Legislature(2019 - 2020)BARNES 124
07/19/2019 11:00 AM House RESOURCES
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| Audio | Topic |
|---|---|
| Start | |
| Presentation: Alaska Lng Update by Joe Dubler, Interim President, Alaska Gasline Development Corporation | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
ALASKA STATE LEGISLATURE
HOUSE RESOURCES STANDING COMMITTEE
July 19, 2019
11:54 a.m.
MEMBERS PRESENT
Representative Geran Tarr, Co-Chair
Representative Grier Hopkins, Vice Chair
Representative Sara Hannan
Representative Chris Tuck
Representative Ivy Spohnholz
Representative Dave Talerico
Representative Sara Rasmussen (via teleconference)
MEMBERS ABSENT
Representative John Lincoln, Co-Chair
Representative George Rauscher
COMMITTEE CALENDAR
PRESENTATION: ALASKA LNG UPDATE BY JOE DUBLER~ INTERIM
PRESIDENT~ ALASKA GASLINE DEVELOPMENT CORPORATION
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
JOE DUBLER, Interim President
Alaska Gasline Development Corporation
Anchorage, Alaska
POSITION STATEMENT: Provided a PowerPoint presentation
entitled, "Legislative Update," dated 7/18/19, and answered
questions.
FRANK RICHARDS, Senior Vice President, Program Management
Alaska Gasline Development Corporation
Anchorage, Alaska
POSITION STATEMENT: Answered a question during the PowerPoint
presentation entitled, "Legislative Update," dated 7/18/19.
ACTION NARRATIVE
11:54:35 AM
CO-CHAIR GERAN TARR called the House Resources Standing
Committee meeting to order at 11:54 a.m. Representatives
Hannan, Talerico, Hopkins, Spohnholz, and Tarr were present at
the call to order. Representatives Tuck and Rasmussen arrived
as the meeting was in progress.
^Presentation: Alaska LNG Update by Joe Dubler, Interim
President, Alaska Gasline Development Corporation
Presentation: Alaska LNG Update by Joe Dubler, Interim
President, Alaska Gasline Development Corporation
11:55:22 AM
CO-CHAIR TARR announced the only order of business would be an
update on the Alaska Gasline Development Corporation as required
by Senate Bill 138 [passed in the Twenty-eighth Alaska State
Legislature].
11:56:08 AM
JOE DUBLER, Interim President, Alaska Gasline Development
Corporation (AGDC), directed attention to a PowerPoint
presentation entitled, "Legislative Update" dated 7/18/19. Mr.
Dubler noted since the last update in March [2019], AGDC began
working with oil producers on the details of the Federal Energy
Regulatory Commission (FERC) authorization; further, on July 10,
[2019], AGDC announced a reorganization which would refocus the
corporation toward its purpose in the next year to obtain a
license from FERC to construct the [Alaska liquefied natural gas
pipeline (Alaska LNG)] project. He explained in the last two or
three years AGDC developed a large infrastructure but will now
strictly focus on the FERC license. As a result of the
reorganization, AGDC will reduce departments; for example, the
legal department will be reduced to one attorney, as needed,
from the Department of Law (DOL), and reductions will also be
made to the department of external affairs and government
relations, and to the commercial department. These reductions
are due to AGDC's new role acting as the state's sovereign
representative instead of its previous role as the sole party in
the Alaska LNG project. He pointed out the importance of
participation by private sector, experienced, large companies or
independent oil companies to build a project "of this
magnitude." Mr. Dubler stated AGDC's reorganization and
reductions will not affect its ability to accomplish its mission
in the upcoming year (slide 2).
12:00:36 PM
REPRESENTATIVE HANNAN asked for the number of AGDC employees
before and after reorganization.
MR. DUBLER explained AGDC staff would be reduced from nineteen
position control number (PCN), to eight or nine PCN, over the
next three months.
REPRESENTATIVE HANNAN questioned the use of the word "sovereign"
in the context of "referring to [the state] as a sovereign
versus a sole party."
MR. DUBLER clarified a sovereign typically does not build a
project but acts to advance a project through regulatory,
financial, or tax issues. He said, "... we're not going to be
building it, we're not going to be hiring people to do this.
We're going to be sitting back and, and helping to accomplish
the project for the parties that are going to do that."
REPRESENTATIVE HANNAN recalled the state was the sovereign
during construction of the Trans-Alaska Pipeline System (TAPS)
and surmised [the Alaska LNG project] is analogous.
MR. DUBLER stated the project is similar but is not a "TAPS
model." He noted the state's role in the construction of TAPS
was as a regulator and taxing authority; however, [for Alaska
LNG] the state would be involved in issues such as payment in
lieu of taxes (PILT). He elaborated on the impact of taxes on
the profit margins of oil and natural gas pipelines.
12:05:30 PM
REPRESENTATIVE TUCK offered some details about the history of
AGDC, beginning in 2010, and described the expansion in 2014 of
AGDC to the primary responsible party to develop [a liquefied
natural gas (LNG) project] along with the Department of Natural
Resources (DNR) and the Department of Revenue (DOR), followed by
an appropriation to determine the state's participation. He
observed AGDC holds an aggressive role in efforts to monetize
natural gas resources on the North Slope and asked who made the
decision to reorganize, and under what authority that decision
was made.
MR. DUBLER said the AGDC board of directors is appointed by the
governor and serves at the pleasure of the governor; the
president is appointed by the board. He said it is his decision
to determine staffing and the board has turned the corporation's
direction away from commercial efforts and toward permitting; in
fact, commercial efforts were nonbinding because the cost of the
LNG was unknown. Furthermore, not having permits is a
"roadblock" to projects and he described regulatory impediments
to construction projects in North America. He opined obtaining
a permit would "open up the door ... to other investors that
don't want to take regulatory risks ...." Mr. Dubler said it
was his decision on how to "fit this corporation to [the] right
size for the effort that we've got moving forward."
REPRESENTATIVE TUCK asked what AGDC was doing that it will not
be doing after reorganization.
MR. DUBLER responded AGDC executed nonbinding letters of
interest and agreements that he characterized as not progressing
the project. Also, AGDC sought to attract interest in the
project through social media, its website, and press releases.
After reorganization, AGDC will complete its work for FERC and
in June [2020], will review the project.
12:11:54 PM
REPRESENTATIVE HOPKINS questioned whether AGDC would rehire
staff after receiving its permit from FERC.
MR. DUBLER said no. He added, "We would ... at that time look
at what AGDC's role in any project that may be going forward
would be, and whatever that role is ... we would maybe adjust
our staffing to, to reflect the role that we would be performing
at that time." He stressed his intent to only employ staff
necessary for the work underway in the next year.
REPRESENTATIVE HOPKINS asked if legislation would be needed to
authorize AGDC's new role after FERC approval is received.
MR. DUBLER said it is impossible to answer that question at this
time; however, the legislation that created AGDC is "forward-
looking" and grants power and many aspects to the corporation.
He acknowledged AGDC would need legislative approval for
funding.
12:14:10 PM
CO-CHAIR TARR recalled originally AGDC was to represent the
state's one-quarter equal interest in the project with three
partners, all equally responsible for development and costs.
Subsequently, the state assumed the lead role as evidenced by
AGDC seeking commercial agreements to sell the resource first to
obtain the funding to build the project. She posited the next
phase would be a stage-gate approach and asked whether the
state's role would return to the original role with four equal
partners or move to a different organizational structure.
MR. DUBLER was unsure. He restated AGDC would not be in a lead
role in the project, and that AGDC's future role in the project,
if any, will be determined in the next year. He said, "We're
currently 100 percent of the project owner right now, and that's
what we're getting away from and we're looking for someone to
step in."
CO-CHAIR TARR referred to a decision on tax as gas (TAG) and
asked when the legislature would become engaged in this issue.
MR. DUBLER explained there will be two decisions, the first of
which addresses royalty in kind (RIK) versus royalty in value
(RIV); for example, for TAPS, the state takes RIV, which creates
annual disputes with oil companies over costs and revenues in
order to determine the state's value. To avoid similar disputes
over the natural gas pipeline, the state seeks to take RIK,
which is a decision that will be made by the commissioner of
DNR. If the decision is made to take RIK, the producers will
have the option to pay their taxes to the state as TAG. Mr.
Dubler further explained either way, royalty tax equates to
about 25 percent, which was the basis for the state's one-
quarter interest in the original project; currently only two
major oil producers, BP and ExxonMobil Corporation (ExxonMobil),
are participating in funding the FERC process.
12:19:10 PM
CO-CHAIR TARR restated her question as to when the legislature
would be engaged on the aforementioned items.
MR. DUBLER was unsure because of the constitutional question as
to whether the state can commit to sell future years' gas. He
pointed out the Alaska State Constitution directs the
legislature to appropriate revenues each year; however, if AGDC
enters into a 20-year contract to sell gas, the funds are
already appropriated, which raises the constitutional question
as to whether the aforementioned action can be authorized by
legislation or by a constitutional amendment. He expressed his
understanding the commissioner of DNR would bring the RIK issue
to the legislature.
REPRESENTATIVE TUCK returned to the issue of AGDC's change in
purpose and asked whether the board of directors did not decide
to [reorganize AGDC] but hired Mr. Dubler, and Mr. Dubler, on
his own authority, made the decision to change the [focus of
AGDC to seek FERC authorization].
MR. DUBLER said, "... the board is the one who sets the
direction ... what I did is adjusted the staff to, to meet the,
the purpose that, that we're currently working on, and that's
on, just on the FERC effort."
REPRESENTATIVE TUCK paraphrased from AGDC's vision as follows:
AGDC's role is to facilitate the development of
infrastructure necessary to move the gas into local
and international markets in order to maximize the
benefit of Alaska's vast North Slope natural gas.
REPRESENTATIVE TUCK asked if AGDC's vision has changed.
MR. DUBLER said the vision is still to commercialize North Slope
gas reserves; however, the difference is the state will not
build the project and AGDC will solicit third parties to build
the project for the state.
REPRESENTATIVE TUCK surmised AGDC is no longer seeking
partnerships or any type of vested ownership interest in the
project other than to ensure the FERC approval is in place and
to facilitate applicable regulations.
MR. DUBLER clarified the state would still be involved in the
project for at least the next year, and AGDC will continue to
fulfill its requirements. Relating to partners, because the
state holds ownership, the transfer of its equity represents the
disposition of a state asset which is governed by an appropriate
statute process.
REPRESENTATIVE TUCK restated several points and concluded the
next step is to sell the project.
MR. DUBLER said selling could be one option; in addition, the
state could maintain some ownership not as an active
participant, and there are other options to be analyzed.
12:25:14 PM
CO-CHAIR TARR recalled the Walker Administration developed
contractual relationships with financial companies who sought
financing for the project. At that time the project carried
higher risks, which would result in a loss of equity. However,
any interest in the project would indicate potential success.
She was unsure if said effort garnered interest or affected AGDC
decision-making. Co-Chair Tarr urged for the effective use of
state money and estimated over $600 million has been spent
overall.
MR. DUBLER said the previous administration contracted with the
Bank of China and Goldman Sachs to find equity and debt
investors, which resulted in multiple non-binding letters of
interest from entities worldwide; interest was shown but the
effort did not result in commitments.
REPRESENTATIVE TUCK inquired as to what the interested parties
require before signing commitments.
MR. DUBLER said AGDC needs to estimate the cost of gas delivered
to Asia well below the previous estimate of $11-$12 [per million
British thermal unit (MMBtu)]. Before signing a commitment,
buyers also need to know two other terms: when the gas would be
available and how much would be available.
REPRESENTATIVE TUCK commented the project does not pencil out
for investors under the current price environment.
MR. DUBLER suggested after potential cost reductions, the cost
of the project has reduced; in fact, based on the cost
reductions identified by AGDC, BP, and ExxonMobil, there is
potential for the project to be competitive, especially after
the FERC license is issued.
12:31:15 PM
REPRESENTATIVE TUCK questioned what terms are sought by
investors and buyers for cost, delivery, and volume.
MR. DUBLER cautioned it would be disadvantageous to disclose
cost information and data to potential customers, thus sellers
and buyers compete on the natural gas spot market to negotiate
long-term contracts.
CO-CHAIR TARR asked how BP and ExxonMobil benefit from their
investment in the FERC application if the state holds 100
percent ownership in the project.
MR. DUBLER pointed out he does not speak for BP or ExxonMobil;
however, he suggested the state and other entities all seek to
monetize North Slope natural gas and reserves.
12:35:00 PM
REPRESENTATIVE SPOHNHOLZ asked why [natural] gas is not
considered a commodity.
MR. DUBLER explained gas is [secured by long-term contracts]
because it is required by some countries to provide electricity
for heat and power. For example, Japan needs to ensure its
source of energy by securing long-term contracts for the
delivery of LNG at a certain volume and price for 20 years.
This is similar to the purpose of the Regulatory Commission of
Alaska (RCA), which regulates the electric utilities in Alaska.
Oil products differ in that they can be stored efficiently over
a long period of time.
REPRESENTATIVE SPOHNHOLZ clarified gas purchase agreements are
not subject to market volitively but are long-term for reasons
of security.
MR. DUBLER answered "exactly."
12:37:34 PM
MR. DUBLER addressed slide 3, entitled "FERC Draft EIS
Overview," which read:
?Alaska LNG Project Draft Environmental Impact
Statement (DEIS) published June 28 is 3,674 pages,
including appendices and map sets
?Technical review for completeness, accuracy, and
consistency in impact determination is underway
?Public comments due October 3, 2019
?Several areas where FERC staff has deemed project
impacts to be "significant", many of which can be
reduced or eliminated with proposed mitigations:
?Granular fill impacts that permanently convert
habitat
?Caribou (timing of impacts, impacts to habitat)
?Air emission impacts from the LNG Plant at start
up and in Years 7 and 8
?Aboveground facility emissions for SOx, NOx,
visibility near Class I & II areas
?Noise impacts during operations at two Noise
Sensitive Areas near LNG Plant
?"Likely to adversely affect" 6 listed species
?Significant impacts to listed species critical
habitat
?Potential substantial cumulative impacts (Alaska
LNG and others) to subsistence; BLM to conduct
public hearings to gather testimony from Nuiqsut,
Kaktovik, Utqiagvik, and Anaktuvuk Pass
communities
?FERC accepted preferred alternatives, left open
acceptance of Denali National Park & Preserve
(DNPP) alternative
MR. DUBLER informed the committee the Alaska LNG Project Draft
Environmental Impact Statement (DEIS) was published [6/28/19]
and has been reviewed by AGDC staff. He directed attention to
the executive summary and characterized the DEIS as "a good
product." Although negative impacts were reported in the media,
the DEIS indicated that AGDC had used the least environmentally
damaging practicable alternative (LEDPA) to minimize the impact
to each issue, such as impacts to polar bears or the caribou
herds. He advised FERC reviews the scope and purpose of a
project in the context of the least damage resulting from the
project. Mr. Dubler opined FERC "realized" not doing anything
on the North Slope was not acceptable. He pointed out the
public comment period ends 10/3/19 and encouraged comments.
Significant impacts identified by FERC [included on slide 3]
have mitigating action and were addressed by the Alaska Stand
Alone Pipeline Project (ASAP) U.S. Army Corps of Engineers
(USACE) EIS. Turning to the Denali National Park and Preserve
(DNPP), he said the project would cross into the park and may
provide a bike path over the pipeline.
12:42:02 PM
REPRESENTATIVE HANNAN asked if there would be public meetings
during the public comment period or if comments were limited to
written comments.
MR. DUBLER stressed the public comment process is a FERC process
and FERC will host events all along the route of the project.
He noted some meetings will focus solely on impacts to
subsistence hunting on the North Slope. He stated AGDC would
work to mitigate impacts on subsistence hunting; in fact, the
project could improve access to the Minto Flats area. He
addressed slide 4, entitled "FERC Review Process Update," which
featured a flow chart detailing the complex FERC review process,
and noted - for the next ten months - AGDC will be responding to
questions posed by the DEIS.
MR. DUBLER addressed slide 5, entitled "FERC Draft EIS
Overview," which read:
Positive
AGDC has initiated project changes since 2016 that
reduced environmental impact
and improved project benefits:
?ASAP Project data leveraged for Alaska LNG
?LNG water source City of Kenai
?Kenai Spur Highway Re-Route selection
?Designation of interconnections
?Elevated Point Thomson Transmission Line river
crossings
No scope changes to Project Design Basis
?No change to Proposed Actions
?No change to Jurisdictional issues
?No change to first 60 miles of buried mainline
?DNPP Alternative identified as sufficient and
acceptable
? Design engineering requirements fulfilled
? Basic environmental data requirements fulfilled
? No further field programs required prior to the FERC
Order (e.g., geotechnical,
wetlands, cultural, fisheries, etc.)
? No change to FERC schedule
MR. DUBLER said the Kenai Spur Highway Re-Route selection
remains under discussion.
CO-CHAIR TARR recalled a resolution related to the
abovementioned issue.
12:46:32 PM
FRANK RICHARDS, Senior Vice President, Program Management,
Alaska Gasline Development Corporation, explained since 2017
AGDC has worked with the community on alternatives to the Kenai
Spur Highway Re-Route; at this time, the selection is for a road
around the plant site connecting to the existing Kenai Spur.
CO-CHAIR TARR restated her question.
MR. RICHARDS did not recall a legislative resolution in this
regard.
REPRESENTATIVE HOPKINS asked how the DEIS addressed offtake
points that would facilitate transporting natural gas to
Fairbanks.
MR. DUBLER observed the DEIS does not designate offtake areas;
however, AGDC proposes to install a block valve every 40 miles
that will allow the pipeline to be shut down if necessary and
which could be used to offtake gas. He cautioned a supplemental
EIS would be necessary to address additional future pipeline
construction.
REPRESENTATIVE HOPKINS surmised the ASAP pipeline to Fairbanks
maps are not part of the DEIS.
MR. DUBLER said correct.
MR. DUBLER returned to slide 5 and noted FERC agreed with all of
AGDC's proposals, made no changes to jurisdictional issues, and
allowed the first 60 miles of buried pipeline. He explained
that natural gas pipelines should be buried whenever possible
for safety reasons. In addition, no further field programs are
required and there is no change to the June 2020, schedule.
12:51:34 PM
MR. DUBLER paraphrased from slide 6, entitled "AGDC Immediate
Priorities," which read:
1.Respond to 28 Recommended Mitigations due by end of
the DEIS Review Period
?Many have been addressed in previous FEED Data
Request responses
2.If necessary, review and comment on 186 remaining
Recommended Mitigations
3.Review and comment on strategic issues found in the
DEIS
narrative
4.Review technical completeness and accuracy
5.Continue consultation with Federal and State
permitting
agencies
6.Respond to SOA agency questions
MR. DUBLER addressed slide 7, entitled "DNPR Re-Route
Alternative," which featured a map of the DNPP Re-Route
Alternative, and read:
DEIS includes Denali National Park & Preserve (DNPP)
Route Alternatives
Constructability more feasible and represents less
risk
Construction cost reduced
ANILCA Title XI risk removed
National Park Service (NPS) ROW application in
process
AGDC Management of Change in process
Consistent with Army Corps' Least Environmentally
Damaging
Practical Alternative (LEDPA) for ASAP Project
MR. DUBLER cautioned there are "pinch point[s]" on the DNPR
route such as Atigun Pass and north of Glitter Gulch. In
response to Representative Tuck, he confirmed the pinch points
are on the route through DNPP.
12:54:10 PM
MR. DUBLER continued to slide 8, entitled "State Support," which
read:
?Department of Natural Resources
?Established Reimbursable Services Agreements (RSAs)
with the State Pipeline Coordinator's Section and
Office and Project Management
-Coordinate State Agencies review of Draft EIS
-Assist with State permitting
-Adjudicate Alaska LNG Right of Way application
Department of Revenue
?Economic model validation
Department of Environmental Conservation
?Preliminary decision for Air Quality Permit for Gas
Treatment Plant
- Public Comment Period through August 12, 2019
?Continued review of Air Quality Permit for
Liquefaction Plant
Department of Transportation & Public Facilities
?Assistance with DNPP re-route
?Permitting interface and Draft Highway Use Agreement
MR. DUBLER advised the state has been very supportive of the
project and that AGDC has very good working relationships with
DOR, DNR, and the Department of Environmental Conservation
(DEC). He described work that will be done with the Department
of Transportation & Public Facilities (DOTPF).
12:56:02 PM
MR. DUBLER addressed slide 9, entitled "Summary," which read:
The Alaska LNG Project DEIS was published on schedule
The DEIS is a detailed and comprehensive review of
environmental impacts reflecting the best available
project information and environmental data
The DEIS concludes the Purpose and Need for the
project is met with the Preferred Alternatives
AGDC is actively engaged is review and comment as the
FERC applicant
The FERC is scheduled to issue the Final Order on
June 4, 2020
Legislators and constituents can provide comments to
the DEIS at FERC's website: http://www.ferc.gov/docs-
filing/docs-filing.asp
MR. DUBLER noted the schedule has been delayed by four months.
He said FERC concluded the purpose and need for the project have
been confirmed and has provided a project website to accept
online written comments.
CO-CHAIR TARR asked about the degrees of collaboration and
information-sharing between AGDC, state agencies, and FERC
during the DEIS process.
MR. DUBLER assured the committee AGDC has a different
relationship than that of a third-party entity. He advised
there is an "exemplary" collaborative environment with the state
departments and commissioners.
12:59:09 PM
MR. DUBLER addressed slide 10, entitled "Producer
Participation," which read:
?BP & ExxonMobil
?First third-party financial participation in Alaska
LNG in three years
?Each funding 1/3 of AGDC's FY20 costs, up to
$10MM
?Technical assistance with DEIS review and analysis
?Assisting with evaluation of potential cost
reduction
opportunities
MR. DUBLER restated producers are participating in a cost-
sharing role with the expectation the costs will remain
significantly under $10 million each for the state, BP, and
ExxonMobil.
REPRESENTATIVE HANNAN asked if the financial contributions by BP
and ExxonMobil will show as receipt authority in AGDC's budget.
MR. DUBLER expressed his belief AGDC has receipt authority for
$25 million in its capital budget.
MR. DUBLER addressed slide 11 entitled, "Financial
Summary/Budget." He reviewed [fiscal year] year-to-date (YTD)
costs for ASAP, in-state gas pipeline (ISG), AKLNG, and AGDC,
all of which are significantly under budget. Further shown was
a breakdown of costs. He continued to slide 12 [same title] and
pointed out which costs will not be incurred in the current
fiscal year.
1:03:46 PM
REPRESENTATIVE HANNAN questioned whether the agreements with
AGDC's financial partners provide "authority" for the partners
in the case of a dispute over expenses.
MR. DUBLER explained cost-sharing agreements will include a work
program and budget, thus all parties would have to agree to any
changes; furthermore, AGDC does not contemplate any additional
costs in this fiscal year.
REPRESENTATIVE HANNAN suggested partners may seek to use their
engineering staff instead of third-party engineers.
MR. DUBLER said any work completed by a partner's staff would
save money because it would not be reimbursed. In response to
Representative Hopkins, he returned attention to slide 11 and
explained the total $8,252 million in YTD costs of general and
administrative is the same total but has been divided into
different categories - by function or by object code - and he
gave an example.
REPRESENTATIVE HOPKINS directed attention to slide 12 and asked
whether there will be no action or reduced action on "AFE
Commercial" [in the upcoming fiscal year].
MR. DUBLER clarified although the commercial team is being
downsized there may be some commercial work on organizational
structure and governance. He said he was qualified to fulfill
the limited amount of commercial work that may be requested by
the producers. He related outside counsel was paid $3.1 million
for agreements [FYD] "... and that's why we're not going to
incur them this year."
1:08:40 PM
CO-CHAIR TARR referred to the replacement of board members by
the [Dunleavy] administration and asked how the "market" views
the downsizing of the corporation on the future of the project.
She further asked how the state can continue to sell the
project.
MR. DUBLER characterized the reorganization as rightsizing, not
downsizing; in fact, reorganization will enable AGDC to address
more focused priorities by eliminating certain "function[s]."
He explained AGDC has combated feelings of concern by
communicating with [the parties to a joint development agreement
executed 11/9/17] Bank of China, China Investment Corp. (CIC),
and Sinopec. Although the joint development agreement on the
previous project proposal will not be renewed, AGDC informed the
parties to the agreement that the corporation will continue to
work on the project with the producers. Mr. Dubler acknowledged
parties to the joint development agreement "were obviously
concerned," but they were assured that AGDC is "moving into the
back seat ... and negotiating to get somebody to sit in the
front seat and, and, drive this project."
CO-CHAIR TARR surmised [negotiations] would be the function of
the external affairs and communications staff to mitigate the
concern, which is a department that is being eliminated. She
asked whether AGDC will have sufficient staff to continue
communication and promotion.
MR. DUBLER opined there will be sufficient staff to fulfil
AGDC's [new] purpose, which is not to sell the project.
1:12:54 PM
CO-CHAIR TARR returned attention to slide 6 and brought up the
strategic issue of timing the completion of the project to
coincide with a window of opportunity - during 2022 to 2024 -
which is at the time existing long-term contracts to provide
natural gas will expire. She inquired as to the next window of
opportunity.
MR. DUBLER cautioned against allowing the schedule to dictate
the project and pointed out AGDC is not in a position to make a
final investment decision in 2019. He opined the [gap in the
supply of natural gas] in 2024-2025 may not be as previously
stated; the next drop off in supply may come in 2028-2029. He
restated the benefits of employing a stage-gate process to
determine a final investment decision.
1:16:08 PM
REPRESENTATIVE TUCK returned attention to the change of the
state's role "from a partnership to a sovereign" and observed
[BP and ExxonMobil] may have access to confidential information.
He restated AGDC's previous role as Alaska's natural gas
infrastructure development corporation, and that this role and
responsibility have changed - even though there are partners in
the FERC [application] process - and he urged that the state
have "some investment and some partnerships with the final
development of the gas pipeline." Further, he expressed concern
entities have lost interest in a potential gas pipeline and
reviewed the previous proposals that are no longer pursued.
Representative Tuck also expressed concern about how monetizing
natural gas from the North Slope would affect oil production.
MR. DUBLER stressed AGDC is currently the sole owner and is not
in a partnership; in fact, [BP and ExxonMobil] are providing
some financing for future activities but are not backing the
project as partners. He stated AGDC remains in a position to
expedite and empower the project for [a future owner]. In
further response to Representative Tuck, he agreed the future
owner is unknown: one factor is the regulatory risk to
investors. In addition, the project has no partners, and the
state's policymakers will determine the state's investment in
the project. He disagreed that interest in the project has
dimmed because AGDC is close to obtaining an EIS for the
project, producers are looking at the project, and the state and
the producers seek to monetize North Slope gas.
1:22:59 PM
REPRESENTATIVE TUCK inquired as to whether [BP and ExxonMobil]
will garner the same access to the information the state is
acquiring in its new role.
MR. DUBLER observed a lot of data included in the FERC
application process came from the producers; data generated by
the state is available to [BP and ExxonMobil] as it was to
parties of the joint development agreement.
REPRESENTATIVE TUCK surmised with a letter of intent, "it sounds
like anybody has access to that data" and asked whether the
agreement to share [FERC] costs allows [BP and ExxonMobil] to
have information that is otherwise confidential.
MR. DUBLER clarified access to the data is contingent upon the
execution of a confidentiality agreement. He restated sharing
costs grants the ability to see data, and [AGDC, BP, and
ExxonMobil] have a cost-sharing agreement, not a partnership.
1:25:58 PM
REPRESENTATIVE HANNAN asked whether BP and ExxonMobil are
involved with other LNG projects worldwide and, if so, for the
timelines thereof.
MR. DUBLER expressed his understanding BP and ExxonMobil are
involved in multiple projects worldwide - as would be all
international entities that produce LNG - and which would not
preclude them from investing in a competitive project.
1:29:12 PM
CO-CHAIR TARR pointed out four gubernatorial administrations
have made changes to the project and she reviewed some of the
legislative history of the project beginning with [the Alaska
Gasline Inducement Act (AGIA) passed in the Twenty-fifth Alaska
State Legislature]. She recalled [in 2007] only TransCanada
Corp. was interested in the project and questioned what has
changed to indicate another interested party will emerge.
MR. DUBLER gave reasons the AGIA legislation may have
discouraged participation by other parties. He said, "Where we
go from here, we've got a year to figure that out. ... There was
a lot of good done in the last three years, it just, it doesn't
align with what we're doing now, but it did show that there are
people interested in this project, there are people interested
in getting gas from Alaska ..."
CO-CHAIR TARR asked if the administration has taken a position
on confidentiality agreements.
MR. DUBLER said interested members of the committee can contact
his office to instigate a confidentiality agreement.
1:33:36 PM
REPRESENTATIVE TALERICO asked whether the approval of the FERC
permit has a "shelf-life." He agreed parties will be more
seriously interested in the project after the permit is approved
and inquired as to the effect of the approval on the project's
timeline.
MR. DUBLER expressed his belief the EIS will be awarded for a
construction time of eight years; further, extensions can be
granted anytime during the eight years.
REPRESENTATIVE TALERICO surmised a reduction in the cost of
materials such as steel could affect the project's
competitiveness.
MR. DUBLER agree all commodities and markets go through cycles;
furthermore, the 25 percent China tariff has arisen to affect
construction costs and the price of U.S. LNG delivered to China.
He commented on the growing concern about impacts on the
corporation by the uncertainties of a "trade war" with China.
1:38:06 PM
REPRESENTATIVE TUCK returned attention to the sections of slide
4 which read:
Alaska LNG assesses market need and considers Project
facilities; Alaska LNG studies potential Project sites
and routes; Alaska LNG identifies stakeholders
REPRESENTATIVE TUCK asked whether the aforementioned actions
were requirements of the pre-file process.
MR. DUBLER clarified said actions were required as part of the
application.
REPRESENTATIVE TUCK asked whether FERC requires AGDC to continue
to assess market need.
MR. DUBLER responded:
The market will determine whether the project gets
built or not, because if there's not a market for the
... gas when, when we're looking at, you know,
starting a [front end engineering design (FEED)]
decision, we'll never proceed from, from there.
REPRESENTATIVE TUCK concluded, at the beginning of the
application process, the state was required to show there was an
interest by the market.
CO-CHAIR TARR made closing remarks.
1:41:50 PM
ADJOURNMENT
There being no further business before the committee, the House
Resources Standing Committee meeting was adjourned at 1:42 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| AGDC Legislative Update 7.18.19.pdf |
HRES 7/19/2019 11:00:00 AM |
AGDC Update |
| FERC Alaska LNG DEIS Executive Summary - June 2019.pdf |
HRES 7/19/2019 11:00:00 AM |