.1 million acres                                                               
in the Foothills area of  the North Slope with Anadarko Petroleum                                                               
Corporation and  Petro-Canada.   On the  eastern North  Slope, BG                                                               
has  explored with  partners and  drilled its  first well  in the                                                               
area this past winter.  BG  hopes to drill an exploratory well in                                                               
the Foothills area sometime next year.                                                                                          
                                                                                                                                
MR.  KEANE emphasized  that  BG is  extremely  interested in  the                                                               
pipeline and is investing  in Alaska.  He set forth  that BG is a                                                               
leading player throughout  the natural gas value chain.   He said                                                               
that  BG supports  AGIA  as the  right way  to  move the  project                                                               
forward.    He  opined  that  "it will  result  ultimately  in  a                                                               
pipeline."   He  expressed concern  over past  negotiations which                                                               
excluded  participation of  new  entrants.   He  opined that  the                                                               
eventual contract needs to provide  a level playing field for all                                                               
participants.    He  relayed  that whatever  the  result,  it  is                                                               
critical  for BG  to have  reasonable certainty  that it  will be                                                               
able  to  secure  access  or   capacity  on  the  pipeline.    He                                                               
encouraged  the   state  to  enter  into   the  discussions  with                                                               
independent pipeline companies.                                                                                                 
                                                                                                                                
1:33:15 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON  asked if  BG has  a strategy  for reducing                                                               
carbon dioxide emissions  in pipeline operation so as  to save on                                                               
expenses for "cap and trade" purchase of CO                                                                                     
                                           2.                                                                                   
                                                                                                                                
MR.  KEANE stated  that he  could  not answer  the question,  but                                                               
could provide further information to the committee.                                                                             
                                                                                                                                
REPRESENTATIVE  SEATON  noted  that environmental  standards  and                                                               
efficiencies are  an area  of concern  for shipping  and pipeline                                                               
operation  issues, therefore  information in  this area  would be                                                               
appreciated.   He asked  for comments on  specific areas  of AGIA                                                               
that BG may see as problematic.                                                                                                 
                                                                                                                                
MR.  KEANE  opined  that  AGIA  is a  good  vehicle  for  getting                                                               
everyone  to the  table  to  discuss key  issues.    He said  his                                                               
understanding  is that  the bill's  purpose  as set  forth in  AS                                                               
43.90.010 is  to get a  gas pipeline  developed.  He  opined that                                                               
there  is an  understandable  tendency "to  be  dragged into  the                                                               
weeds"  with details  of  each party's  individual  desires.   He                                                               
offered his belief  that all the details  are unimportant "unless                                                               
we  have a  pipeline" and  encouraged the  committee to  focus on                                                               
"getting the vehicle  together" that allows the  state to receive                                                               
applications so that it can issue a license.                                                                                    
                                                                                                                                
1:36:47 PM                                                                                                                    
                                                                                                                                
MR.  KEANE said  that BG  would like  a longer  period of  fiscal                                                               
certainty than 10  years, but commented that "it is  not going to                                                               
mean anything  if we don't have  a pipeline."  He  explained that                                                               
it may  take at least  three years to  determine if some  of BG's                                                               
leased   land  in   Alaska   contains  commercially   significant                                                               
quantities of gas.  He opined that  although BG may not be in the                                                               
position  to "try  and secure  capacity during  the initial  open                                                               
season," as long as BG is  diligently exploring for gas it should                                                               
not  be penalized  in terms  of fiscal  certainty with  regard to                                                               
"tax rates  and the like."   He characterized this issue  as "one                                                               
of our biggest concerns with regards  to the bill right now."  He                                                               
reiterated that  "everybody that is actively  involved" should be                                                               
on a level playing field.                                                                                                       
                                                                                                                                
1:38:46 PM                                                                                                                    
                                                                                                                                
MR.  KEANE said  that BG  supports rolled-in  rates and  that the                                                               
Federal Energy  Regulatory Commission  (FERC) may be  involved in                                                               
setting the  rates.   Once the  licensee is  determined, everyone                                                               
involved in the process will have  the opportunity to weigh in on                                                               
the most  appropriate rate  design, he  predicted.   Therefore he                                                               
emphasized that  it is important  not to  get bogged down  in the                                                               
intricacies of  rate design at this  point and lose focus  of the                                                               
main goal  of getting a  licensee in  place to move  the pipeline                                                               
project forward.                                                                                                                
                                                                                                                                
1:39:49 PM                                                                                                                    
                                                                                                                                
MR. KEANE went  on to say that  the only other issue  BG has with                                                               
AGIA is 60 day period  for review of applications [AS 43.90.160].                                                               
If  the  state  gets  more   than  one  application,  it  may  be                                                               
physically impossible to review them  as they will be lengthy and                                                               
detailed documents, he suggested.                                                                                               
                                                                                                                                
1:40:35 PM                                                                                                                    
                                                                                                                                
CO-CHAIR JOHNSON asked for  clarification regarding BG's position                                                               
on rolled-in rates.                                                                                                             
                                                                                                                                
MR. KEANE replied that BG  supports rolled-in rates and that FERC                                                               
will help determine  what the actual rates should be.   He stated                                                               
he thinks having it in the bill is extremely helpful.                                                                           
                                                                                                                                
CO-CHAIR JOHNSON returned the gavel to Co-Chair Gatto.                                                                          
                                                                                                                                
1:41:16 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  GATTO   asked  whether  flaring  of   gas  is  typical,                                                               
referring to a picture of an Egyptian LNG port on slide 10.                                                                     
                                                                                                                                
MR. KEANE replied no, and said  he assumes the picture is showing                                                               
the result of  "a plant upset."  He explained  that typically one                                                               
would not be flaring gas unless there was a reason.                                                                             
                                                                                                                                
CO-CHAIR GATTO sought  assurance that the flaring  shown on slide                                                               
10  was not  a continual  operation, but  a way  to handle  over-                                                               
pressure or some other issue.                                                                                                   
                                                                                                                                
MR. KEANE replied that it is likely  due to some sort of an upset                                                               
in the plant whereby the operators have to "flare it."                                                                          
                                                                                                                                
1:42:19 PM                                                                                                                    
                                                                                                                                
CO-CHAIR JOHNSON  asked about a  recent ruling of  the California                                                               
Coastal Commission denying a license  to an LNG plant and whether                                                               
BG sees this as problematic.                                                                                                    
                                                                                                                                
MR.  KEANE replied  that  he cannot  speak  about the  particular                                                               
project  itself,  although  he  opined  that  the  aforementioned                                                               
project "looked like  the perfect project."  However,  he said BG                                                               
believes it  is difficult to  develop LNG facilities on  the West                                                               
Coast of the U.S.                                                                                                               
                                                                                                                                
CO-CHAIR   JOHNSON  asked   for   further   explanation  of   the                                                               
difficulties of developing LNG plants.                                                                                          
                                                                                                                                
MR.  KEANE responded  that the  opposition on  the East  and West                                                               
Coasts of the U.S. is not so  much on the regulatory side, but is                                                               
mostly due  to a  tremendous amount of  public opposition  to LNG                                                               
plants.   He  offered that  this opposition  is despite  the safe                                                               
operation  of LNG  plants in  urban areas  worldwide.   He opined                                                               
that public opposition is the  biggest hurdle to overcome for LNG                                                               
plant development in the U.S.                                                                                                   
                                                                                                                                
1:45:10 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GATTO opined  that  Los Angeles  must  be a  huge                                                               
consumer of gas and asked where that area gets its gas.                                                                         
                                                                                                                                
MR. KEANE  explained that  most of  the gas  used in  Los Angeles                                                               
comes from the Southwestern United States.                                                                                      
                                                                                                                                
CO-CHAIR GATTO  asked if there  was a plan  to import LNG  to the                                                               
Los Angeles area.                                                                                                               
                                                                                                                                
MR. KEANE replied  that the last plan he saw  from the California                                                               
Energy  Commission does  include LNG  imports, although  he noted                                                               
"he is not  an expert" on California energy policy.   In response                                                               
to  a further  question,  he noted  he could  only  guess at  the                                                               
amount of power that could  be generated by windmills, but opined                                                               
"they cannot build" enough windmills  and solar energy sources to                                                               
supply  the  energy  needs  of   California.    He  characterized                                                               
California as  an "enormous consumer"  of energy, but  a "limited                                                               
producer" of energy.                                                                                                            
                                                                                                                                
CO-CHAIR GATTO  asked whether California  is planning  to produce                                                               
its own electricity.                                                                                                            
                                                                                                                                
MR.  KEANE  replied that  California  has  power plants  and  has                                                               
recently constructed some gas-fired plants.                                                                                     
                                                                                                                                
1:48:52 PM                                                                                                                    
                                                                                                                                
CO-CHAIR GATTO  asked whether BG  retires its old LNG  tankers as                                                               
new ones come on line.                                                                                                          
                                                                                                                                
MR. KEANE  replied that as its  new tankers are complete  in 2009                                                               
or 2010, it will retire some of its current long-term charters.                                                                 
                                                                                                                                
CO-CHAIR GATTO asked what happens to a retired ship.                                                                            
                                                                                                                                
MR. KEANE  replied that usually  there is a market  "for somebody                                                               
to  purchase  it."    In  response  to  a  further  question,  he                                                               
explained  that  there  are  no  U.S.  flagged  LNG  carriers  at                                                               
present.   There are some  older tankers  that were built  in the                                                               
U.S.  some  20  years  ago,   and  newer  ships  are  from  other                                                               
countries.  He  said he can obtain information  for the committee                                                               
on the life expectancy of tankers.                                                                                              
                                                                                                                                
1:50:45 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE WILSON inquired as to  how BG would be affected if                                                               
the  issue of  rolled-in  rates was  changed,  especially if  the                                                               
change occurred  during the  time BG  was engaged  in exploration                                                               
activities in Alaska.                                                                                                           
                                                                                                                                
MR.  KEANE replied  that clearly  such  a change  would add  more                                                               
uncertainty to  its business.   He noted that decisions  on where                                                               
to invest  are based on  an evaluation of all  factors, including                                                               
rates.  He indicated that it  would be helpful for an explorer to                                                               
have some certainty  regarding its transport rates.   He said "if                                                               
you get  tagged with the  incremental rates" it may  "simply make                                                               
it uneconomic."                                                                                                                 
                                                                                                                                
CO-CHAIR  GATTO  characterized  AGIA  as setting  forth  a  level                                                               
playing  field  for  all  participants,  and  asked  for  further                                                               
explanation of any BG concerns with AGIA.                                                                                       
                                                                                                                                
1:52:36 PM                                                                                                                    
                                                                                                                                
MR.  KEANE stated  that  BG absolutely  believes  that AGIA  does                                                               
provide a level  playing field for all involved.   He stated that                                                               
it appears  there will be  many opportunities for  comment before                                                               
the  appropriate  regulatory  agencies regarding  pipeline  rates                                                               
once the  licensee is selected.   He noted the need  to build the                                                               
pipeline in a prudent cost-efficient  manner so as to help assure                                                               
reasonable   rates  and   offered  his   belief  that   the  "big                                                               
independent pipeline companies" are "best placed" to do that.                                                                   
                                                                                                                                
1:54:34 PM                                                                                                                    
                                                                                                                                
CO-CHAIR GATTO offered  that a pipeline is also  the state's goal                                                               
and   that   the   provision  regarding   rolled-in   rates   [AS                                                               
43.90.130(7)] was  drafted to allow independent  explorers to add                                                               
to  the  pipeline's capacity.    He  asked  about the  effect  on                                                               
explorers if  the rates  had to shift  to incremental  rates once                                                               
the pipeline was filled to capacity.                                                                                            
                                                                                                                                
MR. KEANE responded to question  by stating that BG currently has                                                               
several leases in  the Foothills area of the North  Slope and has                                                               
a strong interest  in seeing development of a  pipeline that will                                                               
provide access  to capacity  on a fair  and reasonable  basis for                                                               
independent explorers.                                                                                                          
                                                                                                                                
1:56:14 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GUTTENBERG stated his  understanding that BG Group                                                               
is  not  looking to  build  the  pipeline, but  wants  reasonable                                                               
access  to the  pipeline.   He  asked for  clarification of  BG's                                                               
request  that "the  contract  must  provide reasonable  certainty                                                               
that  when we  discover  gas,  we will  have  access to  pipeline                                                               
capacity."  He  asked whether BG means  "reasonable certainty" as                                                               
to pipeline access or as to another area.                                                                                       
                                                                                                                                
MR.  KEANE opined  that prior  negotiations did  not result  in a                                                               
requirement  to expand  the pipeline;  although  there were  some                                                               
discussions  about requiring  a  certain quantity  of gas  before                                                               
evaluating pipeline expansion opportunities.   He offered that BG                                                               
"thinks  if it  is economic  to expand,  then it  is economic  to                                                               
expand."  He  said that "open access" gas pipelines  in the Lower                                                               
48  give everybody  with  gas access  to capacity.    He said  BG                                                               
"wants  to make  sure we  have the  same type  of access  for the                                                               
Alaska gasline."   Access to  pipeline capacity is  important for                                                               
explorers throughout the  life of the pipeline so  that they know                                                               
they will have somewhere to market their gas, he indicated.                                                                     
                                                                                                                                
CO-CHAIR GATTO asked about the  stock market capitalization of BG                                                               
and how it may compare to other pipeline companies.                                                                             
                                                                                                                                
MR. KEANE explained  that BG's "market cap"  is approximately $45                                                               
billion U.S.,  although the  company is  primarily traded  on the                                                               
London exchange.   He  explained that BG  "prefers to  have other                                                               
people" build the pipelines.                                                                                                    
                                                                                                                                
1:59:23 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON  asked whether  BG is comfortable  with the                                                               
terms  [AS  43.90.130(6)]  regarding   the  requirement  that  an                                                               
applicant  commit  to  expanding   the  project  in  commercially                                                               
reasonable terms  and in reasonable  engineering increments.   He                                                               
asked  whether  those  terms  give   enough  guidance  as  to  be                                                               
acceptable.                                                                                                                     
                                                                                                                                
MR. KEANE replied yes.                                                                                                          
                                                                                                                                
REPRESENTATIVE  SEATON asked  if BG  sees fiscal  certainty as  a                                                               
component of building the pipeline or of going to open season.                                                                  
                                                                                                                                
MR. KEANE  replied that  he sees  it as a  component of  going to                                                               
open season.                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GUTTENBERG  noted  that prior  negotiations  were                                                               
based  on a  producer-owned pipeline.    He asked  whether it  is                                                               
unique in the gas market to have a similar situation.                                                                           
                                                                                                                                
2:00:47 PM                                                                                                                    
                                                                                                                                
MR. KEANE responded  that he does not think  "it is unreasonable"                                                               
because in the  gas exploration industry there are  many areas in                                                               
the world  where there is  no expertise.   He said that  there is                                                               
expertise in this situation as  there are companies with pipeline                                                               
construction  experience.    He  offered his  belief  that  these                                                               
companies  can construct  a pipeline  on a  cost-effective basis.                                                               
He would prefer that the builder  of the pipeline be motivated to                                                               
increase revenues by increasing  "through-put," rather than being                                                               
built  by  a party  who  is  motivated  to increase  revenues  by                                                               
decreasing "through-put."   He indicated that it  gives him "more                                                               
comfort"  to  know  that  an  independent,  third-party  pipeline                                                               
company  whose business  is transporting  natural gas  to markets                                                               
will build the  pipeline.  He responded to a  question by stating                                                               
that  BG encourages  the  state to  enter  into discussions  with                                                               
independent pipeline  companies regarding  the construction  of a                                                               
pipeline.                                                                                                                       
                                                                                                                                
2:02:38 PM                                                                                                                    
                                                                                                                                
MR.  KEANE  summarized  that  BG   encourages  the  Alaska  State                                                               
Legislature  "to  get to  a  point  where  we actually  have  the                                                               
vehicle  in place  that  would  allow for  the  development of  a                                                               
pipeline."   He observed  that in  the past  few years  the "fast                                                               
track  method"  became the  slow  track.    He  said BG  is  very                                                               
encouraged  by this  process and  that it  will result  in a  gas                                                               
pipeline.                                                                                                                       
                                                                                                                                
[Co-Chair Gatto turned the gavel over to Co-Chair Johnson.]                                                                     
                                                                                                                                
2:04:03 PM                                                                                                                    
                                                                                                                                
CO-CHAIR JOHNSON asked  about the possibility that  BG Group will                                                               
be  in a  position  to  offer gas  at  the  initial open  season,                                                               
assuming a  three-year time frame  from issuance of a  license to                                                               
open season.                                                                                                                    
                                                                                                                                
2:04:15 PM                                                                                                                    
                                                                                                                                
MR. KEANE replied that would be  difficult.  He mentioned that BG                                                               
will be drilling exploratory gas wells  in the winter of 2008 and                                                               
depending on  the results,  more drilling may  occur in  2009 and                                                               
2010.    AGIA  requires  that the  successful  licensee  hold  an                                                               
initial  open season  within three  years after  issuance of  the                                                               
license, which he opined  is a good idea as one  does not want to                                                               
delay too long.   He said that companies that  do not participate                                                               
in  the initial  open season  are  not eligible  for the  10-year                                                               
fixed  tax rate  in AGIA  and suggested  that the  state consider                                                               
amending  this provision.    He offered  that  explorers who  are                                                               
diligently  exploring  for  more  gas  should  not  be  penalized                                                               
because they are  not able to "make that specific  window" of the                                                               
initial open season.                                                                                                            
                                                                                                                                
2:06:13 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GUTTENBERG asked where BG would ship its gas.                                                                    
                                                                                                                                
MR. KEANE  clarified that  today's discussion  was not  about "an                                                               
LNG  project."    He  noted  that  currently  there  are  no  LNG                                                               
terminals on the  West Coast of the U.S., therefore  it is likely                                                               
that the  market would  be in  the Far East  - Japan,  Korea, and                                                               
Taiwan.   He  said  that  currently "you  cannot  go through  the                                                               
Panama Canal," a restriction he believes is based on ship size.                                                                 
                                                                                                                                
REPRESENTATIVE WILSON asked if there  are there other independent                                                               
pipeline  companies  besides  Mid-America and  Trans-Canada  that                                                               
might be interested in the Alaska project.                                                                                      
                                                                                                                                
MR.  KEANE  said  he  cannot  speak as  to  what  other  pipeline                                                               
companies may be interested in this project.                                                                                    
                                                                                                                                
The committee took an at-ease from 2:09:32 to 2:16:31.                                                                          
                                                                                                                                
2:17:04 PM                                                                                                                    
                                                                                                                                
CO-CHAIR JOHNSON asked  about the process the Alaska  Oil and Gas                                                               
Conservation Commission  (AOGCC) uses  to evaluate the  volume of                                                               
gas that can be removed from a field.                                                                                           
                                                                                                                                
2:17:08 PM                                                                                                                    
                                                                                                                                
CATHERINE   FOERSTER,   Commissioner,    Alaska   Oil   and   Gas                                                               
Conservation  Commission  (AOGCC),  explained that  typically  an                                                               
operator comes to  AOGCC and requests a  "gas allowable off-take"                                                               
for an oil field.  She  indicated that this procedure would apply                                                               
to a  field in Prudhoe  Bay.  Before this  can be done  for Point                                                               
Thomson, a determination must be made  as to whether it should be                                                               
operated as  an oil  field or  a gas field.   She  indicated that                                                               
Point Thomson  does not meet  the criteria  of a gas  field under                                                               
Alaska  law  and  regulations, rather  it  meets  the  "producing                                                               
parameters" of an  oil field.  Therefore, the  operator will have                                                               
to request  permission to operate  Point Thomson as a  gas field.                                                               
She  reminded the  committee  that  the mission  of  AOGCC is  to                                                               
prevent waste  of hydrocarbons.   She  explained that  removal of                                                               
gas from a  field prior to recovery of all  the liquids "does put                                                               
those liquids at  risk of being lost."  She  explained that AOGCC                                                               
has  the  authority to  call  its  own  hearing to  determine  an                                                               
allowable gas  off-take if the  operator does not request  one so                                                               
that  AOGCC  can be  assured  that  there  will  be no  waste  of                                                               
hydrocarbons.                                                                                                                   
                                                                                                                                
2:19:30 PM                                                                                                                    
                                                                                                                                
MS. FOERSTER explained that AOGCC  considers three variables when                                                               
determining what  an operator  will be allowed  to do  in Prudhoe                                                               
Bay:   timing  and  rate of  off-take, and  details  of plans  to                                                               
remove as  much oil  as possible  prior to  gas production.   The                                                               
operator  must  demonstrate  that  greater  ultimate  hydrocarbon                                                               
recovery  will  result from  their  proposal.   The  AOGCC  staff                                                               
evaluates  the  technical  data  submitted  by  the  operator  to                                                               
evaluate the accuracy of the operator's predictions.                                                                            
                                                                                                                                
CO-CHAIR  JOHNSON noted  that currently  AOGCC  authorizes a  2.7                                                               
billion cubic  feet (Bcf) off-take  of gas at Prudhoe  Bay, which                                                               
is not enough "to really do  a pipeline."  He asked whether AOGCC                                                               
uses  its  own  data  or   operator-provided  data  to  make  its                                                               
determinations.                                                                                                                 
                                                                                                                                
2:21:00 PM                                                                                                                    
                                                                                                                                
MS. FOERSTER explained that two  years ago AOGCC called a meeting                                                               
to consider  the amount of  gas off-take authorized  from Prudhoe                                                               
Bay.  The conclusion of that  meeting was that "the 2.7 [Bcf] was                                                               
probably not  the right  number" and  needed to  be re-evaluated.                                                               
As a result, AOGCC entered  into an agreement with BP Exploration                                                               
(Alaska) Inc. (BP), and its  partners to do a collaborative study                                                               
that  combined the  technical expertise  of the  AOGCC staff  and                                                               
BP's more  advanced and  complete data.   The AOGCC  started that                                                               
study in January  2006 and completed it last year,  she said.  In                                                               
February  2007,  AOGCC  presented  a  technical  report  that  is                                                               
available  on  its  web  site.    She  said  that  the  technical                                                               
evaluation  is  complete.   The  next  step  is  for BP  and  its                                                               
partners  to  request that  AOGCC  amend  the allowable  off-take                                                               
amount, she  explained.  At  that point,  there will be  a public                                                               
hearing  and   more  information   will  become   available,  she                                                               
indicated.   She  concluded  "we  are pretty  far  along" on  the                                                               
Prudhoe Bay analysis,  and opined that AOGCC has  engaged in this                                                               
process so  as to  be ready for  any hearing  regarding allowable                                                               
gas off-take at Prudhoe Bay.                                                                                                    
                                                                                                                                
MS. FOERSTER said  that AOGCC has "tried to do  the same thing at                                                               
Point Thomson," but has faced more  obstacles for this area.  She                                                               
reiterated  that AOGCC  "is adequately  prepared  to address  the                                                               
Prudhoe Bay gas  off-take allowable," assuming it  is not delayed                                                               
by  years, in  which case  AOGCC will  have to  update its  data.                                                               
However,  she said  she is  "very uncomfortable  that we  are not                                                               
where we need to be on Point Thomson."                                                                                          
                                                                                                                                
2:24:21 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  JOHNSON asked  for further  definition of  a reasonable                                                               
amount of  time in which  to hold a  hearing on Prudhoe  Bay off-                                                               
take issues.                                                                                                                    
                                                                                                                                
MS. FOERSTER  responded that  if the  hearing is  held a  year to                                                               
eighteen  months   from  now,  AOGCC  would   likely  still  have                                                               
sufficient information  to feel  comfortable with  the data.   If                                                               
the  hearing is  five  years from  now, "it's  not  fine" due  to                                                               
changes in data based on field operations.                                                                                      
                                                                                                                                
2:25:10 PM                                                                                                                    
                                                                                                                                
CO-CHAIR JOHNSON asked  how long it may take to  issue an opinion                                                               
on a new field, such as Point Thomson.                                                                                          
                                                                                                                                
MS. FOERSTER said that AOGCC  has an agreement with operators for                                                               
a study at Point Thomson similar  to the one done at Prudhoe Bay.                                                               
The  study started  around  the time  the  Department of  Natural                                                               
Resources (DNR)  found the  operators in  default of  their lease                                                               
terms, so  there was only one  meeting that gave AOGCC  "a little                                                               
tiny  bit  of  the  data"  needed.    She  said  that  ExxonMobil                                                               
Corporation (Exxon) has indicated it  will not proceed with AOGCC                                                               
until legal issues regarding the  leases are resolved.  Had there                                                               
not  been obstacles,  she opined  that  it might  have taken  six                                                               
months for AOGCC to complete  its technical analysis and be ready                                                               
to consider  an operator  proposal.  She  said that  AOGCC cannot                                                               
make a  ruling without sufficient  data, and without it,  will be                                                               
"completely at  the mercy" of  the operator's decision as  to how                                                               
much data  it wants  to provide.   She said  that in  a reservoir                                                               
like Point Thomson if the gas  is not "cycled" [re-injected] on a                                                               
continuing  basis,  the result  is  a  waste of  hydrocarbons  in                                                               
violation of  the mandates of  AOGCC's mission.  She  opined that                                                               
the volume  of liquid  hydrocarbons at risk  in Point  Thomson is                                                               
comparable to "an  Alpine field."  She emphasized  that there are                                                               
"hundreds of millions" of barrels  of liquid hydrocarbons at risk                                                               
"if we  don't do  it right  at Point Thomson."   She  expanded on                                                               
this point  by opining it would  not be appropriate to  allow the                                                               
Point Thomson operator to "do whatever"  it wants so as to "get a                                                               
gas pipeline going"  if that approach puts  "hundreds of millions                                                               
of barrels" of liquid hydrocarbons at risk.                                                                                     
                                                                                                                                
2:29:03 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  JOHNSON asked  about the  timelines  in AGIA  - If  the                                                               
licensee  has 36  months from  the  date of  license issuance  to                                                               
prepare  for open  season, is  it reasonable  to expect  that the                                                               
producers will have  enough information to receive  a ruling from                                                               
AOGCC  regarding the  amount  of gas  available  for off-take  at                                                               
Prudhoe Bay in time for open season?                                                                                            
                                                                                                                                
MS. FOERSTER  replied that a 36  month timeline is not  a problem                                                               
for Prudhoe Bay due to the  amount of work already done.  However                                                               
for Point Thomson, AOGCC needs  data and information to start the                                                               
evaluation process.                                                                                                             
                                                                                                                                
2:29:43 PM                                                                                                                    
                                                                                                                                
CO-CHAIR JOHNSON  asked for  further specificity  regarding Point                                                               
Thomson - could a ruling  regarding allowable off-take be made in                                                               
36 months.                                                                                                                      
                                                                                                                                
MS. FOERSTER  replied "you'll  have to ask  Exxon" whether  it is                                                               
going  to provide  data.   She said  that without  any data,  the                                                               
answer is no  [that AOGCC could make a decision  in time for open                                                               
season.]                                                                                                                        
                                                                                                                                
CO-CHAIR JOHNSON asked  if 36 months is a  reasonable time period                                                               
if data is available.                                                                                                           
                                                                                                                                
MS. FOERSTER replied  that 36 months for a study  is "pretty darn                                                               
comfortable," and  that a  study could be  completed in  a year's                                                               
time if necessary.                                                                                                              
                                                                                                                                
2:30:31 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GUTTENBERG asked  what type  of data  is required                                                               
and whether it is confidential under the current lease terms.                                                                   
                                                                                                                                
MS. FOERSTER responded  that this data will  be confidential once                                                               
provided, but  becomes public  during the  hearing process.   The                                                               
data necessary  is "reservoir description" data  which shows that                                                               
the  planned  development  will not  waste  hydrocarbons.    This                                                               
includes:    reservoir  description,  geophysical  data,  seismic                                                               
data, reservoir modeling, and other information.                                                                                
                                                                                                                                
2:31:58 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GUTTENBERG  asked  if  individual  fields  within                                                               
Prudhoe Bay are similar in nature.                                                                                              
                                                                                                                                
MS.  FOERSTER  replied  that question  is  difficult  to  answer.                                                               
However,  she pointed  out that  Point  Thomson is  significantly                                                               
different from Prudhoe  Bay.  She explained  that a determination                                                               
to take  gas from one  field has "nothing  to do with  whether or                                                               
not it is okay to take gas out of another field."                                                                               
                                                                                                                                
REPRESENTATIVE  GUTTENBERG summed  up Point  Thomson as  a "whole                                                               
other project."                                                                                                                 
                                                                                                                                
MS.  FOERSTER agreed  and stated  that Point  Thomson requires  a                                                               
separate analysis.  She said  that the questions to be considered                                                               
for gas off-take  for Prudhoe Bay are : when,  how much, and what                                                               
the operator plans  to do in the meantime to  recover as much oil                                                               
as possible.   However, the  issue at  Point Thomson is  "can you                                                               
get better ultimate  recovery by cycling or by not  cycling?"  If                                                               
the operator  proposes not to  cycle, it  must explain how  it is                                                               
going to remove liquid hydrocarbons, she explained.                                                                             
                                                                                                                                
2:34:14 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GUTTENBERG asked what  happens if Point Thomson is                                                               
declared a gas field instead of an oil field.                                                                                   
                                                                                                                                
MS. FOERSTER  replied that  if Point Thomson  is designated  as a                                                               
gas field, the operator "would not  have to get an allowable" and                                                               
could produce  as much gas  as it wanted.   If it is  declared an                                                               
oil  field, the  operator  must demonstrate  that its  operations                                                               
will not put the liquid hydrocarbons at risk.                                                                                   
                                                                                                                                
2:34:58 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON referred to  the Prudhoe Gas Sale Reservoir                                                               
Study  by the  AOGCC  dated  February 28,  2007.    He asked  for                                                               
further  information  about some  language  in  that report  that                                                               
indicates  there is  not sufficient  information to  allow a  gas                                                               
off-take amount over  2.7 Bcf.  He expressed  some uncertainty as                                                               
to whether AOGCC  would allow a higher gas off-take  amount if BP                                                               
requested it in light of the language in the report.                                                                            
                                                                                                                                
2:36:14 PM                                                                                                                    
                                                                                                                                
MS. FOERSTER offered  her belief that the  report recognized that                                                               
there  is still  a lot  of uncertainty  regarding an  appropriate                                                               
off-take amount.  However, to "give  them an off take", the AOGCC                                                               
must know the operator's plans with  regard to oil recovery.  She                                                               
said that  the determination  involves many  variables.   The key                                                               
variables to consider are when  the gas off-take will start, what                                                               
the operator will be doing until  that time, and how much gas can                                                               
be safely removed without compromising  recovery of liquids.  The                                                               
determination  of the  off-take  amount will  vary  based on  the                                                               
operator's plans, she explained.   For example, an off-take start                                                               
date  for tomorrow  would likely  not be  allowed, while  a start                                                               
date  twenty  years from  now  would  allow  an operator  to  "do                                                               
whatever" it wants.                                                                                                             
                                                                                                                                
REPRESENTATIVE SEATON  asked if an  operator would be  allowed to                                                               
off-take 2  Bcf a  day of  gas for an  earlier start  [at Prudhoe                                                               
Bay.]                                                                                                                           
                                                                                                                                
2:37:37 PM                                                                                                                    
                                                                                                                                
MS. FOERSTER answered  that if the operator was  planning to sell                                                               
the gas  tomorrow, the AOGCC  would "call a hearing"  to consider                                                               
whether the  "rate should be zero  or whether 2 [Bcf]  was okay."                                                               
She said the  only reason AOGCC has "not taken  the gas allowable                                                               
off-take rate  away is because  there is nothing there  are going                                                               
to be able to do without it."   She said she is "not sure 2 [Bcf]                                                               
would be  okay today", and  reminded the committee that  the off-                                                               
take amount was  determined 30 years ago, prior  to the existence                                                               
of any production data on Prudhoe  Bay.  She said that if someone                                                               
wanted to sell  gas from Prudhoe Bay today, she  "would be really                                                               
uncomfortable  with  it,"  as  "every   puff  of  gas"  currently                                                               
produced  is  being  re-injected  into  the  field  to  keep  the                                                               
pressure up or for enhanced oil  recovery (EOR) in Prudhoe Bay or                                                               
other fields.                                                                                                                   
                                                                                                                                
2:39:03 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SEATON  clarified   his  understanding  that  the                                                               
amount of gas  available for the pipeline will  not be determined                                                               
until the  lease holders put  in a request  with AOGCC for  a new                                                               
gas off-take amount.                                                                                                            
                                                                                                                                
2:40:07 PM                                                                                                                    
                                                                                                                                
MS. FOERSTER agreed  that until there is an  application for "gas                                                               
take  allowable"  everything is  on  hold.    She said  that  for                                                               
Prudhoe Bay,  AOGCC is  ready to review  an application  in which                                                               
the  operator sets  forth their  depletion plan  and start  time.                                                               
She offered that AOGCC will work  with the operator to develop an                                                               
allowable  off-take   that  will  insure  the   greater  ultimate                                                               
recovery  of Prudhoe  Bay hydrocarbons.   She  opined that  Exxon                                                               
could continue to work with  AOGCC on Point Thomson regardless of                                                               
the legal  issues regarding  the leases.   She predicted  that if                                                               
Exxon cooperated,  AOGCC could  be ready for  a hearing  on Point                                                               
Thomson in a year.  She said  that there is plenty of time before                                                               
open season to resolve these issues.                                                                                            
                                                                                                                                
2:42:11 PM                                                                                                                    
                                                                                                                                
MS.   FOERSTER  suggested   that  these   procedures  can   cause                                                               
frustration and  that AOGCC  can appear to  be a  stumbling block                                                               
for development.  However, she  reminded the committee that AOGCC                                                               
is  charged  with working  to  insure  that state  constitutional                                                               
directives  regarding resource  management  are met  and that  as                                                               
much of Alaska's oil and  gas reserves as possible are recovered.                                                               
She characterized the oil as the  "bird in hand" while the gas is                                                               
"the bird in  the bush," and the challenge is  to protect the oil                                                               
resources while working to develop gas resources.                                                                               
                                                                                                                                
2:43:50 PM                                                                                                                    
                                                                                                                                
CO-CHAIR JOHNSON asked  whether there is any  more information on                                                               
an appropriate gas  off-take amount for Prudhoe Bay  based on the                                                               
now 30 years of production history for that field.                                                                              
                                                                                                                                
MS. FOERSTER  explained that she  cannot predict  the appropriate                                                               
gas off-take amount absent information  regarding how much oil is                                                               
left  in the  ground and  when gas  production will  start.   She                                                               
emphasized that "there  is not a number," and that  there will be                                                               
more  information available  when there  is a  public hearing  on                                                               
this issue.                                                                                                                     
                                                                                                                                
[HB 177 was held over.]                                                                                                         
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being no further business before the committee, the House                                                                 
Resources Standing Committee meeting was adjourned at 2:45:43                                                                 
PM.                                                                                                                           

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