Legislature(2007 - 2008)SENATE FINANCE 532
07/28/2008 02:00 PM Senate SENATE SPECIAL COMMITTEE ON ENERGY
| Audio | Topic |
|---|---|
| Start | |
| SB3001|| HB3001 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB3001 | TELECONFERENCED | |
| += | HB3001 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
SENATE SPECIAL COMMITTEE ON ENERGY
July 28, 2008
2:37 p.m.
MEMBERS PRESENT
Senator Charlie Huggins, Chair
Senator Bert Stedman, Vice Chair
Senator Kim Elton
Senator Lyda Green
Senator Lesil McGuire
Senator Gary Stevens
Senator Joe Thomas
Senator Bill Wielechowski
Senator Fred Dyson
Senator Thomas Wagoner
MEMBERS ABSENT
Senator Lyman Hoffman
Senator Donald Olson
OTHER LEGISLATORS PRESENT
Representative Jay Ramras
Representative Bryce Edgmon
Representative Andrea Doll
COMMITTEE CALENDAR
SENATE BILL NO. 3001
"An Act approving issuance of a license by the commissioner of
revenue and the commissioner of natural resources to TransCanada
Alaska Company, LLC and Foothills Pipe Lines Ltd., jointly as
licensee, under the Alaska Gasline Inducement Act; and providing
for an effective date."
HEARD AND HELD
HOUSE BILL NO. 3001(efd fld)
"An Act approving issuance of a license by the commissioner of
revenue and the commissioner of natural resources to TransCanada
Alaska Company, LLC and Foothills Pipe Lines Ltd., jointly as
licensee, under the Alaska Gasline Inducement Act."
HEARD AND HELD
PREVIOUS COMMITTEE ACTION
BILL: SB3001
SHORT TITLE: APPROVING AGIA LICENSE
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR
06/03/08 (S) READ THE FIRST TIME - REFERRALS
06/03/08 (S) ENR
06/03/08 (S) REPORT ON FINDINGS AND DETERMINATION
06/04/08 (S) ENR AT 10:00 AM TERRY MILLER GYM
06/04/08 (S) Heard & Held
06/04/08 (S) MINUTE(ENR)
06/05/08 (S) ENR AT 9:00 AM TERRY MILLER GYM
06/05/08 (S) Heard & Held
06/05/08 (S) MINUTE(ENR)
06/06/08 (S) ENR AT 10:00 AM TERRY MILLER GYM
06/06/08 (S) Heard & Held
06/06/08 (S) MINUTE(ENR)
06/07/08 (S) ENR AT 10:00 AM TERRY MILLER GYM
06/07/08 (S) Heard & Held
06/07/08 (S) MINUTE(ENR)
06/08/08 (S) ENR AT 1:00 PM TERRY MILLER GYM
06/08/08 (S) Heard & Held
06/08/08 (S) MINUTE(ENR)
06/09/08 (S) ENR AT 10:00 AM TERRY MILLER GYM
06/09/08 (S) Heard & Held
06/09/08 (S) MINUTE(ENR)
06/10/08 (S) ENR AT 10:00 AM TERRY MILLER GYM
06/10/08 (S) Heard & Held
06/10/08 (S) MINUTE(ENR)
06/12/08 (S) ENR AT 10:00 AM FBX Carlson Center
06/12/08 (S) Heard & Held
06/12/08 (S) MINUTE(ENR)
06/13/08 (S) ENR AT 10:00 AM FBX Carlson Center
06/13/08 (S) Heard & Held
06/13/08 (S) MINUTE(ENR)
06/14/08 (S) ENR AT 10:00 AM FBX Carlson Center
06/14/08 (S) Heard & Held
06/14/08 (S) MINUTE(ENR)
06/16/08 (S) ENR AT 9:00 AM ANCHORAGE
06/16/08 (S) Heard & Held
06/16/08 (S) MINUTE(ENR)
06/17/08 (S) ENR AT 9:00 AM ANCHORAGE
06/17/08 (S) Heard & Held
06/17/08 (S) MINUTE(ENR)
06/18/08 (S) ENR AT 9:00 AM ANCHORAGE
06/18/08 (S) Heard & Held
06/18/08 (S) MINUTE(ENR)
06/19/08 (S) ENR AT 9:00 AM ANCHORAGE
06/19/08 (S) Heard & Held
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06/20/08 (S) ENR AT 9:00 AM ANCHORAGE
06/20/08 (S) Heard & Held
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06/24/08 (S) ENR AT 1:00 PM MAT-SU
06/24/08 (S) Heard & Held
06/24/08 (S) MINUTE(ENR)
06/26/08 (S) ENR AT 1:00 PM KENAI
06/26/08 (S) Heard & Held
06/26/08 (S) MINUTE(ENR)
07/01/08 (S) BILL CARRIES OVER FROM 3RD SPECIAL
SESSION
07/01/08 (S) ENR AT 9:00 AM BARROW
07/01/08 (S) Heard & Held
07/01/08 (S) MINUTE(ENR)
07/08/08 (S) ENR AT 1:00 PM KETCHIKAN
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07/09/08 (S) ENR AT 1:30 PM TERRY MILLER GYM
07/09/08 (S) Heard & Held
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07/10/08 (S) ENR AT 8:00 AM TERRY MILLER GYM
07/10/08 (S) Heard & Held
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07/11/08 (S) ENR AT 9:00 AM TERRY MILLER GYM
07/11/08 (S) Heard & Held
07/11/08 (S) MINUTE(ENR)
07/12/08 (S) ENR AT 9:00 AM TERRY MILLER GYM
07/12/08 (S) Heard & Held
07/12/08 (S) MINUTE(ENR)
07/13/08 (S) ENR AT 12:30 AM TERRY MILLER GYM
07/13/08 (S) Heard & Held
07/13/08 (S) MINUTE(ENR)
07/14/08 (S) ENR AT 9:00 AM TERRY MILLER GYM
07/14/08 (S) Heard & Held
07/14/08 (S) MINUTE(ENR)
07/22/08 (S) ENR AT 1:00 PM SENATE FINANCE 532
07/22/08 (S) Heard & Held
07/22/08 (S) MINUTE(ENR)
07/23/08 (S) ENR AT 1:00 PM SENATE FINANCE 532
07/23/08 (S) Heard & Held
07/23/08 (S) MINUTE(ENR)
07/24/08 (S) ENR AT 2:00 PM SENATE FINANCE 532
07/24/08 (S) -- MEETING CANCELED --
07/25/08 (S) ENR AT 1:30 PM SENATE FINANCE 532
07/25/08 (S) Heard & Held
07/25/08 (S) MINUTE(ENR)
07/28/08 (S) ENR AT 2:00 PM SENATE FINANCE 532
BILL: HB3001
SHORT TITLE: APPROVING AGIA LICENSE
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR
06/03/08 (H) READ THE FIRST TIME - REFERRALS
06/03/08 (H) RLS
06/03/08 (H) WRITTEN FINDINGS & DETERMINATION
06/04/08 (H) RLS AT 9:00 AM CAPITOL 120
06/04/08 (H) Subcommittee Assigned
06/04/08 (H) RLS AT 10:00 AM TERRY MILLER GYM
06/04/08 (H) Heard & Held
06/04/08 (H) MINUTE(RLS)
06/05/08 (H) RLS AT 9:00 AM TERRY MILLER GYM
06/05/08 (H) Heard & Held
06/05/08 (H) MINUTE(RLS)
06/06/08 (H) RLS AT 10:00 AM TERRY MILLER GYM
06/06/08 (H) Heard & Held
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06/07/08 (H) RLS AT 10:00 AM TERRY MILLER GYM
06/07/08 (H) Heard & Held
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06/14/08 (H) RLS AT 10:00 AM FBX CARLSON CENTER
06/14/08 (H) Heard & Held
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06/16/08 (H) RLS AT 9:00 AM ANCHORAGE
06/16/08 (H) Heard & Held
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06/17/08 (H) RLS AT 9:00 AM ANCHORAGE
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06/20/08 (H) RLS AT 9:00 AM ANCHORAGE
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06/24/08 (H) RLS AT 1:00 PM MAT-SU
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06/26/08 (H) RLS AT 1:00 PM KENAI
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07/01/08 (H) RLS AT 9:00 AM BARROW
07/01/08 (H) Heard & Held
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07/02/08 (H) BILL CARRIES OVER TO FOURTH SPECIAL
SESSION
07/08/08 (H) RLS AT 1:00 PM KETCHIKAN
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07/09/08 (H) RLS AT 1:30 PM TERRY MILLER GYM
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07/10/08 (H) RLS AT 8:00 AM TERRY MILLER GYM
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07/11/08 (H) RLS AT 9:00 AM TERRY MILLER GYM
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07/12/08 (H) RLS AT 9:00 AM TERRY MILLER GYM
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07/13/08 (H) RLS AT 12:30 AM TERRY MILLER GYM
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07/15/08 (H) RLS AT 9:00 AM CAPITOL 120
07/15/08 (H) -- MEETING CANCELED --
07/21/08 (H) RLS AT 2:00 PM CAPITOL 120
07/21/08 (H) Moved Out of Committee
07/21/08 (H) MINUTE(RLS)
07/21/08 (H) RLS RPT 3DP 4DNP
07/21/08 (H) DP: KERTTULA, GUTTENBERG, COGHILL
07/21/08 (H) DNP: JOHNSON, FAIRCLOUGH, SAMUELS,
HARRIS
07/22/08 (H) BEFORE THE HOUSE IN THIRD READING
07/22/08 (S) ENR AT 1:00 PM SENATE FINANCE 532
07/22/08 (S) <Pending Referral>
07/23/08 (H) TRANSMITTED TO (S)
07/23/08 (H) VERSION: HB 3001(EFD FLD)
07/23/08 (S) ENR AT 1:00 PM SENATE FINANCE 532
07/23/08 (S) <Pending Referral>
07/24/08 (S) READ THE FIRST TIME - REFERRALS
07/24/08 (S) ENR
07/24/08 (S) ENR AT 2:00 PM SENATE FINANCE 532
07/24/08 (S) -- MEETING CANCELED --
07/25/08 (S) ENR AT 1:30 PM SENATE FINANCE 532
07/25/08 (S) Heard & Held
07/25/08 (S) MINUTE(ENR)
07/28/08 (S) ENR AT 2:00 PM SENATE FINANCE 532
WITNESS REGISTER
Governor Walter J. Hickel
POSITION STATEMENT: During hearing on SB 3001 and HB 3001,
opposed license to TransCanada and supported an all-Alaska line.
Governor Tony Knowles
POSITION STATEMENT: Expressed concerns about AGIA during
hearing on SB 3001 and HB 3001, proposing alternatives.
ACTION NARRATIVE
CHAIR CHARLIE HUGGINS called the Senate Special Committee on
Energy meeting to order at 2:37:20 PM. Present at the call to
order were Senators Green, Elton, Wagoner, Wielechowski,
Stevens, Stedman, and Chair Huggins; Senators Dyson and Thomas
arrived shortly thereafter, and Senator McGuire joined the
meeting in progress. Also in attendance were Representatives
Jay Ramras, Bryce Edgmon, and Andrea Doll.
SB3001-APPROVING AGIA LICENSE
HB3001-APPROVING AGIA LICENSE
CHAIR HUGGINS brought SB 3001 and HB 3001 before the committee
for consideration. He welcomed former governors Walter J.
Hickel and Tony Knowles. Chair Huggins invited Governor Hickel
to testify first, noting he'd been governor twice, had been U.S.
Secretary of the Interior, and had recently gone with him and
other Alaskans to China.
2:38:42 PM
GOVERNOR WALTER J. HICKEL testified as follows:
There is an issue before you of giant proportions.
This is the most important vote you'll ever cast.
You'll decide whether the State of Alaska,
representing all our people, the owners of our
resources won in our battle for statehood, should
build a natural gas pipeline from Prudhoe Bay to
Valdez, or whether you approve a Canadian corporation
to control this resource, set the timetable, determine
who gets the jobs and other benefits promised to the
Alaska people in our Constitution.
Don't sell us out. Remember who you are. Remember
where you are. This is Alaska. And don't sell us
out. Ask yourself what is best for Alaska. If you
do, you'll vote no on the TransCanada license and you
will say yes on an all-Alaska gas line.
Your vote can have an immediate and positive impact on
our economy and our future. We can get Alaska moving
again. We can lead the nation with an economic
turnaround badly needed in the South 48, 49. Your
vote can begin a new era - not an era of giving out
money. Giving out money does not save a society. It
corrupts it.
The pluses of an all-Alaskan line: While the
TransCanada plan means loss of control and serious
delay, an all-Alaska gas line owned by the State of
Alaska means the opposite. It means that Alaska will
retain control of our resources and our future. It
means that there will be absolutely no risk that any
one corporation or group of corporations will control
us.
While TransCanada readily admits that they won't even
start building a gas line until the end of the next
decade, and Canadian pipelines are well known for
their delay, we can start the all-Alaska gas line this
year. It will give us access to the most lucrative
markets in the world. Alaska's natural market is
Asia, and we can provide all the gas they need to the
U.S. West Coast. We have before us the greatest
opportunity in my lifetime and yours. And if we stop
acting like a fearful colony and stand up for our
rights, we will have all the export licenses we need.
2:42:35 PM
GOVERNOR HICKEL continued:
In 1989, I helped obtain a presidential finding from
President Ronald Reagan, an export license for Alaska
LNG that is valid for 25 years from the sailing of the
first LNG tanker. If called on to assist, I look
forward to help renew and expand that license. All it
takes is someone who knows our constitutional rights
and isn't afraid to go to the top to fight ... for
them.
And keep in mind, the anti-Asia mood in Congress will
change once the South 48 is awash in the 500 trillion
cubic feet of gas that will soon come on line. I know
about these gas resources. I tried to kick-start them
in 1970 as Interior Secretary. When that gas floods
America, Congress will welcome Alaska coming to the
rescue and saving our nation from our ... imbalance of
trade and the economic giants of Asia. ...
Who will control our gas under the TransCanada plan?
Not TransCanada. It will be the producers. No one
but the State of Alaska, the owner of the resource,
can force the producers to use the gas they control.
That's why TransCanada has offered to give up equity
ownership in their gas line in exchange for producers'
gas. The end of this process is obvious. The
producers will control the line through Canada.
In addition, the TransCanada plan will mean that the
Canadian government will determine when a gas line is
built, how it is regulated, how much it is taxed, how
it addresses environmental issues, and the First
Nations land claims. And when they negotiate these
issues, depending how generous they are, there will be
less revenue for the Alaska people because we will pay
the bill.
What are the Canadians telling their people? Visit
the TransCanada website and look up the Northern
Pipeline Act of 1978. Here's what it says: This Act
ensures that the following benefits for Canadians are
realized in the development of the Alaska pipeline
project - Canadian ownership, access to Alaska's gas
for Canada's petrochemical industry, gas to remote
Canadian communities along the pipeline, property tax
benefits in the Yukon, maximization of Canadian jobs
and supplies. And it says that the tolls [for] this
project would be set by Canada's National Energy
Board.
If you grant this license, ladies and gentlemen of the
Alaska Senate, all these promises made by TransCanada
will come true and Alaska will be reduced once again
to a colony. I remember in territorial days well when
corporations from outside made decisions for us and we
just got the crumbs. So don't sell us out.
If you vote yes for TransCanada, you are voting for
someone else to take control of our future, someone
else, governed by a corporate boardroom in Calgary and
the Canadian government. For years to come, future
Alaska governors and legislators will have to go to
these individuals, hat in [hand], and say: "Please,
can you hurry up? Please, can we have some of our
gas? Please, can we have some jobs?" You and the
Alaska people will be frustrated. And the northern
part of Alaska, including Fairbanks and many remote
areas, will be left without energy for years and maybe
decades. Some of those communities will be abandoned.
2:46:53 PM
GOVERNOR HICKEL continued:
So I urge you, the members of the state Senate, not to
transfer our wealth, our jobs, and our future to
Canada. Don't grant exclusive control over the
resource to Canada, with no commitment to build a gas
line. Don't sell us out.
The U.S.-Canada natural gas treaty calls for Canada to
prebuild a pipeline to Chicago and another to the West
Coast. They built both. Through these pipelines,
they have sold over 14 trillion cubic feet of Canadian
natural gas ... to the U.S. But this is what the
Canadian National Bank calls the dirty little secret.
According to that treaty, if the Alaska gas pipeline
is built into Canada, the ... first 14 trillion cubic
feet of Alaska gas must be sold to Canada - not
America, but Canada.
So if this is true, those that think our gas will go
[via] TransCanada to America haven't done their
homework. This is an issue of enormous importance. I
urge this committee to look into it.
Governor Palin has made the wrong decision. As most
of you know, I endorsed Sarah Palin as candidate for
governor in 2006, and I co-chaired her campaign. She
has proven to be a good governor. But I cannot be
silent on this decision because it is so bad for
Alaska. She knows my views. On April 7, I flew here
to Juneau to advise her that this was the most
important decision since statehood. I met with her
again on July 1 in Anchorage. I asked, over and over,
why build an Alaska gas line through Canada, a
question she didn't answer.
Now it is up to you to reverse that decision for the
good of the Alaska people. If you take this ... step,
Governor Palin in her heart of hearts may be thankful.
She has a gift of moving beyond temporary defeats and
turning them into victories. I haven't given up. If
you vote down TransCanada, I think she will embrace
the all-Alaska line as she used to.
2:49:27 PM
GOVERNOR HICKEL continued:
Let me describe what can happen if you deny this
license. The door ... will swing wide open to a
wonderful new era for Alaska. The next step will be
"build it and own it."
If we put all our shoulders to the wheel, we can start
getting North Slope gas to ... Alaskans in the
Interior in five or six years. Then we will move our
gas to the highest and most profitable markets. And
by keeping the gas line within our boundaries, we will
keep the jobs - all the jobs - here at home. These
jobs belong to Alaskans, not to Canadians. Don't sell
us out.
How much will an all-Alaska gas line system cost?
About half of the $50 billion estimated by the
TransCanada line. And we don't have to build LNG
tankers; there are plenty available to ship our gas to
the markets.
As anyone in business knows, you have to spend money
to make money. If Alaska invests $7 billion in an
all-Alaska gas line, the market will jump at the
chance to finance the rest. It's ... not only doable,
it would be the ... best investment we could make.
Keep in mind: Wall Street is a risky place to be
right now. It's the right time to diversify Alaska's
portfolio.
2:51:00 PM
GOVERNOR HICKEL continued:
Building and operating the all-Alaska gasline: For
those not familiar with government-owned
infrastructure, let me describe the steps we should
take. It starts with a decision, a decision by our
governor, supported by the legislature. Remember when
JFK announced we were going to the moon? Then she
names a project director who hires the best gas
pipeline builder in North America. State employees
will not build the gas line. The best pipeliners in
our country will build it.
Once the pipeline is built, it will be operated by the
private sector through a management contract. Such
contracts are used worldwide to manage pipelines and
market gas. Keep in mind that an all-Alaska pipeline
would be built much faster and cheaper than either of
the two Canadian lines being proposed because it can
start ... nearly immediately. It would follow the
right-of-way of the Trans-Alaska oil line. Permits
and right-of-ways already exist.
And for those who criticize projects created by the
State of Alaska, take another look. The all-Alaska
natural gas pipeline will follow in the tradition of
our state's roads, ports, and highways. And think of
the Ted Stevens International Airport, the Bradley
Lake hydro facility, the Four [Dam] Pool, and the
Alaska Railroad. And don't forget the permanent fund.
I want to take a minute now to clarify the difference
between monetizing and maximizing our resources.
[Monetizing] means transforming our gas into cash for
the state treasury. And so, one of the greatest
failures of AGIA was that it failed to require that
the ... priority use of our gas liquids must be within
the state.
That was a fatal flaw. The intent of our Founders was
to create an outstanding quality of life in Alaska.
With the rich gas liquids ... from Prudhoe,
generations of our people will earn a decent salary so
they can afford to live here, raise their children
here, and enjoy all the glories of the North.
2:53:45 PM
GOVERNOR HICKEL continued:
How will the state get the gas it needs for a state-
owned all-Alaska gas line? First of all, keep in mind
that it's our gas. The state has the power of
taxation and ultimate control over all leases on state
lands. All the state has to do is announce we will
build the all-Alaska line and invite the producers to
use it. They will join us in a heartbeat. They
recognize they have made tens of billions from
Alaska's lands and resources. They do not want to be
shut out of the great promise ahead of us.
Alaska has all the power it needs to choose where to
build its pipeline and market where it will sell its
gas. It simply needs to choose not to yield that
power. Don't sell us out. Remember who you are.
Remember where you are. This is Alaska. Don't sell
us out. And the very worst thing to do would be to
... yield control and pay someone $500 million to take
it. The world is watching to see if we will fall for
something so bad for our state.
But I want to end on a positive note. Your vote can
build a culture here dreamed of by Alaskan visionaries
for a century, a society of productive people. Your
vote will determine if this Senate will live up to
your pledge as public servants, to care for the
residents of this unique owner state and make a model
for the world. Yes, Alaska can inspire people all
over the [globe] to follow our lead. God bless you
and thank you.
2:55:43 PM
SENATOR DYSON thanked Governor Hickel, but said he'd understood
that a regulated independent pipeline would be like a common
carrier in that shippers would have a market and end users, and
they'd control where the gas ends up. He asked: How could the
Canadian government or a Canadian firm pull shippers' gas off
and use it for purposes other than what the shippers intended?
GOVERNOR HICKEL answered by questioning how that could be
stopped because Canada is its own country. He said an all-
Alaska pipeline doesn't work that way. The gas would go to
Valdez and could be shipped where needed, for instance, as
liquefied natural gas (LNG) to the U.S. West Coast. Since
Alaska's economic ties are with Asia, it could be shipped to
China, Japan, Korea, and so on. He said the Canadian gas line
couldn't do that.
SENATOR DYSON responded that it's against the law and shippers
wouldn't allow their gas to be taken to a market other than what
they intended and the contracts they'd made, which probably
would be long-term contracts.
GOVERNOR HICKEL reiterated earlier points and added that before
statehood "we could never get anything past Seattle." He cited
some history and said he doesn't want to lose that.
SENATOR DYSON responded that TransCanada said explicitly that if
the shippers nominate gas for the pipeline for the LNG market,
they'll build the pipeline to Valdez or Cook Inlet, wherever the
shippers want it to go. He asked Governor Hickel whether he
believes that isn't a true promise.
GOVERNOR HICKEL noted he has nothing against Canada, but asked
why someone would do that. He added, "We should build it
ourselves. We own the gas. It's our land."
2:59:42 PM
SENATOR WAGONER pointed out that he'd distributed information
he'd received last week, consisting of federal legislation
H.R. 6515; a page labeled "Section from an amendment introduced
by Senator Bingaman (D-NM), chairman of the Senate Committee on
Energy and Natural Resources, introduced on July 24, 2008 -
currently pending on the Senate calendar"; and a page labeled
"Use of Loan Guarantees" attributed to Greenberg Traurig.
SENATOR WAGONER explained that Congress is watching Alaska
closely. The proposed amendment in part gave the sense of the
U.S. Senate that "the Alaska natural gas pipeline is a
critically important national infrastructure project that would
benefit all consumers in the United States" and went on to talk
about reserves and so on.
SENATOR WAGONER said H.R. 6515 failed in the U.S. House because
it required a two-thirds vote. This resolution attempted to
reinstate the ban on exporting oil and talked about the 35
trillion cubic feet (Tcf), saying these gas supplies could
contribute significantly to meeting U.S. energy needs, but the
lack of a natural gas transportation system prevents these
resources from reaching Lower 48 markets. He said, as U.S.
Senator Ted Stevens noted, that everything indicates this gas
won't be allowed to be exported outside the U.S.
GOVERNOR HICKEL responded that as Secretary of the Interior he'd
heard all those things. Kansas isn't told it cannot export
wheat around the world, for instance. He related some history,
suggested the world doesn't understand Alaska's uniqueness, and
said it's the only commonly owned area in the world that has a
democracy. He reiterated the need to manage the resources that
Alaska owns.
3:05:03 PM
SENATOR THOMAS referred to attachments mentioned in the written
copy of Governor Hickel's testimony, including one that says the
U.S. Department of Energy (DOE) is granting the application of
Yukon Pacific Corporation (YPC) for authorization of Section 3
of the Natural Gas Act to export natural gas from the North
Slope of Alaska to the Pacific Rim countries of Japan, South
Korea, and Taiwan by means of the proposed Trans-Alaska Gas
System (TAGS). Senator Thomas noted it says DOE concluded that
this export won't be inconsistent with the public interest.
SENATOR THOMAS said he believes this gets to one major problem
when looking at the reality, including what Senator Wagoner and
U.S. Senator Ted Stevens said recently about the reality of
exporting this natural gas. People are concerned about it.
GOVERNOR HICKEL asked what the concern is.
SENATOR THOMAS responded that it's whether there'll be the
ability to export natural gas to those countries. Even for
offshore drilling on the Outer Continental Shelf (OCS), if
that's approved for exploration and development, people are
indicating gas and oil would have to come to the U.S. Now
almost 70 percent of the energy is being imported. While
expressing support for in-state gas, he suggested the question
is whether to limit the opportunity to the Denali project if the
TransCanada project is done away with. He noted just eight
months ago the Port Authority had the opportunity to come
forward with its plan, but didn't for whatever reasons.
SENATOR THOMAS said this has been a concept since 1989 or
before, when the Natural Gas Act was passed. He surmised
everybody wants to believe what Governor Hickel is saying and
produce the gas in Alaska, run it through Alaska, and use it
here. While supporting this concept, however, Senator Thomas
said a fleshed-out plan isn't there that shows how everyone is
involved, what it will cost the state, and the reality of
whether that gas can be exported.
3:09:02 PM
GOVERNOR HICKEL reiterated that as Secretary of the Interior
he'd seen those battles. He asked why they don't say wheat or
beef from Montana cannot be sold; noted the market is a world
market; and emphasized that because it's Alaska's gas, Alaska
should decide and say what to do. He suggested if Alaska had
had the opportunity to "become an independent country under the
United States" it would have been all right. He asked how many
states are owned in common like Alaska and answered "nobody."
GOVERNOR HICKEL related his experience in China, where he said
the desire in return for building a pipeline was to have a
contract to buy the LNG. Suggesting the U.S. doesn't want to
see Alaska be a competitor, he said Alaska cannot let some other
state or country dictate what it does with its resources.
3:13:00 PM
SENATOR McGUIRE asked how Governor Hickel had arrived at the
decision to oppose rewarding the license to TransCanada.
GOVERNOR HICKEL asked: Why give away our resources? Why have
another country tell Alaska what to do? He said he'd gone to
China and Russia years ago, and Russia wants to change its whole
government to be like Alaska. He said the resources belong to
the total, and the commons of the ocean are owned by no one.
SENATOR McGUIRE noted that some folks who support granting this
license to TransCanada say it will bring more opportunities for
the state. She asked how Governor Hickel sees that as limiting
the opportunities.
GOVERNOR HICKEL replied by asking why it should be sold to
Canada and how that helps Alaska. He said Canada hasn't even
settled its land claims yet. He again suggested taking the gas
to Valdez or another port from which it can be shipped.
3:17:57 PM
SENATOR DYSON noted that some people in the industry that he
respects have suggested that maybe Alaska itself should build
the pipeline somewhere east of Delta Junction and let the market
direct where it goes. He asked: Do you envision using the
permanent fund corpus to build the line and treatment facilities
or at least use it as a backstop for borrowing the money?
GOVERNOR HICKEL opined that it wouldn't be necessary and that
there'd be no problem finding financing. Whether it costs
$10 billion or $50 billion, 20 percent will be earned on that.
Or if a few billion were financed, the market would finance the
rest because it's unique, and the gas line would make Alaska
billions of dollars. Relating his experience from Asia, where
he said resources besides coal are lacking but money is
available, he emphasized that the arctic has those resources.
3:19:51 PM
SENATOR THOMAS said the producers are cycling gas now and
reinjecting about 8 billion cubic feet a day (Bcf/d) at Prudhoe
Bay. He asked: How would we get that gas out of their hands?
Would we take back leases, as at Point Thomson? He noted
TransCanada wouldn't be buying and selling gas, but would just
transport it, whereas the producers might sell some into the
Canadian tar sands or through whatever lines take it to the
Lower 48.
GOVERNOR HICKEL again stressed that it is Alaska's gas and that
Alaska should develop it. He said it takes a strong legislature
and governor to tell the oil companies that this is Alaska's
gas. Giving some history involving oil, him, and former U.S.
presidents, he added that he won't give up and that U.S.
education doesn't teach about the commons, which conflicts with
a lot of economic reasoning.
3:23:25 PM
CHAIR HUGGINS referred to Governor Hickel's two books and
praised his long history of service and consistency in
supporting a course of action, noting Governor Hickel is
cautioning that the choices here have a long-term impact. Chair
Huggins expressed concern about the $500 million being offered,
that the state is limiting its ability to deliver in-state gas
by removing flexibility, and about the treble damages.
CHAIR HUGGINS also voiced concern that more money will follow
the $500 million, including a request from Alaska's Department
of Natural Resources (DNR) for $6.3 million to ensure
TransCanada's compliance with license terms and a like amount to
ensure that the first and subsequent open seasons are
successful. He agreed with Governor Hickel's counsel to avoid
giving up exclusive control and selling Alaska out.
3:27:15 PM
GOVERNOR HICKEL concluded by saying he didn't know when this
battle would be won. People are starting to understand the
uniqueness of Alaska, he told members, and six years ago,
62 percent of the people voted for an all-Alaska pipeline. He
surmised those with economic interests don't want Alaska to
develop that gas because they cannot own it and be in
competition. He said Alaska doesn't have to put up with others
telling it what to do, and ideas are more powerful than money.
Returning to the idea of the commons, he predicted that will
come to reality.
CHAIR HUGGINS thanked Governor Hickel for his time, wisdom, and
service.
The committee took an at-ease from 3:32:58 PM to 3:41:12 PM.
CHAIR HUGGINS introduced Governor Tony Knowles, noting he was a
Yale graduate and Vietnam veteran and had been mayor of
Anchorage and a two-term governor of Alaska.
3:43:29 PM
GOVERNOR KNOWLES lauded Governor Hickel for his service and told
members he always learns something from him and his grand vision
for the future. Governor Knowles testified as follows:
I thank you for the opportunity to share my thoughts
with you on the Alaska Gasline Inducement Act, as to
whether it will promote or hinder the realization of
development of North America's largest known reserve
of natural gas. Like every other former governor
since the discovery of the North Slope reservoir, I
worked hard to promote the development of this
resource, as have past legislators and the current
governor and this legislature.
We all know the stakes are high. The benefits of the
largest private-sector project in American history are
unmatched, both for Alaska and America. The
difficulty and risks are equally significant. We also
all know the current and projected price of natural
gas is the dominant factor in making this project
viable. At a little over $10 an Mcf, it is at an all-
time historical high for this time of year. On a
cautionary note, though, it has fallen 29 percent
since April.
Now this economic advantage, nonexistent until the
last three years, offers the State of Alaska an
historic opportunity for building a success or
creating an unfortunate barrier.
It is my opinion that the consequences of passing AGIA
as it now stands could needlessly jeopardize the
entire project. It surrenders the sovereign right of
the State of Alaska to negotiate for the best
interests of its citizens. And its very risky
subsidy/grant of $500 million of Alaska's money to a
Canadian corporation for the purpose of applying for a
certificate is, I think, a very wrong decision for the
State of Alaska.
The passage of AGIA could well be termed as snatching
defeat from the jaws of victory. I urge you to reject
these impediments to developing our resource.
3:46:58 PM
GOVERNOR KNOWLES continued:
Let me take just a minute to explain my conclusions
and suggest a positive alternative approach. While
price is a primary factor in making a gas line viable,
it's not the only determining factor. Costing upwards
of $30 billion, spanning two countries and five states
and provinces, extending 3,600 miles of some of the
world's most challenging terrain and extreme weather
conditions, the complexity and scale of this project
demand the cooperation and alignment of all the
participating parties, public and private, for
successful completion.
Yet the AGIA legislation, prior to any process in
determining the costs or capitalizing the project or
before the Federal Energy Regulatory Commission, ...
has picked TransCanada as Alaska's choice as the
pipeline owner and in the legislation has provided -
with the overwhelming majority of the money - for
TransCanada to solicit gas shipments from the
producers and to apply for the certificate to build
the line from FERC.
Meanwhile, ConocoPhillips and BP, owners of two-thirds
of the gas leases, have initiated their own project
for the same goals. Dividing the participants is not
in the state's best interests and, as I said before,
could jeopardize the entire project.
Everyone acknowledges that the gas line must have the
commitment of the owners of the gas leases to ship the
gas, regardless of who owns the gas line. Now, this
commitment is an irrevocable commitment to ship, for
the next 20 to 25 years, 4.5 billion cubic feet of gas
a day. ... The $30 billion for the construction of the
pipeline pales to the enormity of that financial
commitment by these companies, which could exceed
upwards of $180 billion.
It is obvious they would probably in making that
commitment to ship ... choose their own pipeline
project rather than a lesser study done for another
project. But at the same time the owners of the gas
leases recognize that they need both TransCanada or
another Canadian pipeline company and the State of
Alaska.
Now, from Alaska's perspective, there are advantages
to both a shipper-owned line and a pipeline-company-
owned line. As the owner and shipper of ...
12.5 percent of the royalty gas, the state is in
alignment with the shippers in wanting the lowest
tariffs to maximize the financial returns. But the
state also wants to promote maximum exploration and
development of additional gas. This is in alignment
with the interests of a pipeline-company-owned
project.
Perhaps the most disturbing consequence of the AGIA
legislation is the self-imposed prohibition and
treble-damage penalty of the state discussing any
fiscal terms of a pipeline project with another party.
Beyond a field day for lawyers in interpreting when
and how this applies, this is an unprecedented
transfer of our state's sovereignty.
It is my belief that the state's sovereign right and
responsibility to negotiate the terms of a project
that will have a multi-generational effect on our
future is not transferable to a Canadian corporation
or any other party. Alaska should never hesitate or
be afraid of directly negotiating jobs and businesses
for Alaska's families.
What is truly baffling to me is that we are
transferring, along with our rights and
responsibilities, a $500 million subsidy for an
independent party to hopefully qualify to build this
project.
3:51:40 PM
GOVERNOR KNOWLES continued:
I mentioned earlier about AGIA ... snatching defeat
from the jaws of victory. Well, let me explain ...
how we would describe these jaws of victory, and I
think that'll help us understand a better way forward.
We know the conditions are right for this project.
There is an extraordinary unity behind the project.
Can you think of any project that even comes somewhat
near to the size and scope of this project that has
such broad support? The civic, business, and
political leaders of two countries and five states and
provinces - every known organization of environmental,
organized labor, development, and [indigenous] peoples
- have unified in support of this project.
The price of gas ... has made this project
commercially viable. Now is the time for the state,
in its unique position, to step forward with a policy
that is a sensible, long-term business plan for the
construction and operation of the pipeline and the
development of known and yet-to-be-discovered natural
gas resources. It should reflect market conditions
and Alaska's best interests.
The first step of a policy and a plan is to identify
the essential participants and engage them in a
collaborative process. This would include the owners
of the gas leases, including Alaska as a royalty share
owner, TransCanada, and to identify the interests in
the areas of negotiation.
3:53:57 PM
GOVERNOR KNOWLES continued:
Now, there are those ... who say that a vote for AGIA
is ... a harmless vote, that coming together will
inevitably happen. I disagree. Many experts, to this
day, say despite all of the unity and the favorable
prices that this is - and always will be, until
construction - a marginal project.
The limitations placed upon the state and the
unexplored and undetermined relationship between
parties, as I mentioned, is a lawyers' feeding frenzy
and the riskiest approach that I believe that we could
possibly take. At best, Alaska would be on the back
bench, with its hands tied from intervening on our own
best interests.
Now, there are also those who say that the
$500 million, which is unprecedented subsidy to a
private-sector project, is a good investment and that
we'll recoup it. Well, this defies logic to me. They
say that it will lower the tariff and therefore the
state as a shipper will then recoup the money.
Well, now, think about that for a minute. We own
12.5 percent. That is our share. So if it's a
benefit to us ... and we pay the $500 million, why are
we subsidizing this benefit at no cost to the other
shippers: BP, ConocoPhillips, and ExxonMobil? Why
would we ever pay that and they get no benefit and
they don't participate at all in it?
Now ... it is also said that if we give the
$500 million that this will elicit companies to show
their interest. ... I would hope so. But if you look
at the scale of the project, if $500 million makes a
difference as to whether they're interested or not, I
don't think we want them as a partner; I don't think
they would be capable.
And finally, in terms of the $500 million, if indeed
it is an investment, let that reflect itself in an
ownership on the pipeline-ownership side. And I'm not
advocating that, but I'm saying if you do that ...
then at least you will guarantee your share will get a
return on investment, through the rate of return that
is given by the regulatory body. And that's how it
would limit your share, the participation to your
share, and you don't necessarily subsidize others.
3:56:18 PM
GOVERNOR KNOWLES continued:
Now, there are some that [say] ... this doesn't limit
the opportunity, that we can sign it and that we'll
all get together afterwards. Well, that comes from an
interpretation that I don't see in the legislation as
it's before the public. It very specifically states
that the state cannot negotiate any fiscal terms with
what is a competing party. And there's already, I
know, arguments and discussions on "Does this mean
that you can't change the tax rate and the general gas
tax that has nothing to do with a specific project?"
But yet there's arguments on the other side that
absolutely ... you can't do that and the state would
tie its hands on its most sovereign powers. And I
find that does not open it up, but rather it entirely
limits what we're going to be doing.
GOVERNOR KNOWLES concluded by noting that some say this is too
far down the road to take a different path. He suggested for
those there is a way out: Put it on the shelf for six months, a
year, or what's necessary to see how the other project plays
out. He said everyone agrees it is preferable to have all
parties working together to make this project happen.
3:58:31 PM
SENATOR WAGONER asked whether Governor Knowles was promoting the
Denali project, but somewhat modified to bring in a Canadian
pipeline partner.
GOVERNOR KNOWLES answered no. He clarified that he was
suggesting that it isn't in Alaska's interests to pick the
winner prior to any public process. As the Denali project moves
forward in requesting a FERC license, the all-Alaska pipeline
could certainly do that, as could TransCanada if it wants to
pursue a FERC application. He opined that the state shouldn't
choose or subsidize any party at this point.
SENATOR WAGONER said the reason there wasn't a deal with the
producers under the Stranded Gas Development Act (SGDA) was that
the concessions were $10.2 billion. He'd sent a letter to the
governor asking about $13.3 billion in upstream concessions,
including part of the gas treatment plant. He asked why the
state could get a deal with the producers through the Denali
process any better than the SGDA process.
GOVERNOR KNOWLES replied that nothing says concessions have to
be made, and his suggestion was that negotiations must occur and
that the state shouldn't back away from negotiating directly
with the parties that own the leases to the gas. There cannot
be a pipeline project without their commitment to ship, no
matter who owns it. The state doesn't have to agree to anything
that isn't deemed in its best interests.
4:01:06 PM
SENATOR WAGONER concurred with that point, but said the
producers had the opportunity to apply under AGIA but didn't,
claiming in part that AGIA didn't provide fiscal certainty.
Also, AGIA was set up to protect the state's interests and
rights, not those of the producers.
GOVERNOR KNOWLES opined that that's one interpretation of the
purpose of AGIA, which he recalled as being advertised as an
open, competitive process that turned out to be an exclusive
process after it was laid out, primarily aimed at one party that
didn't apply. He said what exists isn't an opportunity to look
at all offers and that no offer will have all the negotiations
completed at the time of the offer.
GOVERNOR KNOWLES also surmised that the producers had chosen not
to participate because there was no honest discussion of the
demands with respect to how those would fit into a business plan
to produce a pipeline. He highlighted the need to have a
discussion to do that, which he said any business plan will do.
He further suggested that AGIA doesn't allow avoiding that, but
pushes the day outward. He expressed concern that this project
is still marginal and doesn't allow the necessary negotiation of
the terms of this agreement.
4:03:19 PM
CHAIR HUGGINS asked: As governor, did you contemplate paying
somebody $500 million to participate in a gas pipeline?
GOVERNOR KNOWLES answered that it was a different time, with oil
at $9 to $20 a barrel.
CHAIR HUGGINS asked if he recalled any scenario under which he'd
have considered subjecting the state to treble damages if it did
something.
GOVERNOR KNOWLES replied absolutely not. He explained that in
2000-2001 natural gas spiked at $3.50 an MCF and everyone got
excited that it would make a pipeline viable. Discussions began
with the producers and there was a meeting with the pipeline
companies of the day, including Duke Energy; El Paso; Foothills,
a precursor of TransCanada; and others. When asked if they'd be
interested in participating, those companies had said they'd
participate only with the producers' commitment to ship.
GOVERNOR KNOWLES added that most gas companies are owned by
pipeline companies and not producers, but they don't build the
line until getting the commitment to ship. He recalled being
advised that the state shouldn't have any ownership interest
unless it could be shown to be absolutely in the state's
financial best interest; there was no consideration of giving
money to a selected party during the process or selecting the
winner prior to the FERC process.
4:06:20 PM
SENATOR THOMAS asked: Why would the Denali folks, who said a
year ago that it's uneconomic, risky, uncertain, and so on, rush
forward now for preapproval from FERC, spending $600 million and
incorporating most of the state's must-haves into a contract, if
it was believed to be marginally feasible? Why wouldn't Denali
just wait to see whether someone else proves this up?
GOVERNOR KNOWLES noted Denali would have to speak for itself,
but surmised the belief is this: At the current price and
what's projected over 7-10 years while the pipeline comes on
line, it is economically viable but not a slam-dunk. Thus
Denali is putting so much capital into the phase of proving it
up before the open season, when that commitment to ship would be
made. He suggested the $600 million is being put in to make the
best possible case for a commitment of some $150-180 billion.
The desire is to be as sure as possible. He surmised Denali
doesn't believe the proposed project would provide the necessary
information to make that kind of commitment.
SENATOR THOMAS asked where the project would be if somebody
hadn't stepped forward to spend some money to push it forward.
GOVERNOR KNOWLES responded that he doesn't believe it is the
state's responsibility or role to spend money such as the
$500 million to explore whether the project is viable. He
opined that since all signals show there can be a commercially
viable project, the state is in the unique position to call
those parties together and insist that they negotiate.
GOVERNOR KNOWLES added that signals have been given that this is
not only a viable alternative, but perhaps the preferred one
when compared with the course being embarked upon now. He
referred to Governor Hickel's testimony and cautioned that once
the state starts down that path, there isn't a 24-hour "buyer's
remorse" clause.
4:11:22 PM
SENATOR WIELECHOWSKI recalled a previous speech by Governor
Knowles and asked what analysis his administration had done on
the viability of an all-Alaska line and whether his opinion has
changed, particularly with respect to the state's participation.
GOVERNOR KNOWLES answered that there'd been an extensive public
process and he'd always felt good about the foundation built in
terms of listening to the public. There'd been little money to
hire expert consultants, but they'd sat down with the
principals, both producers and pipeline companies. They'd also
talked with leadership throughout Alaska about the state's best
position. Although it didn't select the winner, the best
position was the most economical at that time, the so-called
highway route, which had the most interest for a commercially
viable project at $3.50 per MCF.
GOVERNOR KNOWLES recalled that the public spoke out strongly on
the need for in-state gas; for hiring and training Alaskans and
having a strong project labor agreement, not making the same
mistakes with Title 29 as during the building of the oil
pipeline with respect to Alaska Native people; and for a
commitment to growing Alaskan businesses. Given that
foundation, he said, he'd felt the state was in a strong
position to negotiate well with the producers.
GOVERNOR KNOWLES also stressed that the constitution prohibits
binding future legislators' actions on taxation. He highlighted
the need to discuss ways to provide the most comfort in terms of
certainty without forgoing that responsibility. Noting that is
a challenge, he said it nonetheless isn't one to shrink away
from. If giving certainty is wrong for 2 years, it's wrong for
10 or 20 years, and legislation needs to be crafted that gives
the most comfort to not only the producers, but also the capital
market that will loan them the money. He emphasized stability
rather than certainty.
4:14:55 PM
SENATOR STEDMAN asked: In your perspective, should the state
take seriously the statement from the major producers that it
should provide fiscal certainty in some form? Or is the current
tax structure fair enough so the industry will come forward
without any alterations?
GOVERNOR KNOWLES replied he wasn't well versed enough to advise
on the specifics of the current legislation or even what kind of
stability would be acceptable to the state and the capital
market that will loan that money; that will have to be looked
into. He opined, however, that a framework would include
something along the principle of "share the gain, share the
pain." In times of increasing prices for natural gas and more
profitability, the state would take a larger share; if prices
dropped, the state would take less and share the pain. Such a
structure would give the least need for change over time.
4:17:21 PM
SENATOR McGUIRE thanked Governor Knowles for his leadership.
She asked: How do you see the provisions that give up the
ability to discuss incentives for other projects? Noting that
part of the bill disturbs her, she asked how he'd have conducted
himself as governor under such rules.
GOVERNOR KNOWLES answered that each governor has a style and
method of representing the people's interests; it wouldn't be
his place to critique someone else's style. He then opined that
a governor's most powerful role relates to negotiation. The
governor has the power to call parties together to negotiate,
which is why he said Alaskans were pleased to hear there'd be a
process to have all parties come forward with their best offer.
GOVERNOR KNOWLES said there clearly is an executive branch role
for hard negotiations in that. Then the legislature has the
difficult role of approval. There's overlap because legislative
leadership and members are an important part of a negotiating
position, and there must be good communication so the state puts
its best foot forward.
GOVERNOR KNOWLES added that he couldn't conceive of the
advantages of taking away the state's ability to act in the best
interests of the Alaskan people. In the beginning stages of a
project, when information hasn't been developed on who has the
best opportunity to develop the pipeline, the state needs to be
at the table. When FERC gives its certificate and the open
season awards shipping contracts, the state wants to be talking
with them on behalf of the best interests of Alaska. For the
state to remove itself from that forgoes a fundamental
responsibility.
4:20:28 PM
SENATOR McGUIRE expressed concern that so little has been
reduced to writing, resulting in a field day for lawyers. She
asked: When negotiating as governor, how did you approach it,
and did you rely on interpretation of a statute to be the
contract?
GOVERNOR KNOWLES emphasized that legislation isn't required to
negotiate; he expressed puzzlement over AGIA in this regard. He
said negotiation can be done in an open process. He recalled
working with legislators that were part of the public process in
a bipartisan approach along with community and civic leaders to
try to develop the best position for Alaska.
GOVERNOR KNOWLES explained that such a process gives the
executive branch, as the primary initial negotiator, the ability
to go in with the full force of the state's support to say what
is needed in a project. The legislature then goes through an
open and serious deliberative process on how to approve but also
amend it. He added that he never would have told the
legislature it couldn't amend a law that was passed.
SENATOR GREEN brought up hindsight and surmised Governor
Knowles' idea of negotiating must have been after 1996 and 1997.
GOVERNOR KNOWLES acknowledged that congenially.
4:24:27 PM
GOVERNOR KNOWLES closed by thanking legislators for their work.
He said when people look back later, the political nuances will
have long since faded. They'll want to know what the state did
to take advantage of a great opportunity and whether, right or
wrong, it was a thoughtful position that had little to do with
politics and everything to do with a collaborative process that
reflects Alaska's unity. He said he doesn't know of anyone who
doesn't want the project to work, though the legislature will
have to sort through the different ideas about how it would work
best. He added that he believes it will work out.
4:26:11 PM
CHAIR HUGGINS thanked Governor Knowles for his past leadership,
noting while they are of different political persuasions, he
believes the approach of "lead, follow, or get out of the way"
has proven itself in Alaska. Saying both Governor Knowles and
Governor Hickel want to successfully bring Alaska's gas to
market, Chair Huggins thanked them for their continuing efforts
on behalf of the state. SB 3001 and HB 3001 were held over.
There being no further business to come before the committee,
Chair Huggins adjourned the Senate Special Committee on Energy
meeting at 4:27:44 PM.
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