Legislature(2017 - 2018)BARNES 124

03/08/2017 01:00 PM House RESOURCES

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01:02:58 PM Start
01:03:33 PM HB111
02:16:34 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Heard & Held
-- Testimony <Invitation Only> --
Presentation: 40 Year Anniversary of TAPS by Tom
Barrett, President, Alyeska Pipeline Service
**Streamed live on AKL.tv**
                    ALASKA STATE LEGISLATURE                                                                                  
               HOUSE RESOURCES STANDING COMMITTEE                                                                             
                         March 8, 2017                                                                                          
                           1:02 p.m.                                                                                            
MEMBERS PRESENT                                                                                                               
Representative Andy Josephson, Co-Chair                                                                                         
Representative Geran Tarr, Co-Chair                                                                                             
Representative Dean Westlake, Vice Chair                                                                                        
Representative Harriet Drummond                                                                                                 
Representative Justin Parish                                                                                                    
Representative Chris Birch                                                                                                      
Representative DeLena Johnson                                                                                                   
Representative George Rauscher                                                                                                  
Representative David Talerico                                                                                                   
MEMBERS ABSENT                                                                                                                
Representative Mike Chenault (alternate)                                                                                        
Representative Chris Tuck (alternate)                                                                                           
COMMITTEE CALENDAR                                                                                                            
HOUSE BILL NO. 111                                                                                                              
"An  Act  relating  to  the  oil  and  gas  production  tax,  tax                                                               
payments,  and  credits;  relating   to  interest  applicable  to                                                               
delinquent  oil and  gas  production tax;  and  providing for  an                                                               
effective date."                                                                                                                
     - HEARD & HELD                                                                                                             
PREVIOUS COMMITTEE ACTION                                                                                                     
BILL: HB 111                                                                                                                  
SHORT TITLE: OIL & GAS PRODUCTION TAX; PAYMENTS; CREDITS                                                                        
SPONSOR(s): RESOURCES                                                                                                           
02/08/17       (H)       READ THE FIRST TIME - REFERRALS                                                                        
02/08/17       (H)       RES, FIN                                                                                               
02/08/17       (H)       TALERICO OBJECTED TO INTRODUCTION                                                                      
02/08/17       (H)       INTRODUCTION RULED IN ORDER                                                                            
02/08/17       (H)       SUSTAINED RULING OF CHAIR Y23 N15 E2                                                                   
02/08/17       (H)       RES AT 1:00 PM BARNES 124                                                                              
02/08/17       (H)       Heard & Held                                                                                           
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02/27/17       (H)       RES AT 7:00 PM CAPITOL 106                                                                             
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03/01/17       (H)       RES AT 1:00 PM BARNES 124                                                                              
03/01/17       (H)       Heard & Held                                                                                           
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03/01/17       (H)       Heard & Held                                                                                           
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03/06/17       (H)       RES AT 1:00 PM BARNES 124                                                                              
03/06/17       (H)       Scheduled but Not Heard                                                                                
03/06/17       (H)       RES AT 6:30 PM BARNES 124                                                                              
03/06/17       (H)       Heard & Held                                                                                           
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03/08/17       (H)       RES AT 1:00 PM BARNES 124                                                                              
WITNESS REGISTER                                                                                                              
TOM BARRETT, President                                                                                                          
Alyeska Pipeline Service Company                                                                                                
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Provided a PowerPoint presentation                                                                       
entitled, "TAPS Update" dated 3/8/17, and answered questions.                                                                   
KLINT VAN WINGERDEN, Engineering Manager                                                                                        
Oil Movements Department                                                                                                        
Alyeska Pipeline Service Company                                                                                                
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Answered a  question during the presentation                                                             
by Alyeska Pipeline Service Company.                                                                                            
ACTION NARRATIVE                                                                                                              
1:02:58 PM                                                                                                                    
CO-CHAIR  GERAN   TARR  called   the  House   Resources  Standing                                                             
Committee meeting  to order at  1:02 p.m.   Representatives Tarr,                                                               
Birch, Drummond,  Johnson, Parish, Rauscher,  Talerico, Westlake,                                                               
and Josephson were present at the call to order.                                                                                
       HB 111-OIL & GAS PRODUCTION TAX; PAYMENTS; CREDITS                                                                   
CO-CHAIR TARR announced that the only order of business would be                                                                
HOUSE  BILL  NO.  111,  "An  Act relating  to  the  oil  and  gas                                                               
production tax,  tax payments, and credits;  relating to interest                                                               
applicable  to  delinquent  oil   and  gas  production  tax;  and                                                               
providing for an effective date."                                                                                               
CO-CHAIR TARR  said in conjunction  with the committee's  work on                                                               
HB  111,   Tom  Barrett,  President,  Alyeska   Pipeline  Service                                                               
Company, [and  retired Admiral in  the U.S. Coast  Guard (USCG)],                                                               
would present an update on the Trans-Alaska Pipeline System.                                                                    
1:04:44 PM                                                                                                                    
TOM   BARRETT,  President,   Alyeska  Pipeline   Service  Company                                                               
(Alyeska),  provided a  PowerPoint  presentation entitled,  "TAPS                                                               
Update."   He  informed  the committee  Alyeska  is honoring  the                                                               
Trans-Alaska  Pipeline System  (TAPS)  on  its 40th  anniversary;                                                               
TAPS is  a remarkable piece of  infrastructure and a part  of the                                                               
history  of the  state, along  with oil  production on  the North                                                               
Slope over  the last  40 years.   He  told a  story of  meeting a                                                               
visitor  in  Fairbanks  who  brought  her  children  to  see  the                                                               
pipeline after  hearing their grandfather's stories  about Alaska                                                               
and the  construction and  operation of  the pipeline  during its                                                               
early years.   Mr. Barrett related that the people  who worked on                                                               
the  pipeline,  and who  work  there  today,  take pride  in  the                                                               
pipeline and understand that its  successful operation matters to                                                               
everyone in  the state.  However,  he said he is  more interested                                                               
in  the next  40 years  and  working to  maintain the  pipeline's                                                               
fundamentally strong,  solid, and sound infrastructure,  in order                                                               
to keep  TAPS functional and moving  forward:  a goal  that needs                                                               
help from  the legislature because  a major driver  [of continued                                                               
operation] is production.                                                                                                       
MR. BARRETT  presented slide 3,  noting TAPS operates in  a tough                                                               
environment of hurricane force wind  and blizzards that challenge                                                               
its 40-year-old infrastructure, and  which, therefore, requires a                                                               
lot  of care.    In  addition, throughput  is  at  25 percent  of                                                               
maximum capacity, although throughput  increased last year and is                                                               
up in January and February of this  year as well.  He pointed out                                                               
TAPS  is  challenged  by its  aging  infrastructure,  impacts  of                                                               
declining throughput, and  - beginning 10 to 15 years  ago - risk                                                               
from  global  cyber  [terrorism],  which due  to  the  pipeline's                                                               
automated  system, garners  an enormous  amount  of attention  to                                                               
keep its  operations safe.   Further, Alyeska  is "solid"  on the                                                               
environment  and  in  business  performance, and  seeks  to  keep                                                               
operating costs down;  however, the efforts to  keep TAPS running                                                               
safely are among  the most expensive in the U.S.   "Bottom line,"                                                               
he said,  TAPS successful performance  comes from its  people who                                                               
are  tough, smart,  and who  work in  conditions as  difficult as                                                               
those during the construction of the pipeline.                                                                                  
1:10:02 PM                                                                                                                    
MR.  BARRETT directed  attention  to slide  4,  and offered  that                                                               
efforts  to   prevent  an  aging  infrastructure   from  impeding                                                               
operations  include:     major  electrification   and  automation                                                               
projects at  pump stations to  provide variable speed  drivers in                                                               
order  to better  manage fluctuations;  replacement of  the flare                                                               
tip at Pump  Station 1 after a drone inspection  conducted by the                                                               
University of  Alaska Fairbanks (UAF); completion  of a four-year                                                               
valve  testing program;  continued pipe  inspections at  all pump                                                               
stations  and  storage  tanks;  major  inspection  of  the  large                                                               
gravity  underground   lines  at  the  Valdez   Marine  Terminal;                                                               
increased  use  of  "smart"  instrumented   pigs  to  assess  the                                                               
mainline; replacement  of loading arms  on two loading  berths in                                                               
service at Valdez.                                                                                                              
REPRESENTATIVE RAUSCHER  requested additional information  on the                                                               
MR. BARRETT  explained that a  sensor package that  contains high                                                               
fidelity  cameras, infrared,  or  geophysical global  positioning                                                               
service  (GPS)   locator  information  is  hung   from  a  drone.                                                               
Although drones  cannot be  operated over  water out  of line-of-                                                               
sight, UAF,  the Federal Aviation Administration  (FAA), Alyeska,                                                               
and others  are conducting a  pilot program to  determine whether                                                               
drones  can be  operated  safely over  the  pipeline corridor  to                                                               
provide  less-expensive  and  more   reliable  assessments.    He                                                               
pointed out  approximately one-half of TAPS  runs aboveground due                                                               
to seismic activity  and permafrost, and because  the pipeline is                                                               
located in  an earthquake zone, Alyeska  utilizes 70,000 pipeline                                                               
supports  to keep  the  pipeline stable  and  prevent lateral  or                                                               
vertical movement.   At  this time Alyeska  believes a  drone and                                                               
sensors  could detect  vertical  deflections [bends],  and if  so                                                               
crews  could  then  be  sent  to specific  sites  as  needed  for                                                               
measurements.   Further,  security is  always an  issue; security                                                               
patrols drive  the line, stations  are locked out,  and terminals                                                               
receive more  security than ever  post-[the terrorist  attacks of                                                               
September 11, 2001].   Mr. Barrett opined  technology has unknown                                                               
potential to improve the state's understanding of TAPS.                                                                         
1:16:02 PM                                                                                                                    
CO-CHAIR TARR asked for information  on the aforementioned "smart                                                               
MR. BARRETT  explained pigs  are a  pipeline inspection  tool and                                                               
TAPS uses two different kinds of  pigs, one of which is a scraper                                                               
pig made of hard plastic that  scrapes off wax.  Alyeska needs to                                                               
know the  condition of  the pipeline inside  as well  as outside,                                                               
thus "instrumented  pigs" measure  the thickness  of the  pipe to                                                               
reveal wall loss  or pits, detect corrosion from  the outside due                                                               
to wall  loss, and  measure a  gouge or a  deflection.   The pigs                                                               
used on TAPS weigh approximately  10,000 pounds and the data from                                                               
the vendor  is analyzed  for approximately  three to  six months.                                                               
One  challenge to  the operation  of the  pigs occurs  where TAPS                                                               
crosses  a  mountain  range  because  as  the  pig  descends,  it                                                               
accelerates until  it abruptly  contacts the  oil at  the bottom.                                                               
However, industry  technology has made  the pigs more  rugged, so                                                               
they do  not lose  their sensors  on impact.   The data  from the                                                               
sensors calls  attention to a  potential loss  of pipe wall  or a                                                               
dent in the pipe, which  would then require a physical inspection                                                               
to determine  whether the pipe needs  to be dug up  and repaired.                                                               
He said  Alyeska was  exploring the  use of  a "hat"  pig design,                                                               
which has  never been used  on a 48-inch pipeline,  and explained                                                               
that rather than  scraping, it would "jet the  oil," dissolve the                                                               
wax, and put the wax back in the flow stream.                                                                                   
1:20:20 PM                                                                                                                    
MR. BARRETT, in  response to Representative Rauscher,  said a pig                                                               
could travel  a distance of  280 miles on battery  power; current                                                               
technology allows the  instrumented pigs to run  in two segments,                                                               
from  Pump Station  1 down  to  a new  launcher/receiver at  Pump                                                               
Station 9 - where  it is reset - and then  continuing to the end.                                                               
This is possible because battery life has improved.                                                                             
1:21:25 PM                                                                                                                    
REPRESENTATIVE  RAUSCHER asked  whether  pigs  are equipped  with                                                               
MR. BARRETT  advised cameras are  useless in the oil  stream; the                                                               
pig  measures  the  thickness  of  the  pipe  wall  and  magnetic                                                               
resonance.   Cameras are  used on  tethered "crawler"  pigs which                                                               
can travel in "clean" lines  under buildings or through difficult                                                               
bends and turns.  Alyeska  engineers based the crawler pig design                                                               
on pigs  used in natural  gas pipelines,  and there is  hope that                                                               
further  technology will  improve the  design and  facilitate the                                                               
use of cameras in smaller lines.                                                                                                
REPRESENTATIVE  PARISH surmised  that most  pigs travel  from oil                                                               
MR.  BARRETT said  yes,  pigs move  with  the flow  of  oil.   He                                                               
pointed out  if the flow  continues to decline, pigs  will become                                                               
stuck  in  the pipeline  because  pigs  require  an oil  flow  of                                                               
approximately one foot per second.                                                                                              
MR. BARRETT  directed attention to  throughput decline  and noted                                                               
that last calendar year, TAPS  throughput was approximately 8,000                                                               
barrels per  day up  over what  was anticipated;  through January                                                               
and February 2017, there has been  a further increase, which is a                                                               
welcome change  from the last 10  years.  The decline  issue is a                                                               
particular  challenge  in cold  weather,  and  he explained  that                                                               
although  the line  is  always  full with  about  9 million  plus                                                               
barrels of  oil, the  flow rate  is slower with  less oil.   When                                                               
TAPS was built, it took approximately  four days to move a barrel                                                               
of oil  from Pump  Station 1  to Valdez,  but currently  it takes                                                               
almost 18  days; furthermore, with extremely  low temperatures in                                                               
the  Interior for  periods  of 7-10  days,  as throughput  slows,                                                               
small amounts of  water in the oil can become  ice, which poses a                                                               
risk to  pump stations and can  damage equipment.  To  manage the                                                               
ice, heat is  added through recirculation at Pump  Stations 3, 4,                                                               
7,  and 9,  to minimize  the  risk of  ice causing  problems.   A                                                               
second and  worse problem  caused by slow  flow is  paraffin wax,                                                               
which can  clog the pipe,  but also can  adhere to the  pipe wall                                                               
and  cause   corrosion.    In   response  to  wax,   Alyeska  has                                                               
instrumented the  pipeline with testing devices  such as cameras,                                                               
to understand  how wax forms  in the  pipeline - at  various flow                                                               
rates under varying  conditions - in order to  solve this problem                                                               
prior to continued  throughput decline.  To  further address cold                                                               
weather,  Alyeska installed  methanol  injection  ports that  are                                                               
used  to inject  antifreeze if  pipeline flow  is stopped,  which                                                               
will make  a restart easier [slide  6].  Mr. Barrett  assured the                                                               
committee   Alyeska  is   working   on   solutions  to   continue                                                               
operations;  however, to  the question  as to  how long  TAPS can                                                               
operate,  his  answer  is  that   TAPS  is  being  managed  in  a                                                               
significant risk  profile and needs the  legislature's assistance                                                               
to prevent decline and to continue to increase throughput.                                                                      
1:30:58 PM                                                                                                                    
CO-CHAIR TARR asked how heat recirculation occurs.                                                                              
MR.  BARRETT explained  some of  the  pump stations  - like  Pump                                                               
Station 7 - are no longer used to  pump oil, and so loops of pipe                                                               
have been  added; the  oil runs through  drag valves  that create                                                               
friction which  generates heat, resulting  in several  degrees of                                                               
increased  temperature.   Although, he  said, a  better and  more                                                               
cost-efficient way to generate heat is to use a fire heater.                                                                    
REPRESENTATIVE RAUSCHER asked whether the  wax scraped by the pig                                                               
dissolves from the heat of the oil.                                                                                             
MR. BARRETT returned  attention to slide 6 that  showed a picture                                                               
of a pig trap, a pig, and wax.   The wax does not dissolve but is                                                               
a  hard, hazardous  material  that must  be  removed and  shipped                                                               
south  in oil  drums at  high expense.   In  further response  to                                                               
Representative Rauscher, he  said he was unsure of  the length of                                                               
the run that generated the amount of wax shown on slide 6.                                                                      
MR. BARRETT restated Alyeska seeks  to understand what causes the                                                               
wax to form, and at what flow rate.                                                                                             
REPRESENTATIVE PARISH questioned  whether more hazardous material                                                               
would accumulate during winter than in summer.                                                                                  
MR.  BARRETT  deferred to  Mr.  Van  Wingerden, Alyeska  Pipeline                                                               
Service Company.                                                                                                                
1:34:20 PM                                                                                                                    
KLINT   VAN  WINGERDEN,   Engineering   Manager,  Oil   Movements                                                               
Department,  Alyeska  Pipeline  Service Company,  attributed  wax                                                               
accumulation to freeze/thaw cycles; in  fact, in winter, the heat                                                               
transfer is  less, thus the  highest heat transfer is  during the                                                               
spring  breakup  season and  through  the  summer months  because                                                               
where  the pipeline  is  routed  through the  ground  and up  the                                                               
riverbeds,  heat   loss  is  high,   which  contributes   to  wax                                                               
MR. BARRETT  turned to the subject  of environmental stewardship,                                                               
and  pointed out  Alyeska completes  hundreds of  response drills                                                               
every  year.   The  Ship  Escort/Response  Vessel System  (SERVS)                                                               
operation is  unique in that  Alyeska has over 400  fishing boats                                                               
on  charter  for  near-shore potential  cleanup  in  Valdez  from                                                               
Valdez, Cordova, Homer, Kodiak, and  Seward.  The vessels receive                                                               
training each  year, participate in  exercises to prepare  for an                                                               
emergency,  and are  essential for  the safe  operation of  TAPS.                                                               
Further,  the  pipeline  crosses   over  700  streams  which  are                                                               
surveyed to make sure the fish  can run clear, run free, and that                                                               
pipeline  activity does  not impede  fry  or fish  movement.   In                                                               
addition, TAPS crosses 34 major rivers [slide 7].                                                                               
MR.  BARRETT  noted  that  Alyeska's  employees  are  instinctive                                                               
conservationists and he  told the story of Katie,  the muskox who                                                               
was rescued  by Alyeska  employees.   In his  experience, wolves,                                                               
bears, moose,  fox, birds, and  caribou are often seen  along the                                                               
pipeline  and  he  said  conservation is  an  inherent  value  of                                                               
Alyeska employees  [slide 8].   Continuing to  marine operations,                                                               
Mr. Barrett said  over 40 years Alyeska has  loaded nearly 22,000                                                               
tankers, carrying 17  billion of barrels of oil,  and today loads                                                               
approximately 20 tankers  per month for market.   Today's tankers                                                               
are equipped with double hulls and  he stressed much of his focus                                                               
and effort  is on preventing  an incident, as much  as responding                                                               
to  an  incident;  he   reviewed  Alyeska's  response  operations                                                               
including SERVS,  response tugs and barges,  and trained response                                                               
fishing vessels  [slide 9].   Currently, Alyeska  is transferring                                                               
its  marine services  provider from  Crowley  Marine Services  to                                                               
Edison Chouest  Offshore, and the  transfer will be  finalized in                                                               
2018.   The  contract was  competitively bid  with the  intent to                                                               
make some  changes in operations, although  performance standards                                                               
are based on contingency plans  required by the state for tankers                                                               
and for the terminal.   In addition to performance standards, the                                                               
bid sought  new equipment to  replace old, including  barges that                                                               
are  50 years  old.    In response  to  the  bid, Edison  Chouest                                                               
Offshore offered  a best-value service  package of  new equipment                                                               
including escort  tugs, new docking  tugs, new barges, and  a new                                                               
utility  tug, all  of  which  are under  construction.   The  new                                                               
equipment will  provide more horsepower and  additional features.                                                               
The transition  plan is  underway, and he  described some  of the                                                               
pertinent activities.  He assured  the committee that the current                                                               
provider  will  meet  its  commitments through  the  end  of  the                                                               
existing contract.   Mr. Barrett  cautioned the greatest  risk is                                                               
in crews that are not  qualified or experienced in Prince William                                                               
Sound waters.   He restated the new equipment  is better, modern,                                                               
and has more  capability; for example, all of  the escort vessels                                                               
will meet load  line requirements and USCG  requirements, and are                                                               
equipped with  some of  the best technology  available.   The bid                                                               
process was purposefully long to  allow interested companies time                                                               
to build new equipment [slide 10].                                                                                              
1:45:47 PM                                                                                                                    
CO-CHAIR   JOSEPHSON   said  he   was   impressed   by  the   new                                                               
infrastructure  and  capability  of  Edison  Chouest,  but  noted                                                               
criticisms of the successful bidder  from both the Prince William                                                               
Sound Regional Citizens' Advisory  Council, and the Department of                                                               
Environmental Conservation (DEC).  He  asked Mr. Barrett to speak                                                               
to those concerns.                                                                                                              
MR. BARRETT answered  DEC will have to  approve Alyeska's revised                                                               
contingency plan  with the new equipment  before operations begin                                                               
in 2018.   Alyeska's goal is to give DEC  whatever information it                                                               
needs  to  certify  the  tugs,  which will  also  need  USCG  and                                                               
American  Bureau of  Shipping (ABS)  certifications.   He pointed                                                               
out DEC is  a good agency with which to  work, however, obtaining                                                               
its approval  on a  change takes  315 days,  which is  costly and                                                               
difficult for  Alyeska.  Therefore, the  contingency plan process                                                               
must  begin long  before any  of the  vessels are  in the  water.                                                               
Furthermore, some  of the design-build concepts  requested by DEC                                                               
are proprietary.   In  any case,  Edison Chouest's  contract must                                                               
meet the  requirements of  the contingency plan  and will  do so.                                                               
Regarding the  Prince William  Sound Regional  Citizens' Advisory                                                               
Council (advisory council) he remarked:                                                                                         
     They've  raised   some  questions,  some  of   which  I                                                                    
     fundamentally  disagree  with  and  I  think  are  ill-                                                                    
     informed  and ill-advised.   That's  their prerogative,                                                                    
     we don't tell  them what to do  or how to do  it, and I                                                                    
     value  the citizen  input and,  and but  we've scrubbed                                                                    
     their  report and  ...  some of  the  material in  that                                                                    
     report is  simply not accurate,  that's the only  way I                                                                    
     can put  it.  But  again, we'll keep working  with them                                                                    
     and meeting with them and hopefully get to one place.                                                                      
MR. BARRETT,  speaking from his  experience as an Admiral  in the                                                               
USCG,  strongly cautioned  against conducting  training exercises                                                               
with  new  tugs and  a  tanker  in  conditions suggested  by  the                                                               
advisory  council.    He  said   this  type  of  training  in  an                                                               
uncontrolled  environment risks  lives, and  he gave  examples of                                                               
unsafe and safe  training exercises that do  not take unnecessary                                                               
risks in  unknown conditions.   He noted  the new tugs  will have                                                               
equipment  sought  by  the  advisory  council,  and  assured  the                                                               
committee  Alyeska  will  provide the  requested  information  to                                                               
agencies in a timely manner.                                                                                                    
1:52:21 PM                                                                                                                    
MR.  BARRETT,   in  response  to   Co-Chair  Tarr,   explained  a                                                               
contingency  plan is  a  plan  to address  the  contingency of  a                                                               
tanker oil  spill of a certain  size.  For example,  Alyeska must                                                               
have the equipment,  trained people, and the ability  to manage a                                                               
spill  safely, contain  it, and  clean  it up;  Alyeska also  has                                                               
contingency plans  for the pipeline.   For Prince  William Sound,                                                               
there are separate contingency plans  for the tankers and for the                                                               
terminal itself.                                                                                                                
1:53:13 PM                                                                                                                    
REPRESENTATIVE BIRCH noted that Edison  Chouest is a great outfit                                                               
and it is exciting to see new equipment coming online.                                                                          
REPRESENTATIVE PARISH  said he was  excited to hear  about state-                                                               
of-the-art technology and better  hardware; however, he expressed                                                               
concern about  out-of-state crews  brought into  one of  the most                                                               
challenging environments in the world.   Alyeska has maintained a                                                               
high  level of  Alaska-hire [employment  policies], and  he asked                                                               
whether  Edison Chouest  would adhere  to a  similar standard  of                                                               
acquiring high quality Alaskan captains and crews.                                                                              
MR.   BARRETT  said   in  accordance   with  the   Alaska  Native                                                               
Utilization  Agreement, Alyeska's  contract  contains the  Alaska                                                               
Native  Program and  maintains a  20 percent  Alaska Native  hire                                                               
standard; Edison  Chouest is  required - and  has committed  - to                                                               
uphold  that  standard.    Alyeska  is  95  percent  Alaska-hire,                                                               
although marine  operators average less; Crowley  has between 200                                                               
and 220  employees working under  the marine  operators' contract                                                               
and the majority  are not Alaskans.  He  expressed his confidence                                                               
that Edison Chouest  will have trained crews, and  opined it will                                                               
hire  Alaskans and  also "certainly  bring in  some of  their own                                                               
people."    Mr. Barrett  observed  Edison  Chouest has  excellent                                                               
training facilities.                                                                                                            
MR.  BARRETT recalled  most  of  those who  built  TAPS were  not                                                               
Alaskans, today  however, Alyeska encourages Alaska  hire through                                                               
its  [local hire]  preferences;  furthermore, 70  percent of  its                                                               
support  businesses  are headquartered  in  Alaska,  and over  20                                                               
percent of its workforce are  Alaska Native.  Ninety-five percent                                                               
of Alyeska  employees live  in Alaska, some  in villages,  and he                                                               
estimated  about 40  percent  are "blue  collar"  employees.   He                                                               
lauded  the union-sponsored  Fairbanks  Pipeline Training  Center                                                               
that  serves  to  train instrument,  electrical,  and  mechanical                                                               
technicians,   and   educational    opportunities   through   the                                                               
University of Alaska  Anchorage.  He advised  Edison Chouest will                                                               
begin  hiring  for the  marine  services  contract late  in  2017                                                               
[slide 12].                                                                                                                     
REPRESENTATIVE  PARISH  asked  whether Edison  Chouest  currently                                                               
operates in any other environment comparable to that of Valdez.                                                                 
MR.   BARRETT  responded   that   Edison   Chouest  operates   in                                                               
Antarctica,  is  an  ice-capable   operation,  and  is  a  global                                                               
company.   However, from an ecological  perspective, some aspects                                                               
of Prince William Sound are globally  unique, and thus "it can be                                                               
tough water, and  we shut down a lot."   He noted that operations                                                               
in Prince William  Sound are different now than 25  years ago for                                                               
many reasons, including  an increase in activity,  and he related                                                               
details  of  the rescue  of  500  cruise  ship passengers.    Mr.                                                               
Barrett again  expressed tremendous  pride in  Alyeska employees,                                                               
and reiterated that they are mainly Alaskans.                                                                                   
2:02:12 PM                                                                                                                    
MR. BARRETT offered that the  future of TAPS includes keeping the                                                               
systems up  with maintenance and  addressing the  declining flow,                                                               
because throughput  is the  bottom line for  TAPS.   The pipeline                                                               
was designed to run most  efficiently at 2 million barrels, which                                                               
is a  much higher  level than throughput  today.   Therefore, the                                                               
future of  TAPS also depends  upon state and  federal willingness                                                               
to  remove   the  obstacles   to  developing   Alaska's  enormous                                                               
resources.   He  urged for  making resources  available for  safe                                                               
development, so  that Alyeska can  fulfil its obligation  to move                                                               
the resources safely  to market.  In addition,  federal and state                                                               
regulatory processes  need to be  simpler and  better coordinated                                                               
because   dueling  federal   agencies   cost   money  and   cause                                                               
frustration.   Mr. Barrett said  Alaska also needs  a competitive                                                               
business environment - which has  improved - although in the last                                                               
15  years  the  oil  and  gas  market  has  changed  due  to  the                                                               
availability of  oil and shale  gas in the  Lower 48.   Alaska is                                                               
now competing  with North  Dakota, Oklahoma,  and Texas,  and not                                                               
just with  the Middle East and  overseas sources of oil  and gas.                                                               
Today, the U.  S. is the largest petroleum producer  in the world                                                               
and with  Alaska's resources, there  is an opportunity  to create                                                               
an environment wherein operators will  develop its resources.  He                                                               
cautioned  at current  oil prices,  the ability  to move  product                                                               
quickly and easily  to the market is also very  different than it                                                               
was 15-20  years ago.   He referred  to a newspaper  article that                                                               
characterized Alaska as  an owner state with the  industry as its                                                               
adversary,  and pointed  out that  Alyeska has  dozens of  Alaska                                                               
business  partners,  and  they  work to  succeed  together.    In                                                               
closing, he said, "You've got to  have a vision of where you want                                                               
to be  long-term, and then you've  got to have an  action plan to                                                               
get there.   And, if you just act without  the vision piece being                                                               
right, then you've  kind of got a nightmare."   The challenge for                                                               
Alyeska  is to  safely operate  TAPS  for the  next 10-20  years.                                                               
Speaking from  his previous  experience, he  advised to  plan and                                                               
train for the worst cases, but hope for the best [slide 13].                                                                    
REPRESENTATIVE  RAUSCHER  said  he   appreciates  the  fact  that                                                               
Alyeska is  95 percent [Alaska-]  hire, and also  appreciates the                                                               
maintenance of TAPS, and Alyeska's  safety concerns and training.                                                               
He  questioned  whether  the [owners  of  the]  response  fishing                                                               
vessels volunteer their services.                                                                                               
MR. BARRETT  responded that the vessels  volunteer to participate                                                               
in  the program  and they  are qualified  by Alyeska.   When  the                                                               
vessels are  working for Alyeska  they are paid, and  training is                                                               
scheduled  offseason.    Although  the  work  is  voluntary,  the                                                               
vessels are  reimbursed and crews  are paid during training.   He                                                               
described how the training is beneficial to all.                                                                                
2:11:10 PM                                                                                                                    
CO-CHAIR  TARR recalled  at one  time when  oil prices  were down                                                               
there was  a glut of  supply, and  she asked how  Alyeska adjusts                                                               
operations  when there  is no  buyer awaiting  at the  West Coast                                                               
MR. BARRETT  answered that Alyeska  adjusts its  operations based                                                               
strictly on throughput, which is  driven by the producers and the                                                               
markets.   A change in  law that indirectly affected  Alyeska was                                                               
that  TAPS crude  could  always be  exported as  long  as it  was                                                               
transported in  U. S.  flagged vessels;  however, now  TAPS crude                                                               
can  be taken  globally in  [foreign] flagged  vessels that  meet                                                               
USCG standards, and that are  certified and qualified.  Last year                                                               
some  oil  was  transferred  to   non-U.S.  flagged  vessels,  as                                                               
shippers moved outside the U.S.  [market].  Mr. Barrett clarified                                                               
that Alyeska does  not participate in where the  oil is marketed;                                                               
however, every  barrel of TAPS throughput  "counts" regardless of                                                               
its price, and he restated TAPS throughput is up.                                                                               
REPRESENTATIVE  TALERICO referred  to  safety  and training,  and                                                               
said  he appreciates  the safety  culture at  TAPS, and  strongly                                                               
agreed that  training should  not take  place in  an uncontrolled                                                               
MR.  BARRETT related  that he  is always  interested in  learning                                                               
others' ideas about  safety.  As an  aside, he said that  he is a                                                               
Vietnam  veteran and  recently  saw the  movie, "Hacksaw  Ridge,"                                                               
which is  a [true] story  about the first  conscientious objector                                                               
to  receive the  Medal  of  Honor.   [Corporal]  Donald Sperl  of                                                               
Juneau was also a conscientious  objector who held a Bronze Star,                                                               
and is  buried in a local  cemetery.  Mr. Barrett  said Mr. Sperl                                                               
was also a hero deserving of recognition.                                                                                       
[HB 111 was held over.]                                                                                                         
2:16:34 PM                                                                                                                    
There being no  further business before the  committee, the House                                                               
Resources Standing Committee meeting was adjourned at 2:16 p.m.                                                                 

Document Name Date/Time Subjects
HB111 ver O 2.8.17.PDF HRES 2/13/2017 1:00:00 PM
HRES 2/17/2017 1:00:00 PM
HRES 2/20/2017 1:00:00 PM
HRES 2/22/2017 1:00:00 PM
HRES 2/22/2017 6:30:00 PM
HRES 2/24/2017 1:00:00 PM
HRES 2/27/2017 1:00:00 PM
HRES 3/1/2017 1:00:00 PM
HRES 3/1/2017 6:00:00 PM
HRES 3/6/2017 6:30:00 PM
HRES 3/8/2017 1:00:00 PM
HB 111
HB111 Fiscal Note DOR-TAX 2.12.17.pdf HRES 2/13/2017 1:00:00 PM
HRES 2/17/2017 1:00:00 PM
HRES 2/22/2017 1:00:00 PM
HRES 2/22/2017 6:30:00 PM
HRES 2/24/2017 1:00:00 PM
HRES 2/27/2017 1:00:00 PM
HRES 3/1/2017 1:00:00 PM
HRES 3/1/2017 6:00:00 PM
HRES 3/6/2017 6:30:00 PM
HRES 3/8/2017 1:00:00 PM
HRES 3/13/2017 1:00:00 PM
HB 111
HB111 Sectional Analysis 2.12.17.pdf HRES 2/13/2017 1:00:00 PM
HRES 2/17/2017 1:00:00 PM
HRES 2/20/2017 1:00:00 PM
HRES 2/22/2017 1:00:00 PM
HRES 2/22/2017 6:30:00 PM
HRES 2/24/2017 1:00:00 PM
HRES 2/27/2017 1:00:00 PM
HRES 3/1/2017 1:00:00 PM
HRES 3/1/2017 6:00:00 PM
HRES 3/6/2017 6:30:00 PM
HRES 3/8/2017 1:00:00 PM
HB 111
HB111 Sponsor Statement 2.12.17.pdf HRES 2/13/2017 1:00:00 PM
HRES 2/17/2017 1:00:00 PM
HRES 2/20/2017 1:00:00 PM
HRES 2/22/2017 1:00:00 PM
HRES 2/22/2017 6:30:00 PM
HRES 2/24/2017 1:00:00 PM
HRES 2/27/2017 1:00:00 PM
HRES 3/1/2017 1:00:00 PM
HRES 3/1/2017 6:00:00 PM
HRES 3/6/2017 6:30:00 PM
HRES 3/8/2017 1:00:00 PM
HRES 3/13/2017 1:00:00 PM
HB 111
HB111 Supporting Document - TAPS Presentation - Tom Barrett 3.8.17.pdf HRES 3/8/2017 1:00:00 PM
HB 111