Legislature(2015 - 2016)BUTROVICH 205
04/10/2015 03:30 PM Senate RESOURCES
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| Audio | Topic |
|---|---|
| Start | |
| HJR18 | |
| SB101 | |
| SB50 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HJR 18 | TELECONFERENCED | |
| *+ | SB 101 | TELECONFERENCED | |
| += | SB 50 | TELECONFERENCED | |
| + | TELECONFERENCED |
ALASKA STATE LEGISLATURE
SENATE RESOURCES STANDING COMMITTEE
April 10, 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
CS FOR HOUSE JOINT RESOLUTION NO. 18(RES)
Urging the United States Congress to pass the Improved National
Monument Designation Process Act.
- MOVED SCS CSHJR 18(RES) OUT OF COMMITTEE
SENATE BILL NO. 101
"An Act relating to fees for use of state park system
facilities; and relating to the sale of merchandise by the
Department of Natural Resources."
- HEARD & HELD
SENATE BILL NO. 50
"An Act relating to the programs and bonds of the Alaska
Industrial Development and Export Authority; related to the
financing authorization through the Alaska Industrial
Development and Export Authority of a liquefied natural gas
production plant and natural gas energy projects and
distribution systems in the state; amending and repealing bond
authorizations granted to the Alaska Industrial Development and
Export Authority; and providing for an effective date."
- HEARD & HELD
PREVIOUS COMMITTEE ACTION
BILL: HJR 18
SHORT TITLE: LIMIT DECLARATION OF NATL. MONUMENTS
SPONSOR(s): REPRESENTATIVE(s) MILLETT
03/16/15 (H) READ THE FIRST TIME - REFERRALS
03/16/15 (H) RES
03/30/15 (H) RES AT 1:00 PM BARNES 124
03/30/15 (H) Moved CSHJR 18(RES) Out of Committee
03/30/15 (H) MINUTE(RES)
03/31/15 (H) RES RPT CS(RES) 5DP 1DNP 2AM
03/31/15 (H) DP: HERRON, JOHNSON, OLSON, HAWKER,
TALERICO
03/31/15 (H) DNP: JOSEPHSON
03/31/15 (H) AM: SEATON, TARR
04/08/15 (H) TRANSMITTED TO (S)
04/08/15 (H) VERSION: CSHJR 18(RES)
04/09/15 (S) READ THE FIRST TIME - REFERRALS
04/09/15 (S) RES
04/10/15 (S) RES AT 3:30 PM BUTROVICH 205
BILL: SB 101
SHORT TITLE: STATE PARKS FEES & SALES OF MERCHANDISE
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR
04/08/15 (S) READ THE FIRST TIME - REFERRALS
04/08/15 (S) RES, FIN
04/10/15 (S) RES AT 3:30 PM BUTROVICH 205
BILL: SB 50
SHORT TITLE: AIDEA: BONDS;PROGRAMS;LOANS;LNG PROJECT
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR
02/11/15 (S) READ THE FIRST TIME - REFERRALS
02/11/15 (S) NRG, RES, FIN
03/10/15 (S) NRG AT 3:30 PM BELTZ 105 (TSBldg)
03/10/15 (S) Heard & Held
03/10/15 (S) MINUTE(NRG)
03/26/15 (S) NRG AT 3:30 PM BELTZ 105 (TSBldg)
03/26/15 (S) Moved CSSB 50(NRG) Out of Committee
03/26/15 (S) MINUTE(NRG)
03/27/15 (S) NRG RPT CS 3DP 1NR SAME TITLE
03/27/15 (S) DP: EGAN, BISHOP, HOFFMAN
03/27/15 (S) NR: MICCICHE
03/30/15 (S) RES AT 3:30 PM BUTROVICH 205
03/30/15 (S) Heard & Held
03/30/15 (S) MINUTE(RES)
04/03/15 (S) RES AT 3:30 PM BUTROVICH 205
04/03/15 (S) -- MEETING CANCELED --
04/09/15 (S) FIN AT 1:30 PM SENATE FINANCE 532
04/09/15 (S) <Pending Referral>
04/10/15 (S) RES AT 3:30 PM BUTROVICH 205
WITNESS REGISTER
JEFF TURNER, staff to Representative Millett
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Explained HJR 18 for the sponsor.
RANDY RUARO, staff to Senator Stedman
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Commented on HJR 18.
BEN ELLIS, Director
Division of Parks and Outdoor Recreation
Department of Natural Resources (DNR)
Juneau, Alaska
POSITION STATEMENT: Explained the rationale for SB 101.
FRED PARADY, Deputy Commissioner
Department of Commerce, Community and Economic Development
Anchorage, Alaska
POSITION STATEMENT: Explained SB 50.
NICK SZYMONIAK, Energy Infrastructure Development Officer
Alaska Industrial Development and Export Authority (AIDEA)
Anchorage, Alaska
POSITION STATEMENT: Explained SB 50.
ACTION NARRATIVE
3:30:23 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, Coghill and Chair
Giessel.
HJR 18-LIMIT DECLARATION OF NATL. MONUMENTS
3:30:58 PM
CHAIR GIESSEL announced the consideration of HJR 18 [CSHJR
18(RES) was before the committee].
SENATOR COSTELLO moved to adopt SCS HJR 18( ), version 29-
LS0707\N, as the working document.
CHAIR GIESSEL objected for discussion purposes.
JEFF TURNER, staff to Representative Millett, Alaska State
Legislature, Juneau, Alaska, explained that HJR 18 urges the
United States Congress to pass the Improved National Monument
Designation Process Act. Sponsored by U.S. Senator Lisa
Murkowski and co-sponsored by Senator Dan Sullivan, SB 437
creates new requirements and limits the authority of the
president to create or expand existing monuments under the
Antiquities Act of 1906. Passed under the administration of
President Teddy Roosevelt, it grants the president of the United
States the power to create national monuments that protect and
preserve important land marks in environmentally sensitive areas
using the smallest area necessary to conserve and protect the
monument.
3:32:50 PM
SENATOR MICCICHE joined the committee.
MR. TURNER continued that while this act has been used wisely
for decades to preserve some of America's most pristine and
important areas, a lot has changed. There are more demands on
public lands than ever and state and local economies need to be
taken into consideration. Tourism, hunting, commercial and sport
fishing, and natural resource development all take place on
public lands. The time has come to make the process for creating
national monuments more comprehensive.
3:32:59 PM
He said SB 437 makes three significant changes to the
Antiquities Act. First, it requires specific authorization by an
act of Congress to designate a national monument. Second, it
requires approval by the state legislature and, for marine
national monuments, it requires approval by each state
legislature within 100 miles of the proposed monument. And
third, it must conform to the National Environmental Policy Act.
These commonsense changes will bring the act into the 21st
Century.
Why is the improved National Monument Designation Process Act so
important and why is it important to Alaska? Right now there are
142 national monuments nationwide; 10 of them were created and 2
more were expanded since the current administration in
Washington, D.C., started its second term in January 2013. They
were all created without the approval of Congress or the states
where the monuments were created. The last one in Alaska was
created by President Carter in 1978.
Senator Murkowski filed this legislation because she is
concerned about the potential for new national monuments in
Alaska that are going to restrict or outright prohibit critical
economic activity. Two possible sites, in particular, are the
Aleutian Islands and the Arctic National Wildlife Refuge.
President Obama will be in Alaska this summer and no one knows
if he will announce the creation of a new national monument, but
the two senators are worried that will happen and filed SB 437
and Representative Millett filed HJR 18 to support it.
MR. TURNER referred to an article from the Fairbanks Daily News
Miner January 25 in which Senator Murkowski said that nothing
will happen in congress and she was worried the president would
use the authority of the Antiquities Act and put the Arctic
National Wildlife Reserve (ANWR) in permanent wilderness status
and lock it up.
This month the White House transmitted to Congress its formal
request to designate the Coastal Plain of ANWR as wilderness.
The proposal is very unlikely to pass congress, so the stage is
set for the president to use the Antiquities Act and lock up the
most promising on-shore oil and gas prospect in the entire
country and starve the TransAlaska Pipeline (TAPS) from oil.
They are not seeking to stop creation of new national monuments,
but to make the process better.
3:33:48 PM
SENATOR STOLTZE joined the committee.
3:36:11 PM
RANDY RUARO, Staff to Senator Stedman, Alaska State Legislature,
Juneau, Alaska, said that Senator Stedman had proposed on page
2, lines 10-15 and lines 24-26, to insert language that reminds
the federal government that there is already in statute the "no
more clauses" of Alaska National Interest Land Conservation Act
(ANILCA) that were intended to prevent unilateral exercise of
federal authority to designate more wilderness areas or parks in
Alaska. His language supplements the intent of the resolution
well, which is to add clarity and boundaries to the exercise of
executive authority.
CHAIR GIESSEL asked Mr. Turner if the change was acceptable to
the sponsor.
MR. TURNER answered yes.
CHAIR GIESSEL removed her objection and the Senate CS for CSHJR
18, version N, was adopted.
SENATOR STEDMAN noted that a couple of the national monument
proclamations had been abolished: one in Lake Lewis and Clark,
Montana, and another one the Shoshone cabins in Wyoming. So,
apparently, it can be done.
MR. TURNER commented that national monuments had been abolished
in the past for a couple of reasons: one is a national monument
that later on was determined to not be that historically
significant; another one was a site explored by a French
explorer in North or South Dakota and it was later determined
that explorer was never at that site. Another in New York was
taken over and turned into a state/national park.
SENATOR MICCICHE said what is scary about the Antiquities Act is
that the one that was vetoed by a state in Jackson Hole,
Wyoming, was not overridden by the court.
MR. TURNER summarized that there are over 300 million people in
this country, but the power to create a national monument rests
entirely in the hands of one person who can't seem to be
challenged on any level.
3:41:30 PM
SENATOR COGHILL offered Amendment 1 on page 2, line 15, to
delete "by federal legislation" and say that no more land in the
state should be set aside, period.
CHAIR GIESSEL objected for discussion.
SENATOR STEDMAN said it was fine with him.
MR. RUARO said the amendment is important because the "no more
clause" has expanded beyond legislation by Congress to
unilateral action by the president, as well.
MR. TURNER said the sponsor approves of the change.
CHAIR GIESSEL removed her objection and without further
objection, Amendment 1 was adopted.
3:44:30 PM
SENATOR MICCICHE said considering the Jackson Hole case, which
used the Antiquities Act for a national monument, he wondered if
ANILCA could give Alaska standing if the same issue occurred
under the "no more clause."
MR. RUARO replied that ANILCA gives Alaska a very strong
position of standing if that same situation were to occur here.
CHAIR GIESSEL opened public testimony and finding none, closed
public testimony.
3:45:47 PM
SENATOR WIELECHOWSKI joined the committee.
SENATOR WIELECHOWSKI asked how many acres President George Bush
expanded under the Antiquities Act.
MR. TURNER replied that he didn't have that number in front of
him, but would get it.
SENATOR WIELECHOWSKI asked how many new national monuments
President George Bush established.
MR. TURNER answered that he didn't see one on his list.
SENATOR WIELECHOWSKI said he thought that list might be
inaccurate and asked if he had a listing of how many presidents
established national monuments.
MR. TURNER answered 16.
SENATOR STEDMAN remarked on the magnitude of the impacts on
Alaska regardless of which president did it and he thought there
would be more emphasis on Alaska in the future.
3:48:37 PM
SENATOR MICCICHE said it looks there were 15 by President Obama
and President George Bush did 6.
MR. TURNER corrected his previous testimony and said 6 were
created under the second President Bush.
SENATOR WIELECHOWSKI said his 2009 article says President Bush
invoked the Antiquities Act to establish three marine monuments
that protect 125 million acres of habitat, and according to the
article, it was the most sweeping use of the Antiquities Act
since 1906. He asked if the resolution could be made more bi-
partisan.
CHAIR GIESSEL responded that the information in his article was
outdated and that President Obama had created 15.
SENATOR WIELECHOWSKI asked if the legislature took any action or
do any resolutions when President Bush undertook his "most
sweeping actions since 1906."
MR. TURNER replied that he wasn't aware of any and explained the
point they are trying to make is that an unprecedented number of
national monuments had been created and expanded in this state
in the space of two years and one month.
3:51:03 PM
He understood Senator Wielechowski's point about pointing a
finger at the current administration, but this is for future
administrations. The point is that a public process should be
created that brings everyone to the table instead of just one
person having the ability to create a national monument.
3:51:38 PM
SENATOR WIELECHOWSKI asked if they should urge revocation of all
national monuments that have been invoked by presidents without
congressional approval as part of this resolution.
MR. TURNER answered that was not part of Representative
Millett's resolution and there is a concern about what could
happen to ANWR when President Obama visits Alaska.
3:52:26 PM
SENATOR STEDMAN asked the committee to reflect that Sitka under
President Taft was number 24. On the repeal issue, if they were
to do that, it would be attractive to look at Glacier Bay, which
is the area lost to submerged lands.
3:54:38 PM
SENATOR MICCICHE commented that the focus on Alaska seemed to be
from President Carter with Admiralty Island.
SENATOR COSTELLO moved to report SCS CSHJR 18( ), version N as
amended, from committee with individual recommendations and
attached fiscal note(s). There were no objections and SCS CSHJR
18(RES) was reported from Senate Resources Standing Committee.
3:55:42 PM
At ease from 3:55 to 3:57.
SB 101-STATE PARKS FEES & SALES OF MERCHANDISE
3:57:17 PM
CHAIR GIESSEL announced the consideration of SB 101.
BEN ELLIS, Director, Division of Parks and Outdoor Recreation,
Department of Natural Resources (DNR), Juneau, Alaska, said SB
101 is necessary to allow the Division of Parks and Outdoor
Recreation to sell state park merchandise to retailers ensuring
a fair and reasonable return to help support state park
operations, thereby reducing reliance on the general fund.
SB 101 would add a new subsection to AS 41.21.026 to grant the
DNR the authority to sell the retailers state park-themed
merchandise for informational, educational and promotional
purposes to support park operations. The new subsection that
would allow the department to establish prices for park-themed
merchandise is to ensure a fair and reasonable return. It would
also remove language in AS 41.21.026(a) requiring all fees to be
collected in a park unit, making clear that the department has
the authority to collect fees at locations outside of park
units.
3:58:48 PM
MR. ELLIS said the bill is needed to help the division get more
revenue. The division currently generates about $3 million
annually from park fees and 33 percent of their operating budget
is covered by these fees. Fees were raised across the board
going into the 2015 season projecting the same usage as last
year and that results in about a 42-44 percent increase in
revenue. It has been his and the commissioner's goal to find
alternative ways to help fund more recreational opportunities in
Alaska. A number of states use this model; South Carolina has
done it for 10 years and raises about $1.72 million annually
above what their merchandising program costs to run. This
proposal would get Alaska going in that direction.
SB 101 would allow the state to create, purchase and sell
authentic state park merchandise to retailers thus providing
opportunity for private businesses while generating revenue for
the state. Currently, he could find only one source for
purchasing state park merchandise and it's on line. One can pick
any state park in Alaska and are able to buy a T-shirt, sweat
shirt, hat, whatever, and the state receives no funds from that
enterprise.
He said with this legislation that Alaskans who buy authentic
Alaska state park merchandise could be confident that their
purchases would benefit the state parks they care about.
4:01:26 PM
MR. ELLIS related that four years ago, they just had completed a
40-year celebration of Alaska state parks and had a number of
beautiful photos in a photo contest. He thought what great note
cards they would be and put eight of the winning photos on a
blank notecard along with the name of the photographer, the
location, and technical information. It was put into a nice
package that could be sold. His intent was to charge $15 for
what cost them $5.28 to create and it was going to go toward
operations. Unfortunately, current statutes say that parks can't
sell anything - camp fees, fire wood, whatever - for profit.
That was the beginning of his starting to look at what other
states do. He said that 39 other states have some type of a
merchandising program; South Carolina has the most successful.
SENATOR COSTELLO said she remembered this issue from previous
legislatures and asked if raising park fees needs a statute
change.
MR. ELLIS answered yes, because AS 41.21.026(a) lists
informational, educational and promotional purposes. It gets
wrapped up with fire wood and other things that can only be sold
for cost.
SENATOR STOLTZE asked if Alaska has a patent or trademark on
these logos.
MR. ELLIS answered no, but a patch saying "official gear" could
be put on with the Alaska state park logo and retailers could be
urged to put a sticker of support for Alaska state parks in
their windows. He can't get a copyright on it, but he is working
with people on using the Alaska grown symbol.
SENATOR STOLTZE mentioned that the DNR and the Department of Law
(DOL) could give him a lot of insight on the issue of patenting
that would be useful to have.
SENATOR MICCICHE said he thought selling authentic Alaskan wear
would be a good idea. He asked where the $350,000 would come
from to initiate the program and what it would be used for.
MR. ELLIS answered the $50,000 is a one-time capital request.
The $350,000 would the ability to receive up to $350,000 from
the merchandise. If this goes forward, he wanted to do it on a
very measured basis starting with creating $50,000 worth of
product, selling it, looking at the return, and investing it
again the following year until they get to a point of actually
having enough volume to make a significant profit.
SENATOR MICCICHE asked if he plans on changing revenues from
FY16 to FY21 on the fiscal note.
MR. ELLIS answered no.
4:07:21 PM
SENATOR WIELECHOWSKI asked what section 3 is repealing.
MR. ELLIS answered that it basically deletes language saying the
state can charge the cost of what the product is, but not for a
profit.
SENATOR STEDMAN said he had talked to Mr. Ellis earlier this
year about the budgets in trying to deal with the parks in
Sitka, one of which is where the Russians and Americans changed
the flag. Quite a few people access it and the state should be
able to charge a couple dollars to help offset the cost of
running the parks. But maybe they should consider outsourcing
the merchandising program and take some sort of royalty off of
it. People who are in the business of selling T-shirts or
popcorn are probably better at it than the well-meaning folks
that aren't actually in that type of business. The state could
just license the product and collect the check and not stick its
neck out too far.
MR. ELLIS responded that some states have that model, but he
looked at the states that generated the highest level of revenue
above the cost of the program and that was South Carolina that
is doing it themselves. But he was not opposed to that approach.
SENATOR STEDMAN said he saw his point, but state agencies don't
have that great a history of getting through their overhead
burden. But he supported the bill and the concept.
4:12:42 PM
SENATOR STOLTZE concurred with Senator Stedman, but added that
Alaska doesn't have a trademark or a patent and some companies
are already making these types of products. All Alaska can
really sell is an official sanction, which would have limited
value if it gets too expensive.
4:14:28 PM
SENATOR WIELECHOWSKI also wondered what the state really has to
sell if it doesn't have a trademark or a patent. He thought a
lot of people would want to buy an official T-shit or hat or
something knowing that a big chunk of it is going to the state
park system. Going to a private model would be preferable but
the state doesn't have anything to sell.
MR. ELLIS responded that he is exploring all options. He had
conversations with Princess Lodge that wants to sell these items
in their gift shops, because they want to promote and support
Alaska's parks. So, he believes there are merchants out there
that would be interested. Totem Bite is another example.
He didn't expect to make as much money as South Carolina does,
because the programs are different, but it is the start of
looking at other possible revenue generating areas. Just raising
fees is not a sustainable model.
4:19:20 PM
SENATOR STEDMAN asked him to explain what the Totem Bite is.
MR. ELLIS replied that Totem Bite is a state historical park in
Ketchikan that has hundreds of thousands of visitors each year.
It is a replica of a totem village that Totem Trading Company,
Inc., has next door to it, a museum that is second to none.
SENATOR MICCICHE agreed that there is a market for gear, but
said the division already has ability in existing law for
competitive and exclusive commercial use permits. Even if they
used kiosks in the most popular places, they wouldn't have to be
run by park employees. They have the option right now under
existing law for someone coming in and having such a thing with
a portion of the proceeds going to the Park Service.
MR. ELLIS answered if there is a product, yes, but he didn't
know of an Alaskan state product being sold in the state.
SENATOR WIELECHOWSKI wondered if the state is violating law now
by selling cabins referencing deleting "in a park unit" on page
1, line 6, and he thought it would be a good idea to do
something about that. He asked if there could be some other
unintended impacts coming from that deletion.
MR. ELLIS said he had worked with the Department of Law on that
and didn't always understand legal language, but currently if
one wants to reserve a public use cabin, it is done on line; it
is not done in a unit. If one goes to a public information
center and purchases an annual parking pass, that is not done in
a unit. This language just tries to clarify what is already
being done.
SENATOR COGHILL said this needs to be passed, because the state
is already violating law and asked what assurances he can give
if this proceeds forward, that it gets reviewed so the state
"doesn't get tangled up in a lawsuit." He liked the idea of
merchandising things and having it plowed back into the parks.
MR. ELLIS gave him his personal assurance that he would have the
Department of Law look into it. The model he used, South
Carolina, has a three-legged stool: they sell merchandise in
their units most of which have a gift shop; Alaska doesn't. They
sell them on line and they sell them in retail. Obviously, in
the park and on line, where the State of Alaska is using it, it
would be assured of the return on the profit. He is concerned in
going with on line and in the units that the state would be in
competition with the private sector even though they would be
giving the opportunity for the private sector to purchase the
product at wholesale.
4:27:09 PM
SENATOR COGHILL said on line would be the best place because his
area doesn't even have kiosks.
MR. ELLIS agreed that kiosks would not be cost effective and
that the best bet would be to work with lodges like the Princess
Lodge that has a large volume of people coming through it.
CHAIR GIESSEL said the National Park Service in Kotzebue has a
visitor center that sells merchandise and she sees that in a lot
of other states, as well.
SENATOR STOLTZE said the federal government has concessionaires
at the major national parks. He asked if the division needed a
broader authority so that conservation minded families wanting
to endow a cabin as a friend of the parks could be able to do
that.
MR. ELLIS answered that they do have that authority now. It
comes through a donation from a family that says it wants to
have it applied to a specific area or parks in general.
4:30:26 PM
SENATOR WIELECHOWSKI said he wanted to hear from the Department
of Law if on line fees are illegal.
MR. ELLIS replied he hadn't talked to them about that, but will
have an answer back through the chair.
SENATOR WIELECHOWSKI said he thought they likely needed to pass
something as quick as possible.
CHAIR GIESSEL agreed and said it would be helpful to know about
the logo trademark issue. She asked Mr. Ellis to get that
information. She held SB 101 in committee.
SB 50-AIDEA: BONDS;PROGRAMS;LOANS;LNG PROJECT
4:32:38 PM
CHAIR GIESSEL announced consideration of SB 50. [CSSB 50(NRG)
was before the committee.]
4:32:59 PM
At ease from 4:32 to 4:34 p.m.
4:34:23 PM
FRED PARADY, Deputy Commissioner, Department of Commerce,
Community and Economic Development (DCCED), Anchorage, Alaska,
said he had an abbreviated set of slides to refresh people on SB
50.
NICK SZYMONIAK, Energy Infrastructure Development Officer,
Alaska Industrial Development and Export Authority (AIDEA),
Anchorage, Alaska, introduced himself.
MR. PARADY said the goals of the Interior Energy Project (IEP)
are straightforward, to supply natural gas to the Interior at
the lowest possible cost to as many customers as possible and as
soon as possible.
Investments in the IEP complement the eventual sources of gas
supply from a natural gas pipeline which everyone hopes will
come forward. A key goal, he said, is the lowering of the
particulate matter (PM) 2.5 in the non-attainment areas of the
Interior, a serious health issue that the legislature has
directed to address through previous SB 23.
MR. PARADY said the current status of the IEP is that they
diligently pursued development of a North Slope liquefied
natural gas supply agreement through a concession agreement.
That agreement did not work out. AIDEA and the Alaska Energy
Authority (AEA) are now evaluating infrastructure to develop
natural gas from Cook Inlet and are seeking authority to source
gas from Cook Inlet.
He said AIDEA is financing the build out of the natural gas
distribution systems in Fairbanks and North Pole. It has
allocated a $15 million loan to Fairbanks Natural Gas (FNG) and
a $37.78 million loan to the Interior Gas Utilities (IGU) for
those distribution systems - a total of $52.78 million.
4:38:22 PM
MR. PARADY revisited the reason the North Slope project under
the concession agreement did not proceed was because it did not
pass AIDEA's due diligence process and receive board approval.
That is why they are now looking at sourcing gas from the Cook
Inlet.
CHAIR GIESSEL asked him to explain the chart he was referencing.
4:38:58 PM
MR. PARADY said AIDEA takes its loan portfolio very seriously.
Phase 1 is the project suitability assessment which consists of:
proposal information, sponsor information, estimated cost and a
timeline. The AIDEA process that would follow those project
sponsor submittals answers the following: Is the project
consistent with AIDEA's initiatives? Is it feasible? What is the
proponent's experience and capability? Are they capable of
delivering what they are proposing? And, is AIDEA the right
source for financing?
The output is a suitability report; the decision-making would
come from a project evaluation committee.
Phase 2 has the full-blown feasibility analysis, which is the
business and financing plan, the schedule, its execution and
development plan. The AIDEA process is the asking whether the
building and financing plan is attainable. Is there public
support for it? What is the timing and status of the project?
What are the risks? The output of that piece of due diligence,
which comes from the Investment Committee, is the reimbursement
agreement and term sheet and that goes to the AIDEA board.
Phase 3 asks for the deal's structuring and due diligence, which
is the final execution plans and final financing plans.
Phase 4 is the finalization and closing. The North Slope project
did not reach this finalization and closing phase.
MR. PARADY said the concession agreement for the North Slope
project with MWH, was a long involved process. The equity
partner in that agreement offered $80 million for private
capital through North Leaf, but the details surrounding the
liquefaction plant soared to $280 million, the deliverables
weren't there in terms of timing and so it did not reach phase 4
finalization and closing. The concession agreement was
terminated prior to phase 4.
4:41:23 PM
MR. PARADY provided a quick snap shot of project comparisons. He
said the natural gas supply for Cook Inlet is not certain, but
indications are positive. On the North Slope there was an
abundant supply at low cost and other contracts in place for
some of it, but designing and constructing an LNG plant for
North Slope conditions is expensive. That will be cheaper coming
from the south as that has lower trucking costs and a large
trailer potential. He noted the declaration of emergency on the
Dalton Highway and if the project were connected to an LNG plant
on the North Slope, not one single truck would be moving for a
substantial period of days. If that were to occur in deep winter
conditions in Fairbanks, an ultimate storage facility would be
needed to assure reliable supply.
4:42:43 PM
Trucking is more expensive from the North Slope, but it is
feasible. He said the Dalton Highway risk which is a somewhat
new development and that storage and distribution is essentially
the same in either project.
4:43:32 PM
MR. SZYMONIAK took over the presentation. He noted that the
supply of natural gas is not certain and being explored through
a competitive commercial process. He exhibited a slide that
indicated an 80 bcf of Interior gas demand for 10 years. That
compares with about 1 tcf of existing natural gas reserves not
including undiscovered fields or recently discovered fields like
Kitchen Lights or Cosmo, which are anticipated to have
significant, producible commercial volumes of natural gas. A
scale of the last 10 years of LNG exports out of the
ConocoPhillips LNG plant indicated exports approaching 400 bcf
in the last 10 years, which is vastly greater than what is
expected to go to Interior Alaska over the next 10 years. If the
Agrium Plant were restarted, it would mean about 30 bcf/year. At
full build out the Interior demand is expected to be about 9.5
bcf. This includes both natural gas utilities as well as Golden
Valley Electric Association (GVEA) - and it would take a number
of years to complete very ambitious customer conversions to
natural gas.
4:45:14 PM
SENATOR COGHILL said he couldn't anticipate this project going
forward more, but there was the question of gas supply a couple
of years ago and asked why this gas concept is different now.
MR. SZYMONIAK explained that AIDEA is a market driven authority;
they respond to the market and support the private sector. One
of the big indications that Cook Inlet may be a viable source
was that the private sector - Hilcorp and Westpac - started
proposing solutions to bring natural gas for LNG from there into
the Interior market. In addition, Cook Inlet gas discoveries
that were in large part due to the tax incentives as well as the
two jack up rigs, one of which AIDEA participated in the
financing of, are significant. So they have been in preliminary
discussions with producers and Cook Inlet utilities to get a
sense of where the market is heading. There is reason to be
optimistic that gas could be available. Before they commit to
Cook Inlet that will all be vetted through a commercial
solicitation to determine what gas is available and if it's
available at a level of security that is adequate for Interior
utilities.
MR. PARADY offered that the gas supply team - DCCED, AIDEA, AEA,
and DNR - is developing the best information to understand the
Cook Inlet gas situation. The question they have been asked is
how they can be confident with the gas supply today in relation
to the brown-outs people worried about three years ago and the
answer is a function of Cook Inlet Natural Gas Storage Alaska
(CINGSA) that has improved gas storage, a function of incentives
that have been operating in Cook Inlet. It is also a function of
the success of independent operators that have come into play
beginning with Hilcorp, which acquired Marathon and Chevron
assets. There have been 75 new oil and gas exploration and
development wells drilled since 2009; 36 have been completed as
gas wells, an average of 7.2 new wells a year. The Kenai Loop
gas field was discovered in June 2011 with sustained production
beginning in January 2012. Gas reserve additions have come from
production enhancements, compression additions, new completions
of high probability pay intervals, and new completions of
potential pay intervals. And then the DNR analysis to this point
has excluded the Kitchen Lights and Cosmopolitan gas
discoveries, both of which are in development but are not yet
producing.
So, one of the questions to be ascertained in the gas supply
agreement will be essentially the deliverability of gas to the
pipe for the Fairbanks demand and sustainability of the gas
reserves. Mr. Parady said the major utility operator in the
Anchorage area, Enstar, has gas supply under contract through
2018 and is looking to place contracts for their forward demand.
Gas supply will be put under contract for Fairbanks through the
utilities - FNG, IGU, and GVEA - for a 5-10 year period. It is
worth contemplating that this project is viewed as a bridge to a
future gas line, but as the uncertainties are weighed, decisions
will have to be made about the longevity of terms they seek from
the market in placing the contracts. Those will be private
sector decisions rather than AIDEA decisions.
SENATOR COGHILL said IGU is not private sector.
MR. PARADY clarified that a better way to say that is that they
are non-AIDEA.
4:51:04 PM
MR. SZYMONIAK said slides 7 & 8 show the project plan for the
North Slope that has been pursued for the last two years and the
one after showed the Cook Inlet alternative. He next reviewed
the value chain to describe AIDEA's approach to allowing the
private parties to put together the financing.
For the North Slope LNG project, two of the Interior utilities
came to the project with executed natural gas supply contracts
in hand. AIDEA anticipated using one of those contracts through
project development. For LNG production, AIDEA's plan was to
partner with the private developer. They went through a
competitive process and selected MWH and then spent a
significant period of time advancing the project with it.
Legally, that resulted in a concession agreement on which AIDEA
would own the LNG plant and MWH's private investor they brought
to the project would finance, operate and construct the LNG
plant. MWH would lead the process under the concession
agreement; they were responsible for getting the construction
contract, the operating contract, and signing the offtake
agreements with the utilities. Once the concession agreement was
signed, AIDEA took the backseat and hoped to assist and
facilitate. Ultimately the costs came in too high for this
project and the contracts with the utilities were not signed and
it did not make it through AIDEA's due diligence process.
4:52:43 PM
AIDEA explored the trucking component and discussed owning some
trailers with the utilities, but at no point did AIDEA have any
interest in operating the trucking operation. They expected that
component to be resolved through a competitive private market.
The three Interior Utilities - Fairbanks Natural Gas, Interior
Gas Utility and Golden Valley Electric - cooperated on LNG
storage and regasification and worked together to plan the
entire value chain.
4:53:37 PM
MR. SZYMONIAK said the Cook Inlet LNG alternative is visually
much the same project with the big difference being that the
Cook Inlet alternative has a gas supply in hand. AIDEA will
evaluate the proposed projects and determine which ones are the
most promising, move through the competitive process into
negotiation and then determine which one is the best partner to
finance.
The utilities will be engaged the entire way through, he said.
While AIDEA is working with DCCED to explore and secure gas
supply and go through the RFP process for liquefaction, it is
known that all the way through that it's not going to be AIDEA
that owns or even signs the contracts with the private
developers. It will be the utilities. AIDEA is playing a
facilitating role to aggregate and rationalize the demand from
the three Interior utilities and come up with one commercial
approach as opposed to forcing the private developers to try to
negotiate three individual gas supply and LNG capacity
agreements with three different utilities.
4:55:25 PM
MR. SZYMONIAK moved to the transportation pieces saying the
options were trucking or railroad and at this point their plan
is to use trucks. Just like the North Slope, they expect the
trucking cost to be much lower than off the North Slope, but
they are working with the Railroad to determine if rail is a
cost effective alternative. He noted that SB 50 includes
provision for AIDEA to finance a small diameter pipeline. If
that is the case it will replace the LNG production as well as
the transportation. The mechanism for that to happen would be
through this competitive RFP process that is exclusively open to
pipeline developers. If a developer can demonstrate that it is
the preferred means to transport natural gas to Fairbanks, AIDEA
will work with them and try to come to a financing agreement
where the private developer builds and operates the pipeline
with some AIDEA financing to achieve the goals of the IEP. The
limit of that pipeline is 12 inches or less.
SENATOR MICCICHE said it not only cuts out the LNG production
and transportation, but it also cuts out the storage and re-gas
facilities unless there was a supplemental system with the
existing liquefaction capacity.
MR. SZYMONIAK said that was correct.
CHAIR GIESSEL said AIDEA and DCCED are state government and were
also working together in competitive solicitation for contracts
and she was uncomfortable with government stepping in to
contract negotiations that should be done by the utilities.
MR. PARADY said that AIDEA's role is to facilitate that ongoing
process with the utilities. Looking at the history of energy
supply issues in the Interior, it is arguable that the private
market has not succeeded in supplying what amounts to relatively
small levels of demand. One of AIDEA's successes to this point
with this project is the Pentax acquisition, which is under due
diligence review now, where there is an opportunity to combine
the two utilities - FNG and IGU - and not have two separate
entities operating, not have two separate administrative
structures, two different metering systems, and two different
warehouse systems. The market, itself, is small and combining
the two entities is a success.
CHAIR GIESSEL noted that the state gives credits and incentives
to develop the gas supply in Cook Inlet and now it is stepping
in and negotiating contracts with those same folks. It doesn't
sound too free "market-ish."
MR. PARADY responded that, however it sounds to her, that AIDEA
is applying its analytical skills and its investment tools to
support the market. It is not trying to bypass the private
sector; it is trying to find a way to help the system
rationalize itself.
4:59:28 PM
SENATOR STOLTZE said he was wrapped around the HB 132 argument
and asked how a competing gas line fits in.
CHAIR GIESSEL said time has run out and others still want to
testify so she would continue the discussion of SB 50 at a later
time.
5:00:40 PM
CHAIR GIESSEL adjourned the Senate Resources Committee at 5:00
p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HJR18 Ver. H.PDF |
SRES 4/10/2015 3:30:00 PM |
HJR 18 |
| HJR18 Ver. E.PDF |
SRES 4/10/2015 3:30:00 PM |
HJR 18 |
| HJR18 Explaination of Changes.pdf |
SRES 4/10/2015 3:30:00 PM |
HJR 18 |
| HJR18 Sponsor Statement.pdf |
SRES 4/10/2015 3:30:00 PM |
HJR 18 |
| HJR18 Fiscal Note.PDF |
SRES 4/10/2015 3:30:00 PM |
HJR 18 |
| HJR18 Supporting Documents -NPCA National Monuments List.pdf |
SRES 4/10/2015 3:30:00 PM |
HJR 18 |
| HJR18 Supporting Documents-ADN Article.pdf |
SRES 4/10/2015 3:30:00 PM |
HJR 18 |
| HJR18 Supporting Documents-Deseret News Editorial.pdf |
SRES 4/10/2015 3:30:00 PM |
HJR 18 |
| HJR18 Supporting Documents-KUCB News Article.pdf |
SRES 4/10/2015 3:30:00 PM |
HJR 18 |
| HJR18 Supporting Documents-Legislation and Policy Article.pdf |
SRES 4/10/2015 3:30:00 PM |
HJR 18 |
| HJR18 Supporting Documents-NPS Antiquities Act 1906.pdf |
SRES 4/10/2015 3:30:00 PM |
HJR 18 |
| HJR18 Supporting Documents-S. 437.pdf |
SRES 4/10/2015 3:30:00 PM |
HJR 18 |
| HJR18 Supporting Documents-S.437 News Release.pdf |
SRES 4/10/2015 3:30:00 PM |
HJR 18 |
| SB 101.pdf |
SRES 4/10/2015 3:30:00 PM |
SB 101 |
| SB 101 Transmittal Letter.pdf |
SRES 4/10/2015 3:30:00 PM |
SB 101 |
| SB 101 Fiscal Note.pdf |
SRES 4/10/2015 3:30:00 PM |
SB 101 |
| SB 101 Briefing Paper.pdf |
SRES 4/10/2015 3:30:00 PM |
SB 101 |
| SB50 Transmittal Letter.pdf |
SRES 4/10/2015 3:30:00 PM STRA 3/10/2015 3:30:00 PM |
SB 50 |
| SB50 Fact Sheet.pdf |
SRES 4/10/2015 3:30:00 PM STRA 3/10/2015 3:30:00 PM |
SB 50 |
| SB50 Fiscal Note-DCCED-AIDEA-Zero-2-11-15.pdf |
SRES 4/10/2015 3:30:00 PM STRA 3/10/2015 3:30:00 PM |
SB 50 |
| SB50 Sectional Analysis.pdf |
SRES 4/10/2015 3:30:00 PM STRA 3/10/2015 3:30:00 PM |
SB 50 |
| FBX North Star Borough R2015-08.pdf |
SNRG 3/10/2015 3:30:00 PM SRES 4/10/2015 3:30:00 PM |
SB 50 |
| Fairbanks Chamber Letter of Support for HB 105 & SB 50.pdf |
SNRG 3/10/2015 3:30:00 PM SRES 4/10/2015 3:30:00 PM |
HB 105 SB 50 |
| SB50 ver A.pdf |
SNRG 3/10/2015 3:30:00 PM SRES 4/10/2015 3:30:00 PM |
SB 50 |
| SB50 Fact Sheet.pdf |
SNRG 3/10/2015 3:30:00 PM SRES 4/10/2015 3:30:00 PM |
SB 50 |
| SB 50 CS NRG version W dated 3-26-15.PDF |
SNRG 3/26/2015 3:30:00 PM SRES 4/10/2015 3:30:00 PM |
SB 50 |
| SB50 Summary of Changes ver A to ver W.pdf |
SRES 3/30/2015 3:30:00 PM SRES 4/3/2015 3:30:00 PM SRES 4/10/2015 3:30:00 PM |
SB 50 |
| SB50 Supporting Documents-Furie LLC letter 3-2015.pdf |
SRES 3/30/2015 3:30:00 PM SRES 4/3/2015 3:30:00 PM SRES 4/10/2015 3:30:00 PM |
SB 50 |
| SB 50 Letter of Support Merrick Peirce.pdf |
SRES 3/30/2015 3:30:00 PM SRES 4/3/2015 3:30:00 PM SRES 4/10/2015 3:30:00 PM |
SB 50 |
| SB50-AIDEA PowerPoint.pdf |
SRES 4/10/2015 3:30:00 PM |
SB 50 |
| CSHJR18 Explanation of Changes Version E to N.pdf |
SRES 4/10/2015 3:30:00 PM |
|
| SB 50 - Coghill Amendment 29-GS1019 W.2.pdf |
SRES 4/10/2015 3:30:00 PM |
SB 50 |
| CSHJR18-Version N.pdf |
SRES 4/10/2015 3:30:00 PM |
HJR 18 |