Legislature(2009 - 2010)
04/11/2009 02:02 PM House RES
| Audio | Topic |
|---|---|
| Start | |
| Alaska Oil and Gas Conservation Commission | |
| Alaska Commercial Fisheries Entry Commission | |
| HB163 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE RESOURCES STANDING COMMITTEE
April 11, 2009
2:02 p.m.
MEMBERS PRESENT
Representative Craig Johnson, Co-Chair
Representative Mark Neuman, Co-Chair
Representative Bryce Edgmon
Representative Kurt Olson
Representative Paul Seaton
Representative Peggy Wilson
Representative David Guttenberg
Representative Scott Kawasaki
Representative Chris Tuck
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
CONFIRMATION HEARING(S):
Alaska Oil and Gas Conservation Commission
John Norman - Anchorage
Alaska Commercial Fisheries Entry Commission
Peter Froehlich - Juneau
- CONFIRMATION(S) ADVANCED
HOUSE BILL NO. 163
"An Act clarifying the purpose of the Alaska Natural Gas
Development Authority; and relating to definitions of certain
terms in AS 41.41."
- HEARD AND HELD
PREVIOUS COMMITTEE ACTION
BILL: HB 163
SHORT TITLE: ALASKA NATURAL GAS DEVELOPMENT AUTHORITY
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR
03/02/09 (H) READ THE FIRST TIME - REFERRALS
03/02/09 (H) ENE, RES, FIN
03/28/09 (H) ENE AT 10:00 AM BARNES 124
03/28/09 (H) Heard & Held
03/28/09 (H) MINUTE(ENE)
04/09/09 (H) ENE AT 3:00 PM BARNES 124
04/09/09 (H) Moved Out of Committee
04/09/09 (H) MINUTE(ENE)
04/10/09 (H) ENE RPT 3DNP 3NR
04/10/09 (H) DNP: RAMRAS, PETERSEN, EDGMON
04/10/09 (H) NR: DAHLSTROM, JOHANSEN, TUCK
04/11/09 (H) RES AT 12:00 AM BARNES 124
WITNESS REGISTER
JOHN NORMAN, Appointee
to the Alaska Oil and Gas Conservation Commission
Department of Administration
Anchorage, Alaska
POSITION STATEMENT: Testified as an appointee to the Alaska Oil
and Gas Conservation Commission.
PETER FROEHLICH, Judge, Appointee
to the Alaska Commercial Fisheries Entry Commission
Alaska Department of Fish & Game
Juneau, Alaska
POSITION STATEMENT: Testified as an appointee to the Alaska
Commercial Fisheries Entry Commission.
JOE BALASH, Inter-Governmental Coordinator
Department of Natural Resources
Anchorage, Alaska
POSITION STATEMENT: Presented HB 163 on behalf of Governor
Palin.
HAROLD HEINZE, Executive Director
Alaska Natural Gas Development Authority
Department of Revenue
Anchorage, Alaska
POSITION STATEMENT: During the hearing on HB 163, presented
information and answered questions.
ACTION NARRATIVE
2:02:32 PM
CO-CHAIR CRAIG JOHNSON called the House Resources Standing
Committee meeting to order at 2:02 p.m. Representatives
Johnson, Guttenberg, Olson, Wilson, Seaton, and Tuck were
present at the call to order. Representatives Edgmon, Kawasaki,
and Neuman arrived as the meeting was in progress.
^CONFIRMATION HEARING(S):
^Alaska Oil and Gas Conservation Commission
2:03:03 PM
CO-CHAIR JOHNSON announced that the first order of business is
the confirmation hearing for John Norman, appointee to the
Alaska Oil and Gas Conservation Commission.
CO-CHAIR JOHNSON began by asking Mr. Norman why he is interested
in being appointed to the Alaska Oil and Gas Conservation
Commission (AOGCC).
2:03:28 PM
JOHN NORMAN, Appointee to the Alaska Oil and Gas Conservation
Commission, Department of Administration, replied that he has
lived in Alaska for over 40 years and his background is in
geology and law. He said he has worked in development of
natural years for virtually all of his career. As a legal
counsel within the Department of Law he worked for the AOGCC and
the Department of Natural Resources. In private practice he
dealt with natural resource law representing a variety of
clients across the state, from individual Alaskans to resource
companies to Native corporations. Now at the end of his
practice career, he said he views this as an opportunity to put
to work for Alaska the knowledge he has gained over all these
years.
CO-CHAIR JOHNSON stated that Mr. Norman is an incumbent up for
re-appointment. He disclosed that Mr. Norman is a constituent
of his district, District 28, and that he supports Mr. Norman.
2:05:18 PM
REPRESENTATIVE GUTTENBERG, in reference to Point Thomson and the
relationship between oil and gas, inquired as to how much oil
needs to come off before gas can be taken out.
MR. NORMAN stated that he will limit his response to what is on
record because this issue is pending before the commission. He
explained that Point Thomson is a retrograde reservoir, which
means the pressures are extremely high. A very large amount of
condensate is suspended in the gas, but as the pressure drops
that liquid will fall out. Because the liquid in the gas is
equivalent to an "Alpine field", there is much at risk and the
commission and other agencies are being vigilant in making sure
that this is not wasted. In addition, there is an oil rim
around that gas, as well as Brookian deposits. He pointed out
that the commission is charged with ensuring that when the Point
Thomson reservoir goes on line there is no waste of valuable
hydrocarbons from approaching production improperly.
2:08:22 PM
CO-CHAIR NEUMAN moved to forward the name of John Norman to the
joint session of the House and Senate for confirmation. There
being no objection, the confirmation of John Norman was advanced
from the House Resources Standing Committee.
^Alaska Commercial Fisheries Entry Commission
2:08:39 PM
CO-CHAIR JOHNSON announced that the next order of business is
the confirmation hearing for Peter Froehlich, appointee to the
Alaska Commercial Fisheries Entry Commission.
CO-CHAIR JOHNSON asked Judge Froehlich why he is interested in
being appointed to the Alaska Commercial Fisheries Entry
Commission (CFEC).
2:08:58 PM
PETER FROEHLICH, Judge, Appointee to the Alaska Commercial
Fisheries Entry Commission, Alaska Department of Fish & Game,
responded that he is interested because of the combination of
his past work in commercial fishing and law: trolling for
salmon, fishing for king and tanner crab out of Kodiak,
tendering salmon, and working for about 12 years in the Office
of the Attorney General, which included advising and
representing the CFEC, which he is now a part of. In addition,
he served as a district court judge in Juneau for over 16 years.
It is a vicarious enjoyment of fishing, he quipped, to deal with
the issues and people involved in fisheries.
JUDGE FROEHLICH, in response to Co-Chair Johnson, confirmed that
this is a re-appointment and that he started in August 1985
after leaving the district court bench that January.
2:11:18 PM
REPRESENTATIVE SEATON, in regard to SB 3 and its requirement
that the CFEC provide public information without charge to
Alaska Regional Development Organizations (ARDORs), asked how
extensive a financial draw this could be upon the commission if
there is a very complex request for data analysis. He expressed
his concern that this provision could be used as a way of
funding research for an ARDOR using CFEC and vessel receipts.
CO-CHAIR JOHNSON noted that the House Resources Standing
Committee has not seen SB 3. He surmised that SB 3 would allow
the providing of information by the commission free of charge.
REPRESENTATIVE SEATON said correct.
2:13:45 PM
JUDGE FROEHLICH explained that while he is familiar with SB 3,
it was CFEC Chairman Frank Homan who testified on the bill. He
said the language in SB 3 mentions public information, which
means data or facts that the commission has, and he does not
recall the word "analysis" being in the bill. The commission
does not plan to do a lot of gratuitous research projects and in
the past the commission has not been asked for such by ARDORs.
While the commission occasionally gets requests for some
analysis, this analysis is billed to the agencies requesting it;
the key here is that ARDORs would essentially be entitled to fee
waiver. The commission did a zero fiscal note, he continued,
and does not see that SB 3 is inviting a lot of analysis
requests, just data requests.
REPRESENTATIVE SEATON said he wants to make sure the commission
is not overlooking something and creating the potential for a
large draw of funds from the CFEC to support another
organization inadvertently.
JUDGE FROEHLICH, in response to Co-Chair Johnson, said he would
pass on Representative Seaton's concerns to the commission.
2:15:53 PM
CO-CHAIR NEUMAN asked what Judge Froehlich does at the
commission and what his purpose and mission are at the CFEC.
JUDGE FROEHLICH replied that he deals with correspondence and
reviews hearing officer decisions on a daily basis. Pretty much
every decision that the CFEC handles on a permit application
goes through several levels of review, he explained, and about a
dozen are in court right now. The commission reviews and edits
the attorney general's briefs, as well as the commission's
decisions. He said the CFEC's mission is to get as many
Alaskans fishing as quickly as possible. A new online system
enables renewals and new interim-use permits to be turned around
within days. He added that his responsibilities vary by time of
year.
2:17:57 PM
CO-CHAIR NEUMAN surmised that the CFEC decides the number of
permits and who gets them.
JUDGE FROEHLICH responded yes.
CO-CHAIR NEUMAN inquired whether the CFEC is involved with
buybacks of permits.
JUDGE FROEHLICH answered yes. He noted that a buyback is fairly
complex to accomplish, but that it is the commission that would
invalidate or retire the permits that are bought back.
2:18:52 PM
CO-CHAIR NEUMAN asked whether Judge Froehlich believes there are
areas in the state that have too many permits.
JUDGE FROEHLICH declined to identify an area that may have too
many permits and referred members to the reports and links
available on the CFEC's website. He said one of the reports
shows the percentage of permits in each fishery over the last 10
years that are not fished. The number of permits not fished is
a market-based indication that the fishermen think there are too
many permits and not worth it to go fishing or that there is no
market for selling the permit. He pointed out that allocation
gets into the Board of Fisheries.
2:20:26 PM
CO-CHAIR NEUMAN offered his belief that it is a big deal to
receive fishing permits from the state and then afterwards there
is a value for selling them or having the state buy them back.
JUDGE FROEHLICH reiterated that the CFEC's website has many
links and reports. He referenced a report that lists by fishery
the percent of permits that are held now by original "issuees"
and many are less than 50 percent. Some non-transferable
permits have been cancelled, he noted. The Southeast seiners
are the only instance of buyback and this was done with private
funds and involved about two or three dozen permits, roughly 10
percent of the total. He added that there is some federal money
for more buybacks.
CO-CHAIR JOHNSON closed public testimony on the appointments of
Mr. Norman and Judge Froehlich after ascertaining that no one
online or in the audience wished to testify.
2:23:43 PM
CO-CHAIR NEUMAN moved to forward the name of Peter Froehlich to
the joint session of the House and Senate for confirmation.
REPRESENTATIVE WILSON objected to ask a question. She said she
did not realize that this is a paid position and asked what the
salary is.
JUDGE FROEHLICH responded that it is just over $100,000 per year
for the full-time position. He said he believes this is the
same for the Alaska Oil and Gas Conservation Commission (AOGCC),
and that the salary is set by a special statute for these two
commissions only.
REPRESENTATIVE WILSON withdrew her objection. There being no
further objection, the confirmation of Peter Froehlich was
advanced from the House Resources Standing Committee.
HB 163-ALASKA NATURAL GAS DEVELOPMENT AUTHORITY
2:24:54 PM
CO-CHAIR JOHNSON announced that the final order of business is
HOUSE BILL NO. 163, "An Act clarifying the purpose of the Alaska
Natural Gas Development Authority; and relating to definitions
of certain terms in AS 41.41."
2:25:18 PM
JOE BALASH, Inter-Governmental Coordinator, Department of
Natural Resources, explained that HB 163 is one element of a
three-part agenda that Governor Palin has initiated to get work
started on an in-state natural gas pipeline. The first piece of
legislation is a funding request, the second piece is HB 164
dealing with right-of-way leasing and "the pipeline act", and
the third piece is HB 163 which makes some changes to the
statutory duties and prerogatives of the Alaska Natural Gas
Development Authority (ANGDA).
2:27:17 PM
MR. BALASH said ANGDA was created by a 2002 voter initiative
that went into law in 2003. Then-Governor Frank Murkowski
appointed the board and began the preliminary steps of getting
the organization up and running. The original initiative
directed ANGDA to put together a feasibility plan for a natural
gas pipeline running from the North Slope to tidewater at Prince
William Sound, with a spur line to Southcentral Alaska. In 2004
the legislature unanimously opened up the statute to examine an
alternative route to look at a destination at tidewater on Cook
Inlet. Over the years ANGDA has looked at additional ways of
commercializing natural gas or otherwise bringing natural gas to
Alaskans and it has kept the legislature and administration
informed in this regard. This fall a request came through ANGDA
to examine a pipeline heading west. However, when a contract
was generated and sent to the desk of the Commissioner of
Revenue it was discovered that there is no real authority in the
statute or the underlying appropriation and therefore this was
beyond what ANGDA should be doing.
CO-CHAIR JOHNSON surmised that it is unclear whether ANGDA is
authorized only for a pipeline from Prudhoe Bay to tidewater at
Prince William Sound and the spur.
MR. BALASH responded that it will become clearer as he goes
through HB 163.
2:29:32 PM
CO-CHAIR NEUMAN asked Mr. Balash to speak further about the
pipeline heading west.
MR. BALASH replied that the request came from a member of the
other body who wanted to see whether there was an opportunity to
build a pipeline to the southwest portion of the state. A
feasibility contract authorized by the [ANGDA] board cited a
particular appropriation as the funding authority; however, that
particular funding authority was specific to a project to
tidewater as opposed to a destination in western Alaska. This
caused an examination of the underlying statute and the
authorities and directions given to ANGDA by the initiative, the
legislature, and the appropriation. He said the governor would
like ANGDA to be able to identify a gas supply anywhere in the
state of Alaska and be able to deliver that gas to any market in
Alaska. Thus, the changes made by HB 163 would allow ANGDA to
look at places other than the North Slope for supply and to take
gas to any market in Alaska.
2:31:29 PM
MR. BALASH noted that page 1, line 7, of HB 163 adds the
language "or other regions within the state"; thus, [AS
41.41.010(a)] is modified to say, "bring natural gas from the
North Slope or other regions within the state to market, ..."
For example, he continued, the present statute does not clearly
address the moving of gas from the Nenana Basin to market in
Southcentral Alaska should gas be discovered in the Nenana Basin
this summer. He said the governor thinks the language should be
made clear that ANGDA has both the authority and the directive
to identify sources of supply in the state and be able to bring
that supply to market wherever that market might be in Alaska.
2:32:49 PM
REPRESENTATIVE GUTTENBERG suggested taking out the old North
Slope language and not adding the new language so that page 1,
line 7, states "order to bring natural gas to market,".
MR. BALASH pointed out that Representative Guttenberg's proposed
language would allow ANGDA to bring gas to any market in Alaska
or the U.S., while the intent is to make clear that it is gas
supplies in Alaska to markets in Alaska.
REPRESENTATIVE GUTTENBERG disagreed with Mr. Balash's
interpretation of what his suggested language would do.
2:34:16 PM
CO-CHAIR NEUMAN surmised that the term "gas" includes all the
components of gas - natural gas, liquids, propanes, butanes, and
ethanes - not just methane.
MR. BALASH replied that he does not believe there are any
restrictions. He cited page 1, line 9, which states "the
acquisition and conditioning of [NORTH SLOPE] natural gas;". He
said he does not believe that in the definitions section natural
gas is defined to mean only methane.
2:35:20 PM
REPRESENTATIVE SEATON inquired whether gas from the six-mile
range off the Alaska coast could be bid into a gas line.
MR. BALASH answered that he is not certain which definition of
the state because it would be beyond the three-mile offshore
boundary. However, he said he thinks that six miles is still
the state even if it is not state land that lies beneath.
REPRESENTATIVE SEATON asked whether the administration has a
problem with "other regions of the state, including the outer
continental shelf off Alaska".
MR. BALASH responded no.
2:36:41 PM
REPRESENTATIVE KAWASAKI noted that the Alaska Gasline Port
Authority was established in 1999 with the idea that the gas go
to tidewater for the liquefied natural gas market. He inquired
what the impact of the amendment in Section 2 would be in regard
to the liquefied gas market.
MR. BALASH replied that the language is still very explicit that
delivery be to markets within the state for use by markets
within the state or to tidewater for shipment to market. This
is well within the bounds and mission of the authority, with the
essential point being that markets within the state are served.
2:38:01 PM
CO-CHAIR NEUMAN asked what powers ANGDA was given.
MR. BALASH answered that he does not have the full statute in
front of him, but that ANGDA has a wide range of corporate
powers, such as the ability to enter into contracts, buy
property, and enter into leases. However, Section 1 of HB 163
speaks to the body of law regarding the purpose of the
corporation as opposed to the powers.
CO-CHAIR NEUMAN, in response to Co-Chair Johnson, said he knows
the purpose is to get in-state gaslines, but he wants to know
about the powers.
2:39:34 PM
REPRESENTATIVE OLSON said that if the Agrium plant was on line
today the demand for the bullet line would be well under 0.5
billion cubic feet (bcf) a day, but to efficiently build a line
it would take 1.5-2.0 bcf per day. He understood that 1.5-2.0
bcf per day would trigger the triple damages under the Alaska
Gasline Inducement Act (AGIA).
MR. BALASH responded that this is probably incorrect. The first
question that arises when the project assurances clause in the
AGIA statute and AGIA license is considered is whether or not a
project is a competing project and that is regardless of whether
it is 500 million cubic feet (mmcf) per day or more.
REPRESENTATIVE OLSON interjected that that is based on capacity.
MR. BALASH continued, saying that the second question is "Has
that competing project been granted a preferential tax or
royalty consideration or has it been granted state dollars ...
for the purpose of constructing the pipe?"
2:41:12 PM
REPRESENTATIVE OLSON inquired whether the use of "Foothills or
Nenana gas" in the line that is being talked about would be
deemed as being gas that could have been used for AGIA.
MR. BALASH replied that there is a qualification within AGIA
that speaks to North Slope gas with regard to the notion of a
competing project and the project assurances clause. He said he
therefore believes that "Nenana gas" would not affect regardless
of whether it is a competing project.
REPRESENTATIVE OLSON said he believes North Slope gas also
covers the Gubic Gas Field.
MR. BALASH, speaking from memory, recalled that the AGIA law
defines North Slope as 68 degrees and therefore the Gubic Gas
Field is in.
REPRESENTATIVE GUTTENBERG requested that Mr. Balash be able to
finish his opening statement.
MR. BALASH said he is finished with his statement.
2:43:25 PM
CO-CHAIR JOHNSON understood it is the administration's desire
that ANGDA take the lead on in-state gas development and HB 163
would provide that additional authority.
MR. BALASH said that is a good summation and added that ANGDA
has within its powers some tools that could be very constructive
in moving in-state gas projects forward. He said the
administration wants to ensure that the purpose of ANGDA is not
in any way limited beyond what it could do for the citizens in
the state of Alaska.
CO-CHAIR JOHNSON related that he has heard some concerns about
expanding ANGDA's power, but he is not terribly concerned and
believes it makes sense given that ANGDA is quasi-government.
2:44:44 PM
CO-CHAIR NEUMAN asked for clarification on whether the Gubic Gas
Field is considered North Slope gas.
MR. BALASH said he will check the definition in the AGIA
statute, but he believes that 68 degrees is used as the line of
demarcation, in which case the Gubic Gas Field is included in
the definition of North Slope gas.
CO-CHAIR NEUMAN understood that gas from the Gubic Gas Field
would be a competing gas.
MR. BALASH said yes, it would be competing if it is a pipeline
that: begins at the North Slope, delivers North Slope gas, is
more than 500 mmcf, and receives a preferential tax or royalty
consideration.
CO-CHAIR NEUMAN surmised that under HB 163 it would be okay to
build a pipeline with the capacity to carry more than 500 mmcf a
day.
MR. BALASH responded that the statute dealing with ANGDA does
not speak to capacity or to a specific project, so he is unsure
how to answer the question.
2:46:52 PM
CO-CHAIR NEUMAN inquired whether AGIA's conditions would be
violated if ANGDA built a pipeline to other regions within the
state with the capacity to carry 1.3-1.8 bcf per day but only
shipped 0.5 bcf of gas per day.
MR. BALASH replied that several fundamental questions must be
answered to determine whether a project violates AGIA. The
first question is whether the project is designed to carry more
than 500 mmcf a day at the initial design and capacity stage.
Any pipeline can be expanded to virtually any capacity, it is
just a matter of whether this is done through compression or
looping. Illogical conclusions can be reached if one were to
say "any capacity of the pipe". After the questions about
design, carrying capacity, and how long the pipe will be at that
capacity, another set of questions can be asked. These
questions are about preferential tax and royalty treatments,
grants of state cash, and whether the pipeline is in fact a
competing project with the AGIA project.
2:48:51 PM
CO-CHAIR NEUMAN said he hopes there will be the ability to
expand opportunities to other regions within the state.
MR. BALASH assured members that voting yes for HB 163 will not
trigger triple damages under the AGIA license. The bill does
not ask for preferential tax or royalty treatment or to build a
particular project, he said. It only makes slight modifications
to the purpose of the Alaska Natural Gas Development Authority.
2:49:55 PM
REPRESENTATIVE GUTTENBERG said he thinks the word "or" in the
amending language in Section 3, line 12, could be interpreted to
mean that this project does not have to include in-state use of
gas. He asked whether this is the intent.
MR. BALASH answered that the intent is to allow "project", as
defined within the ANGDA section of statute, to include a
project that would come from the North Slope or from some other
region within the state and then take it to tidewater at a point
on Prince William Sound or Cook Inlet, but it is to markets
within the state.
CO-CHAIR JOHNSON added that it is not that the language is
exclusionary and requires that one or the other be done; rather
both could be done.
2:51:50 PM
REPRESENTATIVE GUTTENBERG said he hopes both will be done, but
the second "or" in the amending language [Section 3, line 12]
makes it look that theoretically it could be just to tidewater
and not necessarily for in-state use and he is wondering if that
is the intent, although it could just be grammatical.
MR. BALASH responded that the primary directive here is to
markets within the state. If "and" to tidewater was used it
would suggest that the gas must get to tidewater and the
administration is not trying to do that. The desire is the
authority to have the flexibility to just take gas to a market
in-state without having to necessarily go to tidewater for
export. He provided a theoretical example of gas being found in
the Nenana Basin and the examination of building a pipeline to
the Donlin Creek area to support the mine, a situation of not
building to tidewater at all.
REPRESENTATIVE GUTTENBERG said he understands this and that the
intent is to hopefully do both of them, so he will speak to
someone who knows about grammar.
CO-CHAIR JOHNSON stated that he is not sure "or" is exclusionary
and means doing one or the other; it could mean doing both.
2:54:24 PM
REPRESENTATIVE TUCK said he believes that Representative
Guttenberg's worry is that gas taken by pipeline to tidewater
not be for export only, that it also be able to go to Alaska
markets. Representative Tuck asked if he is correct in
surmising that gas is being taken to tidewater so that it can be
distributed to places elsewhere in Alaska.
MR. BALASH replied, "In a manner of speaking, yes". In further
response, he said export would still be allowed and possible.
There was a very specific project for which ANGDA was created,
he continued, and for that reason project was defined in a
particular way. However, that aspect of ANGDA and its mission
has been satisfied and now the administration wants to make sure
that the definition of project is not overly restrictive as
ANGDA pursues projects.
2:56:59 PM
REPRESENTATIVE OLSON understood that Gubic gas was not used in
the initial calculation of gas available for the AGIA line by
either the Alaska Oil and Gas Conservation Commission (AOGCC) or
the Department of Natural Resources (DNR).
MR. BALASH said he believes that is correct in terms of day-one
gas in the models that were used for the AGIA findings.
REPRESENTATIVE OLSON suggested adjusting the degrees to take out
the Gubic Gas Field to clear up any problem with triple damages
as respects that gas. If it was not used in the calculations in
the first place, he opined, it should not be deemed as competing
gas.
CO-CHAIR JOHNSON said he does not have a problem with this line
of questioning, but he does not want to revisit the AGIA
licensing at this point.
MR. BALASH offered to work with Representative Olson off line to
understand how this might be accomplished and how this might be
received by the licensee and the license issuers. He said he is
uncertain what the effect would be if any part of that statute
were amended at this point in time.
REPRESENTATIVE OLSON said he is not planning on amending HB 163.
2:59:07 PM
CO-CHAIR NEUMAN surmised that the expansion provided by HB 163
to other regions and markets within the state, which he likes,
would allow taking off propane at the Yukon River and sending it
to villages in western Alaska.
MR. BALASH said that this is largely correct. There are some
arguments that can be made about being able to take propane
directly at Prudhoe Bay as the law currently stands and, rather
than relying on legal interpretations, this just makes it clear.
CO-CHAIR NEUMAN noted he is bringing this up because of the
language on page 2, lines 14 and 15. He understood that part of
the intent of HB 163 is to use gas, if it is found, to help
generate electricity in other regions and markets in the state.
MR. BALASH answered correct.
3:01:27 PM
HAROLD HEINZE, Executive Director, Alaska Natural Gas
Development Authority, Department of Revenue, pointed out that
ANGDA is a public corporation of the state. Therefore ANGDA has
the same business authorities as any other business entity, such
as the ability to sue, be sued, make contracts, make deals,
spend money, and accept gifts. In addition, as a public
corporation and political subdivision of the state, ANGDA was
granted the authority for bonding. In the evolution of ANGDA's
role in in-state gas, this bonding authority may become the most
important aspect of what ANGDA does. Over its six years ANGDA
has evolved and what it looks at has evolved.
3:04:09 PM
MR. HEINZE explained that initially ANGDA was assigned to look
at a liquefied natural gas (LNG) project out of Valdez.
Although ANGDA determined the project to be economic and
feasible, it was decided that it was too big a project for an
entity like ANGDA. In looking at other projects in the
feasibility sense, it became clear to ANGDA that getting gas
into Southcentral Alaska through a spur line was a project that
offered the maximum benefit to Alaskans, so that is where ANGDA
then focused its efforts. This is the one project where ANGDA
has progressed beyond the feasibility level to looking at the
alignment and obtaining a conditional right-of-way between
Glennallen and Palmer.
3:05:16 PM
MR. HEINZE said ANGDA's current activities on the pipeline side
are now focused on advancing that spur line and advancing its
tie-in to either Denali - The Alaska Gas Pipeline ("Denali") or
TransCanada's Alaska Pipeline Project and preparing for an open
season in 2010 or early [2011]. Other projects that ANGDA has
looked at include a propane facility on the North Slope.
MR. HEINZE referenced an [April 7, 2009] opinion letter from the
attorney general and explained that questions were raised late
last year. One of these questions was in regard to Senator
Hoffman's request that ANGDA look at pipelines to western
Alaska, something ANGDA thought worth doing. However, "the
system" balked, so ANGDA referred it back to Senator Hoffman.
He said ANGDA thinks this could easily be cured through the
appropriation process: when money is appropriated to ANGDA the
language can instruct the agency to look at that feasibility.
Other questions were raised about a number of the other things
ANGDA was doing, he continued. The attorney general's opinion
letter clarifies that ANGDA's authorities are very broad. In
short, ANGDA was formed to deal with the issues of getting North
Slope gas to market and to do it in such a way that it benefited
Alaskans. Within this very broad grant of authority, ANGDA has
chosen to focus down much closer on things and not try to be all
things to all people. For instance, he explained, the Alaska
Gasline Port Authority is still looking at an LNG project out of
Valdez, so ANGDA has backed away from the LNG area.
Additionally, ANGDA's intent on the spur line has been simply to
advance the project to a point where the front-end risk is
lessened and the private sector can do the project.
3:07:52 PM
MR. HEINZE stressed that ANGDA is neither interested in, nor
focused on, being the builder of a pipeline, but thinks it can
play a role in assisting the private sector in accomplishing
this. He said that in ANGDA's mind the reason for HB 163 is
simply clarification. There is no conflict in a real sense that
ANGDA is aware of between what it has wanted to do and what the
statute allows it to do. The attorney general's opinion affirms
the breadth of ANGDA's authority in general, and while there may
be some limitations on the project definition, the language of
HB 163 clarifies that and makes it sufficiently broad.
MR. HEINZE pointed out that the legislature has control through
the appropriations process. Also, the legislature has provided
approval on a year-to-year basis of what ANGDA has said it would
do and checked back to make sure it was done. In addition, the
legislature has provided guidance to ANGDA. Similarly, the
administration, through the power of the governor to appoint the
seven-member public board, has maintained control of ANGDA's
direction throughout at least two administrations. He added
that HB 163 is helpful in the longer run in terms of the
financing ability of ANGDA working in concert to help bring
about some projects.
3:10:28 PM
CO-CHAIR JOHNSON remarked that it is good to hear Mr. Heinze
thinks HB 163 will be helpful.
REPRESENTATIVE KAWASAKI said he thinks the power of authority
section seems fairly clear, but the big difference is that the
project scope and project definition are being changed. When
voters created ANGDA in 2002, he continued, it was clear they
wanted tidewater market in Valdez or Prince William Sound and a
spur line from Glennallen to Southcentral Alaska. He proffered
that taking those out and broadly defining other regions within
the state is not necessarily clearer guidance but actually
expanding the envelope of what a project could mean. He asked
Mr. Heinze to comment in this regard.
MR. HEINZE replied that ANGDA's thinking has been that
regardless of which pipeline system develops in Alaska, it will
- in the long run - link many different places. This is why
ANGDA has been very comfortable thinking about all the different
dots and showing in its diagrams everything it can think of,
including the marine transportation of propane to make the
linkage. The attorney general's opinion says that when ANGDA is
dealing with things that are not real project specific, it has a
lot of room to maneuver. Thus, ANGDA can make contracts, deals,
and business arrangements. He said he believes that when ANGDA
is dealing with something that is very specific to the project,
this language will be helpful in that it makes it clear that
ANGDA has a lot of flexibility as long as the pipelines are
inside the state of Alaska and serving markets that are either
internal markets or export markets in the state of Alaska.
3:13:22 PM
MR. HEINZE added that HB 163 does not represent ANGDA doing
anything new or changing direction. Rather, it reflects a
progression from looking at broad feasibilities to looking at
very specific projects, particularly private-sector-driven
projects, to be driven forward with the help, potentially, of
public financing.
REPRESENTATIVE KAWASAKI offered his opinion that amending the
definition of project in Section 3 seems fairly specific and
liberalizes the definition of project. While not opposed to
this, he said he wants to be clear where [the legislature] is
headed.
CO-CHAIR JOHNSON interjected that he thinks broadening it out is
where [the legislature] is headed. In-state gas is a priority
for committee members' constituents and this is an attempt to
start to get there.
3:15:08 PM
REPRESENTATIVE SEATON inquired whether ANGDA believes that the
language in Section 3, page 2, of HB 163 clarifies for bonding
purposes that which is written on page 4, paragraph 2, of the
[April 7, 2009] attorney general's opinion.
MR. HEINZE qualified that he is not a lawyer and that the
opinion letter was written separate from HB 163. He said that
since he believes the attorney general's office has a similar
source, he therefore believes that within the attorney general's
office the answer to the question should be yes. He added that
ANGDA recently commissioned a private contractor to look at
public/private partnership and this contractor also suggested
that the language related to an exact project that one was
undertaking the financing on be authorized by the legislature as
part of the bonding approval. He said he cannot say that the
fix provided by [Section 3] is the ultimate fix for everything,
but he believes it provides the clarity to convince people to
consider the financial aspects of ANGDA and its ability as a
public entity to bond pipeline projects.
3:17:45 PM
REPRESENTATIVE SEATON asked Mr. Heinze's opinion in regard to a
potential conceptual amendment for page 1, line 7, that would
add "including Alaska outer continental shelf" so there would be
no ambiguity that gas from this area could be put into a
project.
MR. HEINZE responded that he is unsure of the linkage. He said
ANGDA has viewed its authority to obtain gas as the ability to
work with people that would wish to tender gas during an open
season. If ANGDA was involved in either an ownership or
financing aspect of a pipeline from the North Slope area, its
intention would be to make sure that that access was available.
He added that ANGDA has also looked at ways it can encourage
people to put their gas in. In terms of working with the
sellers of gas, he continued, ANGDA might be of aid to local gas
consumers, particularly the electric utilities, in purchasing
long-term supplies of gas in the ground which would provide a
better deal than a year-to-year contract. Therefore it would be
ANGDA's intent to work with a company [that has gas from the
outer continental shelf] and assure access to the pipeline.
3:20:15 PM
CO-CHAIR JOHNSON asked whether adding the language "including
Alaska outer continental shelf" to the gas supplies would hurt
Mr. Heinze's feelings.
MR. HEINZE reiterated that he is not a lawyer, but that it would
never hurt his feelings expanding ANGDA's authority.
REPRESENTATIVE KAWASAKI inquired whether ANGDA must come before
the legislature for approval of any bonding.
MR. HEINZE answered that the ANGDA statute is very clear that
the legislature has control of the limit on the bonding
authority. It is not a matter of bringing forward the actual
bond, but the legislature must approve the amount of bonds that
can be issued.
3:21:51 PM
CO-CHAIR NEUMAN understood that the language in HB 163 allows
for the construction of what is commonly considered and called
the "bullet line".
MR. BALASH responded yes.
CO-CHAIR NEUMAN requested Mr. Balash to provide a definition of
"bullet line".
MR. BALASH replied he is unaware of any legal definition of
"bullet line". He continued:
In sort of the vernacular of Alaska gas pipeline
projects, the bullet line has been identified as one
that travels generally from the North Slope along the
Parks Highway to Cook Inlet. That is distinct from
what's been referred to as the all-Alaska line which
would travel from Prudhoe down to Fairbanks and then
along the Richardson Highway to the Prince William
Sound area. Those aren't legal distinctions or
definitions, but for label purposes that's how I've
come to know the differentiation.
3:22:57 PM
CO-CHAIR JOHNSON pointed out that one other term used a lot is
"spur line" and his understanding is that this would be from
"Delta to market in Southcentral Alaska someplace, so it would
not exclude that either in any case".
MR. BALASH answered correct.
CO-CHAIR JOHNSON added that members likely knew the answer to
these questions, but he wanted the answers on the record. He
said he thinks HB 163 is critical legislation that needs to go
forward for the advancement of a bullet line.
CO-CHAIR JOHNSON opened public testimony on HB 163. There being
no one wishing to testify, he closed public testimony.
3:24:44 PM
REPRESENTATIVE SEATON moved Conceptual Amendment 1 as follows:
Page 1, line 7, after "state":
Insert "including the Alaska outer continental
shelf"
Page 2, line 5, and page 2, line 11, after the first
"within the state":
Insert "including the Alaska outer continental
shelf"
CO-CHAIR JOHNSON objected in order to note that Conceptual
Amendment 1 clarifies that any oil found beyond the three-mile
limit is included and that if the U.S. becomes a signatory of
the Law of the Sea Treaty it would extend up to 350 miles. He
said he thinks Conceptual Amendment 1 is appropriate.
3:26:24 PM
REPRESENTATIVE SEATON pointed out that Conceptual Amendment 1
would be inserted into those places where there is language for
the procurement of gas, but not the marketing of gas.
CO-CHAIR JOHNSON added that a vote for Conceptual Amendment 1
and/or for HB 163 does not necessarily mean the member endorses
the Alaska outer continental shelf, although he hopes everyone
does. He asked whether Mr. Balash or the administration opposes
Conceptual Amendment 1.
MR. BALASH answered no.
CO-CHAIR JOHNSON withdrew his objection. There being no further
objection, Conceptual Amendment 1 was passed.
3:27:41 PM
REPRESENTATIVE GUTTENBERG expressed his concern about amending
the definition of the word project and leaving out "to markets
within the state" after each "or", saying he believes it needs
to be redundant each time. He moved Conceptual Amendment 2 as
follows:
On page 2, Section 3 of the bill, line 9, (3), when
... defining the project: each time we define the
project it includes the parameters that the project is
described to include using the gas for markets within
the state, not exclusively, but markets within the
state as inclusive.
3:29:10 PM
MR. BALASH, in response to Co-Chair Johnson, said he understands
the intent of Conceptual Amendment 2 and that it is consistent
with the intent of the administration if lawyers think the
change is needed.
CO-CHAIR JOHNSON objected to Conceptual Amendment 2 for purposes
of discussion.
CO-CHAIR NEUMAN also objected. He clarified that markets within
the state could be propanes, butanes, gas-to-liquids (GTLs), and
any other capacity or use within the state.
REPRESENTATIVE GUTTENBERG agreed with Co-Chair Neuman.
CO-CHAIR JOHNSON added that market is any exchange of goods or
services for money and it would not be limiting in any form or
fashion.
3:30:20 PM
CO-CHAIR NEUMAN removed his objection. [Co-Chair Johnson's
objection was treated as removed.] There being no further
objection, Conceptual Amendment 2 was passed.
CO-CHAIR JOHNSON held over HB 163.
ADJOURNMENT
There being no further business before the committee, the House
Resources Standing Committee meeting was adjourned at 3:31 p.m.
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