04/02/2013 03:30 PM Senate RESOURCES
| Audio | Topic |
|---|---|
| Start | |
| HB4 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| += | HB 4 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
SENATE RESOURCES STANDING COMMITTEE
April 2, 2013
3:31 p.m.
MEMBERS PRESENT
Senator Cathy Giessel, Chair
Senator Fred Dyson, Vice Chair
Senator Peter Micciche
Senator Lesil McGuire
Senator Hollis French
MEMBERS ABSENT
Senator Click Bishop
Senator Anna Fairclough
COMMITTEE CALENDAR
CS FOR SS FOR HOUSE BILL NO. 4(FIN)
"An Act relating to the Alaska Gasline Development Corporation;
establishing the by the Regulatory Commission of Alaska of
natural gas transportation contracts; Alaska Gasline Development
Corporation as an independent public corporation of the relating
to the regulation by the Regulatory Commission of Alaska of an
in-state natural state; establishing and relating to the in-
state natural gas pipeline fund; making certain gas pipeline
project developed by the Alaska Gasline Development Corporation;
relating information provided to or by the Alaska Gasline
Development Corporation and its to the regulation by the
Regulatory Commission of Alaska of an in-state natural gas
subsidiaries exempt from inspection as a public record; relating
to the Joint In-State pipeline that provides transportation by
contract carriage; repealing the statutes Gasline Development
Team; relating to the Alaska Housing Finance Corporation;
relating to the Alaska Natural Gas Development Authority and
making conforming relating to judicial review of a right-of-way
lease or an action or decision related to the changes; exempting
property of a project developed by the Alaska Gasline
Development development or construction of an oil or gas
pipeline on state land; relating to the lease Corporation from
property taxes before the commencement of commercial operations;
of a right-of-way for a gas pipeline transportation corridor,
including a corridor for a and providing for an effective date."
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
- HEARD & HELD
PREVIOUS COMMITTEE ACTION
BILL: HB 4
SHORT TITLE: IN-STATE GASLINE DEVELOPMENT CORP
SPONSOR(s): REPRESENTATIVE(s) HAWKER, CHENAULT
01/16/13 (H) PREFILE RELEASED 1/7/13
01/16/13 (H) READ THE FIRST TIME - REFERRALS
01/16/13 (H) RES, FIN
01/30/13 (H) SPONSOR SUBSTITUTE INTRODUCED
01/30/13 (H) READ THE FIRST TIME - REFERRALS
01/30/13 (H) RES, FIN
02/04/13 (H) RES AT 1:00 PM BARNES 124
02/04/13 (H) Heard & Held
02/04/13 (H) MINUTE(RES)
02/06/13 (H) RES AT 1:00 PM BARNES 124
02/06/13 (H) Heard & Held
02/06/13 (H) MINUTE(RES)
02/13/13 (H) RES AT 1:00 PM BARNES 124
02/13/13 (H) Heard & Held
02/13/13 (H) MINUTE(RES)
02/15/13 (H) RES AT 1:00 PM BARNES 124
02/15/13 (H) Heard & Held
02/15/13 (H) MINUTE(RES)
03/01/13 (H) RES AT 1:00 PM BARNES 124
03/01/13 (H) Heard & Held
03/01/13 (H) MINUTE(RES)
03/04/13 (H) RES RPT CS(RES) 6DP 1NR 2AM (CS
FORTHCOMING)
03/04/13 (H) DP: JOHNSON, HAWKER, P.WILSON, SEATON,
OLSON, SADDLER
03/04/13 (H) NR: TUCK
03/04/13 (H) AM: TARR, FEIGE
03/04/13 (H) RES AT 1:00 PM BARNES 124
03/04/13 (H) Moved CSSSHB 4(RES) Out of Committee
03/04/13 (H) MINUTE(RES)
03/05/13 (H) CS(RES) NT RECEIVED
03/20/13 (S) RES AT 3:30 PM BUTROVICH 205
03/20/13 (S) -- MEETING CANCELED --
03/21/13 (H) FIN AT 1:30 PM HOUSE FINANCE 519
03/21/13 (H) Heard & Held
03/21/13 (H) MINUTE(FIN)
03/26/13 (H) FIN AT 1:30 PM HOUSE FINANCE 519
03/26/13 (H) Heard & Held
03/26/13 (H) MINUTE(FIN)
03/27/13 (H) FIN AT 9:00 AM HOUSE FINANCE 519
03/27/13 (H) Heard & Held
03/27/13 (H) MINUTE(FIN)
03/28/13 (H) RLS TO CALENDAR PENDING REPORT
03/28/13 (H) IN FINANCE
03/28/13 (H) FIN AT 9:00 AM HOUSE FINANCE 519
03/28/13 (H) Heard & Held
03/28/13 (H) MINUTE(FIN)
03/28/13 (H) FIN AT 1:30 PM HOUSE FINANCE 519
03/28/13 (H) Heard & Held
03/28/13 (H) MINUTE(FIN)
03/29/13 (H) RLS TO CALENDAR PENDING REPORT
03/29/13 (H) IN FINANCE
03/29/13 (H) FIN AT 9:00 AM HOUSE FINANCE 519
03/29/13 (H) -- MEETING CANCELED --
03/29/13 (H) FIN AT 1:30 PM HOUSE FINANCE 519
03/29/13 (H) Heard & Held
03/29/13 (H) MINUTE(FIN)
04/01/13 (H) RLS TO CALENDAR PENDING REPORT
04/01/13 (H) IN FINANCE
04/01/13 (H) FIN RPT CS(FIN) NT 7DP 2NR 2AM
04/01/13 (H) DP: HOLMES, MUNOZ, NEUMAN, THOMPSON,
T.WILSON, COSTELLO, AUSTERMAN
04/01/13 (H) NR: EDGMON, STOLTZE
04/01/13 (H) AM: GARA, KAWASAKI
04/01/13 (H) TRANSMITTED TO (S)
04/01/13 (H) VERSION: CSSSHB 4(FIN)
04/01/13 (H) FIN AT 9:00 AM HOUSE FINANCE 519
04/01/13 (H) Bill Postponed To 4/1/13 @ 1:30 Meeting
04/01/13 (H) FIN AT 1:30 PM HOUSE FINANCE 519
04/01/13 (H) Moved CSSSHB 4(FIN) Out of Committee
04/01/13 (H) MINUTE(FIN)
04/02/13 (S) RES AT 3:30 PM BUTROVICH 205
WITNESS REGISTER
REPRESENTATIVE MIKE HAWKER
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Co-sponsor of HB 4.
REPRESENTATIVE MIKE CHENAULT
Speaker of the House
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Co-sponsor of HB 4.
RENA DELBRIDGE, staff to Representative Hawker
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Provided an overview of HB 4.
DARYL KLEPPIN, Commercial Manager
Alaska Gasline Development Corporation
Anchorage, Alaska
POSITION STATEMENT: Provided supportive testimony for HB 4.
BONNIE HARRIS, Assistant Attorney General
Civil Division
Oil, Gas and Mining
Alaska Department of Law
Anchorage, Alaska
POSITION STATEMENT: Provided legal testimony for HB 4.
CORI MILLS, Assistant Attorney General
Legislative Liaison
Civil Division
Alaska Department of Law
Juneau, Alaska
POSITION STATEMENT: Provided legal testimony for HB 4.
JOHN HUTCHINS, Assistant Attorney General
Civil Division
Oil, Gas and Mining
Alaska Department of Law
Juneau, Alaska
POSITION STATEMENT: Provided legal testimony for HB 4.
STUART GOERING, Assistant Attorney General
Civil Division
Alaska Department of Law
Anchorage, Alaska
POSITION STATEMENT: Provided legal testimony for HB 4.
JOE DUBLER, Vice President and CFO
Alaska Gasline Development Corporation
Anchorage, Alaska
POSITION STATEMENT: Provided supportive testimony for HB 4.
DAN FAUSKE, President
Alaska Gasline Development Corporation
Anchorage, Alaska
POSITION STATEMENT: Provided supportive testimony for HB 4.
ACTION NARRATIVE
3:31:21 PM
CHAIR CATHY GIESSEL called the Senate Resources Standing
Committee meeting to order at 3:31 p.m. Present at the call to
order were Senators French, Dyson, McGuire and Chair Giessel.
HB 4-IN-STATE GASLINE DEVELOPMENT CORP
3:32:07 PM
CHAIR GIESSEL announced HB 4 to be up for consideration [CSSSHB
4(FIN), version 28-LS0021\I, was before the committee].
3:33:08 PM
REPRESENTATIVE MIKE HAWKER, Alaska State Legislature, Juneau,
Alaska, co-sponsor of HB 4, thanked the committee members for
having the bill before the committee in an expeditious manner.
He stated that the committee truly allowed the sponsors a fair
and open opportunity to present HB 4.
3:33:48 PM
SENATOR MICCICHE joined the committee.
3:33:56 PM
REPRESENTATIVE HAWKER said HB 4 was a complex bill and an
important piece of legislation. He said HB 4 would provide a
very important "box of tools" for the state to move forward to
see Alaska's North Slope natural gas into the hands of Alaskans,
both in Fairbanks and the entire Railbelt. He stated that once
gas was available, the limits were only restricted by the vision
of Alaska's entrepreneurs. He asserted that Alaska could not
realize the benefits from natural gas until a pipeline was
built.
3:35:10 PM
REPRESENTATIVE MIKE CHENAULT, Alaska State Legislature, Juneau,
Alaska, co-sponsor of HB 4, thanked the committee members for
allowing the bill to come forward. He informed the committee
that the upcoming presentations on HB 4 would address the bill's
workings and how it operated. He asserted that the bill's
critical issues had been addressed. He affirmed that HB 4 was a
"box of tools" and continued Alaska down the path that the
sponsors started a couple years back with HB 369. The Alaska
Gasline Development Corporation (AGDC) had accomplished the
tasks that were put before it and it was not just through the
hard work that he and Representative Hawker had put forth. He
commended the efforts made by Senator McGuire and others. He
said the collective vision was how to bring gas to Alaskans. He
emphasized that it was important to look at all aspects, but
noted the statutes that were passed a number of years ago
presented limitations and the bill was a way to move forward. He
noted that many attempts had been made over the last 30 or 40
years with a number of projects that promised to bring gas to
Alaskans and help drive down fuel costs for Fairbanks, the
Railbelt, and the Kenai Peninsula. He said HB 4 would ultimately
provide options for the rest of Alaska and help drive down
exorbitant energy costs in rural Alaska.
3:38:35 PM
CHAIR GIESSEL announced that the committee would stand at ease.
3:40:47 PM
RENA DELBRIDGE, staff to Representative Mike Hawker, Alaska
State Legislature, Juneau, Alaska, said she would review the
sectional analysis for HB 4.
3:41:12 PM
CHAIR GIESSEL announced that the committee would stand at ease.
3:41:59 PM
MS. DELBRIDGE said it helped to talk about the bill by
segregating it into three sections that related to certain
concepts. She explained that most of the bill could be separated
into three areas as follows:
1. Sections that established AGDC as a standalone state
corporation that gave it its authorities and
responsibilities: bonding power, its mission, and its
charge to go forward. She added that standard boilerplate
things were addressed that included meetings and minutes.
2. Sections that try to resolve regulatory uncertainties and
the need to know upfront how a pipeline would be regulated.
She said the legislation created a new regulation chapter
under the Regulatory Commission of Alaska (RCA) for in-
state natural gas pipeline carriers. She explained that the
sections were extensive and included RCA's regulatory
authority. She added that the ability to empower contract
carriage was a change to the state's Right-of-Way Leasing
Act, particularly through the covenants that were included
in that act relating to common carriage. The bill would add
the ability to lease with promises to abide by the new
contract carrier covenants. She said relating to certainty
and regulatory issues, judicial review of state permitting,
leasing, and authorization decisions were addressed. The
sponsors believed that reasonable boundaries would be put
into place that provided an opportunity for Alaska to
challenge decisions and to have their voices heard, but
prohibit lawsuits that delayed or stalled a project during
the sensitive pipeline construction period.
3. Sections that address additional ways the state could help
facilitate the pipeline to keep rates down for Alaskans.
Included would be a waiver on state and local property
taxes during construction and to call upon cooperation from
other state agencies to provide priority assistance.
MS. DELBRIDGE said she would proceed with the sectional
analysis. Section 1 included findings and intent language. She
said the section found that an AGDC pipeline was in the best
interest of the state and required for the public convenience
and necessity. The finding came into play through the RCA when
they look at awarding a building permit or a certificate of
public convenience and necessity to a pipeline carrier. The
legislature's finding and action in setting AGDC out on the
mission supported the finding being made. The RCA would not be
required to make a redundant finding by double checking that the
legislature's intent was as intended.
3:46:17 PM
She said the findings and intent language also related to the
repositioning of AGDC from its current status as a subsidiary
corporation of the Alaska Housing Finance Corporation (AHFC).
The bill would move AGDC as an intact, standalone public
corporation of the state. She explained that it was on legal
guidance that the legislative intent was made very clear that
AGDC would be dissolved and reinstated. She specified that AGDC
would be located under the Alaska Department of Commerce,
Community and Economic Development (DCCED) for administrative
purposes only. DCCED would help advance AGDC's mission and
provide specific intent that the transfer would be treated as a
repositioning and not as a new entity creation. The intent and
findings also expressed the legislature's will that AGDC would
procure services, labor, products, and Alaskan resources from:
Alaska businesses, Native Corporations, and municipal
organizations when prices were competitive. AGDC would, to the
extent possible, hire Alaskans, establish hiring facilities, and
use the existing Department of Labor and Workforce Development
(DLWD) systems for training.
MS. DELBRIDGE said Section 2 was conforming as AGDC would be its
own standalone state corporation and AHFC no longer required the
ability to create a gas pipeline subsidiary.
She said Section 3 created the new corporation, providing the
statutory authority and duties. AGDC's location in DCCED would
be for administrative purposes only; that clearly meant only for
the need to work a future potential appropriation request
through DCCED. There would not be regular oversight or
involvement from DCCED. She explained that a seven member board
of directors would be created as the governing body. The
governor would appoint five public members with specific areas
of expertise in natural gas pipeline construction, operations,
marketing, finance, and large project management.
3:48:50 PM
She said the remaining two board members would be commissioners
or heads of departments. The governor would decide which
commissioner would be appointed to the board. She explained that
as long as the commissioners of revenue and natural resources
were signatories to a valid contract under AGIA, they may not
serve. The public board members would serve staggered five year
terms, require legislative confirmation, be removed at the
governor's pleasure, and vacancies would be filled in the same
way. Board members would receive $400 in compensation per day,
an amount that was in-line with most other state corporations.
The board would be required to meet on a regular basis, keep
minutes, hire an executive director, and hire legal counsel. The
corporation's personnel would be exempt from the State Personnel
Act. She said the section clearly spells out AGDC's purpose in
advancing in-state natural gas pipelines, as described in AGDC's
July 2011 project plan as follows:
· Making gas and associated non-oil hydrocarbons, such as
propane, available as soon as possible to Fairbanks,
Southcentral, and other communities.
· Attempt to develop projects that ship and deliver gas at
commercially reasonable rates.
She explained that as soon as AGDC was given its powers and
duties they could determine the following:
· Pipeline ownership and operating structure;
· Plan finance, ownership, and pipeline system operations;
· Exercise the state's existing right of eminent domain if
needed, only under the same terms as the state itself
required;
· Transfer or dispose of assets;
· Operated as a contract carrier;
· Invest funds.
MS. DELBRIDGE explained that once the initial pipeline was laid
out in accordance to the project plan, AGDC would be required to
analyze additional potential lines that connect to more
Alaskans. She said the section required disclosure of open
season results and specified the following:
· Company or entity names that signed up;
· How much capacity commitment each company or entity made;
· Length of individual contracts.
She said the section also related to confidentiality and
interagency cooperation. Other state agencies would assist AGDC
and give priority, except for requests made under AGIA due to
existing prioritization. She explained that AGDC was not to
duplicate the state's existing work, another way to try and
maximize that value that the state was getting out of the
gasline agency. She said AGDC would be able to withhold certain
information that it generated confidentially and treat the
information as an asset for the state; AGDC's tariff model,
field data, and route information would be considered assets.
She noted that once a pipeline was operational, the confidential
information would need to be disclosed as it may benefit other
Alaskans. She specified that AGDC would be able to sign
confidentiality agreements with private entities in order to
conduct commercial transactions, negotiate shipping terms, and
consider potential ownership models. She noted, per the
governor's request, intention to discuss with TransCanada and
other companies pursuing a large diameter export pipeline about
the possibilities of project alignment. She said the section
allowed AGDC to create subsidiaries, create the in-state natural
gas pipeline fund, and direct management. She stated that AGDC's
operating budget would be subject to the Executive Budget Act,
but financing and bonding finances would be exempt. She noted
that AGDC, in HB 369, was already exempt from the State
Procurement Code and the legislation would carry the exemption
over into AGDC's new corporate statutes. She said AGDC would be
able to issue bonds that were limited to their own backing. The
faith and credit of the state may not be pledged.
3:52:55 PM
MS. DELBRIDGE summarized sections as follows:
· Section 4 reiterated the procurement code exemption within
the actual procurement code;
· Sections 5 and 6 were conforming;
· Section 7 included definitions;
· Sections 8, 9, and 10 were all conforming and related to
right-of-way lease changes; those changes were made in
Section 11.
She explained that there were 14 covenants within the existing
state right-of-way lease statute and a lessee had to agree to
abide by those covenants. She detailed that all but three of the
14 covenants were very standard and would carry over to either
common or contract carriers. She said three covenants had very
strong common carrier language. The sponsors retained the
principal behind the three covenants, but removed the language
that required common carriage and therefore enabled contract
carriage as an alternative.
She disclosed that Section 12 directed the Alaska Department of
Natural Resources (DNR) to issue a state right-of-way lease at
no cost to AGDC. She explained that AGDC currently had a state
right-of-way lease and was paying the state $180,000. The cost
could be rolled into a tariff and the sponsors believed the act
was another way the state could make sure the eventual cost of
gas from the pipeline was as low as possible for Alaskans.
She summarized sections as follows:
· Section 13 limited the judicial review of state lease
permits and other authorizations;
· Section 14 was the personal act exemption;
· Section 15 subjected AGDC's officers and board to the
Public Official Financial Disclosure rules;
· Section 16 stated that if AGDC had information that was
allowed to keep confidential, that information was not
subject to release under the Public Records Act;
· Section 17 was conforming to the new RCA section.
She said Section 18 was related to the new RCA section and acted
as an additional backstop for the state's public utilities. It
would allow utilities to be preapproved for contracts that they
might have, not for shipment on the pipeline, but related to. An
example would if a utility purchased gas that was shipped on the
pipeline, or they stored gas and they had contracts for that,
they would be able to recover those costs before they sign those
contracts, that then relate to the contract someone shipping the
gas was paying.
3:55:25 PM
MS. DELBRIDGE noted that Sections 19 and 20 were conforming to
Section 21, which was a new chapter of state law. She said the
new regulatory framework applied to in-state natural gas
contract carrier pipelines. She said the bill's sponsors
believed that the regulatory framework was structured to provide
appropriate checks and balances to protect people that sign
contracts for gas shipped on the pipeline, the pipeline itself,
public utilities, and Alaskan rate payers. She detailed that the
chapter had a number of boilerplate, RCA authorizations that
were needed in order for the RCA to carry out the specifics as a
general overview. She said the section would require the RCA to
regulate and oversee an in-state contract carrier gas pipeline
regarding permits, disputes about open season conduct or terms
of an expansion, and gas supply to utilities. She explained that
if a public utility was not receiving the gas it required for
some odd reason, malfunction, or dispute where public health and
safety was threatened, the RCA could step in and takeover to
make sure the public utilities get what they needed to protect
the public. She noted an example if Fairbanks was not receiving
gas in January. She explained that the section required the
following for awarding pipeline service:
· Open seasons for awarding pipeline service;
· Certain elements that a carrier would need to put forth
when they were noticing and having an open season;
· Defined the three ways that someone could get pipeline
service: taking the initial tariff that the pipeline puts
out that was available to anybody, negotiate a rate, or
opting to sign a presubscription agreement before an open
season that generates the same kind of precedent agreement
that undergoes RCA review;
· Carriers file an initial recourse tariff before signing
contracts with potential shippers;
· Revisions are approved by the RCA.
She said in dealing with recourse tariffs, the carrier would
need to provide all of their cost data to the RCA to verify that
their rates were in fact cost based. She explained that the RCA
would then look to three very key elements within the rates as
follows:
· Important levers for Alaskans in conjunction with pipeline
tariffs;
· Make sure that the rate of return, capital structure, and
depreciation method were reasonable as evidence by being
within a range of similar pipeline findings by the RCA or
Federal Energy Regulatory Commission (FERC);
· Weigh the risks of the pipeline.
MS. DELBRIDGE explained that a new pipeline would probably
generate a higher rate of return because it was riskier than a
pipeline expansion. She summarized that the RCA would review
recourse tariffs and grant approval or denial. Ongoing revisions
would be appropriate once a pipeline starts operations. The
carrier would be required to submit their current cost data to
the RCA for review on a tri-annual basis to ensure actual cost
data was supported.
3:58:57 PM
She said it was highly unlikely that a pipeline would earn a
rate of return in excess of what was allowed. However, there was
nothing that explicitly prohibited a higher rate of return and
some changes were made in the House to accommodate that. If the
pipeline was earning a higher rate of return than the RCA had
said it could, the excess profit would be required to be put
into a segregated operating reserve account to help fund things
in other years when operations were not generating what was
needed. The segregated operating reserve account would be
allowed to grow until it reached 20 percent of the pipeline's
annual average operating cost. If extra profits were generated
beyond what was allowed, the money would be used to immediately
pay down the rates that contractual shippers were paying. She
stated that once shippers in an open season were through the
presubscription agreement and sign a precedent agreement, those
agreements would go to the RCA for review. The standard of
review was whether or not those were just and reasonable. The
evidence of the contract between two willing parties that were
unaffiliated, being just and reasonable was defined in HB 4 as
being at "arm's length." The principal was that if two people,
two entities were willing to settle on a fair price amongst
them, and there was no fraud or duress, and they were not
affiliated, then that was a reasonable price. If the parties
were affiliated, the bill required a much deeper level of review
and extra scrutiny. She said at the RCA, a pipeline would need
to go out and get a Certificate of Public Convenience or
Necessity (CPCN), similar to a building permit for pipelines.
The RCA required a CPCN for most infrastructures that they
regulated and for pipelines it was an important marker as to
whether or not an applicant had what was needed in place to
provide the service that the RCA was granting them the authority
to provide. She said there were a few special findings made for
an AGDC applicant for a CPCN in HB 4. She reiterated Section 1
regarding findings and intent, finding a pipeline that AGDC does
as required by the public convenience and necessity, a finding
that was typically made by the RCA, would be made through the
bill for the RCA. She asserted that the legislature had created
AGDC to do pipelines, equipped it with a strong governing
structure, and presumably funded the corporation to do its jobs.
She explained that the bill made the finding for the RCA that
AGDC was managerially and financially fit, willing, and able to
provide said service. She summarized that the RCA, for an AGDC
pipeline, would have to determine the technical fitness and
ability of AGDC to carry out the service and do the pipeline.
For a non-AGDC applicant, they would have to go through the
entire findings process.
4:02:13 PM
MS. DELBRIDGE summarized sections as follows:
· Section 22 addressed property tax exemption, if AGDC owned
or financed any part of a pipeline project, state and local
property taxes would be exempt during construction.
· Section 23 was a rather length repealer. When HB 369
passed, that became AS 38.34, much of that statute
transitioned into AGDC's corporate structure and some parts
were repealed. The repealer would also repeal the Alaska
Natural Gas Development Authority (ANGDA).
· Section 24 was an additional repealer related to the
ANGDA's repeal.
· Section 25 expressed transition language and legislative
intent. AGDC already had the right-of-way lease from the
state and the intent was clearly there that if the
legislature changed the covenants to allow contract
carriage; the right-of-way lease would be amended to
reflect that. The intent was also clear that the
legislature expects the governor to appoint his new board
of directors for AGDC within 90 days. The intent was that
the repositioning of AGDC would not interfere with or delay
AGDC's work. AHFC would remain intact as the leadership of
AGDC until the new board was up and running. AHFC and DCCED
should provide all possible assistance to AGDC's new board
as it gets up and running in order to not add to delay in
work.
· Section 26 was revisor's instructions.
· Section 27 was an immediate effective date.
MS. DELBRIDGE said the legislator in 2010 passed HB 369 and
charged AGDC with the mission of getting Alaska gas to Alaskans
that was clean, reliable, and reasonably priced. She remarked
that electric and home heating costs were very high in parts of
the state. She noted that costs were increasing and security was
now challenged. She emphasized that gas to Alaskans would mean
economic and industrial development for the state.
4:05:13 PM
She said the specific goals of HB 369 were to build a team under
AHFC's leadership and to consolidate the gas pipeline work that
the state had done to date on an in-state option. She explained
that the team was to fill in the gaps, figure out what was
missing in order to actually get a pipeline project going,
figure what the optimal route was that would benefit the
greatest number of Alaskans, and then report back to the
legislature with a plan on how to get that done. She said AGDC
delivered the report in July 2011, and found that an in-state
gas pipeline, even with the size constraints put forth under the
Alaska Gasline Inducement Act (AGIA) of 500 million cubic feet
per day (500 MCFD), was actually possible. AGDC looked at the
potential price of gas to customers in Fairbanks and
Southcentral. The findings showed Fairbanks' cost could be
significantly lower and Southcentral's rates would be
competitive at the point in time the pipeline arrived.
SENATOR FRENCH asked what the initial price estimates were.
4:06:41 PM
DARYL KLEPPIN, Commercial Manager, Alaska Gasline Development
Corporation, Anchorage, Alaska, asked if the Senator's question
was in reference to the tariff.
SENATOR FRENCH replied no. He said he was referring to Ms.
Delbridge's reference to the fact that gas would be cheaper in
Fairbanks and competitive in Anchorage. He asked what the all-in
consumer price was.
MR. KLEPPIN replied that the revised 2012 project plan's tariffs
at the Fairbanks city gate were between $4.25 and $6.00. He
noted that the purchase price for North Slope gas was assumed to
be $2.00 with a local distribution charge of $2.00. He said all-
in, burner-tip price in Fairbanks was between $8.25 and $10.00.
The estimated burner-tip price in Anchorage was between $9.00
and $11.25.
SENATOR FRENCH asked to clarify that the estimate was for a 500
MCFD line, not a 250 MCFD line.
MR. KLEPPIN answered yes.
SENATOR FRENCH asked what the numbers would be for a 250 MCFD
line.
MR. KLEPPIN replied that assuming the same capital cost, the
tariffs would be roughly twice as much. He noted that redoing
pipeline sizing with capital changes to compute a lean gas
scenario had not been calculated.
4:09:55 PM
MS. DELBRIDGE said part of the 2011 Project Plan that was the
impetus for legislation to encourage AGDC advancement was to
provide AGDC with the ability to make firm, long term contracts
for the pipeline's capacity in order to support financing. She
explained that certain legislative action would be required to
provide AGDC with the authority to do the following:
· Determine pipeline ownership structure;
· Work confidentially with private sector partners;
· Operate as a contract carrier;
· Decide rates and tariff terms.
She said AGDC further recommended the following to the state:
· Consider waiving previously specified property taxes and
state land lease fees;
· Be provided with sufficient funding in order to carry out
AGDC's mission it was charges with, including the creation
of a pipeline fund that would allow AGDC to draw on to pay
pipeline contracts with engineering, design, and commercial
work companies;
· Limitation on judicial review that was similarly provided
for both the Trans-Alaska Pipeline System (TAPS) and AGIA.
She explained that HB 4 was generated from a culmination of
previously stated needs with additional ways the bill's sponsors
believed the state might be able to support. She said HB 4 would
give further direction to AGDC by transferring from the existing
statute the joint in-state gasline development subsidiary
provisions that were in HB 369 and move them over to the new
independent AGDC. She asserted that HB 4 would provide the
framework for AGDC to serve as Alaska's natural gas pipeline
corporation. The sponsors made sure that HB 4 would empower AGDC
to not just do the pipeline as described in their project plan,
but to have the ability to do other pipelines that were
commercially reasonable and beneficial to Alaskans. She said HB
4 would maximize the state's efforts in gas pipeline
development, resolves regulatory uncertainties, supports future
development of Alaska's resources, includes AGDC's
recommendations, and maintains the momentum.
MS. DELBRIDGE noted the following energy challenges:
· Southcentral gas supply and costs were increasingly
uncertain;
· Fairbanks' energy costs were as high as ever;
· Fairbanks' significant air quality problems.
She informed the committee that AGDC's estimated 2.5 percent
inflation rate would equate to $200 million being added annually
to the project's cost. She said there was continued expectation
for the state to find ways to offset high energy costs and
therefore the sooner the better if there was in fact a proposed
solution on the table.
She said specifically under HB 4 that AGDC would keep working on
the in-state pipeline as described in the project plan.
Sufficient shipper support would be required as evidenced by the
long term contracts signed in an open season to pipeline
financing. She said should HB 4 pass during the current session
with adequate funding, the target date for gas flowing would be
in 2019. She affirmed that AGDC would work with TransCanada and
the North Slope producers to see if in fact, as the governor
requested, potential alignment for the two projects. She noted
that uncertainty remained for alignment as there had not been a
development commitment.
4:13:32 PM
SENATOR FRENCH asked if there were aspects of the bill that
directed the two projects to talk, communicate, and try to
merge.
MS. DELBRIDGE answered that there was no specific provision. She
pointed out that the bill would provide the ability to sign
confidentiality agreements that would be needed in order to
proceed. She inferred that AGDC had been asked to pursue
alignment conversations by the governor's recent public remarks.
SENATOR FRENCH replied that the provisions were philosophical
but not statutory.
MS. DELBRIDGE answered correct.
4:14:13 PM
SENATOR MCGUIRE pointed out that there had been previous bills
in the Senate and the House. The Senate bill contained the
language that said the AGIA line and the AGDC line would be
compatible and not competitive. She explained that the bill was
ultimately merged into HB 369. She asked if adding line-
compatibility as a friendly amendment should be carried forward.
MS. DELBRIDGE replied that she was sure the bill's sponsors
would be happy to discuss the topic with Senator McGuire. She
explained that the sponsors believed that the compatibility
spirit carried on. She remarked that nothing in HB 4 prohibited,
blocked, or detours another project from going forward. She
asserted that AGDC was tasked very clearly with getting gas to
Alaskans in Fairbanks, Southcentral, and other communities as
possible at the lowest possible rates. She stated that if there
was another project opportunity on the table, AGDC would have
the mission and be able to amend what they were doing in order
to pursue an alignment opportunity that generated the greatest
benefits to Alaskans.
She mentioned that under HB 4, AGDC would also be prepared to
participate in other frameworks, including a possible Lower 48
pipeline. She said the Lower 48 pipeline was not currently being
pursued, but AGDC would be able to tailor its efforts to a spur-
line. She noted that once the mainline was complete, AGDC would
evaluate other pipeline opportunities that could connect other
communities, industrial developments, or another standalone
pipeline in other areas of the state.
4:16:02 PM
JOE DUBLER, Vice President, Chief Financial Officer, Alaska
Gasline Development Corporation, Anchorage, Alaska, addressed
Senator French's question and stated that AGDC sees the
formation of the board containing two commissioners and five
members of the public appointed by the governor to be a very
strong governing body that would address the issues that Senator
French had raised as far as aligning the two projects. He said
the governor's appointed seven member board would set the
direction for AGDC and lead the corporation.
MS. DELBRIDGE reiterated that Section 3 would establish AGDC as
Alaska's gas pipeline corporation. She explained that HB 4 would
move AGDC from its present location as a subsidiary of AHFC to a
standalone corporation located under ACCED. She specified that
AGDC's location under ACCED would be for administrative purposes
only. She addressed the AGDC governing board and noted that the
House Finance Committee added the two commissioners to the
board. She explained that the bill's sponsors that adding the
two commissioners was a strong step to greater AGDC
accountability to Alaskans in their broader interests in
pipeline development.
4:17:31 PM
SENATOR FRENCH asked to confirm that the public members of the
AGDC board would be serving in a part-time capacity.
MS. DELBRIDGE answered that the public members could have a job
and serve as a part-time board member. She explained that the
public members may also be retired experts in their fields and
noted that there were quite a few different possibilities. She
noted the public board members would be required to have
expertise in natural gas pipeline marketing, operations,
development, general finance, or large project management.
SENATOR FRENCH asked where one would go in Alaska to find
someone that has experience in natural gas pipeline
construction. He noted that there had only been five or six
large projects done in the state's history. He asserted that it
was a fairly narrow pool of people to choose from and noted many
may be currently employed in the industry. He said there would
be many fascinating questions about whether the state could
actually pull people into the AGDC board and ask for their
service when they have fulltime day jobs.
MS. DELBRIDGE answered that some AGDC board candidates may have
gained their experience in certain fields working elsewhere and
have returned to Alaska. She agreed that some individuals might
be in industry and might decide there was an opportunity to be a
part of something bigger for the state. She said the governor
would have to deal with candidate backgrounds when he makes the
AGDC board appointments. She declared that the sponsors firmly
believed that there were many Alaskans that had tremendous
experience in a number of gas pipeline related fields.
4:19:57 PM
SENATOR FRENCH surmised that should HB 4 be passed, the earliest
the AGDC board could start functioning would be after the
legislative approval process for the 2014 session. He asked if
the appointed AGDC board members could meet prior to approval,
similar to the Alaska Department of Fish and Game and other
boards that were allowed to meet before being approved.
MS. DELBRIDGE answered yes.
SENATOR FRENCH responded that the appointed board members could
be taking official action on major questions that were presented
before the legislature had a chance to respond. He noted a
scenario where a relationship could be too close for a certain
type of decision.
MS. DELBRIDGE answered that his concerns were acknowledged. She
stated that the sponsors believed that the governor would be
responsible in making the AGDC board appointments much as he
does with most of his other appointments and be cognizant of the
potential conflicts or issues that would come up in a
confirmation hearing.
She said HB 4 provided very clear statutory abilities to AGDC's
corporate functions. She reiterated that AGDC could enter into
ownership and operating partnerships. AGDC may be a part-owner,
whole-owner, non-owner, but AGDC expected to partner with a
pipeline company to build and operate the pipeline. She asserted
that AGDC had the ability under HB 4 to make ownership decisions
in the best interests of getting gas to Alaskans at the lowest
possible rates.
SENATOR FRENCH asked if AGDC could reach out and contract with
TransCanada to build the gas pipeline.
MS. DELBRIDGE answered correct. She said retaining flexibility
for AGDC was the sponsors' intent and not prescribing how
precisely things had to work realizing that there were many
eventualities and potential outcomes over the course of the next
few years. She said a corporation needs to be able to handle,
needs to be agile and flexible and responsive to what is
happening.
4:22:40 PM
She said AGDC also had the ability to create subsidiaries. She
explained that one of the potential subsidiaries that AGDC may
create would be a very common thing for a pipeline carrier to do
which was to create a subsidiary that was a gas marketer or
aggregator. She detailed that a gas marketer would not mean
someone that goes out and tries to tell other people how great
the gas was and they should buy it, not from a public relations
standpoint, but from an aggregator standpoint. She remarked that
the subsidiary might purchase gas at the beginning of the
pipeline, ship it through pipeline, and then sell it to several
customers that may not have the credit worthiness to actually
sign long term shipping commitments on their own or that
otherwise may want some greater flexibility than the long term
contracts would provide. She noted that it was very common for
transportation pipelines to have marketing subsidiary
corporations.
MS. DELBRIDGE said AGDC could also issue revenue bonds. She
explained that the revenue bonds would be limited to AGDC's own
backing and may not pledge the faith and credit of the state.
She disclosed that the bonding part of AGDC's legislation
included the ability to create a capital reserved fund that was
backed by the moral obligation of state. She pointed out that
the moral obligation provision would only be invoked after AGDC
came back to the legislature in the future for a law expressly
allowing them to go and use a capital reserve fund that was
backed by the moral obligation of the state. She set forth that
AGDC may or may not need to create a capital reserve fund. She
said the reserve fund would allow AGDC to finalize the numbers
and bring the legislature the hard and fast facts behind the
need and have the legislature make the determination at that
point in time.
SENATOR FRENCH stated that he knew the bonding authority and
capital reserve fund was a subject of a lot of discussion in the
House. He asked if specific page and section references.
MS. DELBRIDGE responded that page 16 was the bonding authority
and the capital reserve fund was on page 20. She specified that
the capital reserve fund had language that required expressed
legislative authorization for its use between pages 17 and 23.
SENATOR FRENCH replied that he recalled reading HB 4 for the
first time and was shocked to see a sentence that stated, "The
enactment of the section does not express that authorization."
He stated that he did not know if that had ever been used before
in a statute, but thought the sentence was unusual, interesting,
and good.
MS. DELBRIDGE stated that AGDC would be able to enter into
confidentiality agreements. She explained that confidentiality
agreements were needed in order to use with potential pipeline
shippers, ownership partners, operating partners, and people
that you go to finance a pipeline through bond issuances. AGDC
would generate a lot of information on its own using the state's
money. She explained that the information would be an asset of
the state, provided that the information was not released
publically and went towards pipeline development.
4:25:28 PM
She said an example would be AGDC's tariff models where
information would be derived from field studies and route data
collection. She explained that HB 4 would allow AGDC to keep the
tariff models confidential and be considered an asset of the
state that should be protected while it was a value. She noted
that once a pipeline was operational, the tariff models would
have less value from a confidentiality standpoint and
potentially could be something that other Alaskans find interest
in for right-of-way purposes. She informed the committee that
legislation would call on AGDC to release its confidential
information after that point in time, except for anything that
would hurt the state's economic interest.
She said HB 4 would allow AGDC to exercise the state's existing
power of eminent domain. She explained that the state allowed
eminent domain to be issued for natural gas pipeline. She
emphasized that eminent domain was a last resort once good faith
negotiations could be demonstrated to have unfortunately failed.
She detailed that the process would go through a court system
with the entity being required to supply fair compensation to
the property owner in conjunction with the taking under eminent
domain.
SENATOR FRENCH asked if the Alaska Railroad Corporation (ARC)
had eminent domain.
MS. DELBRIDGE replied that she would have to follow up. She said
she believed ARC had eminent domain, but noted that the Knik Arm
Bridge and Toll Authority (KABATA) had eminent domain.
SENATOR FRENCH confirmed that KABATA had eminent domain. He
asked if there were any others besides ARC and KABATA.
MS. DELBRIDGE responded that Mr. Dubler mentioned that AHFC had
eminent domain.
SENATOR FRENCH asked if AHFC had ever used eminent domain. He
noted a reply from the gallery that AHFC had not used eminent
domain.
CHAIR GIESSEL asked if any of the attorney generals that might
be online could answer Senator French's question about eminent
domain.
SENATOR FRENCH announced that he knew KABATA had it and trusted
Mr. Dubler to know that AHFC had it. He stated that his only
question was if ARC had eminent domain.
4:27:32 PM
BONNIE HARRIS, Assistant Attorney General, Civil Division, Oil,
Gas and Mining, Alaska Department of Law, Anchorage, Alaska,
stated that she did not know if ARC had ever used eminent
domain.
SENATOR MICCICHE asked to be directed to the section that talks
about the specific confidential information and when it becomes
public after operation of a pipeline.
MS. DELBRIDGE replied that the ability to keep information
confidential was on pages 10, 11 and 13, lines 4 through 7. She
said page 13 was the part that called on the project once
operational to release certain information.
SENATOR MICCICHE stated that confidentiality agreements were
important and noted that some Alaskans were concerned. He
remarked that something different about HB 4 was that AGDC would
essentially be operating as a state corporation. He said
confidentiality agreements were very typical in pipeline
projects and important in the duty of negotiating. He remarked
that the pipeline was not a secret project and confidentiality
agreements were just the way it was done. He asserted that what
was unusual was that the information would become public
afterwards.
MS. DELBRIDGE concurred with Senator Micciche. She said it was
very clear that AGDC's information was self-generated. She
explained that confidentiality agreements with another entity
were going to determine whether or not the information that was
protected between a private party and AGDC could ever be
released. She informed the committee that releasing confidential
information would depend on the entity and what kind of
information was discussed. She said the intent of the sponsors
was to make sure that the private sector was willing to engage
with AGDC. If there was any possibility that a judge might come
in at some point and decide that certain information should have
been released and was not, then there would be a very serious
risk that the private sector would never be engaged with. She
noted conversely that information that the state had paid for to
be developed as an asset might benefit other Alaskans and was
very important to be made available to the public.
SENATOR FRENCH stated that he would have a couple of questions
for the Alaska Department of Law (DOL) about how this would work
and who would be making decisions, who would be reviewing
things, and what actions might happen in court under a judge's
determination versus the determinations made by the corporation
with respect to what was confidential and what was not.
MS. DELBRIDGE replied that the DOL had worked very closely with
the sponsors on the bill's language and she noted Cori Mills
might be able to discuss the topic.
4:31:06 PM
CORI MILLS, Assistant Attorney General, Legislative Liaison,
Civil Division, Alaska Department of Law, Juneau, Alaska, stated
that she was available to answer questions.
SENATOR FRENCH asked what would happen if someone filed a public
records request to see confidential gas pipeline information
that was in the hands of AGDC and AGDC said no.
MS. MILLS replied that in a typical process and the way it was
outlined in the bill, the confidentiality provisions make it so
that the information was not subject to Alaska's Public Records
Act. Unlike other information where it may just be exempt from
disclosure under certain circumstances and then a privilege log
would be provided, AGDC's confidential information would not be
subject to the Public Records Act and they would provide some
sort of denial that the information did not fall under the
Public Records Act. She said in the noted case, it would
probably then be a court challenge to find out if in fact the
information properly falls under the confidentiality provisions.
SENATOR FRENCH asked if that was how it worked where a judge
reviewed the confidential information and determined that the
information was indeed confidential under the statute, or would
it just not be turned over to a judge for his or her review.
MS. MILLS replied that she could not say for sure what the
procedures would be. She surmised that like other public records
issues, a judge would probably review the confidential
information "in camera" so that it was not disclosed and a
decision would be made. She said the confidential information
would not necessarily be shown to the judge unless the judge
decided he needed to see it, then that would occur.
SENATOR FRENCH replied that his safety-valve was that at some
point a judicial officer would review the material and sort of
confirm that the confidential information was what was meant by
the language in the statute to be covered and not meant to be
disclosed, because it was possible that AGDC in the future could
take a far more expansive view of its confidentiality provisions
then what we were trying to write down here today.
MS. MILLS responded that was their understanding of how this
would function.
4:33:46 PM
JOHN HUTCHINS, Assistant Attorney General, Civil Division, Oil,
Gas and Mining, Alaska Department of Law, Juneau, Alaska,
replied that if there were a lawsuit challenge in the adequacy
of someone's response to the public records request, there would
be a typical litigation discovery. He explained that if there
was a discovery, the judge would have the normal powers of a
judge in civil litigation to review materials and determine
whether they were in fact confidential or not.
4:34:29 PM
MS. DELBRIDGE pointed out that it was on the recommendation of
DOL that confidentiality be fully separated from the records act
instead of subject to the logs and what not.
SENATOR MICCICHE asked if AS 40.25 was information that was
available for public records requests.
MR. HUTCHINS answered yes. He explained that AS 40.25 was the
Public Records Act.
SENATOR FRENCH asked on the day the pipeline becomes
operational, would there be anything left that was still
confidential or does everything suddenly become inspectable.
MR. HUTCHINS answered that probably the biggest category of
things that still would be confidential was information obtained
through confidentiality agreements.
SENATOR FRENCH asked what would suddenly be available for
inspection and what would still be kept secret.
MR. HUTCHINS replied that principally what was kept secret was
information that was developed by the corporation itself in the
process of studying and constructing the pipeline. What was
still kept secret would be information that was provided by
third parties pursuant to a confidentiality agreement.
SENATOR FRENCH responded that he misunderstood. He asked if the
first part was now suddenly available.
MR. HUTCHINS answered yes.
SENATOR FRENCH replied that with all of the background work the
corporation did was now going to be available, what was not
available were trade secrets or materials that were turned over
by oil companies or gas shipping companies that were filed under
a confidentiality agreement.
MR. HUTCHINS answered yes. He explained that the statute did
describe the previously described circumstances on page 13,
right below subparagraphs one and two.
4:36:57 PM
SENATOR FRENCH asked to verify that trade secrets or materials
that were turned over under a confidentiality agreement would be
kept secret.
MR. HUTCHINS answered yes.
SENATOR FRENCH read from page 13 as follows:
If it was determined that maintaining the
confidentiality was necessary, protect the economic
interest, the corporation, disclosure would violate
another provision of state law, fair law in terms of
the confidentiality agreement.
He stated that since the economic interest of the corporation
was building an in-state gas pipeline, he asked for an example
of something that would still be hidden. He reiterated that the
economic interest of the corporation was to build a gas
pipeline.
MR. HUTCHINS replied that he was probably not close enough to
the business of pipeline construction to give examples.
MS. DELBRIDGE replied that she believed if AGDC developed a
proprietary tariff model that they anticipated using on a future
pipeline in a relatively near sense; that may be something that
had commercial value that AGDC would like to protect and move
forward. She said alternatively, if AGDC had collected data
along the right-of-way and someone wanted to put a cellphone
tower on a segment of the right-of-way and would benefit from
having that information, and AGDC no longer considered it a
proprietary asset because they had the right-of-way, then the
intent was to make sure that that kind of information was
disclosed so that Alaskans could use it.
4:38:22 PM
SENATOR MCGUIRE noted one of the issues with the pipeline's
earlier bills was maintaining the legality of keeping below the
500 MCFD threshold while the sole-source contract to AGIA was
still in play. She asked if the sponsors felt satisfied with HB
4 moving forward and the independence of AGDC that the state
could do its due diligence. She noted that there would be two
commissioners on the board itself. She inquired if the sponsors
felt comfortable that DOL was able to provide enough oversight
in monitoring the activities of AGDC as a quasi-public
corporation in how they would carry out their business
activities, their open seasons in making firm transportation
offers, their compliance with the 500 MCFD limit, and the
possible result in treble damages.
MS. HARRIS replied that she did know a lot about AGIA, but noted
that regulating and monitoring was more of a question for the
regulatory provisions that would be RCA. She explained that DOL
would not monitor the AGDC pipeline to see if it was violating
the AGIA 500 MCFD limit.
4:40:27 PM
STUART GOERING, Assistant Attorney General, Civil Division,
Alaska Department of Law, Anchorage, Alaska, announced that he
represented and advised the RCA, but noted that he was speaking
to the committee in his capacity as an assistant attorney
general. He explained that the RCA had no authority under either
existing law or under the proposed AS 42.08 Contract Pipeline
Carrier Statute, to monitor or investigate compliance with laws
outside of the scope of the regulatory statutes which would be
AS 42.05, AS 42.06, and the proposed AS 42.08. He explained that
the RCA does actually issue pipeline certificates that list a
certificated capacity and that was dependent upon what the
applicant asks for. He explained that unless someone files a
complaint, you would not typically see any kind of field
investigation to verify that that certificate limitation was
being observed.
SENATOR MCGUIRE asked if Ms. Delbridge had an answer to the
question that proves exactly her point, that the RCA would not
be enforcing the 500 MCFD limit. She emphasized that she wanted
to be clear about her previous statement. She stated that her
second point pertained to the two projects as either merging or
not merging. She commented that she was comfortable with either
answers and that was why she supported the bill. She asserted
that the legislature had to be careful to not put the state in
legal jeopardy of treble damages. She said she wanted to be
careful and have someone from Attorney General's office
following AGDC as a quasi-public corporation in their
activities. She noted that Dan Fauske had that "helping hand" in
order to be clear that he did not overstep his boundaries and
emphasize that AGDC would not exceed 500 MCFD. She reiterated
her intent for clarity regarding not putting the state in legal
jeopardy.
MS. DELBRIDGE replied that the Senator had an excellent question
and it was one that the sponsors worked hard on to balance the
competing issues. She stated that there were no less than four
places in the legislation that says AGDC could not do a pipeline
or expand a pipeline that would put the state in violation of
AGIA; that was on AGDC's corporate mission, Section 3, page 10,
lines 9-12. She addressed the Right-of-Way Leasing Act covenant
section that specified the state's issuance through DNR of a
right-of-way lease required that AGDC may not, the lessee,
violate AGIA with the project design; page 31, lines 26-30. She
referred to the regulatory section that two places required
expansions on commercially reasonable terms and affirmed that
expansions may not result in a violation of AGIA. She explained
that the intent was to look out for the future contingencies by
requiring an expansion on commercially reasonable terms without
causing something to be in violation. She said the Legislative
Affairs Agency (LAA) worked very hard with DOL and AGDC on how
to actually word the language in the bill regarding AGIA
compliance.
4:44:33 PM
She said she would read the language to the committee from page
49, line 11. She explained that the language was matched up from
the bill's four instances as follows:
You cannot cause the pipeline to be a competing
natural gas pipeline project as defined in AS
43.94.40, which is AGIA, unless the project for which
a license is issued under AS 43.90, AGIA, has been
abandoned, or is no longer receiving the inducements
in AGIA.
MS. DELBRIDGE explained that the previously stated language was
important because the AGIA statute might still be on the book,
but you may not have a valid licensee and if you do not have a
valid licensee, then it was LAA's opinion that the state was not
going to be violating a license that prohibits them from
supporting a project that competes.
She said she would be happy to supply the committee with LAA's
opinion related to AGIA, parts of it dealt with the concept that
the state may not support a project designed to carry more than
the AGIA limit. She emphasized that AGDC was clear that they
were statutorily not to design a project that would put them in
potential violation of AGIA. She summarized that the sponsors,
DOL and AGDC's attorneys felt very comfortable with the language
in the bill.
SENATOR MCGUIRE appreciated Ms. Delbridge's response and noted
that it answered her first question. She stated that there was
absolutely no need to put the language that was contained in the
merger of SB 287 and HB 369 in the bill that says that any
project should be compatible and not competitive because it was
stated even more clearly on page 49, lines 11-13, and other
parts as well.
4:46:40 PM
She noted that AGDC's board would be a separate corporation and
the state would be "letting go of the reins." She asked at what
point the AGDC board would have the ability to let go due to the
recognition that the Alaska Pipeline Project (APP) was not
compatible due to various constraints and simply move forward
with the plan that was crafted by Mr. Fauske and his team. She
said she wanted AGDC to continue merger consideration. She
stated that Alaskans would love to see the value, even if we did
not vote for AGIA, for the fair value of the $500 million to be
realized and certainly to have more from a larger pipeline. She
recognized that there were timeline considerations and asked how
AGDC would be able to move forward.
MS. DELBRIDGE replied that AGDC's purpose was to continue
advancing the line as described in their project plan. She
explained the project's plan was to go with an open season next
year and conclude the end of 2014 or 2015. She specified that at
the end of open season, AGDC would have precedent agreements
with shipping commitments on the table and at that point AGDC
would probably need to make some choices. She said the sponsors'
point of view had repeatedly been stated that an in-state
pipeline needed to continue. She explained that the sponsors
realized that a merged or larger project could be even more
beneficial, but the sponsors had not seen any firm commitments
to date. She noted that the sponsors had repeatedly stated that
they were not willing to wait forever. AGDC was on a strong
timeline and either APP was clearly going forward or the
alternative was getting Alaska gas to Alaskans in addition to
providing an export opportunity for large volumes to other
markets in the future when the producers decide that was an
option they would want to pursue.
SENATOR MCGUIRE asked if the aggressive timelines were the
timelines that were in the original bill that was merged and
sent forward, but modified and updated.
MS. DELBRIDGE answered that she believed AGDC tried very hard to
meet the timelines. She explained that AGDC found out very
quickly that if they allowed a project to be timeline or
schedule driven, the project would be placed at real risk from a
large project management prospective. AGDC appreciated the
legislature's sense of urgency, but wanted to make sure that it
was also done with the greatest chance of success as possible.
When AGDC issued their project plan in July 2011, they did amend
the date and were candid about the fact that unfortunately there
was not a way to be getting gas to Alaskan at that original
timeframe. She stated that AGDC was quite confident that through
their use of stage-gated approaches and large project expertise,
they would be able to deliver gas starting in 2019.
4:50:31 PM
She said Senator McGuire pointed out a desire to realize the
value of the half billion dollars that the state committed to
its licensee under AGIA. She stated that her understanding was
that a large part of the work that the state had reimbursed
TransCanada to date was focused on the northern section of the
route. She noted that the initial consideration was on a line to
the Lower 48 and it would veer off from where the AGDC pipeline
would be. Therefore a lot of TransCanada's work on a piece of
the pipeline route would be applicable to another project as
well. She said if AGDC was able to enter into confidential
agreements and share information, it was the sponsors' hope that
TransCanada and others would be supportive in sharing the air
quality data or whatever with AGDC. She said Mr. Dublar could
fill the committee in on the extent of any discussions to date.
She explained that the sponsors also did not want to see the
state chalking up the investment as a loss and believed that the
projects could be very compatible and leverage each other.
4:51:48 PM
MS. DELBRIDGE continued on page 11 and said AGDC under HB 4
would be exempt for the State Procurement Code. She asserted
that AGDC believed that following the State Procurement Code
procedures would add significant time and cost to its process.
She noted that HB 369 did exempt AHFC's subsidiary for gaslines
from the State Procurement Code, so HB 4 would be a
repositioning of the provision. She said AGDC would be exempt
from the Alaska's State Personnel Act and noted the anticipation
to hire a great number of people through contracts for project-
specific time bounded work. She noted that AGDC would need to be
flexible and have the greatest ability to get the expertise
onboard as soon as they need it.
SENATOR FRENCH stated that the salaries for some of the AGDC
employees had been in the public eye recently because they were
fairly high. He asked what oversight the legislature would have
if AGDC continued down the path of highly rewarding employment
contracts.
MS. DELBRIDGE asked that Mr. Dubler come forward to respond
about the AGDC salaries. She said she believed generally
speaking that AGDC would have the same level oversight it
currently had as a subsidiary of AHFC. She explained that AGDC
was part of a public corporation of the state and was governed
by a board that was appointed by the governor, including
commissioners that always retained some level of oversight into
that.
4:53:29 PM
MR. DUBLER replied that the salaries Senator French noted were
indicative of the market salary for specific types of employees
and one of the reasons AGDC was looking for exemptions from the
state Procurement Code. He explained that going out to find a
candidate that could work on engineering or run an engineering
plan for a major facility on the North Slope to process natural
gas, the low bidder probably would not be one's first or wisest
choice. He stated that candidates share their compensation
levels and negotiations proceed from that point. He noted coming
from a state-background and was shocked when he first saw some
of the rates, but conceded that was what the industry
compensation levels were. He said an intention to hire the best
in order to make sure the pipeline project moved forward meant
competing with ExxonMobil, BP, and ConocoPhillips.
SENATOR FRENCH asked how much of the salaries were going to be
paid with state money, how much would be paid eventually with
the pipeline's proceeds, where the breaking point was, and how
folks who eventually buy the gas would benefit from the high
salaries.
MR. DUBLER replied that the $400 million requested by AGDC would
get them to "sanction" by 2015. He explained that when project-
sanction occurred after a successful open season, AGDC would
look for a buyer or a builder owner-operator for the pipeline.
At that point the cost would come from either bond proceeds from
the builder owner-operator that takes over the project or the
state could decide to move forward without an outside agency and
continue to fund the project. He explained that the benefit from
hiring expertise was comparable to the expense of education
versus the higher cost of ignorance.
4:56:26 PM
SENATOR FRENCH replied that he used the same argument as Mr.
Dublar noted and could not get more money for education, but he
appreciated the sentiment. He asked for clarification on the
$400 million and referred to the fiscal note that showed a $225
million request. He inquired if there was another $150 million
that had been set aside. He queried where the $400 million came
from and when it would come.
MR. DUBLER answered that there had been approximately $70
million appropriated and not all of it had been spent, but the
remainder had been committed. He explained that the remaining
$330 million would be required to bring the project to full
sanction. He detailed that the fiscal note came through the
House Finance Committee and they added $225 million to the
governor's $25 million for a total of $250 million.
SENATOR FRENCH commented that there was an $80 million shortage
and no one had written down the last $80 million in order to
make HB 4 work. He asked if there was a plan.
MS. DELBRIDGE answered that the House Finance Committee did not
feel the need to insert another requirement into the bill for
AGDC to actually comeback to the legislature for some kind of
approval to keep going on what they were doing. She explained
that the House Finance Committee thought that withholding part
of an appropriation request for a future point in time would
serve as a way to pull AGDC back into the political run of the
legislature to justify going forward with the additional funds.
She said the sponsors had some concerns that without the full
amount in the in-state gas pipeline fund, AGDC would need to
reevaluate its work plan with the possibility of running into
some contracting issues regarding engineering and design.
4:58:28 PM
SENATOR FRENCH said the AGIA enabling legislation was carefully
crafted so that the $500 million state assistance flowed through
to a lower tariff. He asked if the $400 million would work in
the same way to assure that the spending resulted in a lower
tariff.
MR. DUBLER replied that the $400 million was not included in the
tariff calculation with the numbers presented to the committee.
He said the $400 million was assumed to be an initial
contribution by the state and did not affect the tariff.
MS. DELBRIDGE added that the $400 million investment was also
something that AGDC may be able to leverage in a joint ownership
agreement as essentially an in-kind state equity contribution to
a pipeline upon which the state could theoretically be earning a
rate of return back to the state. She explained that there was
potential out there to make even greater use of the $400 million
then simply as an initial upfront investment that does not go
into the tariff.
SENATOR FRENCH stated that he misunderstood and thought the $400
million was what AGDC needed to get to a sanction. He said it
sounds like AGDC thinks it might have some leftover funds to
invest in the pipeline itself.
MS. DELBRIDGE replied that she may not have been very clear. She
said the work being done to date could be viewed as an in-kind
contribution by the state in exchange for an equity
contribution.
SENATOR FRENCH asked who the in-kind contribution would be made
to and who would own this pipeline.
MS. DELBRIDGE responded that the legislature would give AGDC the
authority to determine the ownership and operating structure of
the pipeline. She explained that AGDC would need to understand
specifically at some point in time what the lay of the land was
and how they could best meet their mission of getting a gas
pipeline built that gets gas to Alaskans at the lowest possible
rates. She said there could be interested private sector
entities in being an all-owner or part-owner. She stated that
AGDC looked at various mechanisms and noted that it would come
down to the art-of-the-deal to negotiate something like an
ownership structure that resulted in getting Alaskans gas at the
lowest possible rates.
5:01:00 PM
MR. DUBLER commented that Ms. Delbridge had a very good
description regarding in-kind contribution. He said AGDC
proposed a 75/25 percent debt-to-equity strategy to get the
lowest possible tariff. The 25 percent equity on $8 billion
would end up to be about $2 billion in equity. He explained that
AGDC could negotiate that the $400 million was going in as part
of a contribution towards the $2 billion in a form of an in-kind
equity contribution by the state for partial ownership.
SENATOR FRENCH commented that there was nothing in the bill that
described what the ownership structure of the pipeline. He
remarked that the pipeline could wind up being that the state
was a part-owner, a non-owner, or ExxonMobil could own the
pipeline all by itself if it brought the lowest cost gas.
MR. DUBLER answered correct. He explained that the idea was AGDC
did not currently know if anybody was interested in buying the
pipeline or if the state was interested in owning the pipeline.
He asserted that prescribing something in law was something that
the sponsors were hesitant to do. He stated that the intent was
to leave flexibility to a strong governed board to make
determinations after an open season determined project viability
and then put the pipeline on the market to see who was
interested.
SENATOR MICCICHE asked to clarify that the $400 million would be
an intellectual asset if it blended with AGIA. He summarized
that the asset would entail intellectual property, design
property, permitting property, and right-of-way agreements. He
said the asset would be marketable and could off-set the cost of
an agreement with another entity.
MS. DELBRIDGE answered correct. She explained that another key
aspect was the Federal Environmental Impact Statement (EIS). She
noted that the EIS was another asset on which key federal
permitting and other decisions were going to be made. She
disclosed that AGDC was already building assets by leveraging
its investment. She stated that the sponsors had repeatedly said
there were different ownership scenarios and they were hopeful
that the private sector stepped up to own the pipeline. She
reiterated that it did not matter who owned the pipeline or what
the ownership mix was, as long as Alaskans received gas at the
lowest possible rates.
SENATOR MICCICHE commented that it was key for Alaskans to
understand that we were buying a real asset with what we were
investing in the pipeline project. He noted that there had been
waste in the past, but it was imperative that Alaskans
understand the importance of the project and HB 4.
5:04:29 PM
MS. DELBRIDGE proceeded on page 11 and explained that AGDC's
operating budget would be subject to the Executive Budget Act.
She said the stipulation was another way to make sure AGDC was
accountable to Alaskans for the money it received from the state
and accountable back to the state treasury. She revealed that
the bill would make AGDC's board members subject to the public
official disclosure rules that were currently in state statute,
an action that would provide an appropriate check-and-balance
that was addressed by Senator French regarding individuals that
could come from industry jobs.
She explained page 12 regarding the way the legislation tried to
maximize the state's efforts in gas pipeline development. She
said the legislation would provide additional state support for
a project that the legislature determined to be in the public's
interest by evoking whatever the state could do to keep costs as
low as possible, reduce delays, and benefit Alaskans. She
reiterated that HB 4 would limit judicial review of state
permitting decisions and lease authorizations in order to avoid
delays and injunctive relief that could be crippling to a
project, especially once construction had started. She noted
that the judicial review limitations were in Section 13 of the
bill. She said the legislation would tell the DNR to not charge
AGDC the annual fees on the state right-of-way lease. She noted
that AGDC was currently paying $180,000 annually to the state
for the right-of-way lease. She explained that HB 4 would waive
state and local property taxes during pipeline construction. She
noted that HB 4 would sunset the Alaska Natural Gas Development
Authority (ANGDA) per an audit recommendation.
SENATOR MICCICHE addressed a question he had received from
constituents regarding how to reconcile the fact that ANGDA was
created from a voter initiative. He asked how it would be
explained to Alaskans that we were moving forward with the
intent of the initiative.
MS. DELBRIDGE replied that she thought the sponsors would very
much agree with Senator Micciche and do respect very much what
the voters attempted to do through the 2002 initiative. She said
the sponsors believed that the resounding message from Alaskans
was the need for the state to step up and do something to
develop a gas pipeline that would benefit Alaskans. She
commended ANGDA for their good work over the years and their
development of some plans. She noted that much of ANGDA's work
was contingent upon other things going forward that were not
within their control. She referenced the Division of Legislative
Audit's 2010 audit that recommended sun-setting ANGDA. She
explained that the audit found ANGDA was duplicating the state's
efforts at developing gas pipelines, may have exceeded some of
its statutory authorities, and no longer served the kind of
purpose that it was created to serve. She asserted that the
sponsors believed that AGDC would be able to carry on what the
voters in 2002 intended by having the state step up and assist
by developing the pipelines.
SENATOR MICCICHE asked if the legislative findings and intent in
Section 1 largely met the voters' desires when ANGDA was
created.
MS. DELBRIDGE replied that the legislative findings and intent
in HB 4 related very specifically to the bill. She remarked that
ANGDA had a very long host of findings to begin the ballot
measure when they were created. She said it was interesting to
note the things that were happening in the state regarding gas
availability from different sources and the crisis mode at the
time, circumstances that did not necessarily apply anymore at
present.
5:08:58 PM
She addressed page 13 regarding the requirement for state
entities to cooperate with AGDC and share information. She said
the section also required that AGDC not duplicate work that the
state was already doing on gas pipelines. She explained that the
legislation set forth that the state would need to provide
water, sand, gravel, and other non-hydrocarbon natural resources
to AGDC. She said AGDC would compensate the agencies the usual
prices for the natural resources, but the costs could not be
included in the tariff base and passed on to pipeline shippers.
She explained that passing on costs to the pipelines shippers
would increase costs to the rate payers. She declared that using
state resources to support what the state was doing and not
passing costs onto rate payers would be what the state would
want to step up and do. She said the door was open to a future
legislature to appropriate money directly to cover the natural
resource costs with AGDC reimbursing a state agency for
materials.
MS. DELBRIDGE addressed page 14 regarding the way legislation
would resolve regulatory uncertainties. She said regulatory
issues were very important because it was uncertain how one
would be regulated, under what kind of time frames, under what
kind of standards, and whether or not the kind of financial deal
that was needed would be allowed. She emphasized that regulatory
uncertainties created tremendous uncertainty and risk. She
asserted that potential private sector partners involved in a
pipeline project were risk adverse. She said uncertainty could
add costs and delay timelines. She stated that AGDC had been
very clear that it needed to know how it was going to be
regulated before it went out to solicit private sector partners.
She added that AGDC would also require being able to operate as
a contract carrier pipeline. The legislation would allow
contract carriage through two key ways: by adding a new type of
state right-of-way lease covenants that strictly applied to
contract carriers gas pipelines, and through the RCA's
oversight. She said the sponsors took great steps in both cases
to make sure that the legislation reinforced a very long
standing state policy that applied when using a state land grant
or resource. She explained that pipelines need to be fair, offer
reasonable access to new and future shippers, and encourage
future development of oil and gas basins in Alaska. She asserted
that there was broad opportunity on a number of levels.
5:11:35 PM
SENATOR MICCICHE asked why the RCA would regulate a gas
transmission pipeline. He inquired if the RCA would regulate the
pipeline's entire route.
MS. DELBRIDGE answered that the RCA would regulate the entire
route.
SENATOR MICCICHE asked why the RCA would regulate a transmission
pipeline.
MS. DELBRIDGE responded that the RCA currently regulated either
public utility pipelines or common carrier pipelines. She said
the sponsors understood that there were benefits to regulation
that both protected the carrier and the consumers. She remarked
that a reasonable amount of oversight and certainty would be
provided for the private sector. She asked Senator Micciche if
he was referring to the state's jurisdiction over a gas
pipeline.
SENATOR MICCICHE replied that he would rephrase the question. He
asked if the ownership and operations were not be determined,
what if a future owner-operator decided to have a pipeline that
may not be common carrier until it reached a densely populated
area, was regulated in different sections, and when it became
common carrier or some other agreement, it would be hard to say
what the arrangement would be in the future at that point.
MS. DELBRIDGE answered that the local distribution networks that
go directly to get the gas off of the mainline into communities
would still be regulated as public utilities. She emphasized
that AGDC would require contract carriage in order to secure
long term shipping commitments that would support pipeline
financing. She noted that gas was a little bit different in the
sense that the end users of gas were immediately off of the
pipeline with a need for gas to fuel year round, 24 hours per
day operations. She explained that a public utility needs to
know every day that a certain amount of gas was coming into its
power plant without interruption. An industrial process would
generally work the same way with a need to know that gas was
going to be there. She said utilities and industrial gas users
want to make sure that they could sign long term commitments
that guaranteed supply.
5:14:11 PM
MR. DUBLER added that AGDC had legal counsel look into whether
FERC could regulate the proposed pipeline since it was not an
interstate pipeline. He said FERC had no jurisdiction and the
opinion received by AGDC was that FERC would not be able to. He
noted that some legislators in prior committees felt very
strongly that regulation was important with some sort of
oversight board. He summarized that without FERC, RCA was the
only other regulatory option.
SENATOR DYSON stated that because AGDC would be a natural
monopoly, he did not understand how there would not be some
regulation to protect the consumers and that was what the RCA
was about. He asked if Senator Micciche was making an argument
that there should not be RCA regulation.
SENATOR MICCICHE answered no and stated that he was not making
that argument. He explained that all transmission pipelines in
the U.S. were regulated one way or another. He stated that he
was curious why AGDC chose the RCA "avenue" and he thought that
was a good answer.
SENATOR DYSON replied that the vast difference in Alaska was
that most places in the Lower 48 had alternative pipelines and
there was not a natural monopoly.
SENATOR MCGUIRE pointed out to Senator Micciche that the recent
history on the gas pipeline occurred when SB 287 and HB 369 were
first introduced in 2010. She noted that there was a bit of a
war going on between people who wanted to pursue the AGIA line
to the Lower 48 versus a line for the Asian market with an in-
state line. She said people who supported Representative
Chenault's bill and her bill thought the market was in Asia in
addition to an in-state line with the belief that gas should go
to residents first. She explained that an in-state gas caucus
was formed and the delegation went to Washington D.C. in the
spring of 2010. She divulged that certain members of an
administration had actually solicited an opinion from FERC to
ask that they have authority over an in-state line. She said the
delegation was able to quash the opinion and solicit the caucus'
own opinion that made it very clear that any in-state line would
never be governed by FERC. She asserted that it was very
important that it was the RCA because you want to have authority
over the agency in addition to the ability to deliver to
Alaskans. She stated that there was more than just the fact that
it was to consumers in Alaska, there was a fact that you could
often have competing lines. She noted that FERC made it very
clear to the delegation that they would not allow competing
lines if FERC had jurisdiction over Alaska's in-state line. She
summarized that if the FERC course had not been changed, Alaska
would not have seen a pipeline.
SENATOR FRENCH asked what would ultimately protect consumers if
the pipeline delivered gas that was more expensive than Cook
Inlet gas. He noted an example where Anchorage consumers would
not have a choice if Enstar Natural Gas Company bought $15 gas
from the pipeline versus $8 gas that might be available in Cook
Inlet.
5:18:33 PM
MS. DELBRIDGE answered that unless people saw reasonably priced
gas that was transported from the pipeline, contracts would not
be signed to have gas shipped on the gas pipeline. She noted
that Senator Dyson was quite right with his assessment that
there was necessarily no competition, but that was largely why
the regulatory section allowed for contract carriage, negotiated
contracts, and recourse tariffs. She explained that the recourse
tariff was a cost based, RCA approved rate that anyone could get
in on the pipeline at any time if they wanted to negotiate or
not. She said the recourse tariff added an element of fairness
to some degree for parties that did not want to negotiate, did
not have the means to negotiate, or negotiations did not work
out. She reiterated that the recourse tariff would always be an
opportunity for a cost based, RCA approved rate. She said
generally that Enstar and other public utilities were
accountable to the people that accept their service. She
specified that electric utilities were generally cooperatives
with elected boards that provided general accountability.
MR. DUBLER stated that he believed the utilities were monopolies
as well and were subject to RCA oversight. He said he would not
believe that the RCA would approve an increase in a utility's
cost of gas if they signed up for a pipeline. He cited an
example where the pipeline's price was $12 and the Cook Inlet
price was $10 with the utility opting for the $12 gas, even
though there was plentiful supply at $10. He stated that he did
not believe the RCA would approve an increase and noted that the
increased cost would probably have to come out of the utility's
share.
5:20:40 PM
MS. DELBRIDGE addressed page 15 regarding contract carriage. She
explained that shippers need to know that the space that they
were reserving by signing long term commitments was available,
period. She said the pipeline needs to know that it had
guaranteed payments coming in over a length of time to support
the financing on the pipeline. She stated that the firm,
uninterruptable contracts was the way that gas pipelines were
financed. She specified that the contracts guaranteed future
income in order to secure revenue bonds that would be issued in
this case to finance the pipeline. She remarked that there could
be a perception at times that contract carriage precluded
opportunities in a pipeline because it does not have that common
carriage aspect of immediately moving over and prorating
everyone's existing capacity to make room for any new comer at
any point in time. She reiterated that the contract carrier line
was used due to the need for firm commitments and firm amounts
of capacity reserved. She said contract carriage did not allow
for prorating the capacity, but allowed for expansions that
provided opportunities for new people to get in on the pipeline.
She explained that the pipeline would provide advanced notice of
expansion opportunities so that people who know that they have
gas that they want to be committing could think about those
windows. She noted that the advanced notice may let people that
just acquired gas leases for development with windows of
opportunity to consider. She summarized that it was very
important to the sponsors that even while enabling the contract
carrier status, the ability to protect the access to the
pipeline and others in the future was absolutely maintained.
5:22:35 PM
SENATOR FRENCH stated that the reality was that the majority of
the gas would come from either ConocoPhillips, BP, or
ExxonMobil. He asked for names of other companies that might be
involved.
MS. DELBRIDGE replied that the sponsors had no knowledge of the
actual expression of interest or any commercial discussions. She
explained that limited to 500 MCFD, the sponsors believed that
you may get gas from anyone of the three noted companies and
perhaps some other folks that have been looking at gas
opportunities might see an avenue to get resources to market.
She cited an example that Anadarko Petroleum Corporation had
leases at Gubik that had long been said to hold gas. She pointed
out that there was no pipeline that would carry Gubik field gas
to any kind of market. She stated that there were certainly
other North Slope operators that may have finds as well. She
said the sponsors believed that the pipeline would offer
opportunities. She noted that Doyon, Limited was looking at some
prospects in the Yukon and Nenana basins. She noted that a
letter of support was in the committee's packet about how the
pipeline would provide Doyon with some opportunity if they made
the kind of find that they would hope to and to get their gas to
market. She mentioned that Cook Inlet Energy was exploring in
the Susitna Flats area where they expect to encounter gas and
would certainly like to know that a pipeline was in the vicinity
to carry some of that resource away.
SENATOR FRENCH asked if the Susitna Flats was the area near the
Susitna River.
MS. DELBRIDGE replied that she believed the Susitna Flats was in
the valley right along the Susitna River area.
5:25:07 PM
MS. DELBRIDGE set forth that the bill's intent was to retain the
key common carriage principals of expansions that were required
when there were reasonable terms and access for new shippers
while allowing contract carriage. She said accomplishing the
intent in the legislation would be done through an interface of
both the right-of-way leasing act and the new regulatory
chapter; both areas of the bill required expansions on
commercially reasonable terms. She detailed that both areas
required that in an expansion, the pipeline could not make an
initial shipper pay any more than what was allowed by the
shipper's contract with the pipeline. Therefore the cost of
expansion would be borne by the people shipping gas in the
expanded-capacity, just as the initial costs were to be borne by
the people shipping gas in the initial-capacity.
SENATOR FRENCH addressed expansions with the 500 MCFD pipeline
and asked what expansion could there be as long as AGIA was
alive and well.
MS. DELBRIDGE replied that she had spoken a few minutes prior
regarding the AGIA non-compete mentions in the bill and forgot
to address expansions in the current context. She explained that
the expansion were required as long as they did not cause a
pipeline to be competing with AGIA. She said the legislation was
structured to accommodate a time in the future when the state
was no longer paying inducements to a licensee under AGIA,
perhaps five or ten years after the pipeline was operation, 2025
or 2030. She noted that expansions would not be likely to happen
in the immediate time frame to where it would be a problem. She
explained that expansion mentioned in the bill was all
conditioned upon not creating a competing issue.
MR. DUBLER added that Senator French hit on exactly one of the
large problems that ACDC had with the AGIA restriction and
common carriage. He said a common carriage pipeline with a
customer base where shippers limited-out the 500 MCFD
restriction, would force shippers to cut their percentages to
accommodate a new request. He emphasized that contract carriage
would not allow percentage cuts to shippers.
SENATOR FRENCH asked what the pipeline diameter size was.
MR. DUBLER replied that the diameter was a 36 inch steel pipe.
SENATOR FRENCH asked what the maximum throughput was for the
pipeline's wall thickness.
5:28:19 PM
DAN FAUSKE, President, AGDC, Anchorage, Alaska, replied that the
500 MCFD limitations were repeatedly addressed. He asserted that
the issue was how much gas could the pipeline hold or move. He
explained that the maximum capacity on the pipeline would be
about 1.6 billion cubic feet of gas per day (BCFD). He pointed
out that when the proposed pipeline was 24 inches with 2500
pounds per square inch (PSI) hauling liquid due to increased
compression, the 24 inch line could carry up to 1 BCFD. He
remarked that AGDC had limited the discussion to 500 MCFD and
noted that the AGIA restrictions were lifted below the 68th
parallel north. He stated that AGDC's design, engineering, and
all of their work was being designed towards 500 MCFD.
MR. DUBLER added that the 1.6 BCFD was a theoretical throughput
and AGDC had not done any designs over 500 MCFD in order to stay
within accordance of the AGIA restrictions.
5:30:46 PM
CHAIR GIESSEL commended the input from the experienced
individuals. She noted the urgency in energy needs with Alaskans
waiting for Alaska's natural gas to be delivered. She said the
cost of delay was a pretty high price that the committee did not
want to continue to pay. She appreciated the bill's sponsors'
sense of leadership and their understanding of the urgency. She
pointed out that Representative Hawker and Speaker Chenault
hosted an informative megaproject seminar during the hearing of
HB 4 and many legislators learned about the stage-gate approach.
She announced that Attorney General Michael Geraghty had been
invited to tomorrow's meeting to address the questions
pertaining to the "legacy wells" and what Alaska's opportunity
was as far as the federal government and getting the National
Petroleum Reserve-Alaska (NPRA) wells addressed. She stated that
after Attorney General Geraghty, the committee would continue
with HB 4.
5:32:24 PM
CHAIR GIESSEL adjourned the Senate Resources Standing Committee
meeting at 5:32 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 4 vs I.pdf |
SRES 4/2/2013 3:30:00 PM |
HB 4 |
| HB 4 Compare (RES) vs P and(FIN) vs I.pdf |
SRES 4/2/2013 3:30:00 PM |
HB 4 |
| HB 4 Sponsor Statement CS for SSHB4(FIN).pdf |
SRES 4/2/2013 3:30:00 PM |
HB 4 |
| HB 4 Sectional Analysis CS for SSHB4 (FIN).pdf |
SRES 4/2/2013 3:30:00 PM |
HB 4 |
| HB 4 Fiscal Note 2-25-040113-FIN-Y.pdf |
SRES 4/2/2013 3:30:00 PM |
HB 4 |
| HB 4 Fiscal Note 3-1-040113-FIN-Y.pdf |
SRES 4/2/2013 3:30:00 PM |
HB 4 |
| HB 4 Related Statues-Right-of-Way Leasing Act.pdf |
SRES 4/2/2013 3:30:00 PM |
HB 4 |
| HB 4 Fact Sheet-CS for SSHB4 (FIN).pdf |
SRES 4/2/2013 3:30:00 PM |
HB 4 |
| HB 4 Opp Letters-Resolutions (2).PDF |
SRES 4/2/2013 3:30:00 PM |
HB 4 |
| HB 4 Supp Letters-Resolutions (27).PDF |
SRES 4/2/2013 3:30:00 PM |
HB 4 |
| HB 4 Right-of-Way Leasing Act Covenants Comparison.pdf |
SRES 4/2/2013 3:30:00 PM |
HB 4 |
| HB 4 FAQS-CONTRACT V COMMON CARRIER - AGDC.pdf |
SRES 4/2/2013 3:30:00 PM |
HB 4 |
| HB 4 Overview SRES 2013.04.02.pdf |
SRES 4/2/2013 3:30:00 PM |
HB 4 |