Legislature(2013 - 2014)BUTROVICH 205

03/29/2013 03:30 PM RESOURCES

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03:32:12 PM Start
03:32:36 PM SB71
03:33:27 PM SR5
04:15:36 PM Presentation: Agdc Financing and Ownership Models Associated with Gas Megaprojects
04:43:39 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Moved CSSR 5(RES) Out of Committee
Bills Previously Heard/Scheduled
Moved SB 71 Out of Committee
Informational Hearings - Gasline Projects
Presentation:AK Gasline Development Corp
Uniform Rule 23 Waived
                    ALASKA STATE LEGISLATURE                                                                                  
              SENATE RESOURCES STANDING COMMITTEE                                                                             
                         March 29, 2013                                                                                         
                           3:32 p.m.                                                                                            
MEMBERS PRESENT                                                                                                               
Senator Cathy Giessel, Chair                                                                                                    
Senator Fred Dyson, Vice Chair                                                                                                  
Senator Peter Micciche                                                                                                          
Senator Anna Fairclough                                                                                                         
MEMBERS ABSENT                                                                                                                
Senator Click Bishop                                                                                                            
Senator Lesil McGuire                                                                                                           
Senator Hollis French                                                                                                           
COMMITTEE CALENDAR                                                                                                            
PRESENTATION:  AGDC  FINANCING  AND OWNERSHIP  MODELS  ASSOCIATED                                                               
WITH GAS MEGAPROJECTS                                                                                                           
     - HEARD                                                                                                                    
SENATE BILL NO. 71                                                                                                              
"An  Act relating  to the  filing  date for  the final  quarterly                                                               
payment  of,  and  to  the assessment  of  penalties  under,  the                                                               
fishery resource landing tax."                                                                                                  
     - MOVED SB  71 OUT OF COMMITTEE                                                                                            
SENATE RESOLUTION NO. 5                                                                                                         
Requesting  that the  North  Pacific  Fishery Management  Council                                                               
take action to reduce the  quantity of Chinook salmon by-catch in                                                               
the Gulf of Alaska and Bering  Sea trawl fisheries by setting new                                                               
limits in  the Gulf  of Alaska trawl  fisheries and  lowering the                                                               
existing  limits in  the Gulf  of Alaska  and Bering  Sea pollock                                                               
fisheries to at least half of the current limits.                                                                               
     - MOVED CSSR 5(RES) OUT OF COMMITTEE                                                                                       
PREVIOUS COMMITTEE ACTION                                                                                                     
BILL: SB  71                                                                                                                  
SHORT TITLE: PAYMENT OF FISHERY RESOURCE LANDING TAX                                                                            
SPONSOR(s): SENATOR(s) MICCICHE                                                                                                 
03/11/13       (S)       READ THE FIRST TIME - REFERRALS                                                                        
03/11/13       (S)       RES, FIN                                                                                               
03/27/13       (S)       RES AT 3:30 PM BUTROVICH 205                                                                           
03/27/13       (S)       Heard & Held                                                                                           
03/27/13       (S)       MINUTE(RES)                                                                                            
03/29/13       (S)       RES AT 3:30 PM BUTROVICH 205                                                                           
BILL: SR   5                                                                                                                  
SHORT TITLE: CHINOOK BY-CATCH LIMITS                                                                                            
SPONSOR(s): SENATOR(s) MICCICHE                                                                                                 
03/18/13       (S)       READ THE FIRST TIME - REFERRALS                                                                        
03/18/13       (S)       RES                                                                                                    
03/29/13       (S)       RES AT 3:30 PM BUTROVICH 205                                                                           
WITNESS REGISTER                                                                                                              
ANGIE WHITMAN, representing herself                                                                                             
Bethel, Alaska                                                                                                                  
POSITION STATEMENT: Supported SR 5.                                                                                           
PETE WEDIN, Advocate                                                                                                            
Alaska Marine Conservation Council                                                                                              
Homer, Alaska                                                                                                                   
POSITION STATEMENT: Supported SR 5.                                                                                           
JULIE BONNEY, Executive Director                                                                                                
Alaska Groundfish Data Bank                                                                                                     
Kodiak, Alaska                                                                                                                  
POSITION STATEMENT: Did not voice a position statement on SR 5.                                                               
She suggested that changes be made to SR 5.                                                                                     
STEVEN BRANSON, Advocate                                                                                                        
Crewmembers Association                                                                                                         
Kodiak, Alaska                                                                                                                  
POSITION STATEMENT: Supported SR 5.                                                                                           
TERRY HAINES, representing himself                                                                                              
Kodiak, Alaska                                                                                                                  
POSITION STATEMENT: Supported SR 5.                                                                                           
BECCA ROBBINS GISCLAIR, Senior Fisheries Advisor                                                                                
Yukon River Drainage Fisheries Association                                                                                      
Anchorage, Alaska                                                                                                               
POSITION STATEMENT: Supported SR 5.                                                                                           
DAVE BEEBE, representing himself                                                                                                
Kupreanof, Alaska                                                                                                               
POSITION STATEMENT: Supported SR 5.                                                                                           
TIM SMITH, President                                                                                                            
Nome Fisherman's Association                                                                                                    
Nome, Alaska                                                                                                                    
POSITION STATEMENT: Supported SR 5.                                                                                           
STEPHANIE MADSEN, Executive Director                                                                                            
At-sea Processors Association                                                                                                   
Juneau, Alaska                                                                                                                  
POSITION STATEMENT: Did not provide a position on SR 5.                                                                       
RICKY GEASE, Executive Director                                                                                                 
Kenai River Sportfishing Association                                                                                            
Soldotna, Alaska                                                                                                                
POSITION STATEMENT: Supported SR 5.                                                                                           
JOE DUBLER, Vice President and CFO                                                                                              
Alaska Gasline Development Corporation                                                                                          
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Presented an  overview on the  financing and                                                             
ownership models associated with megaprojects.                                                                                  
ANGELA RODELL, Deputy Commissioner                                                                                              
Alaska Department of Revenue                                                                                                    
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Presented an  overview on the  financing and                                                             
ownership models associated with megaprojects.                                                                                  
ACTION NARRATIVE                                                                                                              
3:32:12 PM                                                                                                                    
CHAIR  CATHY   GIESSEL  called  the  Senate   Resources  Standing                                                             
Committee meeting  to order at 3:32  p.m. Present at the  call to                                                               
order  were  Senators  Dyson,  Micciche,  Fairclough,  and  Chair                                                               
         SB  71-PAYMENT OF FISHERY RESOURCE LANDING TAX                                                                     
3:32:36 PM                                                                                                                    
CHAIR GIESSEL  announced SB  71 to be  up for  consideration. She                                                               
stated that  public testimony  had been  completed and  asked for                                                               
concluding comments from members or the bill's sponsor.                                                                         
SENATOR DYSON moved to report  SB 71, [labeled 28-LS0594\A], from                                                               
committee   with   attached   fiscal   note(s)   and   individual                                                               
CHAIR GIESSEL announced that without  objection, SB 71 moved from                                                               
the Senate Resources Standing Committee.                                                                                        
3:33:17 PM                                                                                                                    
CHAIR GIESSEL announced that the committee would stand at ease.                                                                 
                 SR   5-CHINOOK BY-CATCH LIMITS                                                                             
3:33:27 PM                                                                                                                    
CHAIR GIESSEL announced that SR 5 was up for consideration.                                                                     
SENATOR  MICCICHE  moved  to  adopt  Committee  Substitute  (CS),                                                               
[labeled 28-LS0568\C],  as the working  document. He  asked prior                                                               
to  adoption that  one change  be  made on  page 3,  line 21,  to                                                               
delete the word "require" and insert the word "encourage."                                                                      
CHAIR  GIESSEL, hearing  no  objection, stated  that  the CS  was                                                               
adopted. She asked if Senator  Micciche would like to present the                                                               
SENATOR  MICCICHE,  speaking  as prime  sponsor,  introduced  the                                                               
resolution with the following statement:                                                                                        
     Our    recreational,   subsistence,    and   commercial                                                                    
     fisheries  had faced  dramatic short  falls of  Chinook                                                                    
     salmon  in  recent  years,  it  has  caused  a  lot  of                                                                    
     hardships for  Alaska residents.  The economic  loss is                                                                    
     due  to a  low  abundance of  Chinook  salmon, in  2012                                                                    
     alone in sport and  commercial fisheries in Alaska were                                                                    
     over  $34   million,  not  including   the  significant                                                                    
     effects  on   subsistence  and   personal-use  resource                                                                    
     An example, in your district  and mine, and last summer                                                                    
     I was  the mayor of  a sport fishing town  of Soldotna,                                                                    
     I'm also a  commercial fisherman in Cook  Inlet, but it                                                                    
     began as  a very  promising year throughout  the state,                                                                    
     and  ended in  an economic  disaster, many  not knowing                                                                    
     how they  would get through  the winter. They  pulled a                                                                    
     symposium together last year and  they are working on a                                                                    
     lot  of  the  gaps  on understanding  how  to  maintain                                                                    
     sustainable  stocks of  Chinook  salmon throughout  the                                                                    
     state. But,  one of  the problems  facing us  is salmon                                                                    
     by-catch in  the Bering Sea  and Gulf of  Alaska trawl-                                                                    
     fisheries.  According to  a 2013  report  by the  North                                                                    
     Pacific  Fisheries Management  Council,  the five  year                                                                    
     average  total for  Chinook  salmon  by-catch in  these                                                                    
     fisheries  was  40,621  fish.  I  am  not  blaming  the                                                                    
     failure  of   our  Chinook  salmon  fisheries   on  the                                                                    
     trawlers, I  want that perfectly clear.  But those fish                                                                    
     if  they had  not  intercepted would  have returned  to                                                                    
     Alaska  waters and  provided  harvest opportunities  as                                                                    
     well as the escapement we need.                                                                                            
     This   resolution  simply   asks   the  North   Pacific                                                                    
     Fisheries Management  Council to take action  to reduce                                                                    
     the level  of Chinook  by-catch in  the Bering  Sea and                                                                    
     the Gulf of Alaska trawl  fisheries to at least half of                                                                    
     the current  limits. In  this time  of low  king salmon                                                                    
     abundance, it is critical  that unintended mortality be                                                                    
     reduced and this resolution is  an attempt to address a                                                                    
     known cause  of substantial mortality and  help restore                                                                    
     strong  king salmon  runs  in our  rivers.  In a  state                                                                    
     where folks  seem to really  enjoy fighting  over fish,                                                                    
     support of  this resolution represents one  of the rare                                                                    
     incidences of  an issue where all  fishing Alaskans are                                                                    
     united.  In  your packets  you  will  see support  from                                                                    
     commercial  support and  subsistent  users form  around                                                                    
     the state including the  Association of Village Council                                                                    
     Presidents,  the Tanana  Chiefs  Conference, the  Yukon                                                                    
     River Drainage  Fisheries Association,  Kenai Peninsula                                                                    
     Borough  Assembly, Cooper  Landing Advisory  Committee,                                                                    
     Alaska  Marine   Conservation  Council,   the  Kenaitze                                                                    
     Indian Tribe,  and I  have a  list of  individuals that                                                                    
     have also commented favorably.                                                                                             
     Madam Chair, this resolution is  not about blame, since                                                                    
     I do  not believe any  type of gear-type  of commercial                                                                    
     fishing,  sport  fishing,  or  subsistence  fishing  is                                                                    
     responsible   for   the   low  abundance   of   Chinook                                                                    
     fisheries.  I  honestly  believe that  trawl  fisheries                                                                    
     have worked very hard to  reduce Chinook by-catch. This                                                                    
     resolution is  simply about  returning as  many Chinook                                                                    
     to our river systems to  spawn as possible to hopefully                                                                    
     allow  our  natural  cycles  to  return  to  our  river                                                                    
     systems and return them to  systems of abundance, every                                                                    
     fish  matters.  While   our  constituents  suffer  from                                                                    
     sport,  commercial, and  subsistence closures,  and our                                                                    
     lodges suffer  from cancelations  or simply  asking for                                                                    
     the trawl fisheries and  individual trawl fishing boats                                                                    
     to  do better,  the  best they  can.  For example,  the                                                                    
     highest  boat so  far this  year has  reported catching                                                                    
     980  Chinook salmon,  which is  eight  times more  King                                                                    
     salmon then  all of the  fish catch by  sport fisherman                                                                    
     on the  Kenai River system  last summer, and  there are                                                                    
     three quarters left to go  in the year. This resolution                                                                    
     is about spreading the effort.                                                                                             
     Madam  Chair, you  and I  faced 450  of the  commercial                                                                    
     fishing  families in  our two  districts  on the  Kenai                                                                    
     that  were  out  of  work   last  summer.  While  sport                                                                    
     fishing,  subsistence,  and commercial  fisherman  were                                                                    
     severely  restricted throughout  the  state, the  trawl                                                                    
     fisheries were fishing as  usual without absorbing much                                                                    
     of the  economic challenge of  the other  fisheries and                                                                    
     fishermen. This  resolution simply asks  more fisheries                                                                    
     to  share  the  burden  of the  road  to  recovery  for                                                                    
     Alaska's coastal runs of Chinook salmon.                                                                                   
CHAIR GIESSEL opened public testimony.                                                                                          
3:39:08 PM                                                                                                                    
ANGIE  WHITMAN, representing  herself, Bethel,  Alaska, said  the                                                               
issue  was one  of injustice  with one  group allowed  to legally                                                               
waste  Alaska's  salmon  resource while  the  Kuskokwim  region's                                                               
residents  were severely  restricted, issued  citations, made  to                                                               
appear in court, and paid fines.  She continued that it was great                                                               
to have the resolution and  thanked Senator Micciche, because the                                                               
Bethel  region  needed  the reduction  in  salmon  by-catch.  She                                                               
stated that  it was too  bad that other  areas of the  state were                                                               
affected by the incredible by-catch  numbers. She said the Bethel                                                               
region  had  to fight  for  reduction  of interception  of  their                                                               
salmon resources back  in 2004 regarding Area-M, and  a few years                                                               
later for the high seas  trawl fisheries waste termed "by-catch."                                                               
She stated that it  was too bad that so much  attention had to be                                                               
placed  on  the by-catch  problem  when  so many  other  problems                                                               
require  attention; such  as the  high cost  of living  expenses,                                                               
drug abuse,  and school  educational. She  stressed that  she was                                                               
trying  to  word her  statement  in  such  a  way that  it  would                                                               
resonate with the legislators until  the injustice was corrected.                                                               
She said  she was  trying to  assure that  the Bethel  region had                                                               
their  dried  fish and  other  subsistence  which Chinook  salmon                                                               
provided. She emphasized that a  dollar value could not be placed                                                               
on the Chinook salmon and  noted that regional grocery stores did                                                               
not  sell the  bounty  that Chinook  salmon  provided the  Bethel                                                               
region. She  explained that fisheries disaster  declarations only                                                               
replaced business associated losses,  but not the losses incurred                                                               
by hundreds of  individuals who went without  Chinook salmon last                                                               
summer. She said while her  region's salmon resources were wasted                                                               
on the  high seas, the Bethel  area was told to  conserve and not                                                               
to  fish. She  noted that  there  were low  numbers of  returning                                                               
Chinook salmon  and asked that  the Bethel region's  resources be                                                               
returned to  them. She stated that  SR 5 was a  worthy resolution                                                               
and  asked the  legislature to  put an  end to  the waste  of the                                                               
region's precious salmon resource.                                                                                              
3:43:19 PM                                                                                                                    
PETE WEDIN, Advocate, Alaska  Marine Conservation Council (AMCC),                                                               
Homer, Alaska, said AMCC was  a family of seafood harvesters from                                                               
all  over Alaska,  including: fishermen,  subsistence harvesters,                                                               
marine scientists,  small business owners, and  families. He said                                                               
our  ways of  life, livelihoods,  and local  economies depend  on                                                               
productive  ocean.  He  said  AMCC   believed  that  the  coastal                                                               
residents  have  a  valuable and  unique  perspective  on  marine                                                               
ecosystem   with   a   right  to   meaningful   and   influential                                                               
participation  in fishery  management decisions.  He stated  that                                                               
AMCC thanked Senator Micciche for introducing SR 5.                                                                             
He said  the Gulf  of Alaska  non-pollock trawl  fishery operated                                                               
without a  Chinook salmon by-catch-cap.  He noted that  the North                                                               
Pacific  Fisheries  Management Council  (NPFMC)  set  a 2012  by-                                                               
catch-cap on  the Pollock  fishery that was  higher than  the ten                                                               
year  average. He  explained  that a  25,000  Chinook salmon  cap                                                               
would prevent  the high by-catch of  54,000 in 2010, but  the cap                                                               
still would  not represent a  meaningful reduction.  He indicated                                                               
that a 5,000 fish-cap on the  non-pollock fleet would be the best                                                               
choice to  reduce the waste of  the Chinook salmon. He  said SR 5                                                               
addressed what  AMCC believed to  be the best  alternative, given                                                               
the  motion before  NPFMC, by  placing a  cap on  the non-pollock                                                               
trawl fishery in  the Gulf of Alaska. He noted  that SR 5 further                                                               
advocates for  NPFMC to  explore ways to  reduce all  by-catch in                                                               
the  other trawl  fisheries in  the Bering  Sea and  the Gulf  of                                                               
Alaska. He summarized  that the Chinook salmon  were important to                                                               
his region and asked the committee to pass SR 5.                                                                                
3:46:30 PM                                                                                                                    
JULIE  BONNEY, Executive  Director, Alaska  Groundfish Data  Bank                                                               
(AGDB),  Kodiak, Alaska,  explained that  AGDB members  were both                                                               
shore-side processors  and trawl  catcher vessels  that supported                                                               
fishery economies in Alaska coastal  communities. She stated that                                                               
AGDB was sympathetic to the  Chinook salmon directed users due to                                                               
the  recent  poor Chinook  salmon  runs.  She asserted  that  the                                                               
entire  topic of  salmon by-catch  was extremely  complicated, an                                                               
issue that  stakeholders in the  federal fisheries and  NPFMC had                                                               
spent time to reduce and mitigate by-catch impact.                                                                              
MS. BONNEY said it was  important for the committee to understand                                                               
that  the Gulf  of Alaska  and Bering  Sea trawl  industries were                                                               
completely different,  both in terms  of the Chinook  salmon that                                                               
were caught  and the fishery  management pools available  for the                                                               
fleet to reduce Chinook salmon by-catch.                                                                                        
She explained that  Chinook salmon by-catch taken in  the Gulf of                                                               
Alaska trawl fisheries were not  coastal Western Alaska stock, 99                                                               
percent of the 2011 genetic samples  were from the Gulf of Alaska                                                               
and Pacific coast  region. She specified that  the Chinook salmon                                                               
by-catch in the Gulf of Alaska was as follows:                                                                                  
   · 40 percent from British Columbia,                                                                                          
   · 26 percent from the Pacific Northwest,                                                                                     
   · 14 percent from Southeast Alaska.                                                                                          
She indicated that the three  regions previously noted had a huge                                                               
amount  of hatchery  production with  200  to 250  million fry  a                                                               
year. She explained that  AGDB's environmental findings indicated                                                               
that Chinook  salmon survival was  high in the  Pacific Northwest                                                               
and Canada.  She said fishermen  represented by AGDB  were seeing                                                               
greater numbers  of Chinook  salmon on  the fishing  grounds from                                                               
British  Columbia,   Pacific  Northwest,  and   Southeast  Alaska                                                               
She stated that  the other part that was  important to understand                                                               
was that  fishermen in the Gulf  of Alaska operated under  a race                                                               
for  fish,   which  is  a   perverse  environment   for  by-catch                                                               
reductions. She explained that the  guy that catches the most by-                                                               
catch  potentially catches  the most  target fish  and makes  the                                                               
most money.                                                                                                                     
She summarized  that by-catch  was a  very complicated  issue and                                                               
the Gulf of Alaska and the Bering Sea were not the same.                                                                        
CHAIR GIESSEL asked if Ms. Bonney opposed SR 5.                                                                                 
MS. BONNEY responded that there was  a lot of information in SR 5                                                               
that  was not  correct and  offered  to go  line-by-line to  make                                                               
corrections.  She stated  that  she preferred  [HR  6] where  the                                                               
trawl  industry  and  NPFMC  were complemented  for  all  of  the                                                               
efforts they made. She said AGDB would continue to make efforts.                                                                
SENATOR MICCICHE  commented that he  was aware of the  facts that                                                               
Ms. Bonney had brought up. He  noted that the CS was identical to                                                               
the House  version and  stated that the  changes made  might make                                                               
AGDB more comfortable.                                                                                                          
3:50:06 PM                                                                                                                    
STEVEN BRANSON, Advocate,  Crewman's Association, Kodiak, Alaska,                                                               
said the Crewman's Association,  Kodiak, Alaska, represented 1200                                                               
intermittent  members  and the  largest  faction  of the  fishing                                                               
force  and the  largest  labor force  in the  state.  He said  he                                                               
supported SR 5 and addressed  the incorrect information NPFMC was                                                               
He noted being  in contact with trawl crewman  who mentioned deck                                                               
loads  of by-catch  King Salmon.  He asserted  that one  does not                                                               
report by-catch all the way  and compared the practice to drivers                                                               
of cars  having to  ticket themselves  for speeding.  He asserted                                                               
that there would  be a lot fewer speeding tickets  if drivers had                                                               
to self-ticket.                                                                                                                 
He noted the  new observer program they have  seen through random                                                               
choosing of boats  to observe a reduction in the  amount of trawl                                                               
observation  and an  increase in  the amount  of small  boat pot-                                                               
fishing that  are less damaging  fisheries. He said with  a large                                                               
net you could  make large mistakes in a short  amount of time. He                                                               
pointed  out  that  laws  made   regarding  fisheries  should  be                                                               
accompanied by increased observer  coverage. He said his colleges                                                               
recommended  100 percent  observer  coverage  on the  low-dollar,                                                               
high  by-catch  fisheries  that would  give  the  scientific  and                                                               
statistical  committee  better  ammunition to  inform  NPFMC.  He                                                               
summarized  that laws  and limits  mean nothing  without observer                                                               
3:52:37 PM                                                                                                                    
TERRY HAINES,  representing himself, Kodiak, Alaska,  said he was                                                               
a  local  commercial fisherman  and  served  on the  Kodiak  City                                                               
Council. He  asserted that  one resource  should never  be traded                                                               
for  another. He  noted concern  for high  levels of  by-catch in                                                               
species that  were experiencing decreasing abundance.  He said it                                                               
was  important to  increase the  observer  coverage in  fisheries                                                               
where high  levels of  by-catch were  already being  observed for                                                               
decreased-abundance species. He stated  that 100 percent observer                                                               
coverage would  provide a  much better  baseline to  increase the                                                               
understanding  of what  was  going on.  He  advised that  genetic                                                               
sampling would  provide a  better look at  where the  salmon were                                                               
coming from and going. He said he supported SR 5.                                                                               
3:54:20 PM                                                                                                                    
BECCA  ROBBINS GISCLAIR,  Senior Fisheries  Advisor, Yukon  River                                                               
Drainage Fisheries  Association (YRDFA), Anchorage,  Alaska, said                                                               
YRDFA was  a group of  subsistence and commercial  fishermen that                                                               
encompassed the  length of  the Yukon River  in Alaska.  She said                                                               
YRDFA  supported  SR 5.  She  explained  the Bering  Sea  Chinook                                                               
salmon by-catch as follows:                                                                                                     
   · Severe declines on the Yukon River over the past five                                                                      
   · Federal fishery disasters have been declared for every year                                                                
     since 2008;                                                                                                                
   · No commercially directed Chinook salmon fishery for the                                                                    
     past five years;                                                                                                           
   · Unable to provide the annual amounts necessary for                                                                         
     subsistence which is designated by the Alaska Board of                                                                     
   · The 2012 subsistence harvest was roughly half of the                                                                       
     historic average.                                                                                                          
She stressed that the information  was more than numbers, but the                                                               
impact extended  to people's  culture and  food on  their tables.                                                               
She said the  cause for the decline was not  known, but YRDFA was                                                               
faced  with controlling  what they  were  able to  react to.  She                                                               
pointed out that there were  reductions in river-run fisheries in                                                               
order  to enable  fish to  reach spawning  grounds. She  stressed                                                               
that it was  important to reduce the [salmon]  mortality from by-                                                               
catch  as  well.  She  commented that  the  most  recent  genetic                                                               
studies  indicated that  over 70  percent of  the Chinook  salmon                                                               
taken  as by-catch  was from  Western Alaska's  stocks, virtually                                                               
all of  which were  declining and  struggling. She  stressed that                                                               
maintaining the by-catch  limit at 60,000 fish as  an upper limit                                                               
would  be  absolutely  devastating.  She  summarized  that  YRDFA                                                               
supported SR 5 and asked for by-catch reduction.                                                                                
3:56:39 PM                                                                                                                    
DAVE BEEBE, representing himself,  Kupreanof, Alaska, said he was                                                               
a  commercial  fisherman  for   Individual  Fishing  Quota  (IFQ)                                                               
halibut, Dungeness crab, and sea  cucumbers. He noted that he was                                                               
a  member  of  the  advisory   committee  to  the  North  Pacific                                                               
Anadromous Fish  Commission (NPAFC). He stated  that his position                                                               
with  NPAFC  had provided  him  with  an opportunity  to  receive                                                               
information  directly  from individuals  such  as  Eric Volk  and                                                               
others who  were following [by-catch  in Alaska]. He  pointed out                                                               
that Mr.  Volk and others  were profoundly struck by  the decline                                                               
in  Alaska's  Chinook  salmon  populations.  He  stated  that  he                                                               
strongly  supported the  reductions  of Bering  Sea  and Gulf  of                                                               
Alaska trawl  fisheries. He said  he supported SR  5 and HR  6 in                                                               
regards to  by-catch reduction. He  said that one of  the state's                                                               
primary  obligations  was  to   subsistence  cultures  and  their                                                               
extreme  resource dependence  upon Chinook  salmon. He  explained                                                               
that due  to profound population  decline, it was  incumbent upon                                                               
everyone to look particularly closely  at by-catch and waste that                                                               
was well documented in the trawl fisheries.                                                                                     
SENATOR   FAIRCLOUGH  asked   for  Mr.   Beebe  to   restate  his                                                               
MR. BEEBE answered that he was speaking for himself.                                                                            
SENATOR FAIRCLOUGH  replied that  she thought he  mentioned NPFMC                                                               
and asked if he served on the council.                                                                                          
MR.  BEEBE answered  that he  was  on the  advisory committee  to                                                               
3:59:21 PM                                                                                                                    
TIM SMITH,  President, Nome Fisherman's Association  (NFA), Nome,                                                               
Alaska,  said   NFA  was  a   group  of  sport,   commercial  and                                                               
subsistence  fishermen in  the Norton  Sound Region.  He said  he                                                               
fully supported SR 5.                                                                                                           
He indicated  that SR  5 was  something Alaska  needed to  do and                                                               
commended  the legislature  for putting  it forward.  He said  he                                                               
attended the meetings  where NPFMC set the  King salmon by-catch-                                                               
caps for  both the Bering Sea  and the Gulf of  Alaska. He stated                                                               
that he was  really discouraged and disappointed  with the Alaska                                                               
delegates  to  NPFMC for  not  being  more  active in  getting  a                                                               
reasonable cap set. He noted  that the resolution's calling for a                                                               
[by-catch]   reduction   from   60,000  to   30,000   was   fully                                                               
biologically supportable.                                                                                                       
He  asserted  that Norton  Sound  had  been forgotten  until  the                                                               
important fisheries started to experience  the same problems that                                                               
Norton Sound had  been experiencing for 30 years.  He stated that                                                               
the  northern   Norton  Sound  region   had  three   King  salmon                                                               
population. He  said in  2012, the three  salmon runs  were below                                                               
100 individuals and noted as follows:                                                                                           
   · Pilgrim River had 64 King salmon;                                                                                          
   · Boston Creek had not been counted since 2005, the last                                                                     
     count was 29 King salmon;                                                                                                  
   · Kwiniuk River had 36 King salmon.                                                                                          
MR. SMITH explained  that the Alaska Department of  Fish and Game                                                               
(ADFG) said  it takes  200 pairs  of King salmon  to be  a viable                                                               
stock.  He  noted that  the  three  runs  he had  mentioned  were                                                               
biologically extinct  and were as  endangered as any  King salmon                                                               
or salmon population  in the U.S. He said for  some reason Norton                                                               
Sound's low salmon  runs was being missed. He  said the situation                                                               
with salmon management  was a real constitutional  issue and what                                                               
was  happening in  Norton Sound  with  King salmon  could not  be                                                               
called sustained yield. He asserted  that the Alaska Constitution                                                               
required management  for sustained  yield. He stated  that Norton                                                               
Sound was at  a point where the King salmon  populations were not                                                               
even going to survive, let alone produce any kind of yield.                                                                     
He said  he did not  think it  was possible to  currently harvest                                                               
pollock  without destroying  King salmon  runs and  stressed that                                                               
another way be found. He asserted  that he would be fine with not                                                               
taking  the entire  population  tact every  year.  He noted  that                                                               
pollock  were   long-lived  fish  and  would   be  available  for                                                               
harvesting  a   year  later.  He   summarized  that   the  Alaska                                                               
Constitution  required   that  King  salmon  stocks   had  to  be                                                               
4:02:52 PM                                                                                                                    
STEPHANIE   MADSEN,   Executive   Director,   At-sea   Processors                                                               
Association  (APA), Juneau,  Alaska,  said APA  was  one of  four                                                               
sectors in  the Bering  Sea pollock  fishery. She  explained that                                                               
APA was the offshore component for  a fleet that was only allowed                                                               
to fish in the Bering Sea.                                                                                                      
She informed  the committee  that the  Bering Sea's  four sectors                                                               
included  the Community  Development  Quota  (CDQ) Program  which                                                               
received  10 percent  "off the  top," and  the remaining  sectors                                                               
split between  the catcher-processor fleet that  APA represented.                                                               
She explained that the catcher-vessels that delivered to mother-                                                                
ships  received 10  percent  and  catcher-shoreside vessels  that                                                               
encompassed the inshore-sector received 50 percent of the quota.                                                                
She concurred that  NPFMC established a high cap  of 60,000 [King                                                               
salmon]. She  detailed that if  APA violated the level  of 47,000                                                               
[by-catch] in  any seven years,  APA would  have to abide  with a                                                               
47,000 [by-catch-cap] for the remaining  life of that action. She                                                               
explained  that a  cap was  a  way to  shut down  a fishery.  She                                                               
asserted that  the unique by-catch-cap  proposal did  not provide                                                               
incentive for the  fleet and individual vessels to  do their best                                                               
in every instance, every day.                                                                                                   
MS.  MADSEN  explained the  NPFMC  by-catch-cap  would allow  APA                                                               
access to  60,000 in  very unusual  years with  expectations that                                                               
APA could  live with  a much  lower cap  by reducing  by-catch in                                                               
every level of pollock and salmon  abundance. She said APA had to                                                               
annually meet with NPFMC and  demonstrate how its incentives were                                                               
working. She  stated that APA's  incentives were approved  by the                                                               
National Marine  Fisheries. She said  APA was meeting  with NPFMC                                                               
the following week  to address how their  incentives were working                                                               
and noted that APA's second annual  report to NPFMC was due April                                                               
She explained  that APA's Bering Sea  program for catcher-process                                                               
was a  by-catch avoidance area.  She detailed that  APA monitored                                                               
pollock  and Chinook  catches and  identified by-catch  avoidance                                                               
areas. She said APA shared  information with its fleet. She noted                                                               
that vessels that  performed below a certain  level were excluded                                                               
from the avoidance area. She  reported that vessels that failed a                                                               
test  were out  of the  designated area  for one  week, a  second                                                               
failed  test  meant a  two  week  exclusion. She  said  excluding                                                               
vessels would  have a huge impact  on catch-and-process platforms                                                               
that required  a constant flow.  She reiterated that  [Bering Sea                                                               
by-catch]  was complex  and she  dealt with  its challenges  on a                                                               
daily basis.                                                                                                                    
4:05:58 PM                                                                                                                    
SENATOR DYSON asked  beyond avoiding areas with  high King salmon                                                               
activities,  what practical  practices  were used  to avoid  King                                                               
salmon by-catch.                                                                                                                
MS.  MADSEN   explained  that  APA  used   salmon-excluders  that                                                               
separated salmon from pollock.                                                                                                  
SENATOR DYSON asked if there were any other methods used.                                                                       
MS. MADSEN  answered increased  communication between  the fleet.                                                               
She noted  that a vessel  could be shut  down if it  exceeded its                                                               
SENATOR  DYSON asked  if the  feedback loop  was shared  with the                                                               
MS. MADSEN answered yes.                                                                                                        
SENATOR DYSON  asked if King  salmon information was  shared with                                                               
MS.  MADSEN   responded  that   the  information   was  certainly                                                               
available, but  conceded that she was  not sure if ADFG  was on a                                                               
weekly e-mail list.                                                                                                             
SENATOR  MICCICHE thanked  Ms. Madsen  for  her presentation.  He                                                               
said he  was hesitant  to add  the praises that  were put  in the                                                               
resolution,  but  conceded to  being  happy  to now  having  them                                                               
included.  He  asserted that  SR  5  was  not  a blame  game  and                                                               
remarked that  APA had done  a good  job. He emphasized  that the                                                               
situation with  King salmon  was an  emergency with  thousands of                                                               
Alaskans out  of work or wondering  what was going to  fill their                                                               
freezers. He stated  that SR 5 was a strong  request for everyone                                                               
to  work   together  better  to   further  reduce   by-catch.  He                                                               
emphasized that  SR 5 should not  be viewed as an  intent to shut                                                               
down Alaska's trawl fisheries. He  noted that the trawlers played                                                               
an important role in getting  Alaska's seafood to global markets,                                                               
a role  that he  wanted to  see continue. He  said he  would work                                                               
with  APA to  make  sure  APA continued  fishing  in addition  to                                                               
getting  every  possible  King  salmon back  to  the  rivers  and                                                               
restore normalcy.                                                                                                               
MS. MADSEN replied that Senator  Micciche could rest assured that                                                               
her  capacity for  dealing  with the  skippers  and vessels  that                                                               
salmon would remain on their minds every day.                                                                                   
4:09:01 PM                                                                                                                    
RICKY  GEASE,   Executive  Director,  Kenai   River  Sportfishing                                                               
Association  (KRSA), Soldotna,  Alaska, said  KRSA was  a 501(c)3                                                               
fishery conservation  organization representing some of  the over                                                               
100,000  anglers who  liked to  fish for  King salmon  throughout                                                               
Southcentral  Alaska and  the  rest  of Alaska.  He  said just  a                                                               
decade ago, the Kenai River King  salmon fishery was rated as the                                                               
number  one  sport  fishery  in   North  America,  an  impressive                                                               
statement for  all of  the different  sport fisheries  all across                                                               
the country including: Florida, the  [Gulf of Mexico], San Diego,                                                               
and all  of the  other places.  He said  Field and  Stream stated                                                               
that  the Kenai  was the  "top dog"  for fisheries.  He disclosed                                                               
that  the  Kenai, Norton  Sound,  Yukon,  Kuskokwim, Cook  Inlet,                                                               
Kodiak, Copper River,  had all seen dramatic  declines in Chinook                                                               
He  divulged that  ADFG recently  dealt with  the Chinook  salmon                                                               
problem in the Cook Inlet by  reducing the escapement goal by one                                                               
third for late  run Kenai River King salmon. He  stated that KRSA                                                               
did  not agree  with ADFG's  decision because  KRSA believed  the                                                               
problem was  further exasperated  in the  long term.  He asserted                                                               
that management plans  were developed in times  of high abundance                                                               
and  reevaluation  was  required  to address  low  abundance.  He                                                               
stated that  NPFMC should take  the same approach  and reevaluate                                                               
by-catch limits for the Bering Sea and the Gulf of Alaska.                                                                      
MR.  GEASE said  the Bering  Sea had  many more  tools to  reduce                                                               
Chinook  salmon  by-catch that  could  be  used  in the  Gulf  of                                                               
Alaska. He  suggested that catch-shares could  be introduced into                                                               
the  Gulf  of Alaska.  He  conceded  that catch-shares  would  be                                                               
controversial  in the  Gulf of  Alaska  fisheries. He  emphasized                                                               
that  the time  had  come to  bite  the bullet  due  to the  King                                                               
salmon's rapid decline in Southcentral  Alaska. He explained that                                                               
King salmon from Southcentral Alaska  accounted for 30 percent of                                                               
the Gulf  of Alaska's catch.  He stressed that even  thousands of                                                               
fish could make a difference.                                                                                                   
He recommended that three points be added to SR 5 as follows:                                                                   
   1. Encourage NPFMC to obtain by-catch research data from the                                                                 
     observer program for: age, size, length, fat content,                                                                      
     stomach content to identify food source, and how robust the                                                                
     salmon were at the one to three year old stages.                                                                           
   2. Ascertain harvest data from the observer program in the                                                                   
     Gulf of  Alaska. He  conceded that people  would have  to be                                                               
     placed on  vessels and  that was  not desired.  He suggested                                                               
     using   time-stamped   video   data  to   develop   hot-spot                                                               
     capabilities that was used in the Bering Sea.                                                                              
   3. Initiate incentives used in the Bering Sea by trading                                                                     
     quotas between vessels to discourage racing to fish and not                                                                
     being rewarded for having high King salmon by-catch.                                                                       
SENATOR MICCICHE said  he would talk to Mr. Gease  on some of the                                                               
specific data possibilities on a  limited basis to see what might                                                               
fit. He pointed out that SR 5 had a zero fiscal note.                                                                           
CHAIR  GIESSEL stated  that finding  no further  comments, public                                                               
testimony was closed.                                                                                                           
4:13:04 PM                                                                                                                    
SENATOR DYSON moved that the committee  move CS for SR 5, version                                                               
C, from  committee with individual recommendations  with attached                                                               
fiscal note(s).                                                                                                                 
CHAIR  GIESSEL  announced  that without  objection,  CSSR  5(RES)                                                               
moved from the Senate Resources Standing Committee.                                                                             
4:13:33 PM                                                                                                                    
CHAIR GIESSEL announced that the committee would stand at ease.                                                                 
^Presentation:  AGDC Financing  and  Ownership Models  associated                                                               
with gas megaprojects                                                                                                           
  Presentation: AGDC Financing and Ownership Models Associated                                                              
                     With Gas Megaprojects                                                                                  
4:15:36 PM                                                                                                                    
CHAIR GIESSEL  called the committee  back to order  and announced                                                               
the next order of business on  the agenda would be a presentation                                                               
by  the  Alaska Gasline  Development  Corporation  (AGDC) on  the                                                               
financing and ownership models associated with megaprojects.                                                                    
4:15:58 PM                                                                                                                    
JOE DUBLER,  Vice President and  Chief Financial  Officer, Alaska                                                               
Gasline  Development   Corporation  (AGDC),   Anchorage,  Alaska,                                                               
stated  that he  would provide  a brief  overview of  tariffs. He                                                               
said  there  were  three basic  factors  that  affected  tariffs:                                                               
capital  expenditures,  operating  expenditures,  and  throughput                                                               
volume.  He  explained that  the  tariff  calculation itself  was                                                               
quite  complicated, but  the concept  was  simple. He  emphasized                                                               
that  tariffs  were  forward-looking  projections.  He  said  the                                                               
intent was to figure out the following:                                                                                         
    · How much the line was cost to operate and build;                                                                          
    · How much was going through the line in order to allocate                                                                  
      cost to the throughput.                                                                                                   
He said the  throughput volume was the  most self-explanatory and                                                               
was  defined as  the amount  of gas  that was  anticipated to  be                                                               
shipped through the line.                                                                                                       
He stated that  the capital expenditure number  was the allowable                                                               
non-operating  cost of  construction  and included:  engineering,                                                               
permitting,  pipe  purchase  and facilities  purchase  cost.  The                                                               
capital expenditures  were the pre-operational costs  incurred in                                                               
order to get the facilities and the pipeline up and running.                                                                    
He   explained   that   the  operating   expenditures   included:                                                               
operations, maintenance,  capital expenditures  depreciation over                                                               
the depreciable life, taxes, and interest expenses.                                                                             
He explained that the robust  tariff model used for AGDC's Alaska                                                               
Stand  Alone Pipeline  (ASAP) was  simply a  forward looking  pro                                                               
forma income  statement that  calculated the  project's projected                                                               
net income. He  specified that the net income  equaled the equity                                                               
capital contribution times the return  on equity. The process was                                                               
iterative where  the calculation ran multiple  iterations to come                                                               
up with a  tariff that covered all costs and  return on equity to                                                               
equity investors in  the pipeline. He summarized  that the tariff                                                               
model was a  pretty simple concept derived from  a fairly complex                                                               
4:18:46 PM                                                                                                                    
MR.   DUBLER   explained   that  his   presentation,   "Financing                                                               
Megaprojects," would  provide the committee  with an idea  of how                                                               
large projects were financed. He  said the objective of financing                                                               
any project  was to achieve  the lowest possible cost.  He stated                                                               
that his strategy was to  formulate financing from the investor's                                                               
standpoint since  investors were  the people  that would  buy the                                                               
bonds.  He  explained  that  a better  price  was  achieved  when                                                               
selling  something  that  a  buyer  wanted  rather  than  selling                                                               
something you wanted  to sell. He said AGDC tried  to structure a                                                               
financing  package  to make  it  as  attractive to  investors  as                                                               
possible by  meeting with investors  and bankers to find  out who                                                               
was out there and what they were looking for.                                                                                   
He  said  there were  typically  two  sources  of funding  for  a                                                               
project, equity and  debt. Equity was normally  the first dollars                                                               
into  a  project,  followed  up  by  debt  on  the  backside.  He                                                               
explained  that   both  equity   and  debt  had   advantages  and                                                               
disadvantages.  Rates of  return for  both equity  and debt  were                                                               
determined based  upon several factors that  essentially rewarded                                                               
investors for  taking risk. The  old classic financial  model for                                                               
risk-reward: you  increase your  risk, you increase  your reward.                                                               
He said the formula he used  was the investment yield equaled the                                                               
inflation rate, which was a  baseline that compensated people for                                                               
the time-value  of money,  plus a risk  factor, plus  a liquidity                                                               
factor, and that  provided what an investor was looking  for in a                                                               
yield on a  security. He said the estimated inflation  rate was a                                                               
benchmark based  upon Treasury bills (T-bill);  considered a risk                                                               
free and  highly liquid security.  The interest rate on  a T-Bill                                                               
was considered roughly equivalent to  the inflation rate that the                                                               
market was estimating.                                                                                                          
4:21:26 PM                                                                                                                    
He said  the inflation-component of an  interest rate represented                                                               
the time-value  of money; a  dollar today  was worth more  than a                                                               
dollar tomorrow.  The second  factor was  risk and  the component                                                               
represented the risk  that a borrower would default  or not repay                                                               
the debt  as agreed with the  issuer. He said a  good example was                                                               
an individual's personal  credit score, the higher  the score the                                                               
lower their mortgage rate.                                                                                                      
He said  the liquidity  factor was  a component  representing the                                                               
risk  that an  investor would  not  be able  to readily  exchange                                                               
their  investment  for  cash if  needed.  Investments  traded  on                                                               
normal exchanges  and investment-grade bonds were  usually fairly                                                               
liquid.  Some  stocks could  be  liquid,  junk bonds  and  equity                                                               
shares  in  projects  such  as  ASAP were  not  very  liquid.  He                                                               
referred to  the recent meltdown  in the auction  rate securities                                                               
market and  the effect  on liquidity.  He explained  that auction                                                               
rate securities  did not have  any definite liquidity  and relied                                                               
upon frequent  auctions for  investors to bid  on bonds.  He said                                                               
liquidity issues occurred  when people quit bidding  on bonds and                                                               
the market crashed.                                                                                                             
MR. DUBLER  said equity financing  was riskier and  costlier than                                                               
debt financing  because equity investors typically  are the first                                                               
ones to  put dollars into  a project.  Long term bond  holders do                                                               
not want to take a lot  of completion risk. For example, he noted                                                               
the "Whoops  Bonds" in Washington  where a project  was completed                                                               
but the  facility was never  actually operated. Investors  in the                                                               
project lost everything and there  may have been bondholders that                                                               
never  got  anything  out of  their  investment,  either.  Equity                                                               
shares  unfortunately  are not  very  liquid  and are  much  more                                                               
difficult to  sell than a  bond issued  for the same  project. He                                                               
explained that bonds could be traded on most markets.                                                                           
4:25:52 PM                                                                                                                    
It is  advantageous to keep  the equity portion of  the financing                                                               
as  small as  possible and  the debt  portion as  large possible,                                                               
within  reason; it's  more of  a  balancing act  than a  science,                                                               
depending  on  the project.  Equity  financing  options (not  100                                                               
percent of the whole project)  could go anywhere from 100 percent                                                               
state-ownership to  100 percent private-ownership (a  75/25 split                                                               
would  equate  to  75  percent  state-ownership  and  25  percent                                                               
private ownership).                                                                                                             
MR. DUBLER said  one of the advantages to  a state-owned pipeline                                                               
was that  the state would  have more control over  its components                                                               
and would  be able  to dictate  the structure,  type of  gas, and                                                               
everything to  do with the  pipeline. But  some might say  that a                                                               
totally stated-owned AGDC project would  be a disadvantage due to                                                               
incidences in the past where  state-run projects did not turn out                                                               
so well.                                                                                                                        
4:27:34 PM                                                                                                                    
MR. DUBLER  noted that  from the  beginning, the  customers would                                                               
determine what  goes through  the pipeline  and that  the private                                                               
sector was  a little  better at  judging customers,  because that                                                               
was the business  they were in. He said the  private sector would                                                               
determine  how big  the  pipe was,  the  throughput required  for                                                               
customers, and off-take placements.                                                                                             
SENATOR DYSON  asked if  control over  components also  meant how                                                               
the construction was done and project management.                                                                               
MR.  DUBLER  answered  yes.  He said  the  private  sector  would                                                               
control all aspects of a project.                                                                                               
SENATOR  DYSON  stated that  the  final  important component  was                                                               
whether or  not the  gasline would be  a common  carrier pipeline                                                               
and asked  who controls who can  get on the on-ramp  and off-ramp                                                               
for the project.                                                                                                                
MR. DUBLER replied that if  the state owned the pipeline, subject                                                               
to the state laws  that were in place at the  time, they would be                                                               
able to control the inputs or outputs.                                                                                          
SENATOR DYSON  replied that he understood  common versus contract                                                               
carriage, but  he was worried about  a de facto monopoly  for the                                                               
MR. DUBLER  answered that any  type of utility  or transportation                                                               
of  gas  or  electricity  would typically  have  a  monopoly.  He                                                               
explained  that two  electric lines  would  not run  to the  same                                                               
house  and  that was  why  some  type  of regulation  was  fairly                                                               
common. He  continued that interstate pipelines  are regulated by                                                               
the Federal  Energy Regulatory  Commission (FERC)  and intrastate                                                               
pipelines were  typically regulated by the  Regulatory Commission                                                               
of Alaska (RCA).                                                                                                                
SENATOR  DYSON noted  that the  RCA  did not  control the  Trans-                                                               
Alaska  Pipeline System  (TAPS)  and asked  if  the pipeline  was                                                               
considered a utility.  He suggested that Mr.  Dubler was thinking                                                               
that the  pipeline would be  in the category of  supplying energy                                                               
to Alaskans and not exporting gas.                                                                                              
4:31:23 PM                                                                                                                    
MR. DUBLER  answered that the  ASAP would just be  a transmission                                                               
line  transporting gas  from  the North  Slope  to Fairbanks  and                                                               
Southcentral,  but  that he  was  instructed  to not  comment  on                                                               
regulatory issues.                                                                                                              
SENATOR DYSON  said he talked  about the advantages of  state and                                                               
private owned, but he didn't see  the bullet that says whether it                                                               
is open or restricted access.                                                                                                   
MR. DUBLER said the main  advantage to a privately owned pipeline                                                               
is that the  private sector is probably best equipped  to own and                                                               
operate them, because they do it  for a living. That is why there                                                               
is  some hesitation  to  get  the state  involved,  but then  the                                                               
disadvantage to that  would be that the state  loses control over                                                               
most aspects of  the operation and construction of  the line that                                                               
aren't regulated by current laws.                                                                                               
SENATOR  MICCICHE  clarified  that   there  would  be  a  federal                                                               
jurisdictional  component to  any "192  Line," as  well, even  if                                                               
FERC is not involved in the regulation.                                                                                         
MR.  DUBLER  agreed that  there  are  a  lot of  regulations  and                                                               
permits  on this  pipeline; it's  actually mind-numbing.  He then                                                               
turned the  debt financing  portion of  the presentation  over to                                                               
Ms. Rodell.                                                                                                                     
ANGELA RODELL, Deputy Commissioner,  Alaska Department of Revenue                                                               
(DOR), Juneau, Alaska,  said that a number  of different vehicles                                                               
are available  for the debt  portion of  a project and  she would                                                               
focus  on three  of  the most  common:  general obligation  bonds                                                               
(GO), project  finance or  revenue bonds,  and the  state's moral                                                               
She  said the  general obligation  bonds would  obviously benefit                                                               
from  the state's  rating, which  is  AAA from  all three  rating                                                               
agencies. Under this scenario the  state would enjoy an extremely                                                               
low cost of  funds with a very straight  forward credit analysis,                                                               
because  the rating  agencies would  be looking  straight to  the                                                               
state coffers  for debt  repayment. The downside  to GO  bonds is                                                               
the  requirement for  voter  approval and  that  makes them  more                                                               
challenging  to get  in the  first place.  If they  are approved,                                                               
theoretically, any  appropriations for debt could  potentially be                                                               
offset  by  creating  an  entity with  the  agreement  to  return                                                               
revenues  back  to the  state  general  fund  to cover  the  debt                                                               
She  explained   that  project   financing  with   revenue  bonds                                                               
typically has  no direct impact  on the  state and was  looked at                                                               
for a standalone  project. Revenues would be  estimated using the                                                               
shipper  contracts and  a  rating would  be  assessed. The  bonds                                                               
would be issued up to the  amount of risk, leverage, and coverage                                                               
that investors  would be willing  to take. The  revenues received                                                               
would be used to directly repay to the bond investors.                                                                          
4:34:58 PM                                                                                                                    
MS. RODELL said  that state moral obligation  bonding is actually                                                               
credit enhancement to the revenue  bond project finance construct                                                               
and  that  the   term  "moral  obligation"  does   not  exist  in                                                               
legislation  or state  statutes.  "Moral obligation"  is a  legal                                                               
construct that the  state used to create a  capital reserve fund,                                                               
to be maintained above a certain  dollar amount, so that it could                                                               
be made  available to an entity.  Should the fund fall  below the                                                               
required amount, the issuer (the  state) would be obligated to go                                                               
back   to  the   legislature  and   request  replenishment.   The                                                               
obligation  to  request replenishment  is,  in  fact, the  "moral                                                               
There is  no legal or  binding requirement on the  legislature to                                                               
fund the  replenishment request, Ms. Rodell  explained, but there                                                               
would be  an expectation by the  investors for the state  to step                                                               
up and  honor its request  and show  evidence of support  for the                                                               
project. The  result would be for  investors to pay more  or take                                                               
lower interest rates in return  for the credit enhancement. It is                                                               
a definite financial  benefit to the issuers, but  it does affect                                                               
the  state's credit  rating,  because  it was  viewed  as a  real                                                               
SENATOR FAIRCLOUGH stated that the  committee did not have a bill                                                               
in  front of  it and  noted  that the  Knik Arm  Bridge and  Toll                                                               
Authority  (KABATA) was  going to  be before  the Senate  Finance                                                               
Committee with  "state moral obligation" listed  in its financing                                                               
package. She asked  if the KABATA financing  package could affect                                                               
the state's bond rating.                                                                                                        
MS.  RODELL answered  that KABATA's  financing package  would not                                                               
affect  the state's  ratings at  present, but  "moral obligation"                                                               
would  come into  play as  state debt  when an  appropriation was                                                               
made to honor  an obligation. She said the  Department of Revenue                                                               
(DOR)  kept   track  of  exactly   how  much   outstanding  moral                                                               
obligation  debt  the  state  had and  its  potential  impact  on                                                               
overall  finances in  order to  explain to  rating agencies  that                                                               
they know  exactly what was going  on with state assets  and debt                                                               
4:38:26 PM                                                                                                                    
SENATOR  MICCICHE  clarified  that the  project  financing  would                                                               
technically not  have an  impact on  the state  and asked  if she                                                               
meant it  would use the state's  credit rating to obtain  GO bond                                                               
financing like a toll bridge with  cars paying the toll. It would                                                               
be standalone credit that doesn't hit the general fund?                                                                         
MS. RODELL  answered that  was correct  and that  investors would                                                               
only allow  a project to issue  no more debt that  they think the                                                               
revenues will  support. You  may have  authorization to  issue $1                                                               
billion for a pipeline, but  if all the revenue assessments point                                                               
to  raising enough  to support  only  $200 million  in debt,  the                                                               
market would only allow $200 million worth to be sold.                                                                          
The  presentation  came  back  to Mr.  Dubler  who  said  project                                                               
finance optimization as  about coming up with  the lowest overall                                                               
cost of funds to  finance a project and the goal  is to strike an                                                               
appropriate balance  between debt  and equity. The  quandary with                                                               
these  projects  is that  investors  wanted  more debt  and  debt                                                               
people want  more equity; and  having either of  those situations                                                               
makes the other feel more  secure. The balance is needed, because                                                               
of the  different yields. A  typical yield on a  pipeline project                                                               
similar to ASAP is  in the 10 to 13 percent range  and debt is in                                                               
the 4.5 to  7 percent range, so there is  a very large difference                                                               
in  the costs.  And  because  of that  difference,  one wants  to                                                               
minimize the  10 to  13 percent  range and maximize  to 4.5  to 7                                                               
percent range.                                                                                                                  
4:40:58 PM                                                                                                                    
MR. DUBLER said  they had debated ownership  models and concluded                                                               
that it will  probably end up with each of  the entities having a                                                               
pro-rata share of  ownership commensurate with the  amount of gas                                                               
they  are shipping.  For  example,  if the  state  has an  eighth                                                               
percent (its  royalty percentage  of the gas)  contribution, then                                                               
it would be contributing an eighth  to the equity of the line. If                                                               
the builder,  the owner-operator,  or one  of the  other shippers                                                               
would participate, that would allow  them a percentage of control                                                               
in the  line equal to  the amount of  gas they are  committing to                                                               
the project. But when they commit  their gas to the project, they                                                               
are taking a  risk; if the preliminary tariff is  projected to be                                                               
$9 and  it comes  back at  $12, that  is a  problem. So  they are                                                               
taking a risk in committing their  gas and they want to have some                                                               
control over that process.                                                                                                      
MR. DUBLER concluded  that the target capital  structure for both                                                               
the All-Alaskan Pipeline (APP) and  the Denali pipelines is 75/25                                                               
debt-to-equity and that seems to be a balance that works.                                                                       
CHAIR GIESSEL thanked the presenters.                                                                                           
4:43:39 PM                                                                                                                    
There being no further business to come before the committee,                                                                   
Chair Giessel adjourned the Senate Resources Standing Committee                                                                 
meeting at 4:44 p.m.                                                                                                            

Document Name Date/Time Subjects
SR 5 vs N.pdf SRES 3/29/2013 3:30:00 PM
SR 5
SR 5 Fiscal Note PDF.pdf SRES 3/29/2013 3:30:00 PM
SR 5
SR 5 Chinook Bycatch Management Timeline.PDF SRES 3/29/2013 3:30:00 PM
SR 5
SR 5 North Pacific Fishery Management Council - Update on Chinook Bycatch 2013.02.18.PDF SRES 3/29/2013 3:30:00 PM
SR 5
SR 5 Cooper Landing Advisory Committee Resolution 2013.02.26.PDF SRES 3/29/2013 3:30:00 PM
SR 5
SR 5 Tanana Chiefs Bycatch Resolution 2013.03.08.PDF SRES 3/29/2013 3:30:00 PM
SR 5
SR 5 Oppose Ak Whitefish Trawlers 2013 03 28.docx SRES 3/29/2013 3:30:00 PM
SR 5
SR 5 Kenai Peninsula Borough Resolution 2013.02.05.PDF SRES 3/29/2013 3:30:00 PM
SR 5
SR 5 AVCP Bycatch Resolution 2013.03.05.PDF SRES 3/29/2013 3:30:00 PM
SR 5
SR 5 Yukon River Drainage Fisheries Association Resolution 2013.02.14.PDF SRES 3/29/2013 3:30:00 PM
SR 5
SR 5 Supp Letter Jack's Alaska Lodge 2013.03.27.PDF SRES 3/29/2013 3:30:00 PM
SR 5
SR 5 Supp Letter Bremicker 2013.03.23.PDF SRES 3/29/2013 3:30:00 PM
SR 5
SR 5 Supp Letter AMCC 2013.03.26.pdf SRES 3/29/2013 3:30:00 PM
SR 5
SR 5 Supp Emails.PDF SRES 3/29/2013 3:30:00 PM
SR 5
SR 5 Support Kenaitze Indian Tribe letter.pdf SRES 3/29/2013 3:30:00 PM
SR 5
SRES March 29 2013 - Financing Mega Projects.pdf SRES 3/29/2013 3:30:00 PM
Gasline Projects APP & ASAP
SR 5 Sponsor Statement (2).pdf SRES 3/29/2013 3:30:00 PM
SR 5
SR 5 Written Testimony AngieWhitman 2013.03.29.pdf SRES 3/29/2013 3:30:00 PM
SR 5
SR 5 Written Testimony JulieBonney 2013.03.29.pdf SRES 3/29/2013 3:30:00 PM
SR 5