04/19/2012 10:00 AM Senate COMMUNITY & REGIONAL AFFAIRS
| Audio | Topic |
|---|---|
| Start | |
| HB9 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| += | HB 9 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
SENATE COMMUNITY AND REGIONAL AFFAIRS STANDING COMMITTEE
April 19, 2012
10:09 a.m.
MEMBERS PRESENT
Senator Donald Olson, Chair
Senator Albert Kookesh
Senator Johnny Ellis
MEMBERS ABSENT
Senator Thomas Wagoner
Senator Linda Menard
OTHER LEGISLATORS PRESENT
Senator Gary Stevens
Senator Cathy Giessel
Senator Dennis Egan
Senator John Coghill
COMMITTEE CALENDAR
COMMITTEE SUBSTITUTE FOR HOUSE BILL NO. 9(FIN) AM
"An Act relating to the Alaska Gasline Development Corporation,
a subsidiary created project developed by the Alaska Gasline
Development Corporation; relating to the by the Alaska Housing
Finance Corporation; establishing and relating to the in-state
regulation by the Regulatory Commission of Alaska of an in-state
natural gas pipeline natural gas pipeline fund; making certain
information provided to or by the Alaska that is expressly
authorized to provide transportation as a contract carrier;
relating to Gasline Development Corporation exempt from
inspection as a public record; relating the Alaska Natural Gas
Development Authority; relating to the procurement of certain to
the Joint In-State Gasline Development Team; relating to the
judicial review of a services by the Alaska Natural Gas
Development Authority; exempting property of a right-of-way
lease or an action or decision related to the development or
construction of project developed by the Alaska Gasline
Development Corporation from property taxes an oil or gas
pipeline on state land; relating to the lease of a right-of-way
by the Alaska before the commencement of commercial operations;
and providing for an effective Gasline Development Corporation
or a successor in interest for a gas pipeline date."
- HEARD & HELD
PREVIOUS COMMITTEE ACTION
BILL: HB 9
SHORT TITLE: IN-STATE GASLINE DEVELOPMENT CORP
SPONSOR(s): REPRESENTATIVE(s) CHENAULT
01/18/11 (H) PREFILE RELEASED 1/7/11
01/18/11 (H) READ THE FIRST TIME - REFERRALS
01/18/11 (H) RES, FIN
02/06/12 (H) RES AT 1:00 PM BARNES 124
02/06/12 (H) Heard & Held
02/06/12 (H) MINUTE(RES)
02/08/12 (H) RES AT 1:00 PM BARNES 124
02/08/12 (H) Heard & Held
02/08/12 (H) MINUTE(RES)
02/10/12 (H) RES AT 1:00 PM BARNES 124
02/10/12 (H) Heard & Held
02/10/12 (H) MINUTE(RES)
02/13/12 (H) RES AT 1:00 PM BARNES 124
02/13/12 (H) <Bill Hearing Canceled>
02/24/12 (H) RES AT 1:00 PM BARNES 124
02/24/12 (H) Heard & Held
02/24/12 (H) MINUTE(RES)
02/27/12 (H) RES AT 1:00 PM BARNES 124
02/27/12 (H) Moved CSHB 9(RES) Out of Committee
02/27/12 (H) MINUTE(RES)
02/29/12 (H) RES RPT CS(RES) NT 4DP 2DNP 1NR 2AM
02/29/12 (H) DP: MUNOZ, FOSTER, HERRON, SEATON
02/29/12 (H) DNP: KAWASAKI, GARDNER
02/29/12 (H) NR: FEIGE
02/29/12 (H) AM: DICK, P.WILSON
02/29/12 (H) LETTER OF INTENT WITH RES REPORT
03/13/12 (H) FIN AT 8:30 AM HOUSE FINANCE 519
03/13/12 (H) Heard & Held
03/13/12 (H) MINUTE(FIN)
03/16/12 (H) FIN AT 9:00 AM HOUSE FINANCE 519
03/16/12 (H) Heard & Held
03/16/12 (H) MINUTE(FIN)
03/20/12 (H) FIN AT 9:00 AM HOUSE FINANCE 519
03/20/12 (H) Heard & Held
03/20/12 (H) MINUTE(FIN)
03/21/12 (H) FIN AT 1:30 PM HOUSE FINANCE 519
03/21/12 (H) <Bill Held Over to 6:30 pm Today>
03/21/12 (H) FIN AT 6:30 PM HOUSE FINANCE 519
03/21/12 (H) Heard & Held
03/21/12 (H) MINUTE(FIN)
03/22/12 (H) FIN AT 1:30 PM HOUSE FINANCE 519
03/22/12 (H) <Bill Held Over to 5:00 pm Today>
03/22/12 (H) FIN AT 5:00 PM HOUSE FINANCE 519
03/22/12 (H) Heard & Held
03/22/12 (H) MINUTE(FIN)
03/23/12 (H) FIN RPT CS(FIN) NT 6DP 1DNP 3NR 1AM
03/23/12 (H) DP: FAIRCLOUGH, T.WILSON, NEUMAN,
COSTELLO, EDGMON, THOMAS
03/23/12 (H) DNP: GARA
03/23/12 (H) NR: DOOGAN, JOULE, STOLTZE
03/23/12 (H) AM: GUTTENBERG
03/23/12 (H) RESOURCES LETTER OF INTENT WITH FIN
REPORT
03/23/12 (H) FIN AT 9:00 AM HOUSE FINANCE 519
03/23/12 (H) Moved CSHB 9(FIN) Out of Committee
03/23/12 (H) MINUTE(FIN)
03/27/12 (H) TRANSMITTED TO (S)
03/27/12 (H) VERSION: CSHB 9(FIN) AM
03/28/12 (S) READ THE FIRST TIME - REFERRALS
03/28/12 (S) CRA, RES, FIN
04/03/12 (S) CRA AT 3:30 PM BELTZ 105 (TSBldg)
04/03/12 (S) <Above Item Removed from Agenda>
04/03/12 (S) MINUTE(CRA)
04/05/12 (S) CRA AT 3:30 PM BELTZ 105 (TSBldg)
04/05/12 (S) Heard & Held
04/05/12 (S) MINUTE(CRA)
04/13/12 (S) CRA AT 8:00 AM FAHRENKAMP 203
04/13/12 (S) Heard & Held
04/13/12 (S) MINUTE(CRA)
04/18/12 (H) THIRD SPECIAL SESSION BILL
04/18/12 (S) THIRD SPECIAL SESSION BILL
04/19/12 (S) CRA AT 10:00 AM FAHRENKAMP 203
WITNESS REGISTER
REPRESENTATIVE MIKE CHENAULT
Alaska State Legislature
Juneau, Alaska,
POSITION STATEMENT: Prime sponsor of HB 9, opposed version J
Senate committee substitute.
RENA DELBRIDGE, Staff
Representative Mike Hawker
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Opposed version J Senate committee
substitute for HB 9.
REPRESENTATIVE MIKE HAWKER
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Sponsor of HB 9, opposed version J Senate
committee substitute for HB 9.
ACTION NARRATIVE
10:09:48 AM
CHAIR DONALD OLSON called the Senate Community and Regional
Affairs Standing Committee meeting to order at 10:09 a.m.
Present at the call to order were Senators Ellis and Chair
Olson. Senator Kookesh arrived during the course of the meeting.
HB 9-IN-STATE GASLINE DEVELOPMENT CORP
10:10:02 AM
CHAIR OLSON announced the consideration of HB 9 and noted that
the Senate committee substitute version J was before the
committee.
10:10:32 AM
REPRESENTATIVE MIKE CHENAULT, Alaska State Legislature, prime
sponsor of HB 9, said he was available to answer questions and
would highlight concerns with the CS as the discussion ensued.
CHAIR OLSON recognized that Senator John Coghill, Senator Dennis
Egan, and Senator Cathy Giessel were in the audience.
10:11:34 AM
RENA DELBRIDGE, Staff for Representative Mike Hawker, Alaska
State Legislature, said HB 9 intended to create a quasi-state
entity, the Alaska Gasline Development Corporation (AGDC), to
connect Alaskans with Alaskan gas via pipelines. The first order
of business for AGDC is to pursue an open season for an in-state
bullet line to determine whether there is sufficient shipping
interest to support financing a pipeline. If the open season is
successful, AGDC would begin construction by 2015. If the open
season indicates insufficient commercial backing, AGDC would not
have a project.
When HB 9 passed the House, it also empowered AGDC to represent
Alaskans in a larger pipeline project to carry North Slope gas
to export at tidewater. The intention is to provide a framework
for AGDC to continue into the future to find additional ways to
connect Alaskans with gas, whether these first two projects are
successful or not.
10:13:03 AM
Although version J addresses a structure for AGDC, it omits
critical aspects. It establishes AGDC as a subsidiary
corporation of the Alaska Housing Finance Corporation, including
the ability to acquire property and leases necessary for a
pipeline project. It gives AGDC direction to build gas pipelines
to get gas to Fairbanks, Southcentral, and other communities at
the lowest rates possible while trying to provide commercially
reasonable rates for not only public utility and industrial
customers but also for shippers.
MS. DELBRIDGE said version J prohibits AGDC from constructing a
pipeline without legislative sanctioning. A future legislature
would have to pass this new law and both AGDC and the sponsors
are uncomfortable with this provision. AGDC believes this could
negatively affect its ability to attract sincere shippers,
buyers, and sellers to an open season project.
This CS establishes the in-state natural gas pipeline fund and
directs AGDC to manage the fund prudently. It requires
publication of some terms of precedent agreements resulting from
an open season. However, version J eliminates the legislative
direction to AGDC to pursue the pipeline that it proposed in the
July 2011 progress report to the legislature, as required by HB
369 that passed in 2010. It also eliminates references to an in-
state gas pipeline. This is a concern because it may encourage
AGDC's participation in something that is not strictly an in-
state gas pipeline. Version J restricts AGDC's ability to manage
its assets, which could impinge on the goal of meeting Alaskans'
needs for gas. Further, it does not allow AGDC to issue revenue
bonds or determine the ownership structure of a pipeline. This
creates uncertainty in an open season and potentially affects
AGDC's means to follow through on a project.
10:16:52 AM
The CS does not allow AGDC to offer contract transportation
service, which potentially affects the ability to deliver gas to
the immediate users to produce power, liquefied natural gas or
something else from that material.
CHAIR OLSON asked if there were three gas pipeline proposals.
MS. DELBRIDGE said she wasn't sure, but one project was planned
under the AGIA license.
CHAIR OLSON named the All-Alaska gas line [Alaska Gasline Port
Authority (AGPA) project], the AGIA project, and the in-state
AGDC gas pipeline project.
MS. DELBRIDGE said the sponsors do not believe that the AGIA
framework is an actual pipeline and they don't believe the All-
Alaska line is a project.
CHAIR OLSON questioned why the sponsors oppose legislative
sanction, particularly when revenue bonds are involved.
MS. DELBRIDGE replied it creates uncertainty because it would
require additional timeframes and components. The sponsors
believe other in-state projects have not gone forward because
politics have interfered.
10:19:48 AM
CHAIR OLSON opined that the State of Alaska is taking the risk
while the profit goes elsewhere.
MS. DELBRIDGE responded that the people purchasing the revenue
bonds would carry the risk. That is why long-term, firm,
uninterruptable, guaranteed shipping contracts are so important
in an open season.
CHAIR OLSON asked if the State of Alaska would be guaranteeing
the bonds.
MS. DELBRIDGE responded that the previous version of HB 9 had
specific language to prohibit AGDC from putting liability on the
state.
CHAIR OLSON commented that it was not possible or even desirable
to take politics out of the equation entirely. He reviewed the
Stranded Gas Act debate and asked if she would agree that the
pieces of legislation changing ELF to PPT to ACES were good.
MS. DELBRIDGE said she was not prepared to discuss PPT, but
would agree that it isn't possible to remove all politics from a
process. However, the sponsors believe it reduces that political
risk if additional legislation to sanction a project is not
required. The operation budget for AGDC's pipeline project is
always subject to legislative appropriation. Nothing changes
that.
10:23:09 AM
SENATOR KOOKESH joined the committee.
CHAIR OLSON said he believes the state has reaped the benefits
of the provision in the Stranded Gas Development Act requiring
legislative authorization. He questioned why HB 9 shouldn't have
a similar provision.
10:24:14 AM
REPRESENTATIVE MIKE HAWKER, speaking on behalf of himself and
the prime sponsor, opined that the Stranded Gas Development Act
(SGDA) was developed under a very different process than is
proposed in HB 9. Alaska's gas was economically stranded when
the SGDA passed and the general belief was that it would take
state participation for North Slope gas to be competitive in the
marketplace. The SGDA empowered the administration to enter into
confidential negotiations with North Slope producers to
determine what economic concessions would provide industry a
sound project with which to go forward to the marketplace.
He further opined that all legislators discovered that that
approach didn't work for several reasons. First, the public was
not comfortable with an economic agreement that was crafted
behind closed doors. Another reason that the SGDA failed was
that the market conditions had changed dramatically by the time
that Governor Murkowski brought the contracts forward; gas
prices were anomalously high.
REPRESENTATIVE HAWKER said HB 9 takes a different approach; it
empowers a public corporation to work openly in the marketplace.
Three State of Alaska commissioners will sit on the board of
directors that will manage the corporation, and AGDC will
operate within the Alaska Housing Finance Corporation (AHFC),
the state's investment bank. AGDC has a broad mission to serve
all the state and that can serve to insulate proper best-
business practices from the inevitable politics in the capitol
building.
10:30:33 AM
CHAIR OLSON noted that not all Alaskans agree with the AHFC
model; some would like it to be non-profit.
REPRESENTATIVE HAWKER responded that AGDC is being structured as
a subsidiary of AHFC, but in no way does it encumber the assets
of the Alaska Housing Finance Corporation.
10:32:19 AM
MS. DELBRIDGE continued to review the CS. She recapped that
version J does not allow AGDC to offer contract transportation
service, which means the line will operate as a common carrier.
Referencing an earlier question about common carrier contracts,
she explained that the contract the state has with TransCanada
under AGIA does allow the line to sign contracts for firm
transportation service, but it also requires mandatory
expansions and rolled in rates, which are common carrier issues.
Those things have been cited as conditions that would have to be
addressed if the producers were to sign on to that project.
CHAIR OLSON asked if those issues were insurmountable.
MS. DELBRIDGE responded that she couldn't speak to that specific
project, but AGDC is absolute that it cannot have interruptible
service when the gas being shipped goes to public utilities that
need to be able to count on that supply every day of the
contract.
CHAIR OLSON asked if any gas pipelines are common carrier
pipelines
MS. DELBRIDGE said she couldn't give a definitive answer, but
not being able to offer the opportunity to be a contract carrier
is even now presenting challenges. To date, most of the gas
pipelines in Alaska are public utility pipelines, which is a
different group that might be called gas transportation lines.
She relayed that potential open season participants and
financiers have advised that it may be difficult to finance a
pipeline without firm contracts. Without firm service, public
utilities in Alaska could face the potential of curtailed gas
supplies.
The CS also eliminates a regulatory structure for an in-state
gas pipeline that provides contract carriage and is not a public
utility pipeline. That creates additional risk going into an
open season.
10:35:26 AM
The CS maintains a provision allowing the Alaska Natural Gas
Development Authority (ANGDA) to contract for professional
services that are exempt from the state procurement code. It
transitions a provision from the Joint In-State Gasline
Development Team (JIGDT) that grants access to information of
all state agencies and maintains confidentiality. It also
transitions from JIGDT to AGDC, a provision requiring state
agency cooperation and directs AGDC to avoid duplication of
efforts. However, the CS removes small things that direct state
support in order to offset the tariffs. She cited the example of
local governments charging usual and customary fees for water,
sand, and gravel so the state could pay for them independently
and keep them from being rolled into the tariffs that Alaskans
would eventually pay.
10:37:29 AM
CHAIR OLSON noted that the Alaska Municipal League (AML) voiced
concern that HB 9 would give AGDC the authority to take
municipal resources for this project even if the municipality
didn't want to sell them all. He asked if AML voiced that
concern to the sponsors.
MS. DELBRIDGE answered no, but the Department of Natural
Resources (DNR) wanted clarification that the provision affected
only non-hydrocarbon resources.
SENATOR OLSON asked how the sponsors propose to allay the
concerns of municipalities that may want to allocate their
resources for local projects.
MS. DELBRIDGE offered her belief that AGDC would be happy to
work with municipalities on that issue.
CHAIR OLSON pointed out that AGDC would have municipalities over
a barrel if this provision were to become law.
MS. DELBRIDGE responded that the intent is to work
cooperatively, not to put municipalities in an awkward position.
10:38:58 AM
REPRESENTATIVE HAWKER confirmed that he had never heard those
concerns before, and offered assurance that it was not the
sponsors' intent to trump or damage communities. He offered to
work with the Chair to insert language to clarify that the
intent was that communities' resources needed to be made
available to the project if they were reasonably readily
available. The concept behind the provision was to prohibit a
small entity to hold the entire state hostage by stopping the
project.
CHAIR OLSON asked if he was reading the bill correctly.
REPRESENTATIVE HAWKER confirmed that the provision was written
to say that the local community sources of sand and gravel
resources were to be made available and that the compensation
would be adequate and appropriate in accordance with customary
concerns. He again offered to work towards balance.
CHAIR OLSON asked for confirmation that the sponsor would not be
heartbroken if that provision were struck from the bill.
REPRESENTATIVE HAWKER declined to commit to that degree, and
stated that the sponsors do not want to create a situation that
compromises the ability to go forward with a project.
10:41:42 AM
MS. DELBRIDGE said the CS also eliminates a provision to waive
state and local property taxes during construction of a
pipeline.
CHAIR OLSON asked what municipalities' view is on that
provision.
MS. DELBRIDGE responded that local governments have not voiced
concern about that provision to the sponsors.
She continued to explain that another problem with the CS is
that it makes public the entire work product that AGDC is
building with state money. This information is a valuable asset
but if it is required to be public, the state will not get an
asset in return for the money it spends specific to this
project.
10:43:18 AM
CHAIR OLSON questioned why the people who are paying shouldn't
have some access to the information and knowledge if the entity
was sold, for example.
MS. DELBRIDGE said some information would be public, but to
release technical details to the public would allow any comer to
make the information theirs. This could risk a larger pipeline
project that would further reduce gas rates for all Alaskans.
10:44:42 AM
CHAIR OLSON asked if that includes a pipeline coming down the
Parks Highway to Big Lake as opposed to the AGIA project.
MS. DELBRIDGE said her understanding is that there is the Lower
48 pipeline proposed under the AGIA framework, and another
potential project by the three producer companies and
TransCanada going from the North Slope to an LNG export facility
at tidewater in Alaska. AGDC may have assets, such as rights-of-
way and an EIS, to bring to the table on the latter project.
CHAIR OLSON voiced concern that a specific route might be so
restrictive that it's not economic.
MS. DELBRIDGE said the intent is to avoid too many restrictions.
She explained that the previous version of HB 9 directed AGDC to
follow through (per House Bill 369) on the route that serves the
most Alaskans, with modifications as necessary in an open
season. Thus, there is flexibility to adjust the route.
Potential future pipelines may or may not be attached to a large
in-state pipeline. If gas is found in the Kotzebue area known as
middle earth, that is another kind of pipeline that potentially
can be pursued.
She continued that version J addresses public information and
confidentiality, but not strongly enough. It does not allow AGDC
to enter into confidentiality agreements with anyone other than
state agencies. It requires disclosure of contracts for joint
ownership, sale, operations, and management, which is an
expansion of the disclosure requirements in HB 9. She again
highlighted that the CS does not protect the work product AGDC
develops.
10:48:44 AM
MS. DELBRIDGE questioned the intent in deleting the definition
for in-state natural gas pipeline, because the sponsors believe
it is important for AGDC to work on an intrastate gas pipeline,
not an interstate gas pipeline. Finally, the CS removes the
judicial review limitations that help create certainty and
alleviate risk. The sponsors see those as one way the state can
further support a project that will directly benefit the people
of the state.
CHAIR OLSON mentioned the three pipeline projects currently
contemplated and the tax credits for the two Cook Inlet jack up
rigs, and questioned the need for a gas pipeline from the North
Slope that follows the route outlined in House Bill 369.
MS. DELBRIDGE responded that two of the three pipeline projects
are designed to export significant volumes of Alaska gas to
markets outside the state, whereas an in-state line has
generally been viewed as a way to get in-state gas to Alaskans.
There may be opportunity in the future for a project to
accomplish both, but the sponsors' would like AGDC to be
empowered to work off that and connect as much of Alaska as
possible to natural gas.
The sponsors realize that the jack up rigs headed to Cook Inlet
are covered by credits, but it will take time before any gas
prospects in Cook Inlet result in production.
CHAIR OLSON asked if production from the AGDC pipeline line is
expected in 2020.
MS. DELBRIDGE offered her belief that it would be operational in
2018 if AGDC holds an open season in 2013. She offered to
provide a copy of the AGDC project plan.
CHAIR OLSON asked Representative Hawker if he agreed.
REPRESENTATIVE HAWKER answered yes, absolutely.
10:52:43 AM
MS. DELBRIDGE said the sponsors have been instrumental in trying
to encourage exploration and development in Cook Inlet, but the
Cook Inlet utilities Enstar, Chugach, and ML&P have contracted
with Petrotechnical Resources Alaska (PRA) to evaluate the
resource. As it stands now, those utilities do not have
contracts for a significant portion of the base load of gas
needed in 2015. The larger problem is that Cook Inlet is not
connected to other markets without an LNG export facility, and
without a long-term gas supply, that facility may not be
operating next year. Without an avenue to sell the gas, many of
those small producers may not have a market for what they find.
10:54:30 AM
SENATOR STEVENS joined the committee.
MS. DELBRIDGE said the Cook Inlet producers generally support
the idea that it will not hurt their operations to bring North
Slope gas into Cook Inlet in the timeframe being discussed.
There are indications that it could actually help if it serves
as the foundation for continued exports, and helps with those
seasonal fluctuations that the local markets can't accommodate.
CHAIR OLSON asked about gas storage in Cook Inlet.
MS. DELBRIDGE said the gas storage facility that is almost
complete was designed to meet the seasonal fluctuation, but is
not sufficient to take care of the future anticipated base load.
CHAIR OLSON asked if she would agree that the Cook Inlet jack up
rigs could supply gas more quickly than getting a pipeline from
the North Slope.
MS. DELBRIDGE answered that is theoretically correct, but the
individual companies will need capital and time to define the
resource and get it into production.
10:57:05 AM
REPRESENTATIVE HAWKER added that the sponsors are prepared to
amend HB 9 to direct AGDC to pursue a south to north line
specifically if there is gas in Cook Inlet that can meet long-
term commitments to Fairbanks.
CHAIR OLSON held HB 9 in committee.
10:58:37 AM
There being no further business to come before the committee,
Chair Olson adjourned the Senate Community and Regional Affairs
Standing Committee meeting at 10:59 a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 9 Version J adopted previously.PDF |
SCRA 4/19/2012 10:00:00 AM |
HB 9 |
| HB9 Version J - Sectional.pdf |
SCRA 4/19/2012 10:00:00 AM |
HB 9 |