Legislature(2013 - 2014)BARNES 124

04/09/2014 01:00 PM RESOURCES


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01:05:49 PM Start
01:06:06 PM SB138
03:04:01 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+= SB 138 GAS PIPELINE; AGDC; OIL & GAS PROD. TAX TELECONFERENCED
Moved HCS CSSB 138(RES) Out of Committee
-- Testimony <Invitation Only> --
+ Bills Previously Heard/Scheduled TELECONFERENCED
                    ALASKA STATE LEGISLATURE                                                                                  
               HOUSE RESOURCES STANDING COMMITTEE                                                                             
                         April 9, 2014                                                                                          
                           1:05 p.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Eric Feige, Co-Chair                                                                                             
Representative Dan Saddler, Co-Chair                                                                                            
Representative Peggy Wilson, Vice Chair                                                                                         
Representative Mike Hawker                                                                                                      
Representative Craig Johnson                                                                                                    
Representative Kurt Olson                                                                                                       
Representative Paul Seaton                                                                                                      
Representative Scott Kawasaki                                                                                                   
Representative Geran Tarr                                                                                                       
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
All members present                                                                                                             
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
COMMITTEE SUBSTITUTE FOR SENATE BILL NO. 138(FIN) AM                                                                            
"An  Act relating  to the  purposes,  powers, and  duties of  the                                                               
Alaska Gasline  Development Corporation; relating to  an in-state                                                               
natural gas  pipeline, an Alaska  liquefied natural  gas project,                                                               
and  associated   funds;  requiring  state  agencies   and  other                                                               
entities to expedite  reviews and actions related  to natural gas                                                               
pipelines and  projects; relating  to the authorities  and duties                                                               
of  the commissioner  of natural  resources relating  to a  North                                                               
Slope natural gas  project, oil and gas and gas  only leases, and                                                               
royalty gas  and other  gas received by  the state  including gas                                                               
received as  payment for the  production tax on gas;  relating to                                                               
the tax on oil and gas  production, on oil production, and on gas                                                               
production;  relating  to  the  duties  of  the  commissioner  of                                                               
revenue relating  to a  North Slope natural  gas project  and gas                                                               
received   as  payment   for   tax;   relating  to   confidential                                                               
information and  public record status of  information provided to                                                               
or in the custody of the  Department of Natural Resources and the                                                               
Department of  Revenue; relating to apportionment  factors of the                                                               
Alaska  Net Income  Tax  Act; amending  the  definition of  gross                                                               
value at  the 'point of production'  for gas for purposes  of the                                                               
oil  and  gas production  tax;  clarifying  that the  exploration                                                               
incentive credit, the  oil or gas producer  education credit, and                                                               
the film production  tax credit may not be taken  against the gas                                                               
production tax paid  in gas; relating to the oil  or gas producer                                                               
education  credit;  requesting  the   governor  to  establish  an                                                               
interim  advisory  board  to advise  the  governor  on  municipal                                                               
involvement in  a North  Slope natural  gas project;  relating to                                                               
the  development of  a plan  by the  Alaska Energy  Authority for                                                               
developing infrastructure  to deliver affordable energy  to areas                                                               
of the  state that will not  have direct access to  a North Slope                                                               
natural gas  pipeline and  a recommendation  of a  funding source                                                               
for  energy infrastructure  development; establishing  the Alaska                                                               
affordable energy fund; requiring  the commissioner of revenue to                                                               
develop  a  plan  and  suggest  legislation  for  municipalities,                                                               
regional  corporations, and  residents  of the  state to  acquire                                                               
ownership  interests  in  a  North  Slope  natural  gas  pipeline                                                               
project;  making  conforming  amendments; and  providing  for  an                                                               
effective date."                                                                                                                
                                                                                                                                
     - HEARD & HELD                                                                                                             
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
BILL: SB 138                                                                                                                  
SHORT TITLE: GAS PIPELINE; AGDC; OIL & GAS PROD. TAX                                                                            
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR                                                                                    
                                                                                                                                
01/24/14       (S)       READ THE FIRST TIME - REFERRALS                                                                        
01/24/14       (S)       RES, FIN                                                                                               
02/07/14       (S)       RES AT 3:30 PM BUTROVICH 205                                                                           
02/07/14       (S)       Heard & Held                                                                                           
02/07/14       (S)       MINUTE(RES)                                                                                            
02/10/14       (S)       RES AT 3:30 PM BUTROVICH 205                                                                           
02/10/14       (S)       Heard & Held                                                                                           
02/10/14       (S)       MINUTE(RES)                                                                                            
02/12/14       (S)       RES WAIVED PUBLIC HEARING NOTICE, RULE                                                                 
                         23                                                                                                     
02/12/14       (S)       RES AT 3:30 PM BUTROVICH 205                                                                           
02/12/14       (S)       Heard & Held                                                                                           
02/12/14       (S)       MINUTE(RES)                                                                                            
02/13/14       (S)       RES AT 8:00 AM BUTROVICH 205                                                                           
02/13/14       (S)       Heard & Held                                                                                           
02/13/14       (S)       MINUTE(RES)                                                                                            
02/14/14       (S)       RES AT 3:30 PM BUTROVICH 205                                                                           
02/14/14       (S)       Heard & Held                                                                                           
02/14/14       (S)       MINUTE(RES)                                                                                            
02/19/14       (S)       RES AT 3:30 PM BUTROVICH 205                                                                           
02/19/14       (S)       Heard & Held                                                                                           
02/19/14       (S)       MINUTE(RES)                                                                                            
02/20/14       (S)       RES AT 8:00 AM BUTROVICH 205                                                                           
02/20/14       (S)       Heard & Held                                                                                           
02/20/14       (S)       MINUTE(RES)                                                                                            
02/21/14       (S)       RES AT 8:00 AM BUTROVICH 205                                                                           
02/21/14       (S)       Heard & Held                                                                                           
02/21/14       (S)       MINUTE(RES)                                                                                            
02/21/14       (S)       RES AT 3:30 PM BUTROVICH 205                                                                           
02/21/14       (S)       Heard & Held                                                                                           
02/21/14       (S)       MINUTE(RES)                                                                                            
02/24/14       (S)       RES RPT CS  2DP 4NR 1AM   NEW TITLE                                                                    
02/24/14       (S)       DP: GIESSEL, MCGUIRE                                                                                   
02/24/14       (S)       NR:     FRENCH,    MICCICHE,     BISHOP,                                                               
                         FAIRCLOUGH                                                                                             
02/24/14       (S)       AM: DYSON                                                                                              
02/24/14       (S)       RES AT 8:00 AM BUTROVICH 205                                                                           
02/24/14       (S)       -- MEETING CANCELED --                                                                                 
02/24/14       (S)       RES AT 3:30 PM BUTROVICH 205                                                                           
02/24/14       (S)       Moved CSSB 138(RES) Out of Committee                                                                   
02/24/14       (S)       MINUTE(RES)                                                                                            
02/25/14       (S)       FIN AT 9:00 AM SENATE FINANCE 532                                                                      
02/25/14       (S)       Heard & Held                                                                                           
02/25/14       (S)       MINUTE(FIN)                                                                                            
02/25/14       (S)       FIN AT 5:00 PM SENATE FINANCE 532                                                                      
02/25/14       (S)       Heard & Held                                                                                           
02/25/14       (S)       MINUTE(FIN)                                                                                            
02/26/14       (S)       FIN AT 9:00 AM SENATE FINANCE 532                                                                      
02/26/14       (S)       Heard & Held                                                                                           
02/26/14       (S)       MINUTE(FIN)                                                                                            
02/27/14       (S)       FIN AT 9:00 AM SENATE FINANCE 532                                                                      
02/27/14       (S)       Heard & Held                                                                                           
02/27/14       (S)       MINUTE(FIN)                                                                                            
02/28/14       (S)       FIN AT 9:00 AM SENATE FINANCE 532                                                                      
02/28/14       (S)       Heard & Held                                                                                           
02/28/14       (S)       MINUTE(FIN)                                                                                            
03/03/14       (S)       FIN AT 9:00 AM SENATE FINANCE 532                                                                      
03/03/14       (S)       Heard & Held                                                                                           
03/03/14       (S)       MINUTE(FIN)                                                                                            
03/04/14       (S)       FIN AT 9:00 AM SENATE FINANCE 532                                                                      
03/04/14       (S)       Heard & Held                                                                                           
03/04/14       (S)       MINUTE(FIN)                                                                                            
03/05/14       (S)       FIN AT 9:00 AM SENATE FINANCE 532                                                                      
03/05/14       (S)       Heard & Held                                                                                           
03/05/14       (S)       MINUTE(FIN)                                                                                            
03/05/14       (S)       FIN AT 5:00 PM SENATE FINANCE 532                                                                      
03/05/14       (S)       Scheduled But Not Heard                                                                                
03/06/14       (S)       FIN AT 9:00 AM SENATE FINANCE 532                                                                      
03/06/14       (S)       Heard & Held                                                                                           
03/06/14       (S)       MINUTE(FIN)                                                                                            
03/07/14       (S)       FIN AT 9:00 AM SENATE FINANCE 532                                                                      
03/07/14       (S)       -- MEETING CANCELED --                                                                                 
03/10/14       (S)       FIN AT 9:00 AM SENATE FINANCE 532                                                                      
03/10/14       (S)       Heard & Held                                                                                           
03/10/14       (S)       MINUTE(FIN)                                                                                            
03/10/14       (S)       FIN AT 5:00 PM SENATE FINANCE 532                                                                      
03/10/14       (S)       Heard & Held                                                                                           
03/10/14       (S)       MINUTE(FIN)                                                                                            
03/11/14       (S)       FIN AT 5:00 PM SENATE FINANCE 532                                                                      
03/11/14       (S)       Heard & Held                                                                                           
03/11/14       (S)       MINUTE(FIN)                                                                                            
03/12/14       (H)       RES AT 1:00 PM BARNES 124                                                                              
03/12/14       (H)       -- MEETING CANCELED --                                                                                 
03/14/14       (S)       FIN RPT CS  6DP 1AM  NEW TITLE                                                                         
03/14/14       (S)       LETTER OF INTENT WITH FINANCE REPORT                                                                   
03/14/14       (S)       DP: KELLY, MEYER, DUNLEAVY, FAIRCLOUGH,                                                                
                        BISHOP, HOFFMAN                                                                                         
03/14/14       (S)       AM: OLSON                                                                                              
03/14/14       (S)       FIN AT 9:00 AM SENATE FINANCE 532                                                                      
03/14/14       (S)       Moved CSSB 138(FIN) Out of Committee                                                                   
03/14/14       (S)       MINUTE(FIN)                                                                                            
03/14/14       (H)       RES AT 1:00 PM BARNES 124                                                                              
03/14/14       (H)       <Pending Referral>                                                                                     
03/17/14       (H)       RES AT 1:00 PM BARNES 124                                                                              
03/17/14       (H)       <Pending Referral>                                                                                     
03/18/14       (S)       TRANSMITTED TO (H)                                                                                     
03/18/14       (S)       VERSION: CSSB 138(FIN) AM                                                                              
03/19/14       (H)       READ THE FIRST TIME - REFERRALS                                                                        
03/19/14       (H)       RES, L&C, FIN                                                                                          
03/19/14       (H)       RES AT 1:00 PM BARNES 124                                                                              
03/19/14       (H)       Heard & Held                                                                                           
03/19/14       (H)       MINUTE(RES)                                                                                            
03/21/14       (H)       RES AT 1:00 PM BARNES 124                                                                              
03/21/14       (H)       Heard & Held                                                                                           
03/21/14       (H)       MINUTE(RES)                                                                                            
03/24/14       (H)       RES AT 1:00 PM BARNES 124                                                                              
03/24/14       (H)       Heard & Held                                                                                           
03/24/14       (H)       MINUTE(RES)                                                                                            
03/25/14       (H)       RES AT 4:30 PM BARNES 124                                                                              
03/25/14       (H)       Heard & Held                                                                                           
03/25/14       (H)       MINUTE(RES)                                                                                            
03/26/14       (H)       RES AT 1:00 PM BARNES 124                                                                              
03/26/14       (H)       Heard & Held                                                                                           
03/26/14       (H)       MINUTE(RES)                                                                                            
03/27/14       (H)       RES AT 4:30 PM BARNES 124                                                                              
03/27/14       (H)       Heard & Held                                                                                           
03/27/14       (H)       MINUTE(RES)                                                                                            
03/28/14       (H)       RES AT 1:00 PM BARNES 124                                                                              
03/28/14       (H)       Heard & Held                                                                                           
03/28/14       (H)       MINUTE(RES)                                                                                            
03/31/14       (H)       RES AT 1:00 PM BARNES 124                                                                              
03/31/14       (H)       Heard & Held                                                                                           
03/31/14       (H)       MINUTE(RES)                                                                                            
04/01/14       (H)       RES AT 4:30 PM BARNES 124                                                                              
04/01/14       (H)       Heard & Held                                                                                           
04/01/14       (H)       MINUTE(RES)                                                                                            
04/02/14       (H)       RES AT 1:00 PM BARNES 124                                                                              
04/02/14       (H)       Heard & Held                                                                                           
04/02/14       (H)       MINUTE(RES)                                                                                            
04/03/14       (H)       RES AT 4:30 PM BARNES 124                                                                              
04/03/14       (H)       Heard & Held                                                                                           
04/03/14       (H)       MINUTE(RES)                                                                                            
04/04/14       (H)       RES AT 1:00 PM BARNES 124                                                                              
04/04/14       (H)       Heard & Held                                                                                           
04/04/14       (H)       MINUTE(RES)                                                                                            
04/05/14       (H)       RES AT 10:00 AM BARNES 124                                                                             
04/05/14       (H)       Heard & Held                                                                                           
04/05/14       (H)       MINUTE(RES)                                                                                            
04/06/14       (H)       RES AT 1:00 PM BARNES 124                                                                              
04/06/14       (H)       Heard & Held                                                                                           
04/06/14       (H)       MINUTE(RES)                                                                                            
04/07/14       (H)       RES AT 1:00 PM BARNES 124                                                                              
04/07/14       (H)       Heard & Held                                                                                           
04/07/14       (H)       MINUTE(RES)                                                                                            
04/08/14       (H)       RES AT 8:00 AM BARNES 124                                                                              
04/08/14       (H)       Heard & Held                                                                                           
04/08/14       (H)       MINUTE(RES)                                                                                            
04/08/14       (H)       FIN AT 8:30 AM HOUSE FINANCE 519                                                                       
04/08/14       (H)       -- MEETING CANCELED --                                                                                 
04/08/14       (H)       RES AT 4:30 PM BARNES 124                                                                              
04/08/14       (H)       Heard & Held                                                                                           
04/08/14       (H)       MINUTE(RES)                                                                                            
04/08/14       (H)       FIN AT 6:00 PM HOUSE FINANCE 519                                                                       
04/08/14       (H)       -- MEETING CANCELED --                                                                                 
04/09/14       (H)       RES AT 8:00 AM BARNES 124                                                                              
04/09/14       (H)       RES AT 1:00 PM BARNES 124                                                                              
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
JOE BALASH, Commissioner                                                                                                        
Department of Natural Resources (DNR)                                                                                           
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Answered questions during the hearing on                                                                 
CSSB 138(FIN) am as Commissioner-appointee to the Department of                                                                 
Natural Resources.                                                                                                              
                                                                                                                                
MICHAEL PAWLOWSKI, Deputy Commissioner                                                                                          
Office of the Commissioner                                                                                                      
Department of Revenue                                                                                                           
Anchorage, Alaska                                                                                                               
POSITION  STATEMENT:   Answered questions  during the  hearing on                                                             
CSSB 138(FIN) am.                                                                                                               
                                                                                                                                
DON BULLOCK, Attorney                                                                                                           
Legislative Legal Counsel                                                                                                       
Legislative Legal and Research Services                                                                                         
Legislative Affairs Agency                                                                                                      
Juneau, Alaska                                                                                                                  
POSITION  STATEMENT:   Answered questions  during the  hearing on                                                             
CSSB 138(FIN) am.                                                                                                               
                                                                                                                                
MILES BAKER, Director                                                                                                           
Government Relations and External Affairs                                                                                       
Alaska Gasline Development Corporation (AGDC)                                                                                   
Department of Commerce, Community & Economic Development                                                                        
Anchorage, Alaska                                                                                                               
POSITION  STATEMENT:   Answered questions  during the  hearing on                                                             
CSSB 138(FIN) am.                                                                                                               
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
1:05:49 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  ERIC   FEIGE  called   the  House   Resources  Standing                                                             
Committee meeting to order at  1:05 p.m.  Representatives Seaton,                                                               
Tarr, Kawasaki,  Hawker, Johnson,  P. Wilson, Saddler,  and Feige                                                               
were present at the call  to order.  Representative Olson arrived                                                               
as the meeting was in progress.                                                                                                 
                                                                                                                                
         SB 138-GAS PIPELINE; AGDC; OIL & GAS PROD. TAX                                                                     
                                                                                                                                
1:06:06 PM                                                                                                                    
                                                                                                                                
CO-CHAIR FEIGE  announced that the  only order of business  is CS                                                               
FOR  SENATE  BILL  NO.  138(FIN)  am, "An  Act  relating  to  the                                                               
purposes, powers,  and duties of  the Alaska  Gasline Development                                                               
Corporation;  relating to  an in-state  natural gas  pipeline, an                                                               
Alaska  liquefied  natural  gas project,  and  associated  funds;                                                               
requiring state  agencies and other entities  to expedite reviews                                                               
and  actions  related  to natural  gas  pipelines  and  projects;                                                               
relating to  the authorities  and duties  of the  commissioner of                                                               
natural resources relating to a  North Slope natural gas project,                                                               
oil and  gas and gas only  leases, and royalty gas  and other gas                                                               
received by the  state including gas received as  payment for the                                                               
production  tax on  gas;  relating  to the  tax  on  oil and  gas                                                               
production, on  oil production, and  on gas  production; relating                                                               
to the duties of the commissioner  of revenue relating to a North                                                               
Slope natural  gas project and  gas received as payment  for tax;                                                               
relating to confidential information  and public record status of                                                               
information provided  to or in  the custody of the  Department of                                                               
Natural  Resources and  the Department  of  Revenue; relating  to                                                               
apportionment factors of the Alaska  Net Income Tax Act; amending                                                               
the definition  of gross value  at the 'point of  production' for                                                               
gas for  purposes of the  oil and gas production  tax; clarifying                                                               
that the  exploration incentive credit,  the oil or  gas producer                                                               
education credit, and  the film production tax credit  may not be                                                               
taken against  the gas  production tax paid  in gas;  relating to                                                               
the  oil  or  gas  producer   education  credit;  requesting  the                                                               
governor to  establish an  interim advisory  board to  advise the                                                               
governor on  municipal involvement in  a North Slope  natural gas                                                               
project;  relating to  the development  of a  plan by  the Alaska                                                               
Energy  Authority   for  developing  infrastructure   to  deliver                                                               
affordable  energy to  areas  of  the state  that  will not  have                                                               
direct  access  to a  North  Slope  natural  gas pipeline  and  a                                                               
recommendation  of a  funding  source  for energy  infrastructure                                                               
development;  establishing  the  Alaska affordable  energy  fund;                                                               
requiring  the commissioner  of  revenue to  develop  a plan  and                                                               
suggest  legislation for  municipalities, regional  corporations,                                                               
and residents  of the state  to acquire ownership interests  in a                                                               
North  Slope  natural  gas pipeline  project;  making  conforming                                                               
amendments; and providing for an effective date."                                                                               
                                                                                                                                
1:06:18 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  TARR moved  to adopt  Amendment  43, labeled  28-                                                               
GS2806\I.A.100, Bullock, 4/7/14, which read:                                                                                    
                                                                                                                                
     Page 1, line 7, following "on gas;":                                                                                     
          Insert "relating to a report and recommendations                                                                    
     by the commissioner of  natural resources regarding the                                                                  
     delivery and  availability of  North Slope  natural gas                                                                  
     in  the state,  including the  identification of  risks                                                                  
     and recommendations for mitigation;"                                                                                     
                                                                                                                                
     Page 53, following line 14:                                                                                                
     Insert a new bill section to read:                                                                                         
         "* Sec. 58. The uncodified law of the State of                                                                     
     Alaska is amended by adding a new section to read:                                                                         
          REPORT AND RECOMMENDATIONS BY THE COMMISSIONER OF                                                                     
     NATURAL RESOURCES  ON THE DELIVERY AND  AVAILABILITY OF                                                                    
     NORTH SLOPE  NATURAL GAS  IN THE  STATE; IDENTIFICATION                                                                    
     OF RISKS  AND RECOMMENDATIONS  FOR MITIGATION.  (a) The                                                                    
     commissioner  of natural  resources  shall prepare  and                                                                    
     make available  to the legislature  a report on  a plan                                                                    
     and  alternatives  to  make  North  Slope  natural  gas                                                                    
     available  for  delivery  and use  in  the  state.  The                                                                    
     report must address                                                                                                        
               (1)   the means by which  North Slope natural                                                                    
     gas may be delivered for use in the state;                                                                                 
               (2)   the  anticipated  benefits, risks,  and                                                                    
     liabilities associated  with the  sale by the  state to                                                                    
     utilities and  other customers in the  state of natural                                                                    
     gas  received by  the state  as royalty  in kind  or as                                                                    
     payment of tax;                                                                                                            
               (3)   the effect and  consequences, including                                                                    
     the fiscal  effect and liability  to third  parties, of                                                                    
     the state's  transport of a  reduced amount  of natural                                                                    
     gas   south   of   an  in-state   delivery   point   or                                                                    
     underutilizing  capacity  in  a liquefied  natural  gas                                                                    
     plant; and                                                                                                                 
               (4)     other  issues  the   commissioner  of                                                                    
     natural  resources  determines   are  relevant  to  the                                                                    
     delivery  and use  of North  Slope natural  gas in  the                                                                    
     state and should be considered by the legislature.                                                                         
          (b)  In conjunction with the report in (a) of                                                                         
     this  section, the  commissioner  of natural  resources                                                                    
     shall   recommend   the   means  for   eliminating   or                                                                    
     minimizing the risks and  liabilities identified in the                                                                    
     report.  The recommendations  for  minimizing risk  and                                                                    
     liabilities while still allowing  the state to meet the                                                                    
     natural gas requirements of residents  of the state may                                                                    
     include   authorizing  the   commissioner  of   natural                                                                    
     resources to                                                                                                               
               (1)      negotiate  agreements   with   other                                                                    
     shippers  to  provide  natural  gas  to  the  state  in                                                                    
     proportion to the shipper's share  of the capacity in a                                                                    
     North  Slope natural  gas project  for the  purposes of                                                                    
     maintaining  balance  in  the system  downstream  of  a                                                                    
     delivery point;                                                                                                            
               (2)       acquire    additional   incremental                                                                    
     transportation capacity  on an as-needed basis  to meet                                                                    
     demand for natural gas in the state; or                                                                                    
               (3)    make  unused  transportation  capacity                                                                    
     held by  the state available to  other shippers subject                                                                    
     to  terms that  do not  reduce the  state's receipt  of                                                                    
      revenue below the amount the state would receive if                                                                       
     the state's gas were not sold in the state.                                                                                
          (c)  The commissioner of natural resources shall                                                                      
     make the  report and  recommendations required  by this                                                                    
     section available  to the legislature on  or before the                                                                    
     date  a firm  transportation  services  agreement in  a                                                                    
     North Slope natural  gas project to which  the state is                                                                    
     a party is submitted to the legislature for approval.                                                                      
          (d)  In this section, "North Slope natural gas                                                                        
       project" has the meaning given in AS 38.05.965, as                                                                       
     amended by sec. 23 of this Act."                                                                                           
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
     Page 56, line 6:                                                                                                           
          Delete "61"                                                                                                           
          Insert "62"                                                                                                           
                                                                                                                                
     Page 56, line 9:                                                                                                           
          Delete "secs. 62 and 63"                                                                                              
          Insert "secs. 63 and 64"                                                                                              
                                                                                                                                
CO-CHAIR SADDLER objected.                                                                                                      
                                                                                                                                
REPRESENTATIVE TARR explained Amendment  43 directs that a report                                                               
be provided  to the legislature  to discuss an  in-state pipeline                                                               
and the  use of in-state  gas.  The  amendment is related  to the                                                               
3/26/14  letter   sent  to  Co-Chairs  Feige   and  Saddler  from                                                               
Representatives  Tuck,  Kawasaki,  and   Tarr,  which  asked  the                                                               
following questions:  Who will supply  gas for in-state use?  Who                                                               
will be  penalized for selling gas  in-state?  Can we  ensure in-                                                               
state gas is  affordable?  Are we bearing too  much of the burden                                                               
for supplying  in-state gas?   Can Cook Inlet  producers benefit?                                                               
She concluded,  saying Amendment 43  will allow for a  process to                                                               
report to the legislature the answers to the above questions.                                                                   
                                                                                                                                
1:07:45 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  FEIGE   requested  the  administration's   position  on                                                               
Amendment 43.                                                                                                                   
                                                                                                                                
JOE BALASH, Commissioner, Department  of Natural Resources (DNR),                                                               
speaking   as  Commissioner-appointee   to   DNR,  informed   the                                                               
committee the  administration supports the overall  intent of the                                                               
amendment,  with  reservation.    He directed  attention  to  the                                                               
amendment,  beginning  on page  2,  line  6, after  "report"  and                                                               
continuing through line 16, which read:                                                                                         
                                                                                                                                
     The   recommendations    for   minimizing    risk   and                                                                    
     liabilities while still allowing  the state to meet the                                                                    
     natural gas requirements of residents  of the state may                                                                    
     include   authorizing  the   commissioner  of   natural                                                                    
     resources to                                                                                                               
               (1)  negotiate agreements with other                                                                             
     shippers  to  provide  natural  gas  to  the  state  in                                                                    
     proportion to the shipper's share  of the capacity in a                                                                    
     North  Slope natural  gas project  for the  purposes of                                                                    
     maintaining  balance  in  the system  downstream  of  a                                                                    
     delivery point;                                                                                                            
               (2)       acquire    additional   incremental                                                                    
     transportation capacity  on an as-needed basis  to meet                                                                    
     demand for natural gas in the state; or                                                                                    
               (3)  make unused transportation capacity                                                                         
     held by  the state available to  other shippers subject                                                                    
     to  terms that  do not  reduce the  state's receipt  of                                                                    
     revenue  below the  amount the  state would  receive if                                                                    
     the state's gas were not sold in the state.                                                                                
                                                                                                                                
COMMISSIONER  BALASH said  the administration  would support  the                                                               
amendment if the above identified language were removed.                                                                        
                                                                                                                                
REPRESENTATIVE HAWKER  said the  aforementioned language  is very                                                               
problematic.    He  suggested  that many  of  the  questions  are                                                               
answered in  the project  plan and  expressed his  preference for                                                               
DNR  to  answer questions  before  the  legislature, rather  than                                                               
through a report added to statute.                                                                                              
                                                                                                                                
REPRESENTATIVE KAWASAKI pointed out  that the 2011 Alaska Gasline                                                               
Development Corporation  (AGDC) small  pipeline proposal  is much                                                               
different than  [the Alaska  LNG Project]  proposal; many  of the                                                               
concepts materially change AGDC.  He  opined it is in the state's                                                               
best interest  to know  how the delivery  and offtake  points are                                                               
going to impact aspects of the  project, such as the tariffs.  He                                                               
urged the committee  to support [the intent of  the amendment] in                                                               
uncodified law or elsewhere.                                                                                                    
                                                                                                                                
1:11:30 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TARR moved  to adopt Amendment 1  to Amendment 43,                                                               
as follows:                                                                                                                     
                                                                                                                                
     Delete the following:                                                                                                      
                                                                                                                                
     The   recommendations    for   minimizing    risk   and                                                                    
     liabilities while still allowing  the state to meet the                                                                    
     natural gas requirements of residents  of the state may                                                                    
     include   authorizing  the   commissioner  of   natural                                                                    
     resources to                                                                                                               
               (1)  negotiate agreements with other                                                                             
     shippers  to  provide  natural  gas  to  the  state  in                                                                    
     proportion to the shipper's share  of the capacity in a                                                                    
     North  Slope natural  gas project  for the  purposes of                                                                    
     maintaining  balance  in  the system  downstream  of  a                                                                    
     delivery point;                                                                                                            
               (2)       acquire    additional   incremental                                                                    
     transportation capacity  on an as-needed basis  to meet                                                                    
     demand for natural gas in the state; or                                                                                    
               (3)  make unused transportation capacity                                                                         
     held by  the state available to  other shippers subject                                                                    
     to  terms that  do not  reduce the  state's receipt  of                                                                    
     revenue  below the  amount the  state would  receive if                                                                    
     the state's gas were not sold in the state.                                                                                
                                                                                                                                
There  being  no  objection,  Amendment 1  to  Amendment  43  was                                                               
adopted.                                                                                                                        
                                                                                                                                
1:13:01 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TARR  moved to adopt  Amendment 2 to  Amendment 43                                                               
as follows:                                                                                                                     
                                                                                                                                
     Page 1, line 13, after "resources":                                                                                        
          Insert "in consultation with the Alaska Gasline                                                                       
          Development Corporation"                                                                                              
                                                                                                                                
There  being  no  objection,  Amendment 2  to  Amendment  43  was                                                               
adopted.                                                                                                                        
                                                                                                                                
REPRESENTATIVE   SEATON   expressed    his   understanding   that                                                               
specifying a report  [by adopting Amendment 43] would  give DNR a                                                               
framework  in  which  to  report  to  the  public,  and  said  he                                                               
supported the inclusion of the report.                                                                                          
                                                                                                                                
CO-CHAIR  FEIGE  directed attention  to  the  amendment, page  2,                                                               
subsection (c),  noting the report  and recommendations  would be                                                               
available  to  the legislature  on  or  before  the date  a  firm                                                               
transportation  services agreement  (FTSA)  is  submitted to  the                                                               
legislature  for approval.   He  requested clarification  on when                                                               
the report would be made public.                                                                                                
                                                                                                                                
COMMISSIONER  BALASH surmised  the  report would  be made  public                                                               
prior  to  the  proposed  date.    He  expected  that,  prior  to                                                               
presenting  an   FTSA  to  the  legislature   for  approval,  the                                                               
information required by  the report, such as how  in-state gas is                                                               
managed,  would have  already been  explained "in  the course  of                                                               
bringing  something forward,"  and added  "putting that  specific                                                               
report in  one place ...  might be useful  to the public  and the                                                               
bodies."                                                                                                                        
                                                                                                                                
1:16:45 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  JOHNSON asked  whether  the administration  finds                                                               
the amendment helpful, or just does not object to the amendment.                                                                
                                                                                                                                
COMMISSIONER BALASH  clarified that  the administration  does not                                                               
object to  the amendment, and  "having some guidance in  terms of                                                               
what it  is the  legislature wants  to see from  us ...  I prefer                                                               
that ...."                                                                                                                      
                                                                                                                                
CO-CHAIR SADDLER directed attention  to Amendment 43 beginning on                                                               
page 1, line 18, which read:                                                                                                    
                                                                                                                                
               (2)  the anticipated benefits, risks, and                                                                        
     liabilities associated  with the  sale by the  state to                                                                    
     utilities and  other customers in the  state of natural                                                                    
     gas  received by  the state  as royalty  in kind  or as                                                                    
     payment of tax;                                                                                                            
                                                                                                                                
CO-CHAIR SADDLER  asked whether the issue  of the sale of  gas to                                                               
the utilities is addressed by "the  market."  He observed that if                                                               
a utility  wants to buy  or bid for  gas, it considers  the cost,                                                               
liabilities,  and  benefits  to  make  that  assessment,  and  he                                                               
concluded that  [the proposed  report] is  duplicative.   He then                                                               
directed  attention to  language beginning  on page  1, line  21,                                                               
which read:                                                                                                                     
                                                                                                                                
               (3)  the effect and consequences, including                                                                      
     the fiscal  effect and liability  to third  parties, of                                                                    
     the state's  transport of a  reduced amount  of natural                                                                    
     gas   south   of   an  in-state   delivery   point   or                                                                    
     underutilizing  capacity  in  a liquefied  natural  gas                                                                    
     plant; and                                                                                                                 
                                                                                                                                
CO-CHAIR SADDLER remarked:                                                                                                      
                                                                                                                                
     There's talk  about the effect  of a reduced  amount of                                                                    
     natural gas  and that presumes that  there's some other                                                                    
     normal way to reduce ... of  natural gas.  I don't know                                                                    
     who sets that amount and  who defines what is a reduced                                                                    
     amount,  if it's  below capacity  -  design capacity  -                                                                    
     it's  just  not   quite  clear  what  that   is.    And                                                                    
     underutilizing  on  line  23: What  is  underutilizing?                                                                    
     What is  the proper utilization?   Those are [analyses]                                                                    
     that might  be done by  those [who] design the  size of                                                                    
     the  pipeline, not  necessarily  the commissioner.  ...                                                                    
     And  ... we talk  about "south" of in-state delivery, I                                                                    
     would  ... amend  it to  "downstream"; that  might make                                                                    
     more sense.                                                                                                                
                                                                                                                                
REPRESENTATIVE   KAWASAKI  observed   this  amendment   addresses                                                               
specifically in-state  use because  it is  known that  taking gas                                                               
off this  line potentially harms  residents downstream,  or south                                                               
[of  the   delivery]  point,  due  to   underutilization  of  the                                                               
pipeline.    He said  either  the  term  downstream or  south  is                                                               
acceptable.                                                                                                                     
                                                                                                                                
1:20:02 PM                                                                                                                    
                                                                                                                                
MICHAEL   PAWLOWSKI,   Deputy   Commissioner,   Office   of   the                                                               
Commissioner,  Department of  Revenue (DOR),  stated there  is no                                                               
intent to design  overcapacity in the system in a  way that would                                                               
have  adverse effects  on the  state.   In that  case all  of the                                                               
parties, including  AGDC and  the state,  would not  be operating                                                               
"in the  fashion that these  projects get designed  and developed                                                               
on."    He  stressed  that  he  did not  want  there  to  be  the                                                               
perception  that   as  part  of   the  Pre-FEED   stage,  adverse                                                               
consequences for capacity  are something "that's a  given in this                                                               
project, or something that the state would actively walk into."                                                                 
                                                                                                                                
REPRESENTATIVE TARR  responded to Co-Chair Saddler's  comments to                                                               
the language in  the amendment beginning on page  1, lines 18-19,                                                               
saying she reads the provision  from the opposite viewpoint.  The                                                               
utilities  would decide  what their  contract would  be from  the                                                               
perspective of the utility.  She continued:                                                                                     
                                                                                                                                
     This  would  be us  looking  at  it from  the  opposite                                                                    
     viewpoint  of  the state  and  so  how those  utilities                                                                    
     would  impact us.  ... They're  looking to  serve their                                                                    
     customers and  from that perspective; we're  looking at                                                                    
     it from, from preserving the use of in-state gas.                                                                          
                                                                                                                                
CO-CHAIR  SADDLER   suggested  clarifying   the  intent   by  the                                                               
insertion of "to the state."                                                                                                    
                                                                                                                                
1:22:15 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TARR  moved to adopt  Amendment 3 to  Amendment 43                                                               
as follows:                                                                                                                     
                                                                                                                                
     Page 1, line 18, after "sale":                                                                                             
          Insert "to the state"                                                                                                 
                                                                                                                                
The committee took a brief at-ease.                                                                                             
                                                                                                                                
1:24:13 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TARR  moved to adopt  an amendment to  Amendment 3                                                               
to Amendment 43 as follows:                                                                                                     
                                                                                                                                
     Page 1, line 18, after "liabilities"                                                                                       
          Insert "to the state"                                                                                                 
                                                                                                                                
There being no objection, it was so ordered.                                                                                    
                                                                                                                                
[The  committee   treated  the  adoption  of   the  amendment  to                                                               
Amendment 3 to  Amendment 43 as also the adoption  of Amendment 3                                                               
to Amendment 43.]                                                                                                               
                                                                                                                                
CO-CHAIR  SADDLER maintained  his objection  to Amendment  43, as                                                               
amended.                                                                                                                        
                                                                                                                                
1:25:10 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  TARR said  the  administration  is supportive  of                                                               
Amendment  43,  which is  a  way  to  reassure Alaskans  who  are                                                               
seeking  an  opportunity for  in-state  gas,  and which  provides                                                               
guidance  to  the  administration  on  the  type  of  information                                                               
desired by constituents.                                                                                                        
                                                                                                                                
1:25:48 PM                                                                                                                    
                                                                                                                                
A roll  call vote was  taken.  Representatives  Kawasaki, Seaton,                                                               
P. Wilson,  Tarr, and Feige  voted in  favor of Amendment  43, as                                                               
amended.    Representatives  Hawker,  Olson,  and  Saddler  voted                                                               
against it.  Therefore, Amendment  43, as amended, was adopted by                                                               
a vote of 5 to 3.                                                                                                               
                                                                                                                                
REPRESENTATIVE  TARR   recalled  previous   discussion  regarding                                                               
changes to the  [interim municipal advisory board  created in the                                                               
bill] in order  to ensure that the proposed  statute directs that                                                               
the  board  is  not  an  interim board,  but  one  that  is  more                                                               
permanent and created  under the existing statute  for boards and                                                               
commissions.   She advised that  the issue would not  be broached                                                               
in  committee  but that  the  administration  would address  this                                                               
issue in the next committee of referral.                                                                                        
                                                                                                                                
1:27:26 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE KAWASAKI  moved to rescind the  committee's action                                                               
on 4/8/14  [meeting called to order  at 4:34 p.m.] in  failing to                                                               
adopt  Amendment 38,  labeled 28-GS2806\I.A.21,  Bullock, 4/1/14,                                                               
which read:                                                                                                                     
                                                                                                                                
     Page 11, line 28:                                                                                                          
          Delete "10"                                                                                                           
          Insert "[20]"                                                                                                         
                                                                                                                                
REPRESENTATIVE HAWKER objected.                                                                                                 
                                                                                                                                
REPRESENTATIVE KAWASAKI stated his intention to change his vote.                                                                
                                                                                                                                
1:31:14 PM                                                                                                                    
                                                                                                                                
A roll call  vote was taken.  Representatives  Seaton, P. Wilson,                                                               
Tarr,  Kawasaki,  and Feige  voted  in  favor  of the  motion  to                                                               
rescind.   Representatives  Hawker, Johnson,  Olson, and  Saddler                                                               
voted  against  it.    Therefore,   the  motion  to  rescind  the                                                               
committee's action in  failing to adopt Amendment  38 was adopted                                                               
by a vote of 5-4.                                                                                                               
                                                                                                                                
1:32:08 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  P. WILSON  moved to  adopt Amendment  38, labeled                                                               
28-GS2806\I.A.21, Bullock, 4/1/14, which read:                                                                                  
                                                                                                                                
     Page 11, line 28:                                                                                                          
          Delete "10"                                                                                                           
          Insert "[20]"                                                                                                         
                                                                                                                                
[Note  to  reader:     The  amendment  labeled  28.GS2806\I.A.21,                                                               
Bullock,  4/1/14,  provided  by Legislative  Legal  and  Research                                                               
Services,  Legislative  Affairs Agency,  is  not  the version  of                                                               
Amendment 38 offered in committee.]                                                                                             
                                                                                                                                
CO-CHAIR SADDLER objected.                                                                                                      
                                                                                                                                
CO-CHAIR FEIGE clarified this was  the same Amendment 38 [offered                                                               
at the committee's 4/8/14 meeting, called to order at 4:34 p.m.]                                                                
                                                                                                                                
REPRESENTATIVE  P. WILSON  restated her  motion and  informed the                                                               
committee the  amendment directs  a change  in the  percentage of                                                               
revenue [that is  received from royalty gas and is  to be paid to                                                               
the  Alaska  affordable  energy  fund]  from  10  percent  to  20                                                               
percent.   After allowing  for [payment  to the  Alaska Permanent                                                               
Fund Corporation]  the actual percentage would  be increased from                                                               
7.5 percent to 15 percent of revenue.                                                                                           
                                                                                                                                
CO-CHAIR FEIGE asked for the effective date.                                                                                    
                                                                                                                                
REPRESENTATIVE  P.  WILSON  responded   the  amendment  would  be                                                               
effective at the time "the [gas] starts flowing."                                                                               
                                                                                                                                
REPRESENTATIVE KAWASAKI said at the  time of the previous vote on                                                               
Amendment  38  it was  unclear  to  him whether  Fairbanks  would                                                               
benefit from direct  access [to the pipeline] or  [from the funds                                                               
paid into the Alaska affordable energy fund].                                                                                   
                                                                                                                                
CO-CHAIR SADDLER maintained his objection.                                                                                      
                                                                                                                                
1:34:48 PM                                                                                                                    
                                                                                                                                
A roll call  vote was taken.  Representatives  Seaton, P. Wilson,                                                               
Tarr,  Kawasaki,  and  Feige  voted in  favor  of  Amendment  38.                                                               
Representatives  Johnson,   Olson,  Hawker,  and   Saddler  voted                                                               
against it.   Therefore, Amendment  38 was  adopted by a  vote of                                                               
5-4.                                                                                                                            
                                                                                                                                
The committee took an at-ease from 1:35 p.m. to 1:36 p.m.                                                                       
                                                                                                                                
1:36:10 PM                                                                                                                    
                                                                                                                                
CO-CHAIR FEIGE,  for purposes  of discussion,  directed attention                                                               
to the  Letter of  Intent for  SB 138 [adopted  by the  Senate on                                                               
3/18/14].   He  requested  the administration's  position on  the                                                               
Letter of Intent.                                                                                                               
                                                                                                                                
COMMISSIONER BALASH  said the administration  was a  signatory to                                                               
the Heads of  Agreement (HOA) which includes the  language of the                                                               
Letter  of  Intent,  and  believes   the  language  represents  a                                                               
commitment by all of the parties  to include the terms and future                                                               
relevant agreements  contained therein.  He  pointed out specific                                                               
terms in  the Letter of Intent  are not appropriate in  a general                                                               
statute, but  that does not  obviate the  administration's intent                                                               
to  pursue the  terms.   He urged  that the  Letter of  Intent be                                                               
forwarded with the fiscal notes attached to the bill.                                                                           
                                                                                                                                
REPRESENTATIVE  P.  WILSON  asked  whether Article  11.2  of  the                                                               
Letter of Intent directs that  each person working on the project                                                               
must be a member of a labor union.                                                                                              
                                                                                                                                
COMMISSIONER  BALASH explained  that  Article  11.2 represents  a                                                               
commitment to  negotiate a project  labor agreement  (PLA), which                                                               
is a tool used by project  sponsors and funding sources to ensure                                                               
labor  stability in  order to  prevent increases  to the  overall                                                               
cost  and  schedule  of a  project.    The  terms  of a  PLA  are                                                               
negotiated;  PLAs are  varied  and can  be  union, non-union,  or                                                               
other.                                                                                                                          
                                                                                                                                
1:40:01 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON inquired  as to whether a  PLA directs that                                                               
contractors    ensure    that    employees    have    appropriate                                                               
certifications and experience.                                                                                                  
                                                                                                                                
COMMISSIONER  BALASH  noted   that  DOR  and  DNR   will  not  be                                                               
signatories to  a PLA.   Although  the state  will sign  the FTSA                                                               
with  the sponsors  and equity  owners, the  sponsors and  equity                                                               
owners in the venture will execute PLAs.                                                                                        
                                                                                                                                
CO-CHAIR  FEIGE  clarified that  the  purpose  of the  Letter  of                                                               
Intent was to focus on Article  11 in the HOA, because Article 11                                                               
could not be  drafted into the body  of the bill.   The Letter of                                                               
Intent will  attach to the  bill and  become a permanent  part of                                                               
the public  record with the  intent to provide  clear legislative                                                               
guidance  through the  completion  of the  liquefied natural  gas                                                               
(LNG) project.                                                                                                                  
                                                                                                                                
The committee took an at-ease from 1:43 p.m. to 1:47 p.m.                                                                       
                                                                                                                                
1:47:48 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE KAWASAKI inquired about  the impacts of the Letter                                                               
of Intent  for CSSB 138(FIN) am  - which addresses Alaska  hire -                                                               
versus uncodified law, and whether they carry the same effect.                                                                  
                                                                                                                                
DON  BULLOCK, Attorney,  Legislative  Legal Counsel,  Legislative                                                               
Legal   and  Research   Services,  Legislative   Affairs  Agency,                                                               
informed  the  committee that  adopting  a  Letter of  Intent  is                                                               
similar to passing a resolution in  that it is not binding and is                                                               
not law.   Codified law and  statutory law are both  binding laws                                                               
in place and may have  requirements and prohibitions, so a Letter                                                               
of Intent says,  "We'd sure like this to happen."   He added that                                                               
a Letter of Intent expresses the preference of the legislature.                                                                 
                                                                                                                                
REPRESENTATIVE KAWASAKI  recalled that  in 2007  similar language                                                               
was included in the Alaska  Gasline Inducement Act (AGIA) [passed                                                               
in the  25th Alaska  State Legislature].   A requirement  was put                                                               
into  codified   law  for  "a  commitment   to  negotiate  before                                                               
construction  a project  labor agreement  to  the maximum  extent                                                               
permitted by law."  He asked  whether language to ensure PLAs are                                                               
negotiated would be a problem to put into the bill.                                                                             
                                                                                                                                
MR.  BULLOCK said  it is  possible;  however, the  context of  AS                                                               
43.90.130  was  the solicitation  of  applications  for the  AGIA                                                               
license,  and   the  abovementioned  language  was   one  of  the                                                               
requirements of the application.   He questioned how the proposed                                                               
requirement  could  be enforced,  but  acknowledged  it has  been                                                               
codified  before  and  could  be  again,  particularly  with  the                                                               
limitation "to the maximum extent of law."                                                                                      
                                                                                                                                
1:52:07 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE JOHNSON  assured the  committee that a  project of                                                               
this size will  have a PLA, saying it will  be essential and will                                                               
be part of the project.   However, for the legislature to include                                                               
the requirement  for a PLA  in statute  adds a limitation  on the                                                               
contractor to  the negotiations.   The  labor unions  can provide                                                               
this and  he expressed  his preference to  utilize the  Letter of                                                               
Intent.                                                                                                                         
                                                                                                                                
CO-CHAIR FEIGE pointed out the  benefits from the sections of the                                                               
Letter of  Intent that address  Alaska hire,  vocational training                                                               
through  the Department  of Labor  &  Workforce Development,  and                                                               
local advertising for labor.                                                                                                    
                                                                                                                                
REPRESENTATIVE TARR  appreciated the discussion of  the Letter of                                                               
Intent.    Although  her  preference is  for  the  language  that                                                               
requires  a PLA  to  be included  in the  bill,  she agreed  with                                                               
Representative  Johnson   that  [a   PLA]  will   be  negotiated.                                                               
Furthermore, the producers have  indicated PLAs will be necessary                                                               
for the  project.  The  Alaska hire  and PLA components  are very                                                               
important  to her  and to  the public,  and recent  projects have                                                               
shown their successful use.                                                                                                     
                                                                                                                                
1:56:22 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HAWKER moved to adopt  the Letter of Intent for SB                                                               
138, written  on Senator Click  Bishop's letterhead,  and adopted                                                               
by the  Senate on 3/18/14.   There being no objection,  it was so                                                               
ordered.                                                                                                                        
                                                                                                                                
CO-CHAIR  FEIGE directed  attention to  the current  fiscal notes                                                               
attached to the bill and the effects of amendments thereon.                                                                     
                                                                                                                                
REPRESENTATIVE HAWKER deferred to  agency representatives to talk                                                               
about the  fiscal notes.   He pointed  out that the  fiscal notes                                                               
fund the project for two years.                                                                                                 
                                                                                                                                
MR. PAWLOWSKI agreed that the  current fiscal notes relate to the                                                               
Pre-FEED stage, which  is direct costs through the  end of fiscal                                                               
year  2015  (FY  15).    He  turned  to  fiscal  note  number  10                                                               
[identifier:   SB138CS(FIN)-DCCED-AGDC-03-16-14;    prepared   by                                                               
AGDC],  which  requested $1,394,000  in  personal  services.   He                                                               
deferred to AGDC.                                                                                                               
                                                                                                                                
1:59:11 PM                                                                                                                    
                                                                                                                                
MILES   BAKER,  Director,   Government  Relations   and  External                                                               
Affairs, AGDC, said AGDC prepared  two fiscal notes.  Fiscal note                                                               
number  14   [identifier:    SB138CS(FIN)-FUNDCAP-LDNPF-03-16-14;                                                               
prepared by  AGDC] capitalizes the  new Alaska LNG  Project fund,                                                               
and requests $66,726,700 for an  FY 14 supplemental request.  For                                                               
members to better understand the  requests, he returned attention                                                               
to  fiscal note  number 10,  and explained  that as  part of  the                                                               
budget process, AGDC, in order to  implement HB 4 [passed in 2013                                                               
by the  28th Alaska State  Legislature], recognized that  it only                                                               
submitted for personal  services in its FY  15 budget submission.                                                               
Other operating  costs are associated  with the  corporation, but                                                               
to be consistent with AGDC's  initial submission, the fiscal note                                                               
was prepared with  only personal services included.   Through the                                                               
budget  process, additional  AGDC  costs, such  as travel,  lease                                                               
expenditures,  contractual services,  and  additional AGDC  board                                                               
expenditures   have  been   included  in   other  project-related                                                               
expenditures  shown on  page  2 of  the fiscal  note.   When  the                                                               
fiscal note  is updated, the aforementioned  expenditures will be                                                               
moved from  the analysis section  to the numbers section.   Also,                                                               
the  name of  the new  fund has  been changed.   In  essence, the                                                               
fiscal  note  recognizes  the additional  responsibilities  given                                                               
AGDC  to participate  in the  Alaska  LNG Project,  which are  to                                                               
create a  new allocation called  the Alaska LNG  Participation to                                                               
track the costs  of the project and add  six positions, including                                                               
a  program manager.   The  analysis on  the fiscal  note reflects                                                               
Pre-FEED costs through  FY 17, but the fiscal  note requests cash                                                               
necessary for  the remainder of  FY 14 and  FY 15.   Returning to                                                               
contractual  services, he  said  AGDC  anticipates utilizing  two                                                               
full-time   equivalent  (FTE)   legal   contractors,  three   FTE                                                               
positions  for commercial  gas marketing  and engineering  design                                                               
contractors for a total of $15  million through FY 17.  Returning                                                               
to other additional  costs, Mr. Baker explained that  many of the                                                               
meetings to  negotiate contracts  and coordination  are occurring                                                               
out of  state, more leased  space is  needed, and the  AGDC board                                                               
will be meeting more frequently.                                                                                                
                                                                                                                                
2:05:50 PM                                                                                                                    
                                                                                                                                
MR.  BAKER continued  to the  next  sections of  the fiscal  note                                                               
which further  the analysis of  the state's  equity participation                                                               
in the  project - AGDC's 25  percent share of the  LNG facility -                                                               
which  is $57,850,000.    He  said a  30  percent contingency  is                                                               
included, which is based on  the rough initial cost estimates and                                                               
on the  requirements of  the cash  calls agreed  to in  the joint                                                               
venture agreements  (JVA).  Also,  the state's 40  percent option                                                               
is  estimated  at  $42,250,000.    At  this  time,  AGDC  is  not                                                               
requesting  the  40 percent  option  funds  that are  not  needed                                                               
before FY 16.  Page 4 includes  the analysis of the state cost to                                                               
meet  the conditions  of the  Memorandum  of Understanding  (MOU)                                                               
between TransCanada  (TC) and the state  to reimburse TransCanada                                                               
for  development   costs  and  allowance   for  funds   used  for                                                               
development costs (AFUDC) should the  project fail.  Further, the                                                               
fiscal note  summary contains an  Alaska LNG  Project expenditure                                                               
summary  from   FY  14  through   FY  17,  including  an   FY  14                                                               
supplemental  in  the  amount  of   $11,188,200,  and  an  FY  15                                                               
supplemental  in  the  amount  of $55,538,500,  for  a  total  of                                                               
$66,726,000.  Lastly, the legislation  creates a new fund similar                                                               
to  the in-state  gas  pipeline  fund; AGDC  will  track the  two                                                               
projects  separately,  requiring  a cost  allocation  system  for                                                               
each.                                                                                                                           
                                                                                                                                
2:10:20 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TARR  recalled that  there has been  concern about                                                               
keeping the  funds for  ASAP separate from  funds for  the Alaska                                                               
LNG  Project.    She  asked  whether  any  of  the  $400  million                                                               
appropriated for ASAP  have been used for the  Alaska LNG Project                                                               
and if so, if the ASAP fund would be reimbursed.                                                                                
                                                                                                                                
MR. BAKER was  unsure of the balance remaining in  the ASAP fund.                                                               
In  further  response  to Representative  Tarr,  he  said  AGDC's                                                               
involvement  with  the  Alaska LNG  Project  coincided  with  the                                                               
appointment  of the  new  AGDC  board.   HB  4  granted AGDC  the                                                               
authority to  work on  alignment with the  Alaska LNG  Project as                                                               
long as  the ASAP  project was not  adversely affected,  and AGDC                                                               
management and board  are aware that the allocated  funds were to                                                               
be used  for moving  ASAP to  open season.   A separate  fund was                                                               
established  for the  Alaska LNG  Project,  and prior  to work  -                                                               
beyond  attending meetings  - a  separate appropriation  from the                                                               
legislature is warranted in order for  AGDC to pursue [HB 4].  He                                                               
described  the amount  of  money  that has  been  paid for  staff                                                               
travel  as  de minimis.    Mr.  Baker  was unsure  whether  these                                                               
charges  would   be  transferred  to  the   "new  appropriation";                                                               
however, the  cost allocation methodology  is being  developed to                                                               
track expenses such as administrative  staff, finance team staff,                                                               
leases, supplies, and board member travel.                                                                                      
                                                                                                                                
2:15:32 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TARR directed attention to  page 3 [of fiscal note                                                               
number 10].   She questioned why there will be  high expenses for                                                               
contractor  services instead  of  hiring more  FT  staff for  the                                                               
corporation.                                                                                                                    
                                                                                                                                
MR.  BAKER responded  that AGDC  has tried  to keep  true to  the                                                               
directive given in  HB 4 that while the timeline  for the project                                                               
is long,  the project will  end, and  so AGDC will  only maintain                                                               
the level  of state employees  absolutely necessary.   Also, some                                                               
staff will  be highly  specialized, and only  needed for  a short                                                               
period of time.                                                                                                                 
                                                                                                                                
REPRESENTATIVE  TARR observed  that  if the  state purchases  the                                                               
pipeline  at the  end of  the first  term, expert  staff will  be                                                               
needed to  continue operations and  hiring now would  provide the                                                               
time and opportunity to build staffing for the future.                                                                          
                                                                                                                                
MR. BAKER  agreed with Representative Tarr's  assessment and said                                                               
AGDC   anticipates  proposing   some  in-house   hiring  to   the                                                               
legislature, especially on the gas-marketing side.                                                                              
                                                                                                                                
2:20:51 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  HAWKER  recalled that  proponents  of  HB 4  were                                                               
cautioned against building a base  of employees, but rather staff                                                               
at AGDC were to be task-focused and  dismissed.   He said this is                                                               
not a "continuing operations staff."                                                                                            
                                                                                                                                
REPRESENTATIVE  TARR  returned   attention  to  the  supplemental                                                               
request of [$582,600  on page 3 of fiscal note  10] for increased                                                               
responsibilities  and   authority  for  the  AGDC   board.    She                                                               
questioned whether the board will  be overburdened with the tasks                                                               
of both ASAP and the Alaska LNG Project proposals.                                                                              
                                                                                                                                
The   committee   took  a   brief   at-ease   due  to   technical                                                               
difficulties.                                                                                                                   
                                                                                                                                
2:24:38 PM                                                                                                                    
                                                                                                                                
MR.  BAKER answered  that  the  AGDC board  meets  in person  and                                                               
telephonically monthly,  and subcommittees  also meet.   However,                                                               
the board is meeting frequently  because it is a new corporation;                                                               
of the  $582,600, $285,000 is for  travel, approximately $200,000                                                               
is  for stipends,  and  $100,000  is for  associated  costs.   He                                                               
advised that  this is a  reasonable estimate for work  during the                                                               
remainder of this fiscal year and all of the next fiscal year.                                                                  
                                                                                                                                
REPRESENTATIVE  HAWKER clarified  the number  being discussed  on                                                               
page 3 of fiscal  note 10 is $582,600.  On page  4 this amount is                                                               
shown as the total required for the AGDC board for FY 14-FY 17.                                                                 
                                                                                                                                
MR. BAKER said correct.                                                                                                         
                                                                                                                                
2:28:25 PM                                                                                                                    
                                                                                                                                
MR.  PAWLOWSKI  addressed  fiscal  note  number  11  [identifier:                                                               
SB138CS(FIN)-DOR-TRS-03-16-14;    prepared   by    the   Treasury                                                               
Division, DOR].   He  said page  1 includes  a $500,000  item for                                                               
services for FY  15, and for FY  16 there is a  $150,000 item for                                                               
services to the  Treasury Division of DOR.  The  analysis on page                                                               
2 explains that the allocations are  in response to Section 13 of                                                               
the  bill,  which  creates the  Alaska  affordable  energy  fund.                                                               
There should  be no  administrative costs  to managing  the fund;                                                               
however, Section 60  of the bill directs the  commissioner of DOR                                                               
to develop a plan for  municipalities, regional corporations, and                                                               
residents  to invest  in the  project, and  it is  estimated that                                                               
developing  the  plan will  cost  $500,000.   Also,  providing  a                                                               
broader range of understanding the  financing of the project will                                                               
require  additional funding  to the  Treasury Division  on fiscal                                                               
note 11 to  develop the financing matrix,  although no additional                                                               
staff will be hired.                                                                                                            
                                                                                                                                
MR.  PAWLOWSKI continued  to fiscal  note number  13 [identifier:                                                               
SB138CS(FIN)-DOR-TAX-03-16-14;  prepared by  DOR].   Included  on                                                               
page 1,  for FY 15,  is a $750,000 item  for services to  the Tax                                                               
Division of DOR.   The analysis on page 2  explains that $500,000                                                               
is  for expenses  incurred while  the Tax  Division installs  and                                                               
upgrades the  tax revenue  management system  to account  for the                                                               
changes made  to the  production tax.   Finally, $250,000  is for                                                               
reimbursable services  agreements (RSAs)  with the  Department of                                                               
Law  related to  regulations  that are  needed  to implement  the                                                               
bill.     Again,  no  new   positions  will  be  added   for  the                                                               
aforementioned  tasks.    Mr.  Pawlowski  pointed  out  that  the                                                               
incorporation of the  analysis of Cook Inlet for the  Oil and Gas                                                               
Competitiveness  Review  Board and  the  targeting  of the  gross                                                               
value of reduction will not  require new positions or contractors                                                               
up  to  the FY  17  date;  thus, the  only  addition  is for  the                                                               
financing options in  the report required by  the amended version                                                               
of the bill.                                                                                                                    
                                                                                                                                
2:32:41 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TARR directed attention  to the language in fiscal                                                               
note 13, page  2, paragraph 2, which is related  to the education                                                               
tax credit, and paraphrased the language as follows:                                                                            
                                                                                                                                
     It  is difficult  to determine  how this  language will                                                                    
     affect   taxpayer  behavior   and,  therefore,   it  is                                                                    
     difficult  to  determine  if   this  bill  will  affect                                                                    
     revenue from the oil and gas production tax.                                                                               
                                                                                                                                
REPRESENTATIVE  TARR   asked  whether   information  on   how  an                                                               
education tax  credit was previously  used can be  made available                                                               
to the committee.                                                                                                               
                                                                                                                                
MR.  PAWLOWSKI said  he would  research the  Tax Division  annual                                                               
report and  the Revenue  Sources Book for  this information.   He                                                               
explained that  reporting on  these types  of credits  is delayed                                                               
because they are applied for in the following tax year.                                                                         
                                                                                                                                
2:34:06 PM                                                                                                                    
                                                                                                                                
COMMISSIONER  BALASH  drew attention  to  fiscal  note number  12                                                               
[identifier:    SB138CS(FIN)-DNR-NSG-3-16-14; prepared  by  DNR].                                                               
Commissioner Balash stated part of  the reason DOR's fiscal notes                                                               
are  so low  is  because  DNR holds  much  of the  responsibility                                                               
related  to the  bill:   In  FY 15  and FY  16, DNR's  [estimated                                                               
operating expenditures totaled $8,961,700  per year].  He pointed                                                               
out that  the enabling contracts  will be brought  forward within                                                               
FY 16, which  begins 7/1/15.  The various line  items include six                                                               
positions to be hired under  the special exemption clauses of [AS                                                               
39.25  the  State Personnel  Act],  as  new  hires will  be  "off                                                               
[salary] schedule"  in order to  hire those qualified in  the gas                                                               
marketing  effort.    In  addition,  travel  costs  are  high  in                                                               
anticipation of  overseas travel  to Asia  in order  to determine                                                               
how  to market  the gas.   Also  anticipated is  a high  cost for                                                               
contractual services  for subject-matter experts,  especially for                                                               
RSAs with DOL to support  the development of contracts.  However,                                                               
Commissioner  Balash doubted  if there  would be  an increase  to                                                               
fiscal  note 12  for  costs associated  with  issuing the  report                                                               
required by Amendment 43.                                                                                                       
                                                                                                                                
2:37:07 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  KAWASAKI  observed  that there  are  several  DNR                                                               
expenditures  associated  with  marketing, travel,  and  services                                                               
that are similar to the request  by AGDC.  He asked whether these                                                               
are duplicative functions within the agency.                                                                                    
                                                                                                                                
COMMISSIONER BALASH  responded that  AGDC's marketing  efforts in                                                               
the  next two  years will  be primarily  related to  the in-state                                                               
aspects  [of marketing  natural  gas].   Potentially, a  separate                                                               
subsidiary  to market  LNG exports  may be  formed -  which would                                                               
preclude hiring  marketing experts at  DNR - as the  in-state and                                                               
export  marketing  functions  are   distinct.    Regarding  legal                                                               
services and support,  there are five categories  of agreements -                                                               
two will be signed by AGDC and four  will be signed by DNR - thus                                                               
there  will be  some overlap,  although the  total number  of the                                                               
agreements  remains  the same.    In  response to  Representative                                                               
Tarr, he clarified  that the agency and AGDC will  be signing the                                                               
midstream  services agreement  for liquefaction  service, as  the                                                               
category  of  midstream  services agreements  involves  both  the                                                               
state  and   AGDC.    Regarding  equity   or  governance-type  of                                                               
agreements, only  AGDC will  sign; on  the other  hand, upstream,                                                               
offtake,  and balancing  agreements will  be signed  only by  the                                                               
agencies.   For  fiscal, or  enabling-type contracts  and leases,                                                               
agencies  only will  sign.   Finally, the  disposition agreements                                                               
will be signed by the agencies and maybe by AGDC.                                                                               
                                                                                                                                
2:41:34 PM                                                                                                                    
                                                                                                                                
MR.  PAWLOWSKI  directed  attention  to  fiscal  note  number  15                                                               
[identifier:   SB138CS(FIN)-DCCED-AEA-03-17-14;  prepared by  the                                                               
Alaska Energy  Authority (AEA)].  He  said operating expenditures                                                               
for FY  15 to  the Department of  Commerce, Community  & Economic                                                               
Development (DCCED)  are zero.   However,  there is  an estimated                                                               
capital cost of $1,375,000 in  response to the requirement in the                                                               
bill for the Alaska Energy  Authority (AEA), in consultation with                                                               
AGDC,  the Alaska  Industrial  Development  and Export  Authority                                                               
(AIDEA), and DOR to develop  a plan for infrastructure to deliver                                                               
more  affordable  energy to  areas  of  the  state that  are  not                                                               
expected to  have direct  access to the  North Slope  natural gas                                                               
pipeline.   The plan will  coordinate AEA's existing  work around                                                               
regional energy plans  and begin the groundwork  for the movement                                                               
to other  energy sources  for the  aforementioned regions  of the                                                               
state.   In response to  Representative Tarr, he  understood that                                                               
the abovementioned  capital expense  will be a  line item  in the                                                               
capital budget.                                                                                                                 
                                                                                                                                
REPRESENTATIVE  SEATON offered  his appreciation  for all  of the                                                               
work that has been done regarding  CSSB 138(FIN) am.  He informed                                                               
the committee that  a number of issues that  were not appropriate                                                               
for the codified sections of the  bill would be incorporated in a                                                               
sign-on letter  to ensure that the  issues would be clear  to the                                                               
agencies.   The sign-on letter  will be offered to  the committee                                                               
members for signature.                                                                                                          
                                                                                                                                
2:44:41 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  SADDLER provided  a summary  of the  work done  on CSSB                                                               
138(FIN)  am:   the  governor and  administration's proposal  and                                                               
path to the  project was analyzed; questions were  asked and most                                                               
were answered;  the HOA and  MOU were evaluated; processes  and a                                                               
variety  of scenarios  were discussed  to better  understand what                                                               
lies  ahead;  a  record  number of  amendments  were  offered  to                                                               
improve  the   environment  in  which  to   negotiate  contracts;                                                               
sideboards for the preliminary agreements  were sought to protect                                                               
Alaska's  interests; clear  intent  on the  final agreements  was                                                               
provided; the  option of  ASAP was preserved;  and hard  work was                                                               
done to understand the details of the project.                                                                                  
                                                                                                                                
The committee took a brief at-ease.                                                                                             
                                                                                                                                
2:47:43 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  JOHNSON agreed  that  the work  of the  committee                                                               
provided  a  way forward,  although  he  remained cautious  about                                                               
ownership and control of the project.   He opined the project has                                                               
the potential  for success and  urged the administration  and the                                                               
agencies to  ensure that the project  is the best for  the state.                                                               
He  expressed support  for the  bill,  adding that  he wishes  to                                                               
review the  proposed committee substitute  and fiscal  notes when                                                               
possible.                                                                                                                       
                                                                                                                                
CO-CHAIR FEIGE stated  that the committee will  receive copies as                                                               
requested.                                                                                                                      
                                                                                                                                
2:51:30 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  TARR  expressed  her goals  for  the  committee's                                                               
work:    direct  benefit  to  Alaskans; a  fair  return  for  the                                                               
resource; and a  good process to follow.  Many  of the amendments                                                               
addressed concerns  related to these  topics, and she  is pleased                                                               
Amendment 43 was adopted because  the report on in-state gas will                                                               
have an effect  on the direct benefit to Alaskans.   Although the                                                               
committee  did not  have much  impact on  the process,  she noted                                                               
that  the committee  was able  to express  its concerns  and will                                                               
provide   additional    guidance   to   "the    department"   via                                                               
Representative Seaton's  sign-on letter.  Of  great importance is                                                               
a fair  return for the  resource, and she reminded  the committee                                                               
that  during  the lean  years  ahead  the proposed  project  will                                                               
create the  state revenue needed.   Representative Tarr  said she                                                               
is  glad to  hear  representatives  of DNR  and  DOR state  their                                                               
involvement in the project in order  to avoid past mistakes.  She                                                               
complimented the  work of the administration,  the committee, and                                                               
especially that of Mr. Bullock  at Legislative Legal and Research                                                               
Services.                                                                                                                       
                                                                                                                                
REPRESENTATIVE  KAWASAKI  appreciated  the  amount  of  time  the                                                               
committee   spent  with   consultants  and   the  administration,                                                               
although he still has questions  on ownership and control that he                                                               
hopes will be addressed by the House Finance Committee.                                                                         
                                                                                                                                
2:56:45 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE P. WILSON said she  felt the bill was improved and                                                               
fair for all Alaskans.  She thanked everyone for their work.                                                                    
                                                                                                                                
CO-CHAIR FEIGE observed the committee  considered the bill for 25                                                               
days  of meetings  and  he appreciated  the work  of  all of  the                                                               
members of  the committee.   The staff  and committee  aides also                                                               
worked  long  hours,  as  did   Legislative  Legal  and  Research                                                               
Services, especially Ms.  Nauman and Mr. Bullock.   By its review                                                               
of the  amendments, the Letter  of Intent, and the  fiscal notes,                                                               
the committee  has taken a  close look at  the bill, as  will the                                                               
next committee of referral, he said.                                                                                            
                                                                                                                                
3:00:19 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HAWKER told a personal  story and then stated that                                                               
there  are  areas  of  the  bill   he  would  like  to  see  done                                                               
differently, such  as the  transfer of  wealth to  TransCanada in                                                               
the MOU  and the HOA,  and the ownership and  control provisions;                                                               
however, there are  other elements to be lauded.   On balance, he                                                               
said he would  support the bill.  He reminded  the committee that                                                               
votes  against   amendments  in  committee  would   not  restrict                                                               
subsequent negotiations  by DOR, DNR,  or AGDC on  topics related                                                               
to the failed amendments.                                                                                                       
                                                                                                                                
3:03:14 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  HAWKER moved  to  report [CSSB  138(FIN) am],  as                                                               
amended,  and  with  the  attached   Letter  of  Intent,  out  of                                                               
committee  with individual  recommendations and  the accompanying                                                               
fiscal  notes.    In addition,  Legislative  Legal  and  Research                                                               
Services  is   authorized  to   make  any   necessary  conforming                                                               
amendments.   There  being no  objection, HCS  CSSB 138(RES)  was                                                               
reported from the House Resources Standing Committee.                                                                           
3:04:01 PM                                                                                                                    
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being no  further business before the  committee, the House                                                               
Resources Standing Committee meeting was adjourned at 3:04 p.m.                                                                 

Document Name Date/Time Subjects
HRES Passed Amendments to CSSB138 Version I.A. Packet 1.pdf HRES 4/9/2014 1:00:00 PM
SB 138
HRES Passed Amendments to CSSB138 Version I.A. Packet 2.pdf HRES 4/9/2014 1:00:00 PM
SB 138
HCS CSSB138(RES) Version H 4.10.14.pdf HRES 4/9/2014 1:00:00 PM
SB 138
HCS CSSB138(RES) Sectional Analysis.pdf HRES 4/9/2014 1:00:00 PM
SB 138
HCS CSSB138(RES) Summary of Changes.pdf HRES 4/9/2014 1:00:00 PM
SB 138
HRES SB 138 Issues Letter 4.15.14 .pdf HRES 4/9/2014 1:00:00 PM
SB 138
HRES 4.18.14 AGDC Responses to Questions.pdf HRES 4/9/2014 1:00:00 PM
SB 138