Legislature(2009 - 2010)BUTROVICH 205

04/02/2009 11:30 AM Senate ENERGY


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* first hearing in first committee of referral
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+= SB 135 ALASKA NATURAL GAS DEVELOPMENT AUTHORITY TELECONFERENCED
Heard & Held
*+ SB 162 HEATING FUEL ENERGY RELIEF TELECONFERENCED
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
                    ALASKA STATE LEGISLATURE                                                                                  
               SENATE SPECIAL COMMITTEE ON ENERGY                                                                             
                         April 2, 2009                                                                                          
                           11:42 a.m.                                                                                           
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Senator Lesil McGuire, Chair                                                                                                    
Senator Albert Kookesh                                                                                                          
Senator Bill Wielechowski                                                                                                       
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Senator Lyman Hoffman                                                                                                           
Senator Bert Stedman                                                                                                            
                                                                                                                                
OTHER LEGISLATORS PRESENT                                                                                                     
                                                                                                                                
Senator Joe Thomas                                                                                                              
Senator Joe Paskvan                                                                                                             
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
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."                                                                                                             
     HEARD AND HELD                                                                                                             
                                                                                                                                
SENATE BILL NO. 162                                                                                                             
"An Act relating to a heating fuel energy relief program; and                                                                   
providing for an effective date."                                                                                               
     HEARD AND HELD                                                                                                             
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
BILL: SB 135                                                                                                                  
SHORT TITLE: ALASKA NATURAL GAS DEVELOPMENT AUTHORITY                                                                           
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                                                                          
03/26/09       (S)       Scheduled But Not Heard                                                                                
04/02/09       (S)       ENE AT 11:30 AM BUTROVICH 205                                                                          
                                                                                                                                
BILL: SB 162                                                                                                                  
SHORT TITLE: HEATING FUEL ENERGY RELIEF                                                                                         
SPONSOR(s): PASKVAN                                                                                                             
                                                                                                                                
03/25/09       (S)       READ THE FIRST TIME - REFERRALS                                                                        
03/25/09       (S)       ENE, RES, FIN                                                                                          
04/02/09       (S)       ENE AT 11:30 AM BUTROVICH 205                                                                          
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
JOE BALASH, Special Assistant on Energy and Gas Issues                                                                          
Governor Palin                                                                                                                  
State Capital                                                                                                                   
Juneau, AK                                                                                                                      
POSITION STATEMENT: Presented SB 135.                                                                                         
                                                                                                                                
HAROLD HEINZE, Executive Director                                                                                               
Alaska Natural Gas Development Authority (ANGDA)                                                                                
POSITION STATEMENT: supported SB 135.                                                                                         
                                                                                                                                
PAUL FUHS, representing himself                                                                                                 
Juneau, AK                                                                                                                      
POSITION STATEMENT: Supported SB 135.                                                                                         
                                                                                                                                
MR. OSTNESS, representing himself                                                                                               
Cordova, AK                                                                                                                     
POSITION STATEMENT: Technical difficulties - indiscernible                                                                    
testimony.                                                                                                                      
                                                                                                                                
BILL WARREN, representing himself                                                                                               
Nikiski, AK                                                                                                                     
POSITION STATEMENT: Supported SB 135.                                                                                         
                                                                                                                                
SENATOR PASKVAN                                                                                                                 
State Capital Bldg.                                                                                                             
Juneau, AK                                                                                                                      
POSITION STATEMENT: Sponsor of SB 162.                                                                                        
                                                                                                                                
SCOTT RUBY, Manager                                                                                                             
Division of Operations                                                                                                          
Department of Commerce, Community and Economic Development                                                                      
POSTIION STATEMENT:  Said he was available to answer questions                                                                
on SB 162.                                                                                                                      
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
11:42:43 AM                                                                                                                   
                                                                                                                                
CHAIR  LESIL  MCGUIRE  called the  Senate  Special  Committee  on                                                             
Energy meeting  to order  at 11:42  a.m. Present  at the  call to                                                               
order were Senators Wielechowski, Kookesh and McGuire.                                                                          
                                                                                                                                
        SB 135-ALASKA NATURAL GAS DEVELOPMENT AUTHORITY                                                                     
                                                                                                                                
11:43:34 AM                                                                                                                   
CHAIR MCGUIRE announced SB 135 to be up for consideration.                                                                      
                                                                                                                                
JOE BALASH,  Special Assistant  to Governor  Palin on  Energy and                                                               
Gas  Issues,  said  SB  135  is one  of  three  elements  in  the                                                               
Governor's three-part  plan to initiate  progress and work  on an                                                               
in-state gas  delivery system, specifically  looking at  what has                                                               
been  traditionally referred  to as  a "bullet  line." This  bill                                                               
fits in  with the other  two elements  and addresses what  is the                                                               
most logical vehicle  for pursuing development of  natural gas in                                                               
Alaska  through  the  Alaska Natural  Gas  Development  Authority                                                               
(ANGDA).                                                                                                                        
                                                                                                                                
ANGDA was created  by voter initiative in 2002 and  has some very                                                               
specific assignments to  carry out as conceived  by its drafters.                                                               
That  work was  fulfilled; and  now  ANGDA has  begun looking  at                                                               
other options for bringing gas  to market to Alaskans engaging in                                                               
a number of  different projects and efforts on sort  of a forward                                                               
looking basis, but  in a manner not entirely  consistent with the                                                               
statutory direction provided in AS 41.                                                                                          
                                                                                                                                
MR. BALASH  said the  bill is  fairly straight-forward  and makes                                                               
sure that  ANGDA can look  at gas  supply options other  than the                                                               
North Slope and  can look at delivery options other  than just to                                                               
Southcentral  or  to  tidewater  to   market.  He  said  this  is                                                               
consistent with  the Governor's vision that  Alaska's natural gas                                                               
resources  be made  available to  and  usable by  each and  every                                                               
Alaskan wherever it makes sense.                                                                                                
                                                                                                                                
11:46:09 AM                                                                                                                   
He returned to two questions  that Senator Wielechowski had asked                                                               
at the last  hearing on one of the other  companion bills. He had                                                               
asked whether  or not the  administration had asked for  a change                                                               
in leadership  at ANGDA.  He committed to  going back  and asking                                                               
the questions and  while he knew of the  conversations, he wasn't                                                               
a party to them. The  discussion in those conversations did touch                                                               
on  the leadership  of  the Authority,  the  corporation and  its                                                               
employees. Options were  discussed, but there was  no pressure on                                                               
the chair to make a particular change.                                                                                          
                                                                                                                                
SENATOR WIELECHOWSKI  said he appreciated the  answers, and asked                                                               
who was a party to the conversations.                                                                                           
                                                                                                                                
MR. BALASH  replied those  occurred a few  weeks ago  between the                                                               
Governor, her chief of staff, and Scott Hayward, the chair.                                                                     
                                                                                                                                
SENATOR  WIELECHOWSKI  asked if  anyone  asked  for or  suggested                                                               
resignations from ANGDA.                                                                                                        
                                                                                                                                
MR. BALASH replied that it  wasn't described in that manner. Some                                                               
discussions  were  had on  how  to  make some  transitions.  They                                                               
talked  about the  future of  ANGDA, the  work that  it could  be                                                               
doing, the  direction the Governor  wanted to go, looking  at the                                                               
options available for instate gas, and organizational changes.                                                                  
                                                                                                                                
SENATOR WIELECHOWSKI  said since this  is an ANGDA bill  and they                                                               
will be talking about  where it is going to go,  he wanted to ask                                                               
what the administration's concerns with it are.                                                                                 
                                                                                                                                
MR.  BALASH responded  that fits  in with  Senator Wielechowski's                                                               
other question at  the last meeting. The question  was whether or                                                               
not   any  contracts   for   ANGDA  had   been   denied  by   the                                                               
administration, and  the answer  is yes, one  that was  to pursue                                                               
the initial feasibility of a  pipeline going into western Alaska.                                                               
The  reason it  was denied  is that  the appropriation  authority                                                               
cited in  the contract  document cited  an appropriation  in last                                                               
year's capital  budget, but there  was no mention of  delivery to                                                               
western Alaska  in the  discussion there. It  was all  about just                                                               
Cook  Inlet and  Prince William  Sound destinations.  The concern                                                               
was that there  wasn't the proper appropriation in  place to fund                                                               
that kind  of work.  That is  what invited  the question  of what                                                               
other things ANGDA has been  doing. The legislature broadened the                                                               
scope of the Authority to  include not just Prince William Sound,                                                               
but also Cook  Inlet, as a potential destination and  sight of an                                                               
LNG facility.                                                                                                                   
                                                                                                                                
11:51:19 AM                                                                                                                   
ANGDA has been  investigating delivery of propane  to other parts                                                               
of the state, namely coastal  areas and locations along the river                                                               
system.  Propane  could  be  a better  alternative,  and  a  more                                                               
efficient  alternative  in  many  villages. While  that  work  is                                                               
commendable, it is not explicitly  clear that it is something the                                                               
statute authorizes.                                                                                                             
                                                                                                                                
SENATOR   WIELECHOWSKI  asked   if   this   bill  addresses   the                                                               
administration's  concern   with  the  direction  of   ANGDA  and                                                               
clarifies where they think it needs to be.                                                                                      
                                                                                                                                
MR.   BALASH  replied   this  language   provides  the   kind  of                                                               
flexibility ANGDA  needs to have  to reach the  Governor's vision                                                               
for an  in-state natural gas  pipeline to  Southcentral. However,                                                               
that  is a  limited  and limiting  role  that the  administration                                                               
would  like to  expand. They  want to  see what  the options  and                                                               
opportunities are to deliver gas to other parts of the state.                                                                   
                                                                                                                                
SENATOR  WIELECHOWSKI asked  if the  Governor thinks  ANGDA needs                                                               
leadership changes.                                                                                                             
                                                                                                                                
MR. BALASH responded  that they have gone  through some difficult                                                               
experiences  over  the  last  year  in terms  of  trying  to  get                                                               
cooperative efforts between parties. It's  possible a new face is                                                               
needed.                                                                                                                         
                                                                                                                                
SENATOR  WIELECHOWSKI  said  he  understands that  the  board  of                                                               
directors of ANGDA  is the final arbiter of who  leads ANGDA, and                                                               
the Governor gets to appoint those people. Is that accurate?                                                                    
                                                                                                                                
MR. BALASH  said that is  correct. The  corporation is lead  by a                                                               
seven-member  board of  directors and  the Governor  appointments                                                               
them.  Those   appointments  are   not  subject   to  legislative                                                               
confirmation, because it's not a quasi-judicial entity.                                                                         
                                                                                                                                
CHAIR MCGUIRE said there has been  a lot of discussion about what                                                               
people were voting for when they  voted for ANGDA, but the ballot                                                               
language  said  that  the  Authority would  be  created  for  the                                                               
purpose of developing, constructing  and managing and operating a                                                               
gas pipeline  from the North Slope  of Alaska and a  spur line to                                                               
Southcentral Alaska  natural gas distribution grid.  Her question                                                               
is more philosophical.  Some people say they  envisioned a quasi-                                                               
governmental entity that  would live on into  existence and "have                                                               
all these other  tentacles to it," and some say  "really what the                                                               
people were doing is they were  voting because they wanted to see                                                               
a natural gas pipeline and they  have wanted one for many years -                                                               
and  the frustration  that they  had  could be  exercised at  the                                                               
ballot."  So,  what does  this  governor  think the  people  were                                                               
saying  in this  vote  and how  is that  not  consistent with  an                                                               
expansion of ANGDA?                                                                                                             
                                                                                                                                
11:58:24 AM                                                                                                                   
MR. BALASH  replied that  the Governor  voted for  the initiative                                                               
and believes in the vision. He  hasn't talked with her about what                                                               
the voters  were thinking.  When you look  at the  voter returns,                                                               
everyone in every district voted for that initiative.                                                                           
                                                                                                                                
11:59:39 AM                                                                                                                   
CHAIR  MCGUIRE asked  if voters  today  would vote  for a  ballot                                                               
proposition that reflects the language contained in SB 135.                                                                     
                                                                                                                                
MR.  BALASH  said  he  couldn't  speculate as  a  member  of  the                                                               
administration, but as  someone who has been  around politics for                                                               
12 years,  he would expect  it to  pass by a  significant margin.                                                               
Voters don't  get to  chose to  amend language;  they just  get a                                                               
"yes" or a "no" option at the ballot box.                                                                                       
                                                                                                                                
CHAIR MCGUIRE remarked that this  Authority was created by a vote                                                               
of the people  and here the legislature sits expanding  it - more                                                               
dollars,  more  positions, and  more  bureaucracy  - all  of  the                                                               
things  that  come  with  agencies.   It's  always  important  to                                                               
remember the reason  behind its original creation.   Where in the                                                               
next decade  does he see ANGDA  fitting in, in terms  of the need                                                               
for  a gas  pipeline and  affordable energy  to Alaska  including                                                               
rural Alaska and Southeast Alaska?                                                                                              
                                                                                                                                
MR. BALASH answered  that the best way to identify  where it fits                                                               
in is  by going back to  its title - the  Natural Gas Development                                                               
Authority with  emphasis on "development." He  envisioned that it                                                               
would continue in the development  sphere - the early dollars for                                                               
identifying, estimating the  cost of, and planning  the work that                                                               
would then  be picked  up by a  private entity to  take on  as an                                                               
investment that makes sense.                                                                                                    
                                                                                                                                
12:03:50 PM                                                                                                                   
In  terms   of  a  bureaucracy,  he   wouldn't  characterize  the                                                               
administration's  vision  of ANGDA  as  being  some new  a  super                                                               
agency  whatsoever.  But with  regard  to  the opportunities  for                                                               
natural gas  development in the state  use of the natural  gas at                                                               
the  most  efficient  and   economic  level,  the  administration                                                               
continues to maintain that the best  way to make gas available to                                                               
Alaskans is  through a large-diameter pipeline  that helps secure                                                               
both  delivery of  gas at  the most  efficient way  possible, but                                                               
also would help stabilize and secure the state's fiscal future.                                                                 
                                                                                                                                
The challenges they  face in the cost and  availability of energy                                                               
all  around  Alaska  are  significant   to  say  the  least.  The                                                               
challenges presented  in each nook  and cranny are  different and                                                               
have to  be solved in different  ways. And so coming  back around                                                               
the  identification of  the AHFC  and the  other pieces  of state                                                               
government, it is  clear that they need to work  on identifying a                                                               
single point of  contact, and right now AHFC and  AEA programs in                                                               
the Department  of Commerce and Economic  Development (DCCED) and                                                               
the Department of  Health and Social Services  all have something                                                               
to do with energy. So, they  have sought to revitalize the Alaska                                                               
Energy Authority  by appointing  Mr. Haagenson  last year  as the                                                               
executive  director.  For  years  the  AIDEA  and  AEA  executive                                                               
director were one and the same.                                                                                                 
                                                                                                                                
CHAIR MCGUIRE  said she is  envisioning an  energy organizational                                                               
chart later  in the interim because  she thinks it would  be good                                                               
to see  how all the  state and federal organizations  and efforts                                                               
fit together.                                                                                                                   
                                                                                                                                
12:07:55 PM                                                                                                                   
SENATOR THOMAS said that seeing  how departments are coordinating                                                               
would be  useful for all  the departments of  government "because                                                               
there's a lot of duplication." He  said the bill appears to be an                                                               
expansion of  what takes place and  markets, but he sees  it as a                                                               
good thing,  because it  is more  practical. It  actually focuses                                                               
things a little  more on what they are attempting  to do with the                                                               
creation  of ANGDA.  He thought  they  were headed  in the  right                                                               
direction.                                                                                                                      
                                                                                                                                
SENATOR WIELECHOWSKI  said his statement that  the administration                                                               
still  believes  that  our  best prospect  for  in-state  gas  is                                                               
through a large-diameter pipe.                                                                                                  
                                                                                                                                
MR. BALASH answered that is correct.                                                                                            
                                                                                                                                
12:12:10 PM                                                                                                                   
CHAIR WIELECHOWSKI  asked then,  why are  they hiring  Harry Noah                                                               
and saying that they want to  build the bullet line, not a large-                                                               
diameter line.                                                                                                                  
                                                                                                                                
MR. BALASH replied  that the nature of the work  that Mr. Noah is                                                               
doing is  not with  a predetermined outcome.  They know  there is                                                               
some need  for gas delivery from  outside of Cook Inlet  into the                                                               
Southcentral  market and  it  could  be a  time  period before  a                                                               
large-diameter  pipeline is  operating.  There are  uncertainties                                                               
about when  that pipeline will happen  and if there is  a need to                                                               
fill the gap in the meantime,  they need to know what the options                                                               
are.  The  lead time  for  a  small-diameter pipeline,  a  bullet                                                               
pipeline,  is significant.  People  have been  talking about  the                                                               
magnitude of everything  in Alaska and have been  talking about a                                                               
1,700-mile,   48-inch pipeline for  so long  that the idea  of an                                                               
800-mile pipeline that is 20-24  inches seems small, but in fact,                                                               
it's world class. It would be  one of the largest developments in                                                               
the  world.  So  the  lead  time  involved  in  identifying  that                                                               
particular kind  of project  is significant  enough that  if they                                                               
don't start  working on it  now, it may  be too late  to consider                                                               
that as an option  in 2011 or 2012 when the  state will know what                                                               
its choices  really are.  It is  maintaining the  state's options                                                               
without having a predetermined outcome in mind.                                                                                 
                                                                                                                                
12:12:59 PM                                                                                                                   
SENATOR WIELECHOWSKI said he has based  a lot of his decisions on                                                               
this issue  on statements  that were  made by  the administration                                                               
and TransCanada,  and all  the statements he  has heard  are that                                                               
the large-scale line is scheduled  to be completed in 2018. Today                                                               
is the first  day he is hearing the administration  say there are                                                               
uncertainties  about when  the large-scale  line will  happen. Do                                                               
you have  new information that  the large-scale line will  not be                                                               
ready in 2018?                                                                                                                  
                                                                                                                                
MR. BALASH  answered when  the two commissioners  of the  DNR and                                                               
DOR reviewed  the AGIA application submitted  by TransCanada last                                                               
year, the proposed schedule for  completion and first gas in 2018                                                               
was determined to be achievable,  yet aggressive. They prepared a                                                               
cost/schedule curves  that weighted the probabilities  of various                                                               
things  happening on  the  critical path,  and  he didn't  recall                                                               
whether the  50 percent  case occurred  in 2020  or 2021,  but he                                                               
knows it  was not 2018.  The administration still thinks  that is                                                               
achievable and  possible if  everything goes  right, but  if, for                                                               
example,  FERC   certification  or  any   of  the  NPA   and  NEB                                                               
certifications  are delayed  - regulatory  and logistical  things                                                               
could  slow  the  project.  One   of  the  major  concerns  their                                                               
technical team had  was in the ability to  deliver the components                                                               
of the  GTP on  a sealift  vessel due to  the constraints  in the                                                               
seasonal  opportunity for  delivery  up to  Prudhoe  Bay. If  you                                                               
don't make the  barge, you don't lose  a day for a  day, you lose                                                               
six or nine months. So there  are logistical challenges on top of                                                               
the  regulatory  challenges. So,  it's  not  that they  have  new                                                               
information; they just  have recognized that you  set a schedule,                                                               
you  work  it, but  the  exact  date  that  gas is  delivered  is                                                               
"uncertain."                                                                                                                    
                                                                                                                                
If  Southcentral Alaska  is going  to have  all the  gas that  it                                                               
needs until 2016,  that presents a certain set  of challenges. If                                                               
it  has  all the  gas  it  needs  until  2022, it's  a  different                                                               
question  fundamentally. A  lot of  the  work that  Mr. Noah  has                                                               
identified as being  necessary over the next year  is to identify                                                               
what Cook  Inlet already has  in its  known fields. That  is work                                                               
the Division of Oil and Gas  is working on. They are also working                                                               
on assessments  of what it would  cost to explore for,  find, and                                                               
develop new fields in Cook Inlet  - and what that cost ultimately                                                               
would be and what sort of schedule might be possible.                                                                           
                                                                                                                                
12:16:42 PM                                                                                                                   
The needs of  Southcentral have to be identified  before a supply                                                               
of gas can  be found that would go through  a pipeline that leads                                                               
to  Southcentral, which  is a  constrained market,  not a  liquid                                                               
market.  Southcentral has  a  smaller market  that  gets tied  up                                                               
contractually  for periods  of time,  and so  the opportunity  to                                                               
place gas is a bit of  a challenge. Nevertheless, they think that                                                               
the reserves in  Southcentral are able to produce  for some time;                                                               
they just  need to understand at  what rate they can  produce and                                                               
how  that meets  up with  daily demand,  particularly the  winter                                                               
peaks.                                                                                                                          
                                                                                                                                
SENATOR KOOKESH said  he would appreciate it if  they could spend                                                               
their time on the bill and the changes that are in it.                                                                          
                                                                                                                                
12:19:43 PM                                                                                                                   
HAROLD   HEINZE,   Executive   Director,   Alaska   Natural   Gas                                                               
Development  Authority (ANGDA),  supported SB  135. He  wanted to                                                               
amplify  a few  things that  Mr.  Balash touched  on. Number  one                                                               
ANGDA  didn't come  into existence  until  2003, and  one of  the                                                               
first things  they did  was draw a  diagram that  illustrated the                                                               
benefits to  Alaskans. ANGDA was  formed out of  frustration over                                                               
two things; the fact that  nothing was happening on the pipeline,                                                               
and two,  even if something did  happen on the pipeline,  most of                                                               
the people  in the  state felt it  would not  necessarily benefit                                                               
them. So they  drew a chart that identified what  they saw as the                                                               
potential benefits that  an ANGDA as a public  corporation of the                                                               
state  could deliver  to  the citizens.  That  chart hasn't  been                                                               
changed.  It's not  a simple  chart; it's  a big  pipeline system                                                               
with gas  to electric power,  barging LPG  fuel on the  Yukon and                                                               
local  gas  distribution  to  Fairbanks, and  a  spur  line  from                                                               
Glennallen into  Cook Inlet and maybe  petrochemicals. The reason                                                               
those are  on the  chart is they  thought that NS  gas was  not a                                                               
simple issue  of going from point  A to point B  for instate use.                                                               
It was  a system; and  the ballot measure language  describes the                                                               
design and construction  of "the pipeline system".  It didn't say                                                               
"of the pipeline."                                                                                                              
                                                                                                                                
MR. HEINZE  said they  constantly ask  themselves where  the best                                                               
opportunities are for  ANGDA to contribute to the  benefit of the                                                               
people and  where can  they offer solutions  for the  biggest gas                                                               
issues.  They have  found  that one  of their  roles  is to  keep                                                               
options open.                                                                                                                   
                                                                                                                                
MR. HEINZE said when  you go to bankers in New  York, you have to                                                               
have clarity.  This bill provides clarity.  The board's Authority                                                               
is clear in statute. Article  8 of the Constitution specifies the                                                               
legislature  as  the body  that  makes  policy on  that  resource                                                               
development. In  that case,  he welcomed  legislative interaction                                                               
through  this  bill.  He  urged  them to  keep  all  the  options                                                               
available that provide benefits to Alaskans.                                                                                    
                                                                                                                                
12:26:15 PM                                                                                                                   
SENATOR WIELECHOWSKI asked  if he sees this  changing his ability                                                               
to work with Enstar on developing a bullet line.                                                                                
                                                                                                                                
MR. HEINZE replied that ANGDA  would release the final version of                                                               
a  report on  public/private  partnerships  next Wednesday.  Last                                                               
July  they  were challenged  to  see  if  they  could work  in  a                                                               
public/private  partnership. It  turns  out  that there  probably                                                               
isn't  a strong  basis  for either  of them  to  do that.  Enstar                                                               
should be allowed  to move forward with whatever it  wants to do.                                                               
The challenge  for ANGDA  is to develop  financing ideas  to help                                                               
them achieve a public benefit in the long run.                                                                                  
                                                                                                                                
12:29:15 PM                                                                                                                   
PAUL FUHS, representing  himself, supported SB 135. He  is one of                                                               
the original drafters  of the initiative and it  was an oversight                                                               
to not include  the other regions. They didn't  intend to exclude                                                               
anyone.  He said  the Red  Dog  and Donlin  Creek mines'  biggest                                                               
issue is getting fuel, and the  idea is that they could be anchor                                                               
tenants  for natural  gas. Steven  Haagenson considered  this and                                                               
said his main mission is  really electricity, but based on Enstar                                                               
numbers he  figured that the  gas tariff  would be about  $10 per                                                               
thousand cubic feet. Right now they  are paying about $30 mcf for                                                               
oil. When he helped write the  initiative he wanted ANGDA to have                                                               
the  power to  make something  happen,  but to  also protect  the                                                               
consumer.  But if  ANGDA participates  in something  and provides                                                               
tax exempt financing  and savings to a developer,  they are going                                                               
to demand  that be passed  on to  the consumer. "It's  only right                                                               
that that be done  if they are going to step  in." If the company                                                               
they  are working  with  wants to  put all  that  money in  their                                                               
pocket rather  than give  it to  the consumer,  then there  is no                                                               
basis for a public/private partnership."                                                                                        
                                                                                                                                
SENATOR  KOOKESH asked  if he  has heard  from anyone  else about                                                               
supporting it.                                                                                                                  
                                                                                                                                
MR. FUHS replied he thought everyone would support it.                                                                          
                                                                                                                                
12:33:47 PM                                                                                                                   
MR.   OSTNESS,   representing    himself,   Cordova,   [technical                                                               
difficulties - indiscernible testimony.].                                                                                       
                                                                                                                                
12:35:48 PM                                                                                                                   
BILL WARREN, representing himself,  Nikiski, supported SB 135. He                                                               
wants a  pipeline and  since voting for  the ANGDA  initiative he                                                               
thinks "we've got  mired down in a lot of  politics," although he                                                               
thinks  that ANGDA  has done  a "sterling  job." Renewables  will                                                               
compliment a gas  line, but those will take a  while to phase in.                                                               
He also  strongly supported state  oversight of  in-state natural                                                               
gas.                                                                                                                            
                                                                                                                                
CHAIR   MCGUIRE  said   SB  135   would  be   held  for   further                                                               
consideration.                                                                                                                  
                                                                                                                                
               SB 162-HEATING FUEL ENERGY RELIEF                                                                            
                                                                                                                                
12:41:32 PM                                                                                                                   
CHAIR MCGUIRE announced SB 162 to be up for consideration.                                                                      
                                                                                                                                
12:42:48 PM                                                                                                                   
SENATOR PASKVAN,  sponsor of SB  162, said  this is a  short term                                                               
solution for  a very serious  issue in Interior  Alaska, although                                                               
this  bill  would  apply  to  rural Alaska  and  to  some  extent                                                               
Southeast   and   Southcentral    Alaska.   He   explained   that                                                               
approximately 80 percent of rural  Alaska and Interior Alaska use                                                               
heating  oil as  their  primary  source of  heat.  He knows  this                                                               
legislation needs more work and he asked for their assistance.                                                                  
                                                                                                                                
SENATOR PASKVAN  said Alaskans  who rely on  heating oil  to keep                                                               
warm during  the winter  need a  specific short-term  solution in                                                               
addition  to the  many other  promising long-term  solutions that                                                               
are being considered.  SB 162 is a short-term  solution; it would                                                               
require  the  State  of  Alaska  to  offset  heating  costs  over                                                               
$2.50/gallon when  the price of  a barrel  of crude rises  to the                                                               
point where  the state  is enjoying a  budget surplus.  The state                                                               
would pay the balance directly to the home heating distributors.                                                                
                                                                                                                                
SENATOR  PASKVAN  said having  a  short-term  solution in  place,                                                               
would free  people to  come up with  a long-term  solution, which                                                               
will  restore   optimism  about  our  economic   future,  protect                                                               
families  and  businesses  and   allow  them  to  concentrate  on                                                               
renewable and sustainable energy solutions for all of Alaska.                                                                   
                                                                                                                                
He  said that  SB  162  is easily  administered.  The dealers  of                                                               
heating  oil  as part  of  their  current reporting  requirements                                                               
already  report to  the  State  of Alaska  in  a  monthly form  a                                                               
breakdown  of the  quantities of  the various  petroleum products                                                               
that  they   sell  and   that  does   include  the   heating  oil                                                               
classification.                                                                                                                 
                                                                                                                                
12:45:32 PM                                                                                                                   
He  said  the  quantities  of  heating  oil  are  verifiable  and                                                               
objectively determinable.  SB 162  does not create  a bureaucracy                                                               
of  paperwork  or  a massive  government  employment  program  to                                                               
operate. And  rather than distributing  checks or debit  cards to                                                               
tens of thousands of individuals,  the state would make a payment                                                               
directly oil distributors.                                                                                                      
                                                                                                                                
SB 162  requires the  consumer price of  heating oil  to increase                                                               
each of  the next three years  to reinforce the need  of Alaskans                                                               
to conserve and to switch to  alternative energies or to find the                                                               
long-term  solutions. His  oil distributors  won't go  to a  home                                                               
unless  they  were  delivering  at  least  100  gallons;  if  the                                                               
consumer didn't  have $450,  there would  be no  delivery. People                                                               
were forced to go  to the gas station with a  five gallon gas can                                                               
to get diesel to try to  make it through a minus-50 degree night.                                                               
Many Fairbanks people  were on the verge of freezing  in the dark                                                               
because of  the $4.50/gallon  price. And  when winter  ended, the                                                               
distributors'  accounts receivable  levels were  at unsustainably                                                               
high amounts.  If prices had not  gone down, they would  have not                                                               
been able  to enter this last  winter by providing any  credit to                                                               
the  consumers,   because  they  couldn't  afford   losing  their                                                               
business. He  said the average  1,400 square ft. home  cost about                                                               
$5,000/year to  heat as  compared to about  $1,200 if  the person                                                               
was on  natural gas.  It's also important  to understand  that in                                                               
Interior Alaska  the per  capita income is  20 percent  below the                                                               
national average. The entire Interior  Alaska could not afford to                                                               
stay in the situation for another year.                                                                                         
                                                                                                                                
SCOTT  RUBY,  Manager,  Division  of  Operations,  Department  of                                                               
Commerce,  Community  and  Economic   Development,  said  he  was                                                               
available to answer questions on SB 162.                                                                                        
                                                                                                                                
CHAIR MCGUIRE  said she  liked the approach  in this  bill rather                                                               
than money  being sent out  as happened  last year, and  said she                                                               
would work with him during the Interim on refining the language.                                                                
SB 162 was held in committee.                                                                                                   
                                                                                                                                
12:51:40 PM                                                                                                                   
Finding no further business to come before the committee, Chair                                                                 
McGuire adjourned the meeting at 12:51 p.m.                                                                                     

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