Legislature(2015 - 2016)MAT-SU ASMBLY CHMBR

09/09/2015 06:30 PM RESOURCES

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12:00:16 AM State's Gasline Team Update
12:37:37 AM Adjourn
06:31:04 PM Start
06:33:08 PM Aklng Update
10:24:56 PM State's Gasline Team Update
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Location: 350 East Dahlia Avenue, Palmer
+ Joint with Senate Resources TELECONFERENCED
Update: Alaska LNG Project
- Mayor Larry DeVilbiss, Mat-Su Borough
- Project Update: Steve Butt, Project Manager,
Alaska LNG
- Fiscal Team Presentation: Alaska Gasline
Development Corporation, ExxonMobil Alaska, BP
Alaska, ConocoPhillips Alaska, and TransCanada
-- Testimony <Invitation Only> --
                    ALASKA STATE LEGISLATURE                                                                                  
                         JOINT MEETING                                                                                        
              SENATE RESOURCES STANDING COMMITTEE                                                                             
               HOUSE RESOURCES STANDING COMMITTEE                                                                             
                         Palmer, Alaska                                                                                       
                       September 9, 2015                                                                                        
                           6:31 p.m.                                                                                            
MEMBERS PRESENT                                                                                                               
SENATE RESOURCES                                                                                                                
 Senator Cathy Giessel, Chair                                                                                                   
 Senator John Coghill (Online)                                                                                                  
 Senator Bill Stoltze                                                                                                           
 Senator Peter Micciche (Online)                                                                                                
 Senator Bert Stedman (Online)                                                                                                  
 Senator Bill Wielechowski (Online)                                                                                             
HOUSE RESOURCES                                                                                                                 
 Representative Benjamin Nageak, Co-Chair                                                                                       
 Representative David Talerico, Co-Chair                                                                                        
 Representative Mike Hawker                                                                                                     
 Representative Andy Josephson                                                                                                  
 Representative Bob Herron (Online)                                                                                             
 Representative Geran Tarr (Online)                                                                                             
 Representative Paul Seaton (Online)                                                                                            
MEMBERS ABSENT                                                                                                                
SENATE RESOURCES                                                                                                                
 Senator Mia Costello                                                                                                           
HOUSE RESOURCES                                                                                                                 
 Representative Craig Johnson                                                                                                   
 Representative Kurt Olson                                                                                                      
OTHER LEGISLATORS PRESENT                                                                                                     
  Senator Mike Dunleavy                                                                                                         
  Senator Charlie Huggins                                                                                                       
  Senator Anna MacKinnon                                                                                                        
  Representative Shelley Hughes                                                                                                 
  Representative Charisse Millet (Online)                                                                                       
  Representative Dan Saddler                                                                                                    
  Representative Lynn Gattis (Online)                                                                                           
COMMITTEE CALENDAR                                                                                                            
UPDATE: Alaska LNG Project                                                                                                      
     - HEARD                                                                                                                    
PREVIOUS COMMITTEE ACTION                                                                                                     
No previous action to record                                                                                                    
WITNESS REGISTER                                                                                                              
LARRY DEVILBISS, Mayor                                                                                                          
Matanuska-Susitna Borough                                                                                                       
Palmer, Alaska                                                                                                                  
POSITION STATEMENT:  Welcomed the joint committee to Palmer.                                                                  
STEVE BUTT, Senior Project Manager                                                                                              
Alaska LNG Project                                                                                                              
POSITION STATEMENT:  Provided AKLNG Project update.                                                                           
BILL MCMAHON, Senior Commercial Advisor                                                                                         
AKLNG Project                                                                                                                   
POSITION STATEMENT:  Provided AKLNG Project update.                                                                           
DAN FAUSKE, President                                                                                                           
Alaska Gasline Development Corporation (AGDC)                                                                                   
POSITION STATEMENT:  Provided AKLNG Project update.                                                                           
VINCENT LEE, Director                                                                                                           
Major Projects Development                                                                                                      
POSITION STATEMENT:  Provided AKLNG Project update.                                                                           
DAVID VAN TUYL, Regional Manager                                                                                                
BP Exploration Alaska, Inc.                                                                                                     
POSITION STATEMENT:  Provided AKLNG Project update.                                                                           
DARREN MEZNARICH, Project Integration Manager                                                                                   
AKLNG Project                                                                                                                   
ConocoPhillips Alaska, Inc.                                                                                                     
POSITION STATEMENT:  Provided AKLNG Project update.                                                                           
RIGDON BOYKIN, Lead Negotiator                                                                                                  
AKLNG Project                                                                                                                   
POSITION STATEMENT:  Provided AKLNG Project update.                                                                           
MARTY RUTHERFORD, Deputy Commissioner                                                                                           
Department of Natural Resources (DNR)                                                                                           
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Participated in the AKLNG Project update.                                                                
DONA KEPPERS, Deputy Commissioner                                                                                               
Department of Revenue                                                                                                           
Anchorage, Alaska                                                                                                               
POSITION STATEMENT: Participated in the AKLNG Project update.                                                                 
JUSTIN PALFREYMAN, Director                                                                                                     
Global Power, Energy & Infrastructure Group                                                                                     
Lazard Freres                                                                                                                 
POSITION STATEMENT:  Participated in the AKLNG Project update.                                                                
ACTION NARRATIVE                                                                                                              
6:31:04 PM                                                                                                                    
CHAIR CATHY  GIESSEL called the  joint meeting of the  Senate and                                                             
House  Resources  Standing  Committees  to  order  at  6:31  p.m.                                                               
Present at  the call  to order  were Senators  Micciche, Coghill,                                                               
Stedman, Wielechowski,  and Chair Giessel;  Representatives Tarr,                                                               
Seaton, and Herron.                                                                                                             
^AKLNG Update                                                                                                                   
                   UPDATE: Alaska LNG Project                                                                               
6:33:08 PM                                                                                                                    
CHAIR GIESSEL  announced the fall quarterly  AKLNG Project update                                                               
provided for in  SB 138. She welcomed Mayor Devilbiss  to give an                                                               
opening welcome to the committee.                                                                                               
6:34:00 PM                                                                                                                    
LARRY  DEVILBISS,   Mayor,  Matanuska-Susitna   Borough,  Palmer,                                                               
Alaska, welcomed  the joint committee  to Palmer. He  said unlike                                                               
Anchorage and Fairbanks that have a  large part of their tax load                                                               
carried  by commercial  properties,  the Mat-Su  Borough is  more                                                               
than  80 percent  residential. So  a project  that jumps  over $1                                                               
billion is  really significant  and they have  been told  that 20                                                               
percent of just  the pipeline is going  through borough property.                                                               
He is  currently working on  recommendations for  taxation issues                                                               
for the special session.                                                                                                        
6:35:58 PM                                                                                                                    
CHAIR GIESSEL  invited Steve  Butt to  provide the  AKLNG Project                                                               
6:36:30 PM                                                                                                                    
STEVE  BUTT,   Senior  Project   Manager,  Alaska   LNG  Project,                                                               
Anchorage, Alaska, said he represents  about 1,000 people who are                                                               
working on the project; about  130 are employees from the sponsor                                                               
companies  who work  directly within  the project  and about  250                                                               
people  are  in  the  field  in  Alaska  (about  80  percent  are                                                               
Alaskans) gathering the  data needed to get the  permits to build                                                               
this  project. In  addition, 500-700  contractors  are doing  the                                                               
design work.  The design work  and field data gathering  all feed                                                               
into  the regulatory  process, which  underpins  the project  and                                                               
helps get the permits needed to move forward.                                                                                   
MR.  BUTT said  the  AKLNG Project  is trying  to  treat the  gas                                                               
(removing non-hydrocarbon  elements) and  transport it  just over                                                               
800 miles from  the north to the  south. The gas is  on the other                                                               
side of  the Brooks Range  where there  isn't a market.  Once the                                                               
gas  is transported  to the  southern coast,  it gets  liquefied.                                                               
When it  gets very cold, it  condenses down to a  ratio of 600:1.                                                               
Moving it in  an un-liquefied (uncompressed form)  would take 600                                                               
ships whereas it  can be done with one ship  in a liquefied form.                                                               
Moving the gas  product from Alaska to Asian  markets takes 12-14                                                               
days. Six hundred ships is an enormous number compared to one.                                                                  
6:39:56 PM                                                                                                                    
MR. BUTT  said the modules  have arrived  at Point Thomson  - and                                                               
incidentally,  that  Alaska  had  pioneered the  use  of  modular                                                               
construction where  things are  built in one  place and  moved to                                                               
more  difficult places  on the  North Slope.  "Plug and  play" is                                                               
basically pushing  the modules together,  welding up  the flanges                                                               
where needed and getting the equipment ready to run.                                                                            
6:40:52 PM                                                                                                                    
MR. BUTT said  it's been a real advantage for  this project to be                                                               
able  to work  seamlessly under  FERC  III with  the Prudhoe  Bay                                                               
operator,  because the  parties involved  in AKLNG  are the  same                                                               
parties involved  in the  upstream, for the  most part.  The core                                                               
concept that  underpins what makes AKLNG  different from previous                                                               
attempts to  commercialize gas is  all of the  resource claimants                                                               
are working  together. Those parties  are BP,  ConocoPhillips and                                                               
ExxonMobil (often  called "the producers");  the fourth  party is                                                               
the State  of Alaska, which under  SB 138 is a  25 percent equity                                                               
participant in the  project. All Alaskans are  represented by the                                                               
state  and the  state benefits  and  receives 25  percent of  the                                                               
revenue  that  the  project might  generate.  That  framework  of                                                               
moving the  gas, bringing  it into the  project, having  all four                                                               
parties together is the core element of AKLNG.                                                                                  
6:42:20 PM                                                                                                                    
MR.  BUTT said  the gas  gets treated  in a  Gas Treatment  Plant                                                               
(GTP)  and  they  have  found   ways  of  reducing  the  cost  of                                                               
construction (about  $1 billion) by  going from four  trains down                                                               
to three  and he said, "It  continues to go very  well." Once the                                                               
gas is  treated, all  the impurities are  removed and  the CO  is                                                               
taken out and put  back in the ground. The gas is  what is left -                                                               
mainly methane and  some ethane - and that  gets transported down                                                               
from the GTP  to the south in  a pipeline. A lot  of progress has                                                               
been made  on the pipeline:  everyone agrees on the  routing, but                                                               
more work still needs to be done on the sizing.                                                                                 
Once the gas gets down to  the south, it goes to the liquefaction                                                               
facility. A lot  of design work has been done  positioning it for                                                               
optimization and  really improving  the layout  to make  sure the                                                               
LNG plant can be built as efficiently as possible.                                                                              
Over the last  several months, they continue to  focus on safety.                                                               
It's the most important thing,  because if they are successful in                                                               
moving the  project forward,  it will have  9-10 years  of design                                                               
and  construction life,  but then  it  will have  25-50 years  of                                                               
operating life. They  really want to build  the right environment                                                               
where people can work safely;  it's called a "culture of caring."                                                               
Mr.  Butt said  little incidents  have happened,  but fortunately                                                               
nothing has been a reportable incident.                                                                                         
6:43:28 PM                                                                                                                    
MR. BUTT said they also  continue to progress the pre-FEED design                                                               
work spending  about $243  million on  it in  addition to  a $107                                                               
million on concept  work. Right now they spend  about $32 million                                                               
a month  because they are in  peak summer work; that  falls off a                                                               
little in the winter.                                                                                                           
The  pre-FEED work  that  was initially  scoped  under the  Joint                                                               
Venture  Agreement (JVA)  is about  75 percent  complete and  the                                                               
field work  is about 50 percent  complete. There is about  2 more                                                               
weeks of  intense summer work. This  is the third year  of summer                                                               
field work and it is focused  mainly south of Livengood now. They                                                               
are trying  to understand geotechnical  issues, so that  when the                                                               
project  is built  the  pipeline can  be  designed safely  around                                                               
earthquake-prone areas.                                                                                                         
6:44:38 PM                                                                                                                    
They seek sites  of historical or cultural  significance and work                                                               
with the State  Historic Preservation Office (SHPO)  to make sure                                                               
they aren't impacted in any way by the project.                                                                                 
6:46:21 PM                                                                                                                    
MR. BUTT said  their focus remains on basic  design and execution                                                               
work. The project  will cost $45-65 billion and  they are working                                                               
to push  it towards  the bottom  of that range  and hope  to have                                                               
that work done towards the end of 2015 and beginning of 2016.                                                                   
6:46:55 PM                                                                                                                    
REPRESENTATIVE  HAWKER  asked  how spending  had  been  allocated                                                               
amongst the partners.                                                                                                           
MR. BUTT  replied that spending  ties back to the  equity shares.                                                               
The largest gas  resource owner - ExxonMobil -  has 32.6 percent,                                                               
the state has 25 percent,  ConocoPhillips has 21.6 percent and BP                                                               
has 21.4 percent.                                                                                                               
6:47:58 PM                                                                                                                    
MR.  BUTT said  permitting work  continues, because  it underpins                                                               
everything they do.  A range of federal, state  and local permits                                                               
are needed.  Fortunately, the permitting  process is  going well.                                                               
The project  continues to  have a lot  of community  open houses,                                                               
sessions where  folks are  told what the  project is  and advised                                                               
that Alaskan citizens are owners of the project.                                                                                
Work is  also continuing on  a 48-inch pipeline system  (which he                                                               
would  talk more  about  in a  few more  slides).  The 2016  work                                                               
program and budget  is a near term milestone, because  of the way                                                               
the  JVA   is  structured.  Each   party  has  to  have   a  good                                                               
understanding of  how each  of the participants  are going  to be                                                               
represented in 2016  and how they are going to  fund their share.                                                               
It  is a  critical decision  that has  to be  made over  the next                                                               
several weeks and if the decision  isn't made, they face a lot of                                                               
consequences   that   adversely    impact   timing   or   project                                                               
6:50:10 PM                                                                                                                    
MR.  BUTT said  he always  likes to  talk about  a couple  of key                                                               
messages. From an  AKLNG Project perspective it  is an integrated                                                               
project. Every piece  of the project talks to  every other piece.                                                               
If temperature  or pressure is  changed at  any one point  in the                                                               
project,  it  touches  everywhere  else in  the  project.  As  an                                                               
integrated system, it has been  permitted under FERC III; the DOE                                                               
export authorization and  all the permitting work is  tied to it.                                                               
This  allows  design  integration,   which  makes  it  easier  to                                                               
progress at Prudhoe Bay, because  they can talk to the operators.                                                               
Under different  structures, it's  a lot  more difficult  to have                                                               
that conversation because there  may be competitive or regulatory                                                               
concerns. But because the four  primary resource entities are all                                                               
represented  in the  project, those  concerns are  mitigated; the                                                               
conversation  can  be much  more  transparent,  which allows  the                                                               
design and construction to be a lot more efficient.                                                                             
MR.  BUTT said  they  have  worked to  understand  what the  five                                                               
offtake  points might  look like  and  where they  might be,  and                                                               
continue   to  reach   out   to   the  state's   representatives,                                                               
principally the AGDC,  to understand where the  hydraulics can be                                                               
completed. It  is an important  question to answer,  because they                                                               
know how much  gas is flowing from  the top of the  system to the                                                               
bottom and  where the gas  moves out impacts how  the compression                                                               
is designed  along the  system. This issue  needs to  be resolved                                                               
Most of  all, he repeated, they  are focused on trying  to reduce                                                               
cost  of supply,  a term  which is  used in  the LNG  business to                                                               
describe how  much money is  spent to  move the amount  of energy                                                               
that has  been produced over  the life of  the project. So,  if a                                                               
project takes  $45-65 billion  to build  and moves  32-35 tcf/gas                                                               
over a  30 year period, the  cost is calculated for  moving every                                                               
million btus of gas. LNG is  often sold in "millions of btu units                                                               
or  therms," a  convenient phrase  that folks  use to  define how                                                               
much energy  they are consuming.  Put into context, the  State of                                                               
Alaska (SOA) uses about 220 mmcf/gas  a day. This project has the                                                               
ability to  liquefy 2.7 -  2.8 bcf/gas a  day, enough to  fuel an                                                               
economy the size  of Germany or Canada. When it  comes on stream,                                                               
it has  the ability to replace,  plus or minus 5  percent, of all                                                               
the LNG in the world. It's  an enormous number, but it only works                                                               
if the  cost of delivering that  energy is low enough  to compete                                                               
with other people who are selling gas.                                                                                          
Gas  is  a  true  commodity,  he  explained.  Most  folks  aren't                                                               
interested  in where  the gas  comes from,  because it  goes into                                                               
their utility  grids and domestic  distribution systems,  and one                                                               
molecule of gas  looks a lot like another. This  gas has a little                                                               
more  ethane, so  it's a  little bit  richer or  hotter, but  the                                                               
methane  is  identical.   The  content  of  the   ethane  can  be                                                               
manipulated. So,  gas is a true  commodity and the only  thing to                                                               
compete on  is price. In today's  world where LNG is  selling for                                                               
less than half of what it  was when this conversation was started                                                               
three  years   ago,  the  cost   of  supply   becomes  critically                                                               
important. They haven't  found ways to cut the  $45-65 billion in                                                               
half and this is one of their primary concerns.                                                                                 
6:54:50 PM                                                                                                                    
The way that is done is through the ARC of Success:                                                                             
-Alignment of  all the parties:  can issues be  resolved amicably                                                               
and not adversely impact cost of supply.                                                                                        
-Risks associated with  project: can they be  reduced, because as                                                               
one goes through  the life of the project costs  go up, and risks                                                               
need to go down  so that investors and buyers want  to be part of                                                               
the project with you.                                                                                                           
-Success is measured in cost of supply.                                                                                         
6:55:51 PM                                                                                                                    
MR. BUTT  said the  initial design  scope for  the LNG  plant and                                                               
marine terminal is  72 percent complete. The team  is focusing on                                                               
the geo-technical issues,  making sure that if  this LNG facility                                                               
gets built  in the Nikiski area  that it will work.  The way that                                                               
is done is  they drill a lot  of bore holes and collect  a lot of                                                               
seafloor data to  make sure they understand that  what sits under                                                               
the heavy  equipment is stable  and won't move. To  date, nothing                                                               
but encouraging data  has been found, and they  continue to think                                                               
that the  folks who did  the initial design  work in the  60s and                                                               
who  selected  the  east  side  of  Cook  Inlet  just  below  the                                                               
forelands made some really good  choices; and the characteristics                                                               
of the area continue to be positive.                                                                                            
MR. BUTT said it  all comes down to costs. Right  now the team is                                                               
saying ok, if I  build it with this layout, how  would I move the                                                               
pieces  in  there  and  how  can I  do  that  as  efficiently  as                                                               
MR. BUTT  reported that the  pipeline side is also  continuing to                                                               
make a  lot of progress;  the initial  scope is about  78 percent                                                               
complete and most of the  work on well development procedures has                                                               
been finished.                                                                                                                  
He explained  that there are lots  of different ways pipe  can be                                                               
welded and today he had  visited the Northern Industrial Training                                                               
(NIT) facility  and saw their excellent  welding facilities. They                                                               
are doing those exact same  things: testing different ways to use                                                               
electrodes to  make sure the  weld is  stronger than the  body of                                                               
the pipe.  The weld has to  be 20 percent stronger  than the body                                                               
so it  never fails. This  testing has  been completed on  the 42-                                                               
inch  system and  now they  are  looking at  testing the  48-inch                                                               
system. It's  also very important  that when  the pipe is  put in                                                               
the  ground  it  doesn't  have   any  sort  of  deterioration  or                                                               
corrosion, so it gets coated.  Where  and how it gets coated is a                                                               
very important consideration and it is  a key issue that is being                                                               
worked on now.                                                                                                                  
In response  to the  state's request, he  reported that  about $1                                                               
million of project funds had  been allocated to buy 48-inch pipe.                                                               
One overseas  supplier was  found that was  willing to  give them                                                               
enough material  to do the  tests. The  team is now  working with                                                               
the  federal  regulators  to  look at  design  issues  that  will                                                               
accommodate the interior of Alaska where  it gets very hot in the                                                               
summer and very cold in the  winter. When that happens the ground                                                               
moves up and down  and the pipe has to be  designed so it doesn't                                                               
move. This  is called strain-based  design and means the  pipe is                                                               
loaded to be heavy so that it doesn't move as the ground moves.                                                                 
6:58:07 PM                                                                                                                    
The federal regulatory  agency in charge of all  pipelines in the                                                               
U.S.  is called  the  Pipeline Hazardous  Material Safety  Agency                                                               
(PHMSA). They  make sure the  design, construction  and execution                                                               
of  pipelines  are safe.  The  partners  are very  interested  in                                                               
testing  the 48-inch  system, because  early tests  on a  42-inch                                                               
system weren't always successful.                                                                                               
7:00:08 PM                                                                                                                    
MR.  BUTT  presented  a  graph  depicting  ramp-up,  plateau  and                                                               
decline of  the Prudhoe Bay  (PBU) and Point Thomson  (PTU) units                                                               
and explained why a 42-inch system  was used as the lead case for                                                               
the pre-FEED  stage. The  North Slope has  32 tcf/gas  (known and                                                               
discovered). They  assumed that  LNG buyers  would want  to write                                                               
contracts  in  the  20-25  year timeframe  and  worked  with  the                                                               
Department  of   Energy  (DOE)  to   get  a  20-25   year  export                                                               
authorization. Then  they asked what  size system makes  sense to                                                               
monetize the amount of gas they  know is there in that timeframe.                                                               
So  they looked  at different  balances  and came  up with  these                                                               
curves [in the  graph] to try and create balance  between the GTP                                                               
design, the  pipeline design and  the LNG plant  design including                                                               
expansion capabilities. To  balance the system the  GTP was sized                                                               
to use three  trains that handle about 3.3 bcf/gas  that could be                                                               
expanded  up by  about 1  bcf/gas. The  LNG plant  at the  bottom                                                               
would receive 2.7 - 2.8 bcf/gas  for three LNG trains. The reason                                                               
the sizing -  3 GTP trains, 3  bcf/gas in the pipeline  and 3 LNG                                                               
trains - matters is if one  wanted to expand it, everything stays                                                               
balanced. A  fourth GTP  train would  contain 1-1.1  bcf/gas; the                                                               
expansion capacity  in the  pipeline is  about 1-1.1  bcf/gas and                                                               
the LNG train, after fuel, gets about .8 bcf/gas.                                                                               
No portion of the system  gets overbuilt, because they don't want                                                               
to spend money  on a portion of the system  that doesn't generate                                                               
value.  The project  is sized  to handle  about 25  years of  the                                                               
known  resource.  Realizing  that  there will  probably  be  some                                                               
upside,  capacity about  the size  of another  Point Thomson  was                                                               
included on his  graph and labeled "other." The  system was built                                                               
on a  30-year basis and  needs to  find another Point  Thomson to                                                               
keep it  loaded. Expanding  the system would  be done  by putting                                                               
another 1 bcf/gas  line on top of that Point  Thomson line, which                                                               
over a 30-year life is another 6 tcf gas.                                                                                       
MR. BUTT  explained that if  everything worked well and  the life                                                               
of this project were to be extended  - very often the case in LNG                                                               
-  and from  30 years  to 50  years, that  would need  another 25                                                               
tcf/gas or another  Prudhoe Bay. So, they think  a 42-inch system                                                               
provides the  ability to keep  the system in balance,  gives some                                                               
expansion capability  in the event  more gas can be  found sooner                                                               
and gives some spare capacity late in the life of the project.                                                                  
The project doesn't  see all the data across the  whole state the                                                               
way other folks do. They know  what the known resource looks like                                                               
and how  to keep a 42-inch  system in balance, but  other parties                                                               
want them to look  at a 48-inch system. So, they  have done a lot                                                               
of work  to try and get  the 48-inch system matured  to a similar                                                               
level and then test it, do  the weld procedures, test the tensile                                                               
and compressive  strengths, make  sure the  pipe can  be properly                                                               
built and designed, basically making  sure a 48-inch system would                                                               
7:04:09 PM                                                                                                                    
MR.  BUTT said  that both  systems,  in terms  of peak  capacity,                                                               
would still handle  about 3.3 bcf/gas, delivering  2.7-2.8 net of                                                               
fuel  for instate  use; the  question then  becomes what  is left                                                               
over for export. The cost of  capex and opex for a 42-inch system                                                               
is  lower, because  it costs  less  capital to  build. A  48-inch                                                               
system might cost less to operate,  because less fuel is used for                                                               
the bigger pipe (because the pipe  is bigger, it's easier to move                                                               
gas through  it). That is why  about 8 stations are  needed for a                                                               
42-inch system and  probably only 4 or 5 are  needed on a 48-inch                                                               
system. This  number is  a range  because more  work needs  to be                                                               
done on it.                                                                                                                     
He related that they have been  working on the 42-inch system for                                                               
years but  only a  couple of  months on  the 48-inch  system. Mr.                                                               
Butt   explained  that   the  8-station   design  provides   more                                                               
redundancy, meaning if you lose one  station you still have 7. On                                                               
the flip  side, the 48-inch system  uses a lot less  fuel because                                                               
it has  only 4 or  5 compression  stations. Either system  can be                                                               
expanded by  25-30 percent  (1 bcf/day),  and that  balance could                                                               
still be  preserved by adding  10 stations on the  42-inch system                                                               
and about 5 stations on the 48-inch system.                                                                                     
7:06:45 PM                                                                                                                    
With that  said, Mr.  Butt continued  that they  don't understand                                                               
all the risks  yet. The 42-inch system is bigger  and heavier (by                                                               
20 percent) and  at a higher pressure than any  other system that                                                               
has been built in North America.  A 48-inch system would be about                                                               
60 percent  heavier. To put  that into context, a  42-inch system                                                               
weighs about  5.8 tons per  joint, which is about  the equivalent                                                               
two F-150 pickup  trucks. A 48-inch system is about  7.8 tons per                                                               
joint, which  is about  three F-150s. To  put that  into capacity                                                               
terms, a truck can move six  joints of pipe for a 42-inch system,                                                               
but only four joints per truck  for a 48-inch system. So, instead                                                               
of 150,000  truckloads of  pipe moving up  and down  the pipeline                                                               
right-of-way there will  be 225,000 truckloads of pipe  for a 48-                                                               
inch system.                                                                                                                    
7:08:47 PM                                                                                                                    
What does that  do in terms of sourcing? Right  now they have not                                                               
been able  to find a  North American supplier  of pipe for  a 48-                                                               
inch system and  may not even be  able to find one  for a 42-inch                                                               
system, but  one will  be found  somewhere. Evaluating  a 48-inch                                                               
system will result in a 6-8  month impact on the FEED timing, but                                                               
the project team  doesn't want it to impact  the final investment                                                               
decision  (FID)  or startup  times  and  wants  to find  ways  to                                                               
recover that time.                                                                                                              
7:09:43 PM                                                                                                                    
SENATOR MACKINNON asked  if the administration had  given him any                                                               
information on who is expected to pay for the upsizing.                                                                         
MR.  BUTT  replied  that  a  lot of  conversations  on  that  had                                                               
occurred, but  no decision. The project  team recommends spending                                                               
monies within  the existing  project budget  to mature  a 48-inch                                                               
design to  a level similar to  what has been done  with a 42-inch                                                               
design so  an apples-to-apples comparison  can be made.  But that                                                               
comparison is only going to tell  how much extra a 48-inch system                                                               
will cost and  how much extra risk  it's going to take.  A lot of                                                               
conversations will  be needed about  how any costs or  risks will                                                               
be borne.                                                                                                                       
SENATOR  MACKINNON  said the  sooner  that  number is  known  the                                                               
better since they are talking about  a 6-8 month delay, and under                                                               
the  previous  administration  those   delays  cost  hundreds  of                                                               
millions a  month. The  state doesn't know  where it's  coming up                                                               
with its share of the money.                                                                                                    
7:11:08 PM                                                                                                                    
CO-CHAIR  NAGEAK asked  about the  cost differential  between the                                                               
42-inch and 48-inch pipe.                                                                                                       
MR.  BUTT  answered  that  it  is a  little  premature,  but  the                                                               
additional cost of the pipe is  well in excess of $1 billion, but                                                               
fewer compression  stations will save money.  Their modeling told                                                               
them that  the larger pipe would  add 10-15 cents to  every cubic                                                               
foot of  gas. That  sounds like  a small number,  but it  adds up                                                               
into the  hundreds of  millions when  you're talking  about 32-35                                                               
7:12:51 PM                                                                                                                    
CO-CHAIR NAGEAK asked about the operating cost differential.                                                                    
MR. BUTT  answered that the  operating costs on a  48-inch system                                                               
are a little bit lower  assuming lower fuel use. However, propane                                                               
might  be needed  on  the 48-inch  system,  because the  distance                                                               
between the compression  stations gets much larger.  In a 42-inch                                                               
system, the compression stations are  spaced about every 80 or 90                                                               
miles, so  the gas stays  at a relatively  consistent temperature                                                               
and  can be  managed at  the compression  stations. In  a 48-inch                                                               
system,  there  are  only  5  compression  stations  and  propane                                                               
chilling  might  be   needed  to  keep  the  gas   at  the  right                                                               
temperature.    That  would  change  the  math.  If  the  parties                                                               
involved feel it's  important, that work needs to  be done before                                                               
moving  through  the gate,  because  that  is what  core  project                                                               
management and alignment is about.                                                                                              
7:14:09 PM                                                                                                                    
REPRESENTATIVE HAWKER said  he first became aware  of the 48-inch                                                               
system when  a five-point letter  from the administration  to the                                                               
project  was released.  But  he hadn't  seen  any engineering  or                                                               
economic support for that change  coming from the administration.                                                               
He  asked  if  the  project   received  any  rationale  for  that                                                               
MR. BUTT answered that the letter  of June 8 was received, but no                                                               
information was with it.                                                                                                        
REPRESENTATIVE  HAWKER said  the letter  requested rerouting  the                                                               
project and asked if they are contemplating that.                                                                               
7:15:22 PM                                                                                                                    
MR.  BUTT  replied that  from  conversations  with AGDC  and  the                                                               
administration  he knows  that all  parties are  comfortable with                                                               
the western route.  Conversations about spurs that  take gas from                                                               
the mainline back to population  centers are happening, but there                                                               
is no alignment on them yet.                                                                                                    
REPRESENTATIVE  HAWKER  asked  if  the  preferred  western  route                                                               
requires a crossing of Cook Inlet.                                                                                              
MR. BUTT answered yes.                                                                                                          
REPRESENTATIVE  HAWKER  asked him  to  explain  the notation  "CI                                                               
crossing complexity" for construction of the 48-inch system.                                                                    
MR. BUTT  answered that they  are a  lot less confident  in their                                                               
ability to lay  a 48-inch pipeline across the  Cook Inlet. Laying                                                               
any pipeline across a body  of water is a challenge, particularly                                                               
where it enters  and exists. High directional  drilling is needed                                                               
to position the pipe properly and then  a lay bar is used to pull                                                               
the line.  One of the challenges  of the other route  is its high                                                               
tidal movement  and shoreline  mud and not  being able  to really                                                               
get a construction  barge into those areas. A 48-inch  pipe is so                                                               
much heavier  that it  is always  trying to  flex down  and sink.                                                               
They are fairly  confident they can do it with  a 42-inch system,                                                               
but it will be very difficult.                                                                                                  
7:17:41 PM                                                                                                                    
SENATOR STOLTZE asked if Mr. Butt is an "Exxon guy."                                                                            
MR. BUTT responded  that he worked for Exxon, but  now he reports                                                               
to the  project and he works  on behalf of all  the stakeholders,                                                               
which includes everybody  in this room, as Alaskans.  As such, he                                                               
tries to make fact-based decisions.  One of the questions was the                                                               
routing, east  or west, but all  parties are in alignment  on the                                                               
western  route. The  eastern route  has  some pretty  significant                                                               
issues  like construction  through an  ordinance range,  crossing                                                               
near  the Knik  Arm  that has  a lot  of  seabed movement  (30-40                                                               
feet),  the existence  of eight  Chugach Electric  lines in  that                                                               
area and  trying to  put in  a lay barge  with a  300-foot anchor                                                               
span. Crossing the  Cook Inlet there is very  difficult and would                                                               
cost a lot more money than building a spur back to the Mat-Su.                                                                  
Getting back to the core purpose  of an LNG project, he explained                                                               
that the intent of any party is  to make sure they have access to                                                               
the  gas and  utility value,  and it's  a lot  easier to  build a                                                               
small spur than move a big  mainline. However, how that gets paid                                                               
for and how the risks are  carried are open questions. But from a                                                               
technical  and engineering  design perspective,  putting a  42 or                                                               
48-inch  system in  a very  difficult-to-construct place  makes a                                                               
lot less  sense than putting a  12-16 inch line into  an existing                                                               
utility system that can be expanded in the future.                                                                              
7:20:50 PM                                                                                                                    
SENATOR STOLTZE said when he first  met Mr. Butt he was trying to                                                               
find out what his connections  were and he very skillfully evaded                                                               
any mention of Exxon, which he found troubling.                                                                                 
7:22:05 PM                                                                                                                    
MR. BUTT  responded that  while he  appreciated his  comments, he                                                               
does work on behalf of all  the stakeholders. This means there is                                                               
an integrated  team with  people from all  the companies,  and he                                                               
holds himself  to that  standard; everyone  on the  project does.                                                               
With that  said, he had  worked for  Exxon since the  merger. His                                                               
bio is  clear and has  been read at  every public meeting.  He is                                                               
proud to  work for Exxon; it  has done an outstanding  job on the                                                               
project. The commitment  of each of the parties  has been written                                                               
about many times. He does not speak for any one party.                                                                          
7:23:24 PM                                                                                                                    
REPRESENTATIVE  JOSEPHSON asked  Mr. Butt  if some  of the  other                                                               
participants are interested  in upgrading to a  48-inch pipe, not                                                               
just the administration.                                                                                                        
7:24:29 PM                                                                                                                    
MR. BUTT  answered that  it wasn't  fair to say  that any  of the                                                               
project  participants had  made  a decision  yet  on the  48-inch                                                               
pipeline,  because none  of  them has  all  the information.  The                                                               
project team,  which is an  integrated entity of people  from all                                                               
the companies, has said they  will take money from their existing                                                               
budget and try  to study the 48-inch system  to really understand                                                               
the  additional  costs  for capital,  the  potential  savings  in                                                               
operating expense and  what the whole execution  risk looks like.                                                               
One party has agreed  to put up its share of the  cost to do that                                                               
work and  that party  is ExxonMobil. The  other parties  have two                                                               
more weeks to look at the data and make their own decisions.                                                                    
7:26:05 PM                                                                                                                    
REPRESENTATIVE JOSEPHSON said he  referred to "some disagreement"                                                               
but he used  the word "we," which he though  meant AKLNG was more                                                               
comfortable with a 42-inch plan visa vie other participants.                                                                    
MR. BUTT  replied that by "we"  he means the integrated  group of                                                               
people trying to advance the project.                                                                                           
7:27:26 PM                                                                                                                    
SENATOR MACKINNON  asked the "commonality"  of a 48-inch  pipe in                                                               
the  world and  if pipe  is normally  bought in  America, whether                                                               
it's 48 or 42 inches.                                                                                                           
MR.  BUTT  replied  that  that  information  is  still  emerging,                                                               
because more work is needed on  the 48-inch system, but a 48-inch                                                               
pipe is  much harder to  build. A 4-foot  piece of steel  that is                                                               
8/10ths  of an  inch  thick  needs to  be  rolled  or turned  and                                                               
welded, and not  a lot of mills have that  capacity or people who                                                               
have that skill.  AKLNG was not able  to find a mill  in the U.S.                                                               
able to  do that work  now. That doesn't  mean it can't  be done.                                                               
The  project  needs  to  understand if  the  line  size  decision                                                               
changes the sourcing in any way.                                                                                                
7:28:55 PM                                                                                                                    
SENATOR MACKINNON asked, worldwide, if  there is a lot of 48-inch                                                               
MR. BUTT  answered that TAPS is  a 48-inch line and  early design                                                               
work on  the Denali  and APP  lines were  around a  48-inch line,                                                               
because it was a  very long line and a lot  of economies of scale                                                               
were needed to make it work.  There are a couple of 48-inch lines                                                               
in the Lower 48  - Rex and Ruby - but they are  not this long and                                                               
not  at  these pressures,  and  they  don't  have the  same  wall                                                               
thickness. There  are no  48-inch systems  like they  are talking                                                               
about anywhere  in the world. It's  not just the diameter  of the                                                               
pipe;   it's  the   operating  pressure,   the  length   and  the                                                               
characteristic and composition of what  is in the pipe. In Alaska                                                               
the   ground  moves   and  a   "strain-base"  design   will  have                                                               
consideration.  That  is a  lot  bigger  than any  other  48-inch                                                               
lines. He said  Turkey has a 52-inch line, but  it's much thinner                                                               
and  the weight  per joint  is less  than those  for the  42-inch                                                               
7:30:26 PM                                                                                                                    
SENATOR MACKINNON said she appreciated  the partners slowing down                                                               
and reallocating  resources to make  sure the right size  pipe is                                                               
7:30:43 PM                                                                                                                    
REPRESENTATIVE SADDLER asked if  any vendors supplying either the                                                               
42  or  48-inch pipe  could  demand  an  equity position  in  the                                                               
pipeline as a condition of that sale.                                                                                           
MR. BUTT answered that pipeline  mills usually do not want equity                                                               
in a project, because they would  be in it for 30 years. Pipeline                                                               
mills work on a three or four year project life.                                                                                
7:31:49 PM                                                                                                                    
MR. BUTT  reported that  the Gas Treatment  Plant (GTP)  is going                                                               
very well and  is about 86 percent complete.  Focus is continuing                                                               
on the acid gas rejection unit  (AGRU), the main system that uses                                                               
amine   to  strip   the  non-hydrocarbon   components  from   the                                                               
hydrocarbon  component.  Everything  is   being  done  to  reduce                                                               
weight, because it all has to  be modularized and taken up to the                                                               
North Slope  to be put  together. A lot  of permit work  has been                                                               
done on  the train  layout and design  that involves  the Federal                                                               
Energy Regulatory  Commission (FERC), the  National Environmental                                                               
Process  Act (NEPA),  and  the  overarching Environmental  Impact                                                               
Statement (EIS) process. A lot of  really good work is being done                                                               
with the Prudhoe  Bay operator on understanding how  the GTP will                                                               
impact  integration  with  other  Prudhoe  Bay  systems  as  cost                                                               
effectively as possible.                                                                                                        
An important characteristic  of the Alaska gas at  Prudhoe Bay is                                                               
that is has very  high CO(11  percent or  about 450 mcf/day), and                                                               
removing it  is one of the  very expensive parts of  the project.                                                               
Putting that into context, the  State of Alaska uses 220 mmcf/gas                                                               
for all of  the state's energy needs. The  CO is  recognized as a                                                               
greenhouse  gas   and  gets   put  back   into  the   ground  for                                                               
environmental protection and this project  is unique in that they                                                               
have a clear understanding of how that will be done.                                                                            
7:34:02 PM                                                                                                                    
MR.  BUTT  said  a  lot  of work  had  been  done  on  integrated                                                               
logistics  meaning how  all the  stuff  will get  moved. The  GTP                                                               
weighs as  much as an  aircraft carrier, about 270,000  tons. The                                                               
LNG plant weighs  about 220,000 tons. There is well  in excess of                                                               
1 million tons  of pipe in a  42-inch system and that  goes up by                                                               
40 percent  (1.5 million  tons) for a  48-inch system.  They have                                                               
looked at  all the ports  and all the  ways to move  materials in                                                               
and  out  of  the  communities  to make  sure  that  impacts  are                                                               
minimized  and  as  cost  effective as  possible.  They  want  to                                                               
understand how  to move  big, heavy pieces  of equipment  by rail                                                               
and sea,  and how  people and  the more  time-sensitive materials                                                               
will be moved by air.                                                                                                           
He said that this work was  started with Pacific Rim Logistics, a                                                               
local Alaskan  company. He  related that  250 modules  which will                                                               
have  to clear  customs will  be moved  through Dutch  Harbor. By                                                               
comparison, Point  Thomson has five  modules and even that  was a                                                               
big amount  of work.  The southern  ports will  have to  bring in                                                               
200-400 thousand  tons of material  in 150,000 containers.  A lot                                                               
of the pipe will  have to move through the Mat-Su  area. A lot of                                                               
work  will have  to  be managed  on the  rail  and fuel  systems.                                                               
Construction activities  will have  to be managed  in a  way that                                                               
doesn't adversely impact the community.  It has to make sense all                                                               
across the system.  About 150,000 loads of pipe  will be trucked;                                                               
a bigger system would require  220,000 loads. Sourcing and moving                                                               
all that  has to be  figured out and  that is what  the logistics                                                               
study does.                                                                                                                     
7:36:25 PM                                                                                                                    
MR. BUTT reported that a lot  of work is being done on integrated                                                               
labor and  early estimates indicate  9,000 - 15,000 jobs  will be                                                               
needed  to  build  the AKLNG  Project.  Preliminary  availability                                                               
analyses are  being done  on where to  get the  skilled craftsmen                                                               
and it's  hard to find  them. Workforce development  and capacity                                                               
building will  have to be undertaken.  He said the work  study is                                                               
about half-way  done. A  lot of  conversations had  happened with                                                               
labor  groups   and  the  Department   of  Labor   and  Workforce                                                               
Development  (DLWF) to  understand their  concerns. Gap  analyses                                                               
are being  done to find where  more capacity is needed  and where                                                               
people can  be found to do  this. That information will  be built                                                               
into their recommendations and that  will probably take until the                                                               
end of the year.                                                                                                                
7:38:02 PM                                                                                                                    
SENATOR DUNLEAVY  asked if Exxon  decided independently  from the                                                               
Five Point  Letter to commit  some resources to studying  the 48-                                                               
inch line or as a result of it.                                                                                                 
MR. BUTT answered  that he wasn't sure if it  was fair to divorce                                                               
that decision  from the letter or  not. There have been  a lot of                                                               
conversations with  this administration  as well as  the previous                                                               
one about  the size of  the line. It's not  fair to say  that any                                                               
one  party made  a  decision independent  of  the other  parties.                                                               
Within  the project  team, they  believe they  need to  take some                                                               
time and money to study it,  and one party has had an opportunity                                                               
to  vote. The  other  parties  have their  votes  pending and  he                                                               
didn't want  to presume how they  will vote. Then they  will move                                                               
forward. This is  an example of how a mega  project is worked. In                                                               
pre-FEED the big questions of how  to do different things are hit                                                               
and parties don't always see it  the same. How that is managed so                                                               
the  people  feel  comfortable with  progressing  determines  the                                                               
ability to keep costs down.                                                                                                     
MR. BUTT  related that  they want  to make  sure that  this group                                                               
under  the  SB 138  legislation  gets  the information  on  these                                                               
activities that are being completed on their behalf.                                                                            
7:40:35 PM                                                                                                                    
SENATOR MACKINNON asked if he meant  one person has voted, so the                                                               
Walker  administration  has  requested that  the  other  partners                                                               
consider an upsizing of the line.                                                                                               
MR. BUTT  answered that  he hoped  he had said  that they  have a                                                               
recommendation to take money from  the existing budget and change                                                               
the work scope,  because the JVA was written to  design a 42-inch                                                               
system. A  change in that  requires an agreement of  all parties,                                                               
because all have  agreed that this is the work  they are going to                                                               
do. They  have to  all agree  to do  something different  and the                                                               
state as  a party  has said it  would like to  look at  a 48-inch                                                               
system. The project team has said  to do that will cost this much                                                               
money and  it will  take this long  to do. One  party has  had an                                                               
opporutnity  to  say yes  and  the  other  parties have  time  to                                                               
evaluate that  per the JVA and  they can vote as  they chose. The                                                               
vote has  to be  unanimous. Everyone  has to  be willing  to move                                                               
forward or they have to "go  and talk to each other." That sounds                                                               
difficult,  but that  is how  mega projects  are managed.  It has                                                               
been  proven time  and  again to  move  forward without  everyone                                                               
feeling comfortable with how the  resources are being used is not                                                               
prudent use of them.                                                                                                            
7:42:24 PM                                                                                                                    
SENATOR DUNLEAVY asked  if the 48-inch concept had  not come from                                                               
the administration,  would Exxon  still be looking  at dedicating                                                               
resources to study it.                                                                                                          
MR. BUTT  answered that when he  talks about the project  team he                                                               
means  people  from all  the  parties.  TransCanada provides  the                                                               
leader for the midstream portion and they have looked at a 48-                                                                  
inch system  multiple times over  the last three years.  They are                                                               
always trying  to understand  what makes the  most sense  to move                                                               
that gas to  deliver the curve shape he referenced.  All of their                                                               
analysis  has  found  that  a  48-inch  system  costs  more.  The                                                               
question is if  more gas is found from other  sources, would that                                                               
changed  the math.  They want  to understand  what the  cost/risk                                                               
looks like. Exxon  as a party has worked with  all the parties to                                                               
frame  this issue.  If any  party  had brought  it forward,  they                                                               
would have looked at it, because  when any party brings up a pre-                                                               
FEED question, it gets considered.                                                                                              
He  stated  that  mega  projects  are  successful  when  all  the                                                               
participants work in  an aligned manner and find  ways to resolve                                                               
differences of opinion, and you're  going to have them. It's just                                                               
a  fact. The  challenge is  to  get the  data to  make a  quality                                                               
decision that everyone can support.                                                                                             
7:45:14 PM                                                                                                                    
MR. BUTT  recognized what  all the  work crews  are doing  in the                                                               
field: 200-250 people  at any one time and 225,000  hours of data                                                               
collection field work. This is  fundamental and crucial work, but                                                               
everything hangs on the ability  to keep regulatory work on track                                                               
to  get the  permits, because  without them  they don't  have the                                                               
authorization  to construct.  The  core of  what  they are  doing                                                               
until the permits  are secured is called a  "critical path". This                                                               
is their third  summer field season and one more  will be needed.                                                               
That information  next year will  inform the  application process                                                               
which triggers  the EIS. It  continues to go really  well. Dozens                                                               
of Alaskan companies are involved.                                                                                              
7:46:42 PM                                                                                                                    
"External  Engagement"  is  another critical  element.  With  the                                                               
state as  25 percent participant  with a derivative right  to the                                                               
revenues  from  that production,  they  want  to make  sure  that                                                               
Alaskans  understand  what  is  being done.  They  also  have  an                                                               
obligation under  the NEPA process to  have community engagement.                                                               
FERC takes over once the resource  report is filed and the docket                                                               
is established.  That was done  earlier this year. As  such, FERC                                                               
is actually leading the  community conversations. This engagement                                                               
process is  core to securing  the permits  based on all  the data                                                               
they have talked about.                                                                                                         
He  said  they  had  done  a  lot  of  outreach  to  500  Alaskan                                                               
businesses  to try  and  help them  understand  what the  project                                                               
might  mean  to them.  This  is  a mutually  beneficial  process,                                                               
because all those people will be  needed to do the work. Outreach                                                               
has  been  done  with  the  Alaska  Native  Regional  and  Native                                                               
Corporations, the Alaska Federation  of Natives and Alaska Native                                                               
groups, village and  tribal, who want to ensure  that their lands                                                               
are respected. The time and  energy invested is very valuable and                                                               
continues to go well. One  of the Native corporations is directly                                                               
a  participant in  the  both the  LNG plant  design  and the  GTP                                                               
7:49:05 PM                                                                                                                    
MR.  BUTT said  mega  projects  fit together  by  having a  gated                                                               
process: moving from  concept to pre-FEED, then to  FEED, then to                                                               
Engineering  and Construction  to the  Final Investment  Decision                                                               
(FID). The  strength of the  gated project management  process is                                                               
that  no   one  moves  through   the  gate  until   everybody  is                                                               
comfortable. In focusing on the  importance of the gate, they may                                                               
not have  done enough work  to talk  about what happens  with any                                                               
In the  concept phase, you  identify and rank projects  on ideas:                                                               
how are all the different ways  to do this. Very broad questions.                                                               
Using building  a house as an  analogy, how many bedrooms  do you                                                               
want  and how  big  should  they be.  They  don't  have an  exact                                                               
perfect answer,  but it needs  to be framed  in a manner  that is                                                               
satisfactory to all  parties to be able to move  into a much more                                                               
detailed design  phase that  optimizes the  design and  tests it:                                                               
and how it can be constructed  with the lowest risk and most cost                                                               
efficient manner possible.                                                                                                      
7:51:18 PM                                                                                                                    
MR. BUTT  said the project is  now in pre-FEED, and  in FEED more                                                               
information  on the  regulatory and  design processes  gets done.                                                               
Process flow diagrams  were created depicting how  all the fluids                                                               
would   move.    Those   are   translated   into    process   and                                                               
instrumentation diagrams  that details every nut  and bolt. Those                                                               
are given to the regulators to  be tested for safety concerns and                                                               
all the  other regulatory  issues that  they are  responsible for                                                               
The execution stage is where  the project is actually built. Each                                                               
of  the  phases  is  about   reducing  uncertainty  and  risk  as                                                               
resourcing  and  costs increase.  This  matters  because as  cost                                                               
exposure increases the  project doesn't want to get hung  up on a                                                               
point  of  difference.  The  core  element  of  the  mega-project                                                               
concept  is  that  big  decisions   are  made  early  in  concept                                                               
selection. About $35 million a  year was spent during concept. In                                                               
pre-FEED about $35  million a month was spent. In  the FEED stage                                                               
about  $35 million  a  week will  be spent  -  because many  more                                                               
people  will  be  doing  more detailed  design.  What  is  really                                                               
important  is  that   once  the  permits  are   acquired  one  is                                                               
positioned to  go into  the construct phase  where $35  million a                                                               
day will  be spent! His slide  11 graphed this concept  using the                                                               
actual AKLNG spend curve and  the initial design estimate of $45-                                                               
65 billion.  A red  line was  laid over  the spend  curve showing                                                               
when  the big  decisions are  made. He  pointed out  that as  the                                                               
phases  are  moved through  the  process  the ability  to  change                                                               
things goes  down. Once  permits are  obtained around  citing and                                                               
routing, design,  and machinery, it  can't be changed.  A restart                                                               
would be required.                                                                                                              
7:54:52 PM                                                                                                                    
MR. BUTT  summarized once the  project gets to  construction they                                                               
have basically locked  in a set of documents  which are thousands                                                               
of pages  long that they give  to dozens of contractors  to align                                                               
the work  of thousands of  people to  build the project.  The two                                                               
curve shapes show why alignment is so important.                                                                                
He said  they feel  like they  have made  a tremendous  amount of                                                               
progress since the pre-FEED work  was initiated in June 2014. The                                                               
integrated  project  which  has  members  from  all  the  parties                                                               
including  the state  and  its  representative, TransCanada,  and                                                               
AGDC has  done a lot  of work that  he has summarized  here. Some                                                               
great  milestones  have  been met  and  some  regulatory  hurdles                                                               
achieved that many other projects  in the U.S. have not achieved,                                                               
in a time that  they are really proud of, and  they are trying to                                                               
do it in a way that builds alignment.                                                                                           
7:55:53 PM                                                                                                                    
REPRESENTATIVE MILLET  asked if  there is  alignment for  the 48-                                                               
inch pipe with  all the producers and if he  had documentation of                                                               
what has been agreed to with the partners.                                                                                      
MR. BUTT answered that TransCanada  is the state's representative                                                               
in  the  mid-stream and  Vincent  Lee,  Director, Major  Projects                                                               
Development  for TransCanada,  could  best explain  conversations                                                               
between  TransCanada  and  the   state.  To  her  question  about                                                               
pipeline  size,   he  said  the   state,  a  25   percent  equity                                                               
participant, through  its representative  has said it  would like                                                               
to look  at a bigger pipeline  and make sure that  as those gates                                                               
are passed -  as the project's influence goes down  and its costs                                                               
go up - that it is building the right pipeline.                                                                                 
The project team has  said that they need to spend  a few tens of                                                               
millions of dollars  out of the existing  budget, reallocate some                                                               
resources, buy some 48-inch pipe  and take the 48-inch testing to                                                               
the  same level  it has  on the  42-inch system,  because several                                                               
years of work has been done on  the 42-inch system and only a few                                                               
months of  work on the  48-inch system - so,  we can make  a real                                                               
fair comparison  - apples to apples  - how a real  comparison can                                                               
be  made   of  risks.  All   project  participants  want   to  be                                                               
comfortable that  if they go to  the next step what  they want is                                                               
getting built.                                                                                                                  
The JVA  was aligned around a  42-inch system so all  parties had                                                               
defined the work scope and  costs accordingly. One party has said                                                               
it  is willing  to pay  its share  of the  work to  test the  two                                                               
systems. No one has agreed on  what makes sense going forward and                                                               
believe the  process under SB  138 is their opportunity  to share                                                               
that information  and view, so  that people are  comfortable with                                                               
what they are doing.                                                                                                            
7:59:42 PM                                                                                                                    
REPRESENTATIVE MILLET  asked if he  had any analysis of  what the                                                               
increase from  a 42  to a  48-inch line would  cost and  what the                                                               
return on investment would be.                                                                                                  
MR.  BUTT answered  that  the work  that has  been  done to  date                                                               
indicates the 48-inch  pipe will cost hundreds  of millions more,                                                               
which  will increase  the cost  of supply  of the  project, which                                                               
impacts its competitiveness. That  cost benefit analysis is based                                                               
on preliminary work that was done  at the concept level. They are                                                               
willing to commit the resources to  do the same level of work for                                                               
a  48-inch   line.  One   party  is   willing  to   support  that                                                               
recommendation, but the other parties,  including the state, have                                                               
yet to cast their vote.                                                                                                         
8:01:08 PM                                                                                                                    
REPRESENTATIVE  SADDLER said  some of  the more  cynical Alaskans                                                               
have seen  progress on gasline  projects that have  not proceeded                                                               
to  fruition,  but he  is  excited  about  the momentum  and  the                                                               
potential around  the work  that has  been done  on this  one and                                                               
hopes it proceeds. He asked  how much work from previous projects                                                               
provide a foundation for the AKLNG Project's team's work.                                                                       
MR. BUTT answered that the AKLNG  Project has reached a new level                                                               
and  that has  been done,  because  they have  tried to  preserve                                                               
alignment  as  much as  possible.  Previous  incarnations of  the                                                               
project were all  around moving gas by pipe: both  the Denali and                                                               
APP  projects were  designed to  take  gas from  the North  Slope                                                               
where  it doesn't  have a  market to  Alberta for  access to  the                                                               
Lower  48, and  there is  no  market there,  either. Everyone  is                                                               
lucky they  didn't invest resources  in making that  happen. With                                                               
that said, he respects the skepticism  of all the Alaskans he has                                                               
talked to.  AKLNG is very  different than  previous incarnations,                                                               
because this is the first time  all four parties have been trying                                                               
to  work together.  That's part  of the  reason they  aren't very                                                               
good at it; there isn't a lot  of history doing it. But the state                                                               
is never going to  be successful until it can find  a way to make                                                               
a project work for all parties.                                                                                                 
The core philosophy of AKLNG is  to try and create a relationship                                                               
where the parties  share risks and share returns.  The state puts                                                               
up its money and shares its  risks and has the same voting rights                                                               
as everybody  else. It draws  on the technology and  expertise of                                                               
the  other  three parties  who  have  a  lot  of global  LNG  and                                                               
construction experience.  It is something that  has never existed                                                               
8:04:10 PM                                                                                                                    
The   earlier   incarnations  of   this   project   did  get   an                                                               
Environmental Impact  Statement (EIS), but  the plan was  to vent                                                               
CO.  That is  environmentally irresponsible and he  wouldn't want                                                               
to  be part  of a  project  that planned  to vent  more than  450                                                               
mcf/COa   day. This project  must do things no  other project has                                                               
done before. This gas is  getting treated and the non-hydrocarbon                                                               
elements will be  put back into the ground. But  because they are                                                               
under  FERC III,  they can  work  together with  the Prudhoe  Bay                                                               
operator, and  because of the Point  Thomson settlement structure                                                               
they  have an  access to  those resources  and have  economies of                                                               
Think about it:  the first molecule of LNG that  gets made is the                                                               
most expensive.  Paying for the  first molecule is  the challenge                                                               
everyone thinks about  and that is why the project  curve gets so                                                               
important.  They have  been working  together for  years now  and                                                               
AKLNG has  been structured in  a very  different way. The  SB 138                                                               
framework gives them a chance they have never had before.                                                                       
8:05:50 PM                                                                                                                    
SENATOR  HUGGINS   said  almost  eight  months   ago  the  Senate                                                               
communicated  to  the  administration  to target  October  for  a                                                               
special session on  AKLNG or a pipeline and they  are now burning                                                               
through October.  He asked  Mr. Butt,  as the  spokesman tonight,                                                               
what things he would like to see next.                                                                                          
8:06:57 PM                                                                                                                    
MR.  BUTT  answered on  behalf  of  the  project, it  needs  some                                                               
clarity on  what the state  as a  participant wants in  its role,                                                               
and  particularly  how   it  wants  to  be   represented  in  the                                                               
midstream. Because as  they move forward and  look at contracting                                                               
for FEED,  he didn't know whose  name to put on  those contracts.                                                               
Something else that is very  important is to understand how those                                                               
additional  activities would  be  funded in  the  event they  are                                                               
changed, because the  appropriation is needed. Under  the JVA the                                                               
work program  and budget  have to  be funded  by all  the parties                                                               
before the  end of  the year,  so that  as they  go into  the new                                                               
year, everyone has agreed on what is going to be done.                                                                          
8:08:27 PM                                                                                                                    
REPRESENTATIVE HUGHES  asked how  the pipe size  decision affects                                                               
the overall timeline.                                                                                                           
8:09:33 PM                                                                                                                    
MR. BUTT  answered they think  they can bring the  48-inch design                                                               
to a similar  level of maturity in 6-8 months.  The first step is                                                               
getting the  pipe and  that will  probably be  in early  2016. As                                                               
soon as  they get the  pipe, they will  start doing the  weld and                                                               
compression testing,  the tensile strength testing  and the PHMSA                                                               
testing that is needed to have  the same level of confidence in a                                                               
48-inch system that they do in a 42-inch system.                                                                                
He  stressed  that pipeline  diameter  is  only  a piece  of  the                                                               
puzzle, because the  pipeline in Alaska is  very different. There                                                               
are wall  thickness issues and  the pipe itself is  actually five                                                               
different designs  for different  Alaskan environments.  The most                                                               
important   thing  about   those  6-8   months  is   making  sure                                                               
information is  shared on  the way  and in a  way that  keeps the                                                               
project  moving forward  at a  prudent pace  to keep  costs down.                                                               
Then a  decision will  be made.  Each party under  the JVA  has a                                                               
vote and a unanimous decision is required.                                                                                      
8:11:44 PM                                                                                                                    
REPRESENTATIVE JOSEPHSON  remarked that Exxon found  enough merit                                                               
in the request to pony up its share.                                                                                            
MR. BUTT answered  that was correct. The other  parties are doing                                                               
their work;  he is not impugning  any company. You don't  move to                                                               
more  expensive decisions  until you  have alignment  around your                                                               
design.  Every project  in  the  world that  does  that lives  to                                                               
regret it.  Everyone needs to be  okay with it and  you can't get                                                               
okay with  it until you  have quality  data about capex  and opex                                                               
differentials and other  things. He said they  have been studying                                                               
one system for three years and  comparing it to one that has been                                                               
studied for  four months.  They can take  what they  have learned                                                               
and  catch up  real  quick,  but they  don't  want  it to  impact                                                               
MR.  BUTT went  back to  the  curve and  said that  time is  your                                                               
friend prior  to the  final investment  decision. When  the curve                                                               
starts  to go  straight  up  the wall,  time  is  no longer  your                                                               
friend. It's $35 million or more a day.                                                                                         
8:15:38 PM                                                                                                                    
REPRESENTATIVE  TARR asked  if they  are sticking  to the  former                                                               
commissioner's  labor and  workforce development  plan and  if he                                                               
was following  the budget  reductions that  are limiting  some of                                                               
the  things that  are happening  at the  Department of  Labor and                                                               
Workforce  Development (DOLWD)  and the  university to  make sure                                                               
that areas of workforce development aren't cut.                                                                                 
MR.  BUTT  answered  that  they   are  continuing  to  have  good                                                               
interaction with  Department of  Labor and  Workforce Development                                                               
(DOLWD)  Commissioner  Drygas.   Their  conversations  are  "very                                                               
productive  and very  collaborative." One  of the  most important                                                               
considerations in  the workforce development puzzle  is what long                                                               
terms skills Alaska wants to build  here. Talk is about folks who                                                               
are going  to weld pipe,  but they are  only going to  be welding                                                               
pipe   for  a   few   years.  Other   skills   are  needed   like                                                               
instrumentation  and  long-term  operating jobs.  He  said,  "You                                                               
really want to get Alaskans positioned for the long haul."                                                                      
8:17:48 PM                                                                                                                    
CHAIR GIESSEL thanked Mr. Butt  for his presentation and welcomed                                                               
the project fiscal team.                                                                                                        
8:19:58 PM                                                                                                                    
BILL MCMAHON, Senior Commercial  Advisor, AKLNG Project, provided                                                               
an  update  on  the  financing progress  and  offered  to  answer                                                               
questions. He invited Mr. Fauske to introduce himself.                                                                          
8:20:53 PM                                                                                                                    
DAN  FAUSKE, President,  Alaska  Gasline Development  Corporation                                                               
(AGDC), Anchorage, Alaska, read  the following statement that the                                                               
governor and Gasline Team asked him to present:                                                                                 
     We   are  here   tonight  to   present  the   quarterly                                                                    
     legislative update  mandated by SB 138.  You just heard                                                                    
     the  technical  update  from Steve  Butt  and  I  think                                                                    
     you'll  agree that  the AKLNG  Technical Team  is doing                                                                    
     well   progressing   the   design,   engineering,   and                                                                    
     permitting  on the  AKLNG Project.  However, the  State                                                                    
     Team is  very concerned about  the lack of  progress on                                                                    
     many  of  the key  commercial  and  fiscal issues.  The                                                                    
     process we  are currently involved in  assumes that all                                                                    
     parties  are  equally  motivate to  getting  a  project                                                                    
     built   as   soon   as   possible   within   reasonable                                                                    
     engineering and design constraints.  That may have been                                                                    
     an   unreasonable   assumption  given   the   different                                                                    
     alternatives  and   economic  considerations   of  each                                                                    
     party. I the State  Gas Team's opinion, the progression                                                                    
     of the following key agreements  will not allow them to                                                                    
     be completed in time for a special session this fall:                                                                      
     -  Gas   balancing  negotiations   are  at   a  virtual                                                                    
     standstill  with little  progress  amongst all  parties                                                                    
     having been made in the  last several months. This is a                                                                    
     critical  issue  that  needs to  be  resolved  for  the                                                                    
     process to move forward;                                                                                                   
     -Commercial   agreements   including   governance   and                                                                    
     operating agreements  are being negotiated but  are not                                                                    
     on schedule  for a  review by  the legislature  in this                                                                    
     calendar year;                                                                                                             
     -A  tax stability  agreement, historically  referred to                                                                    
     as a  fiscal agreement has  yet to be agreed  and there                                                                    
     is little common ground between the parties;                                                                               
     -Provisions  for  withdrawal  by a  party  which  would                                                                    
     allow  the state  to  proceed  without interruption  or                                                                    
     delay  if a  party wanted  to withdraw  have yet  to be                                                                    
     agreed.   In  addition   there  is   no  agreement   on                                                                    
     milestones to  insure that  the parties  are reasonably                                                                    
     progressing  the  project.  The  failure  to  meet  the                                                                    
     milestones without  good cause  would result in  a loss                                                                    
     of the fiscal stability provisions.                                                                                        
     Without  these foundation  agreements  is  will not  be                                                                    
     possible of the State Gas  Team to present a project to                                                                    
     the  legislature for  review this  fall. The  State Gas                                                                    
     Team does not intend to  bring an incomplete package to                                                                    
     the legislature  and expect  a decision  from you  on a                                                                    
     change  to the  Constitution to  the the  producers the                                                                    
     tax certainty they desire.                                                                                                 
     However,  there are  policy decisions  including issues                                                                    
     related  to  the   state's  participation  and  interim                                                                    
     funding   necessary   for    continuing   the   state's                                                                    
     participation  that  may  need  to  be  resolved  by  a                                                                    
     special session before the end of this calendar year.                                                                      
     On behalf of  the State Gas Team, I thank  you for your                                                                    
     continued   support    of   AGDC   and    the   state's                                                                    
     participation in the AKLNG Project.                                                                                        
MR. FAUSKE said the issues he  has pointed out are in negotiation                                                               
and the governor  wanted him to be clear that  these are critical                                                               
issues that need to be  resolved and the public should understand                                                               
8:26:23 PM                                                                                                                    
CHAIR  GIESSEL asked  for that  statement to  be provided  to the                                                               
committee. She  said some issues  are 100 percent  within control                                                               
of the State of Alaska and  asked where those milestones are. For                                                               
example,  what  is  the  status  of the  royalty  in  kind  (RIK)                                                               
MR.  FAUSKE deferred  to DNR  Deputy Commissioner  Rutherford who                                                               
had  a  statement  prepared  on  that issue.  He  also  noted  11                                                               
questions that he had answered that  he was prepared to deal with                                                               
in the next phase of the agenda.                                                                                                
CHAIR GIESSEL  responded that  he could do  that now,  but before                                                               
getting to  that asked if the  AGDC has the location  of the five                                                               
off-take   points,  which   falls   100   percent  within   their                                                               
MR. FAUSKE answered no, but they  had sizes and cost estimates of                                                               
the offtakes.                                                                                                                   
8:28:50 PM                                                                                                                    
CHAIR GIESSEL said that determination  is a piece of the progress                                                               
needed and  pointed out that the  state has faltered in  its part                                                               
on some  of these elements, as  well. She said they  had not seen                                                               
legislation  on  the  PILT  (Payment in  Lieu  of  Taxes)  issue,                                                               
either. That, again, is within the state's purview.                                                                             
8:29:41 PM                                                                                                                    
REPRESENTATIVE HAWKER  said he hoped they  had representatives of                                                               
all the sponsors of the project before them.                                                                                    
MR. FAUSKE answered yes.                                                                                                        
REPRESENTATIVE HAWKER  asked if  Mr. Fauske was  representing the                                                               
state's  25   percent  interest  in   the  project  and   who  is                                                               
responsible at the state for  making AKLNG decisions. What is the                                                               
state's  AKLNG organizational  structure?  "Are you  head of  the                                                               
state's AKLNG Project?"                                                                                                         
8:31:01 PM                                                                                                                    
MR. FAUSKE  answered no, he is  not; the lead negotiator  for the                                                               
state is Rigdon Boykin.                                                                                                         
REPRESENTATIVE HAWKER  asked if  the buck stops  at his  desk for                                                               
all things AKLNG.                                                                                                               
MR. FAUSKE answered yes.                                                                                                        
8:32:18 PM                                                                                                                    
SENATOR MACKINNON  asked if the team  is aware of the  gauntlet -                                                               
in the letter  he just read -  he just laid down in  terms of the                                                               
state's  inability  to accomplish  something.  She  asked if  the                                                               
state's partners had  been provided the opportunity  to know what                                                               
he was going to say before today.                                                                                               
MR. FAUSKE answered no. He was asked to keep it in confidence.                                                                  
SENATOR MACKINNON asked if the  governor specifically threw out a                                                               
51 percent ownership on the table.                                                                                              
MR. FAUSKE answered  no. He was in that meeting  when there was a                                                               
representation as  to what  the state could  possibly do  to have                                                               
the ability  to finance more of  the pipeline. He had  never been                                                               
in a  meeting where anyone ever  suggested that the state  own 51                                                               
percent. It was  a finance question based on  the state's ability                                                               
to capture financing that might be beneficial to the project.                                                                   
8:33:55 PM                                                                                                                    
SENATOR  MACKINNON  remarked  that   she  heard  talk  about  the                                                               
instability  that  this  administration   has  created  for  this                                                               
project and noted  the governor's op-ed piece  about a 51-percent                                                               
ownership,  about   selling  our   own  gas,  about   buying  out                                                               
TransCanada,  about  cutting  tax   credits  that  he  asked  the                                                               
legislature for, about a constitutional  amendment and a reserves                                                               
tax. "Please  balance that for  me with creating stability,  so a                                                               
financial team  can put together  something to bring  the project                                                               
MR. FAUSKE said he couldn't  address everything the governor said                                                               
or what he had  written, but he could say he that  is proud to be                                                               
a member of this team and that there  is a lot of good work going                                                               
forward.  It is  important to  point out  that there  are certain                                                               
things  that are  very difficult  right now  in these  agreements                                                               
that are trying  to get done and  there has been a  great deal of                                                               
discussion as to  the need for a special  session. The governor's                                                               
message  is that  until these  agreements get  done, there  is no                                                               
need  for a  special session.  Everyone  is working  hard to  get                                                               
those  agreements done,  but  some difficult  issues  are on  the                                                               
table and  being discussed  every day.  These are  not impossible                                                               
8:35:37 PM                                                                                                                    
SENATOR MACKINNON said it didn't  sound like the team was working                                                               
for the  same goals. She  hoped everyone could work  together for                                                               
Alaskans.  The state's  gas balancing  and commercial  agreements                                                               
have  created  instability and  she  hoped  resolutions could  be                                                               
CHAIR  GIESSEL  noted  the  document  being  passed  out  to  the                                                               
committee and   said it is concerning that elements  the state is                                                               
responsible  for have  not been  completed and  at the  same time                                                               
others  are being  accused of  not completing  their work  in the                                                               
appropriate time table.                                                                                                         
8:37:27 PM                                                                                                                    
REPRESENTATIVE  HAWKER  asked how  Mr.  Boykin  fit in  with  the                                                               
legislature's intent  when it  passed SB  138 and  very carefully                                                               
preserved  certain   responsibilities  to  their   appointed  and                                                               
confirmed commissioners who are accountable  to the people of the                                                               
State of Alaska. Holding people responsible  was a big part of SB                                                               
138. He asked if it is  the administration's intent to remove the                                                               
DNR and DOR commissioners from  the significant process they were                                                               
assigned in SB 138.                                                                                                             
MR. FAUSKE  answered of course not.  He said they are  in contact                                                               
and working  with Mr. Boykin  every day. When he  says negotiate,                                                               
he  means  that  Mr.  Boykin  is  the  one  who  is  leading  the                                                               
negotiations to  report back to the  rest of the team.  That does                                                               
not  mean  that anyone  has  not  carried  out their  duties  and                                                               
responsibilities. Mr. Boykin's role is  lead negotiator and he is                                                               
good at  it in trying to  move these issues along  that have been                                                               
very difficult to complete.                                                                                                     
REPRESENTATIVE HAWKER  said he  appreciated Mr.  Fauske's awkward                                                               
8:39:59 PM                                                                                                                    
SENATOR HUGGINS asked if the HOA has  to be renewed at the end of                                                               
this year.                                                                                                                      
MR. FAUSKE  answered that the  Joint Venture Agreement has  to be                                                               
renewed by December 15.                                                                                                         
SENATOR HUGGINS asked how that will be addressed.                                                                               
MR.  FAUSKE replied  that the  plan for  everyone is  to continue                                                               
working very  hard to try and  resolve the issues he  pointed out                                                               
in order to get to FEED.                                                                                                        
8:41:28 PM                                                                                                                    
SENATOR HUGGINS  said there are  two potential  Special Sessions;                                                               
one is buying  out TransCanada and another is the  HOA. The state                                                               
has to get  its ducks in a  row and tell the  legislature when it                                                               
should meet  and on what items.  The legislature plays a  role in                                                               
the  HOA and  they need  a feel  for that.  Everyone wants  to be                                                               
organized so  they can do the  best they can by  Alaskans and the                                                               
AKLNG Project.                                                                                                                  
8:43:19 PM                                                                                                                    
REPRESENTATIVE  JOSEPHSON asked  if  Mr. Fauske  agreed that  the                                                               
payment  in  lieu of  tax  issue  is  wholly within  the  state's                                                               
authority to determine.                                                                                                         
MR.  FAUSKE  answered  that  it is  totally  within  the  state's                                                               
purview under  the Department of  Revenue and the  legislature in                                                               
agreement with  the partners. Significant  work has been  done on                                                               
the PILT  issue and  there will be  another hearing  on September                                                               
REPRESENTATIVE JOSEPHSON asked  if anyone in the AGDC  or DNR has                                                               
the  kind of  background  Mr.  Boykin brings  in  terms of  these                                                               
significant LNG worldwide dimension projects.                                                                                   
8:44:54 PM                                                                                                                    
MR. FAUSKE  answered that he  is very impressed with  Mr. Boykin.                                                               
He has  a long resume  and record  of negotiating these  types of                                                               
deals around  the world. No  one else  that they could  reach out                                                               
and grab has his experience  in negotiating these types of large-                                                               
scale projects.                                                                                                                 
8:45:53 PM                                                                                                                    
REPRESENTATIVE  HAWKER  asked  if  Mr. Fauske  could  identify  a                                                               
single successful  global LNG  project that  Mr. Boykin  had ever                                                               
represented a sovereign entity on.                                                                                              
MR. FAUSKE  replied that he couldn't  name them off hand,  but he                                                               
had worked on large scale energy projects in Russian and China.                                                                 
MR. BOYKIN responded from the audience that there were none.                                                                    
8:46:48 PM                                                                                                                    
CHAIR GIESSEL  asked if the opening  on the AGDC board  had still                                                               
not been filled.                                                                                                                
MR. FAUSE answered that it hadn't.                                                                                              
CHAIR GIESSEL  remarked that  it has  been functioning  without a                                                               
full board even today.                                                                                                          
MR. FAUSKE said that was correct.                                                                                               
CHAIR GIESSEL said that falls under the governor's purview.                                                                     
8:47:24 PM                                                                                                                    
SENATOR DUNLEAVY asked if aspects  of the financing would have to                                                               
go before the people for a constitutional change.                                                                               
MR.  FAUSKE answered  that a  constitutional  amendment is  being                                                               
proposed to  secure long-term fiscal  terms. He added  that would                                                               
occur in November 2016 in a general election.                                                                                   
8:48:29 PM                                                                                                                    
CHAIR GIESSEL  said they hoped it  would be November of  2016 and                                                               
said  if  the constitutional  language  is  not approved  by  the                                                               
legislature expeditiously  it could  actually miss  that deadline                                                               
and not  fall until November of  2018. It could be  reviewed in a                                                               
special session next month.                                                                                                     
CHAIR GIESSEL added  that they hold him in high  esteem and don't                                                               
mean to attack the messenger.                                                                                                   
MR. FAUSKE said thank you.                                                                                                      
8:49:25 PM                                                                                                                    
SENATOR DUNLEAVY asked if Mr. Boykin is a resident of Alaska.                                                                   
MR. FAUSKE  answered that Mr. Boykin  is a resident of  the State                                                               
of South Carolina.                                                                                                              
8:49:51 PM                                                                                                                    
REPRESENTATIVE HAWKER  said the administration has  said they are                                                               
not going to  entertain a constitutional amendment  until all the                                                               
governance agreements  are on  the table, and  asked how  each of                                                               
them would  respond to the  question of being willing  to proceed                                                               
to FEED  without having  a constitutional  amendment voted  on by                                                               
the public.                                                                                                                     
8:50:53 PM                                                                                                                    
VINCENT LEE,  Director, Major Projects  Development, TransCanada,                                                               
read the following statement:                                                                                                   
     Madam  Chair,   Mr.  Co-chairs   and  members   of  the                                                                    
     Committee, for the record my  name is Vincent Lee. I am                                                                    
     the   Director  of   Major   Projects  Development   at                                                                    
     TransCanada.  I  serve  as   the  commercial  lead  for                                                                    
     TransCanada  in the  Alaska LNG  project and  represent                                                                    
     TransCanada on the project's Management Committee.                                                                         
     Over the  last few months,  the Governor has  been very                                                                    
     clear with Alaskans  about his desire for  the State of                                                                    
     Alaska  to take  on a  bigger  role in  the Alaska  LNG                                                                    
     project. One  way to accomplish  this objective  is for                                                                    
     the state  to take  over TransCanada's interest  in the                                                                    
     project.  The Precedent  Agreement that  the state  and                                                                    
     TransCanada  entered into  in June  2014 allows  either                                                                    
     party to terminate the agreement.                                                                                          
     At  the   Governor's  request,  TransCanada   has  been                                                                    
     working with  the Administration to agree  on a process                                                                    
     for the State to  terminate the Precedent Agreement and                                                                    
     allow the  state to  assume TransCanada's  interest. If                                                                    
     an agreement  is reached, we  expect it will  provide a                                                                    
     roadmap  for  TransCanada's   exit  from  the  project,                                                                    
     including  an   agreement  by  the   administration  to                                                                    
     request  an  appropriation   to  reimburse  costs  that                                                                    
     TransCanada has  invested in the  LNG effort  since the                                                                    
     beginning of 2014.                                                                                                         
     TransCanada  will work  diligently to  ensure that  the                                                                    
     termination  occurs  as   smoothly  and  reasonably  as                                                                    
     possible. I  recognize that some  may want  more detail                                                                    
     on the  termination discussion between  TransCanada and                                                                    
     the  state,  but  due  to  confidentiality,  I  am  not                                                                    
     permitted to share more information  beyond what I have                                                                    
     just described.                                                                                                            
     TransCanada has  been involved  in advancing  a natural                                                                    
     gas pipeline  in the State  of Alaska for  four decades                                                                    
     and   has  made   significant   contributions  to   the                                                                    
     advancement  of the  current LNG  efforts. Anticipating                                                                    
     TransCanada's role  in the Alaska LNG  project may come                                                                    
     to an end  soon, I would take this  opportunity to wish                                                                    
     our project  partners and the  State of Alaska  well in                                                                    
     this endeavor  to bring  Alaska's abundant  natural gas                                                                    
     resources to global markets.                                                                                               
     Madam  Chair,  Mr.  Co-Chairs, I  also  would  like  to                                                                    
     extend my  thanks to  you for  inviting me  here today.                                                                    
     One final  point, TransCanada looks forward  to working                                                                    
     with   the  administration   and  the   legislature  to                                                                    
     complete the  transition in a  timely fashion  to allow                                                                    
     the  other JVA  Parties and  the State  continue to  be                                                                    
     focused on advancing the Alaska LNG project.                                                                               
     Thank you.                                                                                                                 
8:53:31 PM                                                                                                                    
CHAIR GIESSEL said the MOU with TransCanada talks about a 90 day                                                                
period of time when a buyout measure is initiated and asked if                                                                  
that had begun yet.                                                                                                             
MR. LEE answered no; it would start on the day they receive a                                                                   
termination notice from the administration.                                                                                     
8:54:53 PM                                                                                                                    
DAVID VAN  TUYL, Regional Manager,  BP Exploration  Alaska, Inc.,                                                               
Anchorage, Alaska said  he is currently on the  Joint Fiscal Team                                                               
and  BP's   representative  to   the  AKLNG   Project  Management                                                               
Committee. He read the following comments:                                                                                      
     I am very  pleased to be here along  with my colleagues                                                                    
     to provide an update on  the progress of the Alaska LNG                                                                    
     project. The success of Alaska  LNG is critical to BP's                                                                    
     business here in Alaska, and  it's also critical to the                                                                    
     future of the  State of Alaska and to  so many Alaskans                                                                    
     who will benefit, both directly  and indirectly, from a                                                                    
     successful project.                                                                                                        
     As you  are all  aware, the  project has  taken several                                                                    
     very  important  steps   forward  toward  becoming  the                                                                    
     reality we  are all working  so hard to achieve,  and I                                                                    
     think  it's   worth  reminding   us  just   what  we've                                                                    
     - In  January 2014,  we signed  the Alaska  LNG Project                                                                    
     Heads  of  Agreement,  which publicly  mapped  out  our                                                                    
     agreed  aligned way  forward to  commercialize Alaska's                                                                    
     Gas. That's the path we continue on today.                                                                                 
     -  A few  months  later, you,  the Alaska  Legislature,                                                                    
     approved    SB-138,   which    defined   the    State's                                                                    
     participation  in  the  project and  provided  the  way                                                                    
     - The Governor signed SB-138 into law the next month.                                                                      
     -Then last June, the parties  all signed the commercial                                                                    
     agreement that  allowed the parties to  advance through                                                                    
     the pre-FEED phase.                                                                                                        
     -The  next month,  in July,  the project  submitted its                                                                    
     export  license   application  to  the   Department  of                                                                    
     -In  September,  the   project  initiated  our  Federal                                                                    
     Energy  Regulatory  Commission,  or  "FERC"  pre-filing                                                                    
     process, which the FERC approved later that month.                                                                         
     -In November, we received DOE's  approval of the export                                                                    
     license   application   for    Free   Trade   Agreement                                                                    
     -In May  of this  year we  received our  non-FTA export                                                                    
     approval from  the DOE.  As we  have said  before, this                                                                    
     approval sent an important message  not only to Alaska,                                                                    
     but to the world - the  Alaska LNG project is real, and                                                                    
     it's coming.                                                                                                               
     -Just last month, the FERC  chairman visited the Alaska                                                                    
     North  Slope to  see  the existing  facilities and  the                                                                    
     location  of the  future  AKLNG  Project facilities.  I                                                                    
     believe  that's the  first time  every  that a  sitting                                                                    
     FERC  chairman  had  visited the  Alaska  North  Slope.                                                                    
     Project momentum is building.                                                                                              
     Also last  month, the Alaska  Oil and  Gas Conservation                                                                    
     Commission heard our application  to modify the Prudhoe                                                                    
     Bay gas offtake rate, and  allow for CO2 injection from                                                                    
     the  Alaska  LNG  Project into  the  main  Prudhoe  Bay                                                                    
     -  Regulatory approval  of Prudhoe  Bay gas  offtake is                                                                    
     another critical step in this process.                                                                                     
     - Certainty of gas  offtake underpins our upcoming FEED                                                                    
     - To support that huge  financial commitment we want to                                                                    
     reduce uncertainty wherever we can.                                                                                        
     And  as you  just heard  from Steve  Butt, the  Project                                                                    
     Team   is  making   good  progress   on  the   pre-FEED                                                                    
     So  while there  is  still  much work  to  be done,  we                                                                    
     continue   to   make   progress.  We   understand   the                                                                    
     Governor's  recent   statements  about  the   need  for                                                                    
     additional progress. We agree.                                                                                             
     The   agreements  we   are  actively   negotiating  are                                                                    
     complex,  and  will  impact this  multi-billion  dollar                                                                    
     project that  will span decades. Given  the complicated                                                                    
     issues we  are working through  and the fact  that each                                                                    
     of the  parties in the  negotiations has its  own needs                                                                    
     and  concerns,  it  shouldn't  surprise  you  that  the                                                                    
     negotiations can be difficult. If  we did not hit speed                                                                    
     bumps along the way, you  should be concerned. It would                                                                    
     mean  that we  weren't driving  down the  road. We  are                                                                    
     driving  down   that  road   and  continuing   to  make                                                                    
     BP  desires to  get these  agreements done  as soon  as                                                                    
     possible, but  we also recognize  that it  is essential                                                                    
     to ALL parties that these agreements are done well.                                                                        
     BP is committed,  just as we have  been throughout this                                                                    
     process,  to  working  out   our  remaining  issues  as                                                                    
     quickly and as fairly as possible.                                                                                         
     We are  encouraged that the  project continues  to make                                                                    
     real,  tangible  progress,  as measured  by  those  key                                                                    
     external milestones I mentioned.                                                                                           
     BP  remains actively  engaged  to continue  progressing                                                                    
     the Alaska  LNG project,  both with the  technical work                                                                    
     and  the   associated  commercial  work.   The  project                                                                    
     momentum is continuing. BP looks  forward to seeing the                                                                    
     project through to its success.                                                                                            
     Thank you,                                                                                                                 
9:01:13 PM                                                                                                                    
REPRESENTATIVE  HAWKER said  the  legislature is  just trying  to                                                               
find out  what they are  working with so  they can also  make the                                                               
best  decisions. He  said the  statement  read by  Mr. Fauske  on                                                               
behalf  of the  administration was  very pessimistic  about their                                                               
ability to  work together  with the partners  and Mr.  Van Tuyl's                                                               
comments seemed to say that  they are working together, but these                                                               
are just  long, tough  negotiations. He asked  in all  honesty if                                                               
progress was being made and if light  could be seen at the end of                                                               
the tunnel or are they at an impasse.                                                                                           
9:02:50 PM                                                                                                                    
MR.  VAN  TUYL  answered  that   progress  is  being  made.  Many                                                               
agreements are being worked on,  and they are complicated. BP has                                                               
brought  in international  resources who  have worked  successful                                                               
LNG  projects around  the  world to  address  these matters.  The                                                               
process, while painfully slow, is under way.                                                                                    
9:04:27 PM                                                                                                                    
REPRESENTATIVE HAWKER  asked if  the project  is on  schedule, on                                                               
budget and  on track,  including taking up  a special  session in                                                               
fall this year to take up the commercial agreements.                                                                            
9:05:36 PM                                                                                                                    
MR.  VAN TUYL  answered that  he didn't  know; everyone  needs to                                                               
work  through the  necessary issues  until  they find  alignment.                                                               
They won't stop working those issues,  but he couldn't point to a                                                               
9:06:24 PM                                                                                                                    
REPRESENTATIVE  SADDLER asked  if the  team has  enough financial                                                               
resources to  continue the work  it needs  to do on  the somewhat                                                               
extended schedule he descried.                                                                                                  
MR. VAN TUYL answered that depends  on which work he is referring                                                               
to.  The  commercial  work  necessary   to  hammer  out  all  the                                                               
agreements that  have been articulated  are funded  by individual                                                               
parties. He  couldn't speak for  the state's budget, but  BP will                                                               
commit the  necessary resources. A  separate issue that  Mr. Butt                                                               
alluded to about  a vote late this year to  approve the 2016 work                                                               
program for the project and that  will allow the pre-FEED work to                                                               
continue to its logical conclusion.                                                                                             
9:07:48 PM                                                                                                                    
REPRESENTATIVE  SADDLER asked  how much  money was  involved with                                                               
the state's share.                                                                                                              
MR. VAN  TUYL answered that he  did not know, but  could find out                                                               
for him.                                                                                                                        
9:08:33 PM                                                                                                                    
MR. FAUSKE  answered that  currently the  state has  funded $67.7                                                               
million for  its share through  to FEED, but going  forward would                                                               
require an additional $500 million.                                                                                             
9:10:07 PM                                                                                                                    
SENATOR  DUNLEAVY asked  Mr.  Van  Tuyl if  he  was surprised  by                                                               
anything in the governor's letter.                                                                                              
MR. VAN  TUYL answered that  he hadn't  read it, but  agreed with                                                               
the  sense  of  frustration  at  the lack  of  progress  and  the                                                               
magnitude  of  the  project.  He   is  focused  more  on  finding                                                               
solutions past the difficulties.                                                                                                
9:11:29 PM                                                                                                                    
CHAIR GIESSEL said she appreciated  him calling out AOGCC when BP                                                               
and ExxonMobil both asked for gas  offtakes. That was a signal of                                                               
progress and their  ongoing commitment to the  project. She asked                                                               
how the gas  reserve tax and withdrawal  provisions factored into                                                               
any speedbumps on this road to negotiation.                                                                                     
9:12:28 PM                                                                                                                    
MR. VAN  TUYL answered that he  had heard about the  gas reserves                                                               
tax and  BP would view that  as punitive taxation not  helpful to                                                               
incentivizing a project.  But it's best to  pose those withdrawal                                                               
questions to the state.                                                                                                         
9:13:55 PM                                                                                                                    
REPRESENTATIVE SADDLER asked  if he had seen any  evidence of the                                                               
Alaska  Stand   Alone  Pipeline  (ASAP)  project   affecting  the                                                               
administration's commitment to the AKLNG Project.                                                                               
MR.  VAN  TUYL  answered  that he  had  seen  the  administration                                                               
focused  on the  AKLNG Project  and nothing  to the  contrary. He                                                               
added that  BP's focus  is not on  withdrawing from  the project,                                                               
but on  making it successful.  Their Alaskan business  depends on                                                               
9:15:13 PM                                                                                                                    
REPRESENTATIVE  HUGHES asked  if  there had  been a  conversation                                                               
about this  project in relationship to  low oil prices and  if BP                                                               
is committed through the long haul.                                                                                             
MR.  VAN TUYL  answered  that  he wished  he  knew  how long  the                                                               
current  environment  would last.  It  could  be  for a  while  -                                                               
several years.  The current environment  in some ways  creates an                                                               
advantage for this project and they  expect the oil and gas price                                                               
environment will look very different  when the project is brought                                                               
on line.  Investors who are  pursuing LNG projects are  long term                                                               
thinkers, because those projects  are all about generating steady                                                               
reliable cash  flow for  decades. The first  year of  the project                                                               
and the  30th year of  the project  matters. Their focus  is very                                                               
much long term.                                                                                                                 
9:17:47 PM                                                                                                                    
SENATOR  MACKINNON   asked  if   other  nations   have  addressed                                                               
withdrawal concerns in advance.                                                                                                 
9:18:57 PM                                                                                                                    
MR.  VAN TUYL  answered  that  it is  common  for any  commercial                                                               
agreement to have some sort of withdrawal termination provision.                                                                
9:20:34 PM                                                                                                                    
DARREN  MEZNARICH, Project  Integration  Manager, AKLNG  Project,                                                               
ConocoPhillips Alaska, Inc., Anchorage,  Alaska, said his role is                                                               
to  integrate the  team efforts  on all  aspects of  the project:                                                               
technical,  commercial and  marketing. He  said they  are working                                                               
hard with  the administration and  the other parties  to complete                                                               
the  technical  work  and the  necessary  commercial  and  fiscal                                                               
agreements  so the  project will  be ready  to move  to the  next                                                               
As ConocoPhillips  testified back  in February  and in  June, the                                                               
most  important commercial  agreement from  their perspective  is                                                               
the gas  supply agreement.  It is  foundational for  this project                                                               
and  it is  the  basis for  determining the  rate  and the  total                                                               
volume of  gas supply to the  project from Prudhoe Bay  and Point                                                               
Thomson, the two anchor fields of the project.                                                                                  
The gas supply  agreement provides assurance of  gas supply. This                                                               
is  critical for  ConocoPhillips' marketing  of the  LNG as  they                                                               
move  into  FEED.  It  is   also  critical  to  securing  project                                                               
financing.  They need  certainties that  the gas  is going  to be                                                               
there when  they commit  to the  LNG buyers  and talk  to lenders                                                               
about loaning money for their investment in the project.                                                                        
MR. MEZNARICH  said clarity is  good for  the project as  well as                                                               
for  providing transparency  and information  for the  state. The                                                               
gas supply  agreement is  also key  for ConocoPhillips  in asking                                                               
the legislature and by definition  the public to support a fiscal                                                               
package as well as a constitutional amendment.                                                                                  
9:23:30 PM                                                                                                                    
REPRESENTATIVE HAWKER  noted that ConocoPhillips was  not a party                                                               
to the  application to the AOGCC  for offtake out of  Prudhoe Bay                                                               
and asked if they had a position on that.                                                                                       
MR.  MEZNARICH  replied  that ConocoPhillips  and  Chevron  filed                                                               
comments on that  application and testified, but  they proposed a                                                               
slightly lower number than BP and ExxonMobil did.                                                                               
9:24:37 PM                                                                                                                    
SENATOR STOLTZE asked if a  property tax structure and a reserves                                                               
tax   was  part   of   their  fiscal   terms   in  discussing   a                                                               
constitutional amendment.                                                                                                       
9:26:14 PM                                                                                                                    
MR. MEZNARICH answered  that there is an agreement  on the impact                                                               
payments  and  property tax  structure.  The  reserves tax  is  a                                                               
"carrot and  a stick  approach," but parties  are trying  to move                                                               
forward  with  what they  can  to  make  the project  a  success.                                                               
ConocoPhillips is  working hard to  get the gas  supply agreement                                                               
done, but the governor wants the  project to move forward even if                                                               
one party falls  away. ConocoPhillips has said it  would make its                                                               
gas available  and not  stand in  the way of  the state  taking a                                                               
project  forward.   So,  they  would  be   willing  to  entertain                                                               
withdrawal terms and try to find  a way forward for the state and                                                               
other parties if that became necessary.                                                                                         
9:27:55 PM                                                                                                                    
SENATOR STOLTZE commented  on the list of  community impacts from                                                               
the Kenai Peninsula  Borough, but added that  his community wants                                                               
the impacts of jobs and  prosperity that this project would bring                                                               
9:28:43 PM                                                                                                                    
MR.  MEZNARICH answered  that he  hoped to  make an  impact in  a                                                               
positive way.                                                                                                                   
REPRESENTATIVE SADDLER  asked if  he had  seen any  evidence that                                                               
the administration's  focus had been diverted  by emphasizing the                                                               
ASAP line.                                                                                                                      
MR. MEZNARICH echoed Mr. Van Tuyl's  comments in that he had seen                                                               
a  lot of  energy and  commitment to  this project  in trying  to                                                               
resolve issues.                                                                                                                 
REPRESENTATIVE SADDLER  asked about the letter's  mention of lack                                                               
of progress.                                                                                                                    
MR. MEZNARICH replied  he hadn't a chance to look  at the letter,                                                               
but he  thought it reflected  everyone's frustration on  how slow                                                               
things are moving and the complexity of the issues.                                                                             
9:30:15 PM                                                                                                                    
REPRESENTATIVE SADDLER  asked if  he had  any reassurances  as to                                                               
Mr. Boykin's position within the  organizational structure of the                                                               
MR. MEZNARICH  answered that he deferred  to the state on  who is                                                               
in  charge. He  has been  working both  with Mr.  Boykin and  the                                                               
CHAIR  GIESSEL noted  that  the  document in  front  of them  was                                                               
received from Mr. Fauske and on  the first page were his comments                                                               
and  the following  pages were  answers to  11 questions  she had                                                               
provided him a couple of days ago.                                                                                              
9:31:58 PM                                                                                                                    
MR. MCMAHON, Senior Commercial Advisory,  ExxonMobil, said he had                                                               
been working on  the Alaska LNG commercialization  since 1992. He                                                               
said that ExxonMobil, as a  lease holder of natural gas resources                                                               
on  the  Alaska  North  Slope (ANS),  has  diligently  undertaken                                                               
various  individual and  joint  activities  to commercialize  ANS                                                               
natural gas.  ExxonMobil is now  pursuing the Alaska  LNG Project                                                               
(AKLNG)  with the  State  of Alaska,  AGDC,  TransCanada, BP  and                                                               
ConocoPhillips following  the framework established by  the State                                                               
of Alaska  in 2014  that was  set out in  the AKLNG  HOA (January                                                               
2014) and  SB 138 (April  2014). ExxonMobil is a  strong advocate                                                               
for  AKLNG having  funded a  third of  the cost  of pre-FEED  and                                                               
providing two-thirds of the personnel for that project.                                                                         
He said that ExxonMobil has  two key requirements to consider the                                                               
FEED decision: agreeing on acceptable  fiscal contract terms that                                                               
are  both predictable  and durable  and  completing the  pre-FEED                                                               
work. A  key vote  is coming  up this year  on the  2016 pre-FEED                                                               
work  program and  budget. He  encouraged state  action to  allow                                                               
that funding to occur so that  pre-FEED work could be finished in                                                               
2016 as envisioned.                                                                                                             
MR. MCMAHON said the fiscal  contract and completing the pre-FEED                                                               
work  are  both  needed  to  be able  to  do  the  technical  and                                                               
commercial evaluation  necessary to decide  if they are  going to                                                               
FEED.  That  valuation  will  consider   a  view  of  the  market                                                               
conditions, LNG buyer feedback and  an assessment of how the FERC                                                               
regulatory process is going.                                                                                                    
9:35:34 PM                                                                                                                    
MR.   MCMAHON  said   ExxonMobil   supports  the   constitutional                                                               
amendment  approach  and  the  Alaska  legislature  putting  that                                                               
matter  on  the  ballot  at   its  earliest  convenience.  It  is                                                               
important to  hit the November  2016 window for the  public vote,                                                               
because it can only happen in a general vote.                                                                                   
As Mr. Fauske  said, the fiscal and  commercial agreements aren't                                                               
going to  be completed in  time for  a fall special  session, but                                                               
the  legislature should  still consider:  clarifying the  state's                                                               
role  in the  project,  getting  appropriations, authorizing  the                                                               
stratification  vote and  property  tax  legislation that  allows                                                               
flow-related property taxes  as a bonafide way to  pay a property                                                               
tax obligation,  and authorizing PILT construction  as a bonafide                                                               
way  to pay  property  tax. Those  details could  be  put into  a                                                               
fiscal contract.                                                                                                                
MR.  MCMAHON said  they are  working on  all agreements  that are                                                               
necessary  for  all  the  parties  to  be  able  to  support  the                                                               
decision.  Alignment is  critical  for the  success  of any  mega                                                               
9:37:42 PM                                                                                                                    
REPRESENTATIVE  HAWKER asked  what he  thought about  the Calgary                                                               
Harold  article citing  Wood MacKenzie  saying that  LNG projects                                                               
worldwide today are horrifically financially challenged.                                                                        
MR. MCMAHON replied that he was  familiar with the article and it                                                               
coins  the challenge  with Alaska  natural gas.  Many things  are                                                               
going  for  Alaska  gas:  two  world  class  reservoirs,  gas  is                                                               
discovered and it  is ready to go, and a  host government that is                                                               
actively involved in  the development of that natural  gas to the                                                               
point  of  being   willing  to  invest  in  25   percent  of  the                                                               
infrastructure and  to be a  partner with industry to  bring that                                                               
on.  Alaska has  a geographic  advantage  in being  close to  the                                                               
markets, which will reduce the cost of supply.                                                                                  
There are  some challenges, as  well. This business is  all about                                                               
cost  of  supply. So  the  project  participants  need to  put  a                                                               
project together that has the  lowest cost of supply possible and                                                               
put in  place predictable and  durable fiscal terms, so  they can                                                               
offer prices to the market without  fear of having a tax increase                                                               
or  new taxes.  A gas  reserves tax  would have  a very  chilling                                                               
effect on the development of AKLNG.                                                                                             
9:40:42 PM                                                                                                                    
REPRESENTATIVE  HAWKER  asked if  he  thought  the project  could                                                               
truly go forward recognizing the challenges.                                                                                    
MR. MCMAHON answered absolutely.                                                                                                
REPRESENTATIVE HAWKER wondered if  the administration was keeping                                                               
the parallel  backup project  online and  asked what  happened to                                                               
the 45-day review.                                                                                                              
9:42:09 PM                                                                                                                    
MR. FAUSKE answered about the ASAP  project has been put on hold.                                                               
The information  is still intact but  the team is doing  work for                                                               
the other  project. A great  deal of  the money was  removed from                                                               
the Instate  Gasline Fund  during the  last session,  which maybe                                                               
prohibits the ability to go forward.                                                                                            
REPRESENTATIVE HAWKER recalled that enough  money was left in the                                                               
budget for  activities that would  equally benefit  both projects                                                               
to allow  them to kind  of both move  forward. He asked  when the                                                               
state counseled them to consider looking into a backup plan.                                                                    
9:43:36 PM                                                                                                                    
MR.    FAUSKE    answered    if    negotiations    simply    just                                                               
"blow up and fall  apart" - no one wants that to  occur - but the                                                               
state has to  look at what it's  going to do then -  even if it's                                                               
just to go  back to getting gas to the  citizens, which is really                                                               
how ASAP started. They are doing  work that is beneficial to both                                                               
projects,  but   they  are  not  advancing   any  more  technical                                                               
engineering work  based on fiscal constraints.  But if necessary,                                                               
that work could move forward.                                                                                                   
9:45:20 PM                                                                                                                    
REPRESENTATIVE  HUGHES said  the  governor  had narrowed  special                                                               
session down to  two things and asked Mr. McMahon  if he would be                                                               
okay with  taking up PILT,  the constitutional amendment  and the                                                               
stratification authorization in the next regular session.                                                                       
9:46:06 PM                                                                                                                    
MR. MCMAHON answered  that it is within the purview  of the state                                                               
of Alaska to choose when to  take those matters up, but sooner is                                                               
better than  later. There will  be a lot  of business to  take up                                                               
during the 90-day session.                                                                                                      
CHAIR  GIESSEL asked  if a  48-inch line  would require  new FERC                                                               
MR. MCMAHON answered  that the nature of the early  drafts of the                                                               
reports have  been general. They  talk about the  pipeline right-                                                               
of-ways and  disturbances of  a certain  size. They  believe that                                                               
once due  diligence work is done  and if parties agree  to change                                                               
the  pipeline  diameter  that  the  next  version  of  the  draft                                                               
application could be modified to  accommodate that. Their goal is                                                               
to not  impact first  LNG cargos,  but you have  to land  on your                                                               
pipeline diameter before going into FEED.                                                                                       
9:48:41 PM                                                                                                                    
MR. MCMAHON  followed up with Senator  MacKinnon's question about                                                               
of what  happens when  a party  wants to  withdraw. He  said when                                                               
alignment is  so critical  on mega  projects, typically  when you                                                               
get up to a decision gate, if one  of the parties is not ready to                                                               
move  through, to  maintain alignment  you work  with that  party                                                               
until all the parties are ready to go through the gate.                                                                         
Senator Dunleavy's question about the  48-inch pipeline is a good                                                               
example. One  party raised the  issue; the other parties  knew it                                                               
was important and  so they are going to try  to accommodate that.                                                               
Alignment  is   critical  to  move  forward.   So,  a  withdrawal                                                               
agreement  that pre-agrees  what  happens if  someone leaves  and                                                               
also  pre-agrees  how   that  gas  will  be   accessed  would  be                                                               
unprecedented in his experience around the world.                                                                               
9:50:18 PM                                                                                                                    
MR. MCMAHON  said the critical  part of  this project is  how the                                                               
30-32  tcf/gas gets  brought into  the project.  The applications                                                               
are pending  before the AOGCC;  formal hearings happened  one and                                                               
two weeks ago.  They are waiting for the record  to be closed and                                                               
for the commission  to act to make sure they  have the ability to                                                               
supply gas into the project.                                                                                                    
Work continues on getting the  necessary commercial agreements to                                                               
go  into FEED.  Applications are  being  drafted for  the DNR  to                                                               
support lease modifications related  to the RIK/RIV switching and                                                               
the conversion of  leases at Point Thomson. A whole  lot of staff                                                               
is being  applied to the  foundational commercial  agreements and                                                               
as  Mr. Meznarich  pointed  out,  gas supply  to  the project  is                                                               
important and that  is where the gas balancing  issue resides. As                                                               
Mr.  Lee  pointed  out, long  term  firm  transportation  service                                                               
agreements between TransCanada and the  State of Alaska have been                                                               
here  historically  but  there   are  ongoing  discussions  about                                                               
potential disposition of that. These  agreements will be reviewed                                                               
and approved by the legislature consistent with SB 138.                                                                         
9:54:55 PM                                                                                                                    
REPRESENTATIVE HAWKER  asked how  important that RIK  decision is                                                               
relative to gas balancing.                                                                                                      
9:56:09 PM                                                                                                                    
MR. MEZNARICH  said the HOA laid  out a road map  to a successful                                                               
project  and  the  RIK was  a  critical  element.  ConocoPhillips                                                               
believes  that   is  fundamental.  If  it's   decided  after  the                                                               
agreements are ratified it could be a conditional agreement.                                                                    
REPRESENTATIVE HAWKER asked  Mr. Fauske when they  can expect the                                                               
RIK decision.                                                                                                                   
MR.  FAUSKE  answered that  Marty  Rutherford  could answer  that                                                               
question later in the hearing.                                                                                                  
9:57:02 PM                                                                                                                    
REPRESENTATIVE HAWKER remarked that he  didn't know how the state                                                               
can be  a party to  all the  agreements that are  contemplated in                                                               
the big transaction if it doesn't have gas or RIK.                                                                              
9:58:40 PM                                                                                                                    
MR.  MCMAHON   said  they  had  aligned   on  the  constitutional                                                               
amendment as  the vehicle to  provide stabilization and  they are                                                               
aware that a  two-thirds legislative vote is necessary  to put it                                                               
on  the  ballot  and  everyone is  targeting  the  November  2016                                                               
He  said there  is tentative  alignment on  the structure  of the                                                               
property  taxes  subject  to   consultation  with  the  Municipal                                                               
Advisory Gas Project Review Board.                                                                                              
He said they  had talked a lot about the  significance of the DOE                                                               
export authorizations and  the FERC process is  the critical path                                                               
for the  project. Their focus is  on getting the final  permit to                                                               
allow construction to begin.                                                                                                    
9:59:34 PM                                                                                                                    
MR.  MCMAHON  said  their  ever-present  External  Affairs  folks                                                               
continue to  work with public  outreach and building  support for                                                               
the  project.  This  will  become very  critical  as  fiscal  and                                                               
commercial agreements become  available. They need to  be able to                                                               
effectively describe to  the people of Alaska how  the project is                                                               
going to proceed from a fiscal and commercial standpoint.                                                                       
10:00:09 PM                                                                                                                   
SENATOR  DUNLEAVY cautioned  him,  since people  in his  district                                                               
expect that they will get gas  directly to their houses no matter                                                               
how far they are from the road  or where they live, that there be                                                               
a  real genuine  attempt  to  get folks  to  understand that  the                                                               
project doesn't know where or how big the takeoffs will be.                                                                     
10:01:23 PM                                                                                                                   
MR. FAUSKE responded  that more work needs to be  done on instate                                                               
gas use. He has stated publically  that this is probably going to                                                               
be one of the toughest areas  of debate that the entire body will                                                               
deal with,  because when you're  looking at $14 million  for just                                                               
the sled  that takes the  gas and  decompresses it and  trying to                                                               
serve a community of 75 people  - "let's just be honest with each                                                               
other  -  we're  probably  looking at  some  type  of  subsidized                                                               
figure." Everyone wants  gas, the mechanism that will  be used to                                                               
get it is what is difficult.  Do you just have offtake points and                                                               
it's  cheaper for  the residents  to  have gas  trucked to  their                                                               
homes  or do  you  put  pipe everywhere?  It's  not  part of  the                                                               
project,  so it  will be  on the  state's back.  He also  said it                                                               
would  be hard  to  have people  even  consider a  constitutional                                                               
budget amendment if they don't have any skin in the game.                                                                       
10:04:07 PM                                                                                                                   
SENATOR DUNLEAVY  said it's crucial  that people  understand that                                                               
their energy  issues will  benefit from the  gas, but  they might                                                               
not actually get it at their house.                                                                                             
10:06:04 PM                                                                                                                   
MR. FAUSKE  agreed that it is  a state responsibility to  do this                                                               
work  and coupling  it to  the people  describing the  project is                                                               
CHAIR  GIESSEL said  they look  forward  to getting  data on  the                                                               
offtake points.                                                                                                                 
10:07:27 PM                                                                                                                   
MR. MCMAHON  noted that two-thirds  of the questions in  their 80                                                               
public hearings are related to  instate gas and he looked forward                                                               
to working with AGDC to help manage expectations.                                                                               
MR.  MCMAHON  said slide  12  captured  key accomplishments;  one                                                               
being a tentative  alignment on the structure  for property taxes                                                               
both  during and  after  construction.  The remaining  challenges                                                               
are: establishing a role for  the state as a project participant,                                                               
specifically  midstream participation,  funding  and approval  of                                                               
the 2016 pre-FEED  work program and budget,  timely completion of                                                               
the key  commercial and fiscal contracts  followed by legislative                                                               
approval consistent  with SB 138, royalty  decisions around lease                                                               
modifications and RIK elections,  legislation to put property tax                                                               
payment  mechanisms in  place and  legislation  to authorize  the                                                               
public   vote  on   the  constitutional   amendment  to   provide                                                               
predictable and durable fiscal terms.                                                                                           
10:09:03 PM                                                                                                                   
REPRESENTATIVE HAWKER  said both he  and Mr. Butt used  the words                                                               
"to clarify the state's role"  in describing remaining challenges                                                               
and asked what that means.                                                                                                      
MR. MCMAHON  answered that  everyone has  heard about  plans that                                                               
the  state has  with TransCanada  that is  currently the  state's                                                               
party  in  the midstream.  Before  going  into FEED,  clarity  is                                                               
needed  on which  party is  going to  hold the  state's midstream                                                               
10:11:11 PM                                                                                                                   
REPRESENTATIVE HAWKER asked him to explain what the vote means.                                                                 
MR.  MCMAHON answered  that  some of  the  voting outcomes  could                                                               
require an appropriation this year to fund the rest of pre-FEED.                                                                
10:12:06 PM                                                                                                                   
REPRESENTATIVE SEATON  asked if there  is a December  31 deadline                                                               
for the TransCanada  decision that will affect  alignment and the                                                               
RIK decision.                                                                                                                   
10:13:34 PM                                                                                                                   
MR. FAUSKE answered  that there needs to be a  decision made with                                                               
TransCanada  on  the  firm transportation  supply  agreements  by                                                               
December  15, 2015.  The  state's  negotiations with  TransCanada                                                               
have not been finalized, yet.                                                                                                   
10:14:49 PM                                                                                                                   
MR. LEE  explained that the  date of  December 15 refers  to when                                                               
the firm transportation agreement has  to be entered into between                                                               
TransCanada and  the state  and be  ratified by  the legislature.                                                               
The question would be how to  move forward and he didn't know how                                                               
that was related to the state's RIK decision.                                                                                   
10:15:38 PM                                                                                                                   
REPRESENTATIVE SEATON said his concern  was if Alaska is the only                                                               
party owning  gas that  would have to  pay a  firm transportation                                                               
and profit margin  to a third party. Then the  gas going into the                                                               
LNG plant would  not be aligned in cost structure,  and any joint                                                               
sales  agreements  could mean  that  gas  for delivery  would  be                                                               
profitable for the  other buyers and a deficit for  the state. He                                                               
didn't know if  a built-in cost structure and profit  margin to a                                                               
third party would influence the other commercial agreements.                                                                    
10:16:44 PM                                                                                                                   
REPRESENTATIVE  HAWKER said  one topic  in the  governor's letter                                                               
had not  been covered and that  was the method that  gas would be                                                               
marketed. The state's position is  they wanted everyone to market                                                               
10:18:09 PM                                                                                                                   
RIGDON  BOYKIN, lead  negotiator, AKLNG  Project, said  the state                                                               
felt  very strongly  that a  four-party  joint venture  marketing                                                               
arrangement  would  make  a  huge   difference  in  aligning  the                                                               
interests  of all  the parties  especially when  the project  has                                                               
such disparate  ownership interest  in Point Thomson  and Prudhoe                                                               
Bay. However, ExxonMobil has, for  business reasons, decided they                                                               
cannot  do that.  So, the  state has  conceded and  is trying  to                                                               
formulate  individual joint  ventures  with one  or  more of  the                                                               
producers to market  with them, because that will  help the state                                                               
and reduce  some problems in  terms of gas balancing  and lifting                                                               
REPRESENTATIVE  HAWKER  asked  why  the state  would  concede  to                                                               
ExxonMobil. He didn't want to concede to ExxonMobil.                                                                            
10:20:22 PM                                                                                                                   
MR.  BOYKIN  said  that  maybe  ExxonMobil  could  explain  their                                                               
position better.  He said at  least one other party  wanted joint                                                               
venture marketing  of this type and  argued it, but it  was clear                                                               
it would not be resolved. At  that point, the state had to decide                                                               
what to do and felt this was the only option for going forward.                                                                 
REPRESENTATIVE  HAWKER   asked  if  a  joint   venture  marketing                                                               
agreement is an absolute deal breaker for a $65 billion project.                                                                
10:21:34 PM                                                                                                                   
MR.  BOYKIN  answered  in  all  these  negotiations  one  has  to                                                               
consider how hard  and long to push an  issue. ConocoPhillips was                                                               
aligned  with the  state on  this  issue. It  was discussed  with                                                               
ExxonMobil  for  four  months   and  the  state  got  "absolutely                                                               
nowhere." The state realized this  may actually be a killer point                                                               
for ExxonMobil.                                                                                                                 
10:22:51 PM                                                                                                                   
REPRESENTATIVE  JOSEPHSON  said  earlier comments  suggested  the                                                               
administration  was throwing  a wrench  in the  works or  causing                                                               
delay, but  it sounds like  he is saying that  the administration                                                               
also  knows when  there is  perhaps something  insurmountable for                                                               
one party and a need to move forward to some greater good.                                                                      
MR. BOYKIN answered  that it was a judgement call  the state made                                                               
after four months or so  of discussions with ExxonMobil; this was                                                               
extremely important  for them. They  came up  with a way  to cure                                                               
it, perhaps not as perfectly, but it could work.                                                                                
^State's Gasline Team Update                                                                                                    
                  State's Gasline Team Update                                                                               
10:24:56 PM                                                                                                                   
CHAIR GIESSEL, finding no further  comments, thanked everyone for                                                               
their patience  and answering the  questions, and said  next they                                                               
would  hear  from the  state's  gasline  team. She  invited  Dona                                                               
Keppers, Deputy Commissioner, Department  of Revenue (DOR); Marty                                                               
Rutherford, Deputy Commissioner,  Department of Natural Resources                                                               
(DNR); and  Rigdon Boykin, counsel  to the AKLNG Project,  to the                                                               
table and asked them to address the deferred questions.                                                                         
10:26:10 PM                                                                                                                   
MR. FAUSKE said  he had been asked  to stay and take  the lead on                                                               
the questions with participation from his colleagues.                                                                           
CHAIR GIESSEL  said all  parties received  11 questions  from her                                                               
office and were asked to be  prepared to respond. Mr. Fauske said                                                               
he would review the answers.                                                                                                    
10:27:17 PM                                                                                                                   
Question 1:  What conditions or  milestones do you need  in order                                                               
to  authorize the  funding for  entering  the FEED  stage of  the                                                               
AKLNG Project?                                                                                                                  
MR.  FAUSKE's  response:  AGDC  views  that  the  milestones  are                                                               
primarily  technical and  must  include  successful delivery  key                                                               
pre-FEED work products and deliverables,  and those work products                                                               
are now targeted for completion in early to mid-2016.                                                                           
CHAIR GIESSEL asked what those items are.                                                                                       
10:28:16 PM                                                                                                                   
MR. BOYKIN answered they are  mostly technical in nature: reports                                                               
on engineering feasibility studies and cost estimates.                                                                          
CHAIR GIESSEL asked where those are in terms of achievement.                                                                    
MR. BOYKIN answered that they are in the 75-percent range.                                                                      
10:29:54 PM                                                                                                                   
REPRESENTATIVE  HAWKER  said he  thought  that  meant things  the                                                               
state needs  to do in  order to make  its decision to  enter into                                                               
MR.  BOYKIN  answered that  the  state  needs  have a  very  good                                                               
understanding  of what  the deal  on the  project is:  the fiscal                                                               
agreement,  the   constitutional  amendment  and   the  balancing                                                               
agreements. It  needs to be  done in an executable  form, because                                                               
people  need the  security of  knowing commercial  terms for  the                                                               
project are  agreed to before  spending roughly $500  million for                                                               
10:31:17 PM                                                                                                                   
SENATOR STOLTZE  asked him to  relate which  departments actually                                                               
formulated these answers as they are being answered.                                                                            
10:32:27 PM                                                                                                                   
MR. BOYKIN  responded that these  questions were parceled  out to                                                               
various parts  of the administration with  the responsibility for                                                               
those  particular areas  and they  submitted  drafts of  answers.                                                               
Those  were   further  edited  with  the   participation  of  the                                                               
governor.  Marty  Rutherford  would  give  responses  to  certain                                                               
question she  felt uncomfortable with, in  particular the RIK/RIV                                                               
10:33:30 PM                                                                                                                   
CHAIR GIESSEL asked if Mr. Boykin  is the lead (in place of AGDC)                                                               
on negotiating the conditions for this fully papered agreement.                                                                 
MR. BOYKIN answered  yes, "I guess I'm sort of  the point person.                                                               
I'm sort  of a  person that  has about five  clients. I  have the                                                               
Department  of  Law  (DOL),  I have  the  Department  of  Natural                                                               
Resources (DNR), I  have the Department of Revenue  (DOR); I have                                                               
to listen  to all of  them and  in particular AGDC,  because they                                                               
are the  commercial lead  that was  intended by  this legislature                                                               
for this project." He then formulates  a position to try and push                                                               
this project forward and completed as soon as possible.                                                                         
10:35:03 PM                                                                                                                   
CHAIR GIESSEL asked who at the end of the day he answers to.                                                                    
MR. BOYKIN  answered he is answerable  to Dan Fauske and  he also                                                               
consults with  the governor;  at the  end of the  day he  is also                                                               
answering to the  Attorney General. When he  started leading this                                                               
effort he  decided to  attend the sponsor  meetings with  the DNR                                                               
commissioner,  because  his department  has  one  of the  biggest                                                               
inputs into this project at several levels.                                                                                     
CHAIR GIESSEL said it sounds  like a complex arrangement, but his                                                               
business  card  simply  states  that  he  is  a  counsel  to  the                                                               
MR. BOYKIN  answered that  his role has  changed over  time. That                                                               
card reflects what  the role was when it started.  He hasn't been                                                               
able to  find the  time to work  out what his  new card  ought to                                                               
say, because  he has  been so  busy trying  to push  this project                                                               
10:37:00 PM                                                                                                                   
CHAIR  GIESSEL asked  from the  perspective of  the appropriating                                                               
body, at  the end of the  day whose budget pays  him the $120,000                                                               
per month salary.                                                                                                               
MR. BOYKIN replied that AGDC does that.                                                                                         
MR. FAUSKE added because of  Mr. Boykin's cross-over role between                                                               
AKLNG  and AGDC,  when he  was approached  on this  contract, in-                                                               
house counsel determined  AGDC should be involved.  AGDC issued a                                                               
contract not to exceed $500,000,  because the work was within the                                                               
parameters  of what  the In-state  Gas  Fund could  be used  for.                                                               
Other contracts were  declined, because they did not  fit in with                                                               
the legislature's designated purview.                                                                                           
CHAIR GIESSEL said she had  requested an organizational chart and                                                               
asked what Audie Setters is doing these days.                                                                                   
MR. FAUSKE answered  that Mr. Setters does not work  for AGDC; he                                                               
is under contract to DNR.                                                                                                       
10:38:36 PM                                                                                                                   
REPRESENTATIVE SADDLER  said he  sympathized with  the producers'                                                               
expressed  desire for  clarity, but  he  had heard  "the ball  be                                                               
tossed back  and forth  between Mr. Fauske  and Mr.  Boykin twice                                                               
now, I think," and wanted to know who is in charge.                                                                             
MR. FAUSKE  answered Mr.  Boykin is the  lead negotiator  on this                                                               
project. AGDC works with him and all the departments.                                                                           
10:40:26 PM                                                                                                                   
MR. FAUSKE  said everyone  is working in  various areas  of their                                                               
expertise,  but he  reports  back  to Mr.  Boykin  who takes  the                                                               
issues forward.                                                                                                                 
REPRESENTATIVE   SADDLER  asked   who  decided   to  concede   to                                                               
ExxonMobil on the joint marketing venture.                                                                                      
MR. FAUSKE  said after  consulting with  Mr. Dubler  (Joe Dubler,                                                               
Vice President  of Commercial Operations  for the  Alaska Gasline                                                               
Development   Corporation)  that   he  could   tell  them   which                                                               
departments   were  contacted   directly  for   answers  to   the                                                               
CHAIR GIESSEL clarified that during  the last session the lead on                                                               
this  project  that  she  talked  with  was  Deputy  Commissioner                                                               
Rutherford. So, that  lead her to contest the  statement that Mr.                                                               
Boykin had been the lead as long as he has been involved.                                                                       
10:41:49 PM                                                                                                                   
REPRESENTATIVE HAWKER said he didn't  know where the buck stopped                                                               
and asked who is physically sitting  for the state when a sponsor                                                               
is needed.                                                                                                                      
MR. FAUSKE  answered himself, Joe  Dubler and in the  last couple                                                               
of months Mr. Boykin, the DNR and DOR.                                                                                          
REPRESENTATIVE HAWKER  asked if Mr.  Boykin is being paid  out of                                                               
the Instate Gas Fund.                                                                                                           
MR. FAUSKE answered that was correct.                                                                                           
REPRESENTATIVE HAWKER  said they had  been told that part  of the                                                               
special  session   package  they  should  expect   would  be  the                                                               
statutory changes that would affect  AGDC's authorities and asked                                                               
if AGDC  has the statutory  authority to do  what he is  doing in                                                               
moving this  project forward. He  recalled that SB 138  left that                                                               
authority primarily with  the DNR and DOR and not  with AGDC. "Do                                                               
we need  to change statute to  give you the authority  to do what                                                               
you are doing?"                                                                                                                 
10:44:08 PM                                                                                                                   
MR. FAUSKE answered that was  good question; AGDC has been called                                                               
upon  for areas  of  expertise because  of  its staff  expertise,                                                               
primarily on  the technical and  commercial side. A  decision was                                                               
made a couple  of months ago that  Deputy Commissioner Rutherford                                                               
was stepping  down from her role  as the lead. That  decision was                                                               
not made by him.  An awful lot of work is going  on and he didn't                                                               
think AGDC had exceeded its authority.                                                                                          
REPRESENTATIVE  HAWKER  said  in  the beginning  they  heard  the                                                               
Attorney  General's (AG)  office would  review all  key decisions                                                               
and developments and asked if  the attorney general been involved                                                               
in any of these decisions.                                                                                                      
10:46:03 PM                                                                                                                   
MR. BOYKIN  answered that  the AG  is intimately  involved; there                                                               
are one  or two Department  of Law  (DOL) people at  every single                                                               
negotiating session; the attorney  general himself has come. They                                                               
are  under stick  instructions from  him  not to  pass along  any                                                               
response or decision without him approving it.                                                                                  
REPRESENTATIVE  HAWKER   asked  if   AGDC  has   clear  statutory                                                               
authority to  conduct the activities  it is  currently conducting                                                               
and if that would extend to handling marketing activities.                                                                      
MR. FAUSKE answered  that marketing is under the  purview of DNR;                                                               
but the legislature  put money into AGDC's  budget for marketing.                                                               
AGDC has not been directed to do that.                                                                                          
10:47:54 PM                                                                                                                   
REPRESENTATIVE  HAWKER  asked  if  the  AG  had  reviewed  AGDC's                                                               
statutory  authority  to  conduct  the  other  activities  it  is                                                               
involved in.                                                                                                                    
MR. FAUSKE answered not that he was aware of.                                                                                   
CHAIR GIESSEL asked about the personnel changes.                                                                                
10:49:59 PM                                                                                                                   
MARTY  RUTHERFORD,  Deputy  Commissioner, Department  of  Natural                                                               
Resources (DNR),  said she was asked  to step down as  AKLNG lead                                                               
by  the governor  a couple  of months  ago. At  that time,  Audie                                                               
Setters and  Rigdon Boykin became intimately  involved in gasline                                                               
negotiations   and  leading   the  effort   with  both   the  FME                                                               
(specialists) as  well as internal DNR/DOR/DOL  employees who are                                                               
working entirely on AKLNG.                                                                                                      
CO-CHAIR  NAGEAK  remarked  that  he  hadn't  come  here  for  an                                                               
inquisition. He  came here to listen  to what the state  team was                                                               
doing and  hear the answers to  the 11 questions that  were given                                                               
to them.                                                                                                                        
CHAIR GIESSEL  asked if there  were further comments  on question                                                               
1. Finding none, she moved on to question 2.                                                                                    
10:51:14 PM                                                                                                                   
Question 2:  Is there  agreement on  what it  takes to  enter the                                                               
FEED stage of the AKLNG Project?                                                                                                
MR. FAUSKE  answered that the  deliverables for pre-FEED  are all                                                               
necessary  for  a  positive  FEED  decision.  Those  are  clearly                                                               
addressed by  the pre-FEED Joint  Venture Agreement  (JVA). While                                                               
those  are mostly  technical deliverables,  commercial agreements                                                               
also need  to be completed  to ensure a commercial  foundation is                                                               
in place for FEED. Mr.  Boykin mentioned some of those agreements                                                               
Anticipating that there  may be concern by one  or more producers                                                               
to  making   any  commitment  to   enter  into  FEED   until  the                                                               
constitutional  amendment authorizing  the  fiscal agreement  has                                                               
been passed during the November  2016 general election, the State                                                               
of  Alaska  has offered  that  if  producers make  a  conditional                                                               
commitment to  enter FEED,  in advance  of the  general election,                                                               
the state will  funds its share of FEED  expenditures expected to                                                               
be $400-500 million  to meet all FEED cash calls  for the parties                                                               
to enter FEED officially without further conditions.                                                                            
CHAIR GIESSEL asked  if payment in lieu of taxes  (PILT) would be                                                               
a  critical  element  for  the partners  to  make  a  conditional                                                               
commitment to enter FEED.                                                                                                       
MR. FAUSKE answered yes; it's absolutely essential.                                                                             
CHAIR GIESSEL asked if he believed  RIK would be a critical piece                                                               
for the partners.                                                                                                               
MR. FAUSKE  answered, "I  do." The  RIK/RIV decision  is critical                                                               
and it is being  worked on now. He assumed it  would be RIK, only                                                               
because of all the testimony that  has gone on for the last three                                                               
and a  half years. But  the DOR  commissioner is working  on that                                                               
decision and will make an announcement.                                                                                         
CHAIR GIESSEL asked if there is  a need to hurry things along and                                                               
who crafted the answer to that question; AGDC?                                                                                  
10:54:26 PM                                                                                                                   
MR.  FAUSKE answered  yes, in  consultation with  Mr. Boykin  and                                                               
other relevant  people. The  PILT question  would be  answered by                                                               
Ms. Keppers.                                                                                                                    
Question 3: Dealt with property tax structure and mechanisms.                                                                   
10:55:09 PM                                                                                                                   
DONA KEPPERS,  Deputy Commissioner,  Department of  Revenue, said                                                               
she  works   directly  with   Commissioner  Hoffbeck.   She  said                                                               
Commissioner  Hoffbeck  has  worked directly  with  the  producer                                                               
parties in  advancing the property  tax structure  and mechanism.                                                               
He  has also  interacted in  a  public forum  with the  Municipal                                                               
Advisory Gas Project Review (MAGPR)  Board. A lot of the property                                                               
tax  work  is not  in  the  purview  of  the state,  although  an                                                               
important  piece  is. The  mechanisms  and  calculations and  mil                                                               
rates  are  being worked  on  with  the  producer parties  and  a                                                               
tentative alignment on the structure has been reached.                                                                          
MS.  KEPPERS   explained  that  they  actually   are  working  on                                                               
calculations  and details  internally  and meeting  on a  regular                                                               
basis with the  producers. At the end of this  month they go back                                                               
to work  with the  MAGPR Board on  property tax  component piece.                                                               
The impact payment processes are  also within the state's purview                                                               
and  requires  collaboration  with  the MAGPR  Board,  too.  That                                                               
entails  working  with the  producer  parties  as part  of  their                                                               
socio-economic   work.  They   are   also   working  with   their                                                               
consultants on  how the impact  payment mechanisms would  work in                                                               
different places.  She said  the DOR  has to  work also  with the                                                               
MAGPR Board  on the  distribution payment  process of  the impact                                                               
payments, the application process and lots of detailed work.                                                                    
10:58:59 PM                                                                                                                   
CHAIR GIESSEL  said when Commissioner  Hoffbeck presented  to the                                                               
committee  in  June, he  led  them  to  anticipate some  kind  of                                                               
finalized document within  two weeks and it's now  been more than                                                               
two  months. That  is the  genesis  of their  question: where  is                                                               
this?  This  is  similar  to  what  the  sponsor  companies  have                                                               
described in terms of their negotiations.                                                                                       
SENATOR  MACKINNON  asked  what  the  plan  is  for  distribution                                                               
between the local communities and the state.                                                                                    
11:00:53 PM                                                                                                                   
MS.  KEPPERS replied  that the  state does  know what  is on  the                                                               
table  but  is  hesitant  to   talk  about  value  until  it  can                                                               
communicate where it is in the process with the MAGPR Board.                                                                    
SENATOR  MACKINNON   asked  if  the  MAGPR's   interest  is  more                                                               
important than the state's.                                                                                                     
MS. KEPPERS answered that their  interest is just as important as                                                               
the state's interest, because we are  all in this together and it                                                               
has to balance.                                                                                                                 
11:01:33 PM                                                                                                                   
Question 4: What analysis has  been conducted for determining the                                                               
buyout of TransCanada? This question was referred to DNR.                                                                       
MS. RUTHERFORD responded that under  the Precedent Agreement (PA)                                                               
that  exists  between the  State  of  Alaska and  TransCanada,  a                                                               
couple of options are available  for a TransCanada buyout. One is                                                               
to  complete the  firm  transportation  service agreement  (FTSA)                                                               
that is identified as necessary to  have in place by December 15,                                                               
2015,  or the  second is  to  buy out  all  of a  portion of  the                                                               
TransCanada  interest  in the  midstream  (the  pipeline and  the                                                               
The  state's  analysis  of  the  TransCanada  buyout  option  has                                                               
generated certain  conclusions and  observations. In  general, if                                                               
the state  acquires TransCanada's  ownership in the  pipeline and                                                               
the  GTP  portion  of  the project  (the  midstream)  the  state,                                                               
through AGDC,  would have greater  voting rights,  greater access                                                               
to information and  increased equity in the  project, which would                                                               
increase the state's potential revenues from the project.                                                                       
From  a technical  perspective, TransCanada's  involvement offers                                                               
considerable  technical   support  to  the  state   on  midstream                                                               
engineering  issues. From  a financial  perspective, the  state's                                                               
total  cash   flow  from  the   project  increases   with  direct                                                               
participation by the  state in the project  midstream rather than                                                               
through TransCanada. This will mean  that the state would need to                                                               
repay  TransCanada's investment  and handle  future pre-FEED  and                                                               
FEED cash calls  to the project work plan and  budget. The reason                                                               
she  reference the  potential additional  pre-FEED cash  calls is                                                               
because they are linked to the  timing of any potential buyout of                                                               
As  Vincent  Lee,  TransCanada's  representative  indicated,  the                                                               
state  and  TransCanada  are currently  in  negotiations  on  the                                                               
potential  of  the  state  buying   out  TransCanada,  but  these                                                               
discussions have not been completed  nor has the state provided a                                                               
termination letter to TransCanada.                                                                                              
MS.  RUTHERFORD  said  they  hope  that  these  discussions  will                                                               
conclude  very  quickly and  then  the  administration can  bring                                                               
forward  to  the  legislature  a  recommendation  as  quickly  as                                                               
possible  along with  all  supporting  documentation, a  detailed                                                               
technical  and financial  analysis that  was developed  primarily                                                               
using Black and Veatch resources.                                                                                               
Also, since  the negotiations are  ongoing, she added that  it is                                                               
very  difficult to  provide too  much additional  detail at  this                                                               
time.  Earlier  today  she sent  Senator  Giessel  the  quarterly                                                               
report which provides an update to  the amount of money the state                                                               
may  be  obligated to  pay  TransCanada  for  the work  they  are                                                               
undertaking  on   the  state's   behalf  through   the  Precedent                                                               
11:06:17 PM                                                                                                                   
CHAIR GIESSEL  noted that all  committee members have  the letter                                                               
she sent today and it had been posted on BASIS.                                                                                 
REPRESENTATIVE SADDLER asked if the state wants to do a buyout.                                                                 
MS.  RUTHERFORD  answered that  is  the  primary focus  of  their                                                               
discussions. If  that can't be concluded  successfully, the state                                                               
would   need  to   progress  the   firm  transportation   service                                                               
REPRESENTATIVE JOSEPHSON  asked if there is  an existing document                                                               
now that  describes the  modeling that was  done on  the ultimate                                                               
revenue question to the state.                                                                                                  
11:07:28 PM                                                                                                                   
MS. RUTHERFORD replied  that there is a full analysis,  but it is                                                               
a  confidential document.  Should Alaska  progress a  proposal to                                                               
buy  out  TransCanada's interest,  it  would  either provide  the                                                               
entire  analysis  under  confidential  provisions  to  those  who                                                               
signed the  confidentiality agreement or  in all likelihood  do a                                                               
combination of  that to the  people who  have signed, as  well as                                                               
create a publicly available document.                                                                                           
REPRESENTATIVE HAWKER  said he  was party  to putting  together a                                                               
request  to  the administration  in  May/June,  because they  all                                                               
heard stories about this potentially  happening, and the governor                                                               
asked the  legislature for $108  million to complete  the buyout.                                                               
He thought the decision had  been made. The legislature asked the                                                               
governor  for any  analysis that  had been  done and  received no                                                               
response. He  asked the  rationale for  the decision  being under                                                               
confidentiality, because  this would seem  to be the  ultimate in                                                               
public documents.                                                                                                               
11:09:52 PM                                                                                                                   
MS.  RUTHERFORD answered  she  believed the  reason  it is  under                                                               
confidentiality  is  that the  model  used  by Black  and  Veatch                                                               
incorporates  much  AKLNG  confidential information  as  well  as                                                               
confidential information  the Division  of Oil  and Gas  has. She                                                               
completely agrees that when a  proposal is provided to the public                                                               
and the legislature  they will have to make as  much of that data                                                               
available so that there is a  full understanding of the reason to                                                               
propose a buyout of TransCanada.                                                                                                
REPRESENTATIVE HAWKER  said the legislature needed  the Black and                                                               
Veatch  analysis so  their consultant  could prepare  them for  a                                                               
special session. He feels a  due diligence responsibility to look                                                               
out  for the  best  interests of  the State  of  Alaska and  this                                                               
information is needed in order to do that.                                                                                      
11:12:02 PM                                                                                                                   
MS. RUTHERFORD responded,  "I do hear you and  I fully appreciate                                                               
your need to  have this data and  we will work to  try to provide                                                               
that to you."  She explained that the  confidential version could                                                               
be provided  only to  those who  signed the  Precedent Agreement.                                                               
She  added that  they  will  begin immediate  work  to develop  a                                                               
publically available analysis, as well.                                                                                         
REPRESENTATIVE  HAWKER  asked if  the  decision  is not  made  to                                                               
execute the exit  off-ramp for TransCanada, if it is  too late to                                                               
continue the FTSA negotiation.                                                                                                  
MS. RUTHERFORD answered that it is  not too late and that many of                                                               
the FTSA  elements were embedded into  the confidential Precedent                                                               
Agreement. The state  is prepared to move forward  with the FTSA,                                                               
she said,  in a very  diligent fashion if  that is the  result of                                                               
the   discussions  occurring   between  the   administration  and                                                               
11:13:41 PM                                                                                                                   
REPRESENTATIVE HAWKER  asked if TransCanada agrees  with her that                                                               
it's not too late to establish the FTSA.                                                                                        
MS. RUTHERFORD answered  that she had not asked  that question of                                                               
TransCanada but it would be valid to ask them directly.                                                                         
SENATOR  MACKINNON asked  should  the governor  be successful  in                                                               
getting the  $108 million without  talking to the  legislature at                                                               
all  about it,  who  is  going to  offer  the  expertise for  the                                                               
pipeline situation.                                                                                                             
MS.  RUTHERFORD replied  that SB  138 indicates  that should  the                                                               
State of  Alaska buy out  the midstream element,  those interests                                                               
move to  AGDC. So, it's  appropriate for  her to have  Mr. Fauske                                                               
respond to that question.                                                                                                       
11:16:33 PM                                                                                                                   
MR. FAUSKE  replied that AGDC  is a  pipeline company and  it has                                                               
the expertise on  staff. They took the ASAP class  3 estimate for                                                               
a 36-inch, 800-mile pipe and did  all the work necessary to go to                                                               
a  recourse  tariff filing,  and  that  project  is ready  to  be                                                               
sanctioned.  Just a  short  time ago  they were  on  time and  on                                                               
budget, too.  He explained  that AGDC  has limited  personnel and                                                               
deal  mainly with  substantive  matter  experts, consultants  and                                                               
engineers  and  bring  people  in  to do  a  good  job.  He  said                                                               
TransCanada is a great company, but  if this would occur, AGDC is                                                               
set up to take on the  responsibility of managing the building of                                                               
the pipe.                                                                                                                       
SENATOR  MACKINNON said  many people  over the  past decade  have                                                               
said only  a handful  of companies  in the  world could  handle a                                                               
project this big.                                                                                                               
MR. FAUSKE replied that the  determination of who is building the                                                               
pipeline hasn't been  made yet. If AKLNG goes  forward, one could                                                               
argue that ExxonMobil  is going to build and manage  it, but AGDC                                                               
will represent  the state's  share of the  midstream and  GTP. He                                                               
said he is quite proud of the work AGDC does.                                                                                   
11:18:27 PM                                                                                                                   
SENATOR  MACKINNON said  they  do a  great  job, but  TransCanada                                                               
brought a different level of talent to the table.                                                                               
CHAIR  GIESSEL said  TransCanada brings  more to  the table  than                                                               
expertise; they also  have financing and carry  the state's note.                                                               
She asked how the state proposes to replace that.                                                                               
11:19:43 PM                                                                                                                   
MS.   RUTHERFORD  responded   that  the   decision  to   buy  out                                                               
TransCanada  will  be a  balance  of  risk  and reward.  It  will                                                               
reflect the responsibility to  buy out TransCanada's expenditures                                                               
it has made to date and it will  require the state to take on the                                                               
cash calls for pre-FEED and into  FEED. On the other hand, a cost                                                               
of  service transportation  fee  will be  less  expensive than  a                                                               
third-party  tariff  structure.  There are  immediate  costs  and                                                               
risks associated with  that decision, but there  is the potential                                                               
for long term  gain in lower costs, so that  the net result would                                                               
be that the  state's financial position would  be improved. There                                                               
is no question that there is a tradeoff.                                                                                        
MS. RUTHERFORD  said she wasn't  involved in the analysis  of the                                                               
financing aspect and would look  to the Department of Revenue for                                                               
MR. BOYKIN added  that the financing TransCanada  is providing to                                                               
the state  has been very important,  but over the long  term that                                                               
financing  is  probably more  expensive  than  any financing  the                                                               
state might  be able to  obtain from  other parties. It  was very                                                               
advantageous to have that financing  at first, but as the project                                                               
gets further down  the road, the investment  community that would                                                               
invest  in projects  like this  would have  more comfort  lending                                                               
money  to this  project. At  the stage  TransCanada, in  essence,                                                               
lent money to  this project, very few people would  be willing to                                                               
take that  risk. He also  thought that TransCanada  was concerned                                                               
whether the  legislature will appropriate  the money to  get them                                                               
paid.  That is  the  risk  they are  getting  paid  for, to  some                                                               
11:23:23 PM                                                                                                                   
REPRESENTATIVE SADDLER  asked if  the governor  is trying  to get                                                               
financing from Asian investors.                                                                                                 
MR. BOYKIN replied that no decision had been made on that.                                                                      
REPRESENTATIVE SADDLER asked if there had been discussions.                                                                     
MR. BOYKIN  replied that the  governor has said he  would explore                                                               
all  options. In  the  last 10  years it  is  more prevalent  for                                                               
buyers to  have an investment all  the way up the  chain to where                                                               
the  LNG is  coming from.  He had  no idea  whether they  will be                                                               
interested in  this project, but  the state will explore  that as                                                               
well as a number of other alternatives.                                                                                         
11:24:49 PM                                                                                                                   
REPRESENTATIVE  SADDLER  asked  if  Asian  investors  is  one  of                                                               
MR. BOYKIN answered, "I'm sure  it is." Another typical option is                                                               
basically  vendors   who  will  provide  debt   through  a  state                                                               
organization. That  happens often  in places  like Japan.  But at                                                               
the  end of  the  day  he felt  this  project  would be  financed                                                               
through  project financing,  which will  entail tax  exempt bonds                                                               
and a whole host of different financing techniques.                                                                             
11:25:52 PM                                                                                                                   
REPRESENTATIVE SADDLER  asked what  other financing  options were                                                               
MR. BOYKIN answered that he does  not provide that kind of advice                                                               
to the state, but vendors of  large pieces of equipment will help                                                               
projects by loaning  them money at preferential  rates. Since the                                                               
state  will own  25  percent  of this  project,  it is  certainly                                                               
possible that tax  exempt bonds will be used for  a large portion                                                               
of  it.   The  rest  of   the  money  will  probably   come  from                                                               
institutional investors including some even in this state.                                                                      
REPRESENTATIVE  SADDLER asked  if by  tax exempt  bonds he  meant                                                               
revenue or general obligation bonds.                                                                                            
11:27:11 PM                                                                                                                   
MR.  BOYKIN answered  that these  bonds would  be backed  by this                                                               
project, not by the state at all.                                                                                               
REPRESENTATIVE  SADDLER   asked  if  the  state   is  considering                                                               
pledging the Permanent Fund to back this construction project.                                                                  
MR. BOYKIN  answered that usually  projects like this -  that are                                                               
publicly  financed  -  can  use   non-recourse  bonds  after  the                                                               
completion  of  construction.  However,  most  institutions  that                                                               
would invest during construction only  would require some kind of                                                               
credit support  to make  sure that  construction is  completed on                                                               
time and  on budget. The  support would  pay for the  interest to                                                               
the degree it isn't on time  or support to pay for cost overruns.                                                               
That is something  one usually cannot get contractors  to step to                                                               
for a project of this size.  If this were a $100-million project,                                                               
you  could get  that. For  this project,  financing parties  will                                                               
probably require something like a  cost overrun commitment by the                                                               
various parties  involved in  the project.  He assumed  the state                                                               
would have to step up for its share,  but he had no idea what the                                                               
budget would be.                                                                                                                
REPRESENTATIVE   SADDLER   asked   if   the   administration   is                                                               
considering backing this project with the Permanent Fund.                                                                       
MR. BOYKIN answered that he had no idea.                                                                                        
11:29:09 PM                                                                                                                   
REPRESENTATIVE SADDLER asked if he  was not advising the governor                                                               
about financing.                                                                                                                
MR. BOYKIN answered no.                                                                                                         
SENATOR MACKINNON  asked him  about Lazard  Freres qualifications                                                               
in terms of financing.                                                                                                          
11:29:53 PM                                                                                                                   
MR.  BOYKIN  answered  that  Lazard  Freres is  one  of  the  top                                                               
investment banking  houses in the country,  especially on mergers                                                               
and acquisitions; however,  not the top two or  three for project                                                               
financing. But they may be qualified to give advice.                                                                            
SENATOR MACKINNON  asked who the  state is relying on  for advice                                                               
about project financing.                                                                                                        
MR. BOYKIN answered that one of  the problems in hiring anyone in                                                               
this  area  is because  of  the  various  laws passed  after  the                                                               
financial  debacle  of  the  last  15  years  most  of  them  are                                                               
restricted from  becoming a  manager of  whole financing  if they                                                               
are  also the  advisor to  a state  organization like  this. That                                                               
constraint severely  restricted the state's choices  and severely                                                               
limited the  number of  people who  would bid  on a  project like                                                               
SENATOR MACKINNON asked  who the state is relying  on for project                                                               
MR. BOYKIN  replied that Lazard  Freres is providing  an analysis                                                               
of options. When  the project gets to the point  of financing, he                                                               
was  sure  all  the  parties   would  all  get  together  and  do                                                               
integrated project financing.                                                                                                   
11:32:40 PM                                                                                                                   
SENATOR  MACKINNON  asked how  the  market  will feel  about  one                                                               
organization  controlling everything  if  it's 5  percent of  the                                                               
global market. "Will it be seen as a monopoly?"                                                                                 
MR. BOYKIN  answered that  this project  is very  unique, because                                                               
it's unusual for a state in  a stable environment such as this to                                                               
have  a  25 percent  ownership  in  a  project. This  has  unique                                                               
advantages over  a project that  might be  in the Middle  East or                                                               
Africa  where  the  market may  consider  that  environment  less                                                               
SENATOR  MACKINNON  said  she  was  strictly  dealing  with  this                                                               
project's  financing and  asked  if regulators  would allow  that                                                               
close relationship.                                                                                                             
11:34:32 PM                                                                                                                   
MR. BOYKIN said that was a  problem Exxon had when they said they                                                               
did not  want to  do a four-party  joint venture  marketing. It's                                                               
different  for  the  state,  because it  is  only  controlling  5                                                               
million tons  and that is  not creating a monopoly.  Just because                                                               
you  finance jointly  doesn't mean  that  you are  going to  sell                                                               
jointly, and  it's the selling of  the LNG that could  create the                                                               
monopoly, not the financing.                                                                                                    
SENATOR MACKINNON  noted that Mr. Boykin  advocated joint venture                                                               
marketing earlier for the state.                                                                                                
MR. BOYKIN  answered there is  no question that the  state wanted                                                               
joint marketing. It  ameliorated a lot of risks  in the upstream,                                                               
potentially. This  doesn't mean issues can't  be resolved through                                                               
other mechanisms, which  they are now doing. It  is taking longer                                                               
and that is one of the reasons gas balancing isn't resolved yet.                                                                
11:36:47 PM                                                                                                                   
CHAIR  GIESSEL  asked Mr.  Fauske  if  he  felt tax  exempt  non-                                                               
recourse project bonds are a viable option.                                                                                     
MR. FAUSKE answered  yes, but that gets back to  either a private                                                               
letter ruling  from the  IRS or  some sort  of underwriting  by a                                                               
bank. The  tax exempt market  in the United States  is controlled                                                               
by the  Internal Revenue Service; they  look at who the  end user                                                               
of  the product  is. The  state is  a tax  exempt entity  that is                                                               
involved in a for profit venture,  which is not prohibited and he                                                               
thought it would be successful  at some level there. He suggested                                                               
blending tax exempt  and other debt instruments  to structure the                                                               
deal with the lowest capital cost.                                                                                              
CHAIR GIESSEL said  it sounded like another  level of uncertainty                                                               
in the process.                                                                                                                 
11:38:51 PM                                                                                                                   
MR. FAUSKE  said he didn't know  at what level the  tax exemption                                                               
would be  and the  state might  be able to  help its  partners by                                                               
getting cheaper money for the entire project.                                                                                   
SENATOR   MACKINNON  said   the   people  of   Alaska  -   Native                                                               
corporations and  individual Alaskan  companies -  had approached                                                               
the legislature about participating in  this project and asked if                                                               
the state had pursued any of that financing.                                                                                    
MR. FAUSKE  answered that there  have been  discussions; Alaskans                                                               
have a sincere desire to participate  in the project. One idea is                                                               
allowing people to elect to  participate by using their Permanent                                                               
Fund dividend.  He said the  project itself will be  supported by                                                               
long term contracts  with major buyers of the natural  gas on the                                                               
international markets.                                                                                                          
11:41:49 PM                                                                                                                   
SENATOR  MACKINNON  asked if  he  had  a timeline  for  providing                                                               
Alaskans that opportunity.                                                                                                      
MS. KEPPERS replied  that section 76 of SB 138  requests that the                                                               
department     communicates    with     regional    corporations,                                                               
municipalities and individuals  in order to come up  with a high-                                                               
level  plan  as  to  how  they can  become  co-investors  in  the                                                               
pipeline.  That  exercise  took place  over  the  summer.  Lazard                                                               
Freres  and   First  SouthWest  have  had   several  face-to-face                                                               
meetings and  conference calls to  understand what  the financing                                                               
strategies are. She has been  educating them on what this project                                                               
is and her  department is learning how they  make their financing                                                               
decisions in order to be able to bridge this need.                                                                              
SENATOR  MACKINNON asked  for a  timeline for  seeing preliminary                                                               
11:43:37 PM                                                                                                                   
JUSTIN   PALFREYMAN,    Director,   Global   Power,    Energy   &                                                               
Infrastructure Group,  Lazard Freres,  answered the  timeline for                                                               
their report as described in  the legislation is for whenever the                                                               
special session is called and assume  it will be sometime in mid-                                                               
SENATOR MACKINNON  asked if he  was including the  Alaska Project                                                               
financing numbers.                                                                                                              
MR.  PALFREYMAN  answered  yes;   it  will  include  analysis  on                                                               
capacity as  well as benefits and  considerations and structuring                                                               
alternatives  for including  Native corporations,  municipalities                                                               
and  retail or  individual residents  of the  State of  Alaska as                                                               
part of the  overall financing plan and options  available to the                                                               
11:45:39 PM                                                                                                                   
CHAIR  GIESSEL  said the  idea  of  terminating with  TransCanada                                                               
makes her  nervous, because  they don't know  what it  would cost                                                               
the state nor how it would be funded.                                                                                           
MS. RUTHERFORD  replied that many  decisions they are  engaged in                                                               
are  sort of  "a chicken  and  egg" where  certain decisions  are                                                               
pending other decisions.                                                                                                        
REPRESENTATIVE  SADDLER  asked,  absent  TransCanada,  if  Lazard                                                               
Freres will be analyzing the financing options.                                                                                 
MS. KEPPERS  answered that Lazard  Freres prepared the  report on                                                               
financing alternatives,  Milbank, Tweed, Hadley and  McCloy is an                                                               
internal  consultant  to  the  state   for  financing  and  First                                                               
Southwest is  municipal advisor to  the state. At  the integrated                                                               
finance team  level - when the  state with the producers  come to                                                               
terms on  a fiscal  agreement - a  bankability review  is needed,                                                               
which requires  other finance  legal counsel,  and that  is being                                                               
11:49:09 PM                                                                                                                   
REPRESENTATIVE  SADDLER asked  who is  on the  integrated finance                                                               
MS. KEPPERS  replied it is made  up of the treasury  division for                                                               
the producer parties, members of AGDC, DOR and Mr. Boykin.                                                                      
REPRESENTATIVE  SADDLER  asked  for   some  kind  of  diagram  or                                                               
documentation of that. He asked who  the one person is making the                                                               
MR. BOYKIN answered that it will  be made by all the parties, not                                                               
any one party.                                                                                                                  
REPRESENTATIVE SADDLER asked what mechanism would be used.                                                                      
MR. BOYKIN said something that  requires unanimity. Everyone will                                                               
have to agree.                                                                                                                  
11:50:58 PM                                                                                                                   
REPRESENTATIVE HAWKER  asked who is  counseling the state  on how                                                               
it is going  make its investment in this. Did  he hear Mr. Boykin                                                               
say it will be the partners?                                                                                                    
MR. BOYKIN answered  that he was referring to  something a little                                                               
bit different.  The state will have  to make decisions on  how to                                                               
finance  its equity  share, itself.  Some would  like to  see the                                                               
debt portion  of the project  for all  the parties financed  in a                                                               
joint fashion, because  that will be a great  deal more efficient                                                               
and lead to  simpler financing documents, because  the banks that                                                               
lend to this project won't want  to go after Alaska's share, then                                                               
ExxonMobil's share if there is a default or something like that.                                                                
11:53:00 PM                                                                                                                   
REPRESENTATIVE  HAWKER asked  the  difference  between the  state                                                               
financing its equity  share and joint financing. He  asked if the                                                               
state was going  to get 25 percent of this  project by putting up                                                               
$1 billion.                                                                                                                     
MR. BOYKIN  answered no. The  intent of  the state is  to explore                                                               
ways of  getting its  equity portion  through types  of financial                                                               
instruments, vendor arrangements or  buyer arrangements that will                                                               
minimize the amount  it will have to actually put  up. It may not                                                               
be possible to do that on  a reasonable basis. However there is a                                                               
chance that it is in the state's interest to pursue it.                                                                         
11:55:15 PM                                                                                                                   
REPRESENTATIVE  JOSEPHSON said  he  was quite  supportive of  the                                                               
previous administration's  gas team and  SB 138 generally  and he                                                               
thought the equity  option was wise. He assumed they  felt it was                                                               
wise, also.                                                                                                                     
MS.  RUTHERFORD answered  absolutely;  the option  that was  made                                                               
available to  buy out TransCanada  is an  appropriate alternative                                                               
to consider.                                                                                                                    
REPRESENTATIVE JOSEPHSON  asked ultimately  when she  advises the                                                               
governor on  this matter,  is this  going to  be a  decision they                                                               
agonize over?                                                                                                                   
11:57:00 PM                                                                                                                   
MS. RUTHERFORD replied that it will  not be her decision; it will                                                               
be made at  the highest level of the  administration and possibly                                                               
include the  legislature. She  believed that  there is  uplift in                                                               
the long term  for the State of Alaska in  buying out TransCanada                                                               
in terms of the potential for  a much lower tariff structure, but                                                               
that is offset by the immediate cash calls.                                                                                     
REPRESENTATIVE SADDLER asked how the  state will actually pay the                                                               
$500  million for  the  pre-FEED decision,  but  also the  equity                                                               
11:59:11 PM                                                                                                                   
MR. BOYKIN  answered that the decision  will be made by  the both                                                               
the  governor and  AGDC, because  AGDC will  actually be  holding                                                               
this asset. He was not involved in that decision.                                                                               
12:00:16 AM                                                                                                                   
REPRESENTATIVE SADDLER asked  Mr. Fauske if he  believed that was                                                               
the decision process.                                                                                                           
MR. FAUSKE answered yes.                                                                                                        
12:01:30 AM                                                                                                                   
Question  6:  What  his  opinion   is  about  the  constitutional                                                               
amendment  on  fiscal  terms without  the  full  agreement  being                                                               
12:01:58 AM                                                                                                                   
MR.  FAUSKE  answered  that  the   Department  of  Law  supported                                                               
bringing a resolution  on a constitutional amendment  vote to the                                                               
legislature  only  if  it  was  accompanied  by  key  fiscal  and                                                               
commercial   agreements   that   fully   describe   the   state's                                                               
participation in the project.                                                                                                   
CHAIR  GIESSEL   asked  if  those   key  fiscal   and  commercial                                                               
agreements  are  settled  upon   and  the  legislature  writes  a                                                               
constitutional  amendment   and  passes   it  forward   and  then                                                               
something happens  and things  change or  the project  doesn't go                                                               
forward. Could  it be taken  off the ballot and  what opportunity                                                               
would  there  be  to  make   a  more  generalized  constitutional                                                               
amendment that simply said "a  gas project going forward would be                                                               
approved based on legislative approval" or something like that?                                                                 
12:03:28 AM                                                                                                                   
MR. BOYKIN answered  that the intention of the state  was to have                                                               
a  constitutional  amendment  that  if the  project  did  not  go                                                               
forward,   the  constitutional   amendment  effectiveness   would                                                               
expire.  So,  there is  a  sunset  specifically related  to  this                                                               
particular project.                                                                                                             
CHAIR  GIESSEL said  that was  her inquiry  to Legislative  Legal                                                               
folks who said it might be illegal.                                                                                             
Question 7: Who is the State of Alaska's gas team lead?                                                                         
12:04:19 AM                                                                                                                   
MR. FAUSKE  answered that  it is  Mr. Boykin  and he  is briefing                                                               
himself and  the governor daily.  Questions about the  team's day                                                               
to day activities  and engagements can be directed  to himself or                                                               
Joe Dubler.                                                                                                                     
CHAIR GIESSEL  said this  was new  information and  the committee                                                               
appreciated having it in writing.                                                                                               
Question 8:  How does  the state  plan to fund  its share  of the                                                               
costs through FEED?                                                                                                             
12:04:51 AM                                                                                                                   
MR. FAUSKE said that the DOR already responded to that.                                                                         
Question 9:  What is the  status of withdrawal questions  and why                                                               
is this important to Alaska?                                                                                                    
12:05:14 AM                                                                                                                   
MR. FAUSKE said he and Mr.  Boykin had already answered this. The                                                               
process they  are currently  involved in allows  the pace  of the                                                               
project to be  dictated by any party. Because of  this, the state                                                               
needs to  ensure that  if the  process fails  for any  reason, it                                                               
will be able  to continue progressing a  project to commercialize                                                               
North  Slope gas.  The only  way  for it  to commercialize  North                                                               
Slope  gas  is  if  it  has  access to  that  gas,  which  is  an                                                               
underlying  principle of  the  withdrawal process.  Specifically,                                                               
the  state  will  require the  following  from  each  withdrawing                                                               
party: 1.  Such parties'  equity in the  project company  and the                                                               
member's agreement.  2. Each producer  must agree to sell  gas or                                                               
ship gas  through the project.  3. All rights to  receive project                                                               
data  plus assets,  technical or  otherwise, produced  during the                                                               
pre-FEED  process  up to  the  point  of  withdrawal. This  is  a                                                               
difficult issue for all parties to resolve.                                                                                     
12:07:04 AM                                                                                                                   
CHAIR GIESSEL  noted that their  consultants have said  that it's                                                               
rather common  for a project  to start out with  certain partners                                                               
and as it evolves, some drop off  and others come on. She was not                                                               
quite sure "what our degree of fear is coming from."                                                                            
MR.  BOYKIN responded  that the  governor realizes  the project's                                                               
importance  for  the  future.  Even  if the  chance  of  a  party                                                               
withdrawing is only 2-5 percent,  he feels it's important that if                                                               
a party withdraws that the state  has a way to still proceed with                                                               
the  project.  He explained  that  the  state  may be  seeking  a                                                               
different return on  the money that is investing  in this project                                                               
than  a  producer might  have.  It's  likely that  the  producers                                                               
involved  in  this project  have  a  return expectation  that  is                                                               
somewhere  between 10-16  percent.  The state  would probably  be                                                               
happy with  a return less than  that if it produced  a project or                                                               
produced  gas and  a  future  for the  state.  So  the state  has                                                               
different considerations that  may lead it to do  a project where                                                               
one or more  producers may not do it. The  state also, because of                                                               
its  lower return  expectations, could  potentially do  a project                                                               
with a lower oil expectation for  the future. It will be 10 years                                                               
from now when this comes on  line, but that still requires a long                                                               
term view as to  what the future might bring in  terms of oil and                                                               
the  longer the  downturn exists  and  the more  severe it  gets,                                                               
they've got to be more and more concerned about that risk.                                                                      
12:09:59 AM                                                                                                                   
SENATOR DUNLEAVY asked  Mr. Fauske to clarify if  his board still                                                               
meets and makes decisions if Mr. Boykin is in charge.                                                                           
MR. FAUSKE  answered that  the board still  meets -  September 22                                                               
will  be the  next meeting  -  and makes  decisions. His  earlier                                                               
comment referenced  the slowdown of  the work AGDC was  doing for                                                               
the ASAP.                                                                                                                       
REPRESENTATIVE SADDLER asked if any  one of the parties withdraws                                                               
from  the deal,  are the  parties no  longer bound  to remain  in                                                               
terms of the HOA.                                                                                                               
12:11:33 AM                                                                                                                   
MR. BOYKIN  answered that if  any party withdraws,  the remaining                                                               
parties have  the option to decide  whether they want to  stay in                                                               
the project  or not. Maybe one  of them won't and  then the other                                                               
parties would  have to look  at that  again with whoever  is left                                                               
and decide whether they want to proceed.                                                                                        
REPRESENTATIVE  SADDLER  asked  if   the  current  joint  venture                                                               
agreement  would be  voided  and new  negotiations  have to  take                                                               
MR.  BOYKIN answered  no; it's  envisioned  that documents  would                                                               
provide  a process  where  the  parties that  were  still in  the                                                               
project could  proceed under the existing  agreements. Obviously,                                                               
the  equity  percentages would  have  to  change, but  the  basic                                                               
documents would stay the same.                                                                                                  
12:12:49 AM                                                                                                                   
REPRESENTATIVE SADDLER said for the  record he is not envisioning                                                               
that and  understands that the  alignment of the  current parties                                                               
is a good thing.                                                                                                                
CHAIR GIESSEL asked if the HOA would be voided.                                                                                 
MR. BOYKIN replied  that the HOA expires at the  end of this year                                                               
and it's envisioned that other  agreements will take the place of                                                               
that HOA.                                                                                                                       
CHAIR GIESSEL verified that it does.                                                                                            
REPRESENTATIVE HAWKER asked to clarify  the statement: "The state                                                               
will  require  the following  from  each  withdrawing party:  the                                                               
party's equity."                                                                                                                
12:14:15 AM                                                                                                                   
MR.  BOYKIN  answered there  has  been  discussion about  whether                                                               
there would be  compensation or not. One view is  that the equity                                                               
in the project  isn't worth anything if the project  is not going                                                               
forward  with  that party.  He  guessed  if  they were  going  to                                                               
withdraw they would make an effort  to sell their interest in the                                                               
project before they even made that decision.                                                                                    
REPRESENTATIVE  HAWKER  asked if  "the  state  will require  that                                                               
party's  equity"  means  either   with  compensation  or  without                                                               
compensation and if  the presumption is that the  State of Alaska                                                               
is going  to take on a  withdrawing entity's equity share  of the                                                               
12:15:34 AM                                                                                                                   
MR. BOYKIN answered that the remaining parties decide.                                                                          
REPRESENTATIVE  HAWKER asked  if ExxonMobil  decides to  withdraw                                                               
does the  state, itself, take over  its 33 percent and  what does                                                               
that obligate the state to in order to complete the project.                                                                    
MR.  BOYKINS   replied  that  the  state's   preference  in  that                                                               
situation would  be for the  remaining parties to  decide whether                                                               
they  want equal  shares of  ExxonMobil's withdrawal  or if  they                                                               
don't, the state would be the  taker of last resort, if the state                                                               
upon  that withdrawal  decided  it still  wanted  to proceed,  as                                                               
well. The state may feel it  cannot proceed depending on what the                                                               
circumstances are  that required the  party to withdraw  to begin                                                               
12:17:57 AM                                                                                                                   
REPRESENTATIVE HAWKER  imagined if  he was negotiating  this from                                                               
the other side,  he would want compensation for the  value of the                                                               
part of the project, which  does have intrinsic value, because it                                                               
allows the state to continue completing the project.                                                                            
12:20:40 AM                                                                                                                   
REPRESENTATIVE  HAWKER asked  if this  is a  drop dead  provision                                                               
that the  project doesn't go ahead  without or is there  any room                                                               
to negotiate.                                                                                                                   
MR. BOYKIN answered  that there is always room  to negotiate. The                                                               
state recognizes  that no matter what  view one may have  of what                                                               
the various engineering data is worth,  it is clear that the land                                                               
in  Nikiski  is  worth  money  no matter  what  happens  to  this                                                               
REPRESENTATIVE  HAWKER  asked  if  the  state  ultimately  has  a                                                               
contingent  obligation and  someone backs  out, how  that affects                                                               
the state's value and credit on  the open market for all kinds of                                                               
things like keeping AHFC running.                                                                                               
MR.  BOYKIN replied  that the  state is  not making  a unilateral                                                               
commitment  that it  will take  on this  interest. The  state may                                                               
decide that the circumstances that  lead to the withdrawal should                                                               
lead the  state to make  the same decision. That  obligation will                                                               
not mature  until the state makes  the decision that it  wants to                                                               
continue. Whatever  administration and  legislature is in  at the                                                               
time will look at that and jointly make that decision.                                                                          
REPRESENTATIVE  HAWKER  said  the  state as  the  payer  of  last                                                               
recourse  for  a  purchase  of  one of  these  entities  has  the                                                               
contingent liability and the state's  auditors wouldn't like very                                                               
well to  publish financial statements  that didn't  disclose that                                                               
MR. BOYKIN  explained that  he meant if  there were  parties that                                                               
decided they wanted  to proceed supposing one  party withdrew and                                                               
there was  a certain percentage  interest available,  the parties                                                               
would look  at that and decide  whether they wanted to  "split it                                                               
or  what-have-you." That  is in  the HOA.  If the  parties didn't                                                               
want any of it, the state could  if it wanted to at that time say                                                               
it will take  on the whole obligation, but the  state wouldn't do                                                               
that without  serious consultation  with all the  stakeholders in                                                               
the state.                                                                                                                      
REPRESENTATIVE  HAWKER said  that  producers must  agree to  sell                                                               
their gas or ship it through  the project and asked who will have                                                               
the purchase  commitment for that gas  and who will have  to book                                                               
and  record the  commitment to  purchase all  of the  withdrawing                                                               
parties' gas?                                                                                                                   
MR. BOYKIN answered  whatever project goes forward  would have to                                                               
take that gas.                                                                                                                  
REPRESENTATIVE  HAWKER said  the way  the  project is  set up  no                                                               
project  owns  gas.  Each  one of  the  individual  partners  and                                                               
stakeholders has  its own share  of the pipe  and its own  gas in                                                               
MR. BOYKIN said  that was correct and what happens  in that event                                                               
is if the state  is going to take on all  of the engineering data                                                               
- or  the state and one  or two producers  is going to do  that -                                                               
they would then go forward, but  they could not go forward unless                                                               
they had a  commitment from the withdrawing party  to either sell                                                               
the gas or transport it on  the system. This project was designed                                                               
to have all the gas from  Point Thomson and Prudhoe Bay dedicated                                                               
to it. Otherwise it would go to a different project.                                                                            
REPRESENTATIVE HAWKER said that was his point.                                                                                  
12:22:22 AM                                                                                                                   
SENATOR  HUGGINS  said in  his  13  years  of dealing  with  four                                                               
pipelines, this  one has the  greatest potential. He  said: "This                                                               
is doable. We're kind of at  the 49-yard line on a football field                                                               
and kind  of headed downhill."  He was convinced  that elasticity                                                               
is was  needed the  negotiations. About the  duty to  produce and                                                               
the  reserve  taxes,  he  said, "We've  been  through  all  those                                                               
conversations  and it  never really  had a  fruition factor."  He                                                               
said, "It  doesn't take a  genius to recognize that  Alaska needs                                                               
this.  Let's not  screw  it up....Let's  get  across the  50-yard                                                               
He said that  a lot of people don't like  ExxonMobil, but in this                                                               
case they appear  to be by far the most  committed and it doesn't                                                               
take a rocket scientist to figure  out Point Thomson is a "pretty                                                               
crown jewel factor"  in their repertoire. He  exhorted Mr. Boykin                                                               
and  Mr. Fauske:  "Don't  let us  screw this  thing  up." To  Ms.                                                               
Rutherford:  "Let's  learn  from  our experiences  in  the  past,                                                               
because this things is doable."                                                                                                 
12:26:28 AM                                                                                                                   
MR.  FAUSKE responded  that he  worked  on the  finance team  for                                                               
AGIA,  as well,  and he  appreciated Senator  Huggins words.  But                                                               
this  is a  tough  one  for the  state,  because  it's an  equity                                                               
partner  not  a  regulator.  It  has to  start  thinking  like  a                                                               
partner.  It's  hard  sometimes when  they  are  moving  forward,                                                               
because they  want to protect  the state's interest, too,  but at                                                               
the end of the day they  are trying to become partners. So, there                                                               
is always going to be some give and take.                                                                                       
CHAIR GIESSEL  said the last two  questions, 10 and 11,  were for                                                               
Ms. Rutherford: What  is the status of gas balancing  and when it                                                               
will be resolved?                                                                                                               
12:28:19 AM                                                                                                                   
MS.  RUTHERFORD  responded  that gas  balancing  discussions  are                                                               
primarily  occurring  between  the   three  producers.  It  is  a                                                               
difficult  discussion, because  uniquely to  this project,  there                                                               
are two  different units with two  different equity participation                                                               
groups.  They  are  not  equally  balanced.  They  are  currently                                                               
working very aggressively  on it. Luckily the State  of Alaska is                                                               
balanced between both units.                                                                                                    
12:29:40 AM                                                                                                                   
CHAIR  GIESSEL  asked  when  the  state  will  make  the  royalty                                                               
12:29:46 AM                                                                                                                   
MS.  RUTHERFORD  answered that  the  HOA  references the  state's                                                               
royalty election  is subject  to the  prior execution  of project                                                               
enabling contracts.  That includes satisfactory  arrangements for                                                               
disposition of  the state's  share of  LNG. The  DNR commissioner                                                               
will, therefore, make  a royalty election decision  and issue the                                                               
finding once he has access  to adequately termed project enabling                                                               
agreements to  review and use  as a  basis for that  analysis. AS                                                               
38.05.180 also  authorizes the DNR  commissioner to  modify state                                                               
leases  to lock  in either  RIK or  RIV for  the duration  of the                                                               
initial project term (20-25 years).                                                                                             
SB 138 provides that for  making a written determination based on                                                               
a clear and convincing showing by the lessees that:                                                                             
1. The lease modifications are in the state's best interest.                                                                    
2.  The  lease modification  will  improve  the likelihood  of  a                                                               
project's success.                                                                                                              
3. The project has sufficient financial commitments.                                                                            
4.  There are  acceptable  upstream gas  supply commitments  that                                                               
have been made.                                                                                                                 
5.  Lessees have  offered to  purchase or  dispose or  market the                                                               
state's royalty gas  on substantially similar terms  to their own                                                               
Additionally, she said, a decision  to not switch between RIK and                                                               
RIV has  substantial value implications  for the state,  both for                                                               
the general and Permanent Funds,  and for instate gas provisions.                                                               
Accordingly,  the  no-switching  -  current  leases  provide  for                                                               
switching between RIK and RIV mostly  on a 90-day basis - must be                                                               
made  coincident with  the  determination  over gas  disposition,                                                               
whether RIK or RIV. As a  general matter, value deductions and an                                                               
overall marketing risk  are low for RIV. The risk  and rewards of                                                               
the  state's goal  of  taking  RIK are  highly  dependent on  the                                                               
specific  nature  of  the upstream  project  enabling  commercial                                                               
agreements.  These include  gas supply  and balancing  provisions                                                               
for gas  from both  the Prudhoe  Bay unit  and the  Point Thomson                                                               
Whether and how the state joint  venture markets its gas with one                                                               
or more  producers, the cost  responsibility for  disposal of CO                                                                
and other impurities, the field  cost deductions particularly for                                                               
the Point  Thomson unit  leases, for  any empty  project capacity                                                               
owing to  the state's inability to  actually drill for a  new gas                                                               
resource (it is not a producer) are significant value issues.                                                                   
How the State  of Alaska will secure replacement  LNG cargoes for                                                               
its buyers in the event  of any unexpected supply interruptions -                                                               
the  SOA  only  has  one  gas  project  opportunity  whereas  its                                                               
partners  in AKLNG  have alternative  supply options  or the  net                                                               
back  becomes  negative are  issues  that  are under  negotiation                                                               
currently. Until  these have been adequately  resolved, the value                                                               
proposition of  taking RIK and  thus the public  interest impacts                                                               
of a no-switching decision cannot be assessed.                                                                                  
MS.  RUTHERFORD noted  that AS  38.05 mandates  that the  royalty                                                               
election  best  interest  finding   has  broad  scope  with  many                                                               
associated elements that must be  addressed in the determination.                                                               
These include all the foregoing  issues and how instate gas needs                                                               
will  be addressed,  project governance  structure to  the degree                                                               
the  SOA will  have  both insight  into the  project  and how  to                                                               
exercise its 25 percent control,  dispute resolution elements and                                                               
withdrawal  provisions, which  will impact  the SOA  value and/or                                                               
She  said Commissioner  Myers is  very anxious  to make  the best                                                               
interest decision before the end  of the calendar year. They have                                                               
already hired and had a contractor  on staff to pull together the                                                               
structure  and elements  that need  to be  analyzed and  embedded                                                               
within  the  finding  using  some  of  the  work  that  has  been                                                               
developed  by Black  &  Veatch and  other  contractors. They  are                                                               
working towards  being able  to turn that  out very  quickly once                                                               
some of the commercial agreements begin  to be locked down - they                                                               
don't have to be finalized  to begin the analysis. They recognize                                                               
that it is critical for the SOA  and its partners to have a sense                                                               
of whether an RIK preference is  moving forward and that is their                                                               
CHAIR  GIESSEL   found  no  further  comments   and  thanked  the                                                               
12:37:37 AM                                                                                                                   
CHAIR GIESSEL  adjourned the  Senate Resources  Committee meeting                                                               
at 12:37 a.m.                                                                                                                   

Document Name Date/Time Subjects
AGDC Fauke State Gas Line Team Responses Sept 9 2015.pdf HRES 9/9/2015 6:30:00 PM
AKLNG HRES SRES Fiscal Team Project update Sept 9 2015.pdf HRES 9/9/2015 6:30:00 PM
AKLNG Leg Project Update Sept 9 2015.pdf HRES 9/9/2015 6:30:00 PM
SRES letter to AKLNG Project External Affairs Group Sept 9 2015.pdf HRES 9/9/2015 6:30:00 PM
TC Reimbursable cost Sept 9 2015.pdf HRES 9/9/2015 6:30:00 PM
TransCanada Vincent Lee Opening Remarks Sept 9 2015.pdf HRES 9/9/2015 6:30:00 PM