Legislature(2019 - 2020)BARNES 124

03/22/2019 01:00 PM RESOURCES

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01:02:33 PM Start
01:03:05 PM Presentation(s): Alaska Lng Project Update
02:32:17 PM HB16
03:01:57 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Presentation: Alaska LNG Project Update by Joe TELECONFERENCED
Dubler, Interim President, Alaska Gasline
Development Corp.
-- Testimony <Invitation Only> --
*+ HB 16 LOCAL FOOD PROCUREMENT; LABELING TELECONFERENCED
Heard & Held
-- Testimony <Invitation Only> --
                    ALASKA STATE LEGISLATURE                                                                                  
               HOUSE RESOURCES STANDING COMMITTEE                                                                             
                         March 22, 2019                                                                                         
                           1:02 p.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative John Lincoln, Co-Chair                                                                                           
Representative Geran Tarr, Co-Chair                                                                                             
Representative Grier Hopkins, Vice Chair                                                                                        
Representative Sara Hannan                                                                                                      
Representative Ivy Spohnholz                                                                                                    
Representative Dave Talerico                                                                                                    
Representative Sara Rasmussen                                                                                                   
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative Chris Tuck                                                                                                       
Representative George Rauscher                                                                                                  
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
PRESENTATION: ALASKA LNG PROJECT UPDATE                                                                                         
                                                                                                                                
     - HEARD                                                                                                                    
                                                                                                                                
SPONSOR SUBSTITUTE FOR HOUSE BILL NO. 16                                                                                        
"An Act relating to shared animal ownership; and relating to the                                                                
sharing and sale of raw milk and raw milk products."                                                                            
                                                                                                                                
     - HEARD & HELD                                                                                                             
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
BILL: HB  16                                                                                                                  
SHORT TITLE: LOCAL FOOD PROCUREMENT; LABELING                                                                                   
SPONSOR(s): REPRESENTATIVE(s) TARR                                                                                              
                                                                                                                                
02/20/19       (H)       PREFILE RELEASED 1/7/19                                                                                
02/20/19       (H)       READ THE FIRST TIME - REFERRALS                                                                        
02/20/19       (H)       RES, FIN                                                                                               
03/20/19       (H)       SPONSOR SUBSTITUTE INTRODUCED                                                                          
03/20/19       (H)       READ THE FIRST TIME - REFERRALS                                                                        
03/20/19       (H)       RES, FIN                                                                                               
03/22/19       (H)       RES AT 1:00 PM BARNES 124                                                                              
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
JOE DUBLER, Interim President                                                                                                   
Alaska Gasline Development Corporation                                                                                          
Department of Commerce, Community & Economic Development                                                                        
Anchorage, Alaska                                                                                                               
POSITION   STATEMENT:     Provided   a  PowerPoint   presentation                                                             
entitled, "Alaska LNG Project  Update House Resources Committee,"                                                               
dated 3/22/19, and answered questions.                                                                                          
                                                                                                                                
FRANK RICHARDS,P.E., Senior Vice President                                                                                      
Program Management                                                                                                              
Alaska Gasline Development Corporation                                                                                          
Department of Commerce, Community & Economic Development                                                                        
Anchorage, Alaska                                                                                                               
POSITION  STATEMENT:    Answered questions  during  a  PowerPoint                                                             
presentation   entitled,  "Alaska   LNG   Project  Update   House                                                               
Resources Committee," dated 3/22/19.                                                                                            
                                                                                                                                
SUZY CROSBY, Co-Owner                                                                                                           
Cottonwood Creek Farm                                                                                                           
Wasilla, Alaska                                                                                                                 
POSITION   STATEMENT:     Provided   a  PowerPoint   presentation                                                             
entitled, "Cottonwood  Farm Before House Resources  3/22/19," and                                                               
answered questions during the hearing of SSHB 16.                                                                           
                                                                                                                                
PETE KENNEDY, Attorney                                                                                                          
Westin Price Foundation                                                                                                         
No city provided, Florida                                                                                                       
POSITION STATEMENT:  Testified during the hearing of SSHB 16.                                                                 
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
1:02:33 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  JOHN  LINCOLN  called   the  House  Resources  Standing                                                             
Committee  meeting  to  order  at   1:02  p.m.    Representatives                                                               
Hopkins, Hannan, Talerico, Tarr, and  Lincoln were present at the                                                               
call to  order.  Representatives Spohnholz  and Rasmussen arrived                                                               
as the meeting was in progress.                                                                                                 
                                                                                                                                
^PRESENTATION(S): ALASKA LNG PROJECT UPDATE                                                                                     
            PRESENTATION: ALASKA LNG PROJECT UPDATE                                                                         
                                                                                                                              
1:03:05 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  JOHN  LINCOLN announced  the  first  order of  business                                                               
would be a  presentation on the Alaska LNG project  by the Alaska                                                               
Gasline Development Corporation.                                                                                                
                                                                                                                                
1:03:30 PM                                                                                                                    
                                                                                                                                
JOE  DUBLER,   Interim  President,  Alaska   Gasline  Development                                                               
Corporation (AGDC), Department of  Commerce, Community & Economic                                                               
Development (DCCED),  informed the  committee he would  present a                                                               
triannual update on the progress  of two projects tasked to AGDC,                                                               
the Alaska Stand Alone Pipeline  (ASAP) project, begun originally                                                               
in  2010,  and  aspects  of  the  Alaska  liquified  natural  gas                                                               
pipeline (AKLNG) project.   Mr. Dubler said House  Bill 4 [passed                                                               
in the  Twenty-Eighth Alaska State Legislature]  directed AGDC to                                                               
develop the  ASAP project  that would bring  a supply  of natural                                                               
gas from the North Slope to  Cook Inlet, address the high cost of                                                               
energy in  Fairbanks, and  shortages of natural  gas in  areas of                                                               
Anchorage and  the Matanuska-Susitna  (Mat-Su) valley  (slide 3).                                                               
The original plan  was to build a 24-inch steel  pipeline to ship                                                               
natural  gas after  it  is  treated to  utility  grade  at a  gas                                                               
treatment  plant  (GTP) on  the  North  Slope.   On  3/4/19,  the                                                               
project was  permitted in  a joint record  of decision  issued by                                                               
the U.S. Army  Corps of Engineers (USACE) and the  Bureau of Land                                                               
Management  (BLM), U.S.  Department of  Interior (DOI);  however,                                                               
the  project  would  cost  $10   billion,  which  is  uneconomic.                                                               
Although uneconomic, work on ASAP  continued in order to obtain a                                                               
federal right of  way and other permits that  could affect AKLNG,                                                               
such  as:     approval   to  install   a  natural   gas  pipeline                                                               
underground;  approval to  install and  maintain gravel  pads and                                                               
roads;  federal  approval  for the  installation  of  a  pipeline                                                               
through  Denali   National  Park  and  Preserve,   National  Park                                                               
Service,  DOI.   At this  time, ASAP  will be  put aside  pending                                                               
changes in economic conditions (slide 3).                                                                                       
                                                                                                                                
1:11:59 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HOPKINS asked  how much core work,  such as rights                                                               
of  way, pads,  gravel roads,  and the  bearing of  the pipeline,                                                               
could be transferred to AKLNG.                                                                                                  
                                                                                                                                
MR. DUBLER deferred to Mr. Richards.                                                                                            
                                                                                                                                
1:12:44 PM                                                                                                                    
                                                                                                                                
FRANK RICHARDS, P.E., Senior  Vice President, Program Management,                                                               
AGDC, DCCED, advised AGDC provided  the Federal Energy Regulatory                                                               
Commission  (FERC)  all of  the  "regulatory  efforts" that  were                                                               
completed for ASAP; this work  will be submitted into the federal                                                               
record which will be used by  FERC to determine parameters of the                                                               
AKLNG environmental  impact statement  (EIS).   The goal  is that                                                               
FERC  will  not  seek  to  duplicate  the  work  of  the  federal                                                               
agencies, that  is specific to  AKLNG, because the  ASAP pipeline                                                               
right  of way  followed  approximately 80  percent  of the  AKLNG                                                               
route.                                                                                                                          
                                                                                                                                
MR.  DUBLER  turned to  AKLNG,  established  by Senate  Bill  138                                                               
{passed in the Twenty-Eighth Alaska  State Legislature], and gave                                                               
a brief history and description of the project (slides 4 and 5).                                                                
                                                                                                                                
1:17:32 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HANNAN  asked for a  description of a  3-train LNG                                                               
facility.                                                                                                                       
                                                                                                                                
MR.   DUBLER  explained   trains  are   modules;  using   modular                                                               
construction  allows  additions to  be  made,  thus 3-trains  are                                                               
three different modules that can  add compression, and each train                                                               
is designed  to deliver just  under 700 million tonnes  per annum                                                               
(MTPA).   "Trains"  are an  industry  term used  to describe  the                                                               
modular construction of certain  facilities.  In further response                                                               
to Representative Hannan,  he said all of the  trains are located                                                               
at the site  in Nikiski, and there are  eight compressor stations                                                               
located along  the pipeline  to keep the  gas moving  through the                                                               
pipeline.                                                                                                                       
                                                                                                                                
REPRESENTATIVE HANNAN asked whether a train is a unit of size.                                                                  
                                                                                                                                
MR.  DUBLER  said  yes,  although   trains  can  be  designed  in                                                               
different  sizes.   He continued  to explain  AKLNG Pre-Front-End                                                               
Engineering and  Design (Pre-FEED)  work has progressed  to about                                                               
15  percent  in  engineering  design, which  means  some  of  the                                                               
infrastructure, equipment,  and costs  are known and  an economic                                                               
analysis  was completed;  at that  point,  the partners  withdrew                                                               
from the  project, however,  the state  has continued  to advance                                                               
the  project  for   the  last  three  years   in  regulatory  and                                                               
commercial  aspects.    In  fact, the  state  has  presented  the                                                               
project to  potential investors  and has  garnered 16  letters of                                                               
interest from  natural gas buyers  in Asia, but has  not advanced                                                               
the engineering of the project.                                                                                                 
                                                                                                                                
1:22:15 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HOPKINS  questioned the  current stance of  the 16                                                               
companies that have submitted letters of interest.                                                                              
                                                                                                                                
MR.  DUBLER said  all  16 companies  were  contacted in  February                                                               
[2019],  and AGDC  received positive  responses from  the largest                                                               
companies, as related to the  present stage gate schedule for the                                                               
project, which is  a more measured approach.   Further, AGDC will                                                               
be  meeting with  most of  the companies  [in April  2019].   Mr.                                                               
Dubler returned attention to slide  5 and noted the pipeline will                                                               
have thicker  walls in  some areas, but  is basically  a one-inch                                                               
pipeline terminating at the facility in Nikiski.                                                                                
                                                                                                                                
CO-CHAIR  LINCOLN   recalled  there   have  been   media  reports                                                               
suggesting  a  method of  exporting  natural  gas by  icebreakers                                                               
directly from the North Slope.                                                                                                  
                                                                                                                                
MR. DUBLER  acknowledged icebreaking  LNG tankers  are in  use in                                                               
Russia; however, [to successfully  market LNG], a reliable supply                                                               
of  LNG  must  be  guaranteed through  long-term  contracts  with                                                               
buyers, and suppliers of natural gas  need to have a proven track                                                               
record of  delivery.   He cautioned the  icepack above  the North                                                               
Slope could delay the delivery of  LNG, but Nikiski has proven to                                                               
be a  reliable shipping port for  40 years.  In  further response                                                               
to Co-Chair  Lincoln, he  noted a  gas treatment  plant necessary                                                               
for shipping  from the  North Slope  would require  an artificial                                                               
island  that  would affect  the  traditional  lifestyle of  North                                                               
Slope residents.                                                                                                                
                                                                                                                                
1:28:56 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HOPKINS  asked how the processing  capabilities of                                                               
a  floating LNG  plant  would compare  with  the capabilities  of                                                               
[AKLNG].                                                                                                                        
                                                                                                                                
MR. DUBLER did not know.                                                                                                        
                                                                                                                                
REPRESENTATIVE TARR  asked why the project  now specifies 42-inch                                                               
pipeline  and   whether  there  are  still   constraints  on  the                                                               
availability of steel.                                                                                                          
                                                                                                                                
MR. DUBLER explained  a six-inch increase in  pipe diameter would                                                               
mean  a significant  increase in  throughput; although  the fixed                                                               
costs of the  project remain the same, an  increase in throughput                                                               
reduces the cost per unit.   As to the availability of the steel,                                                               
he  expressed his  belief 42-inch  pipe is  not available  in the                                                               
U.S., thus  the source  of the  pipe would  be Asia,  Germany, or                                                               
India.                                                                                                                          
                                                                                                                                
REPRESENTATIVE  TARR  asked  several  questions  related  to  the                                                               
engineering  of  the pipe  and  questioned  whether the  pipeline                                                               
would be installed both under and above ground.                                                                                 
                                                                                                                                
MR.  DUBLER  advised the  pipeline  would  travel aboveground  to                                                               
cross  [earthquake] fault  lines;  however, the  majority of  the                                                               
pipeline would travel underground.                                                                                              
                                                                                                                                
1:34:00 PM                                                                                                                    
                                                                                                                                
MR. RICHARDS stated  a 42-inch diameter has  always been designed                                                               
for AKLNG  and -  after review  - was determined  to be  the most                                                               
economic  when compared  to  a 48-inch  diameter.   The  proposed                                                               
thicknesses  of  the  pipe  are  not  unusual  and  are  produced                                                               
worldwide.     He   observed  there   is   potential  that   U.S.                                                               
manufacturers will begin to produce 42-inch pipe.                                                                               
                                                                                                                                
REPRESENTATIVE  RASMUSSEN  asked  for   the  difference  in  cost                                                               
between 36-inch diameter and 42-inch diameter pipe.                                                                             
                                                                                                                                
MR. RICHARDS estimated a difference in excess of $100 million.                                                                  
                                                                                                                                
REPRESENTATIVE  HANNAN inquired  as to  how long  a lead  time is                                                               
required for a U.S. manufacturer  to produce 800 miles of 42-inch                                                               
steel pipe.                                                                                                                     
                                                                                                                                
MR. RICHARDS clarified 42-inch pipe  is not currently produced in                                                               
the  U.S;  however, AKLNG  would  seek  multiple suppliers,  from                                                               
around the world, that could  produce what is required within one                                                               
to one and one-half years.                                                                                                      
                                                                                                                                
MR.  DUBLER turned  attention  to slide  6  entitled "Alaska  LNG                                                               
Investment"  and  said  funding   for  AGDC  was  established  by                                                               
appropriations into  separate funds  for capital  expenditures on                                                               
each project,  although AGDC sought operating  appropriations for                                                               
each project annually.   As shown on slide 6,  the projected fund                                                               
balance for  fiscal year  2019 (FY  19) is  approximately $15,351                                                               
million to complete the FERC process.                                                                                           
                                                                                                                                
1:40:36 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE RASMUSSEN asked whether  the remaining funds would                                                               
be sufficient.                                                                                                                  
                                                                                                                                
MR. DUBLER opined  approximately $20 million is  needed to finish                                                               
the FERC process.                                                                                                               
                                                                                                                                
REPRESENTATIVE RASMUSSEN posited  if the legislature appropriated                                                               
an  additional  $5  million,  and  the  project  were  abandoned,                                                               
whether the state would recoup the assets of the project.                                                                       
                                                                                                                                
MR.  DUBLER assured  the committee  the  project has  accumulated                                                               
significant  assets to  date in  the  form of  data gleaned  from                                                               
boreholes.  Were  AKLNG abandoned for economic  reasons, the data                                                               
would be a  valuable resource to future development  on the North                                                               
Slope.  In further response  to Representative Rasmussen, he said                                                               
even  changes  to  topography caused  by  earthquakes  would  not                                                               
significantly impact the value of the data.                                                                                     
                                                                                                                                
REPRESENTATIVE  HOPKINS suggested  the FERC  license would  be an                                                               
additional  asset  as the  license  would  be helpful  in  future                                                               
endeavors.                                                                                                                      
                                                                                                                                
MR. DUBLER agreed.                                                                                                              
                                                                                                                                
CO-CHAIR LINCOLN asked for the average depth of the pipeline.                                                                   
                                                                                                                                
MR. DUBLER said three feet.                                                                                                     
                                                                                                                                
1:44:34 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HANNAN asked for the  source of the $5 million re-                                                               
appropriation shown on slide 6.                                                                                                 
                                                                                                                                
MR. DUBLER remarked [from figures provided on slide 6]:                                                                         
                                                                                                                                
     ... If  you look at  the $54 million [Fund  Balance End                                                                    
     of  Period FY2018  Actuals]  and  subtract the  $33,900                                                                    
     [Totals FY2019  Projected] it  would give  you $20,300,                                                                    
     but  the  $5  million   would  come  out,  leaving  you                                                                    
     [$15,351}   [Fund   Balance   End  of   Period   FY2019                                                                    
     Projected].                                                                                                                
                                                                                                                                
MR. DUBLER noted he was tasked  with aligning AGDC to the state's                                                               
fiscal  reality  and accordingly  has  identified  $5 million  is                                                               
savings through staff reductions,  the corporation's new focus on                                                               
one  project instead  of two,  and reductions  in marketing.   He                                                               
said AGDC will continue to  advance the FERC license and maintain                                                               
a  limited  commercial  presence  with customers.    A  satellite                                                               
office in Houston was closed and  offices in Kenai and Tokyo have                                                               
been maintained (slide 7).                                                                                                      
                                                                                                                                
REPRESENTATIVE  RASMUSSEN asked  for  the  expected FERC  process                                                               
timeline and  whether additional information is  needed after the                                                               
FERC process is complete.                                                                                                       
                                                                                                                                
MR.  DUBLER stated  the schedule  for the  FERC process  has been                                                               
pushed  back  four  months,  which  means  a  final  decision  is                                                               
expected June 2020.                                                                                                             
                                                                                                                                
1:51:16 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SPOHNHOLZ  recalled Mr.  Dubler stated it  was too                                                               
early to market the project,  and questioned why the Tokyo office                                                               
was kept open.                                                                                                                  
                                                                                                                                
MR.  DUBLER  clarified  it  is   too  early  to  market  purchase                                                               
agreements;   however,   AGDC   seeks  to   continue   to   build                                                               
relationships with potential LNG purchasers.                                                                                    
                                                                                                                                
REPRESENTATIVE HANNAN  surmised the  Tokyo marketer  is marketing                                                               
primarily to Japan.                                                                                                             
                                                                                                                                
MR. DUBLER said  the marketer is in contact with  buyers all over                                                               
Asia, including new and emerging markets such as Vietnam.                                                                       
                                                                                                                                
REPRESENTATIVE HANNAN  pointed out  Japan represents one  side of                                                               
established  Asia  markets;  however, China  represents  new  and                                                               
emerging markets.                                                                                                               
                                                                                                                                
MR. DUBLER agreed.  He remarked:                                                                                                
                                                                                                                                
     ... AGDC doesn't have any  assets besides this project,                                                                    
     and we  don't have a project  yet.  So, ...  what we're                                                                    
     selling is this contract to sell  gas to a company.  If                                                                    
     that company  is a,  is a country  that doesn't  have a                                                                    
     rating  or that  is an  emerging market,  or that,  you                                                                    
     know, doesn't have the  financial where-with-all to ...                                                                    
     rise  to a  level where  you could  borrow against  it,                                                                    
     then what  you do is  you get  a country like  Japan to                                                                    
     get  a   company  that  picks   up  all   those  little                                                                    
     contracts, and is  willing to take that  risk, and then                                                                    
     we contract  with them to  sell them  the gas.   We use                                                                    
     the credit of ...  the very well-rated Japanese company                                                                    
     to  sell  to  third  parties that  don't  have  a  good                                                                    
     rating.                                                                                                                    
                                                                                                                                
1:55:44 PM                                                                                                                    
                                                                                                                                
MR. DUBLER turned to the  following path forward for AKLNG (slide                                                               
8):                                                                                                                             
                                                                                                                                
    • return to a stage gate process which is a measured                                                                        
      approach:   at  given points  in a  project the  project is                                                               
      reviewed, and a decision is  made to continue; this process                                                               
      prevents the  completion of a project  that thereafter must                                                               
      be subsidized; for example, at  the end of pre-FEED, former                                                               
      partners in the project withdrew                                                                                          
    • the governor has given AGDC 60 days to review the                                                                         
      engineering  and  the  commercial agreements  in  order  to                                                               
      determine whether the project is viable                                                                                   
    • AGDC will provide sufficient information to the legislature                                                               
      on a monthly basis through [board of directors] activities                                                                
    • following a technical review of the project, there will be                                                                
      a  60-day   commercial  review  in  conjunction   with  the                                                               
      Department of Revenue                                                                                                     
    • pursue qualified third-party expertise to build, own, and                                                                 
      operate the project with the state as facilitator                                                                         
    • reevaluate the schedule for FEED, the Final Investment                                                                    
      Decision  (FID),  and  construction on  a  more  reasonable                                                               
      schedule                                                                                                                  
                                                                                                                                
2:01:04 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HOPKINS  asked how much of  the economic viability                                                               
of the  project is based  on the future international  market for                                                               
LNG, as  opposed to just  considering the state's  current fiscal                                                               
situation.                                                                                                                      
                                                                                                                                
MR. DUBLER acknowledged there are  three potential gas sellers in                                                               
the  project's current  memorandum of  understanding (MOU):   BP,                                                               
ExxonMobil  Corporation,   and  AGDC  [document   not  provided].                                                               
However, if the Department of  Natural Resources agrees to accept                                                               
royalty-in-kind  (RIK), rather  than  royalty-in-value (RIV),  it                                                               
would  become a  gas marketer  as  well.   Because of  anti-trust                                                               
considerations,  the parties  cannot  discuss the  sale price  of                                                               
their gas.  All that can be  discussed is AGDC's cost to take the                                                               
gas resource,  convert natural gas  to LNG, and deliver  LNG free                                                               
on board (FOB) to  a dock [in Nikiski] or in  Asia.  He concluded                                                               
each  party, including  AGDC, will  make a  determination on  the                                                               
price delivered in Asia, and whether to continue the project.                                                                   
                                                                                                                                
REPRESENTATIVE HANNAN  inquired as  to the predicted  price range                                                               
for LNG.                                                                                                                        
                                                                                                                                
MR.  DUBLER said  the price  for LNG  will indubitably  depend on                                                               
many  factors; for  example, how  many LNG  projects that  are in                                                               
various  stages  of  development   actually  are  built,  and  on                                                               
increases  in  demand  for  LNG  from  India,  China,  and  other                                                               
emerging economies.   At this time,  there is a huge  gap between                                                               
supply and demand.                                                                                                              
                                                                                                                                
REPRESENTATIVE HANNAN  asked for the  role Russia plays  in world                                                               
gas markets.                                                                                                                    
                                                                                                                                
MR. DUBLER said  Russia has completed, and is  expanding, a large                                                               
LNG facility  in the  north, although he  is unfamiliar  with the                                                               
reserve capacity of  said reservoir.  Mr. Dubler  returned to the                                                               
last item on slide 8:                                                                                                           
                                                                                                                                
   • Complete FERC process with third-party participation; AGDC                                                                 
     will use contractors to augment its small staff                                                                            
                                                                                                                                
2:07:10 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  TARR   recalled  the  previous   AKLNG  structure                                                               
included   engineering,  procurement,   and  construction   (EPC)                                                               
contracts  as an  aspect of  financing  the project.   She  asked                                                               
whether  this method  of  outside financing  is  included in  the                                                               
current model.                                                                                                                  
                                                                                                                                
MR.  DUBLER explained  EPC contracts  are generally  with a  firm                                                               
that would  build the project;  for example, a large  oil company                                                               
could  invest,  provide  capital,   and  construct  the  project.                                                               
However,  AGDC has  no partners  at  this point  beyond the  MOU,                                                               
which directs  the state and  certain companies to  work together                                                               
for 60  days on an assessment  of the project.   He suggested oil                                                               
producers  on  the North  Slope  may  be  interested [in  an  EPC                                                               
contract] because they own the gas.                                                                                             
                                                                                                                                
2:10:06 PM                                                                                                                    
                                                                                                                                
MR. DUBLER  continued to slide 9  and explained the purpose  of a                                                               
stage gate process  is to remove risk; for example,  if AGDC were                                                               
to make an  FID decision after the completion of  only 15 percent                                                               
of engineering,  "you don't know  what the  risks are."   Using a                                                               
stage  gate process,  in order  to continue  to a  FEED decision,                                                               
AGDC must:                                                                                                                      
                                                                                                                                
   • demonstrate economics that would attract private equity                                                                    
     investment and debt financing; procure North Slope LNG                                                                     
     sales contracts                                                                                                            
   • engage qualified partners to construct and operate the                                                                     
     project                                                                                                                    
   • meet AGDC's statutory objectives                                                                                           
                                                                                                                                
MR. DUBLER  said AGDC has  been seeking partners in  the project.                                                               
In March  [2019], AGDC signed  an MOU  with BP and  ExxonMobil to                                                               
review  the project.    In April  [2019], a  group  will meet  in                                                               
Houston to develop  updated costs estimates on  project design to                                                               
a  point  allowed  by antitrust  considerations,  which  will  be                                                               
followed by a commercial review.   If the project continues, AGDC                                                               
must incorporate partners to complete the project (slide 10).                                                                   
                                                                                                                                
CO-CHAIR  LINCOLN   asked  when   the  review  process   will  be                                                               
completed.                                                                                                                      
                                                                                                                                
MR. DUBLER  advised the review  process will be completed  by the                                                               
end of  April, and will  be further  discussed prior to  the AGDC                                                               
board meeting on May 9, [2019].                                                                                                 
                                                                                                                                
2:16:31 PM                                                                                                                    
                                                                                                                                
MR. DUBLER  turned to  aspects that  challenge the  completion of                                                               
the project (slide 11):                                                                                                         
                                                                                                                                
   • many projects in competition with AKLNG worldwide are built                                                                
     at tidewater and thus do not require an 800-mile pipeline                                                                  
     to a port; were AKLNG to be built on the North Slope, LNG                                                                  
     would not be provided to Southcentral and Fairbanks                                                                        
   • many projects in competition with AKLNG, in the Gulf Coast                                                                 
     area of the Lower 48, have access to Henry Hub [pricing                                                                    
     point for lower natural gas futures traded on market                                                                       
     exchanges] lower-priced gas                                                                                                
   • increased competition and Henry Hub prices are driving                                                                     
     price projections to approximately $8.00 per million                                                                       
     British thermal units (MMBtu) in Asia; AKLNG has not met                                                                   
     this threshold                                                                                                             
                                                                                                                                
MR.  DUBLER  advised  a  positive aspect  for  AKLNG  is  cheaper                                                               
transportation costs  than shipping from the  Gulf Coast, because                                                               
of  the  shorter  distance  to Asia,  and  also  avoids  shipping                                                               
congestion in the Panama Canal.                                                                                                 
                                                                                                                                
2:20:07 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  HANNAN asked  for  the volume  of  Henry Hub  LNG                                                               
exports.                                                                                                                        
                                                                                                                                
MR. DUBLER said he  did not know.  He recalled  a shortage of LNG                                                               
was projected before  fracking of shale oil  increased the supply                                                               
to the point that it is now exported.                                                                                           
                                                                                                                                
REPRESENTATIVE HOPKINS  encouraged AGDC  to advance AKLNG  to the                                                               
point  of  the FERC  license.    He  pointed out  the  difference                                                               
between  AKLNG and  the Trans-Alaska  Pipeline  System (TAPS)  is                                                               
that  the  revenue for  the  state  would  be garnered  from  the                                                               
infrastructure, not from the content of the pipeline.                                                                           
                                                                                                                                
MR. DUBLER  said he would share  Representative Hopkins' comments                                                               
with the  AGDC board and the  administration.  He agreed  that if                                                               
the  state fails  to invest  in the  pipeline, there  will be  no                                                               
revenue to the state, unlike oil.                                                                                               
                                                                                                                                
2:23:19 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  TALERICO  questioned  whether  other  permit  and                                                               
licensing deadlines  would arise  if the  state chose  to advance                                                               
AKLNG to the FERC permit stage gate phase in June 2020.                                                                         
                                                                                                                                
MR. RICHARDS said  in addition to FERC [section 3  of the Natural                                                               
Gas Act] authorization and EIS,  other agencies such as U.S. Fish                                                               
and Wildlife, DOI, the Environmental  Protection Agency, BLM, and                                                               
the  U.S. Coast  Guard  are proceeding  with  permitting.   Under                                                               
[Fixing America's  Surface Transportation (FAST)  Act (Fast-41)],                                                               
the  federal  authorizations for  AKLNG  must  be identified  and                                                               
scheduled thus the FERC date  of June 2020 aligns with permitting                                                               
by other  federal agencies.   Mr. Richards  said he  will provide                                                               
timelines for permitting by the aforementioned agencies.                                                                        
                                                                                                                                
2:25:42 PM                                                                                                                    
                                                                                                                                
The committee took an at-ease from 2:25 p.m. to 2:32 p.m.                                                                       
                                                                                                                                
            HB  16-LOCAL FOOD PROCUREMENT; LABELING                                                                         
                                                                                                                              
2:32:17 PM                                                                                                                    
                                                                                                                                
CO-CHAIR LINCOLN announced  the final order of  business would be                                                               
SPONSOR SUBSTITUTE  FOR HOUSE  BILL NO. 16,  "An Act  relating to                                                               
shared animal ownership; and relating  to the sharing and sale of                                                               
raw milk and raw milk products."                                                                                                
                                                                                                                                
CO-CHAIR  TARR  provided   a  PowerPoint  presentation  entitled,                                                               
"House Bill 16 Raw Milk Sales."   Speaking as the sponsor of SSHB
16,  she informed  the  committee  the bill  was  derived from  a                                                               
desire to  provide food  security in Alaska.   Her  background in                                                               
botany and sustainable  agriculture led her to  address the issue                                                               
of food security:   95 percent of food for  Alaska is imported at                                                               
a  cost of  over $2  billion; the  Division of  Agriculture, DNR,                                                               
reported  Alaskans   can  produce  more;  the   Alaska  Grown  $5                                                               
Challenge  provides  more  economic development  opportunity  for                                                               
farmers in Alaska (slides 1 and 2).                                                                                             
                                                                                                                                
CO-CHAIR TARR,  in response  to Representative  Hannan, explained                                                               
the purpose of the Alaska Grown  $5 Challenge is to generate $188                                                               
million  into  Alaska's  economy.   She  provided  a  history  of                                                               
farming in Alaska:   at statehood there were  525 farms producing                                                               
almost one-half of the food  consumed in Alaska and dairy farming                                                               
was well  established.  There is  only one dairy left  in Palmer,                                                               
but  new  dairies  in  Kodiak and  Delta  Junction  are  underway                                                               
(slides 3 and 4).                                                                                                               
                                                                                                                                
2:38:17 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  TARR  advised currently,  raw  milk  products are  sold                                                               
through   a  herd   share  program   authorized  by   the  Alaska                                                               
Administrative  Code.    In  Alaska,   the  commissioner  of  the                                                               
Department  of Environmental  Conservation holds  broad authority                                                               
over matters of food regulations  thus the herd share program was                                                               
established by regulation  and is not in statute:   18 AAC 32.010                                                               
- 18  ACC 32.060 restrict sales  of raw milk products  except for                                                               
personal  use.   She directed  attention to  a sample  herd share                                                               
agreement  included   in  the  committee  packet   -  noting  the                                                               
agreement creates  a contractual relationship between  a producer                                                               
and  consumer -  and described  features of  the agreement.   Co-                                                               
Chair Tarr  pointed out  the "closed loop  system" nature  of the                                                               
agreement provides  safety because  if an issue  arose, consumers                                                               
are known and can be contacted quickly.                                                                                         
                                                                                                                                
2:41:45 PM                                                                                                                    
                                                                                                                                
CO-CHAIR TARR advised the first provision  of SSHB 16 would put a                                                               
herd share program into the  Alaska Statutes.  Comparing the bill                                                               
to  legislation in  other states,  she said  12 states  allow raw                                                               
milk  sales  in retail  stores;  some  allow  raw milk  sales  at                                                               
farmers  markets; some  allow  raw milk  sales  on the  producing                                                               
farm; some allow herd share programs;  some allow the sale of raw                                                               
goat  milk only  [supporting  document provided  by the  National                                                               
Conference  of State  Legislatures  entitled,  "State Milk  Laws"                                                               
included in the committee packet].   The second provision of SSHB
16  allows  producers  to  include  in  the  herd  share  program                                                               
additional value-added products such  as cheese and butter (slide                                                               
7).   This  provision would  help farmers  increase the  scale of                                                               
their businesses and increase  shopping convenience to consumers.                                                               
She directed attention to a  picture of raw milk cheese available                                                               
at a  retail outlet  due to federal  legislation that  allows the                                                               
sale of raw milk cheese that has been aged over 60 days.  Co-                                                                   
Chair  Tarr  concluded,  noting  pasteurization  of  milk  became                                                               
necessary to  address problems created  by the  improper handling                                                               
of milk and  a population shift to urban living  during the early                                                               
1900's; as it  took longer to transport milk  products from farms                                                               
to consumers, problems with illnesses arose.                                                                                    
                                                                                                                                
2:47:42 PM                                                                                                                    
                                                                                                                                
SUZY  CROSBY,   Co-Owner,  Cottonwood  Creek  Farm,   provided  a                                                               
PowerPoint presentation  entitled, "Cottonwood Farm  Before House                                                               
Resources  3/22/19."   She  directed attention  to  a picture  of                                                               
goats  and explained  herd share  is legal  in Alaska,  helps the                                                               
goats "pay  their way" and  connects consumers with  producers in                                                               
order  to shorten  the food  chain,  which is  desired by  "loca-                                                               
vores."   She  restated  herd share  is legal  in  Alaska and  is                                                               
applicable  to fluid  milk only.   Herd  share is  sustainable in                                                               
that  consumers make  a commitment  to pick  up their  milk on  a                                                               
schedule (slides 1-4).  Through  the herd share program, the farm                                                               
is not a  grocery store and farmers do not  sell milk, cheese, or                                                               
other dairy products  (slide 5).  Ms. Crosby  noted the provision                                                               
of SSHB  16 that  would allow  farmers to  make cheese  and other                                                               
products is  important because goats  produce excess milk  in the                                                               
summer, which  could be made  into chevre  and frozen for  use in                                                               
winter.   She  turned to  aspects  of safety  and sanitation  and                                                               
advised the milking  location should be out of the  barn and in a                                                               
clean space.  Goats are cleaned  before and after milking and fed                                                               
so  they remain  standing  after milking;  she further  described                                                               
methods  for  safe  handling  and processing  of  the  milk,  for                                                               
complete  recordkeeping,  and  for educating  consumers  on  milk                                                               
safety (slides 6-8).   Ms. Crosby stated SSHB 16  would allow the                                                               
herd share program to include  value-added products such as Queso                                                               
Fresco, feta cheese, and chevre (slides 9-12).                                                                                  
                                                                                                                                
2:53:32 PM                                                                                                                    
                                                                                                                                
PETE  KENNEDY, Attorney,  Westin Price  Foundation, informed  the                                                               
committee the  Westin Price Foundation  is a  501(c)(3) nonprofit                                                               
and is the biggest  raw milk advocate group in the  U.S.  He said                                                               
he also  works for the  Farm-to-Consumer Legal Defense  Fund that                                                               
has a mission  to protect the rights of farmers  and consumers to                                                               
engage in  direct commerce.   Mr. Kennedy confirmed  [herd share]                                                               
agreements  are closed-loop  transactions  that  create a  higher                                                               
degree   of  transparency   and  traceability   than  any   other                                                               
arrangement.    He  opined the  majority  of  food-borne  illness                                                               
outbreaks blamed on raw milk  consumption are false; in two cases                                                               
where  milk  distributed  through  a  herd  share  agreement  was                                                               
responsible  [for   illness],  affected  parties   were  notified                                                               
without public notice.   He referred to a report  included in the                                                               
committee  packet  related  to  raw  milk  safety  and  said  his                                                               
experience is  that the  demand for raw  milk has  increased, but                                                               
incidents of  illness have not -  or have decreased -  due to the                                                               
better  education of  dairy farmers  and consumers  [document not                                                               
provided].                                                                                                                      
                                                                                                                                
2:57:35 PM                                                                                                                    
                                                                                                                                
MR.  KENNEDY opined  there are  three built-in  safety incentives                                                               
that  ensure the  safe  production  of raw  milk:    the milk  is                                                               
consumed by  the producer;  the small  herd share  dairies cannot                                                               
afford an outbreak  of illness; raw dairy products  have a better                                                               
track record for  safety than fluid raw milk.    From an economic                                                               
standpoint,  raw milks  sales encourage  consumers  to visit  the                                                               
farm  and make  other purchases.   Finally,  he advised  there is                                                               
case law supporting  herd share farmers who  distribute raw dairy                                                               
products to their consumers.                                                                                                    
                                                                                                                                
[HB 16 was held over.]                                                                                                          
                                                                                                                                
3:01:57 PM                                                                                                                    
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being no  further business before the  committee, the House                                                               
Resources Standing Committee meeting was adjourned at 3:01 p.m.                                                                 

Document Name Date/Time Subjects
Alaska LNG Project Update House Resources Committee 3.22.19.pdf HRES 3/22/2019 1:00:00 PM
AGDC LNG Update
HB 16 Version U Sponsor Statement 3.20.19.pdf HRES 3/22/2019 1:00:00 PM
HRES 3/29/2019 1:00:00 PM
HB 16
HB 16 Version U 3.14.19.pdf HRES 3/22/2019 1:00:00 PM
HRES 3/29/2019 1:00:00 PM
HB 16
HB 16 Version U Sectional 3.20.19.pdf HRES 3/22/2019 1:00:00 PM
HRES 3/29/2019 1:00:00 PM
HB 16
HB 16 Fiscal Note DHSS 3.15.19.pdf HRES 3/22/2019 1:00:00 PM
HRES 3/29/2019 1:00:00 PM
HB 16
HB 16 Fiscal Note DEC 3.15.19.pdf HRES 3/22/2019 1:00:00 PM
HRES 3/29/2019 1:00:00 PM
HB 16
HB 16 Supporting Document - Tarr memo re Herdshare Property Rights.pdf HRES 3/22/2019 1:00:00 PM
HRES 3/29/2019 1:00:00 PM
HB 16
HB 16 Supporting Document - NCSL Milk Laws.pdf HRES 3/22/2019 1:00:00 PM
HRES 3/29/2019 1:00:00 PM
HB 16
HB 16 Supporting Document - Herdshare Agreement Sample.pdf HRES 3/22/2019 1:00:00 PM
HRES 3/29/2019 1:00:00 PM
HB 16
HB 16 Supporting Document - Existing Alaska AAC.pdf HRES 3/22/2019 1:00:00 PM
HRES 3/29/2019 1:00:00 PM
HB 16
HB 16 Supporting Document - CDC outbreak map.pdf HRES 3/22/2019 1:00:00 PM
HB 16
HB 16 Supporting Document - ADEC Raw Milk.pdf HRES 3/22/2019 1:00:00 PM
HRES 3/29/2019 1:00:00 PM
HB 16
HB 16 Letter of Support - Denise Statz.pdf HRES 3/22/2019 1:00:00 PM
HRES 3/29/2019 1:00:00 PM
HB 16
HB 16 Supporting Document - Suzy Crosby Testimony Slides.pdf HRES 3/22/2019 1:00:00 PM
HB 16