Legislature(1997 - 1998)
01/23/1997 03:08 PM House WTR
| Audio | Topic |
|---|
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE SPECIAL COMMITTEE ON WORLD TRADE
AND STATE/FEDERAL RELATIONS
January 23, 1997
3:08 p.m.
MEMBERS PRESENT
REPRESENTATIVE Ramona Barnes, Chair
REPRESENTATIVE Alan Austerman, Vice-Chair
REPRESENTATIVE John Cowdery
REPRESENTATIVE Pete Kott
REPRESENTATIVE Gene Kubina
REPRESENTATIVE Irene Nicholia
REPRESENTATIVE Gail Phillips
MEMBERS ABSENT
All members present.
COMMITTEE CALENDAR
* HOUSE CONCURRENT RESOLUTION NO. 1
Relating to a new Alaska liquefied natural gas project.
- MOVED CSHCR 1(WTR) OUT OF COMMITTEE
(* First public hearing)
PREVIOUS ACTION
BILL: HCR 1
SHORT TITLE: NORTH SLOPE NATURAL GAS
SPONSOR(S): REPRESENTATIVE(S) BARNES, Phillips, Rokeberg, Kubina,
Kott, Sanders, Williams, James, Vezey, Austerman, Davis, Hodgins,
Ryan, Dyson
JRN-DATE JRN-PG ACTION
01/13/97 20 (H) READ THE FIRST TIME - REFERRAL(S)
01/13/97 20 (H) WTR, OIL & GAS
01/16/97 92 (H) RES REFERRAL ADDED
01/23/97 (H) WTR AT 3:00 PM CAPITOL 124
WITNESS REGISTER
JOHN T. SHIVELY, Commissioner
Office of the Commissioner
Department of Natural Resources
400 Willoughby Avenue
Juneau, Alaska 99801-1724
Telephone: (907) 465-2400
POSITION STATEMENT: Provided testimony on HCR 1.
GEORGE FINDLING, Government and Public Affairs Advisor
Arco Alaska Inc.
P.O. Box 100360
Anchorage, Alaska 99501
Telephone: (907) 263-4174
POSITION STATEMENT: Provided testimony in support of HCR 1.
JEFF LOWENFELS, President and CEO
Yukon Pacific Corporation
1049 West 5th Avenue
Anchorage, Alaska 99501
Telephone: (907) 265-3100
POSITION STATEMENT: Provided testimony in support of HCR 1.
MARK BENDERSKY, Commercial Manager for Gas
BP Exploration (Alaska) Inc.
P.O. Box 196612
Anchorage, Alaska 99519-6612
Telephone: (907) 564-4666
POSITION STATEMENT: Provided testimony in support of HCR 1.
BEVERLY MENTZER, Manager Business Development-Natural Gas
Department
Exxon Company, U.S.A.
P.O. Box 2180
Houston, Texas 77252-2180
Telephone: (713) 656-6145
POSITION STATEMENT: Provided testimony in support of HCR 1.
ACTION NARRATIVE
TAPE 97-1, SIDE A
Number 001
The House Special Committee on World Trade and State/Federal
Relations was called to order by Chair Ramona Barnes at 3:08 p.m.
Members present at the call to order were Representatives Barnes,
Austerman, Cowdery, Kott, and Kubina. Members absent were
Representatives Nicholia and Phillips.
HCR 1 - NORTH SLOPE NATURAL GAS
The first order of business to come before the House Special
Committee on World Trade and State/Federal Relations was HCR 1,
Relating to a new Alaska liquefied natural gas project.
CHAIR RAMONA BARNES announced to the committee members that there
was a proposed committee substitute to HCR 1 that needed to be
adopted. She explained the changes were located on page 4, lines
2-6. She called for a motion to adopt the proposed committee
substitute.
Number 029
REPRESENTATIVE GENE KUBINA moved that the committee adopt the
proposed committee substitute for HCR 1, Version 0-LS0190/H, Cook,
dated 1/14/97. Hearing no objection, CSHCR 1(WTR) was adopted.
CHAIR BARNES read the following sponsor statement into the record:
"HCR 1 is before the House Special Committee on World Trade &
State/Federal Relations today. The resolution urges the
establishment of a stable fiscal and regulatory environment in
order to provide the best opportunity for a new LNG project to be
economically viable and attractive. To ensure economic viability,
a huge volume of 14 million metric tons of gas must be sold per
year. The proposed LNG project would transport and market the
North Slope gas resources in the Asian Far East market. It is
believed there exists an opportunity in 2005 when demand in that
market will rise enough to accept the volume of gas which this
project will provide. A critical element is the likelihood
Alaska's huge volume of gas could be displaced from the market for
many years if smaller, more easily placed projects come on line
first.
"HCR 1 encourages the Governor to work with North Slope
leaseholders as well as the Legislature, the federal government and
Congress to develop and complete the LNG project.
"The Governor is asked to work with leaseholders to develop a
contract for execution with those who appear likely to become
sponsors of the project. The contract would point out the nature,
degree and duration of fiscal terms for the project and
contractually guaranteeing the terms. The contract would be
submitted to the Legislature for ratification. The Governor would
also provide the Legislature with enabling legislation to authorize
the State of Alaska to formally enter the contract.
"The Legislature encourages potential sponsors of the LNG project
to find suitable measures to support and encourage Alaska
businesses and residents to participate in construction and
operation of the project.
"If built, the project would also be constructed so as to enable
the marketing of gas to Alaska communities.
"The Governor is asked to work with leaseholders and Alaska's
Congressional delegation to identify appropriate federal action to
help expedite the project. He is also asked to identify and report
to the legislature, the form of participation in the project by the
State of Alaska."
Number 087
JOHN T. SHIVELY, Commissioner, Office of the Commissioner,
Department of Natural Resources, was the first person to testify
before the committee. He explained he served on the sub-cabinet
group with Commissioner Wilson L. Condon, Chair, that worked with
the industry, the Yukon Pacific Corporation, and the legislature on
this project. Commissioner Condon was in Anchorage today so he
would testify on behalf of the Administration. He expressed
commendation for the positive work and message that the interim
project created. He stated the project was going to take the
cooperation of the industry and the legislature/Administration to
become a reality. He declared the Administration supported HCR 1.
It was another positive step towards working on this project. He
called the resolution a continuation of work that had been done
between the Administration and the legislature last year. He
reiterated the Administration supported the passage of HCR 1.
MR. SHIVELY referred the committee members to page 4, lines 9-13,
of the committee substitute. He stated the Administration had
recognized that fiscal stability was important for this project to
move forward. There were certain constitutional limits, however,
that would bind future legislatures. It was possible to bind the
executive branch, but the legislature had its own authority. There
were ways to provide more stability, but that would require special
crafting of the language. That was the main reason why the
legislature would need to remain intrinsically involved in this
process. He expressed this would be difficult because it
interfered with the separation of powers issues.
Number 141
CHAIR BARNES expressed her delight in working on this project
during the interim with Mr. Shively. She also stated that everyone
in the Administration had been most helpful and forthcoming and
that the committee was eternally grateful. She recognized the
concerns about the section on page 4 that Mr. Shively expressed.
It was an issue that the legislature would address up front to
ensure that this project "gets off the ground."
Number 158
REPRESENTATIVE KUBINA asked Mr. Shively to explain his concerns
regarding the section on page 4, lines 9-13, of the committee
substitute further. He wondered about the constitutionality of the
issue.
Number 165
MR. SHIVELY replied that it was believed the Administration could
enter into a contract with the legislature to authorize the
Administration to negotiate certain contracts. The Administration
did not believe, however, that there was a 100 percent possibility
that a future legislature would not change that authority. How it
would change it was the issue in dispute. The Administration
believed it should be up front with the oil industry regarding that
risk. He explained, however, there were certain attorneys working
in the oil industry that believed differently. Nevertheless, this
issue continued to be discussed.
Number 190
REPRESENTATIVE KUBINA commented he would follow that issue with
great interest.
Number 201
GEORGE FINDLING, Government and Public Affairs Advisor, Arco Alaska
Inc., was the next person to testify before the committee. He
announced Arco's support of HCR 1 and the committee substitute.
Arco now believed that an opportunity existed to make this project
commercially viable. There was a positive climate within the
legislature and Administration, the market was receptive to the
approaches, the producers had substantial team efforts to move the
project forward, and sound ideas for commercial structures were
emerging. The 2005 date mentioned in the resolution did raise a
matter of goals versus expectations question. Arco believed,
however, that if everything went well with no setbacks, the first
gas deliveries would be projected to the year 2007. That was an
aggressive assumption, he declared. Furthermore, the Far East
buyers did not see LNG deliveries from Alaska until after the year
2005. They believed putting the required new LNG fire powered
plants, for example, into place would take at least ten years from
today. Nevertheless, Arco would continue to support the resolution
because it would continue to make this project economically viable
as soon as possible. He reiterated Arco's support of HCR 1.
CHAIR BARNES stated that the year 2005 was not cast in stone, but
if there was not a goal set then it was likely that nothing would
be accomplished. She explained the year 2005 was an important date
to establish as a goal for contracts even if the gas was not ready
for the market place until the year 2007.
Number 244
JEFF LOWENFELS, President and CEO, Yukon Pacific Corporation, was
the next person to testify before the committee. He announced
Yukon's support of HCR 1 despite the fact that his company was not
mentioned in the resolution. The lease holders of the gas were the
only companies mentioned in the resolution. The Yukon Pacific
Corporation had permits for this project and it would work with the
lease holders in every possible way. Yukon Pacific did not view
2005 as a goal, but as a necessity to supplement some of the
urgency expressed by this legislature. Mr. Lowenfels distributed
to the committee members a handout titled "TAGS Best Case
Development Scenario," illustrating a development time frame. He
reiterated despite the fact that the Yukon Pacific Corporation was
not mentioned in the resolution that did not deter its resolve to
support this piece of legislation, nor did it deter its resolve to
see that this project was completed on a timely basis so that
Alaska could capture the liquid natural gas (LNG) market from 2005
and well beyond. The 14 million tons was just the beginning, he
stated. There was a tremendous future for Alaska to produce
additional quantities of natural gas and liquified natural gas
forms. He reiterated the Yukon Pacific Corporation supported HCR
1.
Number 271
REPRESENTATIVE KUBINA stated he was concerned about the time frame
of this project. He mentioned negotiating for a sales contract
took time and a lot of work when prices were not established. It
appeared from the handout by Mr. Lowenfels titled, "TAGS Best Case
Development Scenario," that this could be done a lot quicker.
Number 279
MR. LOWENFELS responded he believed it could be done a lot quicker.
He cited the countries of Australia and Malaysia whereby the
Japanese had written letters of interest directly to two individual
projects requesting that they move forward in developing the
necessary information. And, those were instances where the gas had
not been developed in comparison to Alaska. The Japanese could not
do that in Alaska because the permit and gas holders were split.
He agreed an exact price was needed to enter into a contract.
However, the exact price was not needed to enter into a contract
negotiation. Only a range was needed.
MR. LOWENFELS distributed to the committee members a handout titled
"Grass Roots LNG Projects-Cost Comparison." The handout
illustrated that there were other projects out there that were not
Alaskan. Therefore, Alaska needed to do everything it could to
bring forward the Alaskan project. He stated he was not scared by
any project out there. The Alaska TAGS project was far better for
the markets then Indonesia, for example because Alaska was viewed
as a stable country. It was often said by some Alaskans that this
was a terrible place to do business. He believed, however, that
Alaska was too good a place to do business and that was the
problem.
MR. LOWENFELS thanked the committee members for working together
with the Yukon Pacific Corporation and encouraged everyone to pull
together to move this project forward.
Number 334
CHAIR BARNES called Mr. Lowenfels a "believer." She expressed her
gratitude towards his hard work on this issue over the years.
Chair Barnes believed that Alaskans could do anything that they set
their minds to. She called the oil pipeline a natural wonder of
the world, and if Alaska could build that, "certainly a 36 inch
line could be built to get our gas to market." It should be a lot
more cost effective the second time. The individuals that said
Alaska had to wait were being short sighted. She truly believed
that if no contracts were in place by the year 2005, the smaller
projects primarily owned by Exxon would displace Alaska in the
market place.
Number 357
CHAIR BARNES explained to Mr. Lowenfels that the Yukon Pacific
Corporation was not mentioned in the resolution because it was not
an owner of the gas. It was an owner of the permits of which the
legislature had no control over. The resources in the ground
belonged to the people of the State of Alaska.
Number 359
MR. LOWENFELS agreed that this project was extremely important for
the State of Alaska. He stated he had been working on this project
for 15 years. He was convinced this project would be a good legacy
for the state. He called the project a "religion" because he felt
so strongly about it, and Chair Barnes and Representative Kubina
were high participants in this religion.
Number 377
REPRESENTATIVE KUBINA called Mr. Lowenfels a great teacher in this
area. He stated he had adopted Mr. Lowenfels as a constituent even
though he did not live in his district. This project, however,
would provide great benefits to his district and the entire state.
Number 391
MARK BENDERSKY, Commercial Manager for Gas, BP Exploration (Alaska)
Inc., was the next person to testify before the committee. He
expressed compliments to the committee members, and stated BP
endorsed and fully supported CSHCR 1(WTR).
Number 400
CHAIR BARNES thanked Mr. Bendersky and stated she looked forward to
working closely with BP between now and the year 2005.
Number 402
BEVERLY MENTZER, Manager Business Development-Natural Gas
Department, Exxon Company, U.S.A., was the next person to testify
before the committee. She thanked the committee members for their
efforts in supporting the issues that needed to be resolved. Exxon
was very interested in commercializing the gas reserves on the
North Slope and supported HCR 1.
MS. MENTZER further stated that Alaska would benefit from this
project. There was a strong international competition in the LNG
market so a competitive price was needed. Long-term contractual
relations were also needed to make the investment viable. The
project should also be backed by a long-term stable and appropriate
fiscal regime.
MS. MENTZER agreed that there was an opportunity in the market
place around the year 2005 due to the increased demand in the Far
East. She further mentioned that the key to the project was that
it be economical to remain competitive in the world wide market
place.
MS. MENTZER reiterated that Exxon agreed with the resolution.
Exxon agreed that the state should work to provide a stable and
appropriate fiscal and regulatory environment so that the best LNG
project would remain competitive and attractive. Exxon looked
forward to working with the legislature and the Administration.
Number 432
CHAIR BARNES announced for the record that Representatives Gail
Phillips and Irene Nicholia were present.
Number 433
REPRESENTATIVE IRENE NICHOLIA moved that CSHCR 1(WTR), Version 0-
LS0190/H, Cook, dated 1/14/97, move from the committee with
individual recommendations.
Number 435
REPRESENTATIVE GAIL PHILLIPS asked Chair Barnes to briefly explain
the amendment to the committee substitute.
CHAIR BARNES explained the committee substitute added lines 2-6, on
page 4, to include the year 2005.
CHAIR BARNES further stated, hearing no objection to the motion by
Representative Nicholia, CSHCR 1(WTR), Version 0-LS0190/H, was so
moved from the House Special Committee on World Trade and
State/Federal Relations.
ADJOURNMENT
Number 446
CHAIR BARNES adjourned the House Special Committee on World Trade
and State/Federal Relations meeting at 3:40 p.m.
| Document Name | Date/Time | Subjects |
|---|