03/27/2015 03:30 PM Senate RESOURCES
| Audio | Topic |
|---|---|
| Start | |
| SB8 | |
| HB132 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| += | SB 8 | TELECONFERENCED | |
| += | HB 132 | TELECONFERENCED | |
| += | SB 57 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
SENATE RESOURCES STANDING COMMITTEE
March 27, 2015
3:31 p.m.
MEMBERS PRESENT
Senator Cathy Giessel, Chair
Senator Mia Costello, Vice Chair
Senator John Coghill
Senator Peter Micciche
Senator Bill Wielechowski
MEMBERS ABSENT
Senator Bert Stedman
Senator Bill Stoltze
OTHER LEGISLATORS PRESENT
Senator Kevin Meyer
Representative Mike Chenault
Representative Mike Hawker
COMMITTEE CALENDAR
SENATE BILL NO. 8
"An Act relating to the regulation and production of industrial
hemp."
- MOVED SB 8 OUT OF COMMITTEE
COMMITTEE SUBSTITUTE FOR HOUSE BILL NO. 132(L&C)
"An Act relating to the purpose, powers, and duties of the
Alaska Gasline Development Corporation related to the Alaska
liquefied natural gas project and an in-state natural gas
pipeline; relating to the in-state natural gas pipeline fund;
and providing for an effective date."
- MOVED CSHB 132(L&C) 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."
- SCHEDULED BUT NOT HEARD
PREVIOUS COMMITTEE ACTION
BILL: SB 8
SHORT TITLE: INDUSTRIAL HEMP PRODUCTION LICENSES
SPONSOR(s): SENATOR(s) ELLIS
01/21/15 (S) PREFILE RELEASED 1/9/15
01/21/15 (S) READ THE FIRST TIME - REFERRALS
01/21/15 (S) RES, JUD, FIN
03/20/15 (S) RES AT 3:30 PM BUTROVICH 205
03/20/15 (S) Heard & Held
03/20/15 (S) MINUTE(RES)
03/27/15 (S) RES AT 3:30 PM BUTROVICH 205
BILL: HB 132
SHORT TITLE: AGDC SUPPORT OF NATURAL GAS PROJECTS
SPONSOR(s): REPRESENTATIVE(s) CHENAULT
03/02/15 (H) READ THE FIRST TIME - REFERRALS
03/02/15 (H) RES, L&C
03/06/15 (H) RES AT 1:00 PM BARNES 124
03/06/15 (H) Heard & Held
03/06/15 (H) MINUTE(RES)
03/11/15 (H) RES AT 1:00 PM BARNES 124
03/11/15 (H) Heard & Held
03/11/15 (H) MINUTE(RES)
03/11/15 (H) RES AT 6:00 PM BARNES 124
03/11/15 (H) Heard & Held
03/11/15 (H) MINUTE(RES)
03/13/15 (H) RES AT 1:00 PM BARNES 124
03/13/15 (H) Scheduled but Not Heard
03/14/15 (H) RES AT 1:00 PM BARNES 124
03/14/15 (H) -- Continued from 3/13/15 Meeting --
03/16/15 (H) RES RPT CS(RES) NT 6DP 1DNP 2NR
03/16/15 (H) DP: JOHNSON, HERRON, HAWKER, OLSON,
NAGEAK, TALERICO
03/16/15 (H) DNP: JOSEPHSON
03/16/15 (H) NR: TARR, SEATON
03/16/15 (H) L&C AT 3:15 PM BARNES 124
03/16/15 (H) Heard & Held
03/16/15 (H) MINUTE(L&C)
03/18/15 (H) L&C AT 3:15 PM BARNES 124
03/18/15 (H) Moved CSHB 132(L&C) Out of Committee
03/18/15 (H) MINUTE(L&C)
03/20/15 (H) L&C RPT CS(L&C) NT 2DP 2DNP 3NR
03/20/15 (H) DP: TILTON, OLSON
03/20/15 (H) DNP: JOSEPHSON, KITO
03/20/15 (H) NR: LEDOUX, COLVER, HUGHES
03/23/15 (H) TRANSMITTED TO (S)
03/23/15 (H) VERSION: CSHB 132(L&C)
03/25/15 (S) READ THE FIRST TIME - REFERRALS
03/25/15 (S) RES
03/25/15 (S) RES AT 3:30 PM BUTROVICH 205
03/25/15 (S) Heard & Held
03/25/15 (S) MINUTE(RES)
03/27/15 (S) RES AT 3:30 PM BUTROVICH 205
WITNESS REGISTER
DENNIS WADE, representing himself
Homer, Alaska
POSITION STATEMENT: Supported SB 8.
JAN FLORA, representing herself
Homer, Alaska
POSITION STATEMENT: Supported SB 8.
MATT MOSER, staff to Senator Ellis
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Commented on SB 8 for the sponsor.
MARTY RUTHERFORD, Deputy Commissioner
Department of Natural Resources (DNR)
Anchorage, Alaska
POSITION STATEMENT: Commented on HB 132 and reiterated that the
governor has stated that his priority is the AKLNG Project and
has asked her to work very hard to accomplish it.
REPRESENTATIVE CHENAULT
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Co-sponsor of HB 132.
REPRESENTATIVE HAWKER
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Co-sponsor of HB 132.
RENA DELBRIDGE, staff to Representative Hawker
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Commented on HB 132 for the sponsors.
MILES BAKER, Director
Governmental Relations and External Affairs
Alaska Gasline Development Corporation (AGDC)
Anchorage, Alaska
POSITION STATEMENT: Explained the new fiscal note for HB 132.
ACTION NARRATIVE
3:31:43 PM
CHAIR CATHY GIESSEL called the Senate Resources Standing
Committee meeting to order at 3:31 p.m. Present at the call to
order were Senators Costello, Coghill, Micciche, and Chair
Giessel.
SB 8-INDUSTRIAL HEMP PRODUCTION LICENSES
3:32:27 PM
CHAIR GIESSEL announced consideration of SB 8 and noted that
public testimony was open.
DENNIS WADE, representing himself, Homer, Alaska, stated support
for SB 8.
3:33:30 PM
SENATOR WIELECHOWSKI joined the committee.
MR. WADE said hemp was the leading oil used for lighting 2,000
years ago and it burns quite well in modern diesel engines. One
acre of hemp will produce as much paper as 4.25 acres of timber
pulp and is easier to refine. The fiber makes strong rope and
cloth, canvas, which is named after cannabis. The Alaskan
agricultural sector will benefit immensely from establishing a
viable hemp industry. It will also diversify the Alaskan
economy.
He hoped the licensing fees would be small, because the Alaska
agriculturalist will have to find seed that will work in the
various agricultural areas of Alaska. The seed that will work in
Homer won't work in Delta Junction or Fairbanks, he explained.
3:35:44 PM
JAN FLORA, representing herself, Homer, Alaska, supported SB 8.
She lives on a cattle ranch that burns diesel to put up 150-200
acres of hay for their beef cattle every year and if they could
produce seed and buy a cheap oil press, they could burn bio
diesel.
She said hemp is grown in Siberia at 65° north latitude. Delta
Junction is at latitude 63° or 64° and this crop is a real
possibility for that area. She suggested that she could work
with the professors and researchers at UAF's Cooperative
Extension Service to develop a seed that would grow in Alaska.
CHAIR GIESSEL thanked her for testifying and finding no further
comments, closed public testimony.
3:38:20 PM
MATT MOSER, staff to Senator Ellis, sponsor of SB 8, Alaska
State Legislature, Juneau, Alaska, thanked the committee for
considering SB 8.
SENATOR COSTELLO moved to report SB 8, version 29-LS0195\A, from
committee with individual recommendations and attached fiscal
note(s). There were no objections and it was so ordered.
HB 132-AGDC SUPPORT OF NATURAL GAS PROJECTS
3:40:24 PM
CHAIR GIESSEL announced consideration of HB 132. [CSHB 132(L&C),
version 29-LS0623\G, was before the committee.] She said she
closed public testimony at the last meeting and noted one letter
of support.
SENATOR WIELECHOWSKI asked to hear Deputy Commissioner Marty
Rutherford's take on HB 132.
MARTY RUTHERFORD, Deputy Commissioner, Department of Natural
Resources (DNR), Anchorage, Alaska, lead on the AKLNG Projects,
reiterated that the governor has stated to her that his priority
is the AKLNG Project and has asked her to work very hard to
accomplish it. She reiterated the essence of letter sent to the
chair by Governor Walker earlier today. The letter says that he
and his administration are focusing on and intending for the
AKLNG Project to succeed. He clearly recognized the work the
legislature did on SB 138, because it created both a structure
and a process that greatly increases the chance to reach a
successful project. However, it does not absolutely guarantee a
project. That is why he wants to continue the process of making
the ASAP an economically viable backup. It is his intention that
people working on AKLNG continue to diligently negotiate and
work with the producers on it.
The governor said he is proposing that the state evaluate
increasing the Alaska Stand Alone Project (ASAP) Project's gas
throughput to make it an economically viable backup. The Alaska
Gasline Development Corporation (AGDC) board recently passed a
resolution that directed the corporation to develop a cost
estimate and schedule for a 36 inch diameter pipeline at two
different strengths: at 600 and 900 psi, in keeping with the
2013 AGDC project plan amendment that increased the pipe size
from 24 inch to 36 inches. He also clearly stated that it is his
plan that the state continue discussions with Asian LNG buyers
to preliminarily explore their interest in a backup ASAP
pipeline should the AKLNG Project fail to come to fruition.
3:45:02 PM
MS. RUTHERFORD said the governor has specific reasons to move
the ASAP forward as an economically viable backup project: the
decision on whether to advance the AKLNG Project to the next
phase of engineering and design is not simply a state's
decision; it is in the hands of the partners, as well. That
decision is currently scheduled for 2nd Quarter 2016, which is
when the three producer partners and TransCanada decide whether
to move forward with the FEED decision. The ASAP project will
provide a backup project for any producer party as well as the
state to ship gas if the AKLNG Project does not advance.
MS. RUTHERFORD said the Governor noted as well that nothing in
the proposed expanded ASAP diminishes or in any way impinges on
the chances of the AKLNG Project succeeding. He notes that he
contacted AKLNG producer partners at high levels prior to
announcing his plan for an expanded ASAP project and continues
having discussions with them. All have indicated an
understanding of the proposal and their willingness to continue
to make progress on AKLNG. That is, in fact, the case, as they
have begun full-fledged negotiations on various commercial
agreements on AKLNG. (She just emerged from three days of
those.)
The Governor notes that having a viable backup plan is typically
how the producer partners do business and that ExxonMobil stated
in a March 4, 2015 analyst meeting:
Simply put, our large resource base affords us the
flexibility to select and develop the most attractive
opportunities. We start with high quality resources
with stable competitive fiscal terms from resource
owners and we choose to invest selectively in only the
most attractive.
He also noted his reason for opposing HB 132, including putting
the ASAP expanded project on hold, which in his opinion, would
be betting the entire fiscal future of Alaska on all four
companies - ExxonMobil, ConocoPhillips, BP and TransCanada -
even though all agree that the AKLNG Project is the most
attractive of each company's multiple options.
3:48:11 PM
MS. RUTHERFORD said the governor also noted that in 2006 the
Stranded Gas Development Act (SGDA) failed because the state put
all its eggs in one basket and imposed timelines on itself,
which leveraged the its ability to negotiate acceptable terms.
He believes that tying our hands through passing HB 132 would
not provide Alaska with a viable alternative and run the risk of
making the same mistake.
He went on to say that HB 132 substantially harms the team's
ability to negotiate favorable terms within the AKLNG framework
without a best alternative structure to go to should the AKLNG
framework and negotiations fail. Further, she said, the AKLNG
Project is scheduled to make a FEED decision in 2nd Quarter 2016
and HB 132 grants an extension of that date to July 1, 2017, and
that managing a project such as AKLNG through legislation isn't
in the state's best interest.
He closed the letter by saying that the AKLNG Project is his and
his administration's preferred option, but that the state needs
to be prepared with a fallback if the parties associated with
the AKLNG negotiations are not able to meet the hurdles set out
in the 2014 Heads Of Agreement (HOA) that preceded SB 138.
3:50:51 PM
CHAIR GIESSEL thanked her on her review of the Governor's
letter.
SENATOR WIELECHOWSKI asked her to address the sponsor's three
arguments: that this could create confusion in the market and
with the state's partners,- that it could cost the state to have
a duplicative effort, and why not wait until the AKLNG Project
potentially doesn't succeed.
MS. RUTHERFORD answered that the governor's letter clarifies
that this is a backup project and would clarify for the
purchasing Asian market that the State of Alaska (SOA) is fully
committed to an AKLNG project and its intent is to advance one.
But should the AKLNG effort fail for some unforeseen reason, the
SOA will undertake an alternative project to bring Alaska gas to
market.
3:53:24 PM
Regarding it being a duplicative effort, the AGDC board members
have all indicated they are looking at ways of moving a backup
project forward during the next year while the AKLNG Project is
going through the commercial negotiations leading up to a FEED
decision in 2nd Quarter 2016. It is interested in finding ways
to move a backup project without spending a tremendous amount of
money and has just begun focusing on a 36-inch pipe.
3:54:35 PM
Why not wait until some decision is made? The letter restated
that waiting is no longer in the state's best interest, Ms.
Rutherford said, since the general fund faces such a significant
deficit. A project is needed that will underpin the state's
economy for the next four decades. It's not in anyone's interest
to just sit back and assume that AKLNG will, in fact, be
successful, but to have something that is sitting there ready to
move forward as an alternative if a successful outcome is not
reach with AKLNG.
3:55:53 PM
CHAIR GIESSEL said the governor's letter refers to the AGDC
project as a backup and an alternative, which is somewhat
different and asked her to explain what "alternative" means.
MS. RUTHERFORD explained that it is simply her being inaccurate.
She should continually call it a backup project. She said the
discussions occurring with the markets during the pre-FEED stage
are at a very high level and the potential of another smaller
project being available through it if AKLNG does not move
forward to FEED. It is indeed a backup.
CHAIR GIESSEL asked if she was an Asian, an Indian or a Chinese
buyer and watched the news, and knew a project was going forward
with the three producers in an equal partnership and 25 percent
for Alaska, with companies that can easily fund their part of
the bill and also know that the SOA has this other project,
wouldn't she be playing one against the other. It seems like a
difficult marketing position for the state to be in.
MS. RUTHERFORD responded that at this stage of any project the
LNG marketing discussions as she understands them are very high
level about not price and specific delivery dates, but that
there is an intention by parties to move gas to market. There is
little opportunity for anyone to leverage the state on price.
The state can clearly explain that it's in its own best interest
that the AKLNG Project is the preferred option. They intend to
deliver that project, however if it should for whatever reason
not move forward, the state has every intention of moving a
backup project forward that may be of slightly less volume.
4:00:31 PM
CHAIR GIESSEL stayed with the marketing issue and asked if
something is preventing the governor from marketing the state's
gas now under the AKLNG Project.
MS. RUTHERFORD answered no. In fact, Audie Setters, the state's
outside expert since he was hired in 2014, is in conversations
with various parties in the Asian markets. The Governor has also
worked with DNR, which is handling the marketing effort that has
sent a letter to Asian markets reiterating the state's
commitment to bring Alaska gas to market. There are plans to
escalate the outreach to the Asian market over the course of the
next few months.
4:02:10 PM
CHAIR GIESSEL remarked that was good to know. Having a backup
plan is important and a critical piece of SB 138, which was
deliberated at length with more than 51 hearings and countless
public testimony through the legislative process. Consultants
and financial advisors evaluated fiscals. She asked if the AKLNG
Project turns out to not be economic, how it would be possible
that the smaller line would then become economic.
MS. RUTHERFORD answered that the governor's concern is that a
decision on economics would not be what would slow or stop
AKLNG, but rather where one of the parties decided they did not
want to commit their funding to this alternative but to one of
their other LNG export options. He does not want to see the
state's gas moving to market based upon simply a company's
alternative priorities. His interest in moving a backup project
forward is simply so that if such a decision were made that
would stall AKLNG, there is something that is ready to take the
next step forward to move Alaska's gas to market.
CHAIR GIESSEL asked if one party dropped out - it could be the
State of Alaska - couldn't another party come in to join the
AKLNG Project partnership.
MS. RUTHERFORD answered yes; it's fair to say that if one party
dropped out another party could be found to move AKLNG forward.
She doesn't hear the Governor saying that alternative would be
unacceptable. If no other party was found to take their place,
something must be available to pick up the pieces and move
forward. Finding a replacement for one party's decision to drop
out is an option and one that the state would want to pursue,
because they want the strength of the large producers involved
in an Alaska gasline project.
CHAIR GIESSEL added that the legislature's consultants have
pointed out that in many cases of large projects around the
world new participants came in during the development stage,
even during construction.
She went to the question of confusion and said she was aware
that ASAP (the smaller, 100 percent state-owned pipeline) had
applied for an Environmental Impact Statement (EIS) from the
Corps of Engineers (COE), and earlier this month when the
governor said he was going to enlarge it to actually be a
conflicting project, the Corps told Alaska Gasline Development
Corporation (AGDC) they were putting the EIS on hold. Isn't this
an example of uncertainty by federal regulators?
4:06:41 PM
MS. RUTHERFORD answered that she is not within AGDC and didn't
know about their communication with the federal regulators on
ASAP, but she had heard second hand that EIS activity was
stopped pending clarification on how the project wishes to
proceed. In working with various federal agencies over the
years, she said it's not unusual for them to say there seems to
be some lag or confusion on a project simply because there are
limited resources to work on projects and they get prioritized.
They are probably quite open to picking up the effort with some
clarification.
CHAIR GIESSEL acknowledged that Ms. Rutherford is focused on the
AKLNG Project.
4:08:20 PM
SENATOR MICCICHE asked when Ms. Rutherford talks about the
danger of one of the companies or the SOA dropping out and the
economy of scale that a 25 percent ownership of the model AKLNG
is working with, under what conditions would a less favorable
scale, smaller diameter line at a significantly higher risk to
Alaskans be more likely to succeed if the economics of the
larger scale were not to prove up, so to speak.
MS. RUTHERFORD answered if project economics was the reason that
a party decided to leave the AKLNG Project she wasn't sure the
state would say an alternative project is in its best interest.
The governor's concern is that the economics of another party's
project could be more economic for them.
SENATOR MICCICHE remarked that there is a reason that these
projects are at an increasingly larger scale; very few decide to
modularize to become more efficient. The very conditions that
would cause the state to not move forward with AKLNG are likely
to be economic conditions that make it unlikely for another
option to be economic unless it was a very small diameter
instate option to get gas to Alaskans.
4:11:34 PM
SENATOR WIELECHOWSKI asked if our partners in the AKLNG Project
have other projects around the world that they are currently
evaluating, that are in competition with the AKLNG Project.
MS. RUTHERFORD answered there is a mix of answers. ExxonMobil
does: one in British Columbia that is approximately at the same
stage; ConocoPhillips doesn't and she didn't know about BP.
SENATOR WIELECHOWSKI asked if the governor's concern is that
ExxonMobil does some extensive economic analysis and finds out
they can make a 12 percent versus 10 percent rate of return
(ROR) on a Canadian line even though it would make Alaska a heck
of a lot of money.
MS. RUTHERFORD answered that captured the governor's concern;
it's not that the project is not economic but rather that a
major player or players decide to not pursue AKLNG because a
better project is in their portfolio that draws them away
because of limited capital.
4:13:58 PM
SENATOR COSTELLO said the AKLNG Project has been described as
five mega projects in one and asked at a time when the
legislature cut live homework help for students and principal
mentoring how can the governor justify adding another mega
project all for the simple reason that the state is unable to
wait until the 2nd Quarter 2016 when it will know whether the
AKLNG goes forward for certain. Why would we pay twice for the
same information?
4:15:26 PM
MS. RUTHERFORD responded that the AGDC is very concerned about
not expending duplicate monies or wasting the state's resources
and is talking about ways of moving a backup project forward
without duplication of efforts.
4:16:11 PM
SENATOR COSTELLO said the state has no gas treatment plant (GTP)
and no LNG plant, and no gas for the ASAP line, and yet the
letter describes the intent to bring ASAP to a viable project.
How is a project brought forward without spending a lot of
money?
MS. RUTHERFORD replied that she is not inside AGDC - she is
focused on AKLNG - and could not speak to what specific elements
they are considering moving forward or how they intend to move a
backup concept forward regarding liquefaction or expansion of
the project, but there are probably ways to do that.
4:17:35 PM
SENATOR COSTELLO said it sounds as if the governor has the
ability to market Alaska's gas now and asked if that would be
the best way to move forward, and if we find early next year
AKLNG is not going to work - and in the meantime he is marketing
Alaska's gas - and then ASAP comes on line if needed. She didn't
see how that plan was not in the state's best interest
especially when they are cutting live homework help.
4:18:34 PM
MS. RUTHERFORD responded that the governor can move forward on
marketing Alaska's gas, but the message he wants to send to the
markets and have something substantive to support it is that
should AKLNG, which is the state's primary focus, not work for
whatever reason, that the SOA has put money into moving an
alternative project forward so that it is not just starting over
from a static position.
CHAIR GIESSEL said the AGDC board has $200 million remaining in
the ASAP fund. Their resolution was to start spending that now
to determine the costs to expand the smaller gas pipeline, and
she agreed that it's probably not a good expenditure of the
money.
4:21:03 PM
SENATOR COGHILL asked what favorable negotiating terms
(mentioned in the governor's letter) will be substantially
harmed if this bill passes.
MS. RUTHERFORD responded that was referencing a basic standard
of negotiation, a premise when going into commercial
negotiations: if, in fact, you have no good alternative, your
ability to negotiate terms is extremely limited.
SENATOR COGHILL said that sounds like a competing alternative
rather than a backup alternative. The governor also said that
the state would take an extreme risk of being able to attract
customers if this bill passes. He asked if she had seen failed
attempts of the partners in trying to co-op Alaska, or not act
in good faith, or anything showing this is a bad partnership.
MS. RUTHERFORD answered no; the parties under AKLNG are
negotiating in very good faith and everyone is working hard to
find solutions to problems and challenges that every party has
with commercial agreements. Things are progressing extremely
well. She explained that any commercial agreement has inherent
in it the risk of failure that the middle ground cannot be
found. The intention is simply to have a valid alternative
backup to AKLNG, but the AKLNG is ahead and it has "huge
advantages to it."
SENATOR COGHILL said HB 132 just says if a partner withdraws,
you can't move forward without a frontend design. AGDC hasn't
been taken off the table, yet.
MS. RUTHERFORD said there is always risk that commercial
agreements won't come together and in this case where there are
so many, there is risk. She personally believes and fully
expects to get to a FEED decision. But the issue is that the
alternative AGDC project is limited to 500 mmcf and is not a
good economic alternative. It is a project that because of the
low throughput would require a tremendous amount of subsidy.
So, the governor wants it expanded to make it much more
economically viable as a backup if AKLNG is not successful.
4:28:49 PM
SENATOR MICCICHE said we are partnered with - not dependent upon
- three companies that have successfully and actively traded
trillions of cubic feet of LNG in Asian markets for the last 45
years and posited: "Don't we have lower risk with companies with
those decades of experience versus a company hopeful to be
engaged in the LNG business in the future?"
MS. RUTHERFORD replied of course there is less risk if the
state's partners are ExxonMobil, BP, and ConocoPhillips. They
are world class producers and marketers of LNG, and they are a
wonderful team to be in partnership with. That is the essence of
why it is the governor's preferred alternative. But, should
something occur that causes AKLNG not to move forward, he does
not want the State of Alaska to be flat-footed, and have no
backup plan that is moving forward and able to deliver for the
state's economic future.
SENATOR MICCICHE said he doesn't like risk and feels comfortable
with where the state is in this process with these partners and
wondered why there is this rub. Increasing polarization doesn't
result in a better outcome. He hoped everyone could come to the
same table and work this out. Working through severance, royalty
and property taxes with the partners has worked out pretty well
for Alaska over the years. It's been a pretty successful
relationship. Those companies have all had operating
relationships that are very complicated but have worked out:
think about the Kuparuk operating agreement, the Prudhoe Bay
operating agreement and the Beluga River unit operating
agreement. These folks could look at other choices in other
places and chose to work together for a great outcome for
Alaska. This is the first time Alaska will be a partner in this
project. Other projects don't make the same claim that the
terminus is in Nikiski, which happens to be in his district and
he is pretty focused on that.
4:33:51 PM
SENATOR WIELECHOWSKI said in the time he had been in the
legislature he had been though the Alaska Gasline Port Authority
(AGPA), the Alaska Natural Gas Development Authority (ANGDA),
the Stranded Gas Act (SGA), the Alaska Gasline Inducement Act
(AGIA), Denali, and it feels like Lucy and the football. Alaska
has waited for 30 years for the largest undeveloped oil and gas
reserve in North America to be developed, which is Pt. Thomson,
and the only way it got developed is when the state yanked the
leases. The tariff disputes have cost the state billions in
which a judge said the state was guilty of inexcusable
trustfulness in its dealings with the oil industry. The concern
over this project comes from the history. It's from people
getting bribed down the street in a hotel room.
SENATOR COSTELLO objected for a point of order; she wasn't here
at that time.
CHAIR GIESSEL asked him to stick to the bill.
SENATOR WIELECHOWSKI explained that he was talking about where
some of the concern comes from and asked permission to continue.
CHAIR GIESSEL said as long as it sticks to the bill.
SENATOR WIELECHOWSKI stated section 3 says the corporation may
not market gas owned or controlled by an entity other than
itself without express written consent from that entity. That
appears to give the producers veto power and there doesn't
appear to be any expiration date on it and asked if Ms.
Rutherford had any concerns about that section.
MS. RUTHERFORD said she wasn't very familiar with that section,
but it sounds like it limits the ability to discuss gas from a
smaller project, such as ASAP. ASAP, at 500 mmcf, must sell gas
outside of the State of Alaska, because the state could not use
that much. So, ASAP gas would have to be marketed even as it
stands now. Yes, she has some concern with section 3 as he read
it to her. She reiterated that the governor isn't suggesting
anything more than that the state move forward a more economic
backup project.
CHAIR GIESSEL asked if Audie Setters with the Alaska Department
of Natural Resources (DNR) will actually be marketing gas on
Alaska's behalf for the AKLNG Project.
MS. RUTHERFORD answered yes, Audie Setters is housed in DNR, but
other parties may be involved in the marketing effort.
CHAIR GIESSEL said she is referring to marketing the state's
royalty gas that still requires a decision by the DNR
commissioner to take that gas in kind versus in value.
MS. RUTHERFORD answered that was accurate. AKLNG would trigger
the ability of the producers to elect to pay their production
taxes as gas so the state's share of gas throughput would
increase from an average of 12.5 percent to close to 25 percent.
CHAIR GIESSEL thanked her for the clarification and said that is
what makes the state an equal 25 percent partner in the AKLNG
endeavor.
4:41:39 PM
REPRESENTATIVE CHENAULT, co-sponsor of HB 132, Alaska State
Legislature, Juneau, Alaska, said they are glad to see
something, which is the governor's letter, to explain the
expansion of the ASAP. It answers some questions, but brings up
more.
Earlier he said it was mentioned that ExxonMobil, BP and
ConocoPhillips have projects all over the world and up and down
the West Coast, but, for the record, BP and ConocoPhillips have
no proposed LNG project in British Columbia or anywhere else in
North America. ExxonMobil is part of a British Columbia project,
which is not as far along as the AKLNG Project.
4:44:34 PM
REPRESENTATIVE HAWKER, co-sponsor of HB 132, Alaska State
Legislature, Juneau, Alaska, said he is concerned about hearing
a backup project being characterized as being an alternative
project and a place for an unsatisfied party to turn to. Ms.
Rutherford kept coming back to that word constantly. An
alternative is a competing project that casts doubt and
questions on the market. All have the same objective, but HB 132
is a temporary statement by all of Alaska that says give success
a chance. HB 132 says wait until the FEED decision on July 1,
2017. HB 132 is not creating an extension; all of the dates
deadlines are defined in the HOA, the MOU and the enabling
legislation passed last year.
4:47:50 PM
RENA DELBRIDGE, staff to Representative Hawker, Alaska State
Legislature, Juneau, Alaska, said HB 132 does not extend any
timeline. She explained that section 3 restricts AGDC from
marketing gas it does not own or have title to. Ms. Rutherford
suggested that would be a problem for the ASAP project, but AGDC
within the AKLNG Project, can still market gas that is held by
someone else with written consent to do so. They can't market
gas that they don't own or control. If the state has gas in
ASAP, it too, would be in DNR's title as royalty gas and the
same principles apply, and they are still welcome and able to
ask AGDC and give them consent to market that gas.
4:48:59 PM
REPRESENTATIVE CHENAULT closed saying that uncertainty kills
projects. The governor's letter talks about what happens with
somebody leaves the project. Upsizing the AGDC Project creates
the uncertainty of AKLNG partners not liking something and
trying to negotiate with ASAP.
4:51:30 PM
CHAIR GIESSEL said the new fiscal note is still zero, but the
narrative on page 2 updates language to correspond with what is
actually in HB 132.
SENATOR COSTELLO asked if Miles Baker AGDC could explain the
changes.
4:52:15 PM
MILES BAKER, Director, Governmental Relations and External
Affairs, Alaska Gasline Development Corporation (AGDC),
Anchorage, Alaska, explained that the principal change is on
page 2 of the fiscal note where paragraph 3 describes section 2
of the bill that sets the three earliest date conditions. One of
the amendments clarified the first condition that the party that
withdraws has to be a venture party that holds natural gas
leases.
SENATOR WIELECHOWSKI asked to hear from the state's partners.
CHAIR GIESSEL responded that this is a bill about SB 138 and not
about their participation in the project, so she had not invited
them to speak on the subject.
SENATOR WIELECHOWSKI said it's a fairly major policy change and
the legislature hears from the partners on every major gasline
issue and he couldn't move the bill without hearing from them.
CHAIR GIESSEL said it isn't a policy change; it's actually
substantiating SB 138, which they passed after having multiple
hearings.
SENATOR WIELECHOWSKI respectfully disagreed and said they had
heard significant testimony indicating that this will impact the
state's partners by creating uncertainty and the committee has
an obligation to hear from the partners.
CHAIR GIESSEL respectfully differed that it is a policy change,
but rather HB 132 just substantiates the findings and directions
that the state is already taking in SB 138.
SENATOR MICCICHE commented that he sees this as policy
preservation and that a 52-8 vote is fairly sure policy. He
hoped that this weekend folks could get together and come to
some agreement.
SENATOR COGHILL said it is confusing that the governor might
want to build a project that would be at least ready to compete
before getting to the FEED decision and he supported moving
forward with this bill. He thought the governor wants the same
thing, but HB 132 pushes him to stay with an agreement that
happened before he became governor. Until they know that the
AKLNG Project is not viable, he didn't know how a competing
project could go along side of it.
4:58:24 PM
SENATOR COSTELLO moved to report CSHB 132(L&C), version 29-
LS0623\G, from committee with individual recommendations and new
attached zero fiscal note dated March 6, 2015.
SENATOR WIELECHOWSKI objected saying this bill is moving
extremely fast and it has only one referral. It's important to
hear from the partners, because that is the major reason this
legislation is needed. It would seem common sense.
CHAIR GIESSEL responded that the policy change would come from
the administration, which is actually changing the ASAP line to
a larger diameter, and AGDC's Board is deciding to expend money
next Tuesday when the state is actually going forward with a
project. HB 132 actually creates certainty for the state.
A roll call vote was taken: Senators Coghill, Micciche, Costello
and Giessel voted yea; Senator Wielechowski voted nay; therefore
CSHB 132(L&C) moved from the Senate Resources Standing
Committee.
5:03:35 PM
CHAIR GIESSEL adjourned the Senate Resources Standing Committee
meeting at 5:03 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB8_GOV POM-Frank Turney.pdf |
SRES 3/27/2015 3:30:00 PM |
SB 8 |
| HB132-Letter of Support-Mike Prax.pdf |
SRES 3/27/2015 3:30:00 PM |
HB 132 |
| CSSB 57 Version S.pdf |
SRES 3/27/2015 3:30:00 PM |
SB 57 |
| SB 57 Explanation of Changes Version G to S.pdf |
SRES 3/27/2015 3:30:00 PM |
SB 57 |
| SB 57 ver S Sponsor Statement.pdf |
SRES 3/27/2015 3:30:00 PM |
SB 57 |
| SB57-Tribe-Peabody_111(d)_Comments_(filed).pdf |
SRES 3/27/2015 3:30:00 PM |
SB 57 |
| SB8-Letter of Support-Meyers .pdf |
SRES 3/27/2015 3:30:00 PM |
SB 8 |
| HB 132-Gov. Walker testimony.pdf |
SRES 3/27/2015 3:30:00 PM |
HB 132 |