Legislature(2009 - 2010)BUTROVICH 205
03/26/2009 11:00 AM Senate ENERGY
| Audio | Topic |
|---|---|
| Start | |
| SB150 | |
| SB136 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 150 | TELECONFERENCED | |
| += | SB 135 | TELECONFERENCED | |
| += | SB 136 | TELECONFERENCED | |
| + | TELECONFERENCED |
ALASKA STATE LEGISLATURE
SENATE SPECIAL COMMITTEE ON ENERGY
March 26, 2009
11:19 a.m.
MEMBERS PRESENT
Senator Lesil McGuire, Chair
Senator Bill Wielechowski
MEMBERS ABSENT
Senator Lyman Hoffman
Senator Albert Kookesh
Senator Bert Stedman
COMMITTEE CALENDAR
SENATE BILL NO. 150
"An Act establishing an emerging energy technology fund."
HEARD AND HELD
SENATE BILL NO. 136
"An Act relating to noncompetitive leases of state land and for
rights-of-way for oil or natural gas pipelines that originate
and terminate within the state and to the regulation and
certification of those pipelines; relating to conditional
certification for certain new natural gas pipelines; relating to
definitions of "common carrier" and "firm transportation
service" in the Pipeline Act."
HEARD AND HELD
SENATE BILL NO. 135
"An Act clarifying the purpose of the Alaska Natural Gas
Development Authority; and relating to definitions of certain
terms in AS 41.41."
SCHEDULED BUT NOT HEARD
PREVIOUS COMMITTEE ACTION
BILL: SB 150
SHORT TITLE: EMERGING ENERGY TECHNOLOGY FUND
SPONSOR(s): SENATOR(s) MCGUIRE
03/13/09 (S) READ THE FIRST TIME - REFERRALS
03/13/09 (S) ENE, RES, FIN
03/26/09 (S) ENE AT 11:00 AM BUTROVICH 205
BILL: SB 136
SHORT TITLE: IN-STATE PIPELINES: LEASES; CERTIFICATION
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR
03/02/09 (S) READ THE FIRST TIME - REFERRALS
03/02/09 (S) ENE, RES, FIN
03/19/09 (S) ENE AT 11:00 AM BUTROVICH 205
03/19/09 (S) Scheduled But Not Heard
03/26/09 (S) ENE AT 11:00 AM BUTROVICH 205
WITNESS REGISTER
TREVOR FULTON, Staff
to Senator McGuire
Alaska State Legislature
Juneau, AK
POSITION STATEMENT: Introduced SB 150 on behalf of the sponsor.
LARRY PERSILY, Aide
to the House Finance Committee
Alaska State Legislature
Juneau, AK
POSITION STATEMENT: Provided prospective on the federal
stimulus as it relates to SB 150.
BILL LEIGHTY
Alaska Applied Sciences, Inc.
Juneau, AK
POSITION STATEMENT: Testified in support of SB 150.
CHRIS ROSE, Executive Director
Renewable Energy Alaska Project (REAP),
POSITION STATEMENT: Testified in support of SB 150.
DENALI DANIELS
Denali Commission
Anchorage, AK
POSITION STATEMENT: Testified in support of SB 150.
PAT PITNEY, Vice Chancellor
University of Alaska Fairbanks
Fairbanks, AK
POSITION STATEMENT: Stated support for SB 150 on behalf of Gwen
Holdmann with the Alaska Center for Energy and Power.
GREG BROWN
Juneau, AK
POSITION STATEMENT: Testified in support of SB 150.
KIRK HARDCASTLE
Taku River Reds
Juneau, AK
POSITION STATEMENT: Testified in support of SB 150.
DOUGLAS JOHNSON
Ocean Renewable Power
Anchorage, AK
POSITION STATEMENT: Testified in support of SB 150.
KATE TROLL, Executive Director
Alaska Conservation Alliance and Board Member of Alaska
Renewable Energy
Anchorage, AK
POSITION STATEMENT: Testified in support of SB 150.
BRENDON BABB, representing himself
Anchorage, AK
POSITION STATEMENT: Stated support for SB 150.
WAYNE WEIHING
Ketchikan, AK
POSITION STATEMENT: Testified that SB 150 provides opportunity
for Alaska's future.
JOE BALASH, Special Assistant to the Governor
Energy and Natural Resource Issues
Alaska Capitol Building
Juneau, AK
POSITION STATEMENT: Presented SB 136 on behalf of the
administration.
LARRY OSTROVSKY, Civil Division
Oil, Gas & Mining Section
Department of Law
Anchorage, AK
POSITION STATEMENT: Provided information related to SB 136.
ROBERT STOLLER, Assistant District Attorney
Civil Division
Commercial/Fair Business Section
Department of Law
Anchorage, AK
POSITION STATEMENT: Provided information related to SB 136.
ACTION NARRATIVE
11:19:52 AM
CHAIR LESIL MCGUIRE called the Senate Special Committee on
Energy meeting to order at 11:19 a.m. Present at the call to
order were Senators Wielechowski and McGuire.
SB 150-EMERGING ENERGY TECHNOLOGY FUND
CHAIR MCGUIRE announced the consideration of SB 150.
11:20:49 AM
TREVOR FULTON, Staff to Senator McGuire, introduced SB 150 and
read the following into the record:
Alaska has great potential to become a world leader in
researching and developing new energy technologies. We
have a unique combination of remote communities,
abundant energy resources - both renewable and fossil-
based - and a stable and attractive investment
environment. SB 150 would complete that picture by
creating a mechanism for the funding of new research
and development (R&D) energy technology projects.
SB 150 establishes the emerging energy technology fund
(EETF), which would distribute R&D funding through a
competitive grant program aimed at funding projects
designed to research and test new energy technologies.
The fund would be administered by the Alaska Center
for Energy and Power (ACEP). ACEP is a University of
Alaska agency whose mission is to meet state, industry
and federal demand for applied energy research in
order to lower the cost of energy throughout Alaska
and develop economic opportunities for the state, its
residents and its industries.
The timing for the creation a state energy fund like
the one created by SB 150 is more critical than ever.
The federal government has committed over $13 billion
to renewable energy research and development through
the American Reinvestment and Recovery Act and
President Obama has vowed to make renewable,
alternative and clean energy technology a top and
continued priority for his administration. In recent
years the Department of Energy has offered millions in
federal grants that typically require a mere 20
percent cost share at the state level. Every dollar of
state funding invested in the EETF could generate up
to an additional four dollars in federal funding.
Alaska has the available natural resources, the
financial means and the political spirit to become a
national and global leader in researching and
developing new energy technologies. SB 150 creates the
funding mechanism that will help us to achieve that
goal.
11:23:24 AM
CHAIR MCGUIRE said she has been asked if the spirit of the bill
came from the former Alaska Science and Technology Fund. In part
it did, but the idea here is to focus on alternative energy and
establish a structure so the fund is managed appropriately. She
asked Mr. Fulton to discuss what the committee substitute (CS)
does.
MR. FULTON explained that the CS makes two changes. The first is
to add a five-member advisory committee that will carry out the
business of soliciting, reviewing and selecting grant
applications. This creates another level of separation between
the agency that would administer the fund and the fund
recipients. University members would not be appointed to the
board. He noted that there had been concern with the university
serving as the oversight agency because they likely would be a
grant applicant or partner with others to apply for funding. The
language that was used is loosely modeled on the Renewable
Energy Fund language and is a common model for grant programs
managed at universities nationwide. It allows a wide range of
stakeholder voices in the selection process. The second change
expands the definition of "eligible applicant" to include
nonprofits as well as public and private sector entities.
CHAIR MCGUIRE asked him to talk about the educational criteria
for becoming a board member.
MR. FULTON explained that the sponsor wanted to make sure that
the board members have the appropriate scientific expertise and
background. The bill requires that each member of the committee
have a degree in science or engineering and at least two years
experience working in Alaska.
11:27:53 AM
SENATOR WIELECHOWSKI asked if a private company like ExxonMobil
could apply for and receive a grant under the bill.
MR. FULTON said he doesn't see any reason why a company like
that would be excluded.
SENATOR WIELECHOWSKI asked if the bill specifies the means by
which the board will evaluate the proposals.
MR. FULTON replied it would be at the discretion of the
administering body, which would be the Alaska Center for Energy
and Power (ACEP).
CHAIR MCGUIRE said the idea is for the board to decide how
criteria would be weighted. Chris Rose is available online and
can talk about some of the standards and there is a handout in
the packet from ACEP, she said.
11:30:05 AM
LARRY PERSILY, Aide to the House Finance Committee, said his
experience in following energy issues leads him to believe that
alternative energy and emerging technologies will be the issue
du jour for several years. There is a significant amount of
money in the stimulus bill and there will be significant funds
in federal budgets for years to come for energy technology,
alternative energies and new research that will help the country
reduce its reliance on fossil fuels. The state would not want to
lose out on a research grant for lack of a qualified applicant
or a mechanism to do it. The question for the Legislature is if
there is a way to improve the state's odds of getting some of
those grants.
11:32:13 AM
SENATOR WIELECHOWSKI asked if the state having a fund available
improves the odds of getting funds.
MR. PERSILY said it's not so much having the fund itself, but
having enough people with the skills, knowledge, and expertise
to look for opportunities.
SENATOR WIELECHOWSKI asked if he envisions this fund
establishing a position for someone to go out and look for
alternative energy or emerging technology grants.
MR. PERSILY replied he hasn't thought to that detail. He is
looking at whether there are federal dollars or programs in
years to come that the state has a chance at and would want to
make a considered effort to go after. It could be funding a
position or staff or board members who serve for honorarium. It
might not be an employee, but you need to have somebody who is
paying attention, he said.
11:34:15 AM
CHAIR MCGUIRE said the idea was to put the fund under the
authority and management of the Alaska Center for Energy and
Power because it has an administrative construct in place, but
it will be interesting to see how the board evolves. Her hope is
that this will draw attention from venture capital companies
that might be looking for incentives to locate in Alaska. It was
purposefully not funded; it's a shell and an idea. In her view
it was shortsighted to remove the statutory language from the
Science and Technology Fund.
11:36:01 AM
CHRIS ROSE, Executive Director, Renewable Energy Alaska Project
(REAP), said REAP is a coalition of more than 60 urban and rural
electric utilities, businesses, conservation groups, consumer
groups, and Alaska Native organizations with an interest in
developing Alaska's renewable energy resources. State and
federal agencies contribute in an advisory capacity. REAP
supports SB 150 and feels it is a niche in Alaska's energy
portfolio and policy that is much needed.
Currently the renewable energy grant fund uses state money to
fund commercial and mature technology projects, but there is a
huge need to do research and development and demonstration
projects because Alaska has some of the highest utility rates in
the nation. At the same time the state has many renewable and
fossil resources that could be developed, but the technologies
for development aren't yet commercial. For example, tidal and
wave power hold tremendous opportunity for coastal villages and
communities statewide, but the technology isn't yet mainstream.
Battery storage is another huge opportunity. Alaska could
develop the technology for use in the state and for export. In
fact, a lot of the technologies that could be developed for
Alaskans could be technology and expertise that is exported
around the world. An advantage to demonstrating projects in
Alaska is that it also saves money for the people in the state
who are using that technology. For example, a 45 cent per
kilowatt hour tidal project wouldn't be much help to anybody in
the Lower 48, but it would be very helpful to a village that is
using diesel power to generate electricity.
MR. ROSE said there is also a huge opportunity to attract
federal money as more comes available for R&D in renewable and
alternative energy. A program such as the one created by SB 150
is necessary to get in line and apply for funding. The Alaska
Center for Energy and Power is well suited and positioned to
administer this program and the proposed advisory committee is a
way to insulate the university from any potential conflict of
interest. This simply creates the shell to attract state and
federal money to help Alaska and Alaskans, he said.
11:40:40 AM
CHAIR MCGUIRE thanked Mr. Rose for his help in getting this
concept off the ground.
DENALI DANIELS, representing the Denali Commission, noted that
yesterday she sent a letter that was signed by the federal co-
chair. She explained that the Denali Commission is an
independent federal agency with seven commissioners. Each
program area operates under the advisory committee structure and
each committee makes recommendations about policy, project
selection and funding determinations.
The energy program is the Denali Commission's legacy program. In
1998 the commission's original intent was to bring deficient
bulk fuel facilities into EPA compliance. Today the focus is on
bulk fuel, power plant upgrades and alternative renewable
energy. The energy advisory committee has been developing a
strategy for funding alternative renewable programs and roughly
$10 million is currently available. Part of the strategy
includes emerging technologies. The commission has historically
been involved in pilot projects including the Chena geothermal
project, a hydrokinetic project in Eagle, and the Alaska Village
Electric Cooperative Inc. (AVEC) high voltage direct current
feasibility project. All of these projects have created
efficiencies and have further developed technologies. At some
point they can become eligible for the renewable fund that the
state funded this last year.
11:43:45 AM
MS. DANIELS said this initiative is consistent with the
commission's vision that emerging technology is instrumental in
the overall continuum for energy development in Alaska. The
commission has been in active dialog with ACEP, REAP and the
national renewable laboratory (NREL) to develop a partnership to
fund emerging technologies. Hopefully some stimulus funding will
be included.
The Denali Commission held its quarterly meeting last week in
Juneau and they heard a great deal of positive testimony about
the commission's efforts to support emerging technology. SB 150
was mentioned frequently. From our perspective, it's our role to
help to leverage resources and we hope to have a seat at the
table as SB 150 moves forward, she said.
11:45:55 AM
CHAIR MCGUIRE said the Denali Commission will be added to the
list of resources.
PAT PITNEY, Vice Chancellor, University of Alaska Fairbanks,
said she is with the UAF administration, but she is speaking on
behalf of Gwen Holdmann who is with the Alaska Center for Energy
and Power. She is attending an energy conference in London. Ms.
Pitney described the fund as an essential piece for the state to
focus research on things that will be of benefit in Alaska.
Energy funds are available and will be used nationwide, but
Alaska will be better off to the degree that it can apply those
funds to problems in Alaska.
MS. PITNEY said it makes no difference to the university if the
fund is managed by ACEP, AEA, or the Denali Commission. There is
a level of expertise with the Alaska Center for Energy and Power
that makes it a reasonable choice for selection and the advisory
committee is essential. But what this does is strengthen the tie
between the university research and the application of the
technology in society. The key points are that the fund is
essential and although the university would do a good job as
manager, it isn't essential. "We are 100 percent behind the idea
of the fund and the essentialness of the fund to attract those
federal dollars to put towards Alaska's problems," she said.
11:48:51 AM
BILL LEIGHTY said he is a 37 year resident of Juneau and a small
business owner. Alaska Applied Sciences Inc. owns 14 wind
machines in Palm Springs that he maintains. He also does energy
consulting. The last 8 years he has spent most of his time pro
bono as a director of the Leighty Foundation co-authoring
research papers on the problem of transmission and firming
storage for stranded renewable energy. The foundation also funds
nonprofit organizations to do energy policy research.
MR. LEIGHTY noted that earlier in the week he emailed all
legislators a paper he will present on March 31 at the National
Hydrogen Association annual meeting. The title is "Alaska
Village Survival: Affordable Energy Independence via Renewables
Firmed via Hydrogen Storage in Liquid Anhydrous Ammonia." The
essence of the research that's promoted is that energy
independence for villages requires annual-scale firming storage.
He told the committee that last week he testified before the
Denali Commission to suggest that they place $5 million of the
$10 million that is available for renewable energy in this new
emerging energy technology fund should it become law.
MR. LEIGHTY provided an example of a project. He explained that
pro bono he helped write a grant application for AEL&P, the
th
local electric utility, under HB 152. [25 Legislature - An Act
establishing a renewable energy grant fund.] It wasn't funded,
primarily because it was too much an (R&D) project and perhaps
people didn't understand that it had village application. But it
is a good match for SB 150 and it is shovel-ready in that the
application has already been written, he said. That project is
referenced in the research paper because it emphasizes storage.
It's an R&D project and demonstration project that would happen
at AEL&P because you want to do a research project close to good
support and in a major city before it's propagated out to an
Alaska village. He noted that he recently emailed some suggested
modifications to the bill.
MR. LEIGHTY agreed with Mr. Rose that Alaska has particular
needs and opportunities. Some of those opportunities can be
pioneered here in Alaska and may have U.S. and worldwide
application so it's important to pass SB 150 to create the fund.
"I recommend that you move this out of committee and that
somewhere in the Legislature it receive an appropriation," he
said.
CHAIR MCGUIRE said she looks forward to reading his paper and
he's invited to visit her office to discuss it.
11:52:08 AM
GREG BROWN, representing himself, said he was the president and
CEO of Schneider Electric in Canada and Latin America, the
largest electrical distribution and control products
manufacturer in the world. He is also a former president and CEO
of the company that makes Zantrex inverters. Although he's now
retired and living in Juneau, he is doing work in Ontario
Canada. That province probably has the most progressive
alternative energy program in the Northern Hemisphere, he said.
Their Legislature set up the renewable energy standard operating
program to attract outside money to develop alternative energy.
He is working for Silicon Solar Inc. to do a 30 megawatt solar
project there. Another project he's working on is called plug-
and-play and it could supply 100 kilowatts to remote Alaska
villages. Standard components are used to hook up to wind power,
solar, tidal or anything that generates power and then it's run
through an inverter.
MR. BROWN said that about six months ago he gave an alternative
energy presentation and in that presentation his company offered
to give the University of Alaska a cutting edge wind machine. In
return they wanted information. The machine is in route from
Spain and will likely end up in his garage since the university
recently told him that they probably won't be accepting it
because of funding problems. This is a concern because this is
an opportunity to work with a seasoned company to use a cutting
edge product, he said.
11:55:07 AM
MR. BROWN said he is also working on a biomass facility on
Prince of Wales Island using pellets. The raw materials would
come from thinning the forest and sawdust from the mills.
They've also experimented with using 5 percent cardboard and
mixed paper. This project would employ about 20 people, solve
recycling issues and provide heat. He described SB 150 as a good
first step in making Alaska a technology state and a leader in
the industry.
CHAIR MCGUIRE commented that if nothing else this bill has
brought out some very interesting people.
11:57:01 AM
KIRK HARDCASTLE, Taku River Reds, said he is a commercial
fisherman in Southeast and he has identified fish waste as a
tremendous renewable resource. In Juneau alone between 12 and 15
million pounds of fish waste goes into the water. He is
currently working with the Alaska Energy Authority (AEA) on a
feasibility study to recover up to 100,000 gallons of biodiesel
from fish waste. Primarily it will be used for heating, but it
might have power application as well. He would like to be able
to venture to find sources for the product.
MR. HARDCASTLE said when he visited Finland he learned that some
older communities that were no longer economically viable had
started to venture into emerging technologies. Right now Finland
is one of the few nations putting positive investments into
alternative energies and emerging energy technologies. It has
the only commercialized fish waste to biodiesel production plant
in existence. Most places, like Dutch Harbor, use fish waste
only as an in-house supplement. What was more impressive than
the Finnish technology was their ability to redevelop a
workforce. They created vocational tech schools and spun the
graduates out to business tech schools and research technology.
Right now they are exporting emerging technology ideas to the
rest of the world. There are a lot of analogies for Alaska.
Finland leveraged innovation and Alaska can do that with this
bill. Also, SB 150 will help his small alternative energy
business cross the tipping point into the commercial realm.
12:01:28 PM
DOUGLAS JOHNSON, Alaska Projects Director, Ocean Renewable Power
Company LLC. (ORPC), Anchorage, said he is pleased to speak in
support of SB 150 because it's just what Alaska needs. He
explained that ORPC is currently developing two hydrokinetic
projects in Alaska: the Cook Inlet Tidal Power project, and a
river project on the Tanana and Nenana. ORPC was started on the
east coast and has received financial support from the
technology funds established in Massachusetts and Maine, both of
which are similar to the fund created by SB 150. This is an
opportunity but it will take work to develop that opportunity,
he said.
MR. JOHNSON said he has worked with the Alaska Center for Energy
and Power and feels it is a credible and professional agency
that will do a good job administering the fund if it is set up.
Alaska is one of the few places in the world that has the full
sweet of renewables. There is tremendous potential here and the
biggest challenge is transmission and storage. He noted that as
a company ORPC is up against some technology challenges and
would like to work cooperatively with the university in R&D
efforts to optimize their technology and be more effective in
the work they are doing in Cook Inlet and Nenana.
MR. JOHNSON said he is speaking directly to ocean & river
technologies, but there is also opportunity in transmission,
storage, biomass to combine heat and power, low temperature
geothermal, and wind turbine optimization. There's a lot of work
to do but without an emerging energy technology fund, it more
than likely won't happen, he said. It is happening in other
states and Alaska needs to get on the bandwagon.
12:05:30 PM
KATE TROLL, Executive Director, Alaska Conservation Alliance
(ACA), said she also serves on the board of the Renewable Energy
Alaska Project. She highlighted that clean energy is estimated
to be a $55 billion business and is recognized as one of the few
bright spots in the world economy. Because Alaska has world-
class resources it is incumbent upon the state to be a leader in
renewable energy. She said she is particularly excited about the
development of hybrid systems for distribution of energy in
rural Alaska. The 220 villages provide a natural laboratory.
This is something the world will need with the over 2 billion
people in the developing world looking for levels of energy. The
projects are exciting and it's exciting that they will in turn
create jobs in rural Alaska where they are very much needed.
MS. TROLL stressed the importance of leveraging federal funds.
Mr. Persily spoke of federal funds that may be available from
the federal stimulus, but ACA anticipates there will be
additional funds as Congress considers climate change and other
energy-related legislation. Clearly it's a smart move for Alaska
to have the fund in place. She said she understands that the CS
expands the eligible applicant pool to include private companies
and it adds the advisory council. She supports those efforts.
She thanked the Legislature for establishing the fund and said
it's critical that Alaska continue to be an energy leader.
12:08:13 PM
BRENDON BABB, representing himself, stated support for SB 150.
He drew an analogy between JFK working to put a man on the moon
and harnessing the moon to help man. There is huge amount of
tidal resource here and it's the moon that causes these amazing
tides that Alaska has, he said. Tidal power, geothermal and wind
are tremendous resources that Alaska enjoys, and this fund will
allow for R&D as well as demonstration projects to harness that
energy and benefit rural villages. This is an opportunity for
Lower 48 companies to collaborate to do a demonstration project
and be able to say that they are saving money for a rural
village at the same time.
A lot of the world looks like rural Alaska in terms of
remoteness and lack of electricity. People want electricity and
they want it yesterday so there is a huge marketplace in which
to sell any new technology. Emerging energy is a $55 billion
industry that is expected to quadruple by 2015. This is the
modern day race to put a man on the moon. Sadly, the U.S. is
behind in that race, but the emerging energy technology fund and
Alaska's vast natural resources can make this state a leader in
the U.S. and the world. The timing is perfect.
CHAIR MCGUIRE said the Legislature has spent a lot of time this
session talking about alternative energy as a method of
sustaining reliable energy and testimony today points out that
it also provides opportunity for the creation of jobs.
12:10:59 PM
WAYNE WEIHING, representing himself from Ketchikan, said SB 150
provides opportunity for Alaska's future. It will help the
workforce and address energy issues in small communities. In
Southeast small communities like Kake and Angoon are hurting
because of power generation costs. Right now Ketchikan is
running on diesel power rather than hydro because lake levels
aren't replenishing in the cold weather. Instead of running
diesels there is the opportunity to generate backup power with
tidal, he said. The opportunities are exciting and he
appreciates the forward thinking of the committee to put this
fund in place.
CHAIR MCGUIRE announced she would hold SB 150 in committee.
SB 136-IN-STATE PIPELINES: LEASES; CERTIFICATION
CHAIR MCGUIRE announced the consideration of SB 136.
12:13:05 PM
JOE BALASH, Special Assistant to the Governor for Energy and
Natural Resource Issues, said SB 136 is part of the Governor's
three-part plan to initiate an instate natural gas pipeline
project. The first part is to secure funding in the current
legislative budget cycle to initiate work to define the need for
and timing of a pipeline to deliver natural gas to Alaskans,
particularly in areas where it's needed most. That includes
conducting an alternatives analysis, selecting a route, applying
for major permits including rights-of-way, identifying the
source of gas and customers, and bringing all the technical and
commercial pieces together to create an opportunity to sanction
a project as early as 2011. The Governor has appointed Harry
Noah, a former DNR commissioner, as project manager for this
first part.
The second part of the plan is a separate piece of legislation
to change the statutory missions of the Alaska Natural Gas
Development Authority. The notion is to broaden the horizon.
The third part, which is contained in SB 136, makes changes to
the Right-of-Way Leasing Act and the Pipeline Act for the
purpose of facilitating the commercial and business arrangements
between shippers of gas, a pipeline project, and the customers
that will be necessary for a commercial project to move forward.
12:15:11 PM
MR. BALASH explained that in late 2008 and early 2009 the
administration began discussions with the parties that were
interested in pursuing a bullet pipeline project, specifically
Enstar and Anadarko, and identified some things that could be
smoothed out to make the process flow easier. The biggest
potential roadblock they identified was that under current law
state right of way leases require that a pipeline and lessee
commit to providing common carrier service on that pipeline.
Describing common carrier service as the gold standard of access
for shippers of gas, he explained that, in general, a common
carrier pipeline has to provide service to any and all comers
when requested. If shippers' requests for service reach the
maximum capacity of that pipeline, the pipeline must pro-rate
the existing shippers and make room for the new entrant.
MR. BALASH pointed out that a 24 inch pipeline from the North
Slope to Southcentral is certainly a world-class project that
would require some significant financial commitments on the part
of the players in order to secure the financing necessary to
construct the project. The shipper, in this case Anadarko, would
like contractual certainty that they won't be pro-rated if they
make the financial commitments to develop a gas field and then
want to get that gas to market. They want certainty that they
won't lose any of their capacity in the pipe so that they'll be
able to follow through on contractual commitments they've made
to customers in terms of delivery.
12:17:31 PM
MR. BALASH said that as the administration moved forward to
introduce the bill and was taking into consideration other
dynamics with regard to the role and scope of ANGDA and the need
to get gas to more than just Southcentral Alaska, the Governor
asked why the kind of provisions they were asking the
Legislature to make for a bullet line aren't good enough for any
other pipeline. Thus SB 136 is drafted in a manner that would
apply to all instate pipelines.
MR. BALASH said he would throw out one caveat before getting
into the sectional analysis. That is that because the
administration did its homework with parties interested in the
bullet line, they did not do the homework necessary to
understand how these changes might impact the operations of
existing pipelines in Cook Inlet and in particular the potential
impact to future pipelines in Cook Inlet.
CHAIR MCGUIRE said the bill is not retroactive in nature.
MR. BALASH said that's correct.
CHAIR MCGUIRE asked if there are any pipelines that are in early
stages that this may impact.
MR. BALASH replied he isn't aware of any but the bill is a
fairly complicated body of law, particularly in the Pipeline
Act. With the Chair's indulgence he said he may defer some
questions to the attorneys who are online representing the
Department of Law and the Regulatory Commission of Alaska.
12:20:00 PM
CHAIR MCGUIRE noted that page 10, line 11, says that the Act is
effective immediately. She asked Mr. Ostrovsky and Mr. Stoller
if they see any impact to existing pipelines in Cook Inlet.
Existing pipelines would probably argue that they shouldn't be
forced to be common carriers when, looking forward, other
pipelines have the opportunity to be contract carriers, she
added.
LARRY OSTROVSKY, Civil Division, Oil, Gas & Mining Section,
Department of Law, Anchorage, agreed with Mr. Balash that the
bill is written to be prospective. It would apply to anybody who
is going to apply for a pipeline right-of-way lease so it
applies equally to every intrastate pipeline.
SENATOR WIELECHOWSKI asked if these provisions would apply if
the line were built intrastate from Prudhoe Bay to Valdez.
MR. OSTROVSKY replied they would apply.
SENATOR WIELECHOWSKI asked if this would apply to a line built
under AGIA by TransCanada Alaska to Valdez.
MR. OSTROVSKY said this is designed for gas pipelines that
originate and terminate within Alaska. He cited Section 3 on
page 2, line 19.
ROBERT STOLLER, Assistant District Attorney, Civil Division,
Commercial/Fair Business Section, Department of Law, Anchorage,
stated agreement with Mr. Ostrovsky.
CHAIR MCGUIRE said at least one proposal envisions supplying the
LNG plant in Kenai for export capacity. Noting that this goes
back to the FERC decision on jurisdiction, she asked what would
happen if the line meets the requirements under Section 3, but
it's envisioned, and it happens, that export of LNG comes out of
that line.
MR. BALASH said the fundamental question will be whether or not
FERC asserts jurisdiction, because in the Pipeline Act RCA more
or less concedes federal jurisdiction in cases where that
happens. When federal law preempts state regulation, the state
does not assert regulation over the facilities or pipelines or
assets. Fortunately TransCanada's license terms require them to
abide by many of the things that are asked in SB 136.
12:24:05 PM
SENATOR WIELECHOWSKI asked if this would apply to a spur line
off the main line as is being contemplated by ANGDA.
MR. BALASH replied he believes the answer is yes, but it will
depend on where federal jurisdiction begins and where it ends.
CHAIR MCGUIRE asked if the FERC mandates common carrier status.
MR. BALASH explained that under the Natural Gas Act FERC
provides for contract service in the regulation of pipelines.
Firm service contracts are contemplated, but then all the
provisions in the Natural Gas Act are designed to prevent
discriminatory behavior by pipelines.
CHAIR MCGUIRE observed that if an intrastate pipeline
contemplated export it would be a contract pipeline, so it
wouldn't matter if it was under federal or state regulation.
MR. BALASH replied we would hope so but if federal jurisdiction
is not asserted over the pipeline, the state right of way leases
require the lessee to covenant that they will provide common
carrier access. The Pipeline Act allows for firm transportation
service to be offered and regulated by the RCA, but it's an
incongruity between the Right-of-Way Leasing Act and the
Pipeline Act. It's a brain teaser to try to marry the two and
make sure that when the state enters into a lease arrangement
with a pipeline that it is getting the kind of commitments from
the pipeline that will protect the public interest. The Right-
of-Way Leasing Act in intended to do that.
SENATOR WIELECHOWSKI asked the value of the lease for state land
on TAPS.
MR. BALASH said he doesn't have that information but he'd be
happy to find out.
12:27:29 PM
SENATOR WIELECHOWSKI noted that he had mentioned $1 million, and
asked if he has a sense of what the lease would run from Gubik
to Southcentral.
MR. BALASH said the $1 million threshold in bill Section 3,
mimics language in AS 38.35.120 regarding covenants that a
lessee is required to make for pipelines valued at $1 million or
more. He isn't certain in what year the $1 million was put into
law, but the decision was to use the amount that's in statute
for purposes of consistency.
SENATOR WIELECHOWSKI said if he reads this correctly "these
covenants are triggered when you have a noncompetitive lease of
state land for rights-of-way for natural gas pipeline valued at
a million dollars or more."
MR. BALASH said it's for a pipeline that is valued at $1 million
or more.
SENATOR WIELECHOWSKI said he isn't sure that it says that and
asked if he's saying that the million dollars applies to the
value of the natural gas pipeline and not to the value of the
rights-of-way.
MR. BALASH said that's his understanding.
SENATOR WIELECHOWSKI asked for legal clarification because he
reads it differently.
MR. OSTROVSKY said he reads the statute to mean a natural gas
pipeline valued at a million dollars or more. He conceded that
he can see how it could be read both ways and he'll verify his
answer.
12:29:27 PM
SENATOR WIELECHOWSKI said if there's uncertainty he'd argue that
it should be clarified.
CHAIR MCGUIRE suggested some modifying language. She asked what
pipelines would be valued at less than $1 million and who the
state might want to keep out of this new statutory framework.
MR. BALASH said he believes the provision was put into AS
38.35.120 in 1972 or 1974, but the question is at what point a
pipeline becomes big enough to affect the public interest such
that these kinds of protections and requirements should apply.
CHAIR MCGUIRE asked him to clarify that before the next hearing.
She understands that this is incorporates an existing statute to
marry philosophical concepts, but it reflects a policy decision.
Either the policy decision is good today and the dollar amount
needs to coincide or the policy decision is no longer relevant
and all pipelines should be regulated under this structure.
12:31:20 PM
MR. BALASH continued the bill overview and said that sections 1
and 2 make corrective references in statute sections of Title
38. Section 3 adds a new section 38.35.121 to the Right-of-Way
Leasing Act. Section 120 requires a lessee to make certain
covenants to the state and section 121 would put into place an
additional set of covenants that a lessee would make when
applying for a state right-of-way lease. The additional
covenants are contained on pages 2-6 and are built on the must-
haves in the Alaska Gasline Inducement Act. They are the things
that were requested of applicants under AGIA that are intended
to ensure that benefits of a project accrue to the citizens,
businesses and workers in Alaska. In addition they provide the
predictability of access to a pipeline that is important for
additional exploration and development to occur.
The first is the commitment to solicit demand every two years
for additional pipelines. Next are the terms under which they
would solicit that demand. Item three is the commitment to seek
the approvals to make the expansion happen. Item four is the
commitment to reasonable engineering increments, and identifying
what those increments might be based on the design of the pipe
when it's first constructed. Item five is the commitment to
expand on those increments on commercially reasonable terms.
Item six is the commitment to treat the expansions on a rolled-
in basis with a cap up to 115 percent of the day-one rate. Item
seven is the commitment to offer distance sensitive rates. The
administration asked for that under AGIA for the big pipe and
believes it is applicable here as well. Item eight relates to
Alaska hire to make sure that the citizens are benefited in the
construction of a project such as this. Item nine is the
commitment to negotiate, prior to construction, a project labor
agreement (PLA) that the lessee will commit to. Item ten is the
commitment to be regulation by the RCA under AS 42.06, the
Pipeline Act.
12:34:30 PM
Section 4 sets out the definitions for "commercially reasonable
terms" and "reasonable engineering increments" in the Right-of-
Way Leasing Act to make sure everyone is talking about the same
thing in section 121.
Section 5 amends the Pipeline Act and spells out that the
covenants in Title 38 under the Right-of-Way Leasing Act are
applicable to the lessee, and that the RCA has jurisdiction to
enforce the covenants as a matter of its regulation of the
pipeline provider.
Section 6 allows an additional certificate to be provided by the
RCA. Mr. Balash continued as follows:
This goes back to the bigger picture in terms of what
it is we're hoping to achieve in the next two and a
half years in terms of getting all of the major
permits under way and basically accumulated and put
together for a project to be sanctioned as early as
2011. What this would allow the RCA to do is grant a
conditional certificate and identify the conditions
that need to be met. If for instance, we had an
application for a certificate on a particular project
that didn't necessarily have a gas supply committed
yet. We want them to be able to go through the steps
at the RCA to be able to get their certificate - much
like we do for conditional rights-of-way at DNR. You
can get a conditional right-of-way granted that spells
out the conditions that must be satisfied to make that
right-of-way firm. So this would take that same
concept and apply it to a certificate that's required
by the Regulatory Commission of Alaska and allow that
same kind of head start, as it were, on the regulatory
process to take place.
Section 7 sets out the enforcement authority of the RCA.
Section 8 changes the definition of firm transportation service
in the Pipeline Act to make it clear that firm service means
that a shipper on a pipeline can not be prorated.
Section 9 adds the definition for "common carrier" that allows
somebody who has an existing right-of-way lease - where they
made the commitment to common carrier service - to be able to
then offer firm transportation service and interruptible
transportation service on that pipeline.
12:37:48 PM
SENATOR WIELECHOWSKI asked the status of ANGDA's work on the
spur line.
MR. BALASH replied his understanding is that ANGDA very recently
entered into a reimbursable arrangement and paid funds to BLM to
continue with the EIS for the Richardson Highway route on the
spur line work.
SENATOR WIELECHOWSKI asked if the administration supports
ANGDA's efforts to build the spur line.
MR. BALASH replied:
We have been supporting ANGDA since day one of the
Palin administration. And the question is,
fundamentally, how to evaluate what opportunities and
needs there are for pipeline service in Alaska in
terms of the spur line project that has been under
pursuit here for the last 15 to 16 months by ANGDA.
Certainly it is complementary to a large diameter
project that would be going across the border and
similar to that pursued by TransCanada and Denali. And
in that regard is very helpful to the overall delivery
of gas to Alaskans.
But, whether or not that's going to be the right
vehicle - whether or not we need to see a bullet line
constructed sooner than a large diameter pipeline may
come into service - is something that we're attempting
to spell out, flesh out and understand more fully. It
may be that Cook Inlet gas supplies reach a critical
point here, whether it be due to deliverability or any
number of other reasons, and because a bullet line
requires such a long lead time to plan and construct,
we want to get started now. And so that's been the
focus here lately from the Governor.
12:41:00 PM
SENATOR WIELECHOWSKI asked if the administration has to sign off
on ANGDA expenditures.
MR. BALASH said he'd be happy to find out.
SENATOR WIELECHOWSKI asked if the administration has refused to
sign off on expenditures that ANGDA has requested.
MR. BALASH said his understanding is that the most recent
request for the work with BLM was delayed somewhat, but it did
go through. They have been scrutinizing whether or not requests
by ANGDA for contracting and expenditures are consistent with
the statutory mission of the authority and the appropriations
made by the Legislature.
SENATOR WIELECHOWSKI asked if he knows if any requests for
expenditures by ANGDA have been denied.
MR. BALASH replied he isn't aware of any outright denials, but
he isn't sure about the latest status.
SENATOR WIELECHOWSKI said he'd appreciate an update on that and
asked if the administration has requested any changes in
leadership at ANGDA.
MR. BALASH said he understands that there have been
conversations about various approaches related to overall
direction and willingness to consider additional information,
but he hasn't participated in those deliberative conversations.
12:43:20 PM
SENATOR WIELECHOWSKI restated the question.
MR. BALASH replied he doesn't have an answer.
SENATOR WIELECHOWSKI asked him to look into that and get back to
him.
MR. BALASH said he'd be happy to.
CHAIR MCGUIRE asked Mr. Balash find out how companies that are
considering a bullet line are reacting to the implementation of
the covenants. She noted that sometimes attempts to incentivize
make for less incentive to the private sector. A company is
considering building a bullet line and Alaska needs that
project. She appreciates many of the covenants and she wouldn't
want the committee to pass a piece of legislation that might
interfere with current business plans and the free market
opportunity for a bullet line.
MR. BALASH agreed and added that the parties they've had
discussions with were aware of the administration's view and
position on the need for the must-haves. But, he said he can't
speak for them here.
CHAIR MCGUIRE announced she would hold SB 136 in committee.
12:46:06 PM
There being no further business to come before the committee,
Chair McGuire adjourned the meeting at 12:46 pm.
| Document Name | Date/Time | Subjects |
|---|---|---|
| Bill Packet for SB 150.pdf |
SENE 3/26/2009 11:00:00 AM SENE 3/27/2009 11:00:00 AM |
SB 150 |
| Bill Packet for SB 136.pdf |
SENE 3/26/2009 11:00:00 AM |
SB 136 |