Legislature(2007 - 2008)ANCHORAGE

06/19/2008 09:00 AM House RULES


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09:03:44 AM Start
09:04:21 AM HB3001|| SB3001
08:18:29 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Howard Johnsons, 239 W 4th (4th & C)
+ HB3001 APPROVING AGIA LICENSE TELECONFERENCED
Heard & Held
House Special Subcommittee on AGIA
Joint w/Sen Special Committee on Energy
Review of AGIA Findings & Determination;
Natural Gas Pipeline Project as proposed
by TransCanada Alaska Company, LLC and
Foothills Pipelines Ltd (TC Alaska) to
the State of Alaska
Presenters: TransCanada; Administration
6:00 pm - 8:00 pm: Public Testimony
                    ALASKA STATE LEGISLATURE                                                                                  
                         JOINT MEETING                                                                                        
                 HOUSE RULES STANDING COMMITTEE                                                                               
               SENATE SPECIAL COMMITTEE ON ENERGY                                                                             
                       Anchorage, Alaska                                                                                        
                         June 19, 2008                                                                                          
                           9:03 a.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
HOUSE RULES                                                                                                                     
                                                                                                                                
 Representative John Coghill, Chair                                                                                             
 Representative Anna Fairclough                                                                                                 
 Representative Craig Johnson                                                                                                   
 Representative Ralph Samuels (AGIA Subcommittee)                                                                               
 Representative Beth Kerttula (AGIA Subcommittee)                                                                               
                                                                                                                                
SENATE SPECIAL COMMITTEE ON ENERGY                                                                                              
                                                                                                                                
 Senator Charlie Huggins, Chair                                                                                                 
 Senator Bert Stedman, Vice Chair                                                                                               
 Senator Lesil McGuire                                                                                                          
 Senator Donald Olson                                                                                                           
 Senator Gary Stevens                                                                                                           
 Senator Joe Thomas                                                                                                             
 Senator Bill Wielechowski                                                                                                      
 Senator Fred Dyson                                                                                                             
 Senator Thomas Wagoner                                                                                                         
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
HOUSE RULES                                                                                                                     
                                                                                                                                
 Representative John Harris (AGIA Subcommittee, Chair)                                                                          
 Representative David Guttenberg                                                                                                
                                                                                                                                
SENATE SPECIAL COMMITTEE ON ENERGY                                                                                              
                                                                                                                                
 Senator Kim Elton                                                                                                              
 Senator Lyda Green                                                                                                             
 Senator Lyman Hoffman                                                                                                          
                                                                                                                                
OTHER LEGISLATORS PRESENT                                                                                                     
                                                                                                                                
Representative Bob Buch                                                                                                         
Representative Harry Crawford                                                                                                   
Representative Nancy Dahlstrom                                                                                                  
Representative Mike Doogan                                                                                                      
Representative Bryce Edgmon                                                                                                     
Representative Les Gara                                                                                                         
Representative Berta Gardner                                                                                                    
Representative Carl Gatto                                                                                                       
Representative Max Gruenberg                                                                                                    
Representative Mike Hawker                                                                                                      
Representative Lindsey Holmes                                                                                                   
Representative Kyle Johansen                                                                                                    
Representative Reggie Joule                                                                                                     
Representative Wes Keller                                                                                                       
Representative Bob Lynn                                                                                                         
Representative Kevin Meyer                                                                                                      
Representative Kurt Olson                                                                                                       
Representative Jay Ramras                                                                                                       
Representative Bob Roses                                                                                                        
Representative Bill Stoltze                                                                                                     
Representative Bill Thomas                                                                                                      
                                                                                                                                
Senator Con Bunde                                                                                                               
Senator Bettye Davis                                                                                                            
Senator Johnny Ellis                                                                                                            
Senator Hollis French                                                                                                           
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
HOUSE BILL NO. 3001                                                                                                             
"An Act  approving issuance of  a license by the  commissioner of                                                               
revenue and the commissioner of  natural resources to TransCanada                                                               
Alaska Company,  LLC and  Foothills Pipe  Lines Ltd.,  jointly as                                                               
licensee, under the Alaska Gasline  Inducement Act; and providing                                                               
for an effective date."                                                                                                         
                                                                                                                                
     - HEARD AND HELD                                                                                                           
                                                                                                                                
SENATE BILL NO. 3001                                                                                                            
"An Act  approving issuance of  a license by the  commissioner of                                                               
revenue and the commissioner of  natural resources to TransCanada                                                               
Alaska Company,  LLC and  Foothills Pipe  Lines Ltd.,  jointly as                                                               
licensee, under the Alaska Gasline  Inducement Act; and providing                                                               
for an effective date."                                                                                                         
                                                                                                                                
     - HEARD AND HELD                                                                                                           
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
BILL: HB 3001                                                                                                                 
SHORT TITLE: APPROVING AGIA LICENSE                                                                                             
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR                                                                                    
                                                                                                                                
06/03/08       (H)       READ THE FIRST TIME - REFERRALS                                                                        
06/03/08       (H)       RLS                                                                                                    
06/03/08       (H)       WRITTEN FINDINGS & DETERMINATION                                                                       
06/04/08       (H)       RLS AT 9:00 AM CAPITOL 120                                                                             
06/04/08       (H)       Heard & Held; Assigned to Subcommittee                                                                 
06/04/08       (H)       MINUTE(RLS)                                                                                            
06/04/08       (H)       RLS AT 10:00 AM TERRY MILLER GYM                                                                       
06/04/08       (H)       Heard & Held                                                                                           
06/04/08       (H)       MINUTE(RLS)                                                                                            
06/05/08       (H)       RLS AT 9:00 AM TERRY MILLER GYM                                                                        
06/05/08       (H)       Heard & Held                                                                                           
06/05/08       (H)       MINUTE(RLS)                                                                                            
06/06/08       (H)       RLS AT 10:00 AM TERRY MILLER GYM                                                                       
06/06/08       (H)       Heard & Held                                                                                           
06/06/08       (H)       MINUTE(RLS)                                                                                            
06/07/08       (H)       RLS AT 10:00 AM TERRY MILLER GYM                                                                       
06/07/08       (H)       Heard & Held                                                                                           
06/07/08       (H)       MINUTE(RLS)                                                                                            
06/08/08       (H)       RLS AT 1:00 PM TERRY MILLER GYM                                                                        
06/08/08       (H)       Heard & Held                                                                                           
06/08/08       (H)       MINUTE(RLS)                                                                                            
06/09/08       (H)       RLS AT 10:00 AM TERRY MILLER GYM                                                                       
06/09/08       (H)       Heard & Held                                                                                           
06/09/08       (H)       MINUTE(RLS)                                                                                            
06/10/08       (H)       RLS AT 10:00 AM TERRY MILLER GYM                                                                       
06/10/08       (H)       Heard & Held                                                                                           
06/10/08       (H)       MINUTE(RLS)                                                                                            
06/12/08       (H)       RLS AT 10:00 AM FBX CARLSON CENTER                                                                     
06/12/08       (H)       Heard & Held                                                                                           
06/12/08       (H)       MINUTE(RLS)                                                                                            
06/13/08       (H)       RLS AT 10:00 AM FBX CARLSON CENTER                                                                     
06/13/08       (H)       Heard & Held                                                                                           
06/13/08       (H)       MINUTE(RLS)                                                                                            
06/14/08       (H)       RLS AT 10:00 AM FBX CARLSON CENTER                                                                     
06/14/08       (H)       Heard & Held                                                                                           
06/14/08       (H)       MINUTE(RLS)                                                                                            
06/16/08       (H)       RLS AT 9:00 AM ANCHORAGE                                                                               
06/16/08       (H)       Heard & Held                                                                                           
06/16/08       (H)       MINUTE(RLS)                                                                                            
06/17/08       (H)       RLS AT 9:00 AM ANCHORAGE                                                                               
06/17/08       (H)       Heard & Held                                                                                           
06/17/08       (H)       MINUTE(RLS)                                                                                            
06/18/08       (H)       RLS AT 9:00 AM ANCHORAGE                                                                               
06/18/08       (H)       Heard & Held                                                                                           
06/18/08       (H)       MINUTE(RLS)                                                                                            
06/19/08       (H)       RLS AT 9:00 AM ANCHORAGE                                                                               
                                                                                                                                
BILL: SB 3001                                                                                                                 
SHORT TITLE: APPROVING AGIA LICENSE                                                                                             
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR                                                                                    
                                                                                                                                
06/03/08       (S)       READ THE FIRST TIME - REFERRALS                                                                        
06/03/08       (S)       ENR                                                                                                    
06/03/08       (S)       REPORT ON FINDINGS AND DETERMINATION                                                                   
06/04/08       (S)       ENR AT 10:00 AM TERRY MILLER GYM                                                                       
06/04/08       (S)       Heard & Held                                                                                           
06/04/08       (S)       MINUTE(ENR)                                                                                            
06/05/08       (S)       ENR AT 9:00 AM TERRY MILLER GYM                                                                        
06/05/08       (S)       Heard & Held                                                                                           
06/05/08       (S)       MINUTE(ENR)                                                                                            
06/06/08       (S)       ENR AT 10:00 AM TERRY MILLER GYM                                                                       
06/06/08       (S)       Heard & Held                                                                                           
06/06/08       (S)       MINUTE(ENR)                                                                                            
06/07/08       (S)       ENR AT 10:00 AM TERRY MILLER GYM                                                                       
06/07/08       (S)       Heard & Held                                                                                           
06/07/08       (S)       MINUTE(ENR)                                                                                            
06/08/08       (S)       ENR AT 1:00 PM TERRY MILLER GYM                                                                        
06/08/08       (S)       Heard & Held                                                                                           
06/08/08       (S)       MINUTE(ENR)                                                                                            
06/09/08       (S)       ENR AT 10:00 AM TERRY MILLER GYM                                                                       
06/09/08       (S)       Heard & Held                                                                                           
06/09/08       (S)       MINUTE(ENR)                                                                                            
06/10/08       (S)       ENR AT 10:00 AM TERRY MILLER GYM                                                                       
06/10/08       (S)       Heard & Held                                                                                           
06/10/08       (S)       MINUTE(ENR)                                                                                            
06/12/08       (S)       ENR AT 10:00 AM FBX Carlson Center                                                                     
06/12/08       (S)       Heard & Held                                                                                           
06/12/08       (S)       MINUTE(ENR)                                                                                            
06/13/08       (S)       ENR AT 10:00 AM FBX Carlson Center                                                                     
06/13/08       (S)       Heard & Held                                                                                           
06/13/08       (S)       MINUTE(ENR)                                                                                            
06/14/08       (S)       ENR AT 10:00 AM FBX Carlson Center                                                                     
06/14/08       (S)       Heard & Held                                                                                           
06/14/08       (S)       MINUTE(ENR)                                                                                            
06/16/08       (S)       ENR AT 9:00 AM ANCHORAGE                                                                               
06/16/08       (S)       Heard & Held                                                                                           
06/16/08       (S)       MINUTE(ENR)                                                                                            
06/17/08       (S)       ENR AT 9:00 AM ANCHORAGE                                                                               
06/17/08       (S)       Heard & Held                                                                                           
06/17/08       (S)       MINUTE(ENR)                                                                                            
06/18/08       (S)       ENR AT 9:00 AM ANCHORAGE                                                                               
06/18/08       (S)       Heard & Held                                                                                           
06/18/08       (S)       MINUTE(ENR)                                                                                            
06/19/08       (S)       ENR AT 9:00 AM ANCHORAGE                                                                               
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
SCOTT SMITH, Vice President                                                                                                     
Black & Veatch                                                                                                                  
Houston, Texas                                                                                                                  
POSITION STATEMENT:  Provided the presentation by Black &                                                                     
Veatch.                                                                                                                         
                                                                                                                                
MIKE ELENBAAS, Senior Consultant                                                                                                
Black & Veatch                                                                                                                  
Seattle, Washington                                                                                                             
POSITION STATEMENT:  Assisted with the presentation by Black &                                                                
Veatch.                                                                                                                         
                                                                                                                                
PATRICK GALVIN, Commissioner                                                                                                    
Department of Revenue (DOR)                                                                                                     
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Provided comments and responded to                                                                       
questions during the day's presentations.                                                                                       
                                                                                                                                
PAUL BLOOM, Vice President                                                                                                      
Public Sector and Infrastructure Investment Banking                                                                             
Goldman Sachs Group, Inc.                                                                                                       
Seattle, Washington                                                                                                             
POSITION STATEMENT:  Responded to questions during the                                                                        
presentation by Black & Veatch.                                                                                                 
                                                                                                                                
DEEPA PODUVAL, Principal Consultant                                                                                             
Black & Veatch                                                                                                                  
Houston, Texas                                                                                                                  
POSITION STATEMENT:  Responded to a question during the                                                                       
presentation by Black & Veatch.                                                                                                 
                                                                                                                                
TONY PALMER, Vice President                                                                                                     
Alaska Business Development                                                                                                     
TransCanada Alaska Company, LLC, ("TransCanada")                                                                                
Calgary, Alberta                                                                                                                
POSITION STATEMENT:  Gave a PowerPoint presentation on                                                                        
TransCanada's proposed pipeline project and answered questions.                                                                 
                                                                                                                                
BLYTHE CAMPBELL                                                                                                                 
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Testified during  the hearing on HB 3001 and                                                             
SB 3001.                                                                                                                        
                                                                                                                                
TAMMIE SMITH                                                                                                                    
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:   Testified in opposition to  AGIA during the                                                             
hearing on HB 3001 and SB 3001.                                                                                                 
                                                                                                                                
CHUCK BECKER                                                                                                                    
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Testified during  the hearing on HB 3001 and                                                             
SB 3001.                                                                                                                        
                                                                                                                                
JACK HAKKILA                                                                                                                    
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Testified during  the hearing on HB 3001 and                                                             
SB 3001.                                                                                                                        
                                                                                                                                
PAUL D. KENDALL                                                                                                                 
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Testified during  the hearing on HB 3001 and                                                             
SB 3001.                                                                                                                        
                                                                                                                                
SCOTT HAWKINS, President                                                                                                        
Advanced Supply Chain International (ASCI);                                                                                     
Chair                                                                                                                           
ProsperityAlaska.org                                                                                                            
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Testified during  the hearing on HB 3001 and                                                             
SB 3001.                                                                                                                        
                                                                                                                                
HEATH HILYARD, Staff                                                                                                            
Advanced Supply Chain International (ASCI);                                                                                     
Board Member                                                                                                                    
ProsperityAlaska.org                                                                                                            
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Testified during  the hearing on HB 3001 and                                                             
SB 3001.                                                                                                                        
                                                                                                                                
MIKE KENNY                                                                                                                      
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Testified during  the hearing on HB 3001 and                                                             
SB 3001.                                                                                                                        
                                                                                                                                
DANIEL DeNARDO                                                                                                                  
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:   Testified in opposition to  AGIA during the                                                             
hearing on HB 3001 and SB 3001.                                                                                                 
                                                                                                                                
MIKE ROGERS                                                                                                                     
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Testified during  the hearing on HB 3001 and                                                             
SB 3001.                                                                                                                        
                                                                                                                                
CARY CARRIGAN                                                                                                                   
Anchorage, Alaska                                                                                                               
POSITION  STATEMENT:   Provided  comments during  the hearing  on                                                             
HB 3001 and SB 3001.                                                                                                            
                                                                                                                                
RICK BARRIER, Executive Director                                                                                                
Commonwealth North                                                                                                              
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Testified during  the hearing on HB 3001 and                                                             
SB 3001.                                                                                                                        
                                                                                                                                
JED WHITTAKER                                                                                                                   
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Testified during  the hearing on HB 3001 and                                                             
SB 3001.                                                                                                                        
                                                                                                                                
RICK CAREY                                                                                                                      
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Testified in  agreement with AGIA during the                                                             
hearing on HB 3001 and SB 3001.                                                                                                 
                                                                                                                                
FRANK BAINES                                                                                                                    
Anchorage, Alaska?                                                                                                              
POSITION STATEMENT:   Testified in opposition to  AGIA during the                                                             
hearing on HB 3001 and SB 3001.                                                                                                 
                                                                                                                                
WILLIAM BASSETT                                                                                                                 
Anchorage, Alaska                                                                                                               
POSITION  STATEMENT:   Testified  in opposition  to  AGIA in  its                                                             
present form during the hearing on HB 3001 and SB 3001.                                                                         
                                                                                                                                
CASH FAY                                                                                                                        
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Testified during  the hearing on HB 3001 and                                                             
SB 3001.                                                                                                                        
                                                                                                                                
LORNE BAILEY                                                                                                                    
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:   Provided comments during the  hearing on HB
3001 and SB 3001.                                                                                                               
                                                                                                                                
DOMINIC LEE, Owner, Chief Executive Officer (CEO)                                                                               
Little Susitna Construction Company                                                                                             
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:   Testified in opposition to  AGIA during the                                                             
hearing on HB 3001 and SB 3001.                                                                                                 
                                                                                                                                
VESTA ELLIOT, Owner                                                                                                             
Organic Hair Design                                                                                                             
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Testified during  the hearing on HB 3001 and                                                             
SB 3001 to promote renewable energy resources.                                                                                  
                                                                                                                                
ANDREW HALCRO                                                                                                                   
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Testified during  the hearing on HB 3001 and                                                             
SB 3001  to express  concern regarding  the contractual  terms of                                                               
AGIA.                                                                                                                           
                                                                                                                                
TOM WALSH, Managing Partner                                                                                                     
Petrotechnical Resources Alaska (PRA)                                                                                           
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Testified during  the hearing on HB 3001 and                                                             
SB 3001 in opposition to AGIA.                                                                                                  
                                                                                                                                
DAVID GOTTSTEIN, Co-chair                                                                                                       
Backbone II                                                                                                                     
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Testified during  the hearing on HB 3001 and                                                             
SB 3001.                                                                                                                        
                                                                                                                                
ERNIE STUTZER                                                                                                                   
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Testified during  the hearing on HB 3001 and                                                             
SB 3001.                                                                                                                        
                                                                                                                                
KELLY WALTERS                                                                                                                   
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Testified during  the hearing on HB 3001 and                                                             
SB 3001 in support of an all-Alaska gas pipeline.                                                                               
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
CHAIR  CHARLIE HUGGINS  called  the joint  meeting  of the  House                                                             
Rules  Standing Committee  and the  Senate  Special Committee  on                                                               
Energy to order at 9:03:44 AM.                                                                                                
                                                                                                                                
HB 3001 - APPROVING AGIA LICENSE                                                                                              
SB 3001 - APPROVING AGIA LICENSE                                                                                              
                                                                                                                                
9:04:21 AM                                                                                                                    
                                                                                                                                
CHAIR  HUGGINS announced  that  the hearing  would  begin with  a                                                               
presentation  by  Black  & Veatch  regarding  net  present  value                                                               
(NPV), followed by  [a review of the  application by] TransCanada                                                               
Alaska  Company, LLC  ("TransCanada"), followed  by [a  review of                                                               
the delayed findings].                                                                                                          
                                                                                                                                
9:05:01 AM                                                                                                                    
                                                                                                                                
SCOTT  SMITH, Vice  President, Black  &  Veatch, referencing  the                                                               
fact  that some  information  had been  provided yesterday,  said                                                               
that price is an important aspect  of a risk assessment.  He went                                                               
on to  note that the Wood  Mackenzie forecast of AECO  Hub prices                                                               
were  what  his  company  used  in its  base  case  analysis  for                                                               
understanding cash flows and net  present value (NPV).  Referring                                                               
to  [slide  12  of]  his  PowerPoint  presentation  [titled  "Net                                                               
Present Value (NPV)  Analysis"], he said that the  AECO Hub price                                                               
forecasted [by Wood Mackenzie and  illustrated by the black line]                                                               
starts at  slightly higher than  $5 [per million  British thermal                                                               
units  (MMBtu)] in  today's terms  and then  increases over  time                                                               
into  the $20-plus  range due  to  inflation and  what he  termed                                                               
"real cost" growth, though prices  in the [AECO Hub] market today                                                               
are right around  $10 - or a little bit  higher because of market                                                               
volatility.  Also  included [on slide 12] and  illustrated by the                                                               
red line is the Energy  Information Association (EIA) forecast of                                                               
AECO Hub  prices.   He said  that one of  the reasons  the latter                                                               
forecast was not selected for  his company's base case is because                                                               
the EIA doesn't  project an AECO Hub price  outright; instead, it                                                               
projects a price  for south Louisiana [Henry  Hub], and therefore                                                               
Black &  Veatch had to make  some assumptions - similar  to those                                                               
used by TransCanada - of deducting  $.75 in order to arrive at an                                                               
equivalent AECO  Hub price, and  this deduction was based  on the                                                               
traditional relationships seen between  AECO Hub prices and Henry                                                               
Hub prices.                                                                                                                     
                                                                                                                                
MR.  SMITH  said that  Black  &  Veatch  also developed  its  own                                                               
forecast,  which is  illustrated by  the  blue line.   He  added,                                                               
"This is  not the base case  result; it's one of  the sensitivity                                                               
cases  that we  do run,  but when  we talk  about results,  we're                                                               
always referring to  the Wood Mackenzie price  forecast unless we                                                               
say explicitly  otherwise."  Black  & Veatch's price  forecast is                                                               
fairly close  to the  Wood Mackenzie price  forecast up  to 2025,                                                               
and then  Black & Veatch shows  a lower price growth  beyond that                                                               
[date] than Wood Mackenzie; the  Black & Veatch forecast falls in                                                               
between  the  EIA  forecast  and  the  Wood  Mackenzie  forecast.                                                               
Generally,  when developing  price  forecasts, one  is trying  to                                                               
make  assumptions  about different  aspects  of  the market;  for                                                               
example, one  might try to  predict what  the gas supply  will be                                                               
"in north  Texas out  of the  Barnett Shale  field", or  what gas                                                               
demands will be for power generation  in New York.  One then adds                                                               
all  those factors  up,  putting  them together  in  a model  and                                                               
letting  that [model]  balance out  and  generate a  price.   "So                                                               
we're  basically  forecasting  the different  components  of  the                                                               
market - supply,  demand, elasticity of demand  relative to those                                                               
prices  - and  that  lends itself  to  generating an  equilibrium                                                               
price  that clears  through time,"  he  added.   All who  develop                                                               
price forecasts  are using some  fundamental economic  model, all                                                               
use a fairly similar approach though with different assumptions.                                                                
                                                                                                                                
9:09:10 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE ROSES, offering his  recollection that the Federal                                                               
Energy   Regulatory   Commission   (FERC)   had   referenced   an                                                               
infrastructure  that's   currently  underway  with   a  liquefied                                                               
natural gas  (LNG) capacity of  20 billion cubic feet  (Bcf) [per                                                               
day], asked  whether Black &  Veatch included a potential  for 20                                                               
Bcf/day in its calculations.                                                                                                    
                                                                                                                                
MR. SMITH  indicated that part  of Black &  Veatch's calculations                                                               
involved  "putting in  place"  what  the expected  infrastructure                                                               
would be:   what pipelines are  in place to move  production from                                                               
one point to  another, what import terminals  [are available], et                                                               
cetera.    With  both  the  Black &  Veatch  and  Wood  Mackenzie                                                               
analyses,   there  is   an  expectation   that   there  will   be                                                               
infrastructure in  place - predominately  in the gulf coast  - to                                                               
take LNG imports.   With regard to how much  LNG "is showing up,"                                                               
he  offered  his understanding  that  the  Wood Mackenzie  import                                                               
expectation for  2020 is  around 17 Bcf/day  on average  over the                                                               
course  of   the  year,  whereas   the  Black  &   Veatch  import                                                               
expectation  is 12-14  Bcf/day,  and there  will  be some  growth                                                               
thereafter  depending on  the scenario  one  looks at.   Black  &                                                               
Veatch,  within its  model, allows  for  the ability  to add  new                                                               
infrastructure  if the  market needs  it  - "We  just imply  some                                                               
expected capital costs  for that to be built out  should there be                                                               
a requirement for gas demand or gas supply for that," he added.                                                                 
                                                                                                                                
MR. SMITH, in  response to a question regarding  Black & Veatch's                                                               
disclaimer statement, explained that it's  used in all of Black &                                                               
Veatch's  reports.   He added  that  Black &  Veatch has  clearly                                                               
stated  what  its  assumptions  were, with  regard  to  some  key                                                               
drivers  such as  LNG  imports and  demand,  when developing  its                                                               
price forecast.                                                                                                                 
                                                                                                                                
SENATOR STEDMAN  said he is  trying to determine whether  Black &                                                               
Veatch  is providing  a totally  independent view  or part  of an                                                               
integrated team approach.                                                                                                       
                                                                                                                                
MR.  SMITH  said  that  all   of  Black  &  Veatch's  assumptions                                                               
specifically   around   the   "flex  analysis"   were   developed                                                               
independently from the State, and  that there were many different                                                               
sources  for   those  assumptions.    For   example,  the  demand                                                               
assumption is reliant  on "EIA as a base case,"  and the "finding                                                               
and development"  costs for  supply were  developed independently                                                               
and were based off of reports  developed several years ago by the                                                               
[National  Petroleum   Council  (NPC)]  and  updated   with  some                                                               
analyses  from   [Cambridge  Energy  Research   Associates,  Inc.                                                               
(CERA)].    Black  &  Veatch  felt it  was  appropriate,  "as  an                                                               
analysis  lead,"  to  not  make [its  forecast]  the  base  case,                                                               
because of  the risk that it  would be viewed as  biased relative                                                               
to  Black &  Veatch's engagement.   Instead,  the Wood  Mackenzie                                                               
forecast is  used as the base  case analysis because it  truly is                                                               
independent,  and the  State contracted  with  Wood Mackenzie  to                                                               
acquire that  forecast.  One  reason Black & Veatch  was retained                                                               
and asked  to do a  price forecast had  to do with  the company's                                                               
ability to understand the risk associated with prices.                                                                          
                                                                                                                                
9:15:28 AM                                                                                                                    
                                                                                                                                
SENATOR  STEDMAN  noted that  when  looking  at oil  prices,  the                                                               
legislature has had  a lot of debate over the  last several years                                                               
regarding taxation structure - switching  from "tax royalty" to a                                                               
production-sharing arrangement -  and the discussion concentrated                                                               
on oil  prices below $60, but  not much on oil  prices above that                                                               
amount.  According  to the current data, though, "most  all of it                                                               
is above $60/barrel oil, going out to 2044," he added.                                                                          
                                                                                                                                
MR.  SMITH  said that  the  price  forecast from  Wood  Mackenzie                                                               
starts  at  about  $75  and  increases  from  there  through  the                                                               
valuation period.   So, yes,  in general, the price  forecast for                                                               
oil is higher  than $60, with both oil and  gas price [forecasts]                                                               
being lower than what their actual prices are today.                                                                            
                                                                                                                                
REPRESENTATIVE GATTO asked whether the  prices today are within a                                                               
range that might have been forecasted five years ago.                                                                           
                                                                                                                                
MR. SMITH  indicated that the  prices today are higher  than what                                                               
Black & Veatch  forecasted for the State in 2005-2006.   A lot of                                                               
the information used in that  forecast, however, was based on the                                                               
costs of "finding and development,"  so what needs to be factored                                                               
in now  in a current price  forecast is the fact  that such costs                                                               
in the "E&P sector" have  increased dramatically since that time,                                                               
just as  have the capital  costs for a  pipeline.  He  noted that                                                               
EIA price forecasts have similarly underestimated prices.                                                                       
                                                                                                                                
9:19:35 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GATTO  asked whether  Black & Veatch  included the                                                               
demand from India and China in its forecast.                                                                                    
                                                                                                                                
MR. SMITH said no, not directly.   In response to a comment about                                                               
the unlikelihood of being able  to forecast an accurate price for                                                               
30-plus years  in the future, he  offered, "we have to  spin this                                                               
[forecast] out fairly  far" because this project has  such a very                                                               
long  lead  time,  and  "we tried  to  take  a  fundamental-based                                                               
approach to making  those assumptions."  He  mentioned that there                                                               
are also  other ways of forecasting  cash flows and NPV,  such as                                                               
using a specific price as opposed to a forecasted one.                                                                          
                                                                                                                                
MR.  SMITH, returning  attention to  slide 12  of his  PowerPoint                                                               
presentation, said that  Black & Veatch looked at  key drivers to                                                               
prices, particularly prices in the  AECO Hub market:  "F&D costs;                                                               
technology improvement,  which would  lower costs of  finding and                                                               
development;  power generation  demand;  LNG imports;  industrial                                                               
demand."    Black  &  Veatch  then made  separate  high  and  low                                                               
forecasts from those  [key drivers], looked at  whether they have                                                               
a relationship,  and then generated different  scenarios in order                                                               
to  understand   what  could  happen  when   unexpected  but  not                                                               
improbable conditions occur.  The  solid, light blue line and the                                                               
dashed, light  blue line represent scenarios  created by changing                                                               
the different  assumption embedded  in the  model with  regard to                                                               
the   aforementioned  key   drivers.      Having  the   resulting                                                               
"distribution  of prices"  enables  Black and  Veatch to  perform                                                               
more risk  analyses in  its report, but  is just  supplemental to                                                               
those analyses and helps provide  some perspective with regard to                                                               
project risk and commodity-price risk.                                                                                          
                                                                                                                                
9:24:21 AM                                                                                                                    
                                                                                                                                
MIKE ELENBAAS,  Senior Consultant,  Black & Veatch,  referring to                                                               
what he  termed "the tornado  diagram" that was  shown yesterday,                                                               
said that "the key takeaway  from that" was that commodity prices                                                               
were the  largest driver of  uncertainty, and that  capital costs                                                               
and schedule  risks were also significant  drivers of uncertainty                                                               
but not as  significant as commodity prices.   Referring to slide                                                               
13, he  explained that the  chart shows models of  uncertainty in                                                               
prices as illustrated  by the light blue curve -  which he called                                                               
a cumulative  probability distribution.  "We're  showing the full                                                               
range of  uncertainty in both  prices and cost and  schedule risk                                                               
to  the project,"  he remarked,  and  calculated the  NPV to  the                                                               
different stakeholders  under this  range of possible  prices and                                                               
costs and schedules.                                                                                                            
                                                                                                                                
MR. ELENBAAS  said that  the y-axis  of the  aforementioned chart                                                               
illustrates   probability  in   percentiles;   that  the   x-axis                                                               
illustrates  NPV for  the state;  and that  the light  blue curve                                                               
illustrates  uncertainty with  regard  to  prices, "capital  cost                                                               
scope risk," and schedule risk  of the TransCanada project.  This                                                               
model, once run,  allows one to capture  statistical results with                                                               
regard  to  how  uncertainty  changes  NPV  to  the  state.    He                                                               
indicated that information provided  yesterday illustrates an NPV                                                               
of  approximately $60  billion; that  one  of the  slides in  the                                                               
PowerPoint presentation  illustrates that NPV ranges  between $10                                                               
billion and over $100 billion;  and that at approximately what he                                                               
termed a  "P50 level"  on slide  13 - via  the dashed,  dark blue                                                               
line  - the  NPV is  right around  $50-$60 billion,  but that  is                                                               
without  price   uncertainty.     The  solid,  light   blue  line                                                               
illustrates that  when price uncertainties are  included, the NPV                                                               
can be much more uncertain as well.                                                                                             
                                                                                                                                
CHAIR  HUGGINS  asked  whether  Black  &  Veatch  is  willing  to                                                               
guarantee its  statement on  slide 13  that its  results indicate                                                               
that there is no likelihood of a negative NPV to the state.                                                                     
                                                                                                                                
MR. SMITH  said he feels  that is  a correct statement  given the                                                               
assumptions that  were made  and the  variables that  were looked                                                               
at.   A similar  chart has been  created regarding  the producers                                                               
that illustrates that there is  a chance that the producers could                                                               
have a negative NPV.                                                                                                            
                                                                                                                                
9:30:17 AM                                                                                                                    
                                                                                                                                
MR. ELENBAAS said that the chart  on slide 13 "was looking at the                                                               
4.5 Bcf  per day project."   In  contrast, slide 14  shows lower-                                                               
volume sensitivity cases:  the  dashed, blue line is 4.5 Bcf/day;                                                               
the gray, solid line is 4  Bcf/day; and the dashed, green line is                                                               
3.5 Bcf/day.   State  NPV remains  largely positive,  though when                                                               
there is  less volume being  sold through the pipeline,  there is                                                               
slightly less money coming to the  state.  Referring to slide 14,                                                               
he  noted that  it illustrates  producer NPV  using all  the same                                                               
sensitivity assumptions  that were made  for the state.   As with                                                               
state  NPV,   commodity  prices   were  the  largest   driver  of                                                               
uncertainty, though  cost escalation  and upstream  capital costs                                                               
also  drive  uncertainty.    Producer NPV,  using  a  10  percent                                                               
discount rate,  is right around $13  billion with a base  case of                                                               
4.5 Bcf/day.                                                                                                                    
                                                                                                                                
9:33:08 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SAMUELS  asked whether the upstream  capital costs                                                               
include expenditures to find gas.                                                                                               
                                                                                                                                
MR. ELENBAAS said those are the "yet-to-find" capital costs.                                                                    
                                                                                                                                
MR. SMITH,  in response to  questions, said that the  question of                                                               
whether the state  should be in the business  of transporting gas                                                               
isn't something  he is prepared  to comment  on; that there  is a                                                               
strong  likelihood  that  the  shippers  will  have  a  favorable                                                               
outcome by  being involved  in this  project; that  since EconOne                                                               
Research, Inc.,  issued its report  several years ago,  there has                                                               
been a  dramatic increase in  costs and corresponding  changes in                                                               
price; and that  the State has hired  several different companies                                                               
and engineering firms  to estimate capital costs.   Given all the                                                               
data collected thus far, it appears  that this will be a positive                                                               
project, and  there appears to  be only  a 5 percent  chance that                                                               
the producers  will experience  a negative  NPV; in  other words,                                                               
there is  a 95 percent chance  that the project will  prove to be                                                               
economic for  the producers, thus justifying  their investment in                                                               
and commitment to the project.                                                                                                  
                                                                                                                                
MR. SMITH, in response to  further questions, after acknowledging                                                               
that at issue is whether the  state should commit to spending $.5                                                               
billion  to   incentivize  the  development  of   the  [gasline],                                                               
explained that  Black &  Veatch is  simply taking  an independent                                                               
look at prices  and other variables in many different  ways so as                                                               
to be able to provide a  representation of what other parties may                                                               
be looking at  when trying to evaluate this project.   He offered                                                               
his understanding that the producers  and the "E&P community" are                                                               
making  investment decisions  today and  drilling very  extensive                                                               
wells in the Lower 48 that have  F&D costs of $6-$8 and are doing                                                               
so  with an  expectation of  a return;  he acknowledged,  though,                                                               
that  that   is  not  comparable   with  making   commitments  to                                                               
underwrite  - or  make transportations  commitments to  - a  "$30                                                               
billion  pipeline."    However,  there are  companies  out  there                                                               
willing  to  take  that  risk,  he  added,  given  today's  price                                                               
environment and F&D costs.   Furthermore, a significant amount of                                                               
the gas is  already known to be there, thus  eliminating the need                                                               
to explore for it.                                                                                                              
                                                                                                                                
MR. SMITH surmised  that the risks a shipper has  to be concerned                                                               
about  are   whether  prices   are  going   to  clear   the  firm                                                               
transportation (FT) costs,  and whether those FT  costs will come                                                               
in  as  estimated.    Black  &  Veatch  relied  upon  information                                                               
provided  by   the  experts  with   regard  to  price   and  cost                                                               
uncertainties,  and  this is  the  basis  of the  analysis  being                                                               
presented  today.   Another element  that must  be considered  is                                                               
whether the  yet-to-find gas  and available gas  can fill  up the                                                               
pipe at some point down the road.   Black & Veatch also looked at                                                               
the  NPV benefits  to the  producers should  yet-to-find gas  not                                                               
show up, and that information will be provided later, he added.                                                                 
                                                                                                                                
9:43:06 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   SAMUELS,   referring   to   slide   11,   sought                                                               
confirmation that  as long as  a [gasline]  is built, then  on an                                                               
NPV  basis, the  state can't  lose because  all it  has to  do is                                                               
recoup its proposed $.5 billion investment.                                                                                     
                                                                                                                                
MR. SMITH said:                                                                                                                 
                                                                                                                                
     We  effectively modeled  the state  physical system  as                                                                    
     well as the royalty  system as (indisc.) taking royalty                                                                    
     in-value  [RIV], not  [royalty] in-kind  [RIK].   We've                                                                    
     obviously  incorporated  [the] $.5  billion  investment                                                                    
     associated  with  that.     And  so,  effectively,  the                                                                    
     investment the state  is out is the $.5  billion.  That                                                                    
     results in  a tariff  deduction of  approximately $.06,                                                                    
     which has  benefit to the  state in and of  itself, and                                                                    
     then  obviously they're  collecting  revenues and  cash                                                                    
     flow, and  those revenues  ... from  taxes as  well the                                                                    
     royalty revenue  doesn't create a situation,  given our                                                                    
     analysis,  that shows  that they  have a  chance for  a                                                                    
     negative NPV.                                                                                                              
                                                                                                                                
MR. SMITH,  in response to  another question, referred to  one of                                                               
the slides and said it illustrates  a 4.5 Bcf [per day] tariff at                                                               
the  bottom and  the  price  forecast that  Black  & Veatch  went                                                               
through.  He added:                                                                                                             
                                                                                                                                
     These  are   all  prices  on   a  nominal   basis,  and                                                                    
     effectively  what  we  did  is  obviously  measure  the                                                                    
     difference between here and the  cost associated with a                                                                    
     commitment to the tariff.   And you can see, obviously,                                                                    
     the  base case  price  forecast is  here, so  obviously                                                                    
     you're looking  at this as  basically cash in  the door                                                                    
     that the  state's taking -  either royalty  revenue or,                                                                    
     alternatively,  [Alaska's  Clear  and  Equitable  Share                                                                    
     (ACES)]  ...  tax-related   revenue.    The  producers,                                                                    
     likewise,  are doing  that, and  then  spending any  of                                                                    
     type  of capital  and operating  costs to  offset that.                                                                    
     So our analysis shows  that given these price scenarios                                                                    
     that we've run, and we've  ran several with the idea of                                                                    
     trying to  understand the sensitivity  to it,  they all                                                                    
     clear  that  bottom  element of  ...  paying  for  that                                                                    
     tariff.                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SAMUELS asked  whether  Black  & Veatch  included                                                               
capital credits for exploration as part of the state's NPV.                                                                     
                                                                                                                                
MR. SMITH said yes.                                                                                                             
                                                                                                                                
SENATOR  STEDMAN  asked  whether   individual  companies  in  the                                                               
industry use "the same forward-looking  price scenarios" in their                                                               
models for purposes of making  investment decisions.  He surmised                                                               
that  the state  must set  up a  scenario similar  to that  which                                                               
would  encourage  such companies  to  come  forward and  make  FT                                                               
commitments.  "Regardless of what  we think the profitability is,                                                               
it's what  that boardroom  thinks it  is when  they sign  that FT                                                               
commitment," he  added.  Therefore,  what does the  industry look                                                               
at?                                                                                                                             
                                                                                                                                
9:47:38 AM                                                                                                                    
                                                                                                                                
MR. SMITH offered his understanding  that other companies do have                                                               
their own  internal price forecasts  but aren't willing  to share                                                               
them, and  that most E&P  companies are using the  Wood Mackenzie                                                               
forecast, but  he doesn't  know whether  they are  using it  as a                                                               
sensitivity case or  as their base.  With  previous analyses that                                                               
the state has done regarding this  issue over the last few years,                                                               
he observed,  the tendency was to  just pick a price  and lock it                                                               
in  when making  an economic  forecast.   He added  that Black  &                                                               
Veatch tried to  incorporate those analyses so as to  look at the                                                               
information in  as many  different ways as  possible in  order to                                                               
determine whether there was a way  to shoot holes in the project,                                                               
given what  is known about  costs and tariffs, and  whether there                                                               
was cause  for concern from  the perspective of either  the state                                                               
or any shippers willing to commit gas to the project.                                                                           
                                                                                                                                
SENATOR STEDMAN asked  whether, if an oil company  looking at the                                                               
project hired Black & Veatch  as a consultant, it would recommend                                                               
that  that company  use  "these  prices" in  its  analysis, or  a                                                               
lower,  more conservative,  price, or  a higher,  more aggressive                                                               
price.   What  would be  Black &  Veatch's recommendation  to the                                                               
board  of directors  of such  a  company as  it seeks  to make  a                                                               
similar multibillion-dollar decision?                                                                                           
                                                                                                                                
MR.  SMITH said  that Black  &  Veatch would  recommend that  the                                                               
company  "do all  the  sensitivity  analyses that  we  did."   He                                                               
added, "We tried, again, to do  this as [impartially] as we could                                                               
by picking a  non-affiliated price forecast - it turns  out to be                                                               
the one that's a little bit more  robust in the out years - we've                                                               
looked EIA,  we've looked  at ours,  as well  as we've  looked at                                                               
flat real  price forecasts  to see what  happens."   He indicated                                                               
that that's  all that could  be done since  no one is  capable of                                                               
actually  knowing  what prices  really  will  be in  the  future,                                                               
adding, "we  tried to make our  estimates based on what  we think                                                               
supply:demand  will be  and where  prices  will go,  but I  think                                                               
you've  got to  look  at  that and  ...  test  it with  different                                                               
sensitivities  ... to  understand  ...  [the] implications  it'll                                                               
have to the  project economics, both to the state  as well as the                                                               
producers."                                                                                                                     
                                                                                                                                
9:50:56 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GATTO,  referring  to  the  graph  on  slide  13,                                                               
expressed  disbelief  in  its  assertion that  there  is  a  zero                                                               
probability that the  state will make zero money.   He said he is                                                               
therefore questioning  the validity  of the  rest of  the graph's                                                               
assertions as well as "everything else."                                                                                        
                                                                                                                                
MR. SMITH - noting that the  state, in general, is a collector of                                                               
revenue  - said  that because  the state  would be  investing $.5                                                               
billion in the  project, that must be considered  relative to the                                                               
gain in the  tariff, and it is therefore just  a coincidence that                                                               
"it  ends   up  at  zero/zero."     He  noted  that   [slide  16]                                                               
illustrating  similar  information  for the  producers  indicates                                                               
that there is a zero  probability that the producers will realize                                                               
a negative $5 billion NPV.                                                                                                      
                                                                                                                                
REPRESENTATIVE  GATTO opined,  however,  that there  is always  a                                                               
probability greater than  zero that something could  go wrong and                                                               
the pipeline can't  get built, and thus he  is uncomfortable with                                                               
slide 13's assertion.                                                                                                           
                                                                                                                                
MR. SMITH offered his understanding  that all the permits will be                                                               
in  hand before  the  pipeline is  built, and  thus  there is  an                                                               
expectation that  the project will  be completed.  In  support of                                                               
the assertion  made in slide  13, he  added, "It's a  function of                                                               
how  the regulatory  process works  and how  permits are  in hand                                                               
[and] treaties are reached with  ... [other] nations ... prior to                                                               
that  capital being  spent, and  that's essentially  how we  made                                                               
those assumptions."  The project  will happen, he posited, and so                                                               
the questions that remain will be  with regard to what the tariff                                                               
is and what the prices are at that time.                                                                                        
                                                                                                                                
9:55:20 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  DOOGAN asked  whether there  is any  company that                                                               
could give the state an absolute prediction of the future.                                                                      
                                                                                                                                
MR. SMITH said no.                                                                                                              
                                                                                                                                
REPRESENTATIVE  DOOGAN surmised  that  the  level of  uncertainty                                                               
with this  project is higher than  it would be if  the state were                                                               
to simply invest its $.5 billion in treasury bills, for example.                                                                
                                                                                                                                
MR.  SMITH  concurred  that the  project  does  incorporate  more                                                               
uncertainty than traditional investments  with regard to what the                                                               
state's returns will be.                                                                                                        
                                                                                                                                
SENATOR FRENCH opined  that there is something  wrong with simply                                                               
assuming that  the prices of natural  gas are just going  to keep                                                               
rising,  and said  he  would  be interested  in  seeing old  Wood                                                               
Mackenzie price forecasts  just to see how  the assumptions about                                                               
natural gas  prices have changed in  the last few years.   Prices                                                               
could  easily go  back down,  he  remarked, and  thereby put  the                                                               
state close to being underwater.                                                                                                
                                                                                                                                
MR.  SMITH  offered  his understanding  that  Dan  Dickinson  has                                                               
provided  the legislature  with historical  information regarding                                                               
the price  of natural gas.   He went  on to explain  that natural                                                               
gas prices in the U.S. were  regulated by the federal Natural Gas                                                               
Act until the  mid-1970s and as such were very,  very low, low to                                                               
the point  that they caused a  natural gas shortage in  the 1970s                                                               
and engendered the federal Natural  Gas Policy Act of 1978, which                                                               
provided new incentives - much  higher prices - for drilling, and                                                               
then at  that point prices  started to  rise again.   However, by                                                               
the mid  1980s, there was too  much natural gas, there  were what                                                               
he  termed  "take-or-pay  agreements"  with  the  pipelines  that                                                               
couldn't buy all the gas that  they'd contracted to buy, and this                                                               
resulted  in  an  industry  restructuring   for  the  purpose  of                                                               
"getting out  of those old contracts,"  and so there was  a free-                                                               
market environment during  the period when there was  a surplus -                                                               
late 1980s up  through 2000.  That surplus was  then "burnt off,"                                                               
he  added,  and  now  there  is  a  more  marginal  supply:demand                                                               
[ratio]; that's  why there has  been an increase in  prices since                                                               
then  -  it represents  the  cost  of  finding  new oil  and  gas                                                               
reserves.                                                                                                                       
                                                                                                                                
MR. SMITH said  that although one could argue that  there will be                                                               
times  when prices  are lower,  the basic  assumption is  that at                                                               
some  point  it will  become  much  more  expensive to  find  and                                                               
develop  this  finite  resource -  that's  a  fundamental  driver                                                               
behind why prices increase.                                                                                                     
                                                                                                                                
10:03:18 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE ROSES asked  whether Black & Veatch  has created a                                                               
slide that illustrates  a tariff associated with  2.5 Bcf/day, or                                                               
3 Bcf/day, or 3.5 Bcf/day.                                                                                                      
                                                                                                                                
MR. SMITH said  he would provide that information.   Referring to                                                               
slide 27,  he said that  it illustrates price forecasts  that are                                                               
all "real prices" with no inflation  built in, and the tariff for                                                               
"the  three  different  projects"  if  the  construction  started                                                               
today.   One  can  see,  he posited,  that  at  the lowest  price                                                               
forecast, there  are a few  years where there is  negative impact                                                               
relative to price relative to tariff.                                                                                           
                                                                                                                                
REPRESENTATIVE  ROSES  said it  appears  that  it could  be  2030                                                               
before the profit structure starts  to increase.  His concern, he                                                               
relayed,  is  the uncertainty  regarding  what  the volumes  will                                                               
actually be.   "We started  out with everything being  assumed at                                                               
[4.5  Bcf/day], but  that was  including Point  Thomson, and  now                                                               
we've taken  that out"  and are assuming  that the  producers are                                                               
going to  [bring the amount]  back up; however, there  will still                                                               
be additional costs associated  with exploration and development,                                                               
and uncertainty regarding price, he noted.  He went on to say:                                                                  
                                                                                                                                
     So  I'm   still  struggling  with   trying  to   get  a                                                                    
     confidence level in  what we think we're  going to have                                                                    
     for  a volume,  which affects  the tariff,  and balance                                                                    
     that  out against  what the  cost  predictions are,  to                                                                    
     still have the  same level of confidence  that ... some                                                                    
     of my colleagues seem to have  in the fact that this is                                                                    
     going to  be wildly  profitable, and coupled  with that                                                                    
     the fact that  if we agree to this  ... [contract] that                                                                    
     we have  now limited the state's  options for somewhere                                                                    
     between 6 to  15 years as to any other  options that we                                                                    
     have  while we're  waiting for  this horserace  to end.                                                                    
     ... That's  why I  keep going  back to  this to  try to                                                                    
     make this comparison so that  I can, in my mind, strike                                                                    
     a level of confidence enough  to make me say, "Yes, I'm                                                                    
     willing to put up $.5 billion of the state's money."                                                                       
                                                                                                                                
10:08:36 AM                                                                                                                   
                                                                                                                                
PATRICK  GALVIN,  Commissioner,  Department of  Revenue  (DOR)  -                                                               
noting  that  there has  been  concern  expressed that  if  Point                                                               
Thomson doesn't come  on line, the state  will lose approximately                                                               
$15 billion  in NPV  - said  it is  important to  understand that                                                               
when speaking about  a 4.5 Bcf/day line resulting  in $66 billion                                                               
in NPV  and a 3.5 Bcf/day  line resulting in $51  billion in NPV,                                                               
that's assuming  that that will be  the volume for the  entire 25                                                               
years.   So even if the  line is designed to  handle 3.5 Bcf/day,                                                               
but  more  gas actually  comes  on  line  right  at or  near  the                                                               
beginning such that with additional  compressors 4.5 Bcf/day ends                                                               
up going  through the pipeline, the  NPV will get back  up to the                                                               
level expected  of a  4.5 Bcf/day  pipeline.   So although  it is                                                               
difficult to  analyze what the  NPV really  will be as  time goes                                                               
on, it will end up being "somewhere between these two numbers."                                                                 
                                                                                                                                
COMMISSIONER GALVIN  indicated that he  is heartened by  a couple                                                               
of statements  made by Cathy Foerster  of the Alaska Oil  and Gas                                                               
Conservation  Commission (AOGCC):   given  the current  trends of                                                               
oil  production,  there will  be  sufficient  gas available  from                                                               
Prudhoe  Bay to  fill any  of  the pipelines  that are  currently                                                               
being  contemplated;  and once  a  pipeline  project is  actually                                                               
moving forward and gas starts  being targeted, there will be more                                                               
gas than [the  state] will know what  to do with.   The issue for                                                               
the state,  therefore, is  to start  with the  right size  pipe -                                                               
which, according  to information presented  to the state,  is the                                                               
48-inch pipe.   With that size pipe, even if  output goes down to                                                               
only 3.5 Bcf/day, TransCanada's  project plan can be accommodated                                                               
without the pipe needing to  be physically adjusted.  The state's                                                               
analysis of this information indicates  that even at 3.5 Bcf/day,                                                               
there will  still be  a positive outcome  with regard  to getting                                                               
financing, getting  a pipeline up  and running, and  getting gas.                                                               
And although there  would be an even greater  positive outcome at                                                               
4.5 Bcf/day,  and the state  would prefer to have  output ranging                                                               
between 4.5  Bcf/day and  6.5 Bcf/day,  the 3.5  Bcf/day scenario                                                               
has  been  analyzed to  determine  whether  even that  amount  is                                                               
enough to  finance the project.   The state's conclusion  is that                                                               
it is enough, though the output  is expected to ultimately end up                                                               
being higher than 3.5 Bcf/day.                                                                                                  
                                                                                                                                
10:13:24 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE ROSES  expressed concern that the  producers might                                                               
not  be willing  to commit  to 4.5  Bcf/day in  the open  season.                                                               
What the producers  are willing to commit to is  really what will                                                               
drive  the project's  financing and  economical feasibility.   It                                                               
matters  not  that  the  amount could  ultimately,  after  a  lot                                                               
exploration  and development,  be 7.9  Bcf/day, for  example; the                                                               
real question is what will the producers commit to.                                                                             
                                                                                                                                
COMMISSIONER GALVIN concurred, but pointed  out that at a minimum                                                               
there will be  3.5 Bcf/day of gas to commit  to, and, again, that                                                               
this amount is sufficient to finance  the project.  The state has                                                               
analyzed,  from several  perspectives, the  question of  what the                                                               
chances are of  getting an FT commitment from  the producers, and                                                               
the state's  conclusion is that from  the producers' perspective,                                                               
committing  to 3.5  Bcf/day would  still constitute  a reasonable                                                               
investment decision.                                                                                                            
                                                                                                                                
REPRESENTATIVE  ROSES  questioned,  then, why  the  state  itself                                                               
doesn't  simply commit  to [2  Bcf/day], particularly  given that                                                               
many people  have testified that  they think the state  should be                                                               
investing  in  this project,  and  given  the estimated  rate  of                                                               
return.                                                                                                                         
                                                                                                                                
COMMISSIONER   GALVIN  said   that  although   the  state   might                                                               
ultimately become more involved in  the project in the future, it                                                               
doesn't need to  at this time -  though it may want  to for other                                                               
reasons - because  there is a private company  willing to advance                                                               
the  project;  furthermore,  [the  state] believes  that  at  the                                                               
appropriate  time,  the  producers  will be  willing  to  act  as                                                               
reasonable commercial players and  make the commitments necessary                                                               
to drive the project ahead.   Getting this project started, which                                                               
is what  the Alaska Gasline  Inducement Act (AGIA) is  all about,                                                               
is the  key; the economics  of the project will  ultimately drive                                                               
it to  fruition "if we  can get  it moving," he  remarked, adding                                                               
that other investment opportunities  related to this project will                                                               
present themselves once that occurs.                                                                                            
                                                                                                                                
REPRESENTATIVE ROSES  expressed concern that moving  forward with                                                               
AGIA could  potentially close off  other options the  state might                                                               
have 6-12 years in the future.                                                                                                  
                                                                                                                                
COMMISSIONER  GALVIN,  in  response  to  comments  regarding  the                                                               
accuracy of  past predictions,  pointed out  that the  purpose of                                                               
the analysis  isn't to predict  future prices, but is  instead to                                                               
look at  whether the  investment decision  being made  today will                                                               
produce positive  results, and the  answer, he surmised,  is yes,                                                               
it will.                                                                                                                        
                                                                                                                                
10:24:03 AM                                                                                                                   
                                                                                                                                
SENATOR  STEDMAN,   offering  his  understanding   that  industry                                                               
doesn't  actually  use  such  robust  price  projections  in  its                                                               
investment decisions, suggested that  [Black & Veatch's] analysis                                                               
leans  more towards  marketing this  project  to the  legislature                                                               
than it  does towards providing  accurate data for  the decision-                                                               
making process.                                                                                                                 
                                                                                                                                
MR. SMITH  disagreed, and  reminded members  that Black  & Veatch                                                               
used  some of  the  same  forecasts that  industry  uses, and  is                                                               
merely trying to  highlight the cash flow  implications and risks                                                               
associated  with  this project.    Using  figures arrived  at  by                                                               
industry experts, the Black &  Veatch models illustrate that this                                                               
project  has  a  high  likelihood  of  success  for  all  parties                                                               
involved.                                                                                                                       
                                                                                                                                
REPRESENTATIVE  GARA pointed  out  that in  a capitalist  system,                                                               
there  is never  a  guarantee  that a  company  will make  money;                                                               
instead, the question  is whether the chance of  success is great                                                               
enough to warrant taking a  risk that a particular endeavor might                                                               
lose  money.   He opined,  therefore,  that this  project can  go                                                               
forward  without  a  guarantee  that the  producers  or  pipeline                                                               
builders  will make  money.   He  noted  that yesterday,  "Exxon"                                                               
stated that when  it submitted its application two  years ago, it                                                               
believed that  there was 4.5  Bcf/day available, and  that's why,                                                               
he surmised, it proposed a  pipeline with that capacity even back                                                               
then.    Since  nothing  has   changed  since  then,  won't  that                                                               
historical information factor into  the chances of this project's                                                               
success, he queried.                                                                                                            
                                                                                                                                
MR. SMITH  explained that risk  analyses tend to focus  on worst-                                                               
case scenarios, rather  than on best-case scenarios,  in order to                                                               
determine  whether  one  could  still  be  comfortable  making  a                                                               
particular investment decision.   Furthermore, the decision being                                                               
faced by the legislature today is  different than what it faced a                                                               
couple of years ago because  of the differences in prices, costs,                                                               
and tariffs.                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GARA  asked  what  will  happen  financially  if,                                                               
during open season,  some of the major producers  still refuse to                                                               
commit their gas.                                                                                                               
                                                                                                                                
COMMISSIONER GALVIN  said that  AGIA is  designed to  ensure that                                                               
the project  will continue to  move on to the  permitting process                                                               
through the  FERC's regulatory process regardless  of whether the                                                               
open  season  is  unsuccessful.     Furthermore,  there  will  be                                                               
continuing efforts  to acquire FT commitments  and determine what                                                               
might be preventing producers from making such commitments.                                                                     
                                                                                                                                
10:34:04 AM                                                                                                                   
                                                                                                                                
PAUL  BLOOM, Vice  President,  Public  Sector and  Infrastructure                                                               
Investment  Banking, Goldman  Sachs Group,  Inc., in  response to                                                               
Representative Gara,  explained that the presumption  is that the                                                               
financing  wouldn't occur  at that  point in  time; instead,  the                                                               
financing wouldn't  occur until  the FERC certificate  is issued.                                                               
At open  season, clearly, getting  the contract signed up  is one                                                               
of the  conditions precedent to  being able to do  the financing,                                                               
but  getting the  FERC  certificate issued  and  getting all  the                                                               
engineering and cost  estimates, et cetera, pinned  down all have                                                               
to be  done before the financing  can occur.  The  open season is                                                               
critical and the contracts are  critical, but that's not when the                                                               
financing occurs - the financing occurs later in the process.                                                                   
                                                                                                                                
REPRESENTATIVE   GARA  asked   whether  it   is  necessary   that                                                               
TransCanada find outside financing.                                                                                             
                                                                                                                                
MR.  BLOOM  explained   that  there  are  two   elements  to  the                                                               
financing.    First,  the  application  suggests  that  the  debt                                                               
portion of the  financing will be project-financed  debt - that's                                                               
debt backed  by the revenues  and assets  of the project,  not by                                                               
TransCanada.  The other element  of the financing pertains to the                                                               
equity,  which TransCanada  must come  to  the table  with.   But                                                               
whether that's  done via cash  flow, or  via raising debt  on its                                                               
own books,  or via  issuing more TransCanada  equity to  fund the                                                               
equity it  must inject into  the project is a  separate question.                                                               
The debt component of the finance  plan is not TransCanada debt -                                                               
it's debt backed by the strength of the project.                                                                                
                                                                                                                                
MR.  BLOOM, in  response to  a question,  explained that  in this                                                               
type  of project  finance, the  concept  is that  one creates  an                                                               
entity  - a  project company  - that  has assets,  which are  the                                                               
revenue contracts  and some physical  assets, and  obligations to                                                               
build  and operate  the  pipeline.   Investors  will  be given  a                                                               
pledge of the  revenue from the project, and  the project company                                                               
will be  "ring-fenced"; it will be  a "bankruptcy-remote" entity,                                                               
and bond investors  will have recourse to the  excess revenue and                                                               
other  assets of  the project  but  not to  TransCanada, and  the                                                               
federal loan  guarantee will  be guaranteeing  a portion  of that                                                               
debt but not all  of it.  He relayed that  the report his company                                                               
prepared as part of the  findings contains more information about                                                               
that latter point.                                                                                                              
                                                                                                                                
CHAIR HUGGINS asked  whether AGIA limits investment  by the state                                                               
to only $.5 billion.                                                                                                            
                                                                                                                                
10:38:17 AM                                                                                                                   
                                                                                                                                
COMMISSIONER GALVIN said  that that is the extent  of the state's                                                               
matching contribution requirement under AGIA.                                                                                   
                                                                                                                                
CHAIR  HUGGINS questioned  whether  the  administration would  be                                                               
coming back  to the  legislature asking for  more money  for this                                                               
project,  particularly  given  that project  financing  won't  be                                                               
available until a FERC certificate is issued.                                                                                   
                                                                                                                                
COMMISSIONER GALVIN indicated that  the administration would not,                                                               
and offered  his understanding that  TransCanada has  stated that                                                               
it  will be  responsible for  any additional  costs necessary  to                                                               
obtain FERC  certification.  The  state is only committed  to $.5                                                               
billion.                                                                                                                        
                                                                                                                                
SENATOR STEDMAN  - raising the  issues of a possible  failed open                                                               
season,  "downstream" financing,  and  the $19  million spent  on                                                               
analyses and documentation - asked  what the likelihood is of the                                                               
"big  utilities"   financing  "this  $30  billion   project"  and                                                               
fulfilling the FT commitments.                                                                                                  
                                                                                                                                
COMMISSIONER  GALVIN said  the  state did  not  do a  probability                                                               
analysis on FT commitments being  made by "the consumers" because                                                               
an  analysis   of  the  conventional  "producer   FT  commitment"                                                               
scenario  indicated  that  it  had  a  sufficient  likelihood  of                                                               
success to  warrant recommendation, and  so there was no  need to                                                               
perform   analyses   of   other    scenarios.      However,   the                                                               
administration has had continued  discussions with those involved                                                               
"on   the   utility   side   in    the   Lower   48,"   and   the                                                               
hope/expectation/demand  for  Alaska  natural  gas  remains  very                                                               
strong.   For  example, the  administration had  discussions with                                                               
the  National  Association  of Regulatory  Utility  Commissioners                                                               
(NARUC)  about  its involvement  in  allowing  utilities to  make                                                               
long-term  commitments  of capacity  and  purchasing  gas at  set                                                               
prices, and the  NARUC seemed very open to that,  and have passed                                                               
resolutions  in  support of  "those  things."   So  although  the                                                               
administration believes  that that opportunity exists,  it didn't                                                               
feel a  need to  analyze that possibility  in detail  because the                                                               
project is likely to succeed under a conventional scenario.                                                                     
                                                                                                                                
10:44:04 AM                                                                                                                   
                                                                                                                                
SENATOR STEDMAN asked  Mr. Bloom whether his firm  has been asked                                                               
to look  at the feasibility  of financing [by]  "the downstream,"                                                               
and  whether  "the downstream"  has  financed  projects over  $20                                                               
billion.                                                                                                                        
                                                                                                                                
MR. BLOOM said his firm was not  asked to look at that issue, and                                                               
that  he himself  has  not  heard of  any  such projects,  though                                                               
typically many utilities in the  Lower 48 do enter into long-term                                                               
contracts for gas  supply.  He surmised that there  is probably a                                                               
reasonable potential  for either the  producers, or the  state in                                                               
marketing  its own  gas,  to  layoff some  of  the  risk of  this                                                               
project  by  entering into  such  contracts,  adding that  he  or                                                               
someone else  from his firm  will be  able to address  that point                                                               
further once the legislature returns to Juneau.                                                                                 
                                                                                                                                
SENATOR  STEDMAN offered  his  understanding  that contracts  for                                                               
delivery get  shortened as the  markets become more dynamic.   He                                                               
clarified that  his question isn't  whether utilities  enter into                                                               
long-term  contracts  for  supply but  rather  whether  utilities                                                               
finance "mega projects" and, if  so, how their board of directors                                                               
deal with  the risk  exposure of a  regulated utility  to finance                                                               
such  a  project.   He  said  he would  also  like  to know  what                                                               
utilities have the  capability of financing, at a  minimum, a $20                                                               
billion project  and what utilities  have done so.   He indicated                                                               
that  there have  been discussions  regarding whether  to finance                                                               
the construction of the project  "from the upstream" or "from the                                                               
downstream," and  about the  "tie-in from  the downstream  to the                                                               
ultimate upstream."                                                                                                             
                                                                                                                                
MR.  BLOOM relayed  that his  firm would  be prepared  to address                                                               
those points when the legislature returns to Juneau.                                                                            
                                                                                                                                
COMMISSIONER GALVIN  pointed out that  the state did  not include                                                               
in  the  findings an  expectation  of  a utility-based  financing                                                               
package -  it's just not part  of the basis upon  which the state                                                               
is making its recommendation.                                                                                                   
                                                                                                                                
CHAIR  HUGGINS expressed  concern that  the project  won't be  as                                                               
economic as the administration is suggesting it will be.                                                                        
                                                                                                                                
MR.  SMITH explained  that Black  & Veatch  tried to  capture the                                                               
risk associated  with the project  with the input  assumptions it                                                               
used.  Nonetheless,  the project appears to have  a potential for                                                               
a very substantial return to the  parties involved, with just a 5                                                               
percent chance of  a negative return for the producers  only.  In                                                               
response to  a question, he  provided some  information regarding                                                               
other clients that Black & Veatch has done work for.                                                                            
                                                                                                                                
CHAIR HUGGINS  asked what this project's  level of risk is,  on a                                                               
scale of 1-10,  when compared with other projects  Black & Veatch                                                               
is familiar with.                                                                                                               
                                                                                                                                
10:53:14 AM                                                                                                                   
                                                                                                                                
MR. SMITH  said that what constitutes  risk is in the  eye of the                                                               
beholder;  for example,  a $30  billion  project represents  more                                                               
risk than a  $1 million project, and an acceptable  level of risk                                                               
for  one entity  might not  be an  acceptable level  of risk  for                                                               
another.   This project does  have a  lot of associated  risk, he                                                               
acknowledged, such as price and  capital costs; in spite of this,                                                               
given  the  known  factors,  this   project  still  looks  to  be                                                               
successful.                                                                                                                     
                                                                                                                                
MR. BLOOM added  that based on size, costs,  and the environment,                                                               
there  clearly is  a tremendous  amount of  risk associated  with                                                               
this project  regardless of who  builds it,  though a lot  of the                                                               
uncertainties  related  to  cost, volume,  shippers,  reservoirs,                                                               
marketing, and prices will be  substantially reduced as time goes                                                               
on, and the main  point of the next few years  is to reduce those                                                               
uncertainties  as much  as  possible so  that  all the  principal                                                               
parties - the state, the equity  sponsors, and the shippers - can                                                               
feel more comfortable before the actual "go" decision is made.                                                                  
                                                                                                                                
CHAIR HUGGINS indicated  that the economic status  of the project                                                               
as time goes on is of major concern to him.                                                                                     
                                                                                                                                
SENATOR  STEDMAN indicated  that  pages 255-257  of  the Black  &                                                               
Veatch report  speaks about  "an integrated  ownership of  a line                                                               
and  the upstream,"  and has  a reference  to "finance  solely by                                                               
equity."   He said, "A 100  percent equity stuck out,  not having                                                               
an  Alaska  tariff  portion,"  and   asked  that  that  issue  be                                                               
addressed further when there's more time.                                                                                       
                                                                                                                                
MR.  ELENBAAS,   referring  to  [slide  17]   of  the  PowerPoint                                                               
presentation, indicated that the  graph illustrates several "flat                                                               
real" prices  - ranging from  $5-$10 - with only  inflation added                                                               
over time, and  noted that currently AECO Hub  prices are trading                                                               
above $10/MMBTU.   Slide 18,  containing two  graphs, illustrates                                                               
producer NPVs for "real" prices  ranging between $5-$10 under two                                                               
different discount  rates -  one at a  10 percent  discount rate,                                                               
and one  at a  15 percent discount  rate - and  under all  of the                                                               
scenarios the producers  earn a positive return -  a positive NPV                                                               
- from  the project.   These graphs  use a 4.5  Bcf/day pipeline,                                                               
and provide another look at what  could happen in terms of NPV if                                                               
prices end up being  half of what they are today.   The graphs on                                                               
slide  19 illustrate  what happens  to the  producers' returns  -                                                               
shown by  the dashed,  black line  - and NPV  if the  pipeline is                                                               
built with the expectation that  there's some yet-to-find gas but                                                               
there never is  any.  These graphs use a  4 Bcf/day pipeline, and                                                               
there would  be no Point Thomson  gas.  A decline  in production,                                                               
of  course, results  in  a  decline in  revenue  if  there is  no                                                               
exploration.      Nonetheless,    even   under   this   extremely                                                               
conservative  scenario,  producers have  a  positive  NPV of  $10                                                               
billion using a 10 percent discount rate.                                                                                       
                                                                                                                                
11:02:25 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE GARA asked whether  the fuel cost for transporting                                                               
the gas is included in the tariff of $4.73.                                                                                     
                                                                                                                                
MR.  SMITH  said  it  isn't,  adding  that  there  is  a  general                                                               
assumption that  the fuel is  provided in-kind with the  right to                                                               
move the gas to the market.                                                                                                     
                                                                                                                                
REPRESENTATIVE GARA surmised that the  fuel cost is factored into                                                               
the NPV calculations.                                                                                                           
                                                                                                                                
DEEPA PODUVAL,  Principal Consultant,  Black &  Veatch, explained                                                               
that  instead the  fuel  cost is  incorporated  into the  revenue                                                               
number; so  it's a lower volume  of product that's being  sold at                                                               
the AECO  Hub market  because some  of it has  been lost  as fuel                                                               
along the way.                                                                                                                  
                                                                                                                                
MR. SMITH explained  that in Black & Veatch's  base assumption, a                                                               
25-year contract was assumed for the 4.5 Bcf/day case, but a 20-                                                                
year  contract was  assumed for  the  4 Bcf/day  and 3/5  Bcf/day                                                               
cases.  Slide 30, in  contrast, illustrates "what happens to yet-                                                               
to-find gas required under  different scenarios with similar-type                                                               
contract terms given the size of the pipeline."                                                                                 
                                                                                                                                
COMMISSIONER GALVIN  indicated that the  information illustrating                                                               
the NPV  to the  state demonstrates, as  is required  by statute,                                                               
that  the  state will  benefit  from  going  forward with  a  gas                                                               
pipeline.  He added:                                                                                                            
                                                                                                                                
     We're  going  to  monetize this  huge  resource  that's                                                                    
     going to provide  both royalty and tax  benefits to the                                                                    
     state for a  long period of time.  So  the fact that we                                                                    
     have  positive NPVs  on the  state returns  ... [isn't]                                                                    
     all  ...  that  significant   -  it's  not  that  earth                                                                    
     shattering.  We provide  the information with regard to                                                                    
     the  NPV   to  the   producers  for  the   question  of                                                                    
     likelihood of  success, and that  goes to  the question                                                                    
     that is on  everybody's mind, which is what  is the ...                                                                    
     likelihood of having a failed  open season and, if that                                                                    
     is  a failed  open  season, of  ultimately getting  gas                                                                    
     committed to this line.   And for that reason we looked                                                                    
     at it from a number of different perspectives.                                                                             
                                                                                                                                
COMMISSIONER GALVIN  pointed out,  however, that by  showing that                                                               
these are  positive investment  opportunities for  the producers,                                                               
it isn't really the  case that if it weren't too  good to be true                                                               
then  everybody  would  be  wanting to  invest  in  the  project.                                                               
Instead, one must recognize that this  is a closed market - it is                                                               
only the  producers that are in  a position to take  advantage of                                                               
this investment opportunity - it  is not available to the regular                                                               
investment  community.   This means  that  this issue  has to  be                                                               
viewed  from  the producers'  vantage  point  when attempting  to                                                               
determine  whether  this  project  is something  they  should  go                                                               
forward with.   It is  a tremendous obligation on  the producers'                                                               
part if  they do go  forward with,  but it comes  with tremendous                                                               
value in return  - they get to  monetize their gas.   In the end,                                                               
however, the question  remains:  is this  something the producers                                                               
will  take advantage  of.   The administration  believes that  in                                                               
moving the project  forward in order to  present this opportunity                                                               
to  them,  the  producers,  one  way  or  the  other,  will  take                                                               
advantage of the opportunity to monetize their gas.                                                                             
                                                                                                                                
COMMISSIONER GALVIN  said that's why the  administration is going                                                               
forward  with the  project, why  the state  needs to  advance the                                                               
gasline, and  why the  administration believes  that in  the end,                                                               
giving the license  to TransCanada is a good thing  for the state                                                               
because it  can make that  decision up  front in a  timely manner                                                               
and force the issue in order to get to a gasline sooner.                                                                        
                                                                                                                                
11:08:41 AM                                                                                                                   
                                                                                                                                
CHAIR HUGGINS, referring to  the earlier-used term "ring-fenced,"                                                               
asked  whether the  state would  be included  in that  protective                                                               
mechanism.                                                                                                                      
                                                                                                                                
MR. BLOOM said  no, and explained that the  term "ring-fenced" is                                                               
simply  a term  of  art used  to mean  that  the project  company                                                               
that's created  is "bankruptcy remote"  from TransCanada  so that                                                               
the  investors in  the project  company do  not have  recourse to                                                               
TransCanada  if  something  goes  wrong with  the  project.    In                                                               
addition  to protecting  TransCanada and  other potential  equity                                                               
sponsors from  having to cover  the debt if something  goes wrong                                                               
with  the   project,  it  also  protects   the  investors  should                                                               
something  go wrong  with TransCanada  - conceivably  the project                                                               
itself  could  continue.    This sort  of  project  financing  is                                                               
typical in the "oil and gas world."                                                                                             
                                                                                                                                
CHAIR HUGGINS  asked what  the state's status  is with  regard to                                                               
liability.                                                                                                                      
                                                                                                                                
MR. BLOOM  said he  doesn't believe that  under the  construct in                                                               
the  proposal, the  state has  any liability  whatsoever for  the                                                               
performance  of the  project, for  the debt,  or for  any of  the                                                               
other obligations that the private parties enter into.                                                                          
                                                                                                                                
CHAIR HUGGINS said that's comforting.                                                                                           
                                                                                                                                
COMMISSIONER  GALVIN relayed  that the  FERC ruled  today on  the                                                               
Trans-Alaska Pipeline  System (TAPS) tariff issue,  affirming the                                                               
decision of  the administrative  law judge which  ultimately will                                                               
mean  the recovery  for  the  state of  hundreds  of millions  of                                                               
dollars of excess tariffs.                                                                                                      
                                                                                                                                
CHAIR HUGGINS asked how long the FERC took for that ruling.                                                                     
                                                                                                                                
COMMISSIONER GALVIN  suggested that someone else  might be better                                                               
able to respond to that question.                                                                                               
                                                                                                                                
The committees then recessed from 11:13 a.m. to 2:06 p.m.                                                                       
                                                                                                                                
2:06:18 PM                                                                                                                    
                                                                                                                                
TONY  PALMER,   Vice  President,  Alaska   Business  Development,                                                               
TransCanada  Alaska  Company,  LLC,  ("TransCanada"),  began  his                                                               
presentation by introducing  TransCanada and providing background                                                               
on  its  decision to  participate  in  AGIA.    He gave  a  brief                                                               
personal history  and noted that he  first started to work  on an                                                               
Alaska gas  pipeline project  23 years  ago.   During the  past 7                                                               
years  that  the  project  has  been  back  under  consideration,                                                               
TransCanada has looked at many top  issues and has worked hard to                                                               
present a complete and comprehensive  AGIA application.  In fact,                                                               
TransCanada  has  filed  over  a   foot  of  paper  in  the  AGIA                                                               
application  and   responses.    He  stated   that  comprehensive                                                               
information on the  project is available to  the legislature, the                                                               
public,  and   the  administration,  via  the   state's  website.                                                               
TransCanada  has 3,600  employees  across North  America, in  all                                                               
disciplines,  who  are  qualified   to  pursue  and  successfully                                                               
complete   this  project.      TransCanada  employees   presently                                                               
administer  36,500   miles  of  interstate   and  interprovincial                                                               
natural  gas  pipeline.    In  addition,  they  administer  7,700                                                               
megawatts of  electric generation.  Each  TransCanada employee is                                                               
responsible for  10 miles of  pipeline and 3 megawatts  of power.                                                               
TransCanada's    power   business    includes   wind,    nuclear,                                                               
hydroelectric, coal, and natural gas projects.                                                                                  
                                                                                                                                
2:10:19 PM                                                                                                                    
                                                                                                                                
MR. PALMER said that TransCanada's  board of directors considered                                                               
several  factors in  last November's  decision to  participate in                                                               
AGIA.    The first  consideration  was  whether the  project  has                                                               
strong economics and  a margin to succeed.  Clearly,  in order to                                                               
have a  successful project, the  fundamentals of  supply, demand,                                                               
expected price, and  the cost of the project  must be understood.                                                               
He  pointed  out the  importance  of  the consultant's  testimony                                                               
regarding  expected  gas  prices   and  construction  costs,  and                                                               
acknowledged  the   skepticism  about  the  correctness   of  the                                                               
projections.   However, when  looking at  the history  of natural                                                               
gas  prices,  there  have  been variations  in  price  and  cost.                                                               
Today, gas   prices and projections are higher, and  costs of the                                                               
project are higher.   He opined that with  some exceptions, price                                                               
and cost  usually move  in tandem.   TransCanada  considered what                                                               
the margin would  be between the price of gas  in the marketplace                                                               
and the  price of this  project.   The projections of  high price                                                               
and high  cost indicate  that there will  be a  sufficient margin                                                               
for the project  to succeed.  Future low price  and low cost also                                                               
provide  a sufficient  margin for  success.   Any potential  risk                                                               
would  be   the  result  of   a  period  of  high   costs  during                                                               
construction, and low gas prices afterward.                                                                                     
                                                                                                                                
MR.  PALMER  encouraged  the  committee  to  look  at  the  broad                                                               
spectrum of risk  and opportunity.  He continued  to explain that                                                               
any  large cross-country  project  needs the  cooperation of  the                                                               
public,  government, and  stakeholders; no  commercial party  can                                                               
deliver this project  alone.  TransCanada has  worked through the                                                               
AGIA statute, and heard testimony  that the government and public                                                               
are  committed to  the project.   Furthermore,  the AGIA  statute                                                               
sets  out  the  rights  and  responsibilities  of  both  parties.                                                               
TransCanada, and  four other  parties, reviewed  the requirements                                                               
of the  applicants and decided to  proceed with the project.   He                                                               
assured  the  committee that  TransCanada  decided  to make  this                                                               
investment  based  on   a  number  of  criteria.     First,  this                                                               
investment is  a strategic fit for  TransCanada's capabilities in                                                               
that   it  is   a  gas   pipeline  opportunity   and  fits   with                                                               
TransCanada's  core competency,  that  being  to construct,  own,                                                               
operate,  and expand  long-distance natural  gas pipelines.   The                                                               
corporation  moves one-fifth of  the natural gas in North America                                                               
daily,  but owns  none  of it.   Second,  the  project is  within                                                               
TransCanada's geographic  footprint and it has  rights-of-way and                                                               
legislative permits necessary for the Canadian portion.                                                                         
                                                                                                                                
SENATOR   WIELECHOWSKI  asked   how   the   FERC  will   evaluate                                                               
TransCanada's  proposal versus  "Denali-The  Alaska Gas  Pipeline                                                               
project."                                                                                                                       
                                                                                                                                
2:19:37 PM                                                                                                                    
                                                                                                                                
MR.  PALMER surmised  that  if  the AGIA  license  is granted  to                                                               
TransCanada,  and both  projects hold  an open  season, the  FERC                                                               
will examine both applications and  make a decision, which may be                                                               
to push the  projects together, to choose one over  the other, or                                                               
to grant certificates to both.                                                                                                  
                                                                                                                                
SENATOR  WIELECHOWSKI offered  his  belief that  if both  parties                                                               
continue  to the  open season,  the Denali  project will  get gas                                                               
commitments.  He asked how TransCanada will overcome that.                                                                      
                                                                                                                                
MR. PALMER  expressed his understanding that  the Denali project,                                                               
at the moment, is two North  Slope producers acting as a pipeline                                                               
company.   There  has  been  no public  commitment  of  gas.   He                                                               
assured  the  committee  that  TransCanada   moves  gas  for  all                                                               
producers and BP is its largest customer across North America.                                                                  
                                                                                                                                
SENATOR WIELECHOWSKI then asked  whether TransCanada was counting                                                               
on Point  Thomson gas  when it prepared  its application  for 4.5                                                               
Bcf/day.                                                                                                                        
                                                                                                                                
MR.  PALMER  explained that  TransCanada  looked  at the  overall                                                               
basin capability of Alaska, rather  than individual pools of gas.                                                               
The corporation wants to begin moving  as much gas as possible as                                                               
early as  possible, and to  expand over  time.  He  stressed that                                                               
TransCanada does  not have  proprietary information  on potential                                                               
fields; however,  the materials  presented by  the administration                                                               
and other witnesses indicate that  there will initially be enough                                                               
gas  for a  pipeline of  3.5  Bcf/day to  4 Bcf/day.   The  Point                                                               
Thomson  gas was  not considered  when TransCanada  submitted its                                                               
application,  and TransCanada  expects that  the basin  in Alaska                                                               
can produce 4.5  Bcf/day.  The availability of  Point Thomson may                                                               
affect the  response at the  open season, though;  regardless, if                                                               
necessary, TransCanada  can downsize  the project to  3.5 Bcf/day                                                               
or increase capacity.                                                                                                           
                                                                                                                                
REPRESENTATIVE GARA  asked whether Mr. Palmer  had any experience                                                               
with lease holders attempting to block pipeline projects.                                                                       
                                                                                                                                
MR. PALMER said no.                                                                                                             
                                                                                                                                
2:26:07 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GARA  stated his belief that  gas commitments will                                                               
be made  if the pipeline  is built.   However, the  oil companies                                                               
have  the  ability  to  refuse   to  commit  gas  and  create  an                                                               
atmosphere of uncertainty.  He asked,  "If they don't put the gas                                                               
into a waiting pipeline, at what  point do they risk losing their                                                               
leases and the future value of the gas?"                                                                                        
                                                                                                                                
COMMISSIONER  GALVIN   surmised  that  the  oil   companies  take                                                               
positions  that  maximize  their commercial  opportunities.    He                                                               
continued:                                                                                                                      
                                                                                                                                
     When we  talk about the lease  prerogatives, [the] duty                                                                    
     to develop, and  so forth, it's not so  much that we're                                                                    
     stating that it  is a risk on their  part, that they're                                                                    
     going  to lose  billions  of dollars  of  value by  not                                                                    
     doing so, it's  just something that is  in the decision                                                                    
     framework ... in terms of  ... whether to commit gas to                                                                    
     a particular line ... [at  a] particular point in time.                                                                    
     As things  unfold, we don't  know how this is  going to                                                                    
     play  out, either  with regard  to  the TransCanada  TC                                                                    
     Alaska  project  going  to an  open  season,  [or]  the                                                                    
     Denali project  going to  an open  season. ...  I think                                                                    
     Senator Wielechowski's  comment that  ... the  gas will                                                                    
     ultimately  end up  at the  Denali project  ... is  the                                                                    
     knee-jerk  feeling. ...  But as  Mr. Palmer  indicated,                                                                    
     it's not  that simple -  it just doesn't work  that way                                                                    
     in the real world. ...                                                                                                     
                                                                                                                                
     There   are  going   to  be   a  number   of  different                                                                    
     considerations that are going to  play out as they make                                                                    
     that decision  on where to  commit their gas.   Clearly                                                                    
     TransCanada,  throughout North  America, has  attracted                                                                    
     gas, [has]  attracted these same  producers to  put gas                                                                    
     into ...  [TransCanada's] lines in instances  where the                                                                    
     producers had just  as much of an  opportunity to build                                                                    
     the   line   themselves.   ...  There's   an   economic                                                                    
     opportunity here, there's a lot  of money to be made by                                                                    
     all the  participants that are here  discussing it, and                                                                    
     it's just  going to be  a matter  of how it  plays out.                                                                    
     ... We  believe that for  the purposes of  the decision                                                                    
     that we  have before us  now, that all  indications are                                                                    
     that ... this gas will get to market.                                                                                      
                                                                                                                                
REPRESENTATIVE GARA  gave an example  of the oil  producers being                                                               
willing to sell gas to their  own project, but not to the project                                                               
chosen by the state.  If  the state still prefers the TransCanada                                                               
project, and other options have  been exhausted, he asked whether                                                               
the  oil companies  are risking,  by their  refusal, the  loss of                                                               
their leases in a lawsuit brought by the state.                                                                                 
                                                                                                                                
2:30:48 PM                                                                                                                    
                                                                                                                                
COMMISSIONER GALVIN indicated that  the advancement of the Denali                                                               
project is an  alternative to get the gas to  market.  The choice                                                               
of   pursuing  that   alternative   is   within  the   producers'                                                               
prerogative, although it means there  will be no additional state                                                               
concessions or  changes to  the system.   Further,  completion of                                                               
the Denali  project will satisfy  the requirement of  the leases.                                                               
However,  if  the  producers  refuse  to put  their  gas  in  any                                                               
project,  that will  raise  the  question of  whether  that is  a                                                               
justifiable position for the producers to take.                                                                                 
                                                                                                                                
REPRESENTATIVE  GARA concluded  that if  the leases  are violated                                                               
and the facts support the state  in a lawsuit, the producers risk                                                               
losing their leases.                                                                                                            
                                                                                                                                
COMMISSIONER GALVIN said yes.                                                                                                   
                                                                                                                                
SENATOR McGUIRE  recalled recent public testimony  from a citizen                                                               
concerned about the legislature not  doing enough to bring all of                                                               
the parties together to work as  a team and move the gas pipeline                                                               
forward.  She observed that  TransCanada is a successful pipeline                                                               
builder  and   is  prepared  with  right-of-ways,   First  Nation                                                               
permitting, and  access to the  [AECO] Hub.   Further, ExxonMobil                                                               
Corporation    ("Exxon"),   British    Petroleum   ("BP"),    and                                                               
ConocoPhillips  Alaska,  Inc.  ("Conoco"), are  three  large  and                                                               
successful  corporations that  own  a significant  amount of  gas                                                               
that they  want to market.   She pointed out that  this vote will                                                               
be a  political decision made  by legislators inexperienced  in a                                                               
business transaction of this proportion.   Senator McGuire stated                                                               
that she  has misgivings even  though the producers  have changed                                                               
their  tone  under  pressure.     In  addition,  the  project  is                                                               
supported by an  extremely popular governor.  On  the other hand,                                                               
there  is the  $500 million  cost to  the state  and the  biggest                                                               
concern  is  that  AGIA  binds  the state  to  only  support  the                                                               
licensee's project.                                                                                                             
                                                                                                                                
SENATOR  McGUIRE expressed  concern about  the possibility  of an                                                               
unsuccessful  open season  leading  to lengthy  litigation.   She                                                               
also mentioned that  her constituents who work for  Conoco and BP                                                               
feel that a vote in favor  of TransCanada is a vote against them.                                                               
She  informed  the  committee  that  there  are  very  successful                                                               
mediators  serving at  the Consensus  Building  Institute at  the                                                               
Massachusetts  Institute  of  Technology;  in fact,  one  of  the                                                               
mediators  there  has  negotiated  47  mega-projects  around  the                                                               
world.   She suggested that  the administration  consider, before                                                               
the vote on the license, one  more attempt, with a trained policy                                                               
mediator, to  get all of  the stakeholders together  in executive                                                               
session.    She  stressed  that   state  business  is  "open  and                                                               
transparent";   however,  the   parties  need   to  be   able  to                                                               
communicate directly "in order for certainty to take place."                                                                    
                                                                                                                                
2:40:59 PM                                                                                                                    
                                                                                                                                
COMMISSIONER  GALVIN observed  that  Senator  McGuire raised  the                                                               
crux  of the  question, that  is,  "How do  we get  from here  to                                                               
there?"   He opined that  there is  an agreement on  the ultimate                                                               
goal.   The  question is  a matter  of sequencing  and the  tight                                                               
timeframe.   "Structurally,  how do  we  get the  state, in  this                                                               
commercial  enterprise that  we've got  ourselves engaged  in, to                                                               
actually  participate in  a  meaningful  way," he  asked.   In  a                                                               
democracy,  with a  representational  form of  government, it  is                                                               
very difficult to operate similarly  to the business sector.  The                                                               
state must  make decisions on an  ongoing basis and cannot  be as                                                               
nimble as  a business in  a commercial  setting.  In  fact, there                                                               
will  be more  structure and  separation between  decisions, and,                                                               
because  of that,  the state  must take  a position  that can  be                                                               
agreed  upon by  the legislature  and the  executive branch,  and                                                               
AGIA sets  up the sequencing that  will allow the state  to reach                                                               
that goal, in a certain manner.                                                                                                 
                                                                                                                                
COMMISSIONER GALVIN  pointed out that interaction  with the other                                                               
parties will establish what the  state is willing, and unwilling,                                                               
to do.   A  review of the  state's work over  the last  few years                                                               
shows that  limits for  what is  possible are  being established.                                                               
He opined  that it  is "absolutely critical  at this  juncture in                                                               
the process, for the state  and the legislature and the executive                                                               
branch, together, to establish what  is the framework for further                                                               
discussion, and we do that  by approving this license and saying,                                                               
'These are the terms that Alaska  wants to operate within.'"  Any                                                               
diversion from doing just that  will expand the discussion beyond                                                               
the current  framework that allows  for consensus, and  will open                                                               
up the expectation  that there is a whole  realm of alternatives.                                                               
He suggested  that a  decision must  be made  on this  license in                                                               
order for Alaska to state its  position, and this will be a major                                                               
advancement in the ability to get the parties together.                                                                         
                                                                                                                                
COMMISSIONER GALVIN warned  that there may be an  impasse at some                                                               
point, and mediation  would then be appropriate.   In response to                                                               
previous  testimony,  he  said that  there  are  no  identifiable                                                               
barriers  within  AGIA,  and  it  is the  best  mechanism  for  a                                                               
democracy to  use in  order to  provide the  tools to  enable the                                                               
administration to achieve its goal.                                                                                             
                                                                                                                                
SENATOR MCGUIRE re-stated her concern  that fierce positions will                                                               
be staked out  and further complicated by the  dispute over Point                                                               
Thomson,  thus interfering  with the  administration's plan.   In                                                               
her opinion,  she relayed, the  department is now faced  with the                                                               
ultimate conflict  of interest;  to deal  with the  revocation of                                                               
leases  [at Point  Thomson]  and  to also  review,  for the  same                                                               
parties, applications on the Denali  project.  She concluded that                                                               
these  positions  could  become  adversarial and  could  lead  to                                                               
litigation instead of reconciliation.                                                                                           
                                                                                                                                
2:50:32 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  CRAWFORD  recalled  that Mr.  Haymes,  ExxonMobil                                                               
Alaska Production  Manager, indicated that ExxonMobil  would like                                                               
to own a  percentage of the line commensurate  to its throughput.                                                               
He  asked Mr.  Palmer  to comment  on how  much  of a  percentage                                                               
TransCanada was considering offering to shippers.                                                                               
                                                                                                                                
MR. PALMER clarified  that members of the  legislature and others                                                               
"would like  TransCanada to remain  north of 50  percent, because                                                               
you're looking for  an independent pipeline."  Since  AGIA is not                                                               
prescriptive  on this  point, TransCanada  has offered  equity to                                                               
parties who commit their gas at  the initial open season in order                                                               
to  improve the  probability of  a  successful open  season.   He                                                               
stated  that  although  there  have  not  been  discussions  with                                                               
producers regarding  the volumes  of shipping or  shareholding, a                                                               
producer  may expect  to have  a volume  commitment equal  to its                                                               
share  ownership, and  TransCanada's  task would  be  to bring  a                                                               
balance that would work for all parties.                                                                                        
                                                                                                                                
REPRESENTATIVE CRAWFORD  relayed his personal  experience working                                                               
on the  Trans-Alaska Pipeline  System (TAPS).   He  asked whether                                                               
TransCanada  considered negotiating  shares  for line-workers  as                                                               
part  of its  project labor  agreement  (PLA), in  order to  keep                                                               
costs and the tariff down.                                                                                                      
                                                                                                                                
MR. PALMER  advised that TransCanada  has not started  to develop                                                               
its strategy and tactics for a  PLA.  However, at a nuclear plant                                                               
in Ontario that  TransCanada is refurbishing, the  workers are "a                                                               
direct partner" with TransCanada.                                                                                               
                                                                                                                                
2:56:27 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SAMUELS  said  he  agrees with  the  decision  to                                                               
dissolve the  unit leases of Point  Thomson.  As far  as leverage                                                               
goes to  ensure the commitment of  gas, the state can  use taxes,                                                               
permitting, and  Point Thomson  to apply  pressure.   However, to                                                               
think the  state could take  back leases  at Prudhoe Bay  from an                                                               
operating oil field is unreasonable.   He opined that seizing the                                                               
Prudhoe Bay  leases is not  a realistic leverage  point, although                                                               
there is real leverage at  Point Thomson.  Representative Samuels                                                               
then asked for Commissioner Galvin's opinion.                                                                                   
                                                                                                                                
COMMISSIONER GALVIN observed that at  issue is what the state can                                                               
do  if the  producers  choose  not to  commit  their  gas to  any                                                               
project.  For  example, if the producers decided to  hold out for                                                               
a long-term tax  break, he opined that the state  would have some                                                               
recourse  as the  lessor.   Furthermore, the  situation could  be                                                               
that either there is no  pipeline or economic justification for a                                                               
pipeline,   and  the   producers'  refusal   to  commit   gas  is                                                               
reasonable,  or it  is  clearly economic  and  the producers  are                                                               
holding  out to  extract additional  value from  the state.   The                                                               
situation   will   probably   be    some   combination   of   the                                                               
aforementioned, and so any resolution  must be based on the facts                                                               
of the case.  Commissioner Galvin  advised that the state can not                                                               
make  a prediction  about this.   At  this time,  the legislature                                                               
does not  have to make  decisions regarding changes in  taxes, or                                                               
steps to support  TransCanada's project.  The purpose  of AGIA is                                                               
to advance  the state another step,  gather information, identify                                                               
the  options,  and  take  the   next  step.    He  expressed  his                                                               
confidence  that this  is the  best step  for the  state to  take                                                               
right  now, to  maximize its  opportunities.   He warned  against                                                               
forestalling  legitimate  options  that  the state  may  want  to                                                               
pursue in  the future, and said  that the duty to  develop is not                                                               
"off the table."                                                                                                                
                                                                                                                                
REPRESENTATIVE SAMUELS said the problem  is that this is going to                                                               
be a  commercial and economic  decision made in  Calgary, London,                                                               
and Houston, and be based on  a review of the numbers, the risks,                                                               
and the economics.  Legislators,  in contrast, are looking at the                                                               
political  world; campaign  promises and  changes in  legislative                                                               
members and  the administration.   The  business world  must feel                                                               
frustration with  decisions made through  a political prism.   He                                                               
opined  the  government  is  trying  to  become  a  player  at  a                                                               
commercial  table,  and cannot  be  successful  due to  potential                                                               
changes in  the administration.  Representative  Samuels recalled                                                               
Mr. Palmer's  previous testimony that TransCanada  would not seek                                                               
an  agreement with  the producers,  outside of  AGIA, unless  the                                                               
state  agreed.    The political  environment  could  change  that                                                               
position.                                                                                                                       
                                                                                                                                
COMMISSIONER  GALVIN acknowledged  that Representative  Samuels's                                                               
comments get to  the heart of the discomfort  and disconnect with                                                               
AGIA.   With  regard  to  resources, the  state  is a  commercial                                                               
player as the owner of  the resources.  Granted, politics prevent                                                               
the  state from  acting in  the  business world,  as a  business,                                                               
because  it  is  not  a dictatorship.    This  situation  creates                                                               
burdens  on commercial  entities  regarding long-term  investment                                                               
decisions  or  contractual  commitments  that  can  change  after                                                               
election night.  However, AGIA  addresses these burdens by fiscal                                                               
assurances  and  treble damages.    It  acts  as a  mechanism  to                                                               
overcome the  lack of ability  to provide a  contractual partner,                                                               
with  reassurances  that  agreements   will  not  change  without                                                               
penalties.   Furthermore, AGIA does not  bind future legislatures                                                               
or prevent changes  from being made, but puts a  price tag on any                                                               
such changes.   This issue  has been seriously  considered, along                                                               
with upstream fiscal  certainty, which needs to be  imbedded in a                                                               
way that  can be  relied upon.   Commissioner Galvin  agreed that                                                               
there  is an  awkward connection  between the  state's commercial                                                               
interests and the inherent structure of a democratic government.                                                                
                                                                                                                                
3:14:00 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE FAIRCLOUGH  raised the  question of  the potential                                                               
conflict   of   interest    within   state   agencies   regarding                                                               
applications  coming from  the  Denali  project and  applications                                                               
from Exxon and Chevron Corporation  ("Chevron") asking to advance                                                               
projects.  She  asked how the state would be  held harmless given                                                               
that on June 6, 2008, Mr.  Palmer stated his expectation that the                                                               
state  will  act  as  a  partner  and  maintain  a  good  working                                                               
relationship   with  TransCanada.      She   further  asked   how                                                               
TransCanada will  view the state processing  the applications for                                                               
the Denali project and for Point Thomson.                                                                                       
                                                                                                                                
MR. PALMER referred to AGIA, AS 43.94.40, which read:                                                                           
                                                                                                                                
     The  review processing  or  facilitation  of a  permit,                                                                    
     right-of-way,  or authorization  by a  state agency  in                                                                    
     connection  with  a   competing  natural  gas  pipeline                                                                    
     project does  not create an  obligation on the  part of                                                                    
     the state under this section.                                                                                              
                                                                                                                                
MR.  PALMER  expressed  his  belief   that  this  is  a  specific                                                               
provision to allow the state  to process permits without a breach                                                               
of contract.                                                                                                                    
                                                                                                                                
COMMISSIONER  GALVIN  advised  that   within  the  Department  of                                                               
Natural Resources (DNR), there is  an office that coordinates the                                                               
permitting   for  large   projects.     He  explained   that  the                                                               
relationship  is established  through  the reimbursable  services                                                               
agreement  (RSA)  between  the  permittee and  the  DNR  and,  by                                                               
extension, through  the other  state agencies.   This  allows for                                                               
the applicant  to contract for dedicated  permitting services for                                                               
a fee.   This is a usual  mechanism that has been  offered to the                                                               
Denali project,  ENSTAR Natural Gas  Company, and  Alaska Natural                                                               
Gas  Development  Authority (ANGDA).    Further,  in response  to                                                               
concerns, he  maintained that the  state will  process, evaluate,                                                               
and ensure  that there is  a timely adjudication  of applications                                                               
of any  gas pipeline,  regardless of their  source.   He stressed                                                               
that the RSA process allows  an applicant a relationship with the                                                               
state very similar to what TransCanada will enjoy.                                                                              
                                                                                                                                
REPRESENTATIVE  KERTTULA said  that in  terms of  working in  the                                                               
marketplace, the legislature has  the goal of avoiding anti-trust                                                               
violations, of  seeing competition  and letting the  market work.                                                               
She  remarked that  if they've  learned anything  from the  TAPS,                                                               
it's  that they  should  support openness  and true  competition,                                                               
because that's been a long time coming.                                                                                         
                                                                                                                                
3:21:13 PM                                                                                                                    
                                                                                                                                
MR.  PALMER,  continuing with  his  presentation,  said that  the                                                               
pipeline  is a  synergetic business  opportunity for  TransCanada                                                               
because  it has  spare capacity  on the  existing system  leaving                                                               
Western  Canada that  it wants  to refill  with Alaska  gas; this                                                               
would  also  be beneficial  for  Alaskans  and for  customers  in                                                               
Western Canada.   He explained that the [AECO] Hub  is the 15,000                                                               
mile pipeline  system in  Alberta that  is owned  by TransCanada.                                                               
Going into  this system  will improve  the economics  for Alaskan                                                               
gas  as  was  demonstrated  by   a  recent  independent  analysis                                                               
purchased  by   the  Legislative  Budget  and   Audit  Committee.                                                               
Netbacks  will be  higher  as  a result  of  going into  existing                                                               
facilities  that are  somewhat  depreciated and  thus, will  have                                                               
lower tolls.   Additional benefits  are:  Alaska's gas  will have                                                               
market diversity,  just like Western  Canada's gas has  today, to                                                               
serve  markets across  the Lower  48; there  is a  liquid market,                                                               
meaning that  gas on the system  can be traded for  free; and the                                                               
risk of  capital overruns is  lowered by not building  a facility                                                               
to transport the gas to Chicago.                                                                                                
                                                                                                                                
MR. PALMER  said that  he has heard  other parties  indicate that                                                               
Alaska's gas  should go  to a  different system  in Alberta.   He                                                               
assured  the committee  that another  system would  provide lower                                                               
value to Alaskans on a  netback basis when rationally looking for                                                               
the  best economic  value.   Turning  to the  subject of  whether                                                               
Alaska gas will  be used in processing the Alberta  oil sands, he                                                               
stated  that Canada  has a  significant surplus  of natural  gas.                                                               
After exporting  gas to the U.  S. for forty years,  Canada has a                                                               
current  surplus of  9 Bcf/day,  which  is more  than double  the                                                               
capacity of the  proposed pipeline.  At this  time, production in                                                               
Western  Canadian is  relatively  flat and  demand is  increasing                                                               
because  of oil  sands  development, heavy  oil development,  and                                                               
electric generation.  Therefore,  the present surplus is expected                                                               
to decline from  9 Bcf/day to 6  or 7 Bcf/day within  the next 10                                                               
years.  However,  Alberta will still be exporting 6  or 7 Bcf/day                                                               
when the Alaska gas comes to market.                                                                                            
                                                                                                                                
MR. PALMER  stressed that Western  Canadian gas will  continue to                                                               
serve the oil sands market for the  next 10 years and beyond.  As                                                               
Alaskans  expect  the Alaska  natural  gas  market to  be  served                                                               
first, so does Alberta intend to  serve its local market.  So, he                                                               
continued, when  Alaska gas comes  to market  in 10 years,  its 4                                                               
Bcf/day will add  to Canada's export of 6 Bcf/day.   He concluded                                                               
that  it is  inaccurate  to  say that  Alaska's  gas  will go  to                                                               
Alberta's  oil sands.    He  acknowledged that  the  gas will  be                                                               
comingled, but  the net effect  is that it  will go to  the Lower                                                               
48, refilling the pipeline, and lowering the toll.                                                                              
                                                                                                                                
3:28:15 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GARA asked  what the  anticipated use  of natural                                                               
gas is for the  oil sands "if they're up and  running fully as an                                                               
exploration project."                                                                                                           
                                                                                                                                
MR.  PALMER  replied  that  generally, natural  gas  is  used  to                                                               
provide heat  and steam.   Huge amount  of incremental  oil sands                                                               
development is expected  in the next 10 or 15  years by either an                                                               
open pit  mining process, or  by steam assisted  gravity drainage                                                               
(SAGD) whereby the oil is collected  via a horizontal well.  Both                                                               
processes use  natural gas, though parties  are currently looking                                                               
for ways  to use  "bottom of  the barrel"  products instead.   If                                                               
that  is unsuccessful,  oil sands  and heavy  oil development  in                                                               
Western  Canada will  increase the  demand for  natural gas  by 2                                                               
Bcf/day within  the next  decade, he predicted.   In  response to                                                               
other questions,  he stated that  the numbers he'd  cited earlier                                                               
for Canadian  exports assumes  an increase in  demand at  the oil                                                               
sands of about 2 Bcf/day, and  exports of about 6-7 Bcf/day in 10                                                               
years time - which is down from 9 Bcf/day today.                                                                                
                                                                                                                                
MR.  PALMER,  continuing  with   his  presentation,  stated  that                                                               
TransCanada's  objectives are  highly aligned  with those  of the                                                               
state.   Those objectives are:   support basin  development, both                                                               
short  term  and long  term;  and  support the  open  competition                                                               
established under  AGIA.   He remarked  that the  legislature and                                                               
the  administration decided  to support  an open  and transparent                                                               
process rather  than a contractual negotiation.   TransCanada has                                                               
participated  in  public  request for  proposal  (RFP)  processes                                                               
around  the   world  and  understands   how  this   process,  and                                                               
negotiated  contract processes,  work.   Furthermore, TransCanada                                                               
agrees  that   competition  is  important;  in   fact,  there  is                                                               
competition for who  will build, own, and operate  the pipe, and,                                                               
more importantly for the resource  owner, there is competition at                                                               
the wellhead.                                                                                                                   
                                                                                                                                
MR. PALMER pointed  out that TransCanada began 50  years ago with                                                               
just 3 customers  in Western Canada and today  has 300 customers;                                                               
no  one can  suggest  that  there is  less  competition with  300                                                               
customers  than  with 3.    He  opined  that TransCanada  has  no                                                               
inherent conflicts,  in pursuing  this project,  with any  of its                                                               
other  business  goals.   In  addition  to  its large  system  in                                                               
Canada,  TransCanada has  employees, offices,  and assets  across                                                               
the  U.  S., including  12,000  miles  of natural  gas  pipeline,                                                               
making  TransCanada  "one  of  the  largest  U.S.-based  pipeline                                                               
companies," he  remarked, and observed  that the natural  gas and                                                               
oil business in North America is  integrated for all parties.  He                                                               
then  noted  that TransCanada  offices  are  located in  Houston,                                                               
Omaha, Portland,  Michigan, Connecticut, and Boston;  however, he                                                               
stressed  that Western  Canada is  most  similar to  Alaska.   In                                                               
fact, there  are several areas in  which TransCanada's experience                                                               
is  similar  to  Alaska's;  for  example,  TransCanada  began  in                                                               
Alberta with a small local  market, 0.25 Bcf/day, and surplus gas                                                               
was then exported.                                                                                                              
                                                                                                                                
MR. PALMER said that furthermore,  like Alaska, Western Canada is                                                               
far removed from major markets  such as New York, California, and                                                               
Chicago.  TransCanada  also began with a small  number of initial                                                               
customers, and  now serves large  and small companies.   Alaska's                                                               
basin has  a high  potential for exploration,  as did  Alberta 50                                                               
years  ago.   He  noted  that  there  have been  questions  asked                                                               
concerning  TransCanada's  capacity  and  ability  to  build  the                                                               
pipeline.   He assured  the committees  that TransCanada  is well                                                               
suited for this project as it  moves 20 percent of North American                                                               
natural gas across interstate and  interprovincial pipeline.  The                                                               
vast majority  of the natural  gas pipelines are owned  by third-                                                               
party  pipeline   companies,  and  TransCanada  is   the  largest                                                               
interstate and interprovincial pipeline  natural gas company with                                                               
proven technical,  engineering, and operational competence.   Its                                                               
operating costs,  as verified  by a third  party, are  lower than                                                               
its competitors by 25-35 percent.                                                                                               
                                                                                                                                
MR.  PALMER relayed  that  TransCanada's  internal auditors  have                                                               
determined  that between  1990 and  2003, its  capital costs  for                                                               
large  projects using  42-inch to  48-inch diameter  pipe are  19                                                               
percent  lower than  Canadian competitors  and  38 percent  lower                                                               
than  others  in  the  U.S.     Furthermore,  during  the  1990s,                                                               
TransCanada built 7,000 miles of  pipe on schedule and within 0.6                                                               
percent of  the budget.   TransCanada built an  original pipeline                                                               
across Canada  50 years  ago that was  longer and  more difficult                                                               
than this project, competitively and  with the cooperation of the                                                               
government.    He  relayed  the   importance  of  looking  beyond                                                               
engineering  and  operating skills  to  construct  and operate  a                                                               
project  of this  nature, because  it  will take  much more  than                                                               
those to complete this business.                                                                                                
                                                                                                                                
3:39:58 PM                                                                                                                    
                                                                                                                                
SENATOR FRENCH asked  Mr. Palmer to address the  argument made by                                                               
some  that TransCanada  doesn't care  if it  runs over  budget on                                                               
this pipeline  because it  will get  all of its  money back  in a                                                               
guaranteed rate  of return through the  FERC and the tariff.   He                                                               
asked whether TransCanada has financial  motivation to bring this                                                               
project in on budget.                                                                                                           
                                                                                                                                
MR. PALMER explained that TransCanada  cannot succeed as a third-                                                               
party business  and expand  its system if  it has  cost overruns;                                                               
that TransCanada  has a long  history of controlling  costs; that                                                               
TransCanada  stipulated in  its  AGIA application  that it  would                                                               
take a lower rate  of return on its capital in  the event of cost                                                               
overruns;  and that  TransCanada has  proposed that  there be  an                                                               
allocation  of  the U.  S.  government  loan guarantee  to  cover                                                               
capital-cost  overruns.    Overruns  would  be  funded  with  100                                                               
percent debt,  and TransCanada would  not earn  additional money,                                                               
but would instead  receive a lower rate of return  on equity.  He                                                               
pointed  out that  TransCanada's record  of cost  control on  the                                                               
construction  of  interstate  and  interprovincial  pipelines  is                                                               
unmatched.                                                                                                                      
                                                                                                                                
SENATOR FRENCH asked  for an explanation of the effect  of a loan                                                               
guarantee on cost overruns.                                                                                                     
                                                                                                                                
MR. PALMER  explained that  a cost overrun  would result  in more                                                               
debt, guaranteed by  the U. S. government, but there  would be no                                                               
incremental equity.   For example, if there was an  overrun of $6                                                               
billion,  without the  loan guarantee,  the $6  billion would  be                                                               
funded with  75 percent debt  and 25 percent equity,  which would                                                               
result in  $1.5 billion  of equity invested  by TransCanada.   He                                                               
further explained that  a 40 percent cost overrun,  for example -                                                               
if   TransCanada's  proposed   cost-overrun  structure   was  not                                                               
approved  -  would   result  in  only  a  7   percent  return  on                                                               
TransCanada's "incremental investment dollars."   Mr. Palmer then                                                               
remarked:                                                                                                                       
                                                                                                                                
     Our proposal is  to adjust the U. S.  loan guarantee to                                                                    
     allocate a  portion of  it to  cover overruns  and that                                                                    
     would   insure   that    TransCanada   earned,   as   a                                                                    
     shareholder, not one penny more from a cost overrun.                                                                       
                                                                                                                                
3:47:10 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SAMUELS  argued,  though,  that  that  7  percent                                                               
return would come  out of the pockets of the  shippers of royalty                                                               
gas.  With regard to  the loan guarantees, if TransCanada obtains                                                               
them for  cost overruns but  then doesn't have any  overruns, the                                                               
federal government  might not allow  TransCanada to use  the loan                                                               
guarantees for the project's original capital costs.                                                                            
                                                                                                                                
MR. PALMER acknowledged  that a portion of the  risk would remain                                                               
with the shipper, while only a  limited portion of the risk would                                                               
remain with  TransCanada.   That would  always be  the case  on a                                                               
project of  this scale, particularly under  the capital structure                                                               
required by AGIA.  He added:                                                                                                    
                                                                                                                                
     You will  not find  a party  - I can  assure you,  as a                                                                    
     pipeline company  - that's going  to go forward  with a                                                                    
     75:25  percent debt  equity that's  going to  guarantee                                                                    
     you  that  that party  will  take  100 percent  of  the                                                                    
     capital cost  risk. ... [With  regard to] the  issue of                                                                    
     the 7 percent,  it is something that  is not attractive                                                                    
     to our  corporation.  You're correct  that the shippers                                                                    
     will have to  bear some of that ... risk  as well.  Our                                                                    
     structure  that we  propose,  in the  event  the U.  S.                                                                    
     government  does  agree to  it,  also  has a  surcharge                                                                    
     mechanism which  would ... reduce  some of the  risk on                                                                    
     the shipper  and put  some of  that risk  on the  U. S.                                                                    
     government. ... I will also  tell you, the AGIA process                                                                    
     has  been highly  unusual in  that ...  we have  had to                                                                    
     reveal  our  commercial  secrets on  this  project  ...                                                                    
     before  we have  won anything.    And that  is, if  not                                                                    
     unique, highly  unusual; I have never  done that before                                                                    
     in my career.                                                                                                              
                                                                                                                                
The committees took an at-ease from 3:49 p.m. to 4:07 p.m.                                                                      
                                                                                                                                
4:08:44 PM                                                                                                                    
                                                                                                                                
MR. PALMER stated  that there are other  critical skills, besides                                                               
engineering and operations, that are  needed to obtain success in                                                               
a project of  this nature.  Regulatory,  community, First Nation,                                                               
and  environmental  issues  must  be addressed,  in  addition  to                                                               
commercial  and   financial  aspects.    TransCanada   has  begun                                                               
discussions with the government of  Canada about the structure of                                                               
this project through Canada; in  fact, there has been and remains                                                               
a structure  in place through  Canada as established  between two                                                               
sovereign nations.  This proposed  project has a 30-year history.                                                               
Although the  legislation and  regulatory structure  is different                                                               
than in the  U. S. - for example, Canada's  norm is for rolled-in                                                               
tolls - there  is a valid treaty that established  the rights and                                                               
responsibilities   of  both   nations.     Furthermore,  Canadian                                                               
legislation -  the Northern  Pipeline Act  - provides  a "single-                                                               
window  regulatory agency"  for  this project.    Turning to  the                                                               
subject of LNG alternatives, Mr. Palmer reiterated:                                                                             
                                                                                                                                
     TransCanada provided  in its application ...  that when                                                                    
     we  hold the  initial  open season,  customers will  be                                                                    
     able to  nominate any location along  the right-of-way,                                                                    
     in Alaska, Yukon,  British Columbia, or all  the way to                                                                    
     Alberta,  or  to  Valdez, simultaneously.  ...  In  the                                                                    
     event that  there is a  potential LNG project  that can                                                                    
     go  forward at  that time,  and they  nominate gas  and                                                                    
     meet all  the standard  terms and  conditions -  as any                                                                    
     customer  would   have  to   -  they  will   have  that                                                                    
     opportunity to nominate Valdez  or Alberta or Fairbanks                                                                    
     or Whitehorse.                                                                                                             
                                                                                                                                
REPRESENTATIVE  CRAWFORD expressed  his understanding  that there                                                               
are environmental  groups that are  unhappy with the  prospect of                                                               
new gas  coming to Canada to  support the tar sands  project.  He                                                               
asked whether TransCanada would have  the ability, after the open                                                               
season, to redirect  the project to Valdez if  the Alberta market                                                               
closed.                                                                                                                         
                                                                                                                                
MR.  PALMER responded  that if  all of  the gas  is committed  to                                                               
Alberta at the  open season, and if, while TransCanada  is in the                                                               
process  of   obtaining  approvals,   there  was   a  significant                                                               
obstruction,  TransCanada would  have  to  contact its  potential                                                               
customers to  see if  they would  make a  change.   He elaborated                                                               
that  in the  highly unusual  circumstance that  the project  was                                                               
stopped, TransCanada would seek  commercial alternatives with its                                                               
potential customers and with government.                                                                                        
                                                                                                                                
REPRESENTATIVE  SAMUELS asked  whether, at  the open  season, the                                                               
same  information about  costs would  be available  for both  the                                                               
route to Valdez and the route to the AECO Hub.                                                                                  
                                                                                                                                
MR. PALMER said yes.                                                                                                            
                                                                                                                                
4:15:48 PM                                                                                                                    
                                                                                                                                
MR. PALMER  addressed the issue  of what  the state gets  for its                                                               
$500  million investment.   He  estimated  that TransCanada  will                                                               
also be  investing more than  $100 million before it  obtains the                                                               
first  license; in  fact, Alaska's  return on  its money  will be                                                               
higher than TransCanada's,  and, for its $500  million, the state                                                               
gets  a  reliable,  world-renowned  partner that  is  capable  of                                                               
advancing the project.   TransCanada will provide  an open season                                                               
within  two  years  and  voluntary  expansions  every  two  years                                                               
thereafter  and  is committed  to  proposing  the rolled-in  toll                                                               
structure that  the state has requested  in AGIA.  He  noted that                                                               
with a  mandatory expansion,  the FERC  indicated that  the tolls                                                               
would be  incremental, not  rolled-in.   Incremental tolls  are a                                                               
substantial  hurdle  to new  explorers  because  they would  face                                                               
higher tolls than  the existing parties and so may  have to go in                                                               
front of  the FERC and  argue their  case with no  certainty with                                                               
regard to outcome.                                                                                                              
                                                                                                                                
MR. PALMER  said TransCanada is committed  to promoting long-term                                                               
development, to  proceeding to FERC certification,  to building a                                                               
pipeline to  Valdez if there is  a market, and to  delivering gas                                                               
to Alaskans.   He concluded  that TransCanada has a  long history                                                               
of moving  gas from western  Canada and is motivated  to continue                                                               
major   expansion.     He   reminded   members  that   employment                                                               
opportunities  come  from   pipeline  expansion  and  exploration                                                               
drilling, not  from the  operation of the  pipeline.   The Alaska                                                               
portion of  the pipeline totals  about 750 miles,  therefore, the                                                               
operation of  the completed pipeline  will require only 50  to 75                                                               
employees.   In  contrast,  there are  thousands  of jobs  during                                                               
construction,  and   long-term  employment  comes   from  further                                                               
drilling and  expansion.  In  addition, in-state  gas development                                                               
is  also  important to  TransCanada;  in  fact, there  are  1,100                                                               
receipt and delivery points on its system in Alberta.                                                                           
                                                                                                                                
4:24:29 PM                                                                                                                    
                                                                                                                                
MR. PALMER began his PowerPoint  presentation.  He displayed maps                                                               
showing  the transportation  system that  TransCanada has  built.                                                               
Under  construction is  the Keystone  oil pipeline  that has  the                                                               
potential  of   becoming  a  $13   billion  project.     Slide  4                                                               
illustrates  TransCanada's growth  from a  pipeline in  1958 that                                                               
delivered  0.25  Bcf/day 250  miles.    Slide 6  illustrates  the                                                               
construction of  "pipeline looping," which  is a second  piece of                                                               
pipe laid  parallel in  the same  right-of-way.   Slides 7  and 8                                                               
illustrate the AGIA  requirements for an application.   He opined                                                               
that the  competition for AGIA,  as in any RFP  process, occurred                                                               
prior  to  the  submission  of  the  application.    He  reviewed                                                               
TransCanada's competitive  response to AGIA and  highlighted that                                                               
the  proposed toll  reduction of  $0.09/MMBtu would  mean a  $150                                                               
million reduction per year for the life of the project.                                                                         
                                                                                                                                
MR.  PALMER then  pointed  out that  TransCanada  has filed  with                                                               
Canada's National  Energy Board (NEB) to  change the jurisdiction                                                               
of its  Alberta system from  provincial to federal,  partially in                                                               
order to be able to structure  a system wherein "the value of the                                                               
incremental Alaskan gas to Western  Canadian producers" is shared                                                               
with  Alaskan  customers.   And  that  structure, if  acceptable,                                                               
would achieve the aforementioned  toll reduction, which, over the                                                               
course  of 15  years, would  ship $3  billion worth  of value  to                                                               
Alaska  producers  and  away  from  Western  Canadian  producers.                                                               
Slide 10  illustrates the proposed  Alaska pipeline  project, and                                                               
Mr. Palmer  noted that 33  percent of the  [AECO] Hub pipe  is in                                                               
the  ground.   Slide  12  illustrates  the  capital cost  of  $26                                                               
billion  and  specified  rolled-in  tolls for  the  Canadian  and                                                               
Alaska  portions  of the  pipeline.    Slide 13  illustrates  the                                                               
financial  parameters of  the  project and  indicates  a debt  to                                                               
equity ratio of 60:40 for all expansions.                                                                                       
                                                                                                                                
MR. PALMER remarked:                                                                                                            
                                                                                                                                
     I will also  assure you that 60:40 is  a structure that                                                                    
     is not unusual  in the U. S. and Canada;  in fact, that                                                                    
     is  the  capital  structure of  our  Canadian  pipeline                                                                    
     systems that I  described for you, and, for  many U. S.                                                                    
     pipelines,  that actually  is a  relatively low  equity                                                                    
     structure.  You  heard talk over the  last several days                                                                    
     about Rockies  Express - [the] existing  pipeline under                                                                    
     construction from  the Rockies  in Wyoming,  going east                                                                    
     to  the Midwest  and  beyond -  that  structure has  55                                                                    
     percent  equity. ...  And,  in fact,  if  you take  the                                                                    
     75:25  for [the]  initial project,  and  60:40 for  ...                                                                    
     expansions,  and  you  ... do  a  weighted  average  up                                                                    
     through  7 [Bcf/day],  you  still do  not  get back  to                                                                    
     70:30.   So TransCanada's  made a significant  step out                                                                    
     here.                                                                                                                      
                                                                                                                                
MR.  PALMER described  the return  on  equity and  the return  on                                                               
equity adjustment in  the event of capital-cost  overruns.  Slide                                                               
14  illustrates the  project  schedule, with  the  license to  be                                                               
issued sometime  in July or  the beginning  of August 2008.   The                                                               
open season is scheduled for  July 2010, with a completed project                                                               
scheduled for September 2018.                                                                                                   
                                                                                                                                
REPRESENTATIVE BUCH  asked for  the meaning  of "a  binding" open                                                               
season, and about  the circumstances that would lead  to two open                                                               
seasons.                                                                                                                        
                                                                                                                                
4:35:33 PM                                                                                                                    
                                                                                                                                
MR. PALMER  explained that the  initial open season is  a binding                                                               
open  season that  is scheduled  to  be completed  by July  2010.                                                               
Over the next 12 months,  TransCanada will be doing the necessary                                                               
field, environmental,  and engineering  work in order  to conduct                                                               
the  open  season.    As  in any  open  season,  there  could  be                                                               
insufficient volume  to proceed.   In  that event,  AGIA requires                                                               
that TransCanada  continue to pursue  the FERC  certification, to                                                               
seek  customers,  and to  hold  a  second  open season  by  2012.                                                               
Clearly, the  preference is for  customers to nominate  their gas                                                               
in  2010.   Slide 15  illustrates TransCanada's  offer of  equity                                                               
opportunity to shippers that subscribe  for a threshold volume in                                                               
the  initial open  season.   Mr.  Palmer added  that his  company                                                               
continues to  seek a partnership  alignment with the  three North                                                               
Slope producers and the state.   Regarding upstream fiscal terms,                                                               
Mr. Palmer said  that that is a matter between  the state and the                                                               
leaseholders.    He  stressed   that  TransCanada  can  and  will                                                               
accommodate natural  gas liquids (NGLs) extraction  as customers'                                                               
desire, and the gas will subsequently be moved to market.                                                                       
                                                                                                                                
SENATOR FRENCH asked  whether the extraction of  NGLs affects the                                                               
price of natural gas.                                                                                                           
                                                                                                                                
MR. PALMER  expressed his  expectation that  the liquids  will be                                                               
removed either  in Alaska or in  Alberta, before the gas  goes to                                                               
the  marketplace,  due to  their  value.   Ethane,  propane,  and                                                               
butane are  generally more  valuable on a  volume or  Btu content                                                               
[basis]   than   natural   gas.      Furthermore,   TransCanada's                                                               
calculations  assume that  the liquids  are included  in the  gas                                                               
going to  Alberta, and  are based  on a Btu  content of  1,118 or                                                               
1,067.   He cautioned that  when the Btus  go down to  1,000, the                                                               
unit tolls will increase.                                                                                                       
                                                                                                                                
SENATOR  FRENCH  opined that  selling  the  liquids and  the  gas                                                               
separately offers more value than selling a combined product.                                                                   
                                                                                                                                
4:42:58 PM                                                                                                                    
                                                                                                                                
MR. PALMER said,  "That's correct; if you are  selling 1,118 Btus                                                               
as methane, you  would generically obtain less value  than if you                                                               
spilt  it, and  that's  why they're  generally removed  somewhere                                                               
before  they hit  the  ultimate  customer."   He  added that  the                                                               
Alberta system is  "straddled" by a number of  complexes owned by                                                               
third parties that will compete for "that business."                                                                            
                                                                                                                                
COMMISSIONER GALVIN  opined that the  state wants to  get maximum                                                               
value for  the gas, and that  will result if the  state sells the                                                               
liquids as well.   In addition, having the  separation take place                                                               
in  Alaska  will  encourage  this industry;  in  fact,  there  is                                                               
nothing in  AGIA that  would discourage  the development  of this                                                               
industry.                                                                                                                       
                                                                                                                                
MR.   PALMER  re-stated   his  description   of  the   regulatory                                                               
structures in Alaska  and Canada, and then turned  to the subject                                                               
of long-term  basin development.   The AGIA  "must-haves" promote                                                               
basin  development:    open  season  every  two  years;  in-state                                                               
deliveries  through distance-sensitive  tolls  and  a minimum  of                                                               
five  delivery  points;  low  equity   ratio;  and  state  fiscal                                                               
incentives.   With regard to  the value to Alaskans  of long-term                                                               
basin development and expansion of  the pipeline, Mr. Palmer said                                                               
that assuming an  average price in nominal dollars  of just under                                                               
$10.00,  there is  a "netback"  of  $350 billion  over 25  years,                                                               
whereas  if the  pipeline is  expanded  to 5.9  Bcf/day after  10                                                               
years, for example,  that [netback] goes up to  $600 billion, and                                                               
up to $700 billion if the pipeline is expanded to 7.2 Bcf/day.                                                                  
                                                                                                                                
MR. PALMER, referring to a  slide on his PowerPoint presentation,                                                               
noted that  the basin in  Western Canada  grew from 180  wells in                                                               
1955  to  13,000-16,000  wells  currently.    He  also  spoke  of                                                               
Alberta's available reserves; 50 years  ago the potential was for                                                               
75 trillion cubic  feet (Tcf), but twice that  amount has already                                                               
been  produced  and   there  remains  another  125   Tcf  in  the                                                               
reservoir.  The original proven  reserves in Western Canada three                                                               
years before TransCanada  completed its pipeline was  15 Tcf, but                                                               
10 years after  TransCanada was in service, that had  grown to 55                                                               
Tcf.   "If  you have  a  basin that  is similar  to Alberta,  and                                                               
Western Canada, that  would imply your 35 Tcf  of proven reserves                                                               
would  be  north  of  100  Tcf 10  years  after  in-service,"  he                                                               
predicted.                                                                                                                      
                                                                                                                                
MR. PALMER turned  to the issue of rolled-in tolls  and said that                                                               
the Legislative  Budget and Audit Committee  asked TransCanada to                                                               
"Examine a scenario  where you start at 4.5, for  two years, then                                                               
you  expand to  5.9  and then  6.5  for two  years  and then  7.2                                                               
thereafter."     The  graph  on   slide  23  of   the  PowerPoint                                                               
presentation   illustrates   that   the   incremental   cost   of                                                               
constructing  a 4.5  Bcf/day pipeline  - just  the pipeline  - is                                                               
under  $2;  that  expanding  the  pipeline  to  5.9  Bcf/day  via                                                               
compression  will have  lower incremental  costs; that  expanding                                                               
the pipeline  to 6.5 Bcf/day,  perhaps via partial  looping, will                                                               
result in still higher costs,  as would expanding the pipeline to                                                               
7.2 Bcf.                                                                                                                        
                                                                                                                                
MR. PALMER then  referred to slide 24 illustrating  the impact of                                                               
rolled-in tolls,  AGIA standards, and  the FERC standards  on the                                                               
previously described  scenario.   He explained that  the pipeline                                                               
company  will  have  to  apply  for  rolled-in  tolls  under  the                                                               
following  structure:   at 4.5  Bcf/day, $1.76;  at 5.9  Bcf/day,                                                               
$1.67; at 6.5  Bcf/day, $1.76; and at  7.2 Bcf/day, approximately                                                               
$2.00.   Under  this  structure, all  customers  would be  paying                                                               
these  rates.     However,  under   the  FERC's  rules,   if  the                                                               
incremental costs are  lower than the base, there  would again be                                                               
rolled-in  tolls for  all customers.   Furthermore,  whenever the                                                               
incremental costs  are higher  than the  base, the  FERC requires                                                               
incremental  tolls  for  new customers,  and  the  difference  is                                                               
$1.00/mmBtu.   Thus, he emphasized,  an explorer looking  for gas                                                               
must consider paying an additional charge for 25 years.                                                                         
                                                                                                                                
MR.  PALMER concluded  that TransCanada  believes  that AGIA  was                                                               
structured  to encourage  the construction  of the  base project,                                                               
long-run  basin development,  and open-access  terms for  initial                                                               
and future  shippers, and to  provide service to  in-state, Lower                                                               
48, and LNG  markets.  TransCanada has the  credentials to build,                                                               
own, operate,  and expand the pipeline.   Moreover, TransCanada's                                                               
objectives are  aligned with AGIA  and the state's  objectives of                                                               
early  in-service; long-run  basin development;  and open  access                                                               
and  equitable treatment  of all  customers, original  and later,                                                               
big and small.                                                                                                                  
                                                                                                                                
The committees took a recess from 4:53 p.m. to 6:01 p.m.                                                                        
                                                                                                                                
6:06:09 PM                                                                                                                    
                                                                                                                                
BLYTHE CAMPBELL opined that $500  million is not a trivial amount                                                               
of money,  and said  that even after  following the  gas pipeline                                                               
issue  pretty closely  for  the past  several  years, she  cannot                                                               
figure out  why the state  needs to spend  that money.   She said                                                               
that  although Mr.  Palmer repeatedly  used the  term "commercial                                                               
decisions" in  his earlier presentation, she  cannot imagine that                                                               
"this  process"  is  similar to  any  commercial  decision-making                                                               
process Mr.  Palmer ever engaged in.   She opined that  the state                                                               
doesn't belong  in this kind  of process  - it's not  the state's                                                               
role to manipulate markets,  particularly given that historically                                                               
the state is not very good at it.  She concluded:                                                                               
                                                                                                                                
     Voting "no"  on the license  gets the state out  of the                                                                    
     middle of  a commercial  project, and given  the robust                                                                    
     economics  and  the low  risk  we  heard about  earlier                                                                    
     today, it's really just about time  we did that.  I may                                                                    
     be  greedy, but  if  we can  try  to get  TransCanada's                                                                    
     expertise  on this  project and  their best  commercial                                                                    
     decision-making  without  spending  $500  million,  I'd                                                                    
     really like to do that.                                                                                                    
                                                                                                                                
SENATOR BUNDE said the $500  million troubles him as well, though                                                               
he noted that the state's  previous attempt [during the Murkowski                                                               
administration] at  getting a  gas pipeline  would have  cost the                                                               
state  $10 billion  to  the  producers.   He  asked Ms.  Campbell                                                               
whether she disapproves of all subsidies.                                                                                       
                                                                                                                                
MS.  CAMPBELL  replied  that   she  respectfully  disagrees  with                                                               
Senator Bunde "about  the $10 billion."  She  reiterated that she                                                               
thinks it  is not at all  the state's role to  be "mucking around                                                               
in the market."                                                                                                                 
                                                                                                                                
SENATOR BUNDE  said he would not  argue with that.   However when                                                               
the  state  considered   the  issue  of  stranded   gas  and  the                                                               
production  profits  tax  (PPT)  legislation,  it  was  over  $10                                                               
billion  that  the   state  would  have  been   offering  in  tax                                                               
incentives.                                                                                                                     
                                                                                                                                
6:08:34 PM                                                                                                                    
                                                                                                                                
TAMMIE SMITH said  there is nothing more she would  like than for                                                               
Alaska  to  remain  "a  great  place to  live,  work,  and  raise                                                               
families."   The action that  the legislature takes in  regard to                                                               
the gas pipeline will greatly  affect the future of all Alaskans,                                                               
she  opined.    She  relayed   that  she  worked  for  ExxonMobil                                                               
Corporation  for nearly  six years  in the  early 1980s,  and her                                                               
husband took part  in the cleanup of the Exxon  Valdez oil spill.                                                               
She  noted also  that  she  has worked  in  the construction  and                                                               
engineering field for the past 16 years.                                                                                        
                                                                                                                                
MS.  SMITH said  she has  been following  the gas  pipeline issue                                                               
since  the  AGIA  request  for proposal  (RFP)  was  issued  last                                                               
summer, and has studied the  matter extensively in the last eight                                                               
months  since  the   firm  for  which  she   works  submitted  an                                                               
application  to build  the gas  pipeline last  November with  the                                                               
Chinese oil firm, Sinopec.   That application was rejected by the                                                               
administration;  however,  Ms.  Smith  said  that  that  has  not                                                               
diminished  the  passion she  has  developed  for the  all-Alaska                                                               
gasline  project to  a Valdez  LNG facility  for shipment  to any                                                               
part  of  the  world,  especially  to  Alaska's  current  largest                                                               
trading partners - the Asian market.                                                                                            
                                                                                                                                
MS. SMITH said  the testimony she has heard over  the last week -                                                               
that there  is plenty  of gas in  the Lower 48  and that  the gas                                                               
market is changing -  is correct.  She said Alaska  needs to be a                                                               
front runner in  the current global economy and do  what is right                                                               
for  the  state, its  citizens,  and  [the  rest of]  the  United                                                               
States.    She  stated  that   she  feels  AGIA  has  created  an                                                               
atmosphere of fear, which she said  is one of the factors driving                                                               
up the price  of oil.  She said the  legislature should not award                                                               
a license to  the wrong project - the pipeline  into Canada - out                                                               
of fear that if  that is not done there will  not be any pipeline                                                               
built,  because  she  believes  another   will  be  built.    She                                                               
continued:                                                                                                                      
                                                                                                                                
     All of  these factors  - the  AGIA process,  the Denali                                                                    
     project, the  devaluation of  our dollar,  which helped                                                                    
     cause the high cost of oil  and gas - ... have all come                                                                    
     together at the right  time to create the circumstances                                                                    
     for the  right project for  Alaska, and I  believe that                                                                    
     project  is the  all-Alaska LNG  project to  Valdez, no                                                                    
     matter who it is built by.                                                                                                 
                                                                                                                                
MS. SMITH said  the all-Alaska gasline project  would provide the                                                               
best  deal   to  Alaskans,  including   long-term  jobs,   a  new                                                               
petrochemical industry and its associated  jobs, and cheaper fuel                                                               
for the state's homes and  businesses; that project would make it                                                               
possible for Alaska  to reduce the United  States' national trade                                                               
deficit with China by selling China  the only thing it needs from                                                               
the United States - energy.   Saying she is not in agreement with                                                               
AGIA,  she added,  "If  you want  to  amend it  to  make it  more                                                               
applicable to  an all-LNG  project, that would  be fine,  but the                                                               
way  it  stands  now,  I  hope that  you  will  not  be  awarding                                                               
TransCanada a license."                                                                                                         
                                                                                                                                
6:12:04 PM                                                                                                                    
                                                                                                                                
SENATOR BUNDE noted that the  night before, another testifier had                                                               
made a plea  for an all-Alaska gasline, and he  had told her that                                                               
an export license would be needed  to send gas to China; however,                                                               
according to  information the legislature  has received  from the                                                               
federal government,  that that's  not going  to happen,  at least                                                               
not  until  the  Lower  48  is served  first.    He  offered  his                                                               
understanding  that the  testifier  had been  told  by the  "Port                                                               
Authority" that  it had an  export license  but was not  told was                                                               
that that  license needs to be  renewed.  He said  the people who                                                               
have spoken  with those  in the U.S.  Department of  Energy (DOE)                                                               
have been  told that  it is highly  improbable that  that license                                                               
would be renewed.                                                                                                               
                                                                                                                                
MS. SMITH remarked that there  is nothing about this project that                                                               
will   not  be   problematic,  but   that's  not   to  say   it's                                                               
unachievable.   She said  she thinks an  export license  could be                                                               
issued "if  you get to the  right people and give  them the right                                                               
information."                                                                                                                   
                                                                                                                                
REPRESENTATIVE RAMRAS offered his  understanding that the DOE has                                                               
a concern  about long-term  export of  energy to  other countries                                                               
because of the current climate here  in the U.S.; that that's why                                                               
"the Conoco  export license" has  to be renewed every  two years;                                                               
but that obtaining  a limited expansion of the  export license is                                                               
in fact  possible.  He mentioned,  however, that "some of  us got                                                               
together with the  director after he testified here,  and he ...,                                                               
said that  Alaskans ought to  build their own pipeline  first and                                                               
look  after their  own needs  first."   He  posited that  putting                                                               
together  different   in-state  Alaskan  markets  and   a  modest                                                               
expansion of the export license is a very reasonable plan.                                                                      
                                                                                                                                
MS. SMITH opined  that if starting with a  smaller project proves                                                               
necessary,  then that  would be  the right  thing to  do, because                                                               
every step taken - even if it's a  little step - is a step in the                                                               
right direction, much  like making payments on  one's credit card                                                               
balance.                                                                                                                        
                                                                                                                                
6:15:53 PM                                                                                                                    
                                                                                                                                
CHUCK BECKER,  noting that  he's recently  retired from  the U.S.                                                               
Commercial Service,  said he's  closely followed  developments in                                                               
Alaska's economy  for a number of  reasons, one of which  is that                                                               
he  and  his wife  want  to  continue to  live  in  the state  as                                                               
retirees.  He then said:                                                                                                        
                                                                                                                                
     I  want to  take this  opportunity to  commend Governor                                                                    
     Palin and  her administration for spurring  interest of                                                                    
     at  least   four  multibillion-dollar   companies  that                                                                    
     together have the capacity  to develop a transportation                                                                    
     system  to monetize  Arctic natural  gas  - a  critical                                                                    
     element in  the prosperous future  for Alaska.   I also                                                                    
     commend each  of you for  taking large amounts  of your                                                                    
     time in  studying the issues associated  with a gasline                                                                    
     project.   It  appears clear  that the  fundamentals in                                                                    
     the market  are such  that the numbers  associated with                                                                    
     the  development   of  a  natural  gas   pipeline  make                                                                    
     economic  sense.   The imperative  is  to minimize  the                                                                    
     enormous, varied risks that loom  over the project like                                                                    
     the Sword of Damocles.                                                                                                     
                                                                                                                                
     To achieve  that end, good faith  cooperation among the                                                                    
     companies  that have  expressed interest  in developing                                                                    
     the trans-Alaska  and Canadian gas pipeline  must begin                                                                    
     immediately.  Now that you  and the administration have                                                                    
     got their attention, the next  step is for the governor                                                                    
     to  call the  parties together  to begin  the requisite                                                                    
     negotiations.    I  believe this  body  should  decline                                                                    
     adoption  of  the  AGIA proposal  with  an  instruction                                                                    
     commending  the administration  for their  achievements                                                                    
     in  spurring the  project and  urging  the governor  to                                                                    
     call for  a timely  gathering of  the key  players that                                                                    
     can make the project a success.                                                                                            
                                                                                                                                
6:17:53 PM                                                                                                                    
                                                                                                                                
JACK HAKKILA remarked that he  taught economics at the University                                                               
of Alaska  in 1969,  back when  oil was  "somewhere in  the $2-$3                                                               
range," and  when the oil pipeline  was built.  He  noted that he                                                               
has met with  about 100 oil companies in Calgary  over the years.                                                               
He mentioned a  friend who was involved in  Canada's discovery of                                                               
oil at  Leduc, outside of  Edmonton, in 1948; the  authorities at                                                               
that  time  decided  not  to  let the  "Seven  Sisters"  [of  the                                                               
petroleum  industry] come  in and  control  Alberta, and  instead                                                               
formed their own company in 1948.   By 1981, that company was the                                                               
largest  petrochemical producer  in  North America,  and was  not                                                               
controlled by any of the major producers.                                                                                       
                                                                                                                                
MR. HAKKILA said he does not  understand why Alaska would want to                                                               
develop its oil  and gas "for the benefit of  the Canadians," and                                                               
suggested that  Alaska should instead  build its own  gasline and                                                               
develop its  own petrochemical industry.   He offered  his belief                                                               
that  developing a  petrochemical  industry would  not require  a                                                               
large  number of  people, and  Alaskans could  benefit from  that                                                               
industry  in   terms  of  employment   and  funding   for  future                                                               
development.   He opined  that the  state should  not "do  any of                                                               
this stuff just to accumulate  money into a treasury," but should                                                               
instead  be doing  something that  benefits Alaskans  rather than                                                               
Canadians.                                                                                                                      
                                                                                                                                
6:21:15 PM                                                                                                                    
                                                                                                                                
PAUL D.  KENDALL said he is  in favor "of those  people who would                                                               
make  the determination  on  AGIA."   He  stated  his purpose  in                                                               
testifying  tonight is  to  convey his  "full  faith and  trust."                                                               
Those  involved  in  the  process  are  "all  well-intended,"  he                                                               
remarked,  and  "just need  to  focus";  regardless of  what  the                                                               
legislature decides,  he will support  that decision.   He stated                                                               
that he amazed  at "the historical moment of  this occasion," and                                                               
that he  has a great  deal of  respect for those  contemplating a                                                               
project of this magnitude.  He  added, "We as [Alaskans] ... must                                                               
come together  as one people  in our understanding of  energy; we                                                               
must understand that true free enterprise  ... is the result of a                                                               
stable and  viable society,  not the  result of  an economically-                                                               
plundered,   over-populated,   confused,  predatory,   kept,   or                                                               
parasitical  society."    All  things  in  society  -  amenities,                                                               
essential  services,  schools,  roads, utilities,  taxes,  banks,                                                               
sexual identities,  organized religions,  entertainments, values,                                                               
commerce, and  governments - are  "begotten from a  single family                                                               
home  and a  rental,"  he opined,  and  characterized clean  air,                                                               
clean water, and  clean energy as three essential  needs "that we                                                               
all owe  each other."  And  freedom, he posited, is  connected to                                                               
energy.                                                                                                                         
                                                                                                                                
MR. KENDALL suggested, therefore,  that Alaska should immediately                                                               
begin to  make itself an  all-electric-based society,  and called                                                               
electricity  and  hydrogen harmonic  fuels,  fuels  that live  in                                                               
harmony  with life's  cycles.   He  remarked  upon Alaska's  vast                                                               
hydroelectric   potential.     He   characterized  large,   free-                                                               
enterprise  oil  companies  as the  emperors  of  capitalism  and                                                               
profits, and said  they represent the "rim" with  the Middle East                                                               
being the "hub."   He said it is imperative  that the legislature                                                               
question why the  major oil companies have been in  Alaska for 20                                                               
years but have  allowed the pipeline to go  two-thirds empty, and                                                               
should "suspect something  unusual."  If one  considers energy to                                                               
be  an essential  need, and  if  "true, free  enterprise" is  not                                                               
applied,  then  that  energy   becomes  a  controlled  substance.                                                               
Alaska is  in a  position to control  that substance  and thereby                                                               
generate capital immediately.                                                                                                   
                                                                                                                                
6:26:10 PM                                                                                                                    
                                                                                                                                
MR. KENDALL opined  that Alaska needs to be  prepared for today's                                                               
"new world,"  wherein a nation's energy  abundance will determine                                                               
its people's fate  for many years to come; and  that the next new                                                               
great  society will  be based  on  clean energy  - energy  that's                                                               
available by  simply turning  on a switch.   Magnetic  fields and                                                               
hydrogen molecules - new energy's  future technology - constitute                                                               
the only viable future that society  can give to its children, he                                                               
remarked.   In response  to a  request that  he clarify  what his                                                               
position is  regarding AGIA, he  said, "I love the  deal," adding                                                               
that he  would like  to see the  oil companies  immediately offer                                                               
the state  a performance  bond because they  are now  moving into                                                               
"power plant positions  across the world" and so  could offer the                                                               
state multiple geothermal,  hydroelectric, and hydrogen projects,                                                               
and electric  vehicles.  He  expressed concern about  [how things                                                               
will  stand]  in  five  to  ten  years,  particularly  given  the                                                               
rapidity with  which technology is  evolving.  He said  that even                                                               
though the  legislature may be  well-intended, the  oil companies                                                               
have  the ability  to  manipulate whatever  market  there is  out                                                               
there.  In conclusion, he said,  "I want to bequeath my faith and                                                               
trust to you people - whatever you determine."                                                                                  
                                                                                                                                
6:29:15 PM                                                                                                                    
                                                                                                                                
SCOTT  HAWKINS, President,  Advanced  Supply Chain  International                                                               
(ASCI);  Chair, ProsperityAlaska.org,  explained that  the latter                                                               
affiliation  was formed  about  nine months  ago  to educate  and                                                               
empower  citizens  to  participate   in  issues  affecting  their                                                               
prosperity.   He opined that Alaska  is at a point  where finally                                                               
there is a pipeline within its  grasp "after many year of wishing                                                               
for one,"  and acknowledged  the efforts  of the  legislature and                                                               
the administration  for moving a  project forward to where  it is                                                               
now.  However, ProsperityAlaska.org has  concerns about AGIA.  He                                                               
noted that  the first  concern is  that Alaska's  government does                                                               
not  have  a  sterling  track record  of  investing  in  economic                                                               
development projects such as the  Healy Clean Coal Project (HCCP)                                                               
and  Alaska  Seafood International,  LLC.    He said  the  failed                                                               
projects  have one  thing in  common:   a certain  hubris in  the                                                               
public sector  that projects  can be  legislated and  funded into                                                               
existence and  become successful  economic entities  competing in                                                               
the  private  sector.     He  said  that  that   is  a  difficult                                                               
proposition, and that AGIA suffers from it as well.                                                                             
                                                                                                                                
MR.  HAWKINS stated  that years  ago, when  he ran  the Anchorage                                                               
Economic Development  Corporation (AEDC), he used  three criteria                                                               
in evaluating whether  or not there was a role  for government in                                                               
a  project.   The first  criterion was  whether the  government's                                                               
role  is a  minority one,  not a  majority role.   He  explained,                                                               
"Because  any time  you have  a  government taking  the lead  and                                                               
providing the  bulk of the  resources for  a project, it's  a red                                                               
flag."    The  second  criterion,   he  noted,  was  whether  the                                                               
investment  is  for  legitimate government  activities,  such  as                                                               
roads, public utilities, or even  training assistance.  The third                                                               
criterion  was that  if the  benefits of  the investment  are not                                                               
mainly  public,   and  the  project   is  not   successful,  then                                                               
government  should get  some enforceable  commitment  to get  its                                                               
money back.   He said those principles served the  AEDC well; for                                                               
example,  the  AEDC  was  involved in  a  number  of  significant                                                               
projects, without a  single failure.  He offered  his belief that                                                               
AGIA fails all  three of the aforementioned criteria,  and so his                                                               
concern is  that AGIA runs the  risk of going down  in history as                                                               
"another embarrassing boondoggle."                                                                                              
                                                                                                                                
MR. HAWKINS  also expressed  the concern  that the  state policy-                                                               
makers involved  in AGIA  are running  the risk  of outdistancing                                                               
their technical expertise.  For  example, on the issue of rolled-                                                               
in rates,  the FERC is a  credible agency that has  existed for a                                                               
long time,  and so he  is not sure that  the state ought  to "lay                                                               
down markers and muddy the waters  on issues like that."  He also                                                               
expressed   concern   with   the   treble-damages   clause,   and                                                               
characterized  it as  bad policy  because it  limits the  state's                                                               
options  to  do  something  different,  even  necessary,  in  the                                                               
future.   He said that  ProsperityAlaska.org is also  troubled by                                                               
the AGIA process  in that the major oil producers  are "getting a                                                               
tone  of confrontation  from state  government."   Characterizing                                                               
himself  as a  student of  economic development,  he said  he has                                                               
watched political jurisdictions world  wide succeed and fail, and                                                               
has  yet  to  see  any  of   them  ever  confront  their  way  to                                                               
prosperity.                                                                                                                     
                                                                                                                                
MR. HAWKINS,  stating his belief  that there is  probably benefit                                                               
in having more  than one competing proposal on the  table at this                                                               
stage, suggested that the legislature  amend AGIA such that there                                                               
is  a better  balance between  the private  and public  resources                                                               
being put into  the project; such that  the treble-damages clause                                                               
is eliminated;  such that the  provisions around  rolled-in rates                                                               
are toned down;  and such that something is put  in place so that                                                               
the major producers could join in  at some point in time.  Alaska                                                               
finally has  an opportunity  to advance this  project, but  he is                                                               
troubled by the approach that is being taken, he relayed.                                                                       
                                                                                                                                
MR. HAWKINS concluded:                                                                                                          
                                                                                                                                
     I  think there's  a way  out here;  I think  victory is                                                                    
     within  our  grasp.   We  have  to  be careful  not  to                                                                    
     overplay  our hand,  as  a state.  ...  By making  some                                                                    
     courageous  decisions  today,  the odds  of  getting  a                                                                    
     pipeline built can be enhanced  and not diminished.  We                                                                    
     need sound policy - not sound politics.                                                                                    
                                                                                                                                
MR.  HAWKINS,  in  response to  questions,  provided  information                                                               
about ProsperityAlaska.org, and confirmed  that none of the major                                                               
oil companies are members.                                                                                                      
                                                                                                                                
REPRESENTATIVE GARA  pointed out that before  AGIA and government                                                               
involvement,  "voluntary"  involvement  by the  producers  hadn't                                                               
resulted in  a pipeline; therefore,  he asked Mr. Hawkins  why he                                                               
would  expect that  if AGIA  is not  adopted, suddenly  the major                                                               
companies would propose an acceptable pipeline plan.                                                                            
                                                                                                                                
MR. HAWKINS  clarified that  he is  not saying  that there  is no                                                               
role  for government  in  this  process or  that  AGIA should  be                                                               
eliminated;  rather, AGIA  should be  made less  confrontational,                                                               
and its terms should be changed  so that there is less government                                                               
involvement and more private-sector  involvement.  TransCanada is                                                               
a  solid company,  and  the  state does  have  interests in  this                                                               
process, interests which are  generally pretty well-aligned with,                                                               
though not identical to, those of the producers.                                                                                
                                                                                                                                
6:38:58 PM                                                                                                                    
                                                                                                                                
HEATH  HILYARD,   Staff,  Advanced  Supply   Chain  International                                                               
(ASCI); Board Member,  ProsperityAlaska.org, stated that although                                                               
tremendous headway and  advanced discussion has been  made by the                                                               
administration and legislature  with regard to AGIA,  he does not                                                               
think  a   $500  million  inducement   is  required  to   move  a                                                               
commercially-viable project forward.  In  response to a question,                                                               
he stated that his position on  AGIA "would be one of a qualified                                                               
opposition."                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GRUENBERG  said  "It  seems  to  me  whether  you                                                               
provide  cash to  somebody or  you allow  them to  keep money  in                                                               
their  pocket by  giving them  a tax  break, the  bottom line  is                                                               
pretty much the same."                                                                                                          
                                                                                                                                
MR. HILYARD concurred.                                                                                                          
                                                                                                                                
6:41:53 PM                                                                                                                    
                                                                                                                                
MIKE  KENNY,  after expressing  a  preference  for an  all-Alaska                                                               
gasline route,  said that although  he welcomes  the transparency                                                               
of the  AGIA process, he still  believes it resulted in  only one                                                               
applicant  who filled  out the  application  correctly and  "went                                                               
through the process."  He continued:                                                                                            
                                                                                                                                
     I don't  know that the  almost unanimous vote  for AGIA                                                                    
     would  necessarily mean  that  this would  be a  rubber                                                                    
     stamp for the  result of this first round  of AGIA, or,                                                                    
     maybe, it'll  turn out  to be the  final round.   There                                                                    
     are  many reasons  that  I think  AGIA  has produced  a                                                                    
     result that  will not be  in the best interests  of the                                                                    
     citizens.   Number one is  the time:   2020.   We can't                                                                    
     wait that long; ... that's beyond the pale.                                                                                
                                                                                                                                
MR. KENNY  noted that he  had passed  out a report,  including an                                                               
interview  with Peter  Lougheed, the  Alberta premier  from 1971-                                                               
1985 and father  of that province's petrochemical  industry.  Mr.                                                               
Kenny said former Premier Lougheed  was completely shaken after a                                                               
helicopter ride  over the  Alberta "tar  sands," during  which he                                                               
saw the worst devastation he  has seen.  Former Premier Lougheed,                                                               
Mr. Kenny relayed,  predicted that there would  be a decades-long                                                               
fight  in  Canada  between Alberta's  right  to  development  its                                                               
resource  and  the Canadian's  right  to  control the  amount  of                                                               
greenhouse  emissions in  the  air.   Mr.  Kenny  said there  are                                                               
several  indications   that  no  one   had  any  idea   that  the                                                               
devastation that they're now seeing  would be the end result, and                                                               
mentioned that an abnormal number  of cancer cases are presenting                                                               
in Canadian villages.                                                                                                           
                                                                                                                                
MR.  KENNY, with  regard  to  the tar  sands,  said  it makes  no                                                               
economic sense  for any of the  producers to send their  gas down                                                               
to Chicago  when just 1  Bcf of gas  is going to  produce 800,000                                                               
barrels of oil  a day at whatever  the price a barrel  of oil is.                                                               
He offered  his belief that  environmentalists and  First Nations                                                               
people are going  to preclude development of the  gas pipeline on                                                               
the  proposed route  anyway, and  that the  need for  oil in  the                                                               
Lower  48   -  particularly  given  "the   deterioration  of  our                                                               
relationship with Venezuela  and what's happening in  Iraq" - far                                                               
outweighs the  need for natural gas.   That oil is  going to come                                                               
from Canada's tar sands.                                                                                                        
                                                                                                                                
MR. KENNY said  he does not have anything  against monetizing the                                                               
tar sands  in Canada, but suggested  that if that is  going to be                                                               
done, "why  not save ourselves  1,700 miles of pipe  and monetize                                                               
West Sak,  Schrader Bluff,  and Ugnu,  and get  our heavy  oil to                                                               
market, and put that in our  pipeline" in stead of building a gas                                                               
pipeline.   In  response to  an inquiry  regarding his  stance on                                                               
AGIA, Mr. Kenny stated, "I'm not supporting the result of AGIA."                                                                
                                                                                                                                
6:47:41 PM                                                                                                                    
                                                                                                                                
DANIEL DeNARDO testified in opposition  to AGIA.  He told members                                                               
that he was Alaska's first  petroleum revenue auditor and handled                                                               
all the  petroleum audits of  the oil  companies, as well  as all                                                               
the  royalty  and production  tax  payments.   Referring  to  the                                                               
Alaska Petrochemical Company  (Alpetco) project, he characterized                                                               
it  as a  financial and  political fraud,  and indicated  that he                                                               
views AGIA  similarly.  Acknowledging that  legislators will vote                                                               
as each  sees fit, he noted  that the first paragraph  of Article                                                               
I,  Section 10,  of  the  Constitution of  the  United States  of                                                               
America reads:                                                                                                                  
                                                                                                                                
     No  state shall  enter  into any  Treaty, Alliance,  or                                                                    
     Confederation;  grant Letters  of Marque  and Reprisal;                                                                    
     coin Money;  emit Bills of  Credit; make any  Thing but                                                                    
     gold  and silver  Coin a  Tender in  Payment of  Debts;                                                                    
     pass any Bill  of Attainder, ex post facto  Law, or Law                                                                    
     impairing  the Obligation  of Contracts,  or grant  any                                                                    
     Title of Nobility.                                                                                                         
                                                                                                                                
MR.  DeNARDO  referred to  Sinopec  and  characterized it  as  "a                                                               
communist-controlled facility in a  corporation," and opined that                                                               
"the decisions you're  being asked to make in  this situation are                                                               
decisions that  nations make,  not corporate  controlled states."                                                               
He concluded  that it  is Alaska's destiny  to develop  a gasline                                                               
for  in-state  use  only,  not for  transport  outside  of  state                                                               
boundaries.  He  asked legislators to look out  for the integrity                                                               
of their constituencies when making their decision.                                                                             
                                                                                                                                
6:54:18 PM                                                                                                                    
                                                                                                                                
MIKE ROGERS offered his understanding  that U.S. domestic markets                                                               
will have the ability to obtain  Alaska natural gas after some is                                                               
used in [the  Canadian] oil sands.  He said  he questions whether                                                               
those  oil sands  would  be uneconomical  or  wasted if  Alaska's                                                               
natural gas  is not  at some point  dedicated to  extracting that                                                               
problematic resource.   On the issue of exporting  LNG to markets                                                               
in Japan, Korea,  and Taiwan, he noted that  although some people                                                               
would  suggest that  "American  gas needs  to  go to  Americans,"                                                               
Alaska's molecules of methane fetch  top dollar in Asian markets,                                                               
and  so  Alaska  should  advocate for  extending  an  LNG  export                                                               
license to Asia,  including China.  The U.S.  must find something                                                               
to sell to Asian bond holders  in order to preserve its financial                                                               
system,  he  warned, because  not  doing  so  might result  in  a                                                               
precipitous  drop  in the  U.S.  dollar,  or devastation  of  the                                                               
Social Security and Medicare systems.   In conclusion, he offered                                                               
his  belief  that a  "nay"  vote  on TransCanada's  license  will                                                               
result  in huge  opportunities  for  Alaska.   In  response to  a                                                               
question from  the chair, he  clarified that he does  not support                                                               
AGIA at this time "in this form."                                                                                               
                                                                                                                                
7:01:05 PM                                                                                                                    
                                                                                                                                
CARY CARRIGAN said he doesn't  really support AGIA in its current                                                               
form because he doesn't think that  the state needs to spend $500                                                               
million  to get  a pipeline.   Legislators  should consider  what                                                               
AGIA  actually  represents and  what  its  costs  will be.    The                                                               
process encompassed in AGIA, he offered,  is a good one, but what                                                               
AGIA gives  away is  too great.   In  conclusion, he  offered his                                                               
understanding  that the  producers  are currently  trying to  put                                                               
together parts of  a pipeline, and expressed support  for an all-                                                               
Alaska gas pipeline.                                                                                                            
                                                                                                                                
7:03:27 PM                                                                                                                    
                                                                                                                                
RICK  BARRIER,  Executive  Director, Commonwealth  North,  stated                                                               
that  Commonwealth  North has  been  in  existence for  about  30                                                               
years, has studied gas pipelines  for probably 25 of those years,                                                               
and has  issued a  report on  TransCanada's proposal  under AGIA.                                                               
Although  neither  for  or against  that  proposal,  Commonwealth                                                               
North  would like  the legislature  to  consider certain  points:                                                               
getting gas to  market as soon as possible;  having a competitive                                                               
oil and  gas exploration  business in  Alaska; pricing  energy as                                                               
low  as possible  for Alaskans;  knowing  what the  cost of  this                                                               
proposal  will be  to the  state in  terms of  infrastructure and                                                               
other state responsibilities; and developing some sort of value-                                                                
added processes in state for commercializing petroleum products.                                                                
                                                                                                                                
MR. BARRIER relayed  that Commonwealth North would  also like the                                                               
legislature to consider  the following questions.   Why would the                                                               
state's contribution  of $500  million not  entitle the  state to                                                               
some equity  position or  return on its  investment?   Should the                                                               
state  have  an  equity  position?    How  can  the  shippers  or                                                               
TransCanada   produce    an   informed   estimate    of   project                                                               
profitability without knowing  what tax regime might  be in place                                                               
during the life of the project?   What would the potential impact                                                               
on the project  be if Point Thomson gas is  not available?  Would                                                               
granting an AGIA license put up  a barrier to some other types of                                                               
projects that might be successful  and that would include all the                                                               
various parties?   Why wouldn't the state want to  lead an effort                                                               
to bring these  parties together, which could  possibly result in                                                               
a more  efficient product and  lower tariff?   And, if  the state                                                               
decides  it does  want to  do that,  would it  still face  treble                                                               
damages?                                                                                                                        
                                                                                                                                
MR.  BARRIER indicated  that Commonwealth  North would  also like                                                               
the legislature  to consider the  following questions  related to                                                               
TransCanada's proposal.   Why is it necessary  for TransCanada to                                                               
receive $500 million from the  state if "the other project that's                                                               
been under way" can proceed without  support from the state?  Why                                                               
would TransCanada only spend approximately  one-fifth of what the                                                               
producers said they were going to  spend to reach open season and                                                               
FERC  certification?   If  TransCanada  reaches  open season  and                                                               
"it's not successful,"  why would the state want  to support that                                                               
with  a $500  million  infusion to  get  the FERC  certification?                                                               
Would any  new participants that  joined TransCanada be  bound to                                                               
the same  "must-haves" as TransCanada?   Could the  state somehow                                                               
compel lease  holders to  make firm  shipping commitments  on the                                                               
TransCanada pipeline?  If the  ANGDA, ENSTAR Natural Gas Company,                                                               
and  the Alaska  Gasline  Port Authority  (AGPA),  or some  other                                                               
entity were  able to  secure commitments to  build a  pipeline in                                                               
open season that exceeded 500  million cubic feet (MMcf) per day,                                                               
would this trigger AGIA's treble-damages clause?                                                                                
                                                                                                                                
7:08:22 PM                                                                                                                    
                                                                                                                                
MR.  BARRIER indicated  that Commonwealth  North would  also like                                                               
the legislature  to consider the  following questions  related to                                                               
both  the  Denali  project  and  TransCanada's  proposal.    What                                                               
assurance do  the people of  Alaska have that the  Denali project                                                               
would proceed in a timely  fashion should the TransCanada project                                                               
not move  ahead?  Since  AGIA limits equity financing,  how would                                                               
the tariff  structure be impacted  by a differential in  the cost                                                               
of borrowing for the Denali  project versus the cost of borrowing                                                               
for TransCanada?   Will  Alaska be better  off if  oil companies,                                                               
rather than TransCanada,  own the gas pipeline?  How  would it be                                                               
better for the  pipeline to be owned only by  a pipeline company?                                                               
How  will TransCanada's  proposal and  the Denali  project ensure                                                               
that there  would be open  access to gas  development, expansion,                                                               
and shipping, as well as fair  and reasonable tariffs for new gas                                                               
developers?   How does the  Denali project ensure that  the state                                                               
can pursue both meeting its  in-state needs and using natural gas                                                               
and gas liquid  to develop the petrochemical  industry in Alaska?                                                               
And how would future possibilities  for LNG be accommodated under                                                               
either the Denali project or TransCanada's proposal?                                                                            
                                                                                                                                
7:09:57 PM                                                                                                                    
                                                                                                                                
SENATOR BUNDE  said he  has heard that  the real  economic impact                                                               
for jobs for  Alaska won't necessarily be in the  building of the                                                               
gas  pipeline  -   though  that  will  result   in  a  short-term                                                               
construction boom  - but  rather in  the development  of multiple                                                               
wells due to rolled-in rates;  for example, "In Canada, when they                                                               
built the first  line," there were a 100 wells,  and that's since                                                               
grown to 13,000  wells.  He asked whether  Commonwealth North has                                                               
considered this,  and if, in its  view, that would likely  be the                                                               
scenario in Alaska - that the  major impact for jobs and economic                                                               
growth in  the state would  be from continued  exploration rather                                                               
than from the initial construction of the pipeline.                                                                             
                                                                                                                                
MR. BARRIER answered that he has  heard that as well, but pointed                                                               
out that  "you can't  have any  jobs until  you have  a gasline."                                                               
The questions of  what then happens in terms  of exploration, and                                                               
how fast  and how much  the basin  will be developed  are unknown                                                               
and  depend on  who is  doing the  developing.   He reminded  the                                                               
legislature that there is a limited supply of gas.                                                                              
                                                                                                                                
JED  WHITTAKER   noted  that  the   $500  million   proposed  for                                                               
TransCanada's  proposal and  the  $1.2 billion  in energy  relief                                                               
proposed  by Governor  Palin  adds up  to 6.6  percent  of a  $30                                                               
billion pipeline.   He  said agrees  with former  Governor Walter                                                               
Hickel that  the state should build  and own its own  natural gas                                                               
pipeline, because that  will be the quickest  and most profitable                                                               
way of "accomplishing this goal."   Furthermore, in doing so, the                                                               
state would not be reliant  on a corporation's possibly disparate                                                               
goals.  He concluded by saying that  if the goal is to manage the                                                               
state's  natural   resources  according  to  the   [Alaska  State                                                               
Constitution] -  in other words,  for the maximum benefit  of the                                                               
people -  one has  to consider future  generations, and  owning a                                                               
gas pipeline would be highly profitable for many years to come.                                                                 
                                                                                                                                
7:15:41 PM                                                                                                                    
                                                                                                                                
RICK CAREY stated  his belief that "AGIA is the  right way to go"                                                               
based upon what little he has  read in the newspaper and upon the                                                               
United  State's participation  in the  North American  Free Trade                                                               
Agreement (NAFTA), adding,  "If you agree with ...  NAFTA and you                                                               
want to deal with the world, this  is the way it is."  He offered                                                               
his  understanding  that originally  a  gas  pipeline was  to  be                                                               
constructed in  order to take care  of in-state needs only.   If,                                                               
after those  needs are met,  there is  any extra natural  gas, it                                                               
should be offered  to the rest of U.S. first  and then perhaps to                                                               
other countries.   He said he has heard  some legislators express                                                               
interest  in selling  Alaska's gas  to  those who  can offer  the                                                               
highest price  even if that  means not  selling to the  Lower 48.                                                               
He expressed  disfavor with that  concept, but clarified  that he                                                               
is not  saying that the  state shouldn't  sell its gas  to China,                                                               
for  example.   In conclusion,  he expressed  a concern  that the                                                               
terms being used by the various parties are not clearly defined.                                                                
                                                                                                                                
7:18:53 PM                                                                                                                    
                                                                                                                                
FRANK BAINES said he opposes AGIA.   He stated that he would like                                                               
to  see  an all-Alaska  gas  pipeline  built because  that  would                                                               
provide the  most jobs for  Alaskans and would solve  the problem                                                               
of what will  happen to the gas  once it crosses the  border.  He                                                               
said he thinks the gasline  should "benefit Alaskans the most" by                                                               
helping bring the  [cost] of energy down.  An  LNG plant, perhaps                                                               
in Valdez, could  provide LNG to both the Lower  48 and the Asian                                                               
Pacific  theatre.   He indicated  that it  should be  possible to                                                               
provide a product for consumers all over the world.                                                                             
                                                                                                                                
7:21:13 PM                                                                                                                    
                                                                                                                                
WILLIAM BASSETT testified that oil has  put food on his table for                                                               
the last  49 years, both  as a  direct employee of  oil companies                                                               
and via  contract services  to oil companies.   He  remarked upon                                                               
other  ventures that  the state  has attempted  to undertake  but                                                               
failed at, and  offered his understanding that  at a presentation                                                               
by  BP after  the AGIA  legislation was  introduced, the  company                                                               
said it could not [apply for  a license under AGIA] because doing                                                               
so would  violate federal  laws, and that  Conoco and  Exxon were                                                               
taking a similar stance.  And  if such laws don't actually exist,                                                               
he  queried,   why  then  didn't   the  oil  companies   make  an                                                               
application  under  AGIA.   He  noted  that  under  TransCanada's                                                               
proposal, TransCanada  will get  $500 million  just to  start the                                                               
initial  certification paperwork,  and that  that money  won't be                                                               
used  to actually  build  any  of the  pipeline.   He  suggested,                                                               
therefore, that the  state could make better use of  its money in                                                               
other  ways  such  as  by  building a  bridge,  or  fighting  the                                                               
environmental  organizations that  stop oil  exploration and  the                                                               
development   of   off-shore   oil,   ANWR,   geothermal   power,                                                               
hydroelectric   dams,   coal   bed  methane   (CBM),   and   road                                                               
construction.                                                                                                                   
                                                                                                                                
MR.  BASSETT  expressed   disappointment  that  some  legislators                                                               
indicated that holding  hearings across the state was  a waste of                                                               
time.   He offered his  understanding that Point Thomson  has oil                                                               
and high-pressure gas,  and asked how any gas  could be delivered                                                               
to market  without a  gasline.   He offered  his belief  that the                                                               
reason  North Slope  producers have  not built  [a gas  pipeline]                                                               
already  is  because the  cost  of  doing  so far  outweighs  any                                                               
expected returns; unless  the price of gas goes up,  a gasline is                                                               
not practical.   He opined  that the  state needs to  stand aside                                                               
and  let the  "professionals" do  the  job; for  example, if  the                                                               
owners of the  proposed Denali project want  to hire TransCanada,                                                               
then let them do that - let  them make that decision - because he                                                               
has no faith that the state can  do any better than it has in the                                                               
past.  If nothing else, he  remarked, build a smaller pipeline to                                                               
the coast and supply gas to  Alaskans and industry.  He expressed                                                               
disfavor with  AGIA as  it currently  stands, and  indicated that                                                               
supporting  the  Denali  project  is currently  the  only  viable                                                               
approach to take.                                                                                                               
                                                                                                                                
7:25:00 PM                                                                                                                    
                                                                                                                                
CASH FAY,  after noting  that he  has worked for  an oil  and gas                                                               
company for over  17 years, characterized TransCanada  as a good,                                                               
reputable  company, but  opined  that "the  process"  - not  AGIA                                                               
itself - has  failed because it did not foster  competition as it                                                               
was touted to do.  Characterizing  the $500 million as a subsidy,                                                               
he  offered  his  understanding that  the  treble-damages  clause                                                               
could result in a  loss to the state of up  to $1.7 billion; that                                                               
TransCanada  might   be  risking  only  about   $111  million  in                                                               
comparison; and  that even before  AGIA was signed into  law, the                                                               
producers  had  indicated that  they  wouldn't  be requiring  any                                                               
subsidies  to  build   a  gas  pipeline,  and   thus  he  doesn't                                                               
understand the need for providing  TransCanada with $500 million.                                                               
He said it is important to  note that neither the Denali proposal                                                               
nor  the  TransCanada  proposal  can or  will  guarantee  that  a                                                               
pipeline will ever be built  - instead, economics will drive that                                                               
decision.                                                                                                                       
                                                                                                                                
MR.  FAY, regarding  hydrocarbon leases,  expressed concern  that                                                               
litigation will  hold up the  building of a gasline,  and offered                                                               
his  understanding that  the  producers have  lived  up to  their                                                               
lease requirements, to which the  AOGCC has testified repeatedly.                                                               
Gas reinjection has  produced an additional 3  billion barrels of                                                               
oil on  the North Slope,  and "oil  is still king,"  he remarked.                                                               
On  the issue  of Point  Thomson, he  said the  state is  just as                                                               
culpable  of the  lack  of development  there,  and surmised  the                                                               
question  of  how to  proceed  with  Point  Thomson needs  to  be                                                               
addressed.    Last  year  the legislature  was  told  that  Point                                                               
Thomson is  needed for  major gas  sales, while  in the  last few                                                               
weeks, the  legislature has been told  it isn't needed.   He said                                                               
he has  heard on the  news that the  producers are not  trying to                                                               
commercialize Alaska's  gas, but he  thinks that the  opposite is                                                               
true.  For  example, from 2000-2002, the  producers invested over                                                               
$125 million, "and now we have  Denali today," he added.  He then                                                               
listed some Henry  Hub prices [for natural gas]:   $1.49 in 1991;                                                               
$3.33 in  2002; $5.85 in 2004;  $8.79 in 2005; and  $13.07 today,                                                               
in   2008.     Mr.   Fay   said,   "It's  about   economics   and                                                               
commercialization."                                                                                                             
                                                                                                                                
7:29:50 PM                                                                                                                    
                                                                                                                                
MR. FAY  suggested that the  real issue is fiscal  certainty, and                                                               
offered his  belief that the  producers are committed  to staying                                                               
in Alaska.   He opined that  when one is entering  into ship-and-                                                               
pay commitments for 25-plus years,  one doesn't need a "Trust me,                                                               
we'll help  you out with  the taxes  later" approach.   Instead a                                                               
fiscal framework is  necessary.  Alaska's oil and  gas taxes were                                                               
changed at  least three times over  a four-year period -  once by                                                               
the previous  administration, once through PPT,  and once through                                                               
ACES.  At today's  West Coast price for oil -  $1.3118 a barrel -                                                               
and with  the progressivity provided  for via ACES,  the marginal                                                               
tax rate  is the highest  in North America, possibly  the highest                                                               
in the world.  Furthermore, that's  a retroactive tax.  He asked,                                                               
"Would  you  like  it  if  the federal  government  came  in  and                                                               
retroactively looked at your income taxes?"                                                                                     
                                                                                                                                
MR. FAY offered his belief that  the immediate effect of that tax                                                               
rate was  the loss of $400  million dollars in investment  by the                                                               
producers.   The  producers take  all  the risks,  yet the  state                                                               
wants  to reap  four times  the profitability,  he remarked,  and                                                               
indicated that he  doesn't support that approach.   He then noted                                                               
that the  TAPS, at its  peak, produced approximately  2.2 billion                                                               
barrels a  day; now it's around  700,000 barrels a day,  with a 6                                                               
percent decrease per  year.  He stated that he  would like to see                                                               
both  the  administration  and  the  legislature  work  with  the                                                               
producers because they own the leases  and are living up to their                                                               
lease  commitments.   He  concluded:   "You  want  to spend  $500                                                               
million?  Hire the best negotiators  out there and come to fiscal                                                               
terms with the producers.  I  bet it won't cost $500 million, and                                                               
maybe we'll get a pipeline."                                                                                                    
                                                                                                                                
7:32:24 PM                                                                                                                    
                                                                                                                                
LORNE BAILEY offered  his understanding that much of  the gas and                                                               
oil used  to operate vehicles in  the U.S. comes from  the Middle                                                               
East.   It doesn't  make sense that  Alaska should  be extracting                                                               
oil and  natural gas and  then sending it overseas  before having                                                               
the chance to sell it locally.   He stated support for AGIA, with                                                               
the  understanding  that  the  gas   be  locally  produced,  with                                                               
anything left  over after that sent  via Canada to the  Lower 48.                                                               
He said  that although  he does  not want a  decision to  be made                                                               
hastily, he also  does not want the process delayed.   Mr. Bailey                                                               
opined that  the state  should also  be looking  into alternative                                                               
energy sources.                                                                                                                 
                                                                                                                                
7:36:01 PM                                                                                                                    
                                                                                                                                
DOMINIC  LEE,  Owner,  Chief   Executive  Officer  (CEO),  Little                                                               
Susitna  Construction  Company,  offered his  understanding  that                                                               
Sinopec proposed building a 48-inch  pipeline from Prudhoe Bay to                                                               
Valdez  in the  existing  corridor, as  well  as a  petrochemical                                                               
plant and LNG plant in Valdez.   Once gas is in that pipeline, he                                                               
suggested, then  a certain  amount could be  provided to  all the                                                               
cities  in  Alaska that  can  use  natural  gas, and  that  those                                                               
communities and cities that could  not get gas directly from that                                                               
pipeline  could instead  be provided  with LNG  or "propane  auto                                                               
gas" so  that everybody can have  real cheap energy.   Under this                                                               
scenario, for example, the cost  per kilowatt hour for generating                                                               
electricity and home  heating would be lower -  perhaps even less                                                               
than  $100  per  month  per family.    Additionally,  the  excess                                                               
pentene,  which, he  proffered, is  equal to  gasoline, could  be                                                               
sold  to  all  the  gas  stations for  $.30  a  gallon,  so  that                                                               
everybody can buy cheap gas.                                                                                                    
                                                                                                                                
MR. LEE surmised  that what is not used in  Alaska, would then be                                                               
turned into  LNG for sale  to Japan, China, Hawaii,  South Korea,                                                               
Taipei, and Taiwan.  Under  Sinopec's proposal, the product would                                                               
not be sent  to the Lower 48  because of the belief  that it will                                                               
instead  end up  in  Canadian "thin  oil"  operations, which  are                                                               
already  condemned by  "the Canadian  EPA" because  they are  the                                                               
biggest  source  of   pollution  in  the  world   and  thus  will                                                               
eventually get  shut down by  the people  of Canada.   He offered                                                               
some comparison  prices and calculated  that selling  the product                                                               
to China  over the  lifetime of  the pipeline  - even  at today's                                                               
prices - will result in $1.1  trillion, and more than double what                                                               
the state  would receive by  sending the product  through Canada.                                                               
He reminded  members that once  the product  is gone, it  is gone                                                               
for good, and  so the state should try to  receive the best price                                                               
it can while  it can.  After surmising that  China would also buy                                                               
LNG from other locations around the  world, he said he is against                                                               
AGIA  because  of  economic  reasons;  although  he  thinks  that                                                               
TransCanada  is  a  good  company,   it  doesn't  deserve  triple                                                               
damages.                                                                                                                        
                                                                                                                                
MR. LEE indicated that another  advantage to the Sinopec proposal                                                               
is that China  would not need Alaska's $500 million,  and in fact                                                               
could simply loan  Alaska the money to build the  pipeline and do                                                               
so at  6 percent, compared  to the 14.5 percent  that TransCanada                                                               
would charge.   On the issue of export licensing,  he opined that                                                               
it  would be  entirely possible  for Alaska  to obtain  an export                                                               
license to  Taiwan or to  South Korea  or to Japan,  for example,                                                               
and offered his  understanding that such a license  would be good                                                               
for  25  years  from  the   day  Alaska  starts  exporting.    In                                                               
conclusion, Mr.  Lee said his  heart is  here in Alaska  - having                                                               
lived here for 30-some years and  having raised his family here -                                                               
and  he wants  what's best  for the  state, such  as keeping  the                                                               
state's economy strong.  He posited  that selling gas to China is                                                               
not an issue of patriotism because  it will help the U.S. finance                                                               
its trade  deficit, particularly  given that  the U.S.  dollar is                                                               
losing buying power compared to the Chinese currency.                                                                           
                                                                                                                                
7:45:12 PM                                                                                                                    
                                                                                                                                
VESTA  ELLIOT,  Owner,  Organic  Hair  Design,  surmised  that  a                                                               
serious  energy  crisis  is   approaching,  with  no  foreseeable                                                               
resolution.   She stated, "I  believe that this inflation  is the                                                               
oil industry's agenda  of praying upon our  fears," and predicted                                                               
that  either  allowing  the  oil industry  to  continue  to  have                                                               
complete  control  or changing  lifestyles  will  prove to  be  a                                                               
financial challenge.   She offered  her understanding  that there                                                               
has been successful development  of renewable energy resources in                                                               
Iceland,  and  noted  that  there   has  been  little  discussion                                                               
regarding the environment  and how the proposed  gas pipeline may                                                               
potentially affect it.  She said  that she does not believe there                                                               
are enough  facts available to  Alaska's citizens  regarding this                                                               
issue, and that that the  oil industry has been relatively inured                                                               
to the damages  it causes to the environment -  both globally and                                                               
locally.     Little  has  been   heard  about   the  preventative                                                               
maintenance that  has not be  undertaken with respect to  the oil                                                               
pipeline and the clean up currently going on "up on the tundra."                                                                
                                                                                                                                
MS. ELLIOTT  stated her firm  belief that the $500  million would                                                               
be better  invested in moving  towards renewable energy,  such as                                                               
geothermal  energy.     She  indicated  agreement   with  earlier                                                               
comments  that practical  solutions and  money can  be made  from                                                               
renewable  energy  sources, and  stated  her  belief that  Alaska                                                               
needs  to stay  beautiful.   She offered  her understanding  that                                                               
although it will take $500  million just for the paperwork, there                                                               
may only be  five years' worth of gas available.   With regard to                                                               
monetizing  the  tar  sands  in  Canada,  she  commented  on  the                                                               
environmental  damage caused  by  producing even  just the  small                                                               
amount of oil available there;  for example, scarecrows have been                                                               
erected to  keep the  migratory birds from  landing in  the toxic                                                               
waste.   Ms. Elliott concluded by  stating that at this  point in                                                               
time, she  is opposed  to AGIA.   She said  she thinks  there are                                                               
environmentally  friendly   alternatives,  and  Alaska   has  the                                                               
opportunity to join  other parts of the world  in utilizing these                                                               
[alternative energy sources].                                                                                                   
                                                                                                                                
7:48:30 PM                                                                                                                    
                                                                                                                                
ANDREW  HALCRO  opined that  the  testimony  that's important  to                                                               
listen to is  that of the regulators and those  who will actually                                                               
"write the checks  and bear the risk for this  project."  He said                                                               
that  for  a  year  or  more  he  has  heard  two  phrases,  "the                                                               
likelihood  of success,"  and  "reasonable  players," and  opined                                                               
that the likelihood of successfully  getting a gas pipeline rests                                                               
solely on the  shoulders of those "reasonable  players," who have                                                               
testified  that  without  Point   Thomson,  there  won't  be  any                                                               
financing  for a  gasline,  and  that the  state  needs to  offer                                                               
fiscal certainty  on this project.   Furthermore, representatives                                                               
from BP  and Conoco,  he noted,  have testified  that AGIA  is so                                                               
commercially  unviable  that  they're  going to  proceed  with  a                                                               
project of  their own [outside of  the constraints of AGIA].   He                                                               
said  he thinks  TransCanada  communicated a  clear message  last                                                               
year when  its representatives testified that  without customers,                                                               
there will  be no credit  and thus  no pipeline, and  opined that                                                               
although  he  thinks TransCanada  is  a  fine company,  the  AGIA                                                               
process sets it up to fail.                                                                                                     
                                                                                                                                
MR. HALCRO spoke  of the proposed $500 million  investment by the                                                               
state,  and expressed  doubt  that without  the  promise of  that                                                               
funding, TransCanada  would still be  seeking a license.   Noting                                                               
that he  served in the legislature  when oil was $9  a barrel, he                                                               
relayed that that $500 million is  not what concerns him the most                                                               
about the  proposal; instead,  what alarms him  the most  are the                                                               
contractual  terms of  AGIA.   By assigning  exclusive rights  to                                                               
TransCanada,  the  state  will  be  precluding  both  itself  and                                                               
TransCanada  from  pursuing any  future  alternatives.   He  then                                                               
referred to testimony  provided by [a former]  FERC employee that                                                               
the  FERC has  never granted  a certificate  to an  applicant who                                                               
showed up without credit and  customers, and that AGIA engendered                                                               
special  federal legislation  regarding  FERC  certificate.   Mr.                                                               
Halcro  told  legislators  that  if   they  think  [AGIA]  is  an                                                               
insurance policy  keeping the producers honest,  then they should                                                               
also think about the terms to  which they would be committing the                                                               
state.  He  reiterated that those terms are  contractual and lock                                                               
the state  into one plan  only.   In conclusion, he  suggested to                                                               
legislators that they echo his concerns to their constituents.                                                                  
                                                                                                                                
7:55:09 PM                                                                                                                    
                                                                                                                                
TOM  WALSH,  Managing  Partner, Petrotechnical  Resources  Alaska                                                               
(PRA) -  after relaying  that PRA  is an  oil and  gas consulting                                                               
company that employs approximately  70 oil and gas professionals,                                                               
and that  PRA's clients include major  oil companies, independent                                                               
oil companies, the  State of Alaska, the  federal government, and                                                               
Native corporations -  said PRA supports projects  that can stand                                                               
on their  own and produce money  for Alaska.  He  said he doesn't                                                               
believe that it  is in the best interest of  the state to provide                                                               
TransCanada with $.5  billion for a project he  doesn't think has                                                               
a  chance of  success, and  suggested to  members that  they vote                                                               
against granting TransCanada a license.                                                                                         
                                                                                                                                
MR. WALSH relayed  his hope that future open  seasons will result                                                               
in the  producers nominating  their gas for  shipment.   He asked                                                               
members   to  consider   the   negative   impact  that   granting                                                               
TransCanada a  license could  have on the  other, what  he termed                                                               
"far  more  sensible,"  gas pipeline  project,  and  warned  that                                                               
endorsing and  financially backing the TransCanada  project would                                                               
in effect  align the state against  the Denali project.   Such an                                                               
alignment would be a big  mistake, he remarked; although it could                                                               
be healthy to have two  projects competing for the opportunity to                                                               
move North  Slope gas to  market, the state shouldn't  be backing                                                               
what he considers to be the weaker of the two projects.                                                                         
                                                                                                                                
MR. WALSH  characterized the treble-damages clause  as dangerous,                                                               
and  said  he is  convinced  that  it  will have  an  unintended,                                                               
catastrophic impact on  getting a gas pipeline  built, because it                                                               
precludes the  state from helping  any other project  go forward.                                                               
At a minimum, the state needs  to be able to support all projects                                                               
equally in order to increase the  probability of success.  And if                                                               
the Denali project  is able to stand on its  own, then supporting                                                               
TransCanada's   pipeline  is   a   waste  of   money  and   time,                                                               
particularly if  no shippers nominate  their gas during  the open                                                               
season.   Mr.  Walsh offered  his  belief that  despite what  Mr.                                                               
Palmer  claims,   TransCanada  also  has  $9   billion  worth  of                                                               
liability   to    its   former   partners,    and   characterized                                                               
TransCanada's proposed project as "a  horse with at least two bad                                                               
legs."                                                                                                                          
                                                                                                                                
7:59:30 PM                                                                                                                    
                                                                                                                                
DAVID GOTTSTEIN, Co-chair, Backbone II,  said the state is facing                                                               
critical,   short-term   decisions   that  will   have   profound                                                               
intermediate and  long-term impacts, the most  important decision                                                               
of which is how to proceed  in developing the state's North Slope                                                               
gas.  He opined  that AGIA has done a good  job in jumpstarting a                                                               
process  that has  the potential  of creating  huge opportunities                                                               
for Alaska now  and long into the future, and  that the state can                                                               
prioritize  its  goals  in  obtaining  the  maximum  benefit  for                                                               
Alaska.   The first goal, he  suggested, is for the  gas pipeline                                                               
to not  be producer-owned,  because as such  it would  generate a                                                               
monopoly  position  on  the  part   of  the  major  producers  in                                                               
controlling the state's future gas  development and production; a                                                               
non-producer-owned  pipeline  would  be  in  alignment  with  the                                                               
state's   desire  for   vibrant   exploration,  production,   and                                                               
marketing.   The second goal is  for an economic pipeline  to get                                                               
built; if that goal is not met, then the state will have failed.                                                                
                                                                                                                                
MR. GOTTSTEIN  said the third  goal is for  the state to  use its                                                               
vast gas resources  to help solve the state's  energy crisis, for                                                               
example,  by getting  the  state's  gas to  Alaskans  as soon  as                                                               
possible in economic  quantities that result in  real savings for                                                               
the majority of Alaska.  The fourth  and final goal is to use the                                                               
route  that  would  supply  the  maximum  benefit  to  the  state                                                               
treasury.  However,  he warned, the state must  not sacrifice the                                                               
local  benefit  in order  to  achieve  its maximum  export  model                                                               
because that  would be a  bad tradeoff.   He relayed that  he has                                                               
been  told by  the governor's  representatives that  it would  be                                                               
possible to  get Alaska's gas  to Alaskans  in as little  as five                                                               
years if  the state  first completes that  portion of  a pipeline                                                               
necessary to just do that.   He emphasized that if done right, it                                                               
could  generate  many  tens  of  billions  of  dollars  of  state                                                               
revenue.                                                                                                                        
                                                                                                                                
MR. GOTTSTEIN said the state  should drive the process, including                                                               
the  necessary investment,  to pre-build  an excess-capacity  and                                                               
expandable line to  the Interior, opening the markets  to an open                                                               
season that  could include local distribution,  Canadian routing,                                                               
and an LNG option.  That would  produce the best of all worlds in                                                               
that  it would  solve  in-state  needs and  grant  the state  the                                                               
option and  the opportunity  to maximize  market conditions.   He                                                               
said the  state should  work with  TransCanada, and  possibly the                                                               
ANGDA  and  the  Alaska  Gasline  Port  Authority  (AGPA),  on  a                                                               
combination  of  ownership,   financing,  marketing,  governance,                                                               
design,  construction,   management,  maintenance,   and  profit-                                                               
sharing  responsibilities that  achieve that  result while  still                                                               
leaving  all other  options  open.   By  keeping the  first-phase                                                               
application and project  to an in-state routing  that could start                                                               
with an  over-capacity line  to the Interior,  with at  least one                                                               
spur line to  feed all population centers, then the  FERC and all                                                               
Canadian obstacles could  be avoided, and the job  could get done                                                               
much more  quickly, bringing  the first phase  of the  project to                                                               
completion in  as little  as five  years - as  opposed to  ten or                                                               
twelve years  - with a  very high  certainty of success  for more                                                               
ambitious  export  options.    If  AGIA has  to  be  adjusted  to                                                               
accomplish these  goals, so be  it, though  it might take  one or                                                               
two more steps to get there.                                                                                                    
                                                                                                                                
MR. GOTTSTEIN said that with the  state likely to receive tens of                                                               
billions  of dollars  in revenue  in the  next few  years, beyond                                                               
what was  forecasted even a few  months ago, it would  be a shame                                                               
if the state didn't  set aside at least a $1  billion a year away                                                               
in these  good times  in order to  ensure long-term  energy cost-                                                               
savings   and  certainty-of-supply   benefits   for  almost   all                                                               
Alaskans.    He  strongly  urged  the  legislature  to  pursue  a                                                               
strategy  that forces  the  development  of a  monopoly-breaking,                                                               
independent  pipeline that  first  serves Alaskans  and then  the                                                               
rest of  the market as  it fully  develops.  Furthermore,  if the                                                               
state  fully pursues  a strategy  of  harnessing other  in-state,                                                               
long-term,  energy  solutions -  such  as  a revitalized  Susitna                                                               
project,  coal  gasification,  wind, solar,  and  other  [energy-                                                               
producing mechanisms]  - along with using  the lowest-cost, long-                                                               
term, reliable  transmission and delivery methods,  then for less                                                               
than the extra revenue forecasted  for this year alone, the state                                                               
could  perhaps solve  its  energy  problems for  100  years.   He                                                               
concluded, "That  is the  choice that  is in front  of us,  and I                                                               
urge the administration  and the legislature to  work together in                                                               
achieving these goals."                                                                                                         
                                                                                                                                
8:04:38 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GARA expressed  concern  regarding Backbone  II's                                                               
aligning itself with  Sinopec, because he is  almost certain that                                                               
Sinopec  is one  of the  companies  that many  groups around  the                                                               
world have identified as doing  work in Sudan and being complicit                                                               
with the genocide taking place there.                                                                                           
                                                                                                                                
MR. GOTTSTEIN  clarified that  he was  not talking  about getting                                                               
commitments  in the  first phase  to sell  gas to  China, because                                                               
although China may offer long-term  opportunity, it doesn't offer                                                               
any  immediate opportunity.   Furthermore,  although China  is an                                                               
important trading  partner, it is  not an  ally with the  U.S. in                                                               
the war against terror, and so  he does not believe that Congress                                                               
will  allow Alaska  to  sell its  hydrocarbons  to China,  unless                                                               
doing  so might  preclude  China from  seeking hydrocarbons  from                                                               
Iran, for example.  He then offered that the way to bring low-                                                                  
cost  energy to  Alaskans is  to provide  an infrastructure  that                                                               
allows for the highest volumes of  gas necessary in order to meet                                                               
market demand.   He said,  "If we  think small in  the beginning,                                                               
we'll never solve  the problem"; for example, a  1.2 Bcf/day line                                                               
to just bring  gas to Alaskans would not lower  the state's long-                                                               
term cost, and it would not  be any less expensive than importing                                                               
gas, because it  is only when larger volumes of  gas are obtained                                                               
that it is  possible to generate economies of  scale large enough                                                               
to reduce the tariff and thereby lower energy costs.                                                                            
                                                                                                                                
MR. GOTTSTEIN said  that if Alaska intends to have  a full export                                                               
project  from  the  beginning,  then  it  has  to  solve  several                                                               
problems before  providing any  energy to Alaska.   On  the other                                                               
hand, if the  state underwrites the option of  meeting all market                                                               
opportunities  by pre-building,  taking ownership,  taking return                                                               
of extra capacity  to the Interior, and then has  an open season,                                                               
then that open  season, in part, could include  delivering gas to                                                               
Alaskans in a shorter period of  time.  He indicated that in this                                                               
way -  particularly given  the demand in  Asia, Hawaii  and other                                                               
West Coast  markets, and  the interior of  the United  States and                                                               
Canada - the  state could then provide for the  expansion to meet                                                               
both a  Canadian route that  becomes a  full project, and  an LNG                                                               
project if such becomes vibrant enough.   It would then simply be                                                               
a  question of  when the  different pieces  of such  projects get                                                               
done.  He added:                                                                                                                
                                                                                                                                
     So what  I'm suggesting is  the low-risk way  of making                                                                    
     sure  we  get  lower-cost   energy  to  Alaskans  in  a                                                                    
     foreseeable  time frame  - perhaps  as  little as  five                                                                    
     years - while  not giving up any other options.   So go                                                                    
     have  an  open season.    If  there's only  enough  gas                                                                    
     through the  TransCanada's bidding mechanism to  make a                                                                    
     Canadian route economic,  then so be it.   On the other                                                                    
     hand,  if  there's  enough  demand  that  can  generate                                                                    
     enough  volumes of  gas to  make both  projects viable,                                                                    
     that's  okay,  too.   And  whichever  can be  completed                                                                    
     first, that's to the maximum benefit of Alaskans.                                                                          
                                                                                                                                
MR.  GOTTSTEIN  said  he  does not  believe  that  Alaskans  will                                                               
support  any project  that  does not  solve  its in-state  energy                                                               
crisis  in  the  foreseeable  future,   or  that  having  only  a                                                               
TransCanada route  or just an LNG  project in the short  run will                                                               
address  that issue.   He  concluded, "I  think we  can solve  it                                                               
otherwise  and be  a  huge profiteer  of  our natural  resources,                                                               
giving as little  as possible away in profits  that are necessary                                                               
to the private sector to do our bidding for us."                                                                                
                                                                                                                                
8:10:06 PM                                                                                                                    
                                                                                                                                
ERNIE STUTZER posited  that with all the good  ideas people have,                                                               
he thinks  there will be  a way for  the state to  accomplish its                                                               
goals.   After noting  that he  is a logger  who, along  with his                                                               
family,  realized  he had  a  valuable  resource [in  the  timber                                                               
located on  his property], likened  that resource to  the natural                                                               
gas wealth that Alaska is sitting  on and wishes to see exported.                                                               
He  remarked that  although  AGIA  is supposed  to  get Alaska  a                                                               
pipeline so  that its natural gas  can be marketed out  of state,                                                               
building a  pipeline will  create a  lot of jobs  for only  a few                                                               
people, and there won't be  any jobs available after the pipeline                                                               
is built.                                                                                                                       
                                                                                                                                
MR.  STUTZER  asked  legislators to  instead  consider  providing                                                               
Alaskans with  [long-term] jobs that  will enable them  to become                                                               
part  of the  middle class,  which he  characterized as  the most                                                               
vital part of  a democracy, and said  that the way to  do that is                                                               
by keeping the  resource in Alaska.  He said  that although there                                                               
are  a lot  of reasons  why  the legislature  should not  support                                                               
AGIA, he  realizes that  there are  two sides to  the issue.   He                                                               
opined  that corporations  and government  are "chipping  away at                                                               
the free  market," and that  the free market, in  itself, creates                                                               
"the seeds for  the destruction of democracy"  because it creates                                                               
wealth,  which in  turn  is used  to  manipulate government  into                                                               
making decisions that will not foster  a robust middle class.  In                                                               
conclusion,  he emphasized  the importance  of building  a large,                                                               
petrochemical infrastructure within the state.                                                                                  
                                                                                                                                
8:18:29 PM                                                                                                                    
                                                                                                                                
KELLY WALTERS  expressed concern  with the process  taking place,                                                               
and said he  believes that perhaps an  alternative answer exists.                                                               
He  said  he is  not  in  favor of  the  state  giving away  $500                                                               
million, mentioned Governor Palin's  $1.2 billion energy subsidy,                                                               
and noted  that the  recent high  price of oil  is the  result of                                                               
actions  taken  by  speculators.    He  recommended  that  Alaska                                                               
operate as if oil were still $9  a barrel like it was when former                                                               
Representative Andrew  Halcro served, because it  very well could                                                               
be again if  the speculators "start short-selling it  in the next                                                               
year or  two."  He characterized  $500 million as a  lot of money                                                               
to be  throwing around.  In  conclusion, he said he  is very much                                                               
in  favor  of an  all-Alaska  line,  and  would  like to  see  an                                                               
alternative in  which TransCanada  builds an all-Alaska  gas line                                                               
to serve the  interest of Alaskans.  Such a  pipeline would allow                                                               
the gas  to get  to market in  less time and  would help  out the                                                               
state quite a bit.                                                                                                              
                                                                                                                                
[HB 3001 and SB 3001 were held over.]                                                                                           
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being no  further business, the joint meeting  of the House                                                               
Rules  Standing Committee  Subcommittee  on AGIA  and the  Senate                                                               
Special Committee on Energy was adjourned at 8:21 p.m.                                                                          

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