Legislature(2007 - 2008)KETCHIKAN

07/08/2008 01:00 PM House RULES


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01:12:20 PM Start
01:13:32 PM HB3001|| SB3001
06:13:34 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Time Change --
Ted Ferry Civic Center (Cape Fox)
+ 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
1 pm - 4 pm: Testimony <Invitation Only>
5:00 pm - 7:00 pm: Public Testimony
                    ALASKA STATE LEGISLATURE                                                                                  
                         JOINT MEETING                                                                                        
                 HOUSE RULES STANDING COMMITTEE                                                                               
               SENATE SPECIAL COMMITTEE ON ENERGY                                                                             
                       Ketchikan, Alaska                                                                                        
                          July 8, 2008                                                                                          
                           1:12 p.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
HOUSE RULES                                                                                                                     
                                                                                                                                
 Representative John Coghill, Chair                                                                                             
 Representative Anna Fairclough                                                                                                 
 Representative Ralph Samuels (AGIA Subcommittee)                                                                               
                                                                                                                                
SENATE SPECIAL COMMITTEE ON ENERGY                                                                                              
                                                                                                                                
 Senator Charlie Huggins, Chair                                                                                                 
 Senator Bert Stedman, Vice Chair                                                                                               
 Senator Kim Elton                                                                                                              
 Senator Lyman Hoffman                                                                                                          
 Senator Donald Olson                                                                                                           
 Senator Joe Thomas                                                                                                             
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
HOUSE RULES                                                                                                                     
                                                                                                                                
 Representative John Harris (AGIA Subcommittee, Chair)                                                                          
 Representative Craig Johnson                                                                                                   
 Representative Beth Kerttula (AGIA Subcommittee)                                                                               
 Representative David Guttenberg                                                                                                
                                                                                                                                
SENATE SPECIAL COMMITTEE ON ENERGY                                                                                              
                                                                                                                                
 Senator Lyda Green                                                                                                             
 Senator Lesil McGuire                                                                                                          
 Senator Gary Stevens                                                                                                           
 Senator Bill Wielechowski                                                                                                      
 Senator Fred Dyson                                                                                                             
 Senator Thomas Wagoner                                                                                                         
                                                                                                                                
OTHER LEGISLATORS PRESENT                                                                                                     
                                                                                                                                
Representative Nancy Dahlstrom                                                                                                  
Representative Mike Doogan                                                                                                      
Representative Berta Gardner                                                                                                    
Representative Mike Hawker                                                                                                      
Representative Lindsey Holmes                                                                                                   
Representative Kyle Johansen                                                                                                    
Representative Mike Kelly                                                                                                       
Representative Gabrielle LeDoux                                                                                                 
Representative Kurt Olson                                                                                                       
Representative Bob Roses                                                                                                        
                                                                                                                                
Senator Hollis French                                                                                                           
Senator Gene Therriault                                                                                                         
                                                                                                                                
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                                                                               
06/19/08       (H)       Heard & Held                                                                                           
06/19/08       (H)       MINUTE(RLS)                                                                                            
06/20/08       (H)       RLS AT 9:00 AM ANCHORAGE                                                                               
06/20/08       (H)       Heard & Held                                                                                           
06/20/08       (H)       MINUTE(RLS)                                                                                            
06/24/08       (H)       RLS AT 1:00 PM MAT-SU                                                                                  
06/24/08       (H)       Heard & Held                                                                                           
06/24/08       (H)       MINUTE(RLS)                                                                                            
06/26/08       (H)       RLS AT 1:00 PM KENAI                                                                                   
06/26/08       (H)       Heard & Held                                                                                           
06/26/08       (H)       MINUTE(RLS)                                                                                            
07/01/08       (H)       RLS AT 9:00 AM BARROW                                                                                  
07/01/08       (H)       Heard & Held                                                                                           
07/01/08       (H)       MINUTE(RLS)                                                                                            
07/02/08       (H)       BILL CARRIES OVER TO FOURTH SPECIAL                                                                    
                         SESSION                                                                                                
07/08/08       (H)       RLS AT 1:00 PM KETCHIKAN                                                                               
                                                                                                                                
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                                                                               
06/19/08       (S)       Heard & Held                                                                                           
06/19/08       (S)       MINUTE(ENR)                                                                                            
06/20/08       (S)       ENR AT 9:00 AM ANCHORAGE                                                                               
06/20/08       (S)       9am - 5pm - Testimony <Invitation Only>                                                                
06/24/08       (S)       ENR AT 1:00 PM MAT-SU                                                                                  
06/24/08       (S)       Heard & Held                                                                                           
06/24/08       (S)       MINUTE(ENR)                                                                                            
06/26/08       (S)       ENR AT 1:00 PM KENAI                                                                                   
06/26/08       (S)       Heard & Held                                                                                           
06/26/08       (S)       MINUTE(ENR)                                                                                            
07/01/08       (S)       ENR AT 9:00 AM BARROW                                                                                  
07/01/08       (S)       Heard & Held                                                                                           
07/01/08       (S)       MINUTE(ENR)                                                                                            
07/01/08       (S)       BILL CARRIES OVER FROM 3RD SPECIAL                                                                     
                         SESSION                                                                                                
07/08/08       (S)       ENR AT 1:00 PM KETCHIKAN                                                                               
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
TONY PALMER, Vice President                                                                                                     
Alaska Business Development                                                                                                     
TransCanada Alaska Company, LLC ("TransCanada")                                                                                 
Calgary, Alberta                                                                                                                
POSITION STATEMENT:  Presented TransCanada's proposed pipeline                                                                
project and answered questions.                                                                                                 
                                                                                                                                
PATRICK GALVIN, Commissioner                                                                                                    
Department of Revenue (DOR)                                                                                                     
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Answered questions related to the proposed                                                               
TransCanada project during the hearing on HB 3001 and SB 3001.                                                                  
                                                                                                                                
BOB WEINSTEIN, Mayor                                                                                                            
City of Ketchikan                                                                                                               
Ketchikan, Alaska                                                                                                               
POSITION STATEMENT:  Testified during the hearing on HB 3001 and                                                              
SB 3001.                                                                                                                        
                                                                                                                                
JOE WILLIAMS, Mayor                                                                                                             
Ketchikan Gateway Borough                                                                                                       
Ketchikan, Alaska                                                                                                               
POSITION STATEMENT:  Testified during  the hearing on HB 3001 and                                                             
SB 3001.                                                                                                                        
                                                                                                                                
DOUG WARD, Director                                                                                                             
Shipyard Development                                                                                                            
Alaska Ship & Dry Dock, Inc.                                                                                                    
Ketchikan, Alaska                                                                                                               
POSITION STATEMENT:  Testified during  the hearing on HB 3001 and                                                             
SB 3001.                                                                                                                        
                                                                                                                                
J.C. CONLEY                                                                                                                     
Ketchikan, Alaska                                                                                                               
POSITION STATEMENT:  Testified during  the hearing on HB 3001 and                                                             
SB 3001.                                                                                                                        
                                                                                                                                
JOEL L. JACKSON                                                                                                                 
Ketchikan, Alaska                                                                                                               
POSITION STATEMENT:  Testified during  the hearing on HB 3001 and                                                             
SB 3001.                                                                                                                        
                                                                                                                                
FRANCES YOUNG                                                                                                                   
Ketchikan, Alaska                                                                                                               
POSITION STATEMENT:  Testified during  the hearing on HB 3001 and                                                             
SB 3001.                                                                                                                        
                                                                                                                                
RICHARD "DICK" L. COOSE                                                                                                         
Ketchikan, Alaska                                                                                                               
POSITION STATEMENT:  Testified during  the hearing on HB 3001 and                                                             
SB 3001.                                                                                                                        
                                                                                                                                
JOE JOHNSTON                                                                                                                    
Ketchikan, Alaska                                                                                                               
POSITION STATEMENT:  Testified during  the hearing on HB 3001 and                                                             
SB 3001 in opposition to AGIA.                                                                                                  
                                                                                                                                
ANDREW STEVENS                                                                                                                  
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Testified during  the hearing on HB 3001 and                                                             
SB 3001.                                                                                                                        
                                                                                                                                
BYRON CHARLES                                                                                                                   
Ketchikan, Alaska                                                                                                               
POSITION STATEMENT:  Testified during  the hearing on HB 3001 and                                                             
SB 3001.                                                                                                                        
                                                                                                                                
DON LUDWIGSEN                                                                                                                   
Craig, Alaska                                                                                                                   
POSITION STATEMENT:  Testified during  the hearing on HB 3001 and                                                             
SB 3001.                                                                                                                        
                                                                                                                                
ED ZASTROW                                                                                                                      
Ketchikan, Alaska                                                                                                               
POSITION STATEMENT:  Testified during  the hearing on HB 3001 and                                                             
SB 3001.                                                                                                                        
                                                                                                                                
RUTH DULIN                                                                                                                      
Ketchikan, Alaska                                                                                                               
POSITION STATEMENT:  Testified during  the hearing on HB 3001 and                                                             
SB 3001.                                                                                                                        
                                                                                                                                
JACKIE DURETTE                                                                                                                  
Ketchikan, Alaska                                                                                                               
POSITION STATEMENT:  Testified during  the hearing on HB 3001 and                                                             
SB 3001.                                                                                                                        
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
VICE CHAIR  BERT STEDMAN  called the joint  meeting of  the House                                                             
Rules  Standing Committee  and the  Senate  Special Committee  on                                                               
Energy to order at 1:12:20 PM.                                                                                                
                                                                                                                                
HB 3001 - APPROVING AGIA LICENSE                                                                                              
SB 3001 - APPROVING AGIA LICENSE                                                                                              
                                                                                                                                
1:13:32 PM                                                                                                                    
                                                                                                                                
VICE CHAIR STEDMAN indicated that  the hearing would begin with a                                                               
presentation  by Tony  Palmer  from  TransCanada Alaska  Company,                                                               
LLC;  followed   by  comments  from   the  commissioner   of  the                                                               
Department  of  Revenue,  Patrick   Galvin;  followed  by  public                                                               
testimony.                                                                                                                      
                                                                                                                                
1:21:45 PM                                                                                                                    
TONY  PALMER,   Vice  President,  Alaska   Business  Development,                                                               
TransCanada Alaska  Company, LLC ("TransCanada"),  explained that                                                               
TransCanada  has 3,600  employees, is  the largest  [natural] gas                                                               
pipeline  company   in  North  America,  owns   36,500  miles  of                                                               
interstate and  interprovincial gas  pipeline, and  has submitted                                                               
an application  under the Alaska  Gasline Inducement  Act (AGIA),                                                               
which  sets  forth  the  state's  requirements  and  process  for                                                               
selecting a  licensee to pursue  a gas  pipeline.  He  noted that                                                               
TransCanada has been  pursuing this project on  the Canadian side                                                               
for some 30  years; has the rights to the  project in Canada; and                                                               
has "some  $2 billion  worth of  pipeline in  the ground  for the                                                               
Alaska  prebuilt."   After  AGIA  was  enacted, TransCanada  then                                                               
considered  the question  of  whether to  pursue  the project  in                                                               
Alaska under AGIA  as well.  TransCanada thinks  that the project                                                               
has  strong economics  and will  provide satisfactory  returns to                                                               
its stakeholders:   the  producers, the  state, and  the pipeline                                                               
sponsors.  Most  parties would project that  [natural] gas prices                                                               
will  increase over  time, and  those prices  are very  high even                                                               
today.                                                                                                                          
                                                                                                                                
MR.  PALMER indicated  that TransCanada  also considered  whether                                                               
the  state  -  its  legislative  body and  its  citizens  -  were                                                               
committed to  a gas pipeline project.   This was a  key factor in                                                               
TransCanada's decision because no  commercial party could provide                                                               
this  project   without  the   cooperation  of   the  governments                                                               
involved.  The  proposed project would involve  having a pipeline                                                               
extending 1,715  miles -  from Prudhoe  Bay to  Alberta -  and no                                                               
commercial party owns  that land or has access to  all that land.                                                               
TransCanada   also   took    into   consideration   the   state's                                                               
requirements, and  then filed its  application accordingly.   The                                                               
rights and  responsibilities of both  parties - the  licensee, or                                                               
potential licensee,  and the  state of  Alaska -  are set  out in                                                               
AGIA  and   TransCanada  expects  to   have  to  live   with  the                                                               
commitments  it   made  under   the  AGIA   application  process.                                                               
TransCanada  believes that  if it  submits a  strong application,                                                               
then the legislature  will ratify it and not  play TransCanada as                                                               
a stalking horse  to advance the project in  a different fashion.                                                               
TransCanada  submitted   its  application  in  good   faith,  and                                                               
believes that the state has the same good faith.                                                                                
                                                                                                                                
1:28:25 PM                                                                                                                    
                                                                                                                                
MR. PALMER said that the proposed  project is a strategic fit for                                                               
TransCanada:  TransCanada is a  gas pipeline company, this is the                                                               
largest gas pipeline investment  opportunity in North America for                                                               
any  company, it's  within  TransCanada's  core competency,  it's                                                               
within TransCanada's  geographic footprint, and  it's synergistic                                                               
with TransCanada's existing businesses.   TransCanada has been in                                                               
the pipeline  business for  50 years,  it started  constructing a                                                               
longer  pipeline than  [the proposed  pipeline] at  the company's                                                               
inception, and  he personally  has been  working on  this project                                                               
"this time"  for 7 years and  was involved in the  project in the                                                               
1980s; TransCanada, and he, have  thought long and hard about the                                                               
very,  very  tough issues  associated  with  moving this  project                                                               
forward.    It's  a  complex  and large  project,  it  will  take                                                               
collaboration,  it  will  take   compromise,  and  it  will  take                                                               
cooperation.   Anyone  can review  TransCanada's application  and                                                               
responses,  he  noted,  adding  that  TransCanada  thinks  it  is                                                               
aligned with what it thinks  the state's objective is, that being                                                               
to promote basin development - both short-term and long-term.                                                                   
                                                                                                                                
MR. PALMER,  mentioning the process the  Murkowski administration                                                               
engaged  in,  characterized  the  AGIA process  as  an  open  and                                                               
transparent  [request  for  proposals  (RFP)]  process  in  which                                                               
interested  parties could  participate.   The interested  parties                                                               
reviewed  that process  last fall  and  did so  on a  competitive                                                               
basis.   When TransCanada submitted its  application, it competed                                                               
vigorously even  though it did  not know what companies  it would                                                               
be  competing with.    In addition  to  seeking competition  with                                                               
regard to who would own the  proposed pipeline, he opined that it                                                               
is important for  the state to also seek  competition with regard                                                               
to  the  "upstream  region"; in  other  words,  competition  with                                                               
regard  to who  will produce  Alaska's gas  and who  will develop                                                               
Alaska's  basin  over the  long  run.    Alaska currently  has  3                                                               
principal  players on  the North  Slope, whereas  TransCanada, in                                                               
contrast, in Alberta,  has 450 players "in  the upstream region";                                                               
450 players,  he relayed, generally compete  more vigorously than                                                               
3  players, and  it is  generally the  smaller players  who, over                                                               
time,  develop  a  basin.    Large players  usually  have  a  big                                                               
position  that they  take  initially:   they  take  a large  land                                                               
position, and they  open the basin.  Again,  however, with regard                                                               
to long-term  development, small  players and future  players are                                                               
at least  as important as  the original  players - this  has been                                                               
TransCanada's  experience  both  in   Alberta  and  across  North                                                               
America.                                                                                                                        
                                                                                                                                
1:32:49 PM                                                                                                                    
                                                                                                                                
MR. PALMER surmised that the same  will be found in Alaska if the                                                               
state  is successful  in constructing  a  pipeline that  provides                                                               
complete  open access.    There are  no  inherent conflicts  with                                                               
TransCanada's other  businesses should it be  chosen to construct                                                               
the proposed pipeline, he remarked.  He added:                                                                                  
                                                                                                                                
     We  think we've  filed a  strong AGIA  application ...,                                                                    
     and we've  indicated that it will  cost our corporation                                                                    
     ... north of $600 million  to get to a certificate from                                                                    
     the [Federal Energy  Regulatory Commission (FERC)], ...                                                                    
     the federal  body that  regulates and  approves natural                                                                    
     gas pipelines as  well as oil pipelines.   And, yes, we                                                                    
     will seek,  and we'll  be using,  if we're  granted the                                                                    
     license,   the  state's   $500   million  that   you've                                                                    
     proposed.   That's part of  the "gives" that  the state                                                                    
     has  provided  in   AGIA,  and  that's  counterbalanced                                                                    
     against what  you've asked of  us. ... In  any business                                                                    
     deal or  any transaction,  you would expect  parties to                                                                    
     have some gives and takes.   This is one of the "gives"                                                                    
     by  the  state  of  Alaska.   ...  I  can  assure  that                                                                    
     TransCanada  is not  pursuing this  project, to  invest                                                                    
     more than  a $100  million of our  corporation's money,                                                                    
     to find that  we don't succeed.  Now,  we don't succeed                                                                    
     at every project  that we pursue, but we  have a strong                                                                    
     track record. ...                                                                                                          
                                                                                                                                
MR. PALMER,  on the  issue of  TransCanada's U.S.  presence, said                                                               
that TransCanada owns 12,000 miles  of pipeline in the U.S.; that                                                               
the  Alaska portion  of the  proposed  pipeline, when  completed,                                                               
will be 750  miles long; and that TransCanada  runs an integrated                                                               
business across  North America, similar  to how the  oil business                                                               
is run.                                                                                                                         
                                                                                                                                
1:36:02 PM                                                                                                                    
                                                                                                                                
MR. PALMER  said that  although TransCanada  has many  offices in                                                               
the U.S.,  he came himself,  from the Alberta office,  because he                                                               
thinks that  the Canadian example  is most similar to  the Alaska                                                               
example in that Calgary and Alberta  are also, just as is Alaska,                                                               
far from  New York,  Chicago, and California.   He  surmised that                                                               
one could also  find that Alaska has  other circumstances similar                                                               
to that of TransCanada.   For example, TransCanada started out as                                                               
a small local business with just  3 customers in Western Canada -                                                               
but currently has  more than 300 customers - and  had a very high                                                               
potential basin,  a basin  that could,  in addition  to producing                                                               
the initial volume,  be developed across Western  Canada and grow                                                               
the market  to the benefit of  the people of Alberta  in the form                                                               
of  in-state gas,  employment, and  revenue.   He indicated  that                                                               
some  of   the  slides  in   his  PowerPoint   presentation  will                                                               
illustrate that point.   A fair question to  pose to TransCanada,                                                               
he  remarked, is  whether TransCanada  can  obtain the  necessary                                                               
approvals,   build  this   project,   and  successfully   capture                                                               
customers.                                                                                                                      
                                                                                                                                
1:39:35 PM                                                                                                                    
                                                                                                                                
MR. PALMER  relayed that TransCanada  is the largest  natural gas                                                               
transmission company  in North  America and  moves 20  percent of                                                               
North America's  natural gas  - one in  five molecules  that move                                                               
every day across North America  moves in TransCanada's pipeline -                                                               
but doesn't own  any of the gas.  TransCanada  is proposing to do                                                               
in Alaska exactly  what it does across North  America, that being                                                               
to  transport other  peoples' natural  gas.   It  is unusual  for                                                               
producers that own the natural gas  to also own the interstate or                                                               
interprovincial gas  pipeline; they  normally put their  gas into                                                               
third-party,  independently-owned  pipes   like  those  owned  by                                                               
TransCanada.    TransCanada  has the  technical  engineering  and                                                               
operating skills  to complete this  project, he  remarked, adding                                                               
that  he  would  argue  that  TransCanada  is  the  best  in  the                                                               
business.    Furthermore,   third-party,  "benchmarking"  studies                                                               
conducted on  TransCanada's operating  costs show that  they were                                                               
25-30 percent lower than those  of TransCanada's competitors, and                                                               
TransCanada's  internal  examinations  of capital  costs  between                                                               
1990 and  2003 for 42-48  inch diameter pipelines show  that they                                                               
were 19  percent lower than  TransCanada's competitors  in Canada                                                               
and 38 percent lower than  TransCanada's competitors in the U.S.,                                                               
and  none  of  these  numbers  have been  challenged  by  any  of                                                               
TransCanada's competitors.                                                                                                      
                                                                                                                                
MR.  PALMER opined,  therefore,  that when  one hears  statements                                                               
asserting  that TransCanada  is not  motivated to  control costs,                                                               
one should consider both TransCanada's  performance [to date] and                                                               
the  fact  that  growing  Alaska's basin  won't  be  possible  if                                                               
TransCanada overspends.   It  is TransCanada's  goal to  have low                                                               
costs  and  low tolls  -  that's  how TransCanada  attracts  more                                                               
customers; no  business attracts more customers  by overcharging.                                                               
Referring  to   a  slide  in  his   PowerPoint  presentation,  he                                                               
indicated  that it  illustrates TransCanada's  completed projects                                                               
of similar size,  with regard to distance and  complexity, as the                                                               
project being  proposed for Alaska.   In addition  to engineering                                                               
and technical competence, in order  to complete a project of this                                                               
nature, the entities  involved must also do  what's required when                                                               
crossing international, interstate,  and interprovincial borders;                                                               
must   gain   regulatory   approval;  must   work   with   Native                                                               
corporations, First  Nations, and  communities; and  must address                                                               
environmental issues,  climate-change issues, and  commercial and                                                               
financial issues.                                                                                                               
                                                                                                                                
MR. PALMER said  that TransCanada has the rights  to this project                                                               
in Canada  and competed for that  right 30 years ago;  that right                                                               
is  enshrined  in  Canadian   legislation,  and  TransCanada  has                                                               
responsibilities as  a result because  one doesn't  obtain rights                                                               
without also  incurring responsibilities.   TransCanada  has been                                                               
having  discussions  with  the  Canadian  government  about  this                                                               
project  for   30  years,  and   the  project  has   some  unique                                                               
attributes:   it  will  cross an  international  border; it  will                                                               
consist of  1,000 miles of  pipe from the Alaska-Yukon  border to                                                               
Alberta, a longer  distance than from Prudhoe Bay  to the Alaska-                                                               
Yukon  border; and  it  could run  into  some significant  issues                                                               
because  of  the  fact  that  a  different  sovereign  nation  is                                                               
involved.  However, 30 years ago  a treaty was struck between the                                                               
U.S. and Canada  specifically for this project,  and this treaty,                                                               
which  remains  in  place  to  date,  sets  out  the  rights  and                                                               
responsibilities   of  both   nations  for   this  project,   and                                                               
stipulates that  TransCanada is  the project's  Canadian sponsor.                                                               
And   although   TransCanada   is   seeking   collaboration   and                                                               
cooperation on  this project,  it still  has a  responsibility to                                                               
its shareholders, so  in the event that other  parties attempt to                                                               
take away its  assets in Canada, it will, as  should be expected,                                                               
defend its rights to those assets.                                                                                              
                                                                                                                                
1:45:23 PM                                                                                                                    
                                                                                                                                
MR. PALMER said  that TransCanada believes that  the best project                                                               
for all parties  - Alaskans, the producers, and  TransCanada - is                                                               
one that  will move the  gas to the  Lower 48 through  Canada; it                                                               
will  provide  the best  "netback,"  which  he described  as  the                                                               
revenue remaining after  the gas is sold in  the marketplace less                                                               
transportation  costs.    TransCanada believes  that  the  review                                                               
completed  by the  administration and  its consultants  concludes                                                               
the  same thing,  he added,  but noted  that TransCanada  is also                                                               
aware that there  are some proponents of a  liquefied natural gas                                                               
(LNG)  project   at  Valdez.    When   TransCanada  prepared  its                                                               
application, it  stipulated that when  it holds the  initial open                                                               
season, the  parties that want to  be customers - the  shippers -                                                               
can stipulate  a delivery point  anywhere along the  pipeline and                                                               
at Valdez at  the same; so, in  the event that an  LNG project is                                                               
superior  and customers  can pull  together a  viable project  at                                                               
Valdez instead of  having to go to Alberta [as  the gas makes its                                                               
way to] the Lower 48, they will still have that opportunity.                                                                    
                                                                                                                                
1:46:44 PM                                                                                                                    
                                                                                                                                
MR.  PALMER offered  that  for its  $500  million investment,  if                                                               
TransCanada  is  granted  the  license,  the  state  will  get  a                                                               
reliable and  capable partner committed to  advancing the project                                                               
and  aligned with  the state's  interests.   TransCanada will  be                                                               
obliged  to  hold an  open  season,  a process  whereby  pipeline                                                               
companies  go out  and  solicit customers;  it's  called an  open                                                               
season  because  it's  open and  transparent,  and  the  pipeline                                                               
company  seeks  customers  and provides  commercial  terms  in  a                                                               
public forum.   Furthermore,  voluntarily, TransCanada  will hold                                                               
an open season  every two years, to seek new  customers, and will                                                               
expand every two  years in the event that  it acquires sufficient                                                               
customers; TransCanada will promote  long-term development of the                                                               
basin  and is  committed, even  in the  event of  an unsuccessful                                                               
open season,  to obtaining  Federal Energy  Regulatory Commission                                                               
(FERC) certification; and TransCanada  is committed to delivering                                                               
gas in-state to Alaskans and to  an LNG project should such prove                                                               
successful.                                                                                                                     
                                                                                                                                
1:48:17 PM                                                                                                                    
                                                                                                                                
MR. PALMER said he'd like  to relay how TransCanada has developed                                                               
the  basin  in  Western  Canada, how  it  has  fostered  upstream                                                               
competition,  what its  motivation is  as a  pipeline owner,  and                                                               
where long-term employment  comes from.  On the  latter point, he                                                               
offered his understanding that Alaskans  are seeking both revenue                                                               
and long-term employment; that  long-term employment doesn't come                                                               
from operating  the pipeline  on a  long-term basis;  that during                                                               
the construction phase  there will be thousands of  jobs for two-                                                               
four years;  that over  the long run,  operating the  pipeline is                                                               
what he  characterized as a low-manpower  operation.  TransCanada                                                               
has  3,600  employees  and  owns   36,000  miles  of  pipe;  each                                                               
employee, in effect, is running 10  miles of pipe.  Again, Alaska                                                               
will have  750 miles of  pipe when  the project is  completed, so                                                               
the state  could expect to  have about 50-75  permanent employees                                                               
to operate  the pipeline  - that's  all that  will be  needed for                                                               
efficient operation  of the pipeline.   He surmised that  that is                                                               
what  the  state  would  want,  just  as  would  any  company  or                                                               
sovereign; as a  tax collector, the state will  want an efficient                                                               
and low-cost  operation.  [Long-term]  employment will  come from                                                               
expanding the  pipe, from drilling, and  from associated services                                                               
-  in other  words, from  finding  more gas  and completing  more                                                               
wells.                                                                                                                          
                                                                                                                                
1:50:42 PM                                                                                                                    
                                                                                                                                
MR. PALMER  turned attention to his  PowerPoint presentation, and                                                               
said that  TransCanada seeks early "in-service"  for the project;                                                               
that  the  project  will   be  TransCanada's  largest  investment                                                               
opportunity in its  core business; that the  project will utilize                                                               
some spare capacity,  which is advantageous both  to Alaskans and                                                               
to  Western  Canadians;  that  there's  some  spare  capacity  in                                                               
TransCanada's pipeline  systems leaving Canada; that  by the time                                                               
the   project  is   completed,  TransCanada   anticipates  having                                                               
sufficient  spare capacity  leaving Western  Canada to  transport                                                               
Alaska's entire  volume all the way  to the Lower 48  without any                                                               
incremental facilities; and that there will  be no need for a new                                                               
pipeline leaving  Western Canada in  order for Alaska  to deliver                                                               
its gas  to the  Lower 48  market.  On  the issue  of encouraging                                                               
long-run   basin  development,   he  offered   his  belief   that                                                               
successful pipeline expansions can  create a virtuous circle that                                                               
leads to  more drilling, which,  if also successful, can  lead to                                                               
more expansions, which is where  [long-term] employment will come                                                               
from  and  where long-term,  in-state  gas  deliveries will  come                                                               
from.    Furthermore,  TransCanada   is  in  favor  of  equitable                                                               
treatment for all  customers, and has a 50-year  track record [of                                                               
providing that].                                                                                                                
                                                                                                                                
1:52:28 PM                                                                                                                    
                                                                                                                                
MR. PALMER  referred to  a map  of TransCanada's  pipeline system                                                               
across North America,  and offered that when built  50 years ago,                                                               
the  original 2,300  miles  of pipe  leaving  Western Canada  and                                                               
going  to Eastern  Canada  was longer  and  more challenging  [to                                                               
build],  from  an   engineering  standpoint,  than  TransCanada's                                                               
proposed   pipeline   going   from  Prudhoe   Bay   to   Alberta.                                                               
Furthermore, that  original pipeline  was built  at TransCanada's                                                               
inception, and, as it passed  through Northern Ontario, was built                                                               
on  solid ground,  so TransCanada  had to  blast its  way through                                                               
that area;  in contrast, the  proposed pipeline will not  have to                                                               
traverse that sort  of terrain.  Then, in  the 1990s, TransCanada                                                               
constructed  7,000  miles  of  pipe, more  than  four  times  the                                                               
distance  the proposed  pipeline  will traverse,  and  did so  on                                                               
schedule and within .06 percent of  budget - no other company has                                                               
a  similar track  record in  building  North American  interstate                                                               
pipelines.                                                                                                                      
                                                                                                                                
MR. PALMER  said that TransCanada is  also currently constructing                                                               
an oil pipeline - illustrated by  the dashed, red line on slide 3                                                               
of   the   PowerPoint   presentation  -   in   conjunction   with                                                               
ConocoPhillips  as the  50 percent  partner; this  pipeline, also                                                               
longer than  Alaska's proposed project,  will move heavy  oil out                                                               
of the oil  sands in Western Canada down into  the Midwest and on                                                               
to Cushing, Oklahoma.  And  if that pipeline and another pipeline                                                               
that  will  be built  between  Alberta  and  the Gulf  Coast  are                                                               
successful, the [cost  of the] two projects  together would total                                                               
some  $13  billion,  half  the  capital  costs  of  the  Alaska's                                                               
proposed  pipeline.   TransCanada  hopes to  have  those two  oil                                                               
pipelines completed by  2012.  With regard  to the aforementioned                                                               
oil  pipeline,  between  Alberta  and  Winnipeg,  TransCanada  is                                                               
intending to  convert 50-year-old  pipe from  gas service  to oil                                                               
service and  then continue to  use it  for the next  30-50 years;                                                               
TransCanada's ability  to do this type  of conversion illustrates                                                               
some measure of TransCanada's maintenance record.                                                                               
                                                                                                                                
1:55:27 PM                                                                                                                    
                                                                                                                                
MR. PALMER, with regard to  Alaska's proposed pipeline, said that                                                               
there  will  be  two  major  components:    the  "within  Alaska"                                                               
component, and  the component  between Alaska  and the  market in                                                               
Alberta  and onto  the Lower  48.   Referring to  slide 4  of the                                                               
PowerPoint  presentation,   he  indicated  that   it  illustrates                                                               
TransCanada's  development of  the basin  in Western  Canada over                                                               
the  last  50  years  -  a 250-mile  pipeline  system  serving  3                                                               
customers is now  a 15,000-mile pipeline system  serving over 300                                                               
customers via 1,100  receipt and delivery points.   Consider what                                                               
this means  for in-state gas  development, he remarked.   Slide 5                                                               
illustrates  the pipeline  going from  Western Canada  to Eastern                                                               
Canada.   A pipe  can be  expanded by  adding compression  - this                                                               
means  adding more  pump stations  to compress  the gas  more and                                                               
thus increase  the amount of  gas that  can be moved  through the                                                               
same-sized  pipe.    However,  at  some  point  it  becomes  more                                                               
efficient  to  simply  add  what  are  called  pipeline  loops  -                                                               
parallel pipelines  on the same  right-of-way as  illustrated via                                                               
slide 6; there are now six  parallel pipes moving gas east out of                                                               
Western Canada.  Parallel loops  don't have to be constructed all                                                               
at once if  expansions are small in scale, they  can instead just                                                               
be  partial  loops,  and  that's   the  kind  of  expansion  that                                                               
TransCanada has  been successful with  over the last 50  years in                                                               
getting its product out of Western Canada.                                                                                      
                                                                                                                                
1:58:38 PM                                                                                                                    
                                                                                                                                
MR.  PALMER referred  to  slides  7 and  8  illustrating what  he                                                               
called   the  "must-haves"   required  by   the  Alaska   Gasline                                                               
Inducement Act (AGIA).  TransCanada is  of the belief that it was                                                               
through  these "must-haves"  that the  state intended  to advance                                                               
the project,  and so submitted  its application in good  faith on                                                               
that  basis.   TransCanada is  gratified that  the administration                                                               
has indicated  that TransCanada  has indeed  met all  the state's                                                               
"must haves."  He went on to say:                                                                                               
                                                                                                                                
     I described  to you  earlier that  TransCanada competed                                                                    
     under AGIA,  and I've heard  some parties in  the press                                                                    
     speculate  that  there's  been no  competition  because                                                                    
     TransCanada is the only party  that made it through the                                                                    
     first test  that had a  complete application.   I think                                                                    
     many of you will have  asked contractors to bid on your                                                                    
     house - either [for] renovations  or ... to construct a                                                                    
     house -  and when you  do that, whether you've  been on                                                                    
     the buyer's side or on  the contractor's side, you know                                                                    
     that the competition occurs in  advance of the bid.  If                                                                    
     you  ask  for   a  best  and  final   offer  from  your                                                                    
     contractor, which is  what the state did  under its RFP                                                                    
     process, parties don't get a  second chance - they must                                                                    
     put their best  foot forward, they must put  a best and                                                                    
     final ...  offer on  the table  not knowing  what their                                                                    
     competitors  will do.   TransCanada  did exactly  that.                                                                    
     We  expected that  there would  be  other parties  that                                                                    
     submitted complete bids, and  we filed accordingly. ...                                                                    
     And  by the  way, after  we  learned that  we were  the                                                                    
     party with  the only  complete application, we  did not                                                                    
     come  back  to   the  state  and  seek   to  amend  our                                                                    
     application  and improve  it from  our standpoint  - we                                                                    
     did not  have the right to  do so, and we  did not seek                                                                    
     to do so.                                                                                                                  
                                                                                                                                
MR. PALMER, in response to a  request, explained that in order to                                                               
transport gas, it has to be  what is known as "pipeline quality,"                                                               
and so impurities  must be removed; in this case  it is primarily                                                               
carbon  dioxide that  will have  to be  removed because  Alaska's                                                               
natural gas  contains significant volumes  of it as it  comes out                                                               
of the  wellhead in Prudhoe  Bay.  Rending Alaska's  gas pipeline                                                               
quality will require that a  $6 billion gas treatment plant (GTP)                                                               
be built on the North Slope.   TransCanada has proposed that this                                                               
GTP  be owned  by other  parties  rather than  TransCanada.   The                                                               
logical  parties to  own the  GTP  are the  three producers  that                                                               
currently  produce   gas  at  Prudhoe   Bay;  they   have  common                                                               
facilities there as  well as other huge operations,  and so could                                                               
probably  save money  by owning  a GTP  at that  location, though                                                               
other parties  might wish to  own such a  facility.  The  cost of                                                               
building a  GTP on  the North  Slope is about  22 percent  of the                                                               
total cost  of the proposed  pipeline project, a  nice investment                                                               
opportunity should  the three producers  not wish to own  it, and                                                               
the GTP  will probably be  regulated by the  FERC.  In  the event                                                               
that no other party wishes to [build  and] own a GTP on the North                                                               
Slope, then  TransCanada will do  so, though it would  prefer not                                                               
to because  it is primarily  a pipeline company;  TransCanada has                                                               
constructed facilities of  that nature before, though  not on the                                                               
scale proposed.                                                                                                                 
                                                                                                                                
2:02:53 PM                                                                                                                    
                                                                                                                                
MR. PALMER,  in response  to another  request, explained  that in                                                               
any  business  there  are  generally  two forms  of  risk:    the                                                               
inherent business risk, and the  financial risk.  The latter form                                                               
of risk pertains to how one  finances one's business.  Most small                                                               
businesses "run with  something close to 100  percent equity"; in                                                               
other words,  it is  essentially the  owner's funds  that finance                                                               
the business.   There  are other  businesses, however,  that have                                                               
some significant  amount of  debt that  supports the  business or                                                               
supports the project.  In  the gas pipeline business across North                                                               
America, particularly in the Lower 48,  one can see a spectrum of                                                               
how much  equity, versus debt,  that a particular business  has -                                                               
and  debt plus  equity,  of course,  makes up  100  percent of  a                                                               
project's  or  business's  "capitalization."     Under  AGIA  the                                                               
licensee is  required to  have a  minimum of  70 percent  debt, a                                                               
very high  debt ratio for a  pipeline company, and for  a project                                                               
of this complexity and risk.   In contrast, in the Lower 48, many                                                               
pipeline  companies  only have  a  debt  ratio of  between  40-60                                                               
percent.                                                                                                                        
                                                                                                                                
MR. PALMER explained  that the aforementioned high  debt ratio is                                                               
achievable   [for  TransCanada]   primarily   because  the   U.S.                                                               
government,  almost  four  years  ago,  passed  legislation  that                                                               
provided  a  federal  loan  guarantee mechanism  for  up  to  $18                                                               
billion for "this  project."  Because of  this financial support,                                                               
TransCanada, regardless  that the  state is  only requiring  a 70                                                               
percent minimum  debt ratio, has  actually offered to go  as high                                                               
as a  75 percent debt ratio  when in service.   This is important                                                               
for TransCanada because as a sponsor,  it earns money only on the                                                               
equity  component of  a project,  and so  going as  high as  a 75                                                               
percent debt  ratio results in  a toll reduction of  $.09/mmBtu -                                                               
$150 million per year in toll  reduction.  This means less return                                                               
for TransCanada than it would normally expect.  He elaborated:                                                                  
                                                                                                                                
     Debt usually  has a cost.   On a project like  this, it                                                                    
     will likely be ... [at a]  5 to 7 or 8 percent interest                                                                    
     rate - that's about what  you can borrow money [for] on                                                                    
     a project  of this nature  in this market.  ... Equity,                                                                    
     on  the other  hand, costs  more money  because it  has                                                                    
     risk,  and ...  [TransCanada's  proposal] assumed  that                                                                    
     the  equity  return  would  be  14  percent.    And  in                                                                    
     addition to  receiving a return, there  is a collection                                                                    
     of  income  taxes on  the  equity;  the nature  of  the                                                                    
     business, both  in the  Lower 48,  here, and  in Canada                                                                    
     [is that] governments collect taxes  on income that you                                                                    
     earn as a shareholder.   That means that equity is much                                                                    
     more  costly  to  customers than  debt,  and  customers                                                                    
     always  want  you  to  have  more  debt,  and  pipeline                                                                    
     companies always want  to have more equity.   So that's                                                                    
     a component we put on the table.                                                                                           
                                                                                                                                
2:07:46 PM                                                                                                                    
                                                                                                                                
VICE CHAIR STEDMAN asked who has  the authority to set the limits                                                               
on debt to equity.                                                                                                              
                                                                                                                                
MR. PALMER  relayed that  the FERC  and Canada's  National Energy                                                               
Board (NEB)  have that authority.   He noted that with  regard to                                                               
other  parties  and   pipelines,  there  has  been   a  range  of                                                               
debt:equity ratios.  For example,  there are a number of projects                                                               
in  which  companies  have 30-60  percent  equity,  though  those                                                               
projects  didn't  have  the  same   risks  as  Alaska's  proposed                                                               
project.  He  suggested that legislators should  review the legal                                                               
and regulatory  complexities of this project,  adding, "Certainly                                                               
this project  is as risky  or more  risky than any  other project                                                               
that I can describe that we  have looked at over the last several                                                               
years."  He  noted that although the producers  have expressed an                                                               
interest in being owners in  the project, currently TransCanada's                                                               
proposal has  TransCanada owning the entire  project; however, in                                                               
its  application,  TransCanada  has also  proposed  that  parties                                                               
which commit their  gas in the initial open season  will have the                                                               
option  of   becoming  TransCanada's  equity  partners   [in  the                                                               
project].                                                                                                                       
                                                                                                                                
MR.  PALMER, in  response to  a question,  indicated that  if the                                                               
state grants TransCanada  a license, those parties  that do chose                                                               
to become  equity partners must  adhere to AGIA's  20 must-haves.                                                               
The question producers must consider,  therefore, is whether they                                                               
can live  with that as  opposed to advancing a  different project                                                               
on their  own.  He predicted  that if the producers  do decide to                                                               
advance   a  different   project,   even   without  the   various                                                               
concessions  from  the  state  that   they've  always  asked  for                                                               
previously,  they  will  still  have  significant  challenges  to                                                               
overcome, both  in Alaska and  in Canada; for  example, producers                                                               
don't have the benefits  of a treaty and or of  a specific Act of                                                               
parliament or of the rights that  TransCanada has or of a "single                                                               
window" regulatory agency.                                                                                                      
                                                                                                                                
MR.  PALMER,  in response  to  another  question, indicated  that                                                               
advancing  TransCanada's proposed  project carries  risk for  the                                                               
state just  as does not  advancing any  project.  With  regard to                                                               
the latter option,  he added, "We've seen some of  the results of                                                               
that  over the  last several  years;  as we've  all pursued  this                                                               
project  and   tried  to  move   it  forward,  we've   seen  some                                                               
international competitors  advance other projects that  are [now]                                                               
in  the market  place  in advance  of Alaska."    With regard  to                                                               
advancing TransCanada's  proposal, the  state will face  the risk                                                               
that it will invest $500 million  only to have this joint venture                                                               
between the state and TransCanada  be unsuccessful, the risk that                                                               
regulators won't approve the project, and  the risk that in a few                                                               
years the state  may decide that it doesn't like  "this deal" and                                                               
therefore  wants to  change it.   In  the event  that the  latter                                                               
occurs, the state has specific  limitations to its obligations to                                                               
TransCanada; in contrast, if  TransCanada breaches the agreement,                                                               
it has no limitations to its obligations to the state.                                                                          
                                                                                                                                
MR.  PALMER  offered  that the  possible  benefits  of  approving                                                               
TransCanada's license  include improving  the state's  chances of                                                               
advancing  the  project  and improving  the  state's  chances  of                                                               
capturing  value  in  terms  of  in-state  gas,  employment,  and                                                               
revenue.   The  legislature  must consider  whether the  possible                                                               
rewards of approving TransCanada's  license are balanced with the                                                               
risks of  doing so.   He said  that TransCanada believes  that it                                                               
has put  forward a proposal that  can succeed, with the  state as                                                               
its partner.                                                                                                                    
                                                                                                                                
2:15:52 PM                                                                                                                    
                                                                                                                                
MR.  PALMER, in  response  to a  question,  explained that  since                                                               
filing the application last year,  TransCanada has expended about                                                               
$2 million;  that the assets  "in Yukon  and North BC"  are about                                                               
$20  million combined;  that that  figure  is .1  percent of  the                                                               
estimated capital  costs of the proposed  project; that Foothills                                                               
Pipe  Lines   Ltd.,  owns  significant  facilities   in  Alberta,                                                               
southern  British   Columbia,  and  Saskatchewan   worth  several                                                               
hundred million dollars; and that  TransCanada, if successful [in                                                               
obtaining a license  under AGIA], is obligated to  fully fund the                                                               
equity  component  of  the  project.    In  response  to  further                                                               
questions,  he  indicated  that  TransCanada  stipulated  in  its                                                               
application  a toll  rate of  $2.41;  that TransCanada's  current                                                               
right-of-way payments for  "the Yukon" is $30,000  per year; that                                                               
TransCanada has  spent some  $750,000 in total  over the  past 25                                                               
years  for that  right-of-way;  and that  the aforementioned  $20                                                               
million includes "those numbers."                                                                                               
                                                                                                                                
The committees took an at-ease from 2:20 p.m. to 2:27 p.m.                                                                      
                                                                                                                                
REPRESENTATIVE FAIRCLOUGH  asked whether an in-state  bullet line                                                               
between  Cook   Inlet  and  the  Interior   would  be  considered                                                               
competition to the proposed project.                                                                                            
                                                                                                                                
MR. PALMER  relayed his understanding  that that would  involve a                                                               
20-inch  pipeline with  a volume  of less  than .5  Bcf/day.   In                                                               
response to a further question,  he explained that a provision in                                                               
the AGIA allows  for the state to provide fiscal  assistance to a                                                               
competitive pipeline that moves less  than .5 Bcf/day of in-state                                                               
gas.  He  added that TransCanada doesn't have an  issue with that                                                               
bullet line  proposal as  long as that  pipe doesn't  exceed that                                                               
size or volume.  In response  to another question, he pointed out                                                               
that any  pipeline can be  expanded via compression  and looping,                                                               
but surmised that the volume of gas moving through such an in-                                                                  
state pipeline will remain under  .5 Bcf/day until [TransCanada's                                                               
pipeline]  is in  service, because  those are  the provisions  of                                                               
AGIA.    He  offered  his  belief that  a  20-inch  pipe  is  the                                                               
appropriate  size  pipe  for  moving  up to,  or  less  than,  .5                                                               
Bcf/day.  He went on to say:                                                                                                    
                                                                                                                                
     What we  would be very  concerned about, of  course, is                                                                    
     if  someone  were  building a  48-inch  line  and  then                                                                    
     dribbling through  [.5 Bcf/day], or slightly  under it,                                                                    
     on  a long-term  basis,  expecting a  subsidy from  the                                                                    
     state  and then  wanting  to compete  with  me the  day                                                                    
     after we  went in service.   That clearly would  not be                                                                    
     in compliance with AGIA, in our view.                                                                                      
                                                                                                                                
2:36:41 PM                                                                                                                    
                                                                                                                                
VICE CHAIR  STEDMAN asked  what volume of  gas is  anticipated in                                                               
TransCanada's proposal,  and why TransCanada is  concerned with a                                                               
.5 Bcf/day limit.                                                                                                               
                                                                                                                                
MR. PALMER responded  that the proposal and  application that was                                                               
filed  anticipated 4.5  Bcf/day transported  from Prudhoe  Bay to                                                               
Western Canada and to the Lower  48.  At this point, however, the                                                               
ultimate volume  will only  be known at  the time  that customers                                                               
actually nominate  in the open  season - what  customers request,                                                               
either  in  Alberta or  to  Valdez.    He indicated  that  AGIA's                                                               
treble-damages clause - which precludes  the state from providing                                                               
fiscal  assistance to  a competing  pipeline project,  that being                                                               
one involving a  pipeline capable of moving more  than .5 Bcf/day                                                               
-  does two  things:   it  ensures that  North Slope  gas is  not                                                               
diverted  from  the TransCanada  pipeline,  and  it ensures  that                                                               
TransCanada's  obligations   to  the  state  won't   be  unfairly                                                               
burdensome  should   the  state  still  choose   to  subsidize  a                                                               
competitor.  He relayed his  understanding that the state intends                                                               
to provide  up to  .5 Bcf/day  of in-state  gas only  to Alaska's                                                               
local markets and not to a competitor of TransCanada's pipeline.                                                                
                                                                                                                                
MR. PALMER,  in response to  a question, stated  that TransCanada                                                               
is  prepared to  move smaller  volumes of  less than  3.5 Bcf  to                                                               
Western  Canada.    However,  due  to  economies  of  scale,  the                                                               
economics  of  the project  could  be  significantly impaired  if                                                               
volumes  drop  below 3.5  Bcf/day  to  the  AECO  Hub -  a  large                                                               
diameter  pipeline, compared  to a  small diameter  pipeline, can                                                               
save  significant  costs.   He  offered  that having  a  pipeline                                                               
capable  of  moving more  than  3.5  Bcf/day  would be  the  most                                                               
economical.   If,  however, customers  were interested  in a  2.5                                                               
Bcf/day pipeline,  then the tariff would  be significantly higher                                                               
due to the lower volume.                                                                                                        
                                                                                                                                
2:39:56 PM                                                                                                                    
                                                                                                                                
MR. PALMER, referring to a  slide in his PowerPoint presentation,                                                               
mentioned  that  TransCanada proposes  that  in  the event  of  a                                                               
capital cost  overrun, it would take  a reduction in the  rate of                                                               
return, which is unusual in  the pipeline industry because of the                                                               
low  level of  equity.   He  noted that  Fort  Nelson, along  the                                                               
[proposed] pipeline  route, is  midway through  British Columbia.                                                               
TransCanada  has significant  spare  capacity in  its systems  in                                                               
Western Canada  and anticipates  more at  the time  that Alaska's                                                               
gas  would   be  online.     Due  to  its   charging  methodology                                                               
TransCanada, as a  pipeline owner, does not make  less money when                                                               
it has  spare capacity in  its system  and won't make  more money                                                               
when it refills  its pipeline with Alaska gas;  instead, the unit                                                               
cost to TransCanada's customers  increases and decreases based on                                                               
the volumes  in the pipeline.   Thus, if TransCanada  refills the                                                               
pipeline  as a  result  of  moving Alaska's  gas,  not only  does                                                               
Alaska  benefit  from  receiving  better  prices  for  gas,  more                                                               
liquidity  for  gas, and  more  diversity,  but Western  Canadian                                                               
producers will benefit as well.                                                                                                 
                                                                                                                                
MR.  PALMER   referred  to  projections  that   Western  Canadian                                                               
producers would benefit by a reduction  of tolls in the amount of                                                               
$10 billion  over the first 15  years that Alaska gas  moves into                                                               
that system.   TransCanada proposes a structure,  called the Fort                                                               
Nelson  option, in  which TransCanada  would seek  authority from                                                               
Canadian  regulators  to  shift  about $3  billion  of  that  $10                                                               
billion to  "Alaskan shippers' accounts," thus  benefiting Alaska                                                               
additional   to  what's   currently  proposed   in  TransCanada's                                                               
application.                                                                                                                    
                                                                                                                                
2:42:31 PM                                                                                                                    
                                                                                                                                
MR. PALMER  - referring  to slide  10, which shows  a map  of the                                                               
proposed pipeline  system -  pointed out  that Alaska  would gain                                                               
access to the  AECO Hub, represented by the blue  lines, and that                                                               
once Alaska has  access to that system, Alaska can  trade its gas                                                               
for free  once the receipt  toll is  paid.  This  system provides                                                               
significant liquidity  and so  Alaska may wish  to trade  its gas                                                               
[at the AECO Hub].  Others  would then take possession of the gas                                                               
and continue  to move it  on to the  Lower 48 to  U.S. consumers.                                                               
He said  that he's heard  in the press  that all of  Alaska's gas                                                               
will end up in the Alberta tar sands.                                                                                           
                                                                                                                                
MR. PALMER  assured members that  that statement is  not correct.                                                               
Western Canada today has surplus gas  and has had surplus gas for                                                               
40  years and  exports  9 Bcf/day  to the  Lower  48, double  the                                                               
volume  of the  proposed Alaska  pipeline.   He relayed  that the                                                               
Western Canadian  supply will be "relatively  flat going forward"                                                               
and that demands are increasing,  which is why the spare capacity                                                               
will increase.   He said he  anticipates that by the  time Alaska                                                               
gas  flows, Western  Canada will  still have  6 to  7 Bcf/day  of                                                               
surplus  gas even  after  meeting  the "oil  sands  demand."   So                                                               
although  "you can't  paint  your molecules  with  your flag  and                                                               
Canadian molecules with  a Canadian flag," he  said, Alaska's gas                                                               
will be  exported to the  Lower-48 market after  serving Alaska's                                                               
markets first.                                                                                                                  
                                                                                                                                
2:45:09 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  KELLY posed  a hypothetical  example  in which  a                                                               
small-diameter  spur   line  was  completed  from   Anchorage  to                                                               
Fairbanks to  deliver Cook Inlet  gas, and the  TransCanada's 48-                                                               
inch pipeline  was delayed.   He asked whether, in  that example,                                                               
TransCanada would be willing to  build a pipeline to Fairbanks or                                                               
Delta  Junction provided  gas was  available from  the producers.                                                               
If  TransCanada did  so, he  surmised, then  that pipeline  would                                                               
bring new gas to Fairbanks.                                                                                                     
                                                                                                                                
MR. PALMER, noting that that  example assumes that a 48-inch pipe                                                               
to Delta  Junction could  get constructed, said  yes, so  long as                                                               
TransCanada has enough customers  to allow TransCanada to recover                                                               
its capital.   He indicated that the volumes would  be small, and                                                               
therefore either the  tariffs would be high  or TransCanada would                                                               
need to have  capital contributions, since a large  pipe can move                                                               
4.5 Bcf/day would only be moving volumes under .5 Bcf/day.                                                                      
                                                                                                                                
REPRESENTATIVE   KELLY   agreed   that  [in   that   case]   some                                                               
contribution would be  necessary for the project.   He asked what                                                               
Mr. Palmer  would project  as the "absolute  floor" on  its first                                                               
open season before "you take a hike."                                                                                           
                                                                                                                                
MR. PALMER  pointed out that  AGIA does not allow  TransCanada to                                                               
"take  a hike";  instead TransCanada  must continue  through FERC                                                               
certification, even if zero volumes  are committed in the initial                                                               
open season,  and must also hold  a second open season  two years                                                               
later.                                                                                                                          
                                                                                                                                
MR. PALMER referred  to a slide labeled,  "Project Schedule," and                                                               
said the  timeline for the first  open season is set  at 2010 and                                                               
that the second  open season would be held at  the same time that                                                               
TransCanada would file its FERC  application.  He offered that if                                                               
TransCanada obtained  a FERC certificate  and still did  not have                                                               
customers,  then  the  project  would  not  appear  viable.    In                                                               
response to  other questions, he  offered his  understanding that                                                               
customers may  be reluctant  to commit to  the pipeline  for less                                                               
than  3.5 Bcf/day  to the  AECO Hub,  and that  TransCanada would                                                               
[build a pipeline]  handling less than 3.5 Bcf/day  if there were                                                               
sufficient customers willing to pay the resulting higher tariff.                                                                
                                                                                                                                
2:50:31 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  LeDOUX  asked   why  TransCanada  would  continue                                                               
through the  FERC certification process  to a second  open season                                                               
if  the initial  open season  is unsuccessful,  except that  AGIA                                                               
requires TransCanada to do so.                                                                                                  
                                                                                                                                
MR.  PALMER  indicated   that  is  why  -  under   AGIA,  one  of                                                               
TransCanada's obligations  is to  proceed to  FERC certification.                                                               
Thus,  if  the  license  is granted,  TransCanada  will  continue                                                               
seeking customers  and FERC certification, and  if TransCanada is                                                               
successful in  capturing customers  at a  later open  season, the                                                               
project  will be  advanced which,  he  opined, is  the intent  of                                                               
AGIA.                                                                                                                           
                                                                                                                                
2:52:24 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE FAIRCLOUGH offered that  she has heard discussions                                                               
about projects that would move a  lot of gas from the North Slope                                                               
to the AECO Hub.  She asked  about building a gasline or a bullet                                                               
line  without  there being  proven  reserves.   She  relayed  her                                                               
understanding  that the  predictions  for gas  have already  been                                                               
made, and asked  Mr. Palmer to speak to the  proven reserves that                                                               
can be demonstrated to the financiers.                                                                                          
                                                                                                                                
VICE CHAIR STEDMAN  asked Mr. Palmer to also  explain the concept                                                               
of oil and gas off-take.                                                                                                        
                                                                                                                                
MR.  PALMER  explained that  natural  gas  often comes  in  "non-                                                               
associated fields"  that contain only  natural gas.   However, in                                                               
an  "associated  gas  field"  such  as at  Prudhoe  Bay,  gas  is                                                               
associated with  oil in the reservoir.   In such fields,  the oil                                                               
is often produced  first, with the natural  gas being re-injected                                                               
to maintain  pressure in the  reservoir.  At some  point, though,                                                               
it  is better  to  stop producing  the  oil or  the  oil and  gas                                                               
together.    The gas  in  Prudhoe  Bay  has been  re-injected  to                                                               
maintain reservoir pressure  for 30 years thus far.   Most of the                                                               
gas  contained in  the  North Slope,  including  Prudhoe Bay  and                                                               
Point Thompson,  is associated  gas, he said,  adding that  he is                                                               
not aware of anyone exploring  solely for non-associated gas.  He                                                               
said  he anticipates  that  there will  be  some exploration  for                                                               
associated  gas, and  although most  reservoirs in  North America                                                               
contain non-associated  gas, since oil production  results in the                                                               
most  profit, gas  is  being re-injected  into  the reservoir  to                                                               
assist  in the  production of  oil.   In  other instances,  where                                                               
there is no gas pipeline, the  reservoir has to be capped because                                                               
there's no market for the gas.                                                                                                  
                                                                                                                                
2:56:32 PM                                                                                                                    
                                                                                                                                
VICE CHAIR  STEDMAN relayed his  understanding that as  the basin                                                               
ages, the off-take amounts could finance gasline construction.                                                                  
                                                                                                                                
2:57:06 PM                                                                                                                    
                                                                                                                                
MR. PALMER  said that the  North Slope contains  approximately 35                                                               
trillion cubic feet (Tcf) of  proven reserves, which represents a                                                               
very substantial initial reservoir,  and that in its application,                                                               
TransCanada is  requiring customers  to have  10 years  of proven                                                               
reserves for  a 25  year contract.   That's  relatively standard.                                                               
In order  to finance the  project, one generally doesn't  need 25                                                               
years of proven reserves before  starting.  He offered his belief                                                               
that  independent  studies confirm  that  the  North Slope  is  a                                                               
prolific basin, and  calculated that 10 years  of proven reserves                                                               
at 4.5  Bcf/day represents  about 1.6  Tcf per year.   So  if the                                                               
pipeline flowed  full every day,  that it would represent  16 Tcf                                                               
over  10   years,  the  amount  needed   to  "backstop"  customer                                                               
contracts under TransCanada's application.                                                                                      
                                                                                                                                
MR. PALMER  relayed that  Prudhoe Bay contains  24 Tcf  in proven                                                               
reserves,  with an  estimated additional  8  to 10  Tcf at  Point                                                               
Thompson, though that  may not be available initially.   Not only                                                               
does [the state] need to know  how much initial and future gas is                                                               
in the  reservoir, but also  how much  can be delivered  from the                                                               
reservoir, he stated,  and this will be  determined by government                                                               
officials  and  the  leaseholders.    Government  officials  have                                                               
projected initial gas  volumes of 3.5 Bcf/day or  4.0 Bcf/day, so                                                               
Point  Thompson,  he opined,  will  be  needed to  increase  that                                                               
amount to 4.5 Bcf/day.                                                                                                          
                                                                                                                                
REPRESENTATIVE  FAIRCLOUGH  surmised  that  Alaska's  ability  to                                                               
successfully   monetize  its   gas   relates   to  the   economic                                                               
feasibility of the project and  the involvement of the producers.                                                               
She  also surmised  that he  question before  the legislature  is                                                               
whether Alaska will invest in an AGIA license with TransCanada.                                                                 
                                                                                                                                
3:01:27 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE ROSES  asked to revert  back one slide  to examine                                                               
the  Fort Nelson  option upside  [slide 9,  labeled TransCanada's                                                               
Competitive  Response to  AGIA].   Representative Roses  recalled                                                               
that TransCanada's  proposal would  be submitted the  NEB without                                                               
any guarantee of approval.                                                                                                      
                                                                                                                                
MR.  PALMER, in  response  to comments  and questions,  clarified                                                               
that if TransCanada  is successful in getting the  NEB to approve                                                               
the aforementioned Fort Nelson option,  the tolls would fall from                                                               
$2.41 to about $2.25.                                                                                                           
                                                                                                                                
REPRESENTATIVE ROSES asked why the  Mackenzie River pipeline must                                                               
be brought to the AECO Hub  prior to the Alaska line, and whether                                                               
TransCanada would have enough excess  capacity to handle Alaska's                                                               
gas without Alaska paying expansion prices inside Canada.                                                                       
                                                                                                                                
MR. PALMER  answered that the 4.5  Bcf/day to 5 Bcf/day  of spare                                                               
capacity assumes  that Mackenzie  River gas  is flowing  prior to                                                               
Alaska  gas;  if  not,  then  only about  1.5  Bcf/day  of  spare                                                               
capacity would be available.                                                                                                    
                                                                                                                                
3:05:13 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HAWKER asked whether  TransCanada would be willing                                                               
to undertake the  pipeline without the state's  $500 million, and                                                               
what the  state and TransCanada's financial  obligations would be                                                               
in the  event that  TransCanada were to  proceed with  the Alaska                                                               
project beyond a failed open season.                                                                                            
                                                                                                                                
MR.  PALMER explained  that  agreeing to  move  forward beyond  a                                                               
failed open  season was difficult  for TransCanada, and  so views                                                               
the $500  million as one of  the values it will  receive from the                                                               
state for doing  so.  He relayed his understanding  that in terms                                                               
of the allocation  of the $500 million, prior to  the open season                                                               
and  if  TransCanada  is  granted  a  license,  the  state  would                                                               
reimburse TransCanada  for up to  50 percent of its  cost, which,                                                               
he  estimated,  would be  about  $84  million.   After  the  open                                                               
season,  whether successful  or not,  TransCanada would  pursue a                                                               
FERC certificate,  and the state  would pay  up to 90  percent of                                                               
the  cost, up  to the  $500 million  cap, with  TransCanada being                                                               
responsible for any costs beyond that.                                                                                          
                                                                                                                                
3:10:23 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HAWKER  questioned whether its reasonable  for the                                                               
state to spend $500 million  to pursue FERC certification after a                                                               
failed open season.                                                                                                             
MR. PALMER reiterated that a  portion of the state's $500 million                                                               
would  be  spent prior  to  the  open  season, pointed  out  that                                                               
pursing FERC certification even after  a failed open season is an                                                               
aspect  of  AGIA  that  was  approved  by  the  legislature,  and                                                               
mentioned  that  TransCanada  has  hopes for  a  successful  open                                                               
season.    In response  to  comments,  he acknowledged  that  the                                                               
legislature   is   not   obligated   to   approve   TransCanada's                                                               
application.                                                                                                                    
                                                                                                                                
3:15:59 PM                                                                                                                    
                                                                                                                                
SENATOR  THERRIAULT  noted  that  although  normally  a  pipeline                                                               
company would not proceed with  FERC certification after a failed                                                               
season  since such  would indicate  that  there's no  need for  a                                                               
pipeline, in  this case,  Congress has  taken action  telling the                                                               
FERC that  this pipeline  is in  fact needed.   Thus,  that first                                                               
hurdle has already been addressed.                                                                                              
                                                                                                                                
MR. PALMER concurred.                                                                                                           
                                                                                                                                
SENATOR  THERRIAULT  said  that  although  TransCanada  might  be                                                               
reluctant to proceed with the  FERC certification process [if the                                                               
first  open  season  fails,  from  the  state's  point  of  view,                                                               
continuing  to advance  the project  is  of value  to the  state.                                                               
Additionally,  the state's  $500 million  investment would  lower                                                               
the tariff,  so after  recouping its  investment the  state would                                                               
receive an additional $200 million.                                                                                             
                                                                                                                                
MR. PALMER concurred with that summation.                                                                                       
                                                                                                                                
3:18:14 PM                                                                                                                    
                                                                                                                                
SENATOR THERRIAULT - noting that  the Denali project, proposed by                                                               
BP Exploration  (Alaska) Inc.  ("BP") and  ConocoPhillips Alaska,                                                               
Inc. ("Conoco"),  is proposing  a volume of  4.5 Bcf/day  - asked                                                               
Mr.  Palmer whether  he  has  heard anything  that  leads him  to                                                               
believe  that  the  gas  will  not be  there  when  the  proposed                                                               
TransCanada pipeline is completed.                                                                                              
                                                                                                                                
MR.  PALMER  said, "I  have  heard  testimony  from a  number  of                                                               
parties that  would lead  me to  believe that  the volume  may be                                                               
more like 3.5 to 4 Bcf/day initially rather than 4.5 [Bcf/day]."                                                                
                                                                                                                                
SENATOR THERRIAULT  surmised that's  still enough volume  to make                                                               
the TransCanada project financially successful.                                                                                 
                                                                                                                                
MR. PALMER concurred.                                                                                                           
                                                                                                                                
VICE CHAIR STEDMAN,  noting that it's necessary to  have a design                                                               
before obtaining  a FERC certificate,  asked how  TransCanada can                                                               
proceed with a design without knowing  what amount of gas will be                                                               
available.                                                                                                                      
                                                                                                                                
MR.  PALMER  answered  that  if sufficient  gas  to  advance  the                                                               
project - either  to the Lower 48  or to an LNG project  - is not                                                               
available, then  TransCanada will  have a  judgment call  to make                                                               
with regard  to what  it will  apply to the  FERC for.   However,                                                               
it's too early to describe what  that might be.  He said, "That's                                                               
a very  unhappy circumstance, where I  have an open season  and I                                                               
get zero  gas committed in two  years time - I  don't expect that                                                               
to happen, but it's always a possibility."                                                                                      
                                                                                                                                
3:21:10 PM                                                                                                                    
                                                                                                                                
MR. PALMER referred  to slide 25 of  his PowerPoint presentation,                                                               
and offered  that TransCanada believes  that AGIA  was structured                                                               
to  encourage construction  of the  base project;  long-run basin                                                               
development;  and  open  access  terms  for  initial  and  future                                                               
shippers and  in-state, Lower  48, and LNG  markets.   A critical                                                               
point  to  consider, and  one  that  impacts the  probability  of                                                               
success, is  that AGIA obliges TransCanada  to voluntarily expand                                                               
the pipeline.  He suggested  that when considering any "non-AGIA"                                                               
pipeline proposal,  the legislature should question  those making                                                               
such a  proposal regarding how  they would pursue expansion.   He                                                               
noted that TransCanada is in  favor of providing gas for in-state                                                               
use, gas to the Lower 48, and gas to LNG markets.                                                                               
                                                                                                                                
MR.  PALMER  said  that  TransCanada believes  that  it  has  the                                                               
credentials and capacity  to build, own, operate,  and expand the                                                               
project.   He  said, "We  think our  objectives are  aligned with                                                               
AGIA;  we   want  early  in-service,   we  want   long-run  basin                                                               
development, and by that I mean  we're not here to just move your                                                               
35 Tcf of gas - we think you have 235 [Tcf of gas] or beyond."                                                                  
He noted  that in  Western Canada,  the original  proven reserves                                                               
quadrupled in the first 10 years  of in-service.  If that were to                                                               
happen in Alaska,  there would be more than 100  Tcf available 10                                                               
years   after  in-service.     He   concluded  by   stating  that                                                               
TransCanada  wants open  access and  equitable treatment  for all                                                               
customers.                                                                                                                      
                                                                                                                                
The committee took an at-ease from 3:24 p.m. to 3:29 p.m.                                                                       
                                                                                                                                
3:30:25 PM                                                                                                                    
                                                                                                                                
PATRICK  GALVIN,  Commissioner,   Department  of  Revenue  (DOR),                                                               
explained that  under the AGIA process,  he shares responsibility                                                               
with  Commissioner Tom  Irwin,  Department  of Natural  Resources                                                               
(DNR); together they  make a number of  decisions associated with                                                               
AGIA  and advancing  the gas  pipeline.   In 2000,  as the  North                                                               
American  natural  gas  prices began  to  increase,  North  Slope                                                               
companies  and the  state began  to  anticipate a  change in  the                                                               
natural  gas  market  and  the  resulting  opportunity  to  bring                                                               
Alaskan gas to the North  American market.  He characterized AGIA                                                               
as the  culmination of the  state's work  in trying to  advance a                                                               
gasline.   The state has  struggled to surmount the  hurdles that                                                               
have delayed the  project, and has tried to  identify the factors                                                               
which have  done so.   In  2002, for  example, BP  indicated that                                                               
production  of  Alaska's natural  gas  was  not yet  economically                                                               
viable  for  it, and  so  the  previous administration  underwent                                                               
extensive  negotiations  with  the  three  North  Slop  producers                                                               
regarding what  changes the  state needed to  make in  its fiscal                                                               
and tax systems and its management  of oil and gas leases, and to                                                               
determine what  level of contractual certainty  and stability was                                                               
necessary to advance a gasline project.                                                                                         
                                                                                                                                
COMMISSIONER  GALVIN  noted that  both  the  legislature and  the                                                               
public  reacted   adversely  to  the   previous  administration's                                                               
proposal.    The  AGIA  proposal,  in contrast,  is  based  on  a                                                               
recognition that the project is  economic and will make money for                                                               
its participants.   He opined that what the state  needs to do to                                                               
advance the project is to instill  a sense of urgency in order to                                                               
attract  the competition  necessary  to drive  a gasline  project                                                               
through  the  number  of  hurdles   that  any  big  project  must                                                               
overcome.   The  state needs  to be  the project's  catalyst, but                                                               
does not  need to carry it  all the way to  completion, taking on                                                               
all the  risks and  forwarding all of  the money  associated with                                                               
the project.   He opined that AGIA was designed  to do just that,                                                               
to be  the catalyst  getting the  competition necessary  to drive                                                               
the project forward.                                                                                                            
                                                                                                                                
3:36:52 PM                                                                                                                    
                                                                                                                                
COMMISSIONER GALVIN  said that  the state  looked to  the private                                                               
sector as  being the primary  driver of the project,  and offered                                                               
inducements  in exchange  for some  agreement  by the  successful                                                               
applicant.  He  added, "Competition was put forth,  both in terms                                                               
of competition to get the  state inducements and also competition                                                               
to  move  the  project  ahead."    Not  all  interested  parties,                                                               
however, were willing to submit  an application to move a gasline                                                               
project   forward  under   the  then-existing   framework.     He                                                               
characterized AGIA as "about  creating competition and unleashing                                                               
the  power of  the private  sector to  move this  project ahead."                                                               
Under AGIA, the state will  provide matching funds upfront to get                                                               
past  the  initial design  and  regulatory  process in  order  to                                                               
"prove up  the economics" and  provide the opportunity  for other                                                               
participants to join  in the project, and to  allow the project's                                                               
economic potential to ultimately drive it to fruition.                                                                          
                                                                                                                                
COMMISSIONER  GALVIN noted  that in  return, the  state wants  to                                                               
protect its long-term  interests since it not only  desires a gas                                                               
pipeline, but  also a gas  pipeline that meets the  state's long-                                                               
term  goals,  which are  to  create  exploration and  development                                                               
opportunities on  the North Slope  - even for companies  that may                                                               
not yet  be in Alaska -  to get the  gas to market as  quickly as                                                               
possible for a  reasonable cost.  The state wants  a gas pipeline                                                               
that  has genuine  "open-access provisions."   He  explained that                                                               
provisions in federal law govern  the regulation of this proposed                                                               
pipeline,  but  don't  guarantee  the outcome,  and  so  AGIA  is                                                               
intended to  increase the likelihood  that the state will  have a                                                               
pipeline  that  will provide  a  competitive  environment on  the                                                               
North  Slope which  ultimately drives  more  development that  in                                                               
turn leads to more jobs and revenue for the state.                                                                              
                                                                                                                                
3:40:28 PM                                                                                                                    
                                                                                                                                
COMMISSIONER GALVIN  offered that the state  solicited applicants                                                               
to accept  the state's  matching funds in  return for  making the                                                               
commitments required  under AGIA, some of  which primarily entail                                                               
a commitment  to a  timeline to move  through the  initial design                                                               
and regulatory  process with  the FERC, and  to move  through the                                                               
open   season  process   and   the   FERC  certificate   process.                                                               
Additionally the  [successful applicant]  would commit  to manage                                                               
the  project  and   to  provide  open  access   -  the  long-term                                                               
opportunity for exploration  - and structure financing  in such a                                                               
way so as to lower [tariff]  rates.  He explained that 90 percent                                                               
of  the state's  revenues are  based on  the taxes  and royalties                                                               
from the  state's oil  and gas  leases and  are derived  from the                                                               
value of  oil and  gas at  the wellhead.   The wellhead  value is                                                               
derived from taking the market  selling price and subtracting the                                                               
transportation cost  to get the gas  to market - the  tariff.  He                                                               
The lower the  tariff on the pipeline, the  greater the "netback"                                                               
value,  which results  in an  increase in  revenue to  the state.                                                               
Additionally,  lower tariffs  also result  in an  increased value                                                               
for  the  producer.    The  state  did  receive  applications  in                                                               
response  to   its  request  for  applications,   and  the  state                                                               
evaluated the  applications in  terms of  whether they  met AGIA.                                                               
The   only  applicant   that  met   all   the  requirements   was                                                               
TransCanada.   Under AGIA,  the state  needs to  evaluate whether                                                               
the  application  maximizes  the  benefits for  Alaskans.    That                                                               
evaluation will  allow the state  to examine  other opportunities                                                               
with regard to a gasline.                                                                                                       
                                                                                                                                
COMMISSIONER  GALVIN  said  it   was  necessary  to  examine  the                                                               
TransCanada project  and compare it with  all other opportunities                                                               
that the state  might have, including LNG options  and the Denali                                                               
Project.  The  state, therefore, focused on four  areas, with one                                                               
top  priority being  to get  a  gas pipeline  moving through  the                                                               
process.                                                                                                                        
                                                                                                                                
3:46:00 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  FAIRCLOUGH  asked   whether  Commissioner  Galvin                                                               
could  explain   the  analysis  the  state   used  regarding  the                                                               
aforementioned BP/Conoco proposal.                                                                                              
                                                                                                                                
COMMISSIONER  GALVIN said  that  the Denali  Project  is not  yet                                                               
fully defined,  and so  the state  has not  been able  to perform                                                               
much of  an economic  analysis.   The little  bit of  an analysis                                                               
that  was  performed  focused  more  on  where  state  wanted  to                                                               
position  itself in  terms  of  advancing a  gas  pipeline.   The                                                               
questions  to  consider  are,  does the  state  go  forward  with                                                               
issuing the license to TransCanada,  how does that compare to the                                                               
Denali project, does  the Denali project give the  state a reason                                                               
not  to pursue  TransCanada's  license and  instead  rely on  the                                                               
Denali Project,  and how  would that determination  be made.   In                                                               
response  to  comments,  he clarified  that  the  state  examined                                                               
hypothetical questions, one of which  was what would the economic                                                               
impact be  on the  state's revenue stream  if the  Denali project                                                               
goes forward - particularly under  a range of debt:equity ratios.                                                               
However, in terms  of an performing an  actual economic analysis,                                                               
the state just doesn't have  enough information yet.  In response                                                               
to  a   comment,  he  explained  that   all  analyses,  including                                                               
associated documentation, are contained in the state's findings.                                                                
                                                                                                                                
3:52:47 PM                                                                                                                    
                                                                                                                                
VICE CHAIR STEDMAN  recalled that the consulting firm  of Black &                                                               
Veatch had indicated that one  can't make a meaningful comparison                                                               
between  AGIA  and  the  Denali   project  with  the  information                                                               
currently available.                                                                                                            
                                                                                                                                
COMMISSIONER  GALVIN relayed  that  Black &  Veatch developed  an                                                               
economic  model for  the  state  so that  it  could perform  some                                                               
sensitivity analyses, and surmised  that the Denali project could                                                               
come in with "the exact  same economics" since the Denali project                                                               
has  no specifications  as of  yet, and  particularly since  both                                                               
projects are nearly  the same in that they are  going to the same                                                               
markets and are using similarly-sized  pipe.  The state, however,                                                               
has  commitments with  TransCanada,  regardless  that the  Denali                                                               
project has the potential for  a wider range of possible economic                                                               
outcomes.                                                                                                                       
                                                                                                                                
SENATOR THERRIAULT  asked whether the administration  has a slide                                                               
that  details  the  benefits  the state  derives  from  the  $500                                                               
million  investment.   He  offered  his  understanding that  that                                                               
investment could  potentially lower the tariff  by up to $1.   He                                                               
indicated,  therefore,  that  what  needs  to  be  considered  is                                                               
whether any value is left as each unit if gas is shipped.                                                                       
                                                                                                                                
COMMISSIONER GALVIN acknowledged that there  are a number of ways                                                               
to view the  potential value to the state in  moving forward with                                                               
an AGIA license.  He continued:                                                                                                 
                                                                                                                                
     In comparison to, for example,  the Denali Project, you                                                                    
     can look  at it ...  from ...  sort of a  ... strategic                                                                    
     aspect  ... -  we  get  somebody to  commit  to move  a                                                                    
     project  forward, to  commit to  have certain  economic                                                                    
     commercial  terms that  are going  to be  beneficial to                                                                    
     the  state.   And we  can put  a price  tag on  some of                                                                    
     that,  but  that price  tag  is  not fixed;  it's  just                                                                    
     looking at  it in  terms of the  potential value  if we                                                                    
     have  a project  instead that  comes forward  with what                                                                    
     would  still   be  considered   an  industry-acceptable                                                                    
     tariff structure.                                                                                                          
                                                                                                                                
     And  that  is  what  Senator  Therriault  was  directly                                                                    
     referring to,  that we  did analyses  that said  if you                                                                    
     had ... a debt to equity  ratio that is 50:50, which is                                                                    
     within   industry   standards,   that  that   alone   -                                                                    
     everything else  being equal - that  change alone would                                                                    
     ... have  an effect  of ... raising  the tariff  by $1,                                                                    
     lowering the  value to the  state [by] ...  $8 billion.                                                                    
     And that's  completely out of  context because  I'm not                                                                    
     talking about  value to the  state yet, but  suffice to                                                                    
     say it would  have a big impact on  the potential value                                                                    
     to the state.                                                                                                              
                                                                                                                                
     Now, that  is [one]  aspect of  it.   The other  way of                                                                    
     looking  at   the  $500  million  is   by  having  that                                                                    
     contribution  go  in  by  the state  early  on  in  the                                                                    
     process.   We end up  lowering the amount of  the costs                                                                    
     that have to be recovered  by the pipeline - lowers the                                                                    
     tariff  itself; that  only lowers  the tariff  by $.06.                                                                    
     However,  that   $.06  reduction  in  the   tariff  ...                                                                    
     [results in an]  increase in the value to  the state of                                                                    
     $200  million.   So  even  if  you consider  the  state                                                                    
     having put in $500 million,  we end up getting our $500                                                                    
     million back  and increasing the value  of this project                                                                    
     to  the  state  by  $200 million.    So,  the  economic                                                                    
     analyses was important. ...                                                                                                
                                                                                                                                
3:59:49 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SAMUELS asked how long  it will take for the state                                                               
to recoup the $500 million and obtain the $200 million.                                                                         
                                                                                                                                
COMMISSIONER GALVIN offered that the  gas pipeline will result in                                                               
revenues to the state for years  to come.  Thus, to evaluate that                                                               
in comparison  to other  potential projects  - with  each project                                                               
having money coming in at different  times - a calculation of net                                                               
present value (NPV)  is used to determine what  those dollars are                                                               
worth today.  For example, if  $1 billion is earned 20 years from                                                               
now with  a 5 percent  loss of value per  year - essentially  a 5                                                               
percent discount rate - that $1  billion earned 20 years from now                                                               
will  be worth  substantially  less than  $1  billion in  today's                                                               
dollars.  In contrast, the  state's $500 million investment today                                                               
would -  under an  NPV calculation  - increase  the value  of the                                                               
project  to the  state by  $200 million  in the  first 25  years;                                                               
essentially, the  state would receive  $700 million in  value for                                                               
its  $500 million  investment.    In response  to  a comment,  he                                                               
acknowledged that his example assumes  there is a viable project.                                                               
When doing  the analysis under AGIA,  the state has to  factor in                                                               
both the  NPV to  the state and  - as a  separate analysis  - the                                                               
project's likelihood of success.                                                                                                
                                                                                                                                
4:03:21 PM                                                                                                                    
                                                                                                                                
COMMISSIONER  GALVIN, with  regard  to  evaluating the  project's                                                               
likelihood  of  success,  indicated  that  the  major  hurdle  of                                                               
getting gas  committed to  the pipeline must  be considered.   So                                                               
the state examines  the economics of the project, the  NPV to the                                                               
producers, in order  to analyze whether the  project will attract                                                               
customers willing to provide gas  commitments, which in turn will                                                               
lead to financing and result in  a successful project.  He opined                                                               
that in this  instance, there is the potential for  the state and                                                               
the  producers  to earn  a  lot  of  money,  and this  gives  the                                                               
administration  confidence  that  the project  has  a  reasonable                                                               
expectation of  attracting gas commitments and  providing revenue                                                               
to the state.                                                                                                                   
                                                                                                                                
COMMISSIONER  GALVIN  referred to  slide  27  - labeled,  "Denali                                                               
Project  Is  More  Risky  For  the State"  -  of  his  PowerPoint                                                               
presentation illustrating  some comparison.   He opined  that the                                                               
analysis is not  only about the revenues to the  state, but about                                                               
the range  of possible  outcomes.  With  the Denali  project, the                                                               
state does not  have commitments with regard to  the timeline and                                                               
advancing the  project to  the open season  and through  the FERC                                                               
certification  process; in  contrast,  the state  does have  such                                                               
commitments  from  TransCanada.   Furthermore,  with  the  Denali                                                               
project, the state  can't anticipate the actual  financing or the                                                               
rates  that  will be  charged.    However,  the state  can  still                                                               
compare the possible outcomes of the two projects.                                                                              
                                                                                                                                
COMMISSIONER GALVIN elaborated:                                                                                                 
                                                                                                                                
     That's where you  see the references to  the $8 billion                                                                    
     change in  NPV.   That's just  simply saying  that it's                                                                    
     possible that this would be  the difference between the                                                                    
     Denali  project  and  the  ...  [proposed  TransCanada]                                                                    
     project.  Similarly,  when we look at  the other values                                                                    
     that the state  is anticipating to get out  of the AGIA                                                                    
     license  with regard  to  the  open access  provisions,                                                                    
     these have tremendous  value to the state  in the long-                                                                    
     term.   This is  the difference  between being  able to                                                                    
     get  just the  known gas  off  of the  North Slope,  in                                                                    
     terms of the  gas that's currently being  produced on a                                                                    
     daily basis  in the oil  fields, versus ...  being able                                                                    
     to get  all of  the expected gas  that should  be found                                                                    
     once explorers are out there  looking for gas.  If they                                                                    
     know  they  can  get  their gas  into  a  pipeline  and                                                                    
     ultimately  to market  at a  reasonable  rate, then  it                                                                    
     will  incentivize that  activity,  which  leads to  the                                                                    
     jobs and the revenue to the state.                                                                                         
                                                                                                                                
4:07:33 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SAMUELS surmised  that  an 80:20  debt to  equity                                                               
ratio would increase the state's NPV.                                                                                           
                                                                                                                                
COMMISSIONER GALVIN agreed.                                                                                                     
                                                                                                                                
REPRESENTATIVE SAMUELS  highlighted that  in terms  of expansion,                                                               
no  certainty  exists  for  either  project or  for  any  of  the                                                               
producers  because  there is  no  guarantee  that the  FERC  will                                                               
approve any such proposals.   The state's $500 million investment                                                               
only ensures  that TransCanada will  ask the FERC  for particular                                                               
expansion provisions and debt:equity ratio.                                                                                     
                                                                                                                                
COMMISSIONER  GALVIN,  turning  attention  to  slide  36  of  his                                                               
PowerPoint  presentation,  said  that  the purpose  of  the  AGIA                                                               
process is  to get  a project  moving and keep  it moving  and to                                                               
ultimately end up  with a pipeline that  meets Alaska's long-term                                                               
needs,  and  that  the  DOR's  analysis  has  revealed  that  the                                                               
TransCanada application  meets that  objective.   TransCanada has                                                               
committed to move  the project under terms that  will provide the                                                               
state  the   best  chance  for   meeting  its   long-term  needs.                                                               
Additionally,  the aforementioned  analysis allows  the state  to                                                               
examine its  opportunities as they  relate to the  advancement of                                                               
an  Alaska natural  gas pipeline.   Thus  the administration  has                                                               
reached the  conclusion that TransCanada  is the best  option for                                                               
the state  to advance  such a  pipeline.  He  noted that  all the                                                               
information provided  by the administration  is available  on the                                                               
DNR's  website.   He specifically  suggested  that the  executive                                                               
summary  of the  findings  provides a  comprehensive overview  of                                                               
each aspect of the DOR's analysis and conclusions.                                                                              
                                                                                                                                
The committees took a recess from 4:12 p.m. to 5:00 p.m.                                                                        
                                                                                                                                
5:02:29 PM                                                                                                                    
                                                                                                                                
BOB WEINSTEIN,  Mayor, City of Ketchikan,  commended the governor                                                               
for her  persistence in  turning the  dream of  a gasline  into a                                                               
reality.   He said he  realizes that the  administration believes                                                               
that TransCanada  made an excellent proposal  through AGIA which,                                                               
with  a  $500 million  state  investment,  will be  of  long-term                                                               
benefit to  all Alaskans; and  that ConocoPhillips  Alaska, Inc.,                                                               
and BP, on  the other hand, have made a  proposal outside of AGIA                                                               
that  they claim  will result  in  a pipeline  without a  similar                                                               
state investment.   He questioned,  though, whether  the proposal                                                               
by Conoco  and BP  is a  real proposal,  whether Prudhoe  Bay can                                                               
sustain a 4 Bcf/day rate  of gas production without Point Thomson                                                               
gas, and whether there is a  risk that reservoir pressure will be                                                               
lowered to the  point where there is an unacceptable  drop in oil                                                               
production.                                                                                                                     
                                                                                                                                
MAYOR WEINSTEIN  offered his understanding that  despite the time                                                               
that  has  elapsed since  TransCanada  first  made its  proposal,                                                               
there  is no  contract document  available for  the legislature's                                                               
review.   He  questioned how  AGIA will  benefit the  citizens of                                                               
Ketchikan, and opined  that at a minimum,  the legislature should                                                               
be able  to review something  containing all the major  terms and                                                               
conditions  that would  be incorporated  into  a final  contract.                                                               
Referring  to  slide  36   of  Commissioner  Galvin's  PowerPoint                                                               
presentation, he said he is  not sure that TransCanada's proposed                                                               
pipeline  will  increase  the  chances  of  obtaining  affordable                                                               
energy in  Ketchikan.  For  example, despite record  oil revenues                                                               
accruing to  the state through high  oil prices and the  new oil-                                                               
tax   regime,  Ketchikan   is  still   experiencing  difficulties                                                               
accessing funds through the appropriations process.                                                                             
                                                                                                                                
MAYOR  WEINSTEIN  - after  offering  comments  regarding some  of                                                               
Ketchikan's capital projects, the  state's budgetary process, and                                                               
the administration's  various proposals to provide  Alaskans with                                                               
some short-term  energy relief -  offered his  understanding that                                                               
the  governor has  proposed  a  gasline from  Cook  Inlet to  the                                                               
north, and  that that  project would cost  between $2  billion $3                                                               
billion, and that the state  would likely have to underwrite much                                                               
of  that cost  because the  demand in  the Interior  of about  50                                                               
million  cubic  feet   (Mcf)  per  day  would   not  amortize  an                                                               
investment of that magnitude.  He continued:                                                                                    
                                                                                                                                
     If that makes sense to you  - so people in the Interior                                                                    
     who are reeling  from high energy costs  can have long-                                                                    
     term  access  to low-cost  energy  -  great.   However,                                                                    
     Southeast   Alaska  in   general,   and  Ketchikan   in                                                                    
     particular,   will  not   benefit  directly   from  the                                                                    
     construction of  the TransCanada  line, a  Denali line,                                                                    
     or a  bullet line.   We're not  going to get  a gasline                                                                    
     here.   We do,  however, have  hydro resources  that we                                                                    
     have developed, and more on  the drawing board, to meet                                                                    
     our future needs, both short- and long-term.                                                                               
                                                                                                                                
5:14:04 PM                                                                                                                    
                                                                                                                                
MAYOR WEINSTEIN asked the legislature  to consider providing debt                                                               
relief  for electric  utilities  throughout the  state, with  the                                                               
understanding that  such relief is to  directly benefit customers                                                               
through  a corresponding  reduction in  rates.   He relayed  that                                                               
he'd been  given a  figure of  $800 million as  the cost  of debt                                                               
service  for  the  interconnected  utilities  from  Fairbanks  to                                                               
Homer, and surmised  that there are probably  additional costs of                                                               
another  $200 million  outside of  that.   He said  that's not  a                                                               
giant sum,  particularly given  that the state  is accruing  a $1                                                               
billion a month  in oil revenues.  He also  asked the legislature                                                               
to  consider  increasing  state funding  for  alternative  energy                                                               
projects,  including hydro,  wind, and  other technologies.   The                                                               
time  to  invest  in  those   alternatives  is  now,  he  opined.                                                               
Furthermore, while  cheap energy  is great, in  and of  itself it                                                               
does  not  mean  much  if   it  does  not  go  hand-in-hand  with                                                               
investments and economic development  - such as Ketchikan's ports                                                               
and  shipyard  projects -  as  well  as investments  in  critical                                                               
public infrastructure, including health care and public safety.                                                                 
                                                                                                                                
MAYOR  WEINSTEIN, in  conclusion, said  he hopes  that a  gasline                                                               
project will  happen one way or  the other and that  the issue of                                                               
both  short-  and long-term  energy  will  be addressed,  and  he                                                               
recommended  that the  state develop  a  capital project  process                                                               
that the legislature - as  the appropriating branch of government                                                               
- insist be applied fairly and consistently.                                                                                    
                                                                                                                                
5:16:13 PM                                                                                                                    
                                                                                                                                
JOE WILLIAMS,  Mayor, Ketchikan Gateway Borough,  questioned what                                                               
the proposed natural  gas pipeline would mean  for Ketchikan, and                                                               
noted that the  legislature is charged with making  sure that any                                                               
resulting  benefits would  be equal  for everyone.   In  terms of                                                               
delivering  North Slope  gas, the  people of  Ketchikan recognize                                                               
the complexity  of [building]  a gas pipeline  and is  aware that                                                               
debating TransCanada's  proposed project compared to  [the Denali                                                               
project] presents a  major challenge.  He  said the southern-most                                                               
communities  of  Southeast  Alaska  must consider  the  issue  of                                                               
energy  and whether  a gas  pipeline could  provide benefit.   He                                                               
commented on  the rising price of  fuel oil, and, with  regard to                                                               
those  funds that  [the legislature  and the  administration have                                                               
been  saving]  for "a  rainy  day,"  emphasized that  "it's  been                                                               
pouring for the last three years."                                                                                              
                                                                                                                                
MAYOR WILLIAMS  said fuel  oil is needed  by individuals  who are                                                               
paying  what  he characterized  as  an  insurmountable amount  of                                                               
money.   For example,  he noted, filling  his own  250-gallon oil                                                               
tank  just last  week  cost him  $1,000.   Again,  how  is a  gas                                                               
pipeline  going  to  affect  households  in  the  communities  of                                                               
Saxman,  Metlakatla,   Craig,  Klawock,  and  Hydaburg   -  those                                                               
communities that are  so far away from the proposed  gasline?  He                                                               
then suggested that  a possible short-term solution  might be for                                                               
residents   to  convert   to  electric   heat  -   thereby  using                                                               
hydroelectric power -  and mentioned the Swan Lake  and Tyee Lake                                                               
projects.                                                                                                                       
                                                                                                                                
MAYOR WILLIAMS  said he appreciates the  legislature's commitment                                                               
to a gas  pipeline project and to the communities  of Alaska, and                                                               
asked legislators  to remember  those families  that have  had to                                                               
move from the  communities of Craig, Klawock,  and Hydaburg, into                                                               
Ketchikan,  because they  could  no longer  afford  the $8-$10  a                                                               
gallon for  fuel just to  heat their homes.   Heating homes  is a                                                               
necessity,  he  emphasized,  and encouraged  the  legislature  to                                                               
ensure  that the  proposed gas  pipeline meets  the needs  of all                                                               
Alaskans so that the entire community  of Alaska may benefit.  In                                                               
conclusion, he offered his thanks  to the members for coming, and                                                               
then sang a Tlingit song of  welcome, followed by a Tlingit gift-                                                               
giving song.                                                                                                                    
                                                                                                                                
5:28:37 PM                                                                                                                    
                                                                                                                                
DOUG  WARD, Director,  Shipyard  Development, Alaska  Ship &  Dry                                                               
Dock,  Inc., explained  that his  company  is the  private-sector                                                               
operator  of  the  State-owned  Ketchikan  shipyard  -  which  is                                                               
managed  by   the  Alaska   Industrial  Development   and  Export                                                               
Authority (AIDEA)  - and has  a 30-year operating  agreement with                                                               
AIDEA to do so.  He went on to explain:                                                                                         
                                                                                                                                
     We  are  ... in  the  early  phases  of nearly  an  $80                                                                    
     million publicly-funded,  expansion/improvement program                                                                    
     to provide the physical  infrastructure at the shipyard                                                                    
     to  create  an   enduring  maritime  and  manufacturing                                                                    
     enterprise.     We  are  also  investing,   with  [the]                                                                    
     participation of  the [Department of Labor  & Workforce                                                                    
     Development  (DLWD)], in  our  human  resources to  ...                                                                    
     create  a  globally-competitive,  agile,  manufacturing                                                                    
     workforce.   Together, with a  multi-skilled, globally-                                                                    
     competitive workforce  and a  very modern  and advanced                                                                    
     manufacturing  facility, we  will  be  able to  support                                                                    
     both  the exploration  of Alaska's  oil and  gas -  the                                                                    
     construction of  any gas pipelines -  and the operation                                                                    
     of refining and transmission  facilities that are built                                                                    
     in Alaska.                                                                                                                 
                                                                                                                                
MR. WARD  offered his understanding  that the AGIA  training plan                                                               
currently lists  113 priority occupations  that will  be required                                                               
in constructing  the gas  pipeline.   The knowledge,  skills, and                                                               
abilities that are  being given to Alaskan  shipyard workers will                                                               
enable  them  to fill  a  vast  majority  of those  113  priority                                                               
occupations.   The Ketchikan  shipyard represents  an opportunity                                                               
for   Alaska,  including   Ketchikan,  to   participate  in   the                                                               
exploration, construction, and operation  of Alaska's oil and gas                                                               
infrastructure, and some of the  ways that that participation can                                                               
take  place is  through offering  a  family of  products such  as                                                               
pumping  and  power-conduction  modules,  and  rapidly-deployable                                                               
port  and  harbor  structures  where  beachheads  are  needed  to                                                               
provide  additional heavy  manufacturing capabilities  to support                                                               
the oil and gas industry.                                                                                                       
                                                                                                                                
MR. WARD, in  conclusion, relayed that Alaska Ship  and Dry Dock,                                                               
Inc., is looking forward to  working with the constructors of the                                                               
gas  pipeline  to  diversify   and  strengthen  Alaska's  economy                                                               
through long-term, heavy and agile manufacturing employment.                                                                    
                                                                                                                                
5:32:19 PM                                                                                                                    
                                                                                                                                
VICE CHAIR STEDMAN remarked:                                                                                                    
                                                                                                                                
     We have sent  the message out to the  oil industry that                                                                    
     the   community   has    ample   land   available   and                                                                    
     manufacturing site  here.  So, hopefully  the community                                                                    
     will get targeted  for some infrastructure-support help                                                                    
     in  construction   of  that  gasline,  even   though  I                                                                    
     recognize we're not real close  to Haines or Anchorage.                                                                    
     But we  are pretty close  to Prince Rupert  [which] ...                                                                    
     has a  fabulous railway  network.  So,  hopefully we'll                                                                    
     be able to participate in the construction.                                                                                
                                                                                                                                
5:32:51 PM                                                                                                                    
                                                                                                                                
J.C. CONLEY spoke of high  energy costs, the use of hydroelectric                                                               
power   in   many    Southeast   communities,   and   Ketchikan's                                                               
deteriorating  economy,  and  asked the  legislature  to  provide                                                               
assistance  in  solving  the energy  problems  facing  the  rural                                                               
communities of the state.                                                                                                       
                                                                                                                                
5:36:36 PM                                                                                                                    
                                                                                                                                
JOEL L. JACKSON - after speaking  about the use of wood, oil, and                                                               
electricity  for home  heating  needs, the  rising  cost of  home                                                               
heating oil, the  need for some energy relief  now, the condition                                                               
of the  roads in Ketchikan  compared to those on  Gravina Island,                                                               
and the detrimental  effect of fuel costs  on Ketchikan's fishing                                                               
industry and  economy -  observed that since  a gas  pipeline via                                                               
the AGIA process is closer to  becoming a reality, there has been                                                               
increasing movement  from the producers.   He said he  trusts the                                                               
legislature to make a decision that  will be in the best interest                                                               
of  all  Alaskans,  and  intimated that  construction  of  a  gas                                                               
pipeline will benefit the younger  generation of Alaskans in that                                                               
they will be able to afford their own homes.                                                                                    
                                                                                                                                
5:40:39 PM                                                                                                                    
                                                                                                                                
FRANCES  YOUNG questioned  why the  state  is considering  giving                                                               
[TransCanada] $500 million  to [build a gas] pipeline.   She said                                                               
she could imagine  what the City of Ketchikan could  do with just                                                               
one-fifth of that money.  She  then spoke of some local projects,                                                               
and  concluded by  reminding the  legislature  that Ketchikan  is                                                               
part  of rural  Bush  Alaska and  to not  forget  those who  live                                                               
there.                                                                                                                          
                                                                                                                                
5:43:40 PM                                                                                                                    
                                                                                                                                
RICHARD  "DICK" L.  COOSE  said  he supports  the  building of  a                                                               
natural  gas pipeline,  stressed the  importance of  doing so  as                                                               
soon as  possible, and  urged the legislature  to make  the right                                                               
decision soon.   A gas pipeline project, he  opined, will require                                                               
the involvement and cooperation of  the state, the AGIA licensee,                                                               
and  the leaseholders,  and currently  there appears  to be  some                                                               
people  being left  out, he  added.   He also  opined that  there                                                               
seems to be a lack of  a fair evaluation by the administration of                                                               
the Denali project.  He added:                                                                                                  
                                                                                                                                
     While the gasline  construction doesn't really directly                                                                    
     affect Ketchikan  in the form  of cheap power  or jobs,                                                                    
     it does affect  us in the way we're going  to get money                                                                    
     back  into the  state budget.   The  way you  folks are                                                                    
     going to  distribute that money  can affect  us greatly                                                                    
     in   our   infrastructure    projects,   our   economic                                                                    
     development  - and  I'm talking  about hydropower,  ...                                                                    
     roads, [and] bridges. ...                                                                                                  
                                                                                                                                
MR.  COOSE  indicated  that  he   would  be  converting  his  own                                                               
household  heating system  to electric  power, and  surmised that                                                               
hydropower will  be the way  that those in southeast  Alaska will                                                               
benefit from  cheaper energy.   The DNR  is currently  focused on                                                               
AGIA, he  remarked, to the  exclusion of all other  projects, and                                                               
is claiming  a lack  of sufficient personnel  and funding  as the                                                               
reason.   In  conclusion,  he  opined that  the  money really  is                                                               
there,  and so  he would  like  the legislature  to [support  the                                                               
various needs of the state] with that money.                                                                                    
                                                                                                                                
5:48:15 PM                                                                                                                    
                                                                                                                                
JOE JOHNSTON  said economic indicators  show that  Americans will                                                               
likely be paying up to $6.00 a  gallon for gasoline by the end of                                                               
2008, but noted that the timeline  for AGIA shows that it will be                                                               
2016-2017 before  one cubic foot of  gas is produced out  of that                                                               
proposed gasline.  He stated,  "I don't think the American public                                                               
is going to wait  that long for energy relief."   He said he does                                                               
not think  that AGIA is the  right idea, or that  former Governor                                                               
Murkowski's proposal  was the right  idea.  He indicated  that he                                                               
interprets today's  testimony to mean  that a pipeline  cannot be                                                               
built  without  TransCanada  and  the producers  and  the  Denali                                                               
project.  He continued:                                                                                                         
                                                                                                                                
     Well, maybe third  time's a charm.  I  think since your                                                                    
     only choice is to vote  AGIA down, if the producers and                                                                    
     TransCanada sit  down at the  table, build  a pipeline,                                                                    
     go to [the] FERC, and  tell the American public and the                                                                    
     U.S. Congress  to expedite it,  I think you can  have a                                                                    
     pipeline in  less than  10 years.   I  think it  can be                                                                    
     done;  I   think  it  [will]  ...   be  profitable  for                                                                    
     everyone,  including  the  state   of  Alaska  and  the                                                                    
     American public.                                                                                                           
                                                                                                                                
MR. JOHNSTON surmised that T.B.  Pickens is going to be investing                                                               
in a  wind farm in Texas  because Americans are not  going to pay                                                               
$6.00  to  $8.00 a  gallon  for  fuel for  very  long.   He  said                                                               
Americans will  change the  way they  live and  the way  in which                                                               
they  use energy,  and if  the  gas pipeline  is not  functioning                                                               
until 2016, there probably won't be  much of a use for Alaska gas                                                               
by  then, particularly  given that  technology  seems to  advance                                                               
exponentially every 10  years.  Mr. Johnston  concluded, "I don't                                                               
think we  should invest $500 million  in AGIA; I think  we should                                                               
invest $5  billion in  a gasline  as part of  the state,  and own                                                               
it."                                                                                                                            
                                                                                                                                
5:51:20 PM                                                                                                                    
                                                                                                                                
ANDREW STEVENS  relayed that 20 years  ago he read in  a National                                                             
Geographic that there is enough  natural gas in Alaska to support                                                             
the world  for 100 years, and  he has never forgotten  that.  Mr.                                                               
Stevens  spoke about  information  he's read  over several  years                                                               
regarding  the  producers,  and   expressed  disbelief  that  the                                                               
producers  will  be  able  to   reclaim  any  land  that  they've                                                               
previously abandoned, or that it  is possible, at today's prices,                                                               
to  build  a 1,700  mile  pipeline  for  only  $30 billion.    He                                                               
surmised that even if  sold for only $1 a cubic  foot, 100 Tcf of                                                               
natural gas would  amount to a lot of money;  that using Canada's                                                               
resources  to  build the  proposed  pipeline  would deprive  U.S.                                                               
citizens  of  a better  way  of  life  and  thus go  against  the                                                               
constitution;  and that  building  an  all-Alaska pipeline  could                                                               
provide the whole country with a  better way of life and decrease                                                               
current [energy] costs.                                                                                                         
                                                                                                                                
5:58:40 PM                                                                                                                    
                                                                                                                                
BYRON CHARLES surmised that the  testimony thus far has pertained                                                               
to "how much  money's going to be spent, and  where it's going to                                                               
be coming from,  who can do what,  [and] who can't do  what."  He                                                               
said  that in  response to  the  question of  why doesn't  Alaska                                                               
build its  own gas line, he'd  heard the answer, "We  can't," but                                                               
expressed disbelief of that concept.  He elaborated:                                                                            
                                                                                                                                
     Why are  we spending all  this money to  bring somebody                                                                    
     else in here to do  something [that] ... our people can                                                                    
     do?   What's  wrong  with this  picture?   We're  still                                                                    
     going  to be  paying -  digging deep  in our  pockets -                                                                    
     when it  comes to transportation.  ... I'm not  good at                                                                    
     marketing, but it  doesn't take a genius  to figure out                                                                    
     that our oil  and gas will have no  trouble hitting the                                                                    
     market.                                                                                                                    
                                                                                                                                
     I would  like to see  the people get together  and say,                                                                    
     "Let's  deal with  this  on a  government-to-government                                                                    
     level,  so let's  see what  we could  do about  the ...                                                                    
     cost of transportation."  But  in the meantime, instead                                                                    
     of  giving  me ...  an  additional  $1,200 through  the                                                                    
     permanent fund -- I don't want  it.  I want to see what                                                                    
     you can do  when you come to the table  [and] say, "Mr.                                                                    
     Charles, we're  doing everything  in our power  to make                                                                    
     it affordable to you and to the public."                                                                                   
                                                                                                                                
MR. CHARLES reminded legislators that  they are deciding the fate                                                               
of  future  generations, and  that  it  is  up  to them  to  make                                                               
positive change right now.                                                                                                      
                                                                                                                                
6:04:08 PM                                                                                                                    
                                                                                                                                
DON LUDWIGSEN,  after noting that  he is  a fisherman who  at one                                                               
time worked up  on the North Slope, expressed  disfavor with [the                                                               
recent  U.S. Supreme  Court decision  regarding the  Exxon Valdez                                                               
Oil  Spill].   He  said  big industry  seems  to  think they  own                                                               
Alaska,  but they  are wrong.   He  stated his  support of  a gas                                                               
pipeline and  of it being  constructed as  soon as possible.   He                                                               
characterized the  gas line as  "something we definitely  have to                                                               
do"  because [access  to natural  gas]  its needed  all over  the                                                               
state.  He  said drilling in the Arctic  National Wildlife Refuge                                                               
(ANWR) would not help at  all; furthermore, he warned, the Arctic                                                               
is  so  fragile that  people  must  be  really careful  in  their                                                               
interaction with it.                                                                                                            
                                                                                                                                
MR. LUDWIGSEN stated:                                                                                                           
                                                                                                                                
     To me, Exxon has shown  their colors - The Exxon Valdez                                                                    
     and Point  Thomson -  and if  it were  up to  me, Exxon                                                                    
     wouldn't  have the  contract to  clean the  fishermen's                                                                    
     bathroom in South Cove in Craig. ...                                                                                       
                                                                                                                                
MR.  LUDWIGSEN,  in conclusion,  opined  that  those who  do  not                                                               
respect Alaska and  do not try to  take care of it  do not belong                                                               
here.                                                                                                                           
                                                                                                                                
6:06:43 PM                                                                                                                    
                                                                                                                                
ED  ZASTROW, on  the issue  of  a natural  gas pipeline,  advised                                                               
legislators to  do what's best for  the State of Alaska  and what                                                               
their  constituents would  like.   He  noted that  he  is on  the                                                               
Alaska Commission  on the Aging  and has  served as chair  of the                                                               
advisory board  for the Alaska  Pioneer Homes, and  then provided                                                               
comments  on  the  senior  care program,  a  $1.5  million  grant                                                               
program, and winterization programs.                                                                                            
                                                                                                                                
6:11:43 PM                                                                                                                    
                                                                                                                                
RUTH DULIN opined that because  Alaskans are also citizens of the                                                               
world, it is incumbent upon  them to consider the larger picture.                                                               
She said  she really  thinks the  legislature should  invest more                                                               
funds, thought, and effort into  renewable energy.  [On the issue                                                               
of a natural gas pipeline] she  said, "I think all this is pretty                                                               
short-sited, and I think probably a lot of other people agree."                                                                 
                                                                                                                                
6:13:34 PM                                                                                                                    
                                                                                                                                
JACKIE  DURETTE  asked all  legislators  to  remember that  those                                                               
living  in Southeast  Alaska are  Alaskans, have  pioneer spirit,                                                               
and  intend to  be part  of the  equation.   Regarding AGIA,  she                                                               
characterized the  accompanying documentation as  cumbersome, and                                                               
opined that there  is no reason why Alaska  labor and contractors                                                               
cannot build  the gas pipeline.   She said she sees  no provision                                                               
in  AGIA that  guarantees a  high  percentage of  Alaska jobs  or                                                               
contracting opportunities for  Alaska's businesses, adding, "that                                                               
has got to be part of the equation  - we're not going to sit back                                                               
and let the building of this gas  line be done by other folks and                                                               
other  businesses from  another  country."   Ms. Durette  thanked                                                               
legislators  for   their  time,   and  asked  them   to  consider                                                               
everything carefully because they  are making decisions on behalf                                                               
of their  constituents.   She acknowledged  that the  task before                                                               
the  legislature is  difficult; however,  she said,  "I think  in                                                               
this part of our world, here in Alaska, we're going to hold your                                                                
seat to the fire on this one."                                                                                                  
                                                                                                                                
[HB 3001 and SB 3001 were heard and held.]                                                                                      
                                                                                                                                
[Members then thanked the participants and those who helped                                                                     
organize the meeting.]                                                                                                          
                                                                                                                                
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 6:21 p.m.                                                                          

Document Name Date/Time Subjects