Legislature(2013 - 2014)SENATE FINANCE 532
04/05/2013 01:30 PM Senate FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB4 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| = | HB 4 | ||
| + | TELECONFERENCED |
SENATE FINANCE COMMITTEE
April 5, 2013
1:43 p.m.
1:43:07 PM
CALL TO ORDER
Co-Chair Meyer called the Senate Finance Committee meeting
to order at 1:43 p.m.
MEMBERS PRESENT
Senator Pete Kelly, Co-Chair
Senator Kevin Meyer, Co-Chair
Senator Anna Fairclough, Vice-Chair
Senator Click Bishop
Senator Mike Dunleavy
Senator Lyman Hoffman
Senator Donny Olson
MEMBERS ABSENT
None
ALSO PRESENT
Representative Mike Chenault; Rena Delbridge, Staff,
Representative Mike Hawker; Senator Peter Micciche; Frank
Richards, Manager, Pipeline Engineering, Alaska Gasline
Development Corporation; Angela Rodell, Deputy
Commissioner, Treasury Division, Department of Revenue.
PRESENT VIA TELECONFERENCE
Joe Dubler, Alaska Gasline Development Corporation,
Anchorage.
SUMMARY
CS SS HB 4(FIN)
ALASKA GASLINE DEVELOPMENT CORP; RCA
CS SS HB 4 (FIN) was HEARD and HELD in committee
for further consideration.
CS FOR SPONSOR SUBSTITUTE FOR HOUSE BILL NO. 4(FIN)
An Act relating to the Alaska Gasline Development
Corporation; establishing the Alaska Gasline
Development Corporation as an independent public
corporation of the state; establishing and relating to
the in-state natural gas pipeline fund; making certain
information provided to or by the Alaska Gasline
Development Corporation and its subsidiaries exempt
from inspection as a public record; relating to the
Joint In-State Gasline Development Team; relating to
the Alaska Housing Finance Corporation; relating to
judicial review of a right-of-way lease or an action
or decision related to the development or construction
of an oil or gas pipeline on state land; relating to
the lease of a right-of-way for a gas pipeline
transportation corridor, including a corridor for a
natural gas pipeline that is a contract carrier;
relating to the cost of natural resources, permits,
and leases provided to the Alaska Gasline Development
Corporation; relating to procurement by the Alaska
Gasline Development Corporation; relating to the
review by the Regulatory Commission of Alaska of
natural gas transportation contracts; relating to the
regulation by the Regulatory Commission of Alaska of
an in-state natural gas pipeline project developed by
the Alaska Gasline Development Corporation; relating
to the regulation by the Regulatory Commission of
Alaska of an in-state natural gas pipeline that
provides transportation by contract carriage;
repealing the statutes relating to the Alaska Natural
Gas Development Authority and making conforming
changes; exempting property of a project developed by
the Alaska Gasline Development Corporation from
property taxes before the commencement of commercial
operations; and providing for an effective date."
1:45:00 PM
REPRESENTATIVE MIKE CHENAULT, introduced the legislation.
He explained that he had worked with Representative
Hawker's office to draft the legislation. He stated that
the bill was meant to bring gas to all Alaskans. He shared
that HB 4 would set up a corporation that had Alaska's
interests in mind. He pointed out that the best people
should be a part of making important decision based on
financing, bonding, or engineering for the project. He
understood that many legislators were capable of making
these important decisions. He explained that the bill
allowed for an open season that would allow for buyers and
sellers to make bids. He felt that the bill would advance
Alaska's interests. He pointed out that the project was
within statute. He shared that there was similar
legislation that was introduced by the governor, but he did
not feel that the other legislation was not advancing.
Therefore, this legislation was relevant and imperative.
1:50:04 PM
Co-Chair Meyer shared that there was a rumor that the bill
was duplicating the governor's bill, and asked for comment.
He also wondered if Alaskans could afford the gas that the
project would utilize. Representative Chenault responded
that the governor's bill was different that HB 4. He also
voiced that the Office of the Governor was in support of HB
4. He remarked that HB 4 would get gas to Alaskans very
soon.
Senator Dunleavy queried the proposed diameter of the
gasline. Representative Chenault responded that diameter of
the proposed pipeline was 36 inches, at a 1440 pci line,
which would move up to 500,000 cubic feet of gas per day.
Senator Dunleavy wondered if there was an export component
to the proposed gasline. Representative Chenault responded
that if there were leftover gas, there would be potential
for an export component.
Vice-Chair Fairclough queried the average size of a gas
pipeline in the world. Representative Chenault replied that
Alaska was the only place in the world that considered the
proposed pipeline as "small." He furthered that he did not
know the average size of a gas pipeline, but stated that
the United States had pipelines that ranged from 12 inches
to 48 inches. He felt that the standard size pipes were 12
inches, 24 inches, 36 inches, and 48 inches. He stressed
that the size was based on whether the project was moving
gas or oil and the pressure of the pipe.
1:59:45 PM
Vice-Chair Fairclough wondered if the pipeline diameter
proposal had increased, because the decrease in pressure
would reduce the cost for Alaskans in small communities to
receive gas. Representative Chenault responded that //
Senator Hoffman wondered what provisions were included in
the legislation that would assure the rural residents that
they could benefit from the proposed gasline.
Representative Chenault responded that the project was
originally proposed to carry natural gas liquid. In order
to ship natural gas liquid, it must be put under high
pressure. In order to stay within the constraints of the
Alaska Gasline Inducement Act (AGIA), the original proposal
was 24 inch pipeline. He stated that the proposal required
a straddle plant to strip the liquids from the gas to send
utility grade gas. He stated that the estimated cost of the
straddle plant was approximately $250 million. The Alaska
Gasline Development Corporation (AGDC) stated that the
consumer would cover the cost of the straddle plant. He
stated that the great difference in cost between Fairbanks
and Anchorage was too great to be deemed fair.
2:05:35 PM
Senator Hoffman wondered if there could be a consideration
to include the construction of tankers in the bond cost,
which would deliver gas to rural Alaska. Representative
Chenault deferred to AGDC.
Senator Hoffman wondered if the terminus had been
predetermined. Representative Chenault replied that the
terminus outside of Big Lake, but furthered that the buyers
and sellers were the payers of the project.
Senator Hoffman wondered why a terminus is determined, if
the language was included in the presentation.
Representative Chenault responded that the objective of the
project was to bring gas to Alaskans at the cheapest cost.
Senator Olson surmised that Representative Chenault would
support an amendment to finance the transportation of the
gas to rural Alaska. Representative Chenault responded that
he was interested to discussing the amendment.
2:12:16 PM
RENA DELBRIDGE, STAFF, REPRESENTATIVE MIKE HAWKER,
displayed that PowerPoint, "An Alaska Natural Gas Future
for Alaskans" (copy on file).
Ms. Delbridge discussed slide 2:
By 2010, frustration with a lack of progress on a big
line
-Trying to make others develop a pipeline for
Alaska, on our terms, wasn't delivering the
results Alaskans wanted
Fresh approach: Decide what Alaska wants, and do
it ourselves
-In-state energy as primary driver
-Use the state as a catalyst
-Make use of existing work, investment
-Provide opportunities for private sector
partners
Legislature in 2010 passed HB 369: AGDC charged
with the mission of getting Alaska gas to
Alaskans
-Electric and home hearing costs
-Economic development for communities
-Industrial development opportunities - jobs
2:14:11 PM
Ms. Delbridge looked at slide 3
House Bill 369 of 2010 goals:
1.Build a team under AHFC leadership
2.Consolidate state's gas pipeline work to date
3.Fill in data gaps; decide optimal route
4.Report back to the Legislature with a project
plan
House Bill 369 passed with broad, bipartisan support
Ms. Delbridge highlighted slide 4:
AGDC delivered with the July 2011 Project Plan
-A pipeline for Alaskans is possible; an in-state
line could deliver competitively priced gas
-Projects will require firm, long-term contracts
to support financing
Including recommendations for legislative action:
-AGDC to determine pipeline ownership structure;
work confidentially with private sector partners;
operate as contract carrier; decide rates and
terms
-State to waive property taxes and state land
lease fees; provide sufficient funding and create
a pipeline fund; limit judicial review
Ms. Delbridge explained slide 5:
Now, House Bill 4:
-Provides further direction for AGDC
-Provides the framework for AGDC to serve as
Alaska's natural gas pipeline corporation
-Maximizes state's efforts in gas pipeline
development
-Resolves regulatory uncertainties while
supporting future development of Alaska resources
-Includes AGDC recommendations
-Maintains momentum - delays hurt!
-AGDC estimates $200 million per year inflation
-Southcentral gas supply (and costs) increasingly
uncertain
-Fairbanks energy costs and air quality - no end
in sight
-As urban costs increase, rural communities hurt
more
-Continuing expectation for state to offset high
cost
Ms. Delbridge displayed slide 6:
HB 4: Establishes AGDC as Alaska's gas pipeline entity
-Section 3; transition language in Section 1,
Section 25
-HB 4 moves AGDC from its present location as a
subsidiary of Alaska Housing Finance, to a stand-
alone state corporation
-Locates AGDC under Department of Commerce,
Community and Economic Development for
administrative purposes only
-AGDC will be governed by a 7-member board
with expertise in relevant fields, appointed
by the governor, confirmed by the
legislature. 5 public members, two
commissioners
-Provides clear transition language
Ms. Delbridge explained slide 7:
Clearly states AGDC's purpose (Section 3):
-To advance an instate gas pipeline as described
in the July 2011 project plan, with modifications
as appropriate, making gas available to
Fairbanks, Southcentral, and other communities in
the state at the lowest rates possible;
-To develop pipelines serving utility and
industrial customers, at commercial reasonable
rates;
-To develop pipelines offering commercial rates
to shippers and that offer access for shippers
producing gas in Alaska
-Once a mainline is complete, to consider
additional pipelines to extend the reach of gas
to other communities, industrial users
-Pipelines should also be developed to make
propane and other non-oil, gas-related materials
available to Alaskans
Ms. Delbridge addressed slide 8:
Provides statutory abilities to AGDC to function as a
corporation and to accomplish its purpose (Sec. 3)
AGDC may:
-Enter into ownership and operating partnerships
-Create subsidiaries, including a subsidiary to
market gas
-Issue revenue bonds limited to AGDC's own
backing to finance a pipeline
-Enter into confidentiality agreements necessary
to participate with private sector shippers,
partners, financiers
-Keep confidential information like field studies
and tariff models that are assets AGDC is
developing for the state
-Exercise the state's existing power of eminent
domain
2:20:58 PM
Ms. Delbridge highlighted slide 9:
House Bill 4 also:
-Exempts AGDC from the state procurement code and
state personnel act (Section 3; and Sections 4
and 14)
-(AGDC is currently exempt from the
procurement code as an AHFC subsidiary (per
HB 369 of 2010)
-(Subjects) AGDC's operating budget only from the
Executive Budget Act (Section 3)
-Applies public official disclosure rules to AGDC
board members (Section 15)
Ms. Delbridge displayed slide 10:
HB 4: Maximizes state's efforts in gas pipeline
development
Additional state support for a project in the
public's interest will help reduce delays and
keep costs as low as possible
-Limits judicial review of state permitting
decisions and authorizations to avoid delays
(Section 13)
-Directs DNR to waive annual fees on a state
right-of-way lease for AGDC (Section 3;
Section 12)
-Waives state and local property taxes
during pipeline construction (Section 22)
-Sunsets the Alaska Natural Gas Development
Authority, per a 2010 Leg Audit
recommendation
Ms. Delbridge discussed slide 11:
-Directs AGDC to avoid duplicating other state work
-Requires state entities to cooperate and share
information with AGDC (Section 3)
-AGDC requests receive priority (except for AGIA
requests)
-AGDC and state entities can enter into
confidentiality agreements if necessary to
protect third-party information in the state's
possession
-Calls on the state to provide water, sand, gravel,
and other non-hydrocarbon natural resources to AGDC
(Section 3)
-AGDC will pay usual prices; cost cannot be included
in tariff base and passed on to pipeline shippers
Ms. Delbridge highlighted slide 12:
Resolves regulatory uncertainties
-Regulatory uncertainties add risk, which adds
costs and can deter private sector participation.
AGDC needs to know how a pipeline will be
regulated before soliciting private sector
partners
House Bill 4:
-Allows natural gas pipelines to operate as
contract carriers through changes to the Right-
of-Way Leasing Act and through Regulatory
Commission of Alaska oversight
-Reinforces state policy that pipelines should be
fair; offer reasonable access to new/future
shippers; and encourage future development of
Alaska's oil and gas resources
2:24:56 PM
Ms. Delbridge explained slide 13:
Why a contract carrier?
-Shippers need to know that the space they are
'reserving' by signing long-term commitments will
be available
-Those firm, uninterruptible contracts are the
way gas pipelines are usually financed: future
income promised through contracts secures revenue
bonds
-Ensures gas customers (utilities, industry)
their shipments are reliable and will not be
curtailed
-House Bill 4 establishes contract carrier status
while providing for expansions in the future
Ms. Delbridge discussed slide 14:
Interfaces
-Key common carriage principles - expansions,
access - are retained
-Contract carriage is allowed
-Interface between right-of-way leasing act and
new regulatory chapter for instate contract
carrier natural gas pipelines:
-Both require expansions on commercially
reasonable terms
-Both allow that expansions cannot make an
initial shipper pay more than is allowed per
the shipper's contract with the pipeline
-Both sections require a pipeline to offer
service without undue discrimination
-Open season oversight by the RCA ensures
that new entrants have opportunity
-Capacity availability notification rules in
Sec. 21 ensure new entrants have opportunity
Ms. Delbridge displayed slide 15:
Right-of-Way Leasing Act
-Section 11: Sections 6, 8, 9 and 10 are
conforming
-Includes a set of 14 covenants a lessee must
agree to
-HB 4 modifies covenants reflecting common
carrier principles, to allow for contract
carriage
-Covenants (a) (3), (4), (6), (7), (8), (9),
(10), (11), (12), (13), and (14) apply to both
common carrier pipelines and to contract carrier
natural gas pipelines
-Covenants (a) (1), (2) and (5) are rebuilt to
retain the general policy principle while
allowing for contract carriage
-Contracts govern terms for connections,
facilities
-Expansions required on commercially reasonable
terms
-Ship without discrimination
Ms. Delbridge discussed slide 16:
Regulatory Commission of Alaska oversight for a
contract carrier gas pipeline
-Section 21 is new regulatory chapter; Section18
is related. Sections 19, 20, 5 are conforming)
-New kind of regulation for Alaska, for a new
kind of pipeline
-Multiple-stage review by RCA
-Contract carrier concepts derived from federal
process
-Provisions built in for Alaska concerns
-Provides certainty and protection for public
utilities
-Sets timelines for thorough review that also
support commercial process
Ms. Delbridge highlighted slide 17:
Terms (Not official definitions … but practically
speaking)
Tariff: A package of the rates and the terms and
conditions that a pipeline offers. Rates may be a
'schedule' of rates distinguishing different
classes of service.
Recourse tariff: A tariff that is kept on file as
the pipeline's official 'offering'. The recourse
rate is available to customers who do not
negotiate rates with the pipeline.
Just and reasonable: A concept; generally, just
is fair to all, reasonable is within a range of
acceptableness.
2:30:59 PM
Ms. Delbridge explained slide 18:
Overview: The Process
1.Pipeline puts together a project - engineering,
design, and cost estimate
2.Develops tariff - a combination of rates and
terms/conditions of service - to present to
potential customers
3.Pipeline has to file the tariff as a 'recourse
tariff' with the RCA before entering contracts,
before open season
Supported by a full cost study
4.Recourse tariff is the default rate; customers
can negotiate final price
HB 4 requires RCA pre-approval of recourse tariff
before an open season
Ms. Delbridge explained slide 19:
When does a recourse tariff come into play?
1.Before the first open season for a new pipeline
2.After construction, when costs are about 95
percent known
3.In advance of any open season for new capacity
or pipeline expansions
Why?
-Sticker price/default rate
-Terms that anyone has the option of using to get
in on the pipeline, whether they choose to
negotiate or not
-Everyone has had the opportunity to get in on
the pipeline on the same terms (although rates in
the recourse tariff may vary per shipper
category)
-Commonly used for short-term interruptible
capacity, when available
Ms. Delbridge highlighted slide 20:
Recourse tariff:
RCA must review and approve initial recourse tariff,
and any substantial amendments
-Supported by a full cost study
-Must include procedures for conducting open
seasons
RCA has 90 days to review; may suspend for additional
90 days
-Terms and conditions not unduly discriminatory
-Rates cost-based
-Proposed rate of return, capital structure,
depreciation reasonable
(Reasonable = commonly accepted or used by
the RCA or FERC)
Same process for revisions in the future
-RCA has 90 days to act on revisions
Ms. Delbridge discussed slide 21:
With approved initial recourse tariff, pipeline holds
an open season
-RCA oversees open season
-Commercial negotiations
-Precedent agreement
Overall, 3 ways to get pipeline service:
1.Negotiated contracts in open season
2.Recourse tariff
3.Presubscription agreements
Ms. Delbridge explained slide 22:
Just and Reasonable - What does it mean?
Just and reasonable is a standard - in this case, a
contract must meet this standard
Just: Everyone is treated fairly and in a reasonable
way
Reasonable: Not too much, not too little: within an
acceptable range and defensible
How do we know?
Was the contract made at arm's length?
Arm's length is a legal principle pulled from contract
law. An agreement is arm's length if it was made by
independent parties, on equal footing; if parties are
connected by 'shared interests', an arm's length
agreement that stands up to scrutiny is important.
Ms. Delbridge discussed slide 23:
Meeting the Arm's Length Standard Start with the
contract. Does it include the recourse rate offered to
everybody?
YES: Contract is at arm's length and acceptable.
NO: Next step: Was the contract made between two state
entities?
YES: Contract is at arm's length and acceptable.
NO: Next step. Is the contract between two
unaffiliated parties?
YES: Contract is at arm's length and acceptable.
NO: Parties are affiliated. Next step: Is the contract
'substantially similar' to one made between
unaffiliated parties?
YES: Contract is at arm's length and acceptable.
NO: Next step. Triggers deeper review by the RCA to
determine 'just and reasonable' by new standards,
using all cost data, digging into the details - BUT,
the RCA must also consider the consequences of failing
to approve the contract at hand.
2:37:15 PM
Ms. Delbridge highlighted slide 24:
Certificate of Public Convenience and Necessity
CPCN required: Legislature makes special findings only
for AGDC
1.Required for the public convenience and
necessity (Sec. 1)
2.In the best interests of the state (Sec. 1)
3.Per Sec. 21, 42.08.020:
1.AGDC is financially fit willing and able
(because it is a corporation of the state)
2.AGDC's board of directors and officers are
managerially fit, willing and able (because
the Governor has appointed directors with
the precise qualifications required by HB 4)
3.An AGDC pipeline is required for the
public convenience and necessity (evidenced
by the Legislature creating a state
corporation to pursue gas pipeline projects
4.Per Sec. 21, 42.08.020(e): The RCA shall
determine whether the AGDC is technically fit,
willing and able
Ms. Delbridge discussed slide 25:
Once construction ends, the pipeline will know a lot
more detail about costs.
At that point, the pipeline has to go back to the RCA
with that 'actual' information, and update the initial
recourse tariff.
The pipeline also has to update the recourse tariff in
the future, whenever the pipeline plans an open season
to expand the pipeline.
Revisions do not affect contractual, negotiated rates.
Ms. Delbridge displayed slide 26:
Excessive rates of return protection
Excessive rates of return are not
anticipated, however:
-Detailed current cost study every three years.
-Includes calculation of 3-year average actual
return on equity.
-RCA reviews: do rate elements 'match' allowable
-Excess profit into segregated operating reserve
fund.
-Capped at 20 percent average annual
operating costs.
-If excess remains, reduce firm service rates for
all shippers over next 3 years.
-Pipeline can draw on reserve account when
operating costs are high.
Ms. Delbridge highlighted slide 27:
Disputes
-Contracts between shippers and a pipeline can
include a dispute resolution method.
-Method must be in resource tariff terms and
conditions, uniform.
-Notify all shippers and creditworthy potential
shippers.
-Allow existing and potential new shippers to
participate.
-Culminate in independent third party/panel
-When can RCA step in?
-Disputes related to things not covered in
contracts.
-Complaints brought be someone who doesn't have a
shipping contract
-Complaints about expansions and open season
conduct
-Disputes that pose an immediate threat to the
public health and safety
2:42:08 PM
Ms. Delbridge explained slide 28:
The Future
Expansions are required on commercially
reasonable terms (providing they do not violate
AGIA).
-Must include an open season.
-Same process as initial capacity: recourse
tariff, open season, negotiated contracts,
precedent agreements, updated recourse
tariffs.
Excess capacity at any time must be noticed and
offered.
Vice-Chair Fairclough looked at slide 14, and wondered why
there was a difference between "undue discrimination" and
"without discrimination." Ms. Delbridge responded that
"undue discrimination" allowed for legitimate reasons to
offer slightly different terms or provisions to different
kinds of shippers, provided that all shippers that were
similarly situated received the same fair terms and
conditions or service. She stated that undue discrimination
would not necessarily be a bad thing, if it were entirely
defensible.
Vice-Chair Fairclough noted that there was a proposal to
exempt AGDC from state procurement code and the state
personnel act, and she wondered if there were any new
exemptions carried forward. She also wondered why AGDC
would be exempt from the state personnel act. Ms. Delbridge
responded that HB 369 had given Alaska Housing Finance
Corporation (AHFC) to do in-state gas line development, and
exempted that any corporation created to do so, from the
state procurement code. She stressed that the bill did not
propose a new provision, but as AGDC was recreated as a
stand-alone state corporation, those provision needed to me
moved in order to remove the ability for AHFC to have a
corporation that does the same thing.
2:47:07 PM
Vice-Chair Fairclough wondered why it was important or AGDC
to be exempt from the state procurement code. Ms. Delbridge
replied that AGDC finds that an exemption from the state
procurement code, because they would be moving quickly
ordering pipes, supplies, and services. The procurement
code generally added time and cost.
FRANK RICHARDS, MANAGER, PIPELINE ENGINEERING, ALASKA
GASLINE DEVELOPMENT CORPORATION, stated that there would be
a presentation the following day regarding Vice-Chair
Fairclough's concerns.
Co-Chair Kelly asked for further information regarding the
recourse tariff.
Vice-Chair Fairclough referred to the passage of HB 369 in
2010 that began the project process. She noted that the
process had exempted AGDC from the state procurement code.
She wondered if there was any more information regarding
that exemption.
Co-Chair Meyer shared the list of people online to testify.
Mr. Richards stated the exemption was based on the
expectation of expeditious work, and the ability to hire
consultants to look at the contracting methodology. He
stressed that the project required approximately $7.7
billion of work.
Vice-Chair Fairclough inquired about the exemption from the
state personnel act. Mr. Richards replied that AGDC needed
to be able follow the procedures that were currently
followed by other state corporations. He stressed that it
was important to hire individuals with skills that were
beyond "normal state functions", and were not in the state
classification system.
2:52:38 PM
Co-Chair Kelly requested a restatement of the position on
the recourse tariff. Ms. Delbridge responded that the
contract carrier pipeline would allow for negotiated
pipeline rates. She stressed that it was important to
establish boundaries and backstops, to ensure an
opportunity to participate without negotiating with the
carrier. She remarked that these provisions would allow for
different situated people equal access. She felt that the
provision was a good way to ensure that the default rate
had a strong factual foundation. Whereas, a negotiated
contractual rate deferred to fairness between two parties.
She stressed that the recourse tariff should be founded in
actual facts. She furthered that the recourse tariff was
comprised of the reams of data that would eventually become
the rate elements like operating, maintenance, due taxes,
recoup of debt costs, and the return on the initial
construction capital.
Co-Chair Kelly inquired who would use the recourse rate.
Ms. Delbridge replied that it would be someone who did not
want to, or was unable to negotiate. She deferred to AGDC
for further information.
Senator Bishop looked at page 40, and wondered if that
focused on the detail of the current discussion. Ms.
Delbridge responded that it was a portion of what pertained
to the discussion. She furthered that the regulatory
chapter began on page 36, and continued through page 55 of
the bill. She remarked that the initial recourse tariff
review was on page 45 and addressed the filing
requirements; and pages 46 through 49 addressed the
requirements for initial and revised rates.
Senator Olson remarked that the bill required an open
season with $225 million to bring the state to open season.
Ms. Delbridge responded that the legislation would carry
Alaska through the open season, and would equip AGDC to
consider other pipelines. She remarked that AGDC would need
the legislative authority, and the funding for the open
season to negotiate with the interests that come with the
open season.
3:00:08 PM
Senator Olson surmised that the state would be required to
fund the project, if the open season was not positive. Ms.
Delbridge responded that the current structure allowed for
the money to be in an in state gas line fund that AGDC
would manage. She stressed that AGDC was an entity that was
created to accomplish a specific goal. She remarked that
there was a strong governance provision that included two
state commissioners and legislative regulatory reporting,
with the expectation that AGDC be responsible in assisting
the work if the open season was unsuccessful
Senator Olson wondered if this was the last time the
legislature would be asked to appropriate money for the
project. Ms. Delbridge replied that there was no
expectation that the legislature would need to appropriate
money in the future.
Senator Olson wondered if the legislature would be faced
with financing the project again. Ms. Delbridge responded
that the sponsors of the bill believed that private sector
groups would provide financing for the project.
Senator Olson looked at the slide 18, and asked for
examples of recourse tariffs in Alaska. Ms. Delbridge
responded that she was not sure if there were examples of
recourse tariffs in Alaska, and furthered that Alaska had
never had a significant long distance natural gas pipeline
or a contract carrier pipeline. She shared that recourse
tariffs that pipelines in the lower 48 would have, and were
used in their open season.
Senator Bishop wondered what might happen if two open
seasons were unsuccessful Ms. Delbridge responded that all
of the assets would be the property of AGDC, and therefore
property of the state.
3:05:35 PM
AT EASE
3:22:28 PM
RECONVENED
3:24:50 PM
Ms. Delbridge explained the "Sectional Analysis: CS for
Sponsor Substitute for House Bill 4 (FIN) Version \I" (copy
on file).
Section 1 - Findings and Intent
- Finds that an Alaska Gasline Development Corporation
(AGDC) natural gas pipeline is in the best interests
of the state, and required for public convenience and
necessity.
The Regulatory Commission of Alaska (RCA) uses these
standards in issuing a building permit to a project.
Through this section, the legislature is making these
findings on behalf of the RCA.
- Finds that locating AGDC under the Department of
Commerce, Community and Economic Development, for
administrative purposes only, will advance AGDC's
mission.
Establishing AGDC as an independent state entity with
a clear purpose and the statutory authority to meet
its mission will make AGDC more likely to succeed.
- Provides intent that AGDC's transfer from an Alaska
Housing Finance Corporation (AHFC) subsidiary to a
stand-alone corporation will be treated as a
repositioning and not as creating a new entity.
This intent should prevent the need to dissolve AGDC
and re-create it as a new corporation; as a transfer,
AGDC will need to amend bylaws and regulations.
- Provides intent that AGDC will procure services,
labor, products and resources from Alaska businesses,
including Alaska Native corporations and municipal
organizations, when prices are competitive.
- Provides intent that AGDC will, as possible, hire
Alaskans; establish hiring facilities in Alaska; and
use Department of Labor and Workforce Development
systems.
Section 2 (conforming) deletes from AS 18.56.086,
Alaska Housing Finance Corp, Creation of subsidiaries,
the ability to create a pipeline subsidiary. HB 4,
Section 3, establishes AGDC as a stand-alone public
corporation of the state, so it is no longer necessary
for AHFC to have a subsidiary corporation related to
natural gas pipelines.
Ms. Delbridge continued with the sectional analysis.
Section 3 (new corporation) adds a new chapter, Alaska
Gasline Development Corporation, to AS 31, Oil and
Gas. This section is the statutory authority for the
stand-alone corporation.
Sec. 31.25.010, Structure, establishes AGDC as an
independent public corporation of the state, located
for administrative purposes in DCCED, and makes
provisions for asset distribution upon termination.
Sec. 31.25.020, Governing body, establishes a seven-
member board of directors, with two commissioners
named by the governor and five public members. Public
members serve staggered, five-year terms; are
appointed by the governor; must be confirmed by the
legislature; and serve at the governor's pleasure. In
making appointments, the governor shall consider
expertise in natural gas pipeline construction,
operation and marketing; finance; and large project
management. Vacancies will be filled in the same way
as original appointments are made. Board members
receive $400 compensation per day spent on official
board business, in addition to actual expenses.
Sec. 31.25.030, Meetings of board, directs the board
to annually elect officers; defines a quorum as a
majority of members; and requires meetings at least
once every three months. Electronic meetings are
allowed. For a meeting in which the board authorizes a
bond issuance, at least 24 hours public notice is
required. At least four board members are required for
major votes, including bond sales; sale or disposition
of assets; determining a pipeline ownership structure;
and participation in a pipeline project.
Sec 31.25.035, Minutes of meetings, requires the board
to keep minutes.
Sec. 31.25.040, Administration of affairs, allows the
board to manage the assets and business of the
corporation; the board may adopt, amend, and repeal
bylaws and regulations; and the board will delegate
corporation administration to the executive director.
Requires the board to adopt formal procedures for
procurement processes; requires a preference for
Alaska veterans.
Sec. 31.25.045, Executive director, requires an
executive director who is appointed by and serves at
the pleasure of the board. The director may not be a
board member.
Sec. 31.25.050, Legal counsel, directs the corporation
to retain legal counsel.
Sec. 31.25.060, Employment of personnel, allows the
board to engage professional and technical
consultants, and allows the executive director to hire
corporation employees and contract with consultants.
The board sets duties and compensation for corporation
personnel.
Sec. 31.25.065, Personnel exempt from State Personnel
Act, exempts AGDC from the State Personnel Act.
Vice-Chair Fairclough wondered if she was on page 6 of the
bill. Ms. Delbridge explained that the affirmative vote
requirement was at the top of page 6, lines 1 through 13.
3:28:56 PM
Vice-Chair Fairclough looked at page 7, and wondered if the
executive director was charged to determine adequate
personnel. Ms. Delbridge replied that the personnel would
be responsible to the executive director, who would then
answer to the board.
Ms. Delbridge continued to discuss Section 3.
Sec. 31.25.070, Purpose, directs AGDC to advance an
instate natural gas pipeline as described in AGDC's
July 2011 project plan, with modifications as
necessary, making gas and associated, non-oil
hydrocarbons such as propane, available as soon as
practicable to Fairbanks, Southcentral, and other
communities where possible; and attempt to develop
projects that ship and deliver gas at commercially
reasonable rates.
Sec. 31.25.080, Powers and duties, lists 21 powers of
the corporation, including the abilities to determine
pipeline ownership and operating structures; plan,
finance, construct and operate a pipeline system;
lease, rent, acquire and manage property; exercise
eminent domain; transfer or dispose of all or part of
a pipeline system; operate as a contract carrier;
conduct hearings; sue and be sued; adopt bylaws;
borrow money; and invest funds. Directs AGDC to
analyze other connecting lines once the main pipeline
is under construction. Prohibits development of a
pipeline that competes under the terms of the Alaska
Gasline Inducement Act (AGIA). Requires publication of
open season results.
Sec. 31.25.090, Confidentiality; interagency
cooperation, requires state agencies to share
information with AGDC; requires state agencies to
cooperate with AGDC and give priority to AGDC
requests, except for requests from the AGIA
coordinator; and directs AGDC to avoid duplicating
state work on a pipeline. State entities must provide
non-hydrocarbon resources like water, sand and gravel
to AGDC at usual cost, but those costs may not be
passed on to pipeline customers. DNR will grant AGDC a
right-of-way lease at no appraisal or rental cost if
certain conditions are met; the fee waiver carries
with the lease in case of a transfer, which must be
approved by the commissioner. AGDC may enter into
confidential agreements as necessary, including with
other state entities; information covered by a
confidentiality agreement is not subject to disclosure
under the Public Records Act. AGDC may also keep other
information confidential, including the results of
field studies; technical information; trade secrets;
and commercial negotiations. AGDC may waive
confidentiality of some information. Once a gas
pipeline is operational, AGDC must release
confidential information, providing doing so does not
hurt the state's economic interests and does not
violate confidentiality agreements.
Sec. 31.25.100, In-state natural gas pipeline fund,
establishes the instate-natural gas pipeline fund
within AGDC; directs AGDC to administer the fund and
allows AGDC to contract with the Department of Revenue
for fund management. Costs to administer the fund are
to be drawn from the fund.
Sec. 31.25.120, Creation of subsidiaries; sale of
natural gas by a subsidiary, allows AGDC to create
subsidiary corporations to meet AGDC's mission,
including subsidiaries to acquire and ship natural
gas.
Sec. 31.25.130, Administrative procedure; regulations,
exempts AGDC from the Administrative Procedure Act,
except for the Open Meetings Act portion. Provides
board direction related to bylaws, regulations, and
public notice of meetings.
Sec. 31.25.140, Exemption from the State Procurement
Code; application of the Executive Budget Act;
corporation finances, exempts AGDC and its
subsidiaries from the State Procurement Code. Subjects
the corporation's operating budget to the Executive
Budget Act. Requires an annual independent audit. AGDC
is already exempt from the procurement code as an AHFC
subsidiary; this transitions the exemption to AGDC as
a stand-alone corporation.
Sec. 31.25.160, Bonds and notes, allows the
corporation to issue bonds and notes in one or more
series, limited to the corporation's own backing.
Sec. 31.25.170, Independent financial advisor, allows
the corporation to retain a financial advisor in
negotiating the private sale of bonds or notes to an
underwriter.
Sec. 31.25.180, Validity of pledge, declares as valid
and binding any pledge of assets or revenue of the
corporation to payment or interest.
Sec. 31.25.190, Capital reserve funds, allows AGDC to,
contingent on future legislative approval, establish
capital reserve funds to secure its obligations.
Directs fund management. Requires annual reports to
the governor and legislature.
Sec. 31.25.200, Remedies, permits enforcement of
rights by those holding AGDC obligations.
Sec. 31.25.210, Negotiable instruments, declares that
obligations are promises to pay an amount of money.
Sec. 31.25.220, Obligations eligible for investment,
AGDC obligations as legitimate investments.
Sec. 31.25.230, Refunding obligations, permits the
corporation to refund obligations and provides
direction for managing refunds.
Sec. 31.25.240, Credit of state not pledged, prohibits
AGDC from pledging the state's credit. AGDC
obligations are limited to AGDC's backing.
Sec. 31.25.250, Limitation on personal liability,
protects corporation officers from personal liability.
Sec. 31.25.260, Tax exemption, exempts AGDC from
paying state and local taxes on corporation property
or property income.
Senator Olson looked at page 9, and wondered who they were
borrowing money from. Ms. Delbridge deferred to AGDC.
Ms. Delbridge looked at page 10, lines 9 through 12, of the
bill, and explained that the corporation was specifically
prohibited from developing or constructing a pipeline that
would be competing project under the license granted to
TransCanada under AGIA. She addressed lines 16 through 24,
which stated that if AGDC had a successful open season,
they needed to report the results within ten days.
3:33:45 PM
Senator Dunleavy wondered if the AGIA language was based on
a competing pipeline size, and further queried what was
determined "competing." Ms. Delbridge responded that, in
conjunction with the state issuing the license under AGIA,
the state agrees that it will not financially support or
give preferential treatment to a project that might be a
competing project by carrying more than one-half billion
cubic feet a day of gas from the North Slope south.
Senator Dunleavy surmised that the pipeline that HB 4
proposed could be a 40 inch line, as long as it did not
exceed the amount capped by AGIA. Ms. Delbridge replied
that it was not, theoretically, the size of the pipe that
could potentially violate the terms; but whether a project
was designed to carry more than one-half billion cubic feet
of gas per day.
Senator Dunleavy felt that her response was contradictory,
because his focus was on whether the pipe actually carried
more gas rather than if it was "designed" to carry more
gas. Ms. Delbridge stated that a pipeline project was
designed to carry a certain capacity, so that capacity was
put out for bids. She furthered that almost any pipeline,
from an engineering standpoint, could be expanded to more
than the original project design.
Senator Dunleavy surmised that the project could be a 40
inch pipeline, which could handle high pressure gas. Ms.
Delbridge replied that AGDC was required to get gas to
Alaskans at the lowest rates possible.
Senator Dunleavy felt that, theoretically, the pipeline
could be 8 inches in diameter. Ms. Delbridge explained that
the initial commercial analysis, under HB 369, determined
that the pipeline needed to be a competitive project. The
commercial analysis determined that an 8 inch line did not
carry enough gas to meet the instate demand.
Senator Dunleavy felt that the size of the pipe volume of
the gas would have an effect on the burner tip. He queried
the constraints on determining the size of the pipeline.
Ms. Delbridge responded that the pipe would be built to the
size that they have commitments to ship gas toward. She
stated that the cost of the pipe would be placed on the
consumer, through the tariff.
Vice-Chair Fairclough pointed out that there were fixed
costs related to the construction of the pipeline, which
drove the economics to make the pipeline at a larger
capacity. Ms. Delbridge responded that the size of the pipe
was based on capacity. She remarked that AGDC had studied
what tariffs might look like, and what size pipeline would
be required if only a small amount of gas were shipped at
one time.
3:38:42 PM
Co-Chair Meyer wondered what would happen to the $330
million, if open season was unsuccessful. Ms. Delbridge
replied that the $330 million would carry to the point of
sanctioning.
Co-Chair Meyer wondered if the legislation would remove the
obligation of $500 million. Ms. Delbridge replied that the
AGIA license was valid, and there was nothing in the bill
that would take the project away from AGIA.
Vice-Chair Fairclough wondered if the fee could be
considered an interest payment to remain in development.
Ms. Delbridge replied that the sponsors of the bill felt
that the project was an investment to see if Alaska could
do for itself what it requires in state, as far as taking
care of the in state energy solutions.
Ms. Delbridge looked at page 10 of the bill. She explained
that the sections on that page dealt with confidentiality
and interagency cooperation. She explained that it required
state agencies to share information with AGDC, and gave
priority treatment to the AGDC requests, except for those
made under AGIA. She furthered that it specifically
required that AGDC not duplicate other state studies,
plans, and designs that were already provided or completed.
3:43:57 PM
Vice-Chair Fairclough noticed that the bill stated that
AGDC "shall avoid duplicating studies." She wondered if
that term was qualified in order to deal with out of date
studies. Ms. Delbridge replied that if studies needed to be
updated, they would not be considered duplicates. She
remarked that there was a concern in the section that dealt
with work that state hand funded through AGIA. She stressed
that the intent was that AGDC and TransCanada would work
together to share information when and where possible so
the state could not make duplicates.
Vice-Chair Fairclough wondered if the interest earned in
the fund was housed in GF. Ms. Delbridge replied that she
believed the interest would be returned to GF, and then
reappropriated.
Vice-Chair Fairclough wondered if the fund was a subset of
GF. Ms. Delbridge deferred to DOR.
ANGELA RODELL, DEPUTY COMMISSIONER, TREASURY DIVISION,
DEPARTMENT OF REVENUE, explained that the fund was housed
in the general fund (GF), unless AGDC determines another
fund management.
Vice-Chair Fairclough asked where the money was housed, and
wondered where the interest would be specifically housed.
Ms. Delbridge agreed to provide further information.
Senator Bishop referred to the Sectional Analysis, and
remarked that the fund would be placed in AGDC, and allowed
AGDC to administer the funds. Ms. Delbridge replied that
AGDC wanted to ensure that whoever had the greatest
expertise in managing the fund would be who they could
administer the funds toward.
3:50:52 PM
Senator Bishop surmised that AGDC had the flexibility to go
to a financial institution to administer the funds. Ms.
Delbridge agreed.
Vice-Chair Fairclough noted that any remaining interest
would lapse to GF.
JOE DUBLER, AGDC, ANCHORAGE (via teleconference), addressed
the concern related to line 13, page 13 of the bill. He
stated that the instate gas pipeline fund would be
established within AGDC, so it would not be a part of GF.
He furthered that the language about DOR managing the fund
for AGDC was added to be clear that AGDC could use DOR as
the fund was currently invested in AHFC.
Vice-Chair Fairclough expressed that she was unsure if she
was supportive of that policy decision, and felt that the
fund should continue to be managed by DOR. She wondered
what AHFC fund was managed by an outside entity. Mr. Dubler
responded that the GeFonsi (General Fund and other Non-
segregated Investments) was managed by DOR, not an outside
entity.
3:55:16 PM
Vice-Chair Fairclough wondered if AGDC had to manage the
fund inside GeFonsi. She felt that there needed to be
control and oversight on the $330 million, but wanted to be
sure that the money went, at least, indirectly to Alaska.
Ms. Delbridge responded that there was built in
accountability.
Ms. Delbridge looked ahead to page 15, and stated that the
corporation's assets were to be annually reviewed by the
legislature, including the assets of the fund.
Senator Hoffman agreed with Vice-Chair Fairclough and felt
that the interest should go back for further scrutiny, and
the legislature should be the appropriating agency. He felt
that the expended dollars should be justified to the state.
Co-Chair Meyer remarked that there were other funds that
were set up in a similar manner.
Ms. Delbridge agreed that most of the state corporations
were, at least, partially exempt from the executive budget
act, when they have the ability to do bond related
financing.
Ms. Delbridge looked at page 13 of the bill.
Sec. 31.25.100, In-state natural gas pipeline fund,
establishes the instate-natural gas pipeline fund
within AGDC; directs AGDC to administer the fund and
allows AGDC to contract with the Department of Revenue
for fund management. Costs to administer the fund are
to be drawn from the fund.
Sec. 31.25.120, Creation of subsidiaries; sale of
natural gas by a subsidiary, allows AGDC to create
subsidiary corporations to meet AGDC's mission,
including subsidiaries to acquire and ship natural
gas.
4:00:12 PM
Vice-Chair Fairclough wondered if it was considered a
protection, if there was a subsidiary developed on the
financing side to insulate the state from any potential
liability. Ms. Delbridge replied that AGDC's ability to
finance and issue bonds were limited only to AGDC's
backing.
Ms. Delbridge looked at pages 14 and 15 of the bill.
Sec. 31.25.130, Administrative procedure; regulations,
exempts AGDC from the Administrative Procedure Act,
except for the Open Meetings Act portion. Provides
board direction related to bylaws, regulations, and
public notice of meetings.
Sec. 31.25.140, Exemption from the State Procurement
Code; application of the Executive Budget Act;
corporation finances, exempts AGDC and its
subsidiaries from the State Procurement Code. Subjects
the corporation's operating budget to the Executive
Budget Act. Requires an annual independent audit. AGDC
is already exempt from the procurement code as an AHFC
subsidiary; this transitions the exemption to AGDC as
a stand-alone corporation.
Vice-Chair Fairclough wondered what was not exempt. Ms.
Delbridge replied that the corporation's bond related
finances were not exempt.
Ms. Delbridge looked at pages 16 through 20.
Sec. 31.25.160, Bonds and notes, allows the
corporation to issue bonds and notes in one or more
series, limited to the corporation's own backing.
Sec. 31.25.170, Independent financial advisor, allows
the corporation to retain a financial advisor in
negotiating the private sale of bonds or notes to an
underwriter.
Sec. 31.25.180, Validity of pledge, declares as valid
and binding any pledge of assets or revenue of the
corporation to payment or interest.
Sec. 31.25.190, Capital reserve funds, allows AGDC to,
contingent on future legislative approval, establish
capital reserve funds to secure its obligations.
Directs fund management. Requires annual reports to
the governor and legislature.
4:04:35 PM
Vice-Chair Fairclough looked at page 20, and queried the
liability that would be created related to the validity of
a pledge. Ms. Delbridge agreed to provide that
information.
Ms. Delbridge looked at pages 22 through 25.
Sec. 31.25.200, Remedies, permits enforcement of
rights by those holding AGDC obligations.
Sec. 31.25.210, Negotiable instruments, declares that
obligations are promises to pay an amount of money.
Sec. 31.25.220, Obligations eligible for investment,
AGDC obligations as legitimate investments.
Sec. 31.25.230, Refunding obligations, permits the
corporation to refund obligations and provides
direction for managing refunds.
Sec. 31.25.240, Credit of state not pledged, prohibits
AGDC from pledging the state's credit. AGDC
obligations are limited to AGDC's backing.
Sec. 31.25.250, Limitation on personal liability,
protects corporation officers from personal liability.
Sec. 31.25.260, Tax exemption, exempts AGDC from
paying state and local taxes on corporation property
or property income.
Sec. 31.25.270, Annual report, requires an annual
report to the governor, legislature and public,
including an independent audited financial statement.
Sec. 31.25.390, Definitions.
4:09:03 PM
Ms. Delbridge explained Sections 4 through 19.
Section 4 (procurement code exemption), adds new
paragraphs to AS 36.30.850(b), Public Contracts, State
Procurement Code, Application of this chapter,
exempting AGDC and its subsidiaries from the state
procurement code. The exemption is reinforced in
AGDC's statutes (HB 4 Section 3, 31.25.140).
Section 5 (RCA accounting, conforming) amends AS
37.05.146(c)(22), Public Finance, Fiscal Procedures
Act, Definition of program receipts and non-general
fund program receipts.
Section 6 (gas or electric utilities, conforming)
amends AS 38.05.180 (bb)(1), Public Land, Alaska Land
Act, Oil and gas and gas only leasing, to conform with
Section 11 creating covenants specific to a contract
carrier pipeline.
Section 7 (definitions)repeals and reenacts AS
38.34.099, Public Land, In-State Natural Gas Pipeline,
Definitions, to refer to the definitions in the new
31.25 (HB 4, Section 3).
Section 8 (right-of-way leases, conforming) amends AS
38.35.100(d), Public Land, Right-of-Way Leasing Act,
Decision on application, to conform to Section 11,
right-of-way leasing for a contract carrier.
Section 9 (right-of-way leases, conforming) amends AS
38.35.120(a), Public Land, Right-of-Way Leasing Act,
Covenants required to be included in lease, to conform
to Section 11, right-of-way leasing for a contract
carrier.
Section 10 (right-of-way leases, conforming) amends AS
38.35.120(b), Public Land, Right-of-Way Leasing Act,
Covenants required to be included in lease, to conform
to Section 11, right-of-way leasing for a contract
carrier.
Section 11 (contract carrier covenants) adds a new
section to AS 38.35, Public Land, Right-of-Way Leasing
Act, to establish covenants for a contract carrier gas
pipeline. This section does not alter the existing
covenants in the Right-of-Way Leasing Act for a common
carrier. A carrier must agree to abide by the
covenants in order to receive a state right-of-way
lease. Of 14 existing covenants for common carriers,
11 also apply to a contract carrier. The others are
adapted to reflect contract carrier principles, while
retaining the policy that pipelines on state rights-
of-way should encourage broader development of oil and
gas resources by expanding when commercial
opportunities exist and shipping without unreasonable
discrimination.
Section 12 (right-of-way leases, costs) adds a new
subsection to AS 38.35.140, Public Land, Right-of-Way
Leasing Act, Payment of rental and costs, requiring a
right-of-way lease to be issued at no cost to AGDC.
This reinforces in the Right-of-Way Leasing Act the
provision in HB4, Section 3 (31.25.090, Interagency
cooperation; confidentiality) that leases should be
made at no rental fee/cost to AGDC.
Section 13 (judicial review) adds new subsections to
AS 38.35.200, Public Land, Right-of-Way Leasing Act,
Judicial review of decisions of commissioners on
application, limiting judicial review of state lease,
permit or other authorization decisions. Claims
challenging this provision must be brought within 60
days of the effective date of HB 4; future claims
alleging a constitutional violation must be brought
within 60 days of the action and must be filed in
superior court. The court may not grant injunctive
relief.
Section 14 (personnel act exemption) exempts AGDC and
subsidiaries from AS 39.25.110, Public Officers and
Employees, State Personnel Act, Exempt service. This
exemption is reinforced in AGDC's corporate statutes.
Section 15 (public officials disclosures) makes the
board of directors of AGDC and subsidiaries subject to
public official financial disclosure rules in AS
39.50.200, Public Officers and Employees, State
Personnel Act, Definitions.
Section 16 (confidentiality) amends AS 40.25.120(a),
Public Records and Recorders, Public Record
Disclosures, Public records; exemptions; certified
copies, to exempt eligible information and information
covered by an AGDC confidentiality agreement from
disclosure under the state Public Records Act. This
relates to HB 4, Section 3 (31.25.090) allowing AGDC
to keep certain information confidential.
Section 17 (RCA, conforming), amends AS 42.04.080(a),
Public Utilities and Carriers and Energy Programs,
Regulatory Commission of Alaska, Decision-making
procedures, to allow the RCA to appoint a panel for
hearing matters under the new 42.08. The RCA needs the
statutory authority to appoint a panel and hear a
matter that comes before them under one of two
existing regulatory statutes. This adds the new
regulatory chapter created in HB 4, Section 21, 42.08,
so the RCA will be able to act on matters that come up
under the new regulatory chapter.
Section 18 (RCA review of public utility contracts),
amends AS 42.05, Public Utilities and Carriers and
Energy Programs, Alaska Public Utilities Regulatory
Act, by adding a new section related to RCA review of
contracts entered into by a public utility with AGDC
for transportation or for contracts that public
utilities sign to purchase gas or store gas
transported on an instate natural gas pipeline
regulated under 42.08. Public utility contracts with
AGDC may include a covenant for public utilities to
collect rates sufficient to meet contractual
obligations. Contracts to buy or store gas to be
shipped on an instate natural gas pipeline regulated
under 42.08 must be submitted to the RCA before they
take effect. The RCA has 180 days to approve contracts
as presented or, if contracts are found not just or
reasonable, to disapprove the contracts. Contracts
approved are not subject to further RCA review. The
RCA may extend the 180 day review period if a public
utility fails to provide supplemental information that
is available to the public utility. This section
provides an interface between regulation of public
utilities, and regulation of a contract carrier
natural gas pipeline. If the RCA approves a contract
involving a utility and the pipeline carrier, the
utility has assurances it will be able to pass along
the costs in power rates.
Section 19 (RCA conforming) amends AS 42.05.711,
Public Utilities and Carriers and Energy Programs,
Alaska Public Utilities Regulatory Act, Exemptions, to
exempt a pipeline subject to regulation under 42.08
from regulation under 42.05.
Co-Chair Meyer surmised that FERC was not involved in this
project. Ms. Delbridge responded that the Federal Energy
Regulatory Commission (FERC) regulated gaslines that a
built beyond state lines.
Co-Chair Meyer wondered if the Regulatory Commission of
Alaska was the only regulating body for the bill.
4:14:10 PM
Ms. Delbridge discussed Sections 20 through 25.
Section 20 (RCA conforming) amends AS 42.06, Public
Utilities and Carriers and Energy Programs, Pipeline
Act, by adding a new section to article 7 exempting a
pipeline subject to regulation under 42.08 from
regulation under 42.06.
Section 21 (RCA natural gas pipeline contract carrier)
adds a new chapter to AS 42, Public Utilities and
Carriers and Energy Programs, to create Chapter 08,
In-state Pipeline Contract Carrier. Chapter 08 applies
to an instate natural gas pipeline providing contract
carriage, and exempts an in-state natural gas pipeline
subject exclusively to federal jurisdiction. The new
42.08 is a shift from traditional cost-based
regulation, and directs the Regulatory Commission of
Alaska to instead evaluate whether negotiated
contracts are fair and reasonable. Checks and balances
are included to set basic rules ensuring fair and open
processes; to promote exploration and development of
Alaska's gas basins; to protect the public welfare; to
promote accountability to Alaska ratepayers; to
protect against rates of return in excess of those
allowed by the RCA; to ensure access for all affected
parties in pipeline disputes; and to heighten scrutiny
for contracts entered into by affiliated parties.
Section 22 (property tax exemption) adds a new
subsection to AS 43.56.020, Revenue and Taxation, Oil
and Gas Exploration, Production and Pipeline
Transportation Property Tax, Exemptions, exempting an
AGDC-owned or financed project from state and local
property taxes during construction.
Section 23 (repealer) repeals 39 sections of statute.
- Repeals AS 36.30.850(b)(45) Public Contracts, State
Procurement Code, Application of this chapter, a prior
exemption that applied to an AHFC pipeline.
- Repeals AS 38.34.030, Public Land, In-State Natural
Gas Pipeline, Joint In-State Gasline Development Team;
38.34.040, Duties of the Development Team; 38.34.050,
Cooperation and access to information; and 38.34.060,
Conflicts of interest, all of which were part of HB
369 in 2010 and relate to the Joint In-state Gasline
Development Team.
- Repeals AS 39.25.110(11)(G), Public Officers and
Employees, State Personnel Act, Exempt Service,
related to ANGDA; and AS 39.50.200(b)(57), Public
Officers and Employees, Public Official Financial
Disclosure, Definitions, related to ANGDA.
- Repeals all of the Alaska Natural Gas Development
Authority: AS 41.41.010 through AS 41.41.990.
Section 24 (repealer) repeals Sections 1 and 5 of 2002
Ballot Measure No. 3, the findings of which are no
longer necessary with the sunset of ANGDA.
Section 25 (transition and intent) expresses the
legislative intent that the existing state right-of-
way lease between AGDC and DNR is amended to reflect
the contract carrier covenants in HB 4 (the Alaska
Constitution bars the Legislature from passing laws
that apply retroactively to contracts in place). Also
expresses intent for a smooth transition for AGDC from
its status as a subsidiary of AHFC, to an independent
corporation.
Specifically, this section includes:
- The intent is that this repositioning does not
interfere with, delay or disrupt AGDC's work.
- The intent that the governor should appoint the new
AGDC board within 90 days of the effective date.
- The AHFC board will remain in place until a new
board is appointed; and will cooperate with the new
board in a smooth transition.
- The intent is that the transition is a change in
placement only, and will not require dissolving AGDC
and creating a new corporation.
- The intent is that AGDC, including employees and
directors, continue in-place while the boards are
transitioning. This is not explicitly stated but
rather is implied.
Senator Bishop remarked that the recourse tariffs made
reference to FERC in their applicability to the rates of
the tariffs. Ms. Delbridge agreed, and furthered that
Regulatory Commission of Alaska looked at recent comparable
rates of return and capital structures and methods of
depreciation that either FERC or Regulatory Commission of
Alaska used.
Senator Olson wondered if there would be experts or
consultants present on the bill. Co-Chair Meyer replied
that the focus was on the structure of the bill.
Ms. Delbridge added that the intent was that the shipper
commitments would finance the project.
Co-Chair Meyer handed the gavel to Vice-Chair Fairclough.
4:19:30 PM
Senator Hoffman remarked that the project could require
constant reexamination. He felt that Harold Hinds and Bill
Walker could share provisions to ensure that rural Alaska
had access to the gas. Ms. Delbridge responded that she
would provide that information to her colleagues, and the
sponsors of the bill.
Senator Hoffman felt that a timeline was important for
understanding the outline of financing for the project. Ms.
Delbridge agreed to provide information regarding a
timeline.
Vice-Chair Fairclough looked at page 56, and expressed a
desire for more conversation related to why the fund was a
part of AHFC.
Vice-Chair Fairclough handed the gavel to Co-Chair Meyer.
4:25:26 PM
Senator Hoffman requested information regarding work that
had been done to get the gas to rural Alaska. Ms. Delbridge
responded that there were studies related to the
feasibility of propane, but there was not a commercial
opportunity.
Senator Hoffman stressed that those individuals that are
furthest from the Railbelt have the highest energy costs in
the state.
Co-Chair Meyer discussed housekeeping.
CS SS SB 4(FIN) was HEARD and HELD in committee for further
consideration.
ADJOURNMENT
4:32:12 PM
The meeting was adjourned at 4:32 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| Bill Index HB 4 version P.pdf |
SFIN 4/5/2013 1:30:00 PM |
HB 4 |
| HB4 Opposition Letters-Resolutions (2).PDF |
SFIN 4/5/2013 1:30:00 PM |
HB 4 |
| HB4 Fact Sheet-CS for SSHB4 (FIN).pdf |
SFIN 4/5/2013 1:30:00 PM |
HB 4 |
| HB4 Sectional CS for SSHB4 (FIN).pdf |
SFIN 4/5/2013 1:30:00 PM |
HB 4 |
| HB4 Sponsor Statement CS for SSHB4(FIN).pdf |
SFIN 4/5/2013 1:30:00 PM |
HB 4 |
| HB4 Support Letters-Resolutions (27).PDF |
SFIN 4/5/2013 1:30:00 PM |
HB 4 |
| HB 4 Overview for S FIN.pdf |
SFIN 4/5/2013 1:30:00 PM |
HB 4 |