03/18/2015 03:30 PM Senate RESOURCES
| Audio | Topic |
|---|---|
| Start | |
| HJR6 | |
| SB57 | |
| Confirmation Hearing: Department of Natural Resources | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| = | HJR 6 | ||
| + | SB 57 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| + | TELECONFERENCED |
ALASKA STATE LEGISLATURE
SENATE RESOURCES STANDING COMMITTEE
March 18, 2015
3:30 p.m.
MEMBERS PRESENT
Senator Cathy Giessel, Chair
Senator Mia Costello, Vice Chair
Senator John Coghill
Senator Peter Micciche
Senator Bert Stedman
Senator Bill Stoltze
Senator Bill Wielechowski
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
CONFIRMATION HEARING
Commissioner, Department of Natural Resources
Dr. Mark Myers
- CONFIRMATION ADVANCED
HOUSE JOINT RESOLUTION NO. 6
Supporting the introduction and enactment of federal legislation
acknowledging that the federal government is financially
responsible under the Alaska Native Claims Settlement Act for
the remediation of contaminated land subject to conveyance under
the Act; urging the United States Department of the Interior to
implement the six recommendations to identify and clean up the
Alaska Native Claims Settlement Act lands in its 1998 report to
the United States Congress; and urging the President of the
United States and the United States Congress to remediate and
make free from pollutants lands in the state conveyed under the
Alaska Native Claims Settlement Act.
- MOVED SCS HJR 6(RES) OUT OF COMMITTEE
SENATE BILL NO. 57
"An Act relating to the development of state emission standards
in accordance with the federal Clean Air Act."
- HEARD & HELD
REVIOUS COMMITTEE ACTION
BILL: HJR 6
SHORT TITLE: FEDERAL CONTAMINATION OF ANCSA LANDS
SPONSOR(s): REPRESENTATIVE(s) MILLETT
01/21/15 (H) READ THE FIRST TIME - REFERRALS
01/21/15 (H) RES
02/27/15 (H) RES AT 1:00 PM BARNES 124
02/27/15 (H) Moved HJR 6 Out of Committee
02/27/15 (H) MINUTE(RES)
03/02/15 (H) RES RPT 7DP
03/02/15 (H) DP: JOSEPHSON, HERRON, TARR, OLSON,
HAWKER, SEATON, TALERICO
03/09/15 (S) RES AT 3:30 PM BUTROVICH 205
03/09/15 (S) Scheduled but Not Heard
03/11/15 (H) TRANSMITTED TO (S)
03/11/15 (H) VERSION: HJR 6
03/13/15 (S) READ THE FIRST TIME - REFERRALS
03/13/15 (S) RES
03/18/15 (S) RES AT 3:30 PM BUTROVICH 205
BILL: SB 57
SHORT TITLE: CLEAN AIR ACT PLAN
SPONSOR(s): SENATOR(s) GIESSEL
02/20/15 (S) READ THE FIRST TIME - REFERRALS
02/20/15 (S) NRG, RES
03/17/15 (S) NRG AT 1:00 PM BUTROVICH 205
03/17/15 (S) Moved CSSB 57(NRG) Out of Committee
03/17/15 (S) MINUTE(NRG)
03/18/15 (S) RES AT 3:30 PM BUTROVICH 205
WITNESS REGISTER
JEFF TURNER
Staff to Representative Charisse Millett
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Commented on HJR 6 for the sponsor.
NICHOLA RUEDY, Executive Director
Alaska Native Village Corporation Association (ANVCA)
Anchorage, Alaska
POSITION STATEMENT: Supported HJR 6.
JULIANNA SHANE, Director
Tanadgusix Corporation
St. Paul Island, Alaska
POSITION STATEMENT: Supported HJR 6.
JIM ARNESEN
Corporate, Lands, and Regulatory Manager
Eklutna Inc.
Eagle River, Alaska
POSITION STATEMENT: Supported HJR 6.
KRISTIN RYAN, Director
Division of Spill Prevention and Response (SPAR)
Department of Environmental Conservation (DEC)
Anchorage, Alaska
POSITION STATEMENT: Commented on HJR 6.
VIVIAN STIVER, staff to Senator Giessel
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Commented on SB 57 for the sponsor.
NORMAN ROKEBERG, Commissioner
Regulatory Commission of Alaska (RCA)
Anchorage, Alaska
POSITION STATEMENT: Answered questions on SB 57.
MARK MYERS, Commissioner-designee
Department of Natural Resources (DNR)
Anchorage, Alaska
POSITION STATEMENT: Commissioner-designee for the Department of
Natural Resources (DNR).
ACTION NARRATIVE
3:30:21 PM
CHAIR CATHY GIESSEL called the Senate Resources Standing
Committee meeting to order at 3:30 p.m. Present at the call to
order were Senators Stedman, Costello, Micciche, Wielechowski,
Coghill, and Chair Giessel.
HJR 6-FEDERAL CONTAMINATION OF ANCSA LANDS
3:31:00 PM
CHAIR GIESSEL announced HJR 6 to be up for consideration.
SENATOR STOLTZE joined the committee.
JEFF TURNER, staff to Representative Charisse Millett, sponsor
of HJR 6, said this is essentially the same resolution passed by
the legislature last year. When the Alaska Native Claims
Settlement Act (ANCSA) was passed in 1971, some lands were
transferred to the newly formed Native corporations that were
found to be contaminated, which prevent the traditional use of
many of those lands, which goes against the intent and spirit of
the law.
In 1998, the Department of Interior prepared a report with six
recommendations ranging from creating a forum made up of the
entities involved in this issue to identifying all of the
contaminated sites, to giving the landowners assurances that
liability for the contamination would not be transferred to
them. Seventeen years later none of those recommendations have
been acted on.
3:32:14 PM
He said that Representative Millett had spoken to Bureau of Land
Management (BLM) officials, but made little progress. To keep up
the pressure on the federal government, she sponsored this
legislation again to hopefully get results similar to what was
accomplished with the travesty wells.
3:33:01 PM
At ease
3:33:29 PM
SENATOR COSTELLO moved Amendment 1.
29-LS0269\A.1
Nauman
3/14/15
AMENDMENT 1
OFFERED IN THE SENATE
Page 3, line 11:
Delete "."
Insert "; and be it"
Page 3, following line 11:
Insert new material to read:
"FURTHER RESOLVED that the Alaska State
Legislature urges the United States federal government
to reimburse the medical expenses of residents who
have health conditions and complications as a result
of living on contaminated and polluted lands in the
state conveyed under the Alaska Native Claims
Settlement Act."
SENATOR STOLTZE objected for discussion purposes.
SENATOR COSTELLO explained that this amendment adds a further
resolve section on page 3, following line 11, urging the federal
government to reimburse medical expenses to those who have
health conditions as a result of living on contaminated lands
the state conveyed under the Alaska Native Claims Settlement Act
(ANCSA).
SENATOR STOLTZE removed his objection.
SENATOR MICCICHE objected for discussion purposes. He was
concerned that the undetermined amount of liability might
complicate the resolution as opposed to just a statement that we
expect the lands to be cleaned up.
MR. TURNER said the sponsor supported the amendment. Patrick
Marshall, a constituent of Senator Stedman's, brought this
amendment forward.
SENATOR MICCICHE removed his objection.
CHAIR GIESSEL, finding no further objections, announced that
Amendment 1 was adopted.
3:36:03 PM
NICHOLA RUEDY, Executive Director, Alaska Native Village
Corporation Association (ANVCA), Anchorage, Alaska, supported
HJR 6. She related some history of the contamination. When the
federal government conveyed millions of acres of land to Alaska
Native Corporations, it included lands with various types of
hazardous waste and toxic materials that posed significant
health risk to humans, animals, and environment, such as
arsenic, asbestos, PCBs, mining waste, chemicals, petroleum and
oil solvents, mercury, and toxic metals.
During the 1990s, the Alaska Native community raised concerns
about the contaminated lands the Department of Interior conveyed
to them, and, in 1995, Congress directed the Secretary of
Interior to prepare a report about the extent of their
contamination. In December 1998, the department submitted a
report entitled "Hazardous Substance Contamination of Alaska
Native Claims Settlement Act Lands in Alaska." In it they
acknowledged conveying approximately 650 contaminated sites and
identified numerous hazardous wastes including known
carcinogens. Recognizing the injustice, the department
recommended fully identifying the sites along with clean up
recommendations. But extensive research indicates that no
efforts have been made to implement any of them.
3:38:18 PM
JULIANNA SHANE, Director, Tanadgusix Corporation, St. Paul
Island, Alaska, supported HJR 6. She said she grew up around so
much petroleum contaminated soils that she didn't know any
different. From 1986-2000, cleanup work was done by the National
Oceanic and Atmospheric Administration (NOAA) for the Pribiloff
Islands under the Fur Seal Act. Since the mid-90s the cleanup
has cost $76 million of both islands. Now, they are in the final
stages of trying to receive the property back from the federal
government.
She wanted them to know that this work can be done internally.
Corporate shareholders have now been trained to do this cleanup
work and one of the companies even does cleanup nationwide.
MS. SHANE said she is from a family of 11 and her husband was
from a family of 15. They watched as four of his sisters, one
from brain cancer, one from stomach cancer, one from kidney
cancer, passed and she recently lost her husband from small cell
lung cancer. Their shareholders have one of the highest rates of
cancer. All the other villages need to be cleaned, not just the
Pribiloffs.
3:41:29 PM
JIM ARNESEN, Corporate, Lands, and Regulatory Manager, Eklutna
Inc., Eagle River, Alaska, supported HJR 6. He said Eklutna had
received a number of contaminated lands through ANCSA; one of
the more prominent areas is in the heart of the Native Village
of Eklutna, itself. It is the former site for the U.S. Army Camp
Mohawk, the BIA Eklutna Boarding School, and the Railroad
quarry. Over the last few years they village received grant
funds for investigation and remediation activities. Currently,
the Corps of Engineers is out there working to attempt further
remediation of petroleum product contamination. Presently, they
are waiting for results of testing from the Corps.
Other contaminated sites include the original Matanuska town
site that had been used by a former polluter from Anchorage who
is now deceased. He had placed a large number of contaminated
materials of various kinds and quantities all around the
properties and some have migrated.
They also received an old homestead that they spent substantial
funds of their own to cleanup. The operation consisted mostly of
surface debris from Donnelly who operated an illegal junk yard
on the property. This property is impaired and will probably
require more remediation in the future.
MR. ARNESEN said they have property near the Birchwood
Recreation and Shooting Park where trespass shooters have
contaminated property with lead and they are in the process of
determining the levels of contamination which will guide the
remediation effort.
He said the municipality had a project to replace the old
Eklutna Bridge that led to the discovery of lead paint
contamination below the bridge that will require remediation.
More recently, potential contamination was discovered and
believed to be emanating from the old Peters Creek landfill.
Eklutna has received other properties that have been used by
various governmental units and as they go to develop these
properties they run into contamination, buried pits, and all
kinds of toxins. The cost of remediating these properties has
been a financial burden and has at time prevented, stopped or
delayed a project.
MR. ARNESEN said Eklutna believes the contamination on Native
lands caused by former governmental units or others has not been
addressed satisfactorily and that those impacted lands are a
burden and a hurdle for economic development opportunities. The
federal government has the financial and moral obligation to
remediate the contaminated sites and reimburse funds spent by
Native corporations on cleaning them up. He also agreed with
Amendment 1.
3:46:17 PM
SENATOR STOLTZE said he appreciated what Eklutna is doing as a
good steward of the resources.
SENATOR COSTELLO asked if the Department of Environmental
Conservation (DEC) has a list of the 650 contaminated sites and
monitors them in some capacity.
KRISTIN RYAN, Director, Division of Spill Prevention and
Response (SPAR), Department of Environmental Conservation (DEC),
answered yes; they have a database of all contaminated sites in
the state that were caused by the federal government. In fact,
the Department of Interior (DOI) relies on it as the best source
of information on contaminated sites in the state.
SENATOR COSTELLO asked if there had ever been a conversation
about taking the feds to court over this.
MS. RYAN answered that the department has several MOUs with
multiple federal agencies that are working on cleaning up
contamination that they own or inherited and she prefers to make
that kind of progress as opposed to taking legal action, and
some sites are already under active remediation work. The
department is continuing to work with the federal government on
the ones they have cleanup standards disagreements with.
SENATOR COSTELLO asked if she supported the amendment.
MS. RYAN said the few claims of medical concern that she knows
of were difficult to prove. It's very difficult to make the
direction connection of old contamination to a potential health
issue.
SENATOR STOLTZE asked if the state is spending SPAR funds on
some of these federally contaminated sites.
MS. RYAN answered that the SOA spends some money to get the
federal government to honor its obligations under federal and
state law. The state gets reimbursed for the majority of those
expenses through the MOUs, but at times it takes years to reach
settlement. Approximately $8 million in federal money that comes
into the contaminated site program is spent to cover oversight
of cleanup of the sites.
CHAIR GIESSEL, finding no further comments, closed public
testimony.
MR. TURNER thanked the committee for their attention on this
issue and said the sponsor is convinced this resolution will
have equally similar results as her resolution for cleanup of
the travesty wells.
SENATOR MICCICHE commented that at some point they will have to
start putting teeth into these requests.
SENATOR COSTELLO moved to report HJR 6, version 29-LS0269\A, as
amended from committee with individual recommendations and
attached zero fiscal note. There were no objections and SCS HJR
6(RES) moved from the Senate Resources Standing Committee.
3:54:16 PM
At ease
SB 57-CLEAN AIR ACT PLAN
3:55:35 PM
CHAIR GIESSEL announced SB 57 to be up for consideration and
invited her staff to explain the bill. [CSSB 57(NRG), 29-
LS0523\G was before the committee.]
3:55:54 PM
VIVIAN STIVER, staff to Senator Giessel, sponsor of SB 57,
Alaska State Legislature, Juneau, Alaska, explained that the
Environmental Protection Agency (EPA) released a proposed rule
regulating emissions for power generators; it has two elements:
statewide emissions reduction targets and guidelines for
development and implementation plans for those reductions.
She explained that the EPA has set Alaska's CO emission
2
reduction target at 26 percent by 2030. SB 57 requires the
Department of Environmental Conservation (DEC) to seek a waiver
or a similar exemption from the proposed rule known as the
Existing Source Performance Standards Under Section 111(d) of
the Clean Air Act (CAA). SB 57 provides guidance to DEC
regarding the development of a state implementation plan should
this rule become effective. The plan will not result in
increased retail or service rates in any way that are
disproportionate to households of low or moderate income, less
reliable electrical service, resource inadequacy or transmission
constraints, impairment of investment in existing electrical
generating capacity, impairment of the competitive position of
manufacturers or other public or private sectors of the state's
economy, a decrease in employment in the state or a decrease in
state revenues.
The bill also requires the DEC to prepare a report to the
legislature that analyzes the effects on the power generating
sector of the affordability of electricity from diverse sources
of generation, the type and amount of electricity generating
capacity in the state that is likely to be eliminated or
switched to another fuel, investment in electricity generating
capacity and other infrastructure, the amount of investment
necessary to offset retirements of electric generating capacity
and maintain generation reserve margins, potential risk to
electric reliability and resource adequacy risk and transmission
constraints, and the amount by which retail electricity prices
in the state are forecasted to increase under the plan.
MS. STIVER said the bill also provides, should that plan be put
in place, consideration of the disproportionate amount of the
increase in the cost of electricity and the effects of the
employment and other economic factors on consumers.
SENATOR COSTELLO asked if any other states that are concerned
about the ability to comply with the reduction targets are
asking for a waiver prior to the rule being adopted.
MS. STIVER answered that 15 other states had passed resolutions
in regard to the EPA's proposed rule.
SENATOR COSTELLO asked what the difference is between a waiver
and an exemption.
MS. STIVER replied the waiver may be on portions of the rule
that don't apply in the state and an exemption would take the
state completely out of the rule.
SENATOR STOLTZE said the bill has a $100,000 fiscal note and
asked if there is existing money.
SENATOR STEDMAN said this is a big issue that is being forced on
states nationwide and more information is needed about strategy
to counteract it.
4:05:01 PM
CHAIR GIESSEL said committee backup had numerous articles and
letters from Senate leadership, the Miners Association, and
various state organizations who are all aware of this that will
point out how this has been getting addressed.
SENATOR STEDMAN said he is aware, but the public, the end
consumer, needs to become aware, because they are the ones who
will have to pay for it.
4:07:02 PM
SENATOR WIELECHOWSKI said if the idea is to get an Alaska
specific plan, which he applauds, this bill seems to undercut it
because the majority of the language is taken verbatim from
model legislation financed by the Koch brothers.
MS. STIVER answered that she looked at numerous prepared
documents specifically containing electrical generation business
language. This is a great tool that outlines why the state is
not capable of meeting this rule and she hopes DEC will use it
in negotiations with the federal government.
4:08:20 PM
NORMAN ROKEBERG, Commissioner, Regulatory Commission of Alaska
(RCA), Anchorage, Alaska, said he was available to answer
questions on SB 57. He commented that initially the comments
provided by the SOA were the result of a multi-agency task force
put together by the governor last year in response to the
promulgation of the EPA rule. The Alaska Energy Association
(AEA), the Port Authority, the RCA, DEC and the governor's
office worked together with two dozen people and devoted several
months meeting to file comments with the EPA by December 1,
2014.
Those comments indicated that the rule mandated a 26 percent
reduction in greenhouse gases by 2030. Analysis done by the task
force indicated that Alaska would not be able to achieve that
particular goal. The governor chose to move forward by enjoining
the Murray Coal Case that questioned the legality and
constitutionality of the rule and says that Alaska should be
exempt.
To his knowledge, Alaska is the only state requesting an
exemption, Mr. Rokeberg said. Some 15 states do not want to
participate in filing a State Implementation Plan (STIP). Alaska
makes an extraordinarily good case for an exemption, because it
is not connected with a North American grid whereas almost all
other portions of the Lower 48 are. Electric utilities can buy
bulk electrical services through bidding processes throughout
the country and are able to obtain power with renewable
resources and have engaged in major energy efficiency programs.
MR. ROKERBERG said it was essential to work with the
congressional delegation in doing everything possible to
convince the EPA to exempt Alaska. Part of the problem with the
plan is the only areas affected under the proposed rule are the
five generating units in the Railbelt area; the rest of the
state is not included. Therefore, references in the bill talking
about electrical consumers and economic development in the state
are a little bit off mark.
He said the SOA had invested billions of dollars in energy
generation, efficiencies and renewable in the last decade, and
the problem is that EPA gives Alaska no credit for the money it
has spent before, because its energy investments have been in
thermal and folks being able to keep their homes warm.
4:14:43 PM
Because the focus is on the Railbelt, the very large amounts of
money invested in renewables, particularly wind and hydro,
Alaska does not receive any credit in terms of computing its
greenhouse gas amount. In their comments they requested that the
EPA give Alaska credit for the amount of investment and the
renewables it has undertaken statewide so far.
CHAIR GIESSEL asked if he would be available on Friday and he
said he would be. She then said she would hold SB 57.
^Confirmation Hearing: Department of Natural Resources
Confirmation Hearing: Department of Natural Resources
Commissioner-designee Mark Myers
4:17:31 PM
CHAIR GIESSEL announced the confirmation hearing for DNR
Commissioner-designee, Mark Meyers, and invited him to tell the
committee why he wants to serve in this position.
MARK MYERS, Commissioner-designee, Department of Natural
Resources (DNR), Anchorage, Alaska, said he grew up in Wisconsin
and came to Alaska as part of a University of Wisconsin geologic
field expedition in 1974 and fell in love with it. He went to
work for ARCO because it had operations in Alaska, but they sent
him to Louisiana instead, where he worked on the Gulf of Mexico
shelf onshore and offshore oil and gas industry and met his
wife. ARCO moved him to Alaska in 1983 where he spent 8 years as
an exploration geologist and looked a lot at frontier basins
offshore, Nome, the Beaufort Sea, and onshore on the North
Slope, and did a lot of geologic field work. Later in that same
period came the crash in oil prices and he moved into
development at Kuparuk and experienced the other big side of
development. He got to see the upside swing in terms of drilling
development wells, working seismic, working infield drilling
patterns, etc.
In 1987, he got his PhD at UAF, because he didn't want to leave
the state, and then the state offered him a job as a petroleum
geologist. While he was working on his PhD he was a student
intern at DNR. In 1990, he became the Division of Oil and Gas
petroleum geologist for about eight years and learned how the
state manages its oil and gas resources. He became interested in
3D seismic and went to work again for ARCO. He spent several
years drilling exploration wells and had two discoveries. It was
great fun to see hard geological concepts become oil fields.
In 2001, he became Director of the Division of Oil and Gas,
really appreciating the role that petroleum exploration and
development plays in Alaska and seeing how the revenue from it
benefited the people of the state. Ultimately working on behalf
of the people of the State of Alaska is what made him excited.
Commissioner Myers said he spent five years as director and left
in November 2005; a week or two later he was asked by the White
House to become Director of the U.S. Geological Survey (USGS),
the pinnacle job in the world for a geologist. USGS is the
largest geological organization with 9,000 people in 400 offices
doing integrated science that included water, satellites, and
biology.
COMMISSIONER MYERS said with the change in administration he
came back to Alaska where he was recruited to become the AGIA
coordinator for a few years. Then the University approached him
about becoming Vice Chancellor of research at UAF and he did
that for four years. Research had about $123 million of mostly
federal research funding. He worked with a lot of different
federal agencies, and increasingly in areas with the Arctic
Council. While with USGS he also did a lot of work with
international committees and leadership positions in the federal
agencies. He was asked along with Senator Stedman to be on the
National Petroleum Counsel and will report to the legislature on
April 7, a major report on offshore oil and gas development for
the Secretary of Energy.
He is on the Methane Hydrate Advisory Committee for the federal
government trying to make sure the well can be drilled on the
North Slope to test out potential hydrates, an important test.
He and Bob Swenson are the only people from Alaska, but there
are a lot of folks from the Gulf Coast. The recommendation is to
get the well drilled. In 2003, he went to Congress at Senator
Stevens' request to get that act renewed, so Alaska basically
wrote the proposal that become the law for the Hydrate Act. In
about two weeks, they will talk to an assistant Secretary of
Energy about further support for the program.
COMMISSIONER MYERS said he is on the U.S. Delegation for the
Arctic Council for Scientific Cooperation Task Force, which is
negotiating a treaty with the eight Arctic nations. All of these
opportunities are important to Alaska in raising awareness in
Congress.
4:28:50 PM
He was happily doing his university job when Governor Walker
called and asked him to consider being commissioner and he is
honored to be considered by this committee. He considers DNR the
economic engine of the state.
COMMISSIONER MYERS said he discussed four principals with the
Governor that he wanted to put into DNR: the first was
stewardship. DNR has stewardship of over 160 million acres of
land and submerged lands or 200 acres per Alaskan. They provide
for the people of Alaska, but they don't own it. They recognize
it is for current and future Alaskans. Secondly, transparency:
because what they do is a public trust. There are often
conflicts on land uses and difficult decisions, so transparency
and public involvement is critical. Integrity is the third
principal and the fourth is to do science-based management.
4:31:14 PM
SENATOR STOLTZE asked what his concerns are.
COMMISSIONER MYERS responded that at USGS with 9,000 people, you
learn you are never the smartest person in the room. It
engenders a sense of humility and the willingness to listen to
staff and the people you can trust in your organization. One
needs to also listen down into the organization. Almost all of
his directors were directors previously; he looked at the
quality of individuals and the continuity necessary to run the
organization. In the areas that the department doesn't have
strength, he has very strong directors; they are all technical
experts or practioners in their fields.
COMMISSIONER MYERS said if you don't learn to listen and get
input on fisheries, the environment and on what really matters
on water, local use of lands and Native lands, you will fail. He
learned to do that successfully and to work and build trust with
the leadership of the other organizations. He will work hard to
fill the gaps with science. Then, he will get out into the field
to get to know employees.
CHAIR GIESSEL said HB 4 and SB 138 were passed as structures to
get to a gas pipeline and asked his thoughts on those two bills.
4:35:51 PM
COMMISSIONER MYERS answered that he has orders from the governor
to move the gasline project forward. Deputy Commissioner
Rutherford is spending 90 percent of her time leading that
effort. They have a strong consultant and some employees but he
intends to add to that. He has a solid budget with which to do
studies and refresh data sets. He has a real commitment to
making it work. This is his third round of gas lines and he
believes the companies are serious this time, but they have a
lot to negotiate. It is an immense task, but he saw some solid
progress after reviewing the draft report on instate demand done
by AGDC. However, there are issues like governance, gas
balancing, managing risk and royalty in kind, and a marketing
strategy that have to be aligned. The other part is making sure
the state can manage its share of the project. Building that
capacity means getting the right people on the team in place and
getting ready for the FEED decision. He is very comfortable with
the team.
CHAIR GIESSEL said he as commissioner plays a pivotal role and
asked if he had signed a confidentiality agreement.
COMMISSIONER MYERS replied that he had not yet signed it, but he
will need to sign one to get the data before making the RIK
decision. He has asked the governor for that authority and he
believes that the governor will be willing to give it to him at
the appropriate time. A major part of the upstream piece is how
the gas offtake is managed in the fields.
CHAIR GIESSEL asked if he thought SB 21 played a role in
bringing small independents to the North Slope.
4:40:58 PM
COMMISSIONER MYERS answered that it has been a factor. The ACES
credits brought them - Armstrong and Repsol - here, which
strengthened the exploration risk piece of it. SB 21 helps the
development part of it more. It depends on where they are in the
cycle. There were some concerns about the amount of money spent
on the exploration side and he has been a strong proponent of
that, because he knows it is the riskiest part of the business.
Will it pay dividends? That success is evidenced by Repsol and
Armstrong drilling 10 wells and production wells being drilled
at Mustang> A unit takes 10 years to develop and credits are
important.
The questions he had before as an individual, not a
commissioner, were concerns that not all oil costs the same to
produce and that the infield drilling credits were very
generous. He didn't think in many cases that the economic payoff
would be quick enough. Along with affordability of the credits,
it's a balance.
4:42:45 PM
The advantages of having progressivity is being able to take
more risk on giving out more credits because more of the upside
is preserved. It also affects the companies investment profile
negatively, another balancing piece. In looking at the state's
oil tax structure you have to look at balancing credits with
revenue coming in from the development side. It's very
complicated, but clearly more credits help with more development
but also give the state a lot less return at lower oil prices.
The progressivity piece of it allows rolling the dice a little
bit at higher prices. The state is wise to look at incentivizing
those activities that won't happen without them versus those
that probably would have happened anyway.
4:43:48 PM
SENATOR STOLTZE said that the Kenai River fishery is managed by
the DNR's Division of Parks and asked him to look at balancing
that sensitivity as there are efforts to skew that balance with
Board of Fisheries representation.
SENATOR STEDMAN advocated for the survival of the forest program
within DNR, because they are down to only one medium-sized saw
mill. Because of the tough budgets coming in the next few years,
they need to be protective of all natural resource extraction
industries, so the state can get through the economic downturn.
4:45:14 PM
COMMISSIONER MYERS said that economic diversification is a
really critical element for Alaska. There will come a time when
the state will need another economic base besides oil,
particularly with price volatility. Timber is a really important
resource. It doesn't get captured in direct revenue flow back to
the state, but in terms of jobs and successful local economies.
He is very concerned when DNR prioritizes its budget about the
cuts to forestry, particularly in Southeast.
COMMISSIONER MYERS added also that if the state is going to
argue it needs a greater say over its resource management, it
has to have credible technicians that can work the problems. The
Tongass loses credibility in cutting out regional foresters. The
same with agriculture, which is more about food stability for
communities. The more that can be grown in Alaska locally the
more stable citizens are and with that he is really concerned
that we don't eat the seed corn with the budget cuts.
SENATOR COSTELLO asked what factors will affect success for the
AKLNG project and which ones are avoidable.
COMMISSIONER MYERS said the largest factor for the project is
that it's very expensive, long term and all parties have to be
aligned enough to move it to FEED and then to FID. There are a
lot of issues, some of which the state has a major role in and
others that are business decisions that have to be made between
parties. The state is a business partner in this, but the other
three also have to align; then there is short term and long term
alignment, which is being negotiated now. Governance is the hard
thing for all parties. Another piece is the market. In the end
there has to be a niche for Alaska gas and the project has to be
competitive for that market. Because these projects are decades
in nature, the markets are very volatile. Something dramatic
could happen two years from now in the international energy
market that affects the cost of LNG to Japan. The best modelers
on the company side and the state side don't believe that, but
it is a possibility. The project has to be competitive with the
other worldwide projects, but he believes it can be.
A state oil company structure has to be really unified
internally; that means alignment between AGDC, DNR, DOR, and
ultimately he thinks a single structure is necessary that goes
from upstream all the way to marketing, because that is how the
companies are set up. You can't have one part of it trying to
make a profit on the other part.
4:51:58 PM
Certainty and signals from state government are also important,
but the critical part as negotiations continue is that they seem
to be high-quality and the parties are aligned. Another near big
immediate one is gas balancing. A state pipeline and the
companies' pipeline all have to be filled or the economics of
the project will ruin the party that can't deliver its gas to
the market and can't use the full capacity of all three pieces:
the GTP, the pipeline, and the liquefaction plant. It has to be
an incredibly efficient structure and to do that an upstream gas
balancing agreement is necessary, particularly for
ConocoPhillips and the state, because production is a derivative
product. He believes they are involved in a good faith effort
and that this is a serious discussion that will get us there. If
the state can't get there, then it can't take the RIK risk. If
the state is guaranteeing 20 years capacity, we have to deliver
the gas. If not, we will have to revert back to an RIV
structure, which could work, but the producers would have to
agree with it. Everyone recognizes the problem and he thinks we
can get there.
SENATOR COSTELLO said obviously the governor trusts him, but
asked if he listens to him.
COMMISSIONER MYERS answered that in his discussion with the
governor before he took the job, he had several conditions; the
first was he could get Marty Rutherford back and that was
granted; the second condition was he needed time to finish his
university commitments and take a couple weeks' vacation, which
was granted; the third condition was that he had to live in
Anchorage, because that is where the bulk of the business
happens as much as he would love to live in Juneau; the fourth
condition was that he would have access to the governor and he
agreed to that, as well. He has honored that and they are having
great dialogues on the gasline. The governor's orders are very
clear; work this as hard as you can and make it work.
Does he want a backup plan? Absolutely! That has been clear,
too. No one is sure this is going to work. The market conditions
and lack of internal alignment could stop the project. He hoped
it wouldn't, but having a backup plan is not unreasonable. The
AGDC structure gave him that, but it is significantly years
behind the AKLNG project - for a couple of significant reasons:
the gas treatment plant on the North Slope isn't designed for
LNG; secondly, the pipeline ended at Big Lake, and thirdly,
there is no liquefaction plant. It truly is a backup.
SENATOR COGHILL thanked him for taking the job and said he will
get to be the steward of probably one of the biggest land pieces
in America, and access to that land patchwork is a big deal.
First, in his view with the Native corporations and then dealing
with the feds, because of the roadless rule, which is arbitrary
to now the waters of the United State, another arbitrary issue,
which could push federal control of lands all the way to the
timberline. He asked how he would work in a condition like that.
Is it agreements among Alaskans? Do we have to go to Congress?
Will his federal connections help?
COMMISSIONER MYERS replied that the department will have to work
diligently on multiple fronts. With the governor's cuts, which
were really painful, he had to cut a fair amount of capacity for
RS-2477 and navigability, but he hopes to get some of it back;
some ongoing lawsuits are important. He has already met with the
regional fish and wildlife director to talk about agreements and
disagreements on the ANW-R wilderness decision. He also had a
successful meeting with the deputy secretary of Interior and the
secretary's chief of staff. He also met with the BLM director
and said he wants to bundle the state's issues together. He
wants to be able to select from the full selection of lands. The
feds want to use lesser survey standards and he said that is
okay where it's appropriate, but also look at the Native
allotments, particularly the ones in the Tanana Valley and Minto
Flats. He would like to see that problem solving accelerated.
Particularly with the deputy secretary, Mike Connor, and the
chief of staff the response was very positive. He did make a lot
of good connections when he worked with USGS and the Department
of Interior was glad to have him in this job now and they are
starting out from a position of trust.
4:58:43 PM
He said the state needs to understand the feds' positions, but
the state needs them to understand some things, too. The
agencies' missions are very specific and the state has a much
more general land mission with some exceptions. He looks at
economic development, sustainability and wildlife management.
Their agencies, except for BLM, are limited to a number of
goals. The problem is that Alaska is checker-boarded and
therefore, there are access issues. Logical rulings are made
within the context of wildlife management, but they will impede
development. Even though development is allowed on refuges, it's
not a core mission within the Fish and Wildlife Service. They
are taking a very conservative role; it's partly tradition and
partly administration and the director's viewpoint. But
ultimately, he said, one can win with good science; show how the
birds are being disturbed and ask for an objective scientific
report on it. It's in their culture to respect that. Ask them to
be consistent between agencies.
SENATOR MICCICHE asked his plan for a comprehensive approach to
developing the state's resources.
COMMISSIONER MYERS said that is a really important issue and
that the $135 billion is way understated. The Institute of
Social and Economic Research at the University of Alaska (ISER)
doesn't believe in exploration (and he does) and the
technological changes are astounding. Folks like Repsol have
proved him right. If we can get to shale oil there is a lot
more. There are 5 billion barrels of technically recoverable
heavy oil under current technologies. The state has an immense
endowment and he was confident that the state is badly
underexplored, but that is a wonderful problem to have. If the
state is clever, it can bring enough capital into the basins to
increase production.
However, the other resources are really important, too, and the
challenge is that a strategic budget is needed that doesn't
strip them out. He was concerned that short term budget cuts
will damage DNR's ability and believes that "we can't cut our
way of this." His biggest concern is keeping capacity and not
eating our seed corn in that structure.
He said we can't build roads to everywhere to develop our lands,
but we can get power in many cases. We can build micro-grids and
investments can be made in longer term energy sources like
tidal. The state has tremendous opportunities and an incredible
resource base, but the R&D investment piece is missing. That is
where the University can be tapped. He was in charge of
University research and saw the capacity there for getting more
investment capital for high tech industry, particularly for
things like micro-gridding and energy production. Rural Alaska
has such high costs that it can afford to use lesser
technologies that wouldn't work in the Lower 48, because they
are grided.
COMMISSIONER MYERS said it takes capital, because the payoff in
those first projects is a poor MPV decision for a company to
make. It's a 10 or 15 year investment. So, the subsidies for
energy conservation are huge in the net to the economy. Alaska's
demand for energy is flat, which is remarkable given the
population growth and everything else going on. Looking at it
strategically: technology, investment, and then growing those
industries strategically that aren't going to bring in huge
profits early or they would have been already - in forestry,
agriculture and fisheries enhancement. Given the budget scenario
those are the first things that are going to be cut.
5:07:29 PM
CHAIR GIESSEL thanked him and said in accordance with AS
39.05.080, the Resources Committee reviewed the following and
recommends the appointment be forwarded to a joint session for
consideration: Commissioner, Department of Natural Resources,
Mark Myers. This does not reflect an intent by any of the
members to vote for or against the confirmation of the
individuals during any further sessions.
CHAIR GIESSEL adjourned the Senate Resources Committee meeting
at 5:08 p.m.