Legislature(2017 - 2018)BUTROVICH 205

02/28/2018 03:30 PM RESOURCES

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Audio Topic
03:30:10 PM Start
03:30:44 PM Update: Alaska Minerals Commission
03:58:52 PM Update on Alaska Lng Project
05:39:48 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Alaska Minerals Commission TELECONFERENCED
Overview of Annual Report
-- Testimony <Invitation Only> --
+ Update on the Alaska LNG Project TELECONFERENCED
Alaska Gasline Development Corporation
-- Testimony <Invitation Only> --
+ Bills Previously Heard/Scheduled TELECONFERENCED
                    ALASKA STATE LEGISLATURE                                                                                  
              SENATE RESOURCES STANDING COMMITTEE                                                                             
                       February 28, 2018                                                                                        
                           3:30 p.m.                                                                                            
                                                                                                                                
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Senator Cathy Giessel, Chair                                                                                                    
Senator John Coghill, Vice Chair                                                                                                
Senator Natasha von Imhof                                                                                                       
Senator Bert Stedman                                                                                                            
Senator Kevin Meyer                                                                                                             
Senator Click Bishop                                                                                                            
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Senator Bill Wielechowski                                                                                                       
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
UPDATE: ALASKA MINERALS COMMISSION                                                                                              
                                                                                                                                
     - HEARD                                                                                                                    
                                                                                                                                
UPDATE ON ALASKA LNG PROJECT                                                                                                    
                                                                                                                                
     - HEARD                                                                                                                    
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
No previous action to record                                                                                                    
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
DR. LANCE MILLER, Chair                                                                                                         
Alaska Minerals Commission                                                                                                      
Anchorage, Alaska                                                                                                               
POSITION STATEMENT: Provided Alaska Minerals Commission Update.                                                               
                                                                                                                                
ROBERT RETHERFORD, Member                                                                                                       
Alaska Minerals Commission                                                                                                      
Juneau, Alaska                                                                                                                  
POSITION STATEMENT: Provided Alaska Minerals Commission update.                                                               
                                                                                                                                
FRANK RICHARDS, Senior Vice President                                                                                           
Project Management                                                                                                              
Alaska Gasline Development Corporation (AGDC)                                                                                   
Anchorage, Alaska                                                                                                               
POSITION STATEMENT: Presented AKLNG Project update.                                                                           
                                                                                                                                
LIEZA WILCOX, Vice President                                                                                                    
Commercial and Economics                                                                                                        
Alaska Gasline Development Corporation (AGDC)                                                                                   
Anchorage, Alaska                                                                                                               
POSITION STATEMENT: Presented AKLNG Project update.                                                                           
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
3:30:10 PM                                                                                                                    
CHAIR  CATHY   GIESSEL  called  the  Senate   Resources  Standing                                                             
Committee meeting  to order  at 3:  p.m. Present  at the  call to                                                               
order were Senators Stedman, Meyer,  Bishop, von Imhof, and Chair                                                               
Giessel.                                                                                                                        
                                                                                                                                
^Update: Alaska Minerals Commission                                                                                             
               Update: Alaska Minerals Commission                                                                           
                                                                                                                              
3:30:44 PM                                                                                                                    
CHAIR GIESSEL  announced the  first order of  business to  be the                                                               
Alaska Minerals Commission update.                                                                                              
                                                                                                                                
3:31:59 PM                                                                                                                    
SENATOR COGHILL joined the committee.                                                                                           
                                                                                                                                
DR.  LANCE MILLER,  Chair, Alaska  Minerals  Commission, said  he                                                               
also  works for  the  NANA Regional  Corporation. The  Commission                                                               
members  are  appointed from  around  the  state including  rural                                                               
areas and represent placer mining,  coal mining, metallic mining,                                                               
and so forth.                                                                                                                   
                                                                                                                                
ROBERT RETHERFORD,  Member, Alaska  Minerals Commission,  said he                                                               
works  for Alaska  Earth Sciences,  a small  group that  consults                                                               
mostly for  minerals and engineering  work such as  at Sweetheart                                                               
Lake  near Juneau.  He said  the commission's  goal is  to create                                                               
strategies  that will  help mitigate  constraints  on the  mining                                                               
industry.                                                                                                                       
                                                                                                                                
3:33:01 PM                                                                                                                    
MR.  MILLER  said  the  commission's   top  ongoing  priority  is                                                               
establishment of a stable fiscal  policy for the state and making                                                               
sure its agencies are properly  funded. When you're trying to get                                                               
companies  to come  to  Alaska, having  a  stable environment  to                                                               
conduct business is paramount.                                                                                                  
                                                                                                                                
MR.  MILLER said  in terms  of severance  taxes, local  companies                                                               
work with  the local government  and reach arrangements  like the                                                               
payments  in lieu  of taxes  (PILT)  in Northwest  Alaska. It  is                                                               
important for  local jurisdictions  to get benefits  from mineral                                                               
development.  So, they  have recommended  that a  portion of  the                                                               
state mining  tax go back  to the affected areas  and elimination                                                               
of  severance  tax but  not  do  away  with any  property  taxing                                                               
ability. He said  the minerals industry is in an  upswing and now                                                               
is a good time  to take advantage of that and  make sure they are                                                               
collectively welcoming to the industry.                                                                                         
                                                                                                                                
3:35:29 PM                                                                                                                    
MR. RETHERFORD said  the "Stand for Salmon"  ballot initiative is                                                               
of concern  and encouraged members to  be fair in looking  at it,                                                               
but  also  encouraged  them  to  examine  the  entire  initiative                                                               
process, because there  is much too much opportunity  to stand in                                                               
the way of resource development.                                                                                                
                                                                                                                                
There are  a lot  of concerns  over water use,  he said,  and the                                                               
report  recommends that  the  legislature is  the  best place  to                                                               
determine what constitutes Tier 3  waters. The primary concern is                                                               
that the state  uses good science and a fair  and balanced method                                                               
to  deal  with  the  water   quality  issue  and  in  determining                                                               
"instream flow reservations" (IFR).                                                                                             
                                                                                                                                
Finally, the  bond pool that the  state has set up  for the small                                                               
placer  miners,  in particular,  should  be  kept in  place,  the                                                               
concern  being  that the  Bureau  of  Land Management  (BLM)  has                                                               
suggested no longer allowing it to  be used on federal lands. The                                                               
thought is  that any other steps  would be a burden  on the small                                                               
placer miners  and keeping the  bond pool  will allow them  to go                                                               
forward while assuring  the BLM that they have  good state agency                                                               
review.                                                                                                                         
                                                                                                                                
3:39:04 PM                                                                                                                    
MR. MILLER  said the legislature  and administration can  do some                                                               
things regarding  federal priorities,  especially now,  given the                                                               
situation at the federal level. Alaska  is still young and is due                                                               
a large  amount of federal land  and a large amount  of wetlands,                                                               
and there  is sort of a  "federal push-down" on things  the state                                                               
has  to do  on  all kinds  of  fronts. These  could  be "sort  of                                                               
lumped"  into public  land closures  and BLM  resource management                                                               
plans (that are  very onerous) and might  even contradict state's                                                               
rights  with  ANILCA.  These  are   significant  issues  and  the                                                               
commission  wants to  be able  to support  the agencies  that can                                                               
then work with the feds on their resolution.                                                                                    
                                                                                                                                
The  Sturgeon  case  about  navigable  waters  is  another  issue                                                               
everyone  is aware  of and  making  sure that  Alaska has  access                                                               
through  these  waterways to  public  and  private lands,  Native                                                               
lands,  and so  forth. The  delegation is  doing a  great job  in                                                               
working these  issues, too, but  the opportunity is there  now to                                                               
resolve some of them.                                                                                                           
                                                                                                                                
3:41:32 PM                                                                                                                    
MR. RETHERFORD  said public  land orders that  are left  open for                                                               
long periods of  time and federal land  withdrawals similarly put                                                               
in place during  ANCSA or ANILCA (points 9 and  11) deserve to be                                                               
reviewed,  and where  appropriate, the  BLM should  release these                                                               
lands so that the state and others can use them appropriately.                                                                  
                                                                                                                                
MR. MILLER displayed an AMA  map of mines and mineral exploration                                                               
locations stating that  Alaska has five metal mines  and one coal                                                               
mine. The  rate of success for  moving a mine prospect  to a mine                                                               
is less than 1 percent. To get  to this number of mines, 7,000 to                                                               
15,000 occurrences have to be reviewed.                                                                                         
                                                                                                                                
Slide  7   graphed  Alaska  mineral  development   timelines  and                                                               
investments:  the  five  successes were  Kensington,  Pogo,  Fort                                                               
Knox, Red Dog,  and Greens Creek. The five  still seeking success                                                               
were  Arctic/Bornite,  Chuitna,  Livengood,  Pebble,  and  Donlin                                                               
Creek. The unsuccessful  one was Rock Creek. He said  it costs an                                                               
average of  $250-300 million and takes  about 16 years to  get to                                                               
the decision about  a mine. The successes are  obviously mines in                                                               
production: Donlin is  a great example. It has been  going for 24                                                               
years and has made over $400 million.                                                                                           
                                                                                                                                
MR. MILLER said  competing for capital on a  global stage depends                                                               
on what  stage the project is  in. The exploration stage  is high                                                               
risk, funding is erratic, and  a strong regulatory environment is                                                               
critical.  In   the  final  feasibility  stage   (and  subsequent                                                               
decision to  build a mine),  the return becomes  more predictable                                                               
and it  is therefore lower  risk and  the financing is  easier to                                                               
secure,  but   the  political/regulatory  environment   is  still                                                               
critical.                                                                                                                       
                                                                                                                                
He displayed  two graphs (slide  10), one of  exploration budgets                                                               
from 2012  to 2017 and  the other  of mining equity  capital from                                                               
2006 to  August 2017.  He said Alaska's  trend has  matched those                                                               
graphs  (a high  of $300  million  in 2010/12  and a  low of  $50                                                               
million  and  up  to  about  $90  million  now).  So,  Alaska  is                                                               
competing on the global stage.                                                                                                  
                                                                                                                                
3:45:29 PM                                                                                                                    
MR.  MILLER  said  slide  11  graphed  combined  commodity  index                                                               
(including oil, wheat,  and everything) cycles back  to 1749. The                                                               
distance  between the  spikes shorten  in more  recent times  and                                                               
that is  presumably as a  result of news traveling  faster. Slide                                                               
12 graphed zinc prices from 1970  to 2016 and he noted that there                                                               
were four price  spikes in that time including the  one we are in                                                               
today.  This is  just how  the mining  business is;  you want  to                                                               
capitalize on  the spikes and be  able to ride out  the lows. For                                                               
example, when Red  Dog came into production in 1989  was a period                                                               
of  high  prices. Then  prices  went  down  into the  "Valley  of                                                               
Death," which is  the reason it didn't get payback  for 14 years.                                                               
Had  their spike  continued,  the payback  would  have been  much                                                               
quicker like  predicted. Global events  can change  metal prices,                                                               
but they  really trend  with supply  and demand.  Basically, when                                                               
metal stocks are  up, the commodity price is low  and vice versa.                                                               
The consumption of  basic metals is going up  globally, and China                                                               
drives a lot of  it, but it is going up in the  U.S. and the rest                                                               
of the world, too.                                                                                                              
                                                                                                                                
MR. MILLER asked  if anyone knew what the  per capita consumption                                                               
(including  for  cars  and  vitamins) of  zinc  is  annually.  He                                                               
answered four pounds.                                                                                                           
                                                                                                                                
3:48:40 PM                                                                                                                    
He  categorized  the  types  of  mining  companies  into  Placer,                                                               
Juniors, Mid-Tiers,  and Majors.  Placers are  important although                                                               
their  investment strategy  is  family livelihood.  Collectively,                                                               
they  add up  to  the equivalent  of one  large  mine for  Alaska                                                               
economically.                                                                                                                   
                                                                                                                                
Juniors' characteristics are high  risk exploration or betting on                                                               
the  management;  Mid-tiers'  are  betting on  the  project,  and                                                               
Majors are usually the more fully integrated companies.                                                                         
                                                                                                                                
He elaborated that  Juniors are the discoverers  of new deposits.                                                               
They are  something like the  pharmaceutical or  biotech industry                                                               
where Bayer, for  instance, doesn't do drug  development but they                                                               
work with  start-ups with  the goal  of buying  them out.  It's a                                                               
good parallel  with the  mining industry, much  more so  than oil                                                               
between independents and majors.                                                                                                
                                                                                                                                
Juniors  have  small  market  capitalization,  depend  on  equity                                                               
markets, and high  risk. Examples are Nova  Gold, Trilogy Metals,                                                               
Donlin,   Millrock,   Constantine,  International   Tower   Hill,                                                               
Northern  Dynasty,  and  Solitario.  And they  are  critical  for                                                               
feeding the whole system to make  sure there is an ongoing supply                                                               
of metals.                                                                                                                      
                                                                                                                                
3:50:23 PM                                                                                                                    
The Mid-tiers are a small  percentage overall and can have market                                                               
caps up to  a few billion dollars. Examples are  Hecla and Greens                                                               
Creek,  Usibelli Coal,  Hudson's Bay,  Lundin, and  Coeur d'Alene                                                               
with Kensington.                                                                                                                
                                                                                                                                
3:50:45 PM                                                                                                                    
The Majors are often vertically  integrated and have large market                                                               
caps, but also  have access to cheaper money. They  have a global                                                               
footprint.  Examples are  TECK,  Barrick, Anglo,  RTZ, BHP,  MMG,                                                               
Glencore, and Kinross.                                                                                                          
                                                                                                                                
MR. MILLER  said Alaska's  projects fit in  with the  juniors and                                                               
the majors. A  lot of the management for the  Juniors came out of                                                               
the Majors, so  they bring that major experience  with them. It's                                                               
just  in the  last  20  years that  the  Majors  have quit  doing                                                               
exploration,   themselves.   So,   there  are   often   strategic                                                               
alliances.                                                                                                                      
                                                                                                                                
3:51:52 PM                                                                                                                    
MR.  MILLER  said  Canada  has   had  some  major  infrastructure                                                               
initiatives:  the  Yukon  Bridges  and  Roads  Program  for  $360                                                               
million; B.C. has the Hydro  Northwest Transmission Line for $700                                                               
million-plus,  and Ontario  has  a  roads infrastructure  project                                                               
versus Alaska where  typically the mining company  builds its own                                                               
roads, and often with public  benefit. Examples are Juneau Hydro,                                                               
the Copper  River Railroad  that one can  still bike  on, Hatcher                                                               
Pass, and  the DeLong Mountain Transportation  System (DMTS). So,                                                               
one can say of the U.S. approach that industry pays for it.                                                                     
                                                                                                                                
3:52:54 PM                                                                                                                    
He said there  are lots of examples of  community benefits (slide                                                               
20).  He said  there was  a bit  of a  downturn between  2012 and                                                               
2014, which  resulted in industry employee  numbers dropping from                                                               
120  to 50  - really  because exploration  dollars dried  up. And                                                               
mining is critical for good paying rural jobs.                                                                                  
                                                                                                                                
MR.  MILLER noted  that NANA  actually  broke the  billion-dollar                                                               
mark for distribution to other  Alaska Native Corporations (ANC)s                                                               
through  7(i) and  7(j).  NANA received  about  $1.7 billion  and                                                               
distributed over $1 billion last year.                                                                                          
                                                                                                                                
3:53:48 PM                                                                                                                    
The Frasier  Institute's Global Mining  Investment Attractiveness                                                               
Ranking (slide  21) ranks Alaska in  10th place out of  91 global                                                               
areas as being an attractive  place for investment and the reason                                                               
is because  Alaska's mineral potential  is ranked 5th in  91. But                                                               
Alaska ranks  41 out of  91 in  the issues around  uncertainty of                                                               
existing  regulations  and  policies,  and that  is  all  in  the                                                               
legislature's court. Alaska is a  great place to do business, but                                                               
a lot of it is because of its geology.                                                                                          
                                                                                                                                
Not  wanting  to leave  on  a  bad  note,  Mr. Miller  related  a                                                               
positive story  about the Haines  Consensus of  1982, legislation                                                               
that  came  out of  a  conflict  over resource  development.  The                                                               
signatories  were  lumber  companies,  Lynn  Canal  Conservation,                                                               
SEACC, U.S.  Fish and Wildlife  Service, Audubon, and  the Alaska                                                               
Miners  Association Haines  Branch, and  that's when  the Chilkat                                                               
Bald Eagle Preserve and the  State Forest Plan were founded. This                                                               
is  a case  that has  been good  for Constantine  Metal Resources                                                               
Ltd., because  some thought and  planning has gone into  the idea                                                               
that multiple uses can co-exist.                                                                                                
                                                                                                                                
SENATOR STEDMAN  said the commission  has been a little  too soft                                                               
in push back on the salmon  initiative and suggested they be more                                                               
aggressive.  He   suggested  being  cautious  of   groups  coming                                                               
together, because  in the Tongass  he has  found that two  out of                                                               
four or five conservation groups will sue you in the end.                                                                       
                                                                                                                                
3:56:56 PM                                                                                                                    
MR. RETHERFORD said the Council of  Producers has put up a lot of                                                               
money into fighting the salmon initiative.                                                                                      
                                                                                                                                
MR. MILLER said the initiative is  bad not only for what it would                                                               
do  for mining  and  for rural  economic  development, even  some                                                               
fishing   organizations  are   not  supporting   it.  Maybe   the                                                               
legislature could do something to  address the initiative process                                                               
overall.                                                                                                                        
                                                                                                                                
SENATOR VON IMHOF  noted that she was going to  follow up with an                                                               
email to the commission with a list of four questions.                                                                          
                                                                                                                                
CHAIR GIESSEL thanked them for their service on the commission.                                                                 
                                                                                                                                
^Update on Alaska LNG Project                                                                                                   
                  Update on Alaska LNG Project                                                                              
                                                                                                                              
3:58:52 PM                                                                                                                    
CHAIR  GIESSEL announced  the continuation  of the  AKLNG Project                                                               
update  from the  end of  January.  She said  today they  weren't                                                               
going through the  rest of the 60-plus-page  power point; instead                                                               
committee members  would ask questions.  She also had  the letter                                                               
AGDC  wrote  responding to  the  one  she and  Senator  MacKinnon                                                               
submitted after their first meeting.                                                                                            
                                                                                                                                
4:01:24 PM                                                                                                                    
SENATOR STEDMAN asked  for him to comment on the  letter from the                                                               
Federal  Energy Regulatory  Commission (FERC)  and the  potential                                                               
delay of the site selection between Valdez and Port Mackenzie.                                                                  
                                                                                                                                
4:02:42 PM                                                                                                                    
FRANK  RICHARDS,  Senior   Vice  President,  Project  Management,                                                               
Alaska Gasline  Development Corporation (AGDC),  referenced slide                                                               
45  and  said the  FERC  letter  was another  environmental  data                                                               
request, the  fourth one since  AGDC had filed  their application                                                               
in April 2017.  Their first tranche of 801 questions  came out in                                                               
June, July, and August 2017.  AGDC responses went out in tranches                                                               
through September, October, and  November 2017 and were finalized                                                               
in January 2018.                                                                                                                
                                                                                                                                
Then,  low and  behold, AGDC  got  another request  from FERC  in                                                               
February for  more environmental information. AGDC's  position is                                                               
that a  "tremendous wealth" of environmental  information already                                                               
exists  from  along  the  route  through  previous  Environmental                                                               
Impact   Statements   (Environmental   Impact   Statement   (EIS)                                                               
conducted on  a North  Slope gas project.  In addition,  AGDC has                                                               
been   working  on   their   Supplemental  Environmental   Impact                                                               
Statement  (SEIS)  on the  Alaska  Stand  Alone Pipeline  Project                                                               
(ASAP), a  project that  has a  gas treatment  plant (GTP)  and a                                                               
pipeline that  is coincidental  to the locations  of the  GTP and                                                               
pipeline for  the AKLNG Project.  That environmental  process has                                                               
been  led by  the Army  Corps of  Engineers over  the last  three                                                               
years, and AGDC  is about to receive it from  them next month. It                                                               
is their position that FERC,  as a federal agency, could leverage                                                               
the work  that has already been  done and advance and  launch the                                                               
schedule, but  that hasn't been  done. Instead AGDC  gets another                                                               
data request  consisting of 289  questions about three  levels of                                                               
information:  some are  just  refinement  of previously  provided                                                               
information, some  are requests  for new information,  which they                                                               
will have to compile, and the  third level questions ask for some                                                               
very  detailed analysis,  similar to  the alternatives  analysis,                                                               
for both  the Port Mackenzie site  or the Valdez site  for an LNG                                                               
plant. That  is going to  require quite a  bit of work,  and they                                                               
want a clear understanding from  FERC what will be acceptable, so                                                               
they don't find themselves receiving a letter like this again.                                                                  
                                                                                                                                
MR.  RICHARDS said  AGDC  will reply  to FERC  next  week with  a                                                               
schedule for returning  replies and follow it up  with a face-to-                                                               
face meeting  to get clarification  on the larger  category items                                                               
such as the alternatives analysis.                                                                                              
                                                                                                                                
4:07:32 PM                                                                                                                    
CHAIR GIESSEL  said when the  State of Alaska had  four partners,                                                               
20  sites were  considered  for the  export  facility. They  were                                                               
honed down  to five and then  Nikiski was selected. She  asked if                                                               
they have access to all that work.                                                                                              
                                                                                                                                
MR.  RICHARDS  replied  that  she   was  referring  to  the  site                                                               
selection  work that  was done  in 2012  by the  Southcentral LNG                                                               
Project,  the predecessor  to the  AKLNG Project,  and yes,  they                                                               
have access  to the site selection  analysis. It came to  them at                                                               
the  conclusion  of  the  pre-FEED  (front  end  engineering  and                                                               
design) Joint Venture  Agreement (JVA). At the  time, the project                                                               
management  team  made  the determination  that  Port  Mackenzie,                                                               
specifically, was an  incompatible site because it  was deemed to                                                               
be a working port with a goal in  the master plan of being a port                                                               
that would  have both import  and export capabilities.  They felt                                                               
that site  couldn't have a  working dock face co-located  with an                                                               
LNG  plant. So,  it  was  disregarded. Then  they  looked for  an                                                               
alternative  site  nearby  -  north   or  south  -  and  chose  a                                                               
demarcation point,  which they called  Point Mackenzie,  and that                                                               
is what was considered in the  site selection study. It fell out,                                                               
because of  the issue of  incompatible land use  potentially with                                                               
the uplands  and the shallow  bathymetry at the actual  LNG berth                                                               
site.                                                                                                                           
                                                                                                                                
4:09:32 PM                                                                                                                    
MR. RICHARDS  said he believed FERC  wants to make sure  that the                                                               
alternatives analysis for Port Mackenzie  is the same as what was                                                               
done for  Nikiski and the other  sites in Resource Report  10 and                                                               
he wants to make sure there is no additional work to consider.                                                                  
                                                                                                                                
SENATOR STEDMAN  asked what delay  he thought would  be involved,                                                               
if any, in responding to the alternative sites issue.                                                                           
                                                                                                                                
MR. RICHARDS  replied the  analysis of  Valdez will  take several                                                               
months, but the section of gas  line to Port Mackenzie is a small                                                               
segment  of the  route  where  it intersects  with  the Wild  and                                                               
Scenic  Rivers  of  Delta  and  Gakona,  and  those  designations                                                               
weren't in place when FERC  did its original Environmental Impact                                                               
Statement (EIS)  on the  route leading to  Valdez. So,  now those                                                               
land use  issues around will  have to  be analyzed and  that will                                                               
take several months. However, he needs  to find out how much more                                                               
information FERC  wants -  a tremendous  amount of  on-site field                                                               
work, a few technical borings,  or bathymetry work - because that                                                               
needs to be done in the summer time.                                                                                            
                                                                                                                                
MR. RICHARDS said  he had a good meeting with  the manager of the                                                               
Mat-Su Borough,  his auditor, and  one of the council  members to                                                               
discuss the  Port Mackenzie alternative.  The Mat-Su  Borough was                                                               
allowed  to become  an intervener,  which means  will be  able to                                                               
receive  information as  it comes  available and  be part  of the                                                               
conversation.  The  Mat-Su  Borough  offered  AGDC  any  and  all                                                               
information that  was available  in their records  to be  able to                                                               
help with  this process,  and AGDC will  leverage that  once they                                                               
know what FERC needs.                                                                                                           
                                                                                                                                
4:13:04 PM                                                                                                                    
SENATOR VON  IMHOF said on  one hand,  it makes sense  to utilize                                                               
work  that  has already  been  done  and  apply  it to  the  FERC                                                               
process,  but  his reply  states  "the  information that  is  not                                                               
required  by  the  state  or  other  agencies  and  will  not  be                                                               
provided."  What if  FERC says  even though  the state  and local                                                               
agencies don't require it, we do? How would he respond?                                                                         
                                                                                                                                
MR. RICHARDS replied that the  FERC letter also wanted plans that                                                               
had   not  been   developed  yet   under   the  normal   national                                                               
Environmental  Policy Act  (NEPA) process,  such as  the wetlands                                                               
mitigation plan  or the cultural  resource management  plan. AGDC                                                               
is going to do those plans  in the general course, but FERC wants                                                               
them now. The  state's former partners agreed  to providing those                                                               
plans at  the time  of application  and AGDC has  met a  trail of                                                               
agreements  and  has  to  follow through  with  them.  They  will                                                               
respond with what FERC needs,  but need a better understanding of                                                               
an appropriate level of response.                                                                                               
                                                                                                                                
4:15:43 PM                                                                                                                    
SENATOR VON  IMHOF asked why he  thinks FERC is asking  for these                                                               
items now, if he thinks it's  unusual, and if he feels that fast-                                                               
tracking  the application  process  is  missing important  normal                                                               
hurdles.                                                                                                                        
                                                                                                                                
MR. RICHARDS replied that FERC's  attorney says FERC is litigated                                                               
on  almost  every  decision  they make,  and  they  want  legally                                                               
defensible documents.  His understanding is the  previous project                                                               
management  team outlines  and  specifics of  the  plan would  be                                                               
provided at a future date. FERC  wants to know that the format of                                                               
the  plans will  meet its  standards and  that AGDC  is going  to                                                               
follow  through  and complete  what  is  needed for  the  federal                                                               
authorizations.                                                                                                                 
                                                                                                                                
AGDC  is in  the process  right  now of  ending the  Supplemental                                                               
Environmental  Impact Statement  (EIS) for  the ASAP  and working                                                               
with the Army  Corps on the wetlands mitigation plan  - they have                                                               
gone through the  NEPA process and the public process  - and just                                                               
received the  jurisdictional determination by the  Army Corps for                                                               
the  wetlands that  are  going  to be  impacted  by the  project.                                                               
Seventy  percent  of  the  ASAP   project  represents  the  AKLNG                                                               
pipeline and  the court has  accepted the wetlands  mapping. Now,                                                               
mitigation has to be identified  for those impacts and their goal                                                               
is to use that process in their FERC discussions.                                                                               
                                                                                                                                
4:18:59 PM                                                                                                                    
CHAIR  GIESSEL  referred  to  the AGDC  letter  of  response  and                                                               
remarked on  how tiny and fuzzy  the print is. It's  hard to read                                                               
the  timeline,   but  it  looks   like  FERC  will   publish  the                                                               
Environmental Impact  Statement (EIS) schedule on  March of 2018,                                                               
which is in a couple of weeks,  and it looks like that time isn't                                                               
going  to be  met. What  can he  tell them  about the  plan going                                                               
forward?                                                                                                                        
                                                                                                                                
MR. RICHARDS  apologized for  the very small  font and  said this                                                               
timeline was  an aspirational goal  and the average  timeline for                                                               
getting to the  point of publishing the NEPA schedule  is about a                                                               
year. FERC's  letter says they  want more information.  Once FERC                                                               
receives the requested information, they  will determine if it is                                                               
sufficient  to provide  a publication  of that  schedule and  the                                                               
preliminary draft of the Environmental  Impact Statement (EIS) is                                                               
being  written  now, which  is  a  positive.  That gives  AGDC  a                                                               
timeline to follow through their  metrics, which can mean a final                                                               
environmental impact statement (FEIS) within 12 months.                                                                         
                                                                                                                                
CHAIR  GIESSEL said  she appreciates  aspirational goals,  but it                                                               
may have given  Senator von Imhof the sense of  rushing and asked                                                               
if that  moves the other goal  posts down to less  than one year,                                                               
as well.                                                                                                                        
                                                                                                                                
4:22:57 PM                                                                                                                    
MR. RICHARDS responded  he would get them a better  print out and                                                               
clarified that Q1 would be between January and March 2019.                                                                      
                                                                                                                                
CHAIR GIESSEL asked if he felt that was realistic.                                                                              
                                                                                                                                
MR. RICHARDS  answered they feel  that it is  potentially doable,                                                               
because  of the  tremendous amount  of work  that has  been done,                                                               
which includes"                                                                                                                 
- publication  of a FEIS  by the Army  Corps on the  ASAP project                                                               
that has gone through the environmental analysis                                                                                
- consulting with the federal permitting agencies                                                                               
- having other authorizations in place including:                                                                               
     - the 404 permit                                                                                                           
     -  the  incidental  harassment authorization  from  National                                                               
     Oceanic and Atmospheric Administration Fisheries                                                                           
     - the air permit, which is being worked on right now                                                                       
                                                                                                                                
4:23:27 PM                                                                                                                    
LIEZA WILCOX,  Vice President,  Commercial and  Economics, Alaska                                                               
Gasline  Development   Corporation  (AGDC),   Anchorage,  Alaska,                                                               
supplemented that answer saying another  part of the timeline, in                                                               
equally  tiny font,  represents  the commercial  timeline of  the                                                               
project. She agreed  with Mr. Richards that they  want to present                                                               
a  permitting  schedule  that can  be  achieved.  The  commercial                                                               
timelines can go along with the  12-month process or if the March                                                               
date  slips, it  can go  with a  different process,  because that                                                               
approval  is   usually  conditioned  precedent  to   any  of  the                                                               
definitive  agreements  becoming  effective.   So,  there  is  an                                                               
ability  to mitigate  the impacts  of  a more-lengthy  permitting                                                               
schedule up to a point in the commercial process.                                                                               
                                                                                                                                
CHAIR  GIESSEL   asked  how  finalizing  an   agreement  with  an                                                               
investment bank and  the due-diligence process with  that bank be                                                               
done  when  we  don't  have  details  of  the  project  yet?  Are                                                               
investment banks interested  in giving the project  money at this                                                               
point?                                                                                                                          
                                                                                                                                
MS. WILCOX replied  that the investment bank would  be engaged in                                                               
the  planning of  the equity  and debt  raising for  the project.                                                               
Yes, they  do have  quite a  bit of  information on  the project;                                                               
pre-FEED has  been completed and  hundreds of millions  have been                                                               
spent. There  is a plan  for construction  of the project  and an                                                               
estimate; customers  are interested. The next  step is absolutely                                                               
planning for the equity and debt  rates for the project that will                                                               
be executed in stages.                                                                                                          
                                                                                                                                
4:26:36 PM                                                                                                                    
CHAIR  GIESSEL thanked  her and  asked  if she  was referring  to                                                               
slide 54, because  she stated that pre-FEED is  completed and now                                                               
they are in the de-risking regulatory stage.                                                                                    
                                                                                                                                
MR. RICHARDS  said that  was correct;  AGDC identified  the stage                                                               
gate  process when  they took  over the  responsibility for  this                                                               
project in January 2017.                                                                                                        
                                                                                                                                
4:27:37 PM                                                                                                                    
SENATOR BISHOP asked  how much more money it will  take to answer                                                               
the latest round of questions.                                                                                                  
                                                                                                                                
MR. RICHARDS  replied that the  budget is being built  right now.                                                               
FERC  needs  a  response  next  week,  which  will  identify  the                                                               
schedule as well as the deadline  for responding to the first two                                                               
categories of questions.  They hope to meet with FERC  as soon as                                                               
possible to  build out work efforts  that will be needed  to meet                                                               
the  third tranche.  The same  engineering companies  that helped                                                               
design the  project are being  used to respond to  the questions.                                                               
Responding to earlier questions cost about $3 million/month.                                                                    
                                                                                                                                
SENATOR BISHOP asked if the  mitigation damage payments under the                                                               
Obama administration had changed under the Trump administration.                                                                
                                                                                                                                
MR.  RICHARDS responded  that they  hadn't  got to  the point  of                                                               
putting dollars on actual mitigation,  yet. However, the approach                                                               
has changed  within the  Army Corps in  regard how  the applicant                                                               
can   define  impacted   wetlands.  For   instance,  Alaska   has                                                               
approximately 737 miles  of pipeline route and  the gas treatment                                                               
plant  (GTP)  on the  North  Slope  for  the ASAP  project.  That                                                               
represents about  204,000 acres  of project  area and  102,000 of                                                               
that is  wetlands. They are going  to have to work  with the Army                                                               
Corps and  figure out how  much of those are  high-value wetlands                                                               
that will have to be mitigated  and the Corps is allowing them to                                                               
look  at   impacts  of  wetlands  in   discrete  watersheds;  for                                                               
instance, Prudhoe Bay  or the Susitna River. Then  they will give                                                               
AGDC a threshold: if the entire  watershed has been impacted by 2                                                               
percent  then they  will require  mitigation.  Since there  isn't                                                               
much development  in Alaska,  a small  number of  watersheds will                                                               
require mitigation. Then  they will have to iron out  how much it                                                               
will cost.                                                                                                                      
                                                                                                                                
4:32:57 PM                                                                                                                    
CHAIR GIESSEL  referenced a  bar graph on  slide 6  and commented                                                               
that it looks like they do make projections of cost.                                                                            
                                                                                                                                
MR. RICHARDS responded  that that bar graph  represents work that                                                               
would be ongoing and provides  ranges for those projects over the                                                               
2018/19 timeframe.  They identify the  major work effort  that is                                                               
synonymous with the  FEED level of effort, called Class  3, to be                                                               
able to  advance the project  definition and ultimately get  to a                                                               
point   of   acquiring    lump-sum,   turn-key   estimates   with                                                               
contractors. That graph is an  indication of what they anticipate                                                               
the funding  needs will  be during  this timeframe.  One activity                                                               
called the  core regulatory team is  the core team from  both the                                                               
ASAP  and  the AKLNG  project.  That  is augmented  with  outside                                                               
contractors to provide the specific answers as needed.                                                                          
                                                                                                                                
CHAIR GIESSEL asked what the (slide 6) bar graph adds up to.                                                                    
                                                                                                                                
MR.  RICHARDS  answered  the  lower  right-hand  corner  displays                                                               
ranges between  $84 million and  $790 million. It will  depend on                                                               
their ability to execute the work  and to be able to initiate the                                                               
work with  the major  contractors in a  timely fashion.  This bar                                                               
graph is a projection of the next 18 months.                                                                                    
                                                                                                                                
SENATOR VON  IMHOF went back to  the last three bullet  points on                                                               
slide 54:                                                                                                                       
                                                                                                                                
     1. Have you identified and secured parties interested                                                                      
         in the equity investment in the infrastructure                                                                         
     project?                                                                                                                   
     2. Have you identified and secured lenders?                                                                                
      3. Have you secured large engineering, procurement,                                                                       
         and construction (EPC) companies to manage the                                                                         
     construction project?                                                                                                      
                                                                                                                                
She  said   the  unlimited  receipt  authority   for  the  Alaska                                                               
Liquified Natural Gas  Fund issue is floating  around the capitol                                                               
building and  asked if  that authority  is needed  to be  able to                                                               
raise that $700 million quickly.                                                                                                
                                                                                                                                
MS. WILCOX said  she wanted to go  to the first bullet  - Have we                                                               
secured  customers sufficient  for financing  - and  said a  Gulf                                                               
Coast LNG  project developer recently  told her that  the offtake                                                               
contracts  are  key to  securing  the  financing. This  has  been                                                               
AGDC's  position  (LNG sales  would  secure  the financing).  The                                                               
bullets  are   listed  in  the   normal  order  of   a  project's                                                               
progression, but some of activities  are done simultaneously. So,                                                               
if interest is  shown from customers, some of the  money can come                                                               
into the  project at  that time. For  example, Venture  Global is                                                               
developing a Louisiana  project that over the last  two years has                                                               
raised about  $470 million in  equity through 6 or  7 placements.                                                               
They are  now going through FEED.  The project is for  about half                                                               
of the  project total of  30 million  tons, and the  only offtake                                                               
agreement announcement she has seen is for 1 MTPA.                                                                              
                                                                                                                                
MS. WILCOX  said AGDC has  done its marketing and  has identified                                                               
parties that are  interested in purchasing LNG  from the project.                                                               
And this  year they  are working to  secure those  agreements and                                                               
bring them  to a  definitive point.  At the  same time,  they are                                                               
starting to plan  for the equity raise that would  cover the FEED                                                               
costs up  to $700  million. To  the extent  they can  accept that                                                               
money from  the outside  sources, it  would help  those potential                                                               
equity investors make  the determination of whether  they want to                                                               
invest. Those  investors will also  ask if  they will be  able to                                                               
invest  in the  project after  that without  another vote  of the                                                               
legislature, a key question the state has to resolve.                                                                           
                                                                                                                                
SENATOR VON  IMHOF said what she  heard is that at  this time she                                                               
can't answer  the bottom  three bullets,  because they  are still                                                               
working  on  it,  and  yes, they  would  like  unlimited  receipt                                                               
authority in  order to easily raise  that money to aid  in moving                                                               
the project forward.                                                                                                            
                                                                                                                                
MS. WILCOX  answered that was  a good  summary of what  she said,                                                               
and  she recognizes  that it  is very  much the  decision of  the                                                               
State of  Alaska and the legislature  as to how to  approach that                                                               
question.                                                                                                                       
                                                                                                                                
4:38:36 PM                                                                                                                    
SENATOR STEDMAN asked if the  legislature gives unlimited receipt                                                               
authority   to   AGDC,  will   it   take   the  project   through                                                               
construction, all else being equal and everything rosy.                                                                         
                                                                                                                                
MS.  WILCOX answered  there  are  a number  of  touch points  and                                                               
approvals  the  legislature would  have  to  make along  the  way                                                               
detailed  in the  answers to  the letter  they submitted.  One of                                                               
them is  a best  interest finding  (BIF) on  the royalty  in kind                                                               
(RIK) issue,  which defines  the state's  contribution of  gas to                                                               
the project  without which  the project  doesn't work.  The state                                                               
has a  number of other  issues to resolve  to the extent  that it                                                               
makes any investment  decision to participate in  the project. It                                                               
does not have  an unlimited ability to go forward.  The chief one                                                               
is the RIK decision.                                                                                                            
                                                                                                                                
CHAIR GIESSEL  pointed out that  those answers  are on page  5 of                                                               
the letter under  the heading of Gas Supply  Field Cost Allowance                                                               
Agreement  and Joint  Venture Marketing  and  Other Gas  Disposal                                                               
Agreements. Sentences there  say the "need to be  approved by the                                                               
legislature" and "will require legislative approval."                                                                           
                                                                                                                                
4:41:00 PM                                                                                                                    
SENATOR STEDMAN  said their  eyes have  been struggling  with the                                                               
timeline and  the financing and  wanted it printed out  in bigger                                                               
font. He asked  if they were concerned about  having enough funds                                                               
available to  deal with the  FERC requests. "It's all  full speed                                                               
ahead without our financial assistance?"                                                                                        
                                                                                                                                
MR. RICHARDS replied  that slide 6 showed a range  of numbers and                                                               
if they  didn't receive a significant  influx of cash to  be able                                                               
to advance  into the major  FEED spend,  they then would  have to                                                               
fall back into  achieving a regulatory program  and acquiring the                                                               
federal permits.  They feel they have  built a budget to  be able                                                               
to take them  through the Q2 of 2019 at  current expenditures and                                                               
that includes  bringing on  the financial  advisor who  will take                                                               
care of the  regulatory advancement, the DOTPF  expenses, and the                                                               
ongoing commercial engagements.                                                                                                 
                                                                                                                                
He said it  won't be enough for the next  major definition phase.                                                               
AGDC  wants to  work  with other  investors to  see  if they  are                                                               
interested in bringing money to the  table. If the money comes in                                                               
for the  project, part of  the challenge will be  what stage-gate                                                               
they  will follow.  When AGDC  and whatever  its partners  end up                                                               
being   get  to   the  final   investment  decision   (FID),  the                                                               
legislature will have the opportunity  to identify their concerns                                                               
and objections if necessary.                                                                                                    
                                                                                                                                
SENATOR BISHOP  asked if they  have enough cash  to theoretically                                                               
get deep into 2019 right now.                                                                                                   
                                                                                                                                
MR. RICHARDS answered yes.                                                                                                      
                                                                                                                                
SENATOR  BISHOP asked  if Mr.  Richards  would want  to bring  an                                                               
authorization back  to this body  to accept funds  from potential                                                               
partners or buyers of gas to get to FID.                                                                                        
                                                                                                                                
MR. RICHARDS said that was correct.  As he said before, they have                                                               
entered  into a  Joint  Development Agreement  with Sinopec,  the                                                               
Bank of China, Ltd., and  CIC Capital Corporation, and their hope                                                               
is to have a definitive agreement by the end of 2018.                                                                           
                                                                                                                                
4:46:00 PM                                                                                                                    
MS.  WILCOX added  that in  order to  make definitive  agreements                                                               
with interested investors, the project  will need to know what it                                                               
can offer in  terms of contributions and terms, and  that is very                                                               
dependent  on the  decisions made  by the  State of  Alaska. They                                                               
anticipate an  active engagement process with  the legislature to                                                               
flesh that out.                                                                                                                 
                                                                                                                                
SENATOR  BISHOP   said  the  DNR  commissioner   will  need  that                                                               
information, as well, to make the RIK decision.                                                                                 
                                                                                                                                
MR. RICHARDS said that was correct.                                                                                             
                                                                                                                                
SENATOR STEDMAN  said a  consultant talked a  few days  ago about                                                               
the synergy that would be created  in this project if some of the                                                               
Chinese companies came  forward. He pointed out  that China could                                                               
retire coal  plants and  clean up  its air,  which would  lead to                                                               
healthier cities, and those gains  that are harder to quantify in                                                               
the negotiations.  The Chinese are  also interested  in supplying                                                               
modules faster  and at a lower  cost and then delivering  them to                                                               
the project and manufacturing the  pipe. He asked if those issues                                                               
are part of the discussions.                                                                                                    
                                                                                                                                
He also  noted Mr. Richards'  past work  on bridges and  roads at                                                               
the Department of Transportation and Public Facilities (DOTPF).                                                                 
                                                                                                                                
4:48:50 PM                                                                                                                    
MR. RICHARDS replied  that he was an advocate at  the DOTPF for a                                                               
multi-year program  to make  sure there  were adequate  roads and                                                               
bridges  for the  project.  As to  Chinese  participation in  the                                                               
project, the JVA, with ExxonMobil  in the lead, took a "concerted                                                               
look" at  modularization of the  major plants and where  the best                                                               
quality steel was  for the most cost-effective  rate. It included                                                               
a very detailed review of  modular construction in China, because                                                               
it is producing  large modules now for  international oil company                                                               
developments  and  offshore  oil   platforms  and  meeting  their                                                               
standards. For instance,  two weeks ago he went to  a plant owned                                                               
in a joint  venture by Fluor and the China  National Offshore Oil                                                               
Corporation  (CNOOC).  It has  a  2  million square  foot  module                                                               
fabrication  yard and  can produce  modules in  excess of  30,000                                                               
tons. Their assembly facility can  bring in the raw product, work                                                               
on it, develop it,  erect it, and then put it on  a barge in very                                                               
short order  and to the  exacting standards of  the international                                                               
oil companies.                                                                                                                  
                                                                                                                                
4:51:07 PM                                                                                                                    
A  recent  study  done  by Fluor  looked  at  strategic  sourcing                                                               
options  and AGDC  looked  at countries  like  China, Japan,  and                                                               
Korea, because  they produce not  only the steel but  the modules                                                               
necessary to  manufacture the plants  looking for ways  to reduce                                                               
the  overall  cost of  the  project.  Fluor identified  potential                                                               
savings of almost  $1.4 billion on the project  utilizing some of                                                               
this methodology.                                                                                                               
                                                                                                                                
He said China  does have the capability of  producing the modules                                                               
and of producing steel plate that  could be rolled into pipe. The                                                               
concern  now  is  with  potential tariffs  coming  on  board  for                                                               
offshore  steel production  into  the United  States (U.S.).  The                                                               
U.S. doesn't  have steel  manufacturing to  produce the  grade of                                                               
steel necessary  for that pipe,  and that has been  identified to                                                               
the Trump administration.  But the U.S. has plants  that can roll                                                               
that  steel  into  the  42-inch  pipe and  they  are  engaged  in                                                               
conversations with  those pipe mills  to make sure they  can meet                                                               
the standards that  are called for in the contract.  So, they are                                                               
looking for  the synergies between  offshore production  and U.S.                                                               
manufacturing capabilities  to make  sure they  are in  line with                                                               
bringing a  project in that will  be at the lowest  cost but meet                                                               
the  requirements,  standards,  and specifications  that  are  in                                                               
place.                                                                                                                          
                                                                                                                                
MR. RICHARDS  said China is  actively engaged in cleaning  up its                                                               
air and has closed many coal plants shifting them over to gas-                                                                  
burning  turbines.  Because  China  made this  massive  push,  it                                                               
created  a shortage  of  LNG, but  it's evident  when  you go  to                                                               
Beijing you can now see the  blue sky. When you leave Beijing and                                                               
go  to  manufacturing areas,  there  are  still coal-fired  power                                                               
plants and  you can see  the smog and  taste it when  you breath.                                                               
Unfortunately, because  of prevailing north east  winds, the U.S.                                                               
gets  a  lot of  that  residue  coming  into  its air  space  and                                                               
hopefully,  China cleaning  up its  air is  another environmental                                                               
benefit for Alaska.                                                                                                             
                                                                                                                                
4:53:59 PM                                                                                                                    
MS.  WILCOX directed  her  comment to  Senator  Stedman and  said                                                               
other than the EPC agreements,  a number of other agreements need                                                               
to be defined  and finalized later in the  year. Those agreements                                                               
relate to  how much  LNG will  be taken from  the project  by the                                                               
parties,  the pricing  associated with  that, the  financing, how                                                               
much of  the debt could potentially  come from the Bank  of China                                                               
or  other Chinese  banks, and  whether  there will  be an  equity                                                               
investment  made   in  the  project   by  the   China  Investment                                                               
Corporation (CIC),  China's sovereign  wealth fund,  that invests                                                               
all over the world. In other  words, a package of agreements need                                                               
to  be termed  up before  the end  of the  year. The  Chinese are                                                               
doing a  fair amount  of due diligence,  because this  project is                                                               
new to them. They are very  interested and have been to the North                                                               
Slope before, although the number of representatives was small.                                                                 
                                                                                                                                
4:55:44 PM                                                                                                                    
SENATOR  STEDMAN said  it appears  that  this integrated  network                                                               
that China  has is going  to create a  lot of synergy  versus the                                                               
capitalist system in the United  States with different companies,                                                               
and that  should be  remembered in price  negotiations. A  lot of                                                               
money can  be made  building the modules  versus just  a straight                                                               
equity or debt investment.                                                                                                      
                                                                                                                                
He  said  several  years  ago  when  they  were  looking  at  the                                                               
different projects,  one of  the big concerns  was lead  time for                                                               
manufacture  of quality  pipe  delivered on  time.  He asked  Mr.                                                               
Richards to touch  on that. And because  the rolling manufacturer                                                               
he visited  was in Arkansas,  he assumed the project  wouldn't be                                                               
shipping steel from China through  the Canal through the Gulf and                                                               
then back and up and asked what his thoughts were on that.                                                                      
                                                                                                                                
MR. RICHARDS answered that AGDC  is engaged in active discussions                                                               
with  both steel  and pipe  manufacturers,  trying to  come to  a                                                               
short list  of companies that  can meet their  specifications and                                                               
product  delivery  timeline.  The  ASAP went  through  a  similar                                                               
process in  looking at strain-based  designed steel.  They talked                                                               
to folks  in Japan and  Austria for  steel production, and  to an                                                               
Indian company called  Welspun Group for rolling.  Welspun was so                                                               
interested in the  project that it flew steel  plate from Austria                                                               
to their pipe plant in India,  rolled it, and then provided it to                                                               
AGDC in  Houston for  testing. So, they  are talking  to multiple                                                               
mills  around  the  world  about  capabilities  for  meeting  the                                                               
specifications.   ExxonMobil  had   some   test  pipe   delivered                                                               
previously, but it didn't meet the standard.                                                                                    
                                                                                                                                
He knew of  two mills that can  roll the 42-inch pipe;  one is in                                                               
Arkansas  and the  other is  in Panama  City, Florida.  The steel                                                               
plate  could come  from  Austria.  It could  come  from China  or                                                               
Japan, but right  now there is a 30 percent  tariff on that pipe,                                                               
so it's not economic.                                                                                                           
                                                                                                                                
When they  get to the point  of launching a project  and put that                                                               
long lead  item in place,  AGDC will have  to put orders  in with                                                               
multiple mills  and not just "hang  our hat" on one  mill. It's a                                                               
tremendous volume, in  excess of 800,000 tons, of  pipe, and they                                                               
want to make sure of having  a delivery mechanism in place to get                                                               
that pipe into Alaska pipe storage  yards and on to the right-of-                                                               
way  to execute  the project  in a  timely fashion.  The delivery                                                               
time and the ability for  those manufacturers to deliver the pipe                                                               
is  going to  depend on  where the  project fits  in the  world's                                                               
project  queue, and  a big  decision point  is if  AGDC wants  to                                                               
reserve  AKLNG's place  in the  queue by  providing them  with an                                                               
assurance that  the pipe will be  there. That is being  worked as                                                               
he speaks.                                                                                                                      
                                                                                                                                
SENATOR  VON IMHOF  said the  supply  and demand  forecast is  on                                                               
slide 38, but she thought a  project of this size warranted a bit                                                               
more analysis. A  year ago, she asked for a  map of the different                                                               
projects  that are  coming  on line  that  identified which  ones                                                               
should be ready  to go between 2023 and 2027.  She wanted to know                                                               
where they are  located, how big they are, how  close they are to                                                               
tide  water, who  is financing  them, and  how they  compete with                                                               
Alaska's project.  She thought  this supply-side  analysis should                                                               
be at the beginning of every presentation.                                                                                      
                                                                                                                                
On  the  demand   side,  there  are  four   or  five  significant                                                               
publications around  the world  that constantly  analyze changing                                                               
market conditions and  model inputs out into  various years. They                                                               
provide high, medium,  and low probability, and  she thought that                                                               
should  also be  updated each  year with  inputs and  assumptions                                                               
identified. Those  things make a  difference in  whether Alaska's                                                               
project is competitive.                                                                                                         
                                                                                                                                
SENATOR VON  IMHOF said, Taiwan  is missing from slide  38, which                                                               
was presented  a month  ago and  she asked  what happened  to it.                                                               
"That's kind of a big deal."  She has asked these questions for a                                                               
year in  various iterations and  asked if  the work is  too much,                                                               
irrelevant, or erroneous; or does he  just not agree that is what                                                               
needs to go into a presentation.                                                                                                
                                                                                                                                
5:04:46 PM                                                                                                                    
MS. WILCOX responded that she  absolutely agrees that the project                                                               
needs to  compete in the  global sense.  The market is  large and                                                               
growing and  there are lots  of agencies and analysts  looking at                                                               
very  detailed  assumptions  on  the project,  but  many  of  the                                                               
individual project  assumptions are  still opaque to  the outside                                                               
world, because each project is  different, and many are privately                                                               
owned.  She  believed  that  they  had  provided  information  on                                                               
project costs  and drivers but  explained that each of  the other                                                               
projects is  different: some are  all equity-owned,  some include                                                               
upstream, some don't include upstream;  they are clearly all very                                                               
different.                                                                                                                      
                                                                                                                                
A number  of publications  analyze all  of that  information, and                                                               
AGDC over  the last year,  partly prompted by her  questions, has                                                               
stepped   up  its   efforts  to   analyze  and   look  at   those                                                               
publications.  One of  the services  they have  purchased is  IHS                                                               
Markit and they attended their  December conference to build up a                                                               
relationship, so  they can ask  questions, particularly  from the                                                               
customers, and get  answers. A member of her team  put together a                                                               
summary of  all the projects  coming on  line and the  96 million                                                               
tons worth of projects under construction.                                                                                      
                                                                                                                                
MS.  WILCOX  said   they  could  "take  another   crack  at"  the                                                               
statistics  in  the  next presentation  and  show  more  detailed                                                               
slides  on what  is available,  but the  rest of  it is  somewhat                                                               
speculative. Many  projects are  proposed and estimates  on which                                                               
ones will  come on  line are constantly  changing. It  depends on                                                               
what funding  each project secures,  what customers  they develop                                                               
relationships  with, and  how much  ground  it will  gain over  a                                                               
year. Their  focus over the last  year has gained more  ground in                                                               
the market, so that people actually  know about it and know it is                                                               
worth something and worth buying  from. The analysis has not been                                                               
ignored. Even if  analytical companies have details  and AGDC has                                                               
a  subscription service  that gives  them that  information, it's                                                               
not  something  she  could  put on  a  public  slide  project-by-                                                               
project.                                                                                                                        
                                                                                                                                
She  said  they  would  continue  their  efforts  to  bring  more                                                               
detailed  analysis  into the  picture,  but  the broad  situation                                                               
remains largely the  same: in 2026 there is  a significant amount                                                               
of uncontracted  capacity in the  market. She knows  this because                                                               
there  haven't  been  a  lot  of  contracts  announced  for  that                                                               
timeframe over  the past year.  However, around the  world, about                                                               
96 million  tons of  projects are  under construction  that would                                                               
seem  likely to  fill that  capacity. The  remaining uncontracted                                                               
portion for  the 2026 timeframe  is 20-40 million  tons depending                                                               
on  which demand  forecast  one believes,  but  it grows  rapidly                                                               
after that. There has been only  one year in which the LNG market                                                               
hasn't  grown.  After  2026,  the market  continues  to  open  up                                                               
rapidly.  According to  IHS Markit,  that  level of  uncontracted                                                               
capacity that currently  doesn't have FID projects  going into it                                                               
by 2030 grows  closer to 100 million tons, and  this is the wedge                                                               
AGDC is trying to fit its project into.                                                                                         
                                                                                                                                
5:11:13 PM                                                                                                                    
CHAIR GIESSEL  remarked one of  the key points Senator  von Imhof                                                               
frequently underscores  is risk,  and LNG  competition is  one of                                                               
the risks that this body has  to take into account in determining                                                               
whether this project  is competitive and should  go forward. They                                                               
are also focused on the regulatory and permitting in progress.                                                                  
                                                                                                                                
"As  you ask  us for  virtually unlimited  receipt authority,  we                                                               
have to  think about what that  means for the State  of Alaska as                                                               
we act as the board of directors," Senator Giessel said.                                                                        
                                                                                                                                
SENATOR BISHOP said a pipe mill  in Calgary can roll 42-inch pipe                                                               
and asked  if they  had done  any rough  take-offs at  bringing a                                                               
mill into Port  Mackenzie. Because the mill he  toured in Calgary                                                               
was actually quite small.                                                                                                       
                                                                                                                                
MR. RICHARDS said he  was on that tour of the  pipe mill with him                                                               
and that the  AGDC team had not actively engaged  in that concept                                                               
and  neither  did  the ExxonMobil-led  project  management  team.                                                               
They looked at the capacity to  be able to produce the quantities                                                               
needed, and that was probably one  of the things that was used to                                                               
screen it out.  But they need to consider  that opportunity again                                                               
as  an  option  under  the   strategic  sourcing  strategy.  Port                                                               
Mackenzie has the  available land and an existing  dock face that                                                               
could handle that product, but  they hadn't studied what the cost                                                               
would be.                                                                                                                       
                                                                                                                                
SENATOR  BISHOP asked  if he  had  worked out  an arrangement  to                                                               
operate the gas treatment plant (GTP) in Prudhoe Bay.                                                                           
                                                                                                                                
MS. WILCOX  replied that  the AGDC  project will  need to  have a                                                               
high  number  of  touch  points with  the  Prudhoe  Bay  operator                                                               
including access to the lease, and  all of that is subject to the                                                               
how the  producer participates in  the project to  monetize their                                                               
gas. She presumes that when  it comes to a construction timeline,                                                               
they  will  have   the  ability  to  enter   into  the  necessary                                                               
agreements  to  access the  dock,  the  GTP  lease, and  all  the                                                               
receipt information  that is necessary  for facility  sharing and                                                               
things like that.  She knows they have a list  of things they are                                                               
thinking about.                                                                                                                 
                                                                                                                                
5:16:03 PM                                                                                                                    
SENATOR COGHILL asked  her to explain how  purchasing natural gas                                                               
would  be   done  either  directly   or  through   an  affiliated                                                               
intermediary  and the  likelihood of  getting the  volumes needed                                                               
from the leaseholders up there.                                                                                                 
                                                                                                                                
MS.  WILCOX said  the basic  mechanics of  volume break  down the                                                               
same as  they did in  the previous  project. The project  has two                                                               
large fields  that are discovered  and are considered  a reliable                                                               
source  of supply  for the  gas  project. Prudhoe  Bay has  about                                                               
three-quarters  of  the  resource;  Point  Thomson  has  about  a                                                               
quarter of  it. In  order to  construct the  three-train project,                                                               
all of that would be needed  to achieve the economics in order to                                                               
compete in an  "eight-dollarish" world of LNG, which  is what the                                                               
long-term LNG pricing is looking like right now.                                                                                
                                                                                                                                
They also think  there is an ability  to do a first  phase with a                                                               
two-train project if  investors can be found willing  to do that,                                                               
because the smaller  the initial investment is the  better. For a                                                               
two-train project you could either have  a mix of gas coming from                                                               
both  fields or  start with  one  and continue  with another.  In                                                               
order to  do that  with an  affiliate, one  could use  a merchant                                                               
model where  a merchant  buys the  gas and then  sells it  at the                                                               
other end of  the project. Here, they are looking  at a hybrid of                                                               
the  merchant and  tolling models.  So, an  affiliate of  AGDC or                                                               
another entity  owned by the  State of Alaska could  purchase all                                                               
the gas,  toll it  through the  project, and sell  it to  the LNG                                                               
buyers  in Nikiski.  It  would  pay tolls  to  the  owner of  the                                                               
infrastructure, which  could potentially  be the State  of Alaska                                                               
(that at  the moment  owns 100  percent of  it) and  that tolling                                                               
revenue  could finance  the project.  The  tolling revenue  would                                                               
ultimately be  secured by the  off-take agreements. So,  the off-                                                               
take agreements would  have a pricing structure  that would cover                                                               
the toll  and the gas  purchase. Then  the gas purchase  price is                                                               
passed on to the upstream including  the State of Alaska. In that                                                               
situation,  last year's  capacity solicitation  had a  fairly low                                                               
response for  the tolling part  (parties that are willing  to pay                                                               
the toll  and sell their own  LNG into the market).  Through that                                                               
solicitation,  they  found  that  the  project  didn't  have  the                                                               
critical mass of  parties willing to sign up to  pay those tolls.                                                               
But it has  parties willing to sell the gas,  have someone in the                                                               
middle pay  the tolls,  and then  sell the LNG.  So, that  is the                                                               
structure  they  are working  under  at  the moment.  It  doesn't                                                               
preclude  other  parties  with  the gas  from  taking  a  tolling                                                               
position  on  the  project  and  just slicing  off  part  of  the                                                               
capacity  and  making  that  part  of  the  revenue  stream  that                                                               
underlies project financing.                                                                                                    
                                                                                                                                
5:21:34 PM                                                                                                                    
SENATOR COGHILL  asked because of  the interest in  getting money                                                               
from Chinese investors who could  somehow be involved in the toll                                                               
structure  and buying  the LNG,  could that  result in  the state                                                               
finding  itself in  a real  structural pinch.  Could the  Chinese                                                               
vertically control the whole system?                                                                                            
                                                                                                                                
MS. WILCOX  replied that they  could if  they bought some  of the                                                               
existing upstream  resources. They would  kind of be in  the same                                                               
position as maybe one of the  producers that markets LNG all over                                                               
the world.                                                                                                                      
                                                                                                                                
SENATOR COGHILL said his only concern  is that the state would be                                                               
squeezed  out  of any  value.  The  Chinese will  leverage  every                                                               
dollar they can, and Alaska might not have the same leverage.                                                                   
                                                                                                                                
MS. WILCOX  agreed and said having  a party that is  owned by the                                                               
state  purchasing  the gas  adds  a  layer of  protection.  Their                                                               
mission  is  to  sell  the  gas at  the  maximum  price  possible                                                               
including the state gas.                                                                                                        
                                                                                                                                
5:23:40 PM                                                                                                                    
SENATOR STEDMAN  asked for help  on the  answer to question  8 of                                                               
the letter.  It looks like they  have decided to use  a placement                                                               
agent versus a  financial adviser to avoid dealing  with the Dodd                                                               
Frank Wall Street Reform Customer Protection Act.                                                                               
                                                                                                                                
MS.  WILCOX  replied  that  the  reason AGDC  would  bring  in  a                                                               
placement agent  instead of  a financial  advisor is  because the                                                               
Dodd  Frank Wall  Street Reform  Customer Protection  Act says  a                                                               
municipality (how AGDC would be  classified under that act) can't                                                               
hire a  financial advisor  and allow  them to  continue on  as an                                                               
investment banker or  as a placement agent. The  issue being that                                                               
any large  company that  would be  willing to  come in  and would                                                               
have an  interest in raising  money for this  project ultimately,                                                               
if  they  come  on  as   a  financial  advisor  would  lose  that                                                               
opportunity.  So,  the  pool  of  interested  financial  advisors                                                               
becomes fairly small and goes  down to the companies who wouldn't                                                               
have the  capability or the  experience to be a  placement agent.                                                               
So, the advice that you get  is what you get with those companies                                                               
that  are  more  consultants   than  actual  investment  bankers.                                                               
Therefore,  AGDC   considered  it   a  lot  more   efficient  and                                                               
beneficial  for  the  project  to open-up  the  field  to  actual                                                               
investment  banks that  could lead  the placement  of equity  and                                                               
debt. That is the selection process they have conducted.                                                                        
                                                                                                                                
5:26:07 PM                                                                                                                    
SENATOR  STEDMAN asked  if there  are  any right-of-way  sections                                                               
they don't  have access to or  have not tied down  tight. He also                                                               
wanted  her to  touch  on  the 400  acres  in  Nikiski, which  he                                                               
assumed  is  the  site  location,  and if  they  have  a  forward                                                               
contract or any agreement  tied down on that - to  get rid of the                                                               
rumors.                                                                                                                         
                                                                                                                                
MR.  RICHARDS  answered  that HB  4  identified  the  legislators                                                               
intent for DNR to provide  the pipeline right-of-way necessary to                                                               
AGDC to  build the  pipelines across state  lands, and  they have                                                               
done that at  no cost. The federal right-of-way comes  to them as                                                               
the  end  result of  the  Environmental  Impact Statement  (EIS),                                                               
which  is a  record of  decision, which  is the  granting of  the                                                               
federal right-of-way  by the Bureau  of Land Management  (BLM) to                                                               
AGDC. When the final SEIS is  achieved for the project, they will                                                               
have  obtained the  federal  right-of-way  across federal  lands.                                                               
That leaves about  40 miles of private lands that  AGDC will have                                                               
to acquire right-of-way leases to.  They are currently engaged in                                                               
that process  with one of  the owners, Ahtna  Native Corporation,                                                               
who controls  38 miles of land  south of Denali National  Park by                                                               
the community  of Cantwell. It  is a  major effort because  it is                                                               
the largest  private landowner that  either project will  have to                                                               
enter into an agreement with.                                                                                                   
                                                                                                                                
The final bit for the AKLNG  project will be some private parcels                                                               
on the Kenai  Peninsula before getting into the  Nikiski LNG site                                                               
where a large  amount of acreage was purchased by  the Alaska LNG                                                               
LLC  (consisting of  BP, ConocoPhillips,  and ExxonMobil),  which                                                               
AGDC  was   not  a   party  to,  thinking   that  AGDC,   as  the                                                               
representative  for the  state would  come in  at a  future date.                                                               
AGDC  is  in  discussions  and negotiations  with  that  LLC  for                                                               
acquiring the  rights to that land  to be able to  show FERC that                                                               
they  have control,  which is  one of  the key  points FERC  will                                                               
want.                                                                                                                           
                                                                                                                                
5:30:12 PM                                                                                                                    
SENATOR BISHOP said we're not the  only project in town and there                                                               
will be  competition for material, manpower,  and contractors. Is                                                               
someone looking at that? And at Alaska labor?                                                                                   
                                                                                                                                
MR.  RICHARDS  answered he  understands  their  keen interest  in                                                               
making sure Alaska has the skill  set and labor trades to be able                                                               
execute the project.  As for  the equipment, they went through an                                                               
exercise of  hiring pipeline contractors, both  Alaskan and Lower                                                               
48,  and heavy  civil contractors,  to be  able to  help them  in                                                               
looking at the execution of  the project and ultimately coming up                                                               
with a  cost for  it. It  was a  very valuable  exercise, because                                                               
they  talked about  the  wide-ranging opportunities  specifically                                                               
regarding  equipment.  It was  educational  in  hearing from  the                                                               
pipeline  contractors  who  would  come to  Alaska  and  have  to                                                               
mobilize  a  huge  fleet  if  it  was  owner-supplied  equipment.                                                               
Certainly,  they  do have  a  core  fleet  in  the Lower  48  but                                                               
suggested that  the owner supply  the equipment to make  sure the                                                               
it  is  available in  time  to  get that  equipment  constructed,                                                               
delivered, and on the right-of-way  ready to execute the project.                                                               
This is  a consideration  as they  go through  their construction                                                               
execution planning efforts.                                                                                                     
                                                                                                                                
5:33:55 PM                                                                                                                    
The other  ancillary part  to that is  having parts  available to                                                               
this  large  fleet spread  out  across  800  miles and  that  the                                                               
contractors won't have to compete for those parts.                                                                              
                                                                                                                                
MR. RICHARDS said they have  been working the Department of Labor                                                               
and Workforce  Development (DOLWD) on  the development of  a plan                                                               
for making  sure Alaskans are  going to  be to have  the training                                                               
opportunities to  be skilled to be  able to work on  the project.                                                               
AGDC  is  identifying the  skill  needs  and  when they  will  be                                                               
needed, the build-up of crew sizes,  and the sequence of when the                                                               
labor  crats  would  be  necessary across  the  spectrum  of  the                                                               
project from  the North  Slope to Nikiski.  Because of  the large                                                               
work force  that will be  necessary, available  skilled, trained,                                                               
and qualified Alaskans are going to  work on this project; it's a                                                               
benefit  to  the project  to  use  Alaskans rather  than  outside                                                               
labor.                                                                                                                          
                                                                                                                                
CHAIR GIESSEL thanked  both speakers for being willing  to ad lib                                                               
answers to  the committee's adding  that they could come  up with                                                               
another  15 hours-worth.  Going forward,  they are  interested in                                                               
the project  structure. However, somethings are  missing on their                                                               
timeline: for  example, where  the legislature  and the  DNR come                                                               
in. As  she looks at  question 9 about  the progress of  DOTPF on                                                               
analyzing the impacts, the first  sentence says DOTPF has advised                                                               
that  the existing  roadway structures  can handle  the increased                                                               
loads the  pipeline construction project  will add. She  was here                                                               
during construction  of the Trans  Alaska Pipeline  System (TAPS)                                                               
and knows  that "those roads got  really torn up" and  she wasn't                                                               
sure our roads  are actually prepared for that.  She was thinking                                                               
specifically of  the bridge over  Hurricane Gulch. She  wanted to                                                               
know more  about where DOTPF fits  into this and what  their plan                                                               
is going forward.                                                                                                               
                                                                                                                                
CHAIR   GIESSEL  said   the   committee   also  wants   continued                                                               
information about  the project structure and  Senator von Imhof's                                                               
request for  an economic overview  of supply and demand  into the                                                               
2020s.  She reminded  committee  members that  they could  submit                                                               
more  questions  in writing  and  thanked  the commissioners  for                                                               
writing the  answers down  as something  the committee  can refer                                                               
back to.                                                                                                                        
                                                                                                                                
SENATOR  BISHOP   asked  if  they  ever   anticipate  bringing  a                                                               
potential client to the committee.                                                                                              
                                                                                                                                
MR. RICHARDS replied that he had considered it.                                                                                 
                                                                                                                                
MS. WILCOX said she had not  thought about it, but it's possible.                                                               
They have  held meetings  with DNR  and interested  customers and                                                               
depending  on the  decision  points that  come  in this  project,                                                               
there may very well be a  place for other project participants to                                                               
come in  front of  the committee  just as they  used to  when the                                                               
producers were investors in the project.                                                                                        
                                                                                                                                
5:39:48 PM                                                                                                                    
CHAIR GIESSEL thanked them again and adjourned the Senate                                                                       
Resource Committee meeting at 5:39 p.m.