Legislature(2023 - 2024)BUTROVICH 205
02/19/2024 03:30 PM Senate RESOURCES
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| Start | |
| SB220 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 220 | TELECONFERENCED | |
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ALASKA STATE LEGISLATURE
SENATE RESOURCES STANDING COMMITTEE
February 19, 2024
3:35 p.m.
DRAFT
MEMBERS PRESENT
Senator Click Bishop, Co-Chair
Senator Cathy Giessel, Co-Chair
Senator Bill Wielechowski, Vice Chair
Senator Scott Kawasaki
Senator James Kaufman
Senator Forrest Dunbar
Senator Matt Claman
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
SENATE BILL NO. 220
"An Act relating to the Regulatory Commission of Alaska and
regulation of the service of natural gas storage."
- HEARD & HELD
PREVIOUS COMMITTEE ACTION
BILL: SB 220
SHORT TITLE: RCA REGULATE NATURAL GAS STORAGE FACILITY
SPONSOR(s): SENATOR(s) GIESSEL
02/08/24 (S) READ THE FIRST TIME - REFERRALS
02/08/24 (S) RES, L&C
02/19/24 (S) RES AT 3:30 PM BUTROVICH 205
WITNESS REGISTER
SENATOR CATHY GIESSEL, District E
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Sponsor of SB 220.
JULIA O'CONNOR, Staff
SENATOR CATHY GIESSEL, District E
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Sponsor of SB 220.
DEREK NOTTINGHAM, Director
Division of Oil and Gas (DOG)
Department of Natural Resources (DNR)
Anchorage, Alaska
POSITION STATEMENT: Presented an overview of natural gas storage
and spoke to SB 220.
BRETT HUBER, Chairman
Alaska Oil and Gas Conservation Commission (AOGCC)
Department of Commerce and Economic Development
Anchorage, Alaska
POSITION STATEMENT: Answered questions on SB 220.
JOHN ESPINDOLA, Commissioner
Regulatory Commission of Alaska (RCA)
Anchorage, Alaska
POSITION STATEMENT: Co-presented an overview of the RCA and
spoke to SB 220.
BECKI ALVI, Advisory Section Manager
Regulatory Commission of Alaska (RCA)
Anchorage, Alaska
POSITION STATEMENT: Co-presented an overview of the RCA and
spoke to SB 220.
JP WOOD, Outside Counsel
Dillon Findley and Simonian, P.C.
Anchorage, Alaska
POSITION STATEMENT: Testified by invitation on SB 220.
ACTION NARRATIVE
3:35:59 PM
CO-CHAIR CLICK BISHOP called the Senate Resources Standing
Committee meeting to order at 3:35 p.m. Present at the call to
order were Senators Wielechowski, Kawasaki, Kaufman, Dunbar, Co-
Chair Bishop, and Co-Chair Giessel.
SB 220-RCA REGULATE NATURAL GAS STORAGE FACILITY
3:36:37 PM
CO-CHAIR BISHOP announced the consideration of SENATE BILL NO.
220 "An Act relating to the Regulatory Commission of Alaska and
regulation of the service of natural gas storage."
3:37:32 PM
SENATOR CATHY GIESSEL, District E, Alaska State Legislature,
Juneau, Alaska, sponsor of SB 220, stated natural gas storage
facilities play a critical role in balancing supply and demand
of gas, especially in Alaska where seasonal variations in
consumption are typical. During the summer, gas consumption
decreases due to warmer temperatures and extended daylight
hours. However, these patterns change dramatically in the
winter. By regulating gas storage facilities, SB 220 ensures
adequate supplies are available year-round and there is
oversight to control price spikes during periods of high demand.
3:39:53 PM
JULIA O'CONNOR, Staff, Senator Cathy Giessel, Alaska State
Legislature, Juneau, Alaska, presented the sectional analysis
for SB 220:
[Original punctuation provided.]
SENATE BILL 220
RCA REGULATE NATURAL GAS STORAGE
SECTIONAL ANALYSIS
Section 1: Amends AS 42.05.141 by adding the authority
to regulate the service of natural gas storage and
liquified natural gas storage, including storage
provided by a pipeline carrier, to the Regulatory
Commission of Alaska's (RCA) general powers and
duties.
Section 2: Amends AS 42.05.711(q) by clarifying that
RCA's regulation is exempted for pipeline carriers on
the North Slope.
Section 3: Amends AS 42.06.140 by adding the authority
to the RCA to regulate natural gas storage facilities
and liquified natural gas storage facilities,
including those operated by a pipeline carrier thereby
creating clarity that the RCA does have the authority
to regulate the cost of storage service, even if it is
part of a pipeline facility or operated by a pipeline
carrier.
Section 4: Repeals AS 42.05.990(10)(B): (10) "Service
of liquefied natural gas storage" means the operation
of a liquefied natural gas storage facility; "service
of liquefied natural gas storage" does not include the
storage of liquefied natural gas
(B) that is incidental to the production or sale
of natural gas to one or more third-party customers
Repeals AS 42.05.990(11)(B): (11) "service of natural
gas storage" means the operation of a natural gas
storage facility primarily or exclusively for the
benefit of third-party customers, and not for the
benefit of the owner, operator, or manager of the
natural gas storage facility; "service of natural gas
storage" does not include the storage of natural gas
(B) that is incidental to the production or sale
of natural gas to one or more third-party customers
3:41:28 PM
CO-CHAIR BISHOP announced invited testimony for SB 220.
3:41:47 PM
DEREK NOTTINGHAM, Director, Division of Oil and Gas (DOG),
Department of Natural Resources (DNR), Anchorage, Alaska,
invited testimony for SB 220. He said he would present a
background on gas storage in Alaska, which is predominantly in
Cook Inlet.
3:42:36 PM
MR. NOTTINGHAM moved to slide 2 and explained gas storage:
[Original punctuation provided.]
GAS STORAGE
What is gas storage?
• Gas storage is a production and injection
operation used to mitigate fluctuating demand for
natural gas that is driven by swings in ambient
temperature.
• During times of peak demand, more gas is called
for (by consumers) than is deliverable from
producing reservoirs.
• By placing gas in storage during times of low
demand, a greater volume of gas is available for
withdrawal during times of peak demand.
There are four active gas storage facilities
• CINGSA Established in 2011, gas storage
capacity 18 bcf, 11 bcf working volume, operated
by CINGSA (an RCA regulated utility)
• Kenai Gas Pool 6 Established in 2006, gas
storage capacity 50 bcf, 17.5 bcf working volume,
operated by Hilcorp
• Pretty Creek Established in 2005, gas storage
capacity 3 bcf, 2.9 bcf working volume, operated
by Hilcorp
• Swanson River (Federal) Established in 2001,
gas storage capacity 3.4 bcf, ~3 bcf working
volume, operated by Hilcorp
bcf = billion cubic feet of natural gas
CINGSA = Cook Inlet Storage Alaska
MR. NOTTINGHAM added that storage provides a buffer. He said gas
is injected in a gas reservoir during summer months and stored
amidst higher demand in the winter. He noted Cook Inlet Natural
Gas Storage (CINGSA) is the only RCA-regulated facility that
handles storage in Cook Inlet.
3:45:32 PM
SENATOR CLAMAN asked for confirmation of his understanding that
Hilcorp is the only supplier that stores gas in the three
Hilcorp facilities listed on slide 2.
3:45:53 PM
MR. NOTTINGHAM replied that Hilcorp is the only entity injecting
gas into those storage facilities.
3:46:07 PM
SENATOR CLAMAN asked if SB 220 would permit storage access for
other producers.
3:46:19 PM
MR. NOTTINGHAM replied he is uncertain at this time.
3:46:33 PM
CO-CHAIR BISHOP asked for clarification on the definitions of
"bcf" and "working gas bcf."
3:47:12 PM
MR. NOTTINGHAM noted that the presentation further explains the
definitions.
3:47:33 PM
MR. NOTTINGHAM moved to slide 3 that showcases gas movement
cycles in the Cook Inlet facilities over the past 20 years. He
stated that as the industrial baseload dropped off over the last
10 years, having Cook Inlet gas storage became critical in
providing a buffer for annual fluctuation. Kenai Gas Pool 6 and
CINGSA are the largest takers of storage gas and providers of
gas during the winter.
3:48:52 PM
MR. NOTTINGHAM moved to slide 4 and said that the graphic
on the right side of the slide demonstrates working and
cushion gas stored in a reservoir through an injection well
and compressors.
[Original punctuation provided.]
NATIVE GAS, CUSHION GAS, & WORKING GAS
• Native Gas: Gas remaining in an underground
formation before gas storage operations commence.
• Cushion or Base Gas: Consists of native gas plus
additional gas required to optimize storage
pressure to ensure sufficient well
deliverability. It's the volume of gas that is
intended for permanent inventory.
• Working Gas or Non-native gas: The volume of gas
that fluctuates due to injection and withdrawal.
The maximum volume of gas available for
withdrawal during normal operation of storage
facility.
• Inventory Gas: Represents the total volume of
natural gas in a storage reservoir at any given
time. In other words, inventory gas is the total
"book value" balance which accounts for
injections and withdrawals.
MR. NOTTINGHAM stated that Kenai Pool 6 has a very large
reservoir capacity and has a 17.5 bcf working volume. In winter,
the gas is extracted from the reservoir through producer wells.
The lease managed by DNR has an allowable capacity of up to 50
bcf. There are rules that limit how much gas can be injected
into a storage reservoir at a particular time. The Alaska Oil
and Gas Conservation Commission (AOGCC) manages the working
reservoir pressure. He shared his understanding that pressure
could be increased in Kenai Pool 6 allows for more working gas
capacity if necessary.
3:53:30 PM
CO-CHAIR BISHOP asked for confirmation of his understanding that
a higher reservoir volume is required to help lift gas.
3:53:47 PM
MR. NOTTINGHAM replied that a certain amount of pressure is
required for horsepower, to supply the wells, and to lift gas to
the surface.
3:54:05 PM
CO-CHAIR BISHOP asked if producer wells flow without mechanical
extraction.
3:54:16 PM
MR. NOTTINGHAM responded with his understanding that producer
wells flow naturally. He said while there may be surface
compression to reduce back pressure, there is no downhole pump
or an artificial lift mechanism.
3:54:44 PM
MR. NOTTINGHAM moved to slide 5 and listed agency roles for gas
storage:
[Original punctuation provided.]
AGENCY ROLES
Alaska Oil & Gas Conservation Commission (AOGCC)
• Authorizes Storage Injection Orders, which
approves gas injection for storage purposes
• Oversees demonstrations of mechanical integrity
for a well before operations begin
• Observes routine well integrity testing and
receives reservoir confinement testing
• Establishes and modifies maximum injection
pressure limits
• Receives annual reservoir performance reporting
• Enforces administrative actions for operators who
deviate from mandated operations
Department of Natural Resources (DNR)
• Ensures lease agreements are properly followed,
particularly sections that relate to lease
development plans and data submittal requirements
for reservoir surveillance
• Monitors gas injection/withdrawal cycles and
reservoir confinement/integrity
• Not all Gas Storage Leases are the same and thus
have different terms of agreements
Regulatory Commission of Alaska (RCA)
• Ensures the utility provides safe and adequate
services and facilities at just and reasonable
rates, terms, and conditions
• Issues and monitors certificate of public
convenience and necessity
• Regulates the rates, services, and practices of
utilities
• Adjudicates tariff filings and any objections to
tariffs or regulations
• Has authority to regulate facilities with third-
party storage, which presently only includes Cook
Inlet Nature Gas Storage Alaska (CINGSA)
3:57:41 PM
CO-CHAIR BISHOP asked the Commissioner of AOGCC to elaborate on
the frequency of routine well integrity testing.
3:58:03 PM
BRETT HUBER, Chair, Alaska Oil and Gas Conservation Commission
(AOGCC), Anchorage, Alaska, stated that mechanical integrity
tests occur annually. and when there are changes to the well.
3:58:51 PM
CO-CHAIR BISHOP asked how the molecules are counted moving in
and out of Cook Inlet.
3:59:15 PM
MR. HUBER replied that the measurement of gas volume depends on
temperature, density, and pressure. He stated gas is metered
when it leaves the unit, so it is a custody transfer. The Alaska
Oil and Gas Conservation Commission (AOGCC) meters the gas
produced at that point, and royalties are applied accordingly.
The meter considers various conditions that impact measurement.
4:00:04 PM
CO-CHAIR BISHOP asked how often meters are calibrated.
4:00:08 PM
MR. HUBER replied that meters are calibrated annually while
unscheduled tests are done on a rotating basis.
4:00:39 PM
SENATOR WIELECHOWSKI asked at which point royalties are
calculated.
4:00:54 PM
MR. HUBER replied royalties are calculated and applied when the
gas is severed from the unit.
4:01:19 PM
CO-CHAIR BISHOP invited the Commissioner of the Regulatory
Commission of Alaska (RCA) to present.
4:01:40 PM
JOHN ESPINDOLA, Commissioner, Regulatory Commission of Alaska
(RCA), Anchorage, Alaska, co-presented an overview of the RCA
and spoke to SB 220. He moved to slide 2 and spoke to a timeline
of RCA milestones:
[Original punctuation provided.]
Where We Started
1960 - Alaska Public Service Commission (APSC).
1970 - The Alaska Public Utilities Commission (APUC)
was created to replace APSC.
1972 - The Alaska Pipeline Commission (APC) was
established to regulate intrastate pipelines.
1981 - The APC merged with the APUC.
1999 - The Alaska Legislature replaced the APUC with
the Regulatory Commission of Alaska (RCA) giving it a
broad authority to regulate utilities and pipeline
carriers.
4:02:44 PM
MR. ESPINDOLA moved to slide 3 and explained the RCA's
organizational structure:
[Original punctuation provided.]
Organizational Structure
Commission Section
• Five Commissioners
(Appointed by the Governor and confirmed by the
Legislature)
• Consumer Protection & Information Staff
• Support Staff
(Administrative Operations, Law Office
Assistants, Records & Filing, Information
Systems)
Administrative Law Section
• Administrative Law Judges
• Paralegals
Advisory Section
• Advisory Section Manager
• Utility Tariff Analysts
• Utility Engineering Analysts
• Utility Financial Analysts
• Communications Common Carrier Specialists
Utility Master Analysts
4:03:40 PM
MR. ESPINDOLA moved to slide 4 and described the RCA's
regulatory authority:
[Original punctuation provided.]
RCA Authority
Alaska Statute (AS) 42.04 (APUC)
AS 42.05 (Public Utilities)
AS 42.05.760 42.05.800 (Electric Reliability
Organization)
AS 42.06 (Common Carrier Pipelines)
AS 42.08 (Contract Carrier Pipelines)
AS 42.45 (Power Cost Equalization)
AS 42.05.141(a) - The Regulatory Commission of Alaska
may do all things necessary or proper to?regulate
every public utility engaged or proposing to in a
utility business inside the state.
4:04:27 PM
MR. ESPNDOLA moved to slide 5 and read the definition of
"public" or "general public."
[Original punctuation provided.]
Definition of Public or General Public:
AS 42.05.990(3) "public" or "general public" means
• (A) a group of 10 or more customers that purchase
the service or commodity furnished by a public
utility; ?
• (B) one or more customers that purchase
electrical service for use within an area that is
certificated to and presently or formerly served
by an electric utility if the total annual
compensation that the electrical utility receives
for sales of electricity exceeds $50,000; and ?
• (C) a utility purchasing the product or service
or paying for the transmission of electrical
energy, natural or manufactured gas, or petroleum
products that are re-sold to a person or group
included in (A) or (B) of this paragraph or that
are used to produce the service or commodity sold
to the public by the utility;
4:04:37 PM
MR. ESPINDOLA moved to slide 6 and read parts (a) and (h) of the
definition of a public utility:
[Original punctuation provided.]
Definition of a Public Utility:
? (A) furnishing by generation, transmission, or
distribution, electrical service to the public for
compensation;
? (H) furnishing the service of liquified natural gas
storage to the public for compensation;
4:05:00 PM
MR. ESPINDOLA moved to slide 7 and explained the certificate
process:
[Original punctuation provided.]
Certificate of Public Convenience and Necessity
Alaska Statutes 42.05 (Public Utilities) and 42.06
(Pipeline Act) authorizes the RCA to certificate
qualified providers of public utility and pipeline
services.
A certificate may not be issued unless the RCA finds
that the applicant is fit, willing, and able, and that
the services are required for the convenience and
necessity of the public (AS 42.05.241).
4:05:49 PM
MR. ESPINDOLA moved to slide 8 and previewed a snapshot of
certified entities. He said there are over six hundred certified
entities; of those, 110 are regulated by AOGCC.
4:06:27 PM
BECKI ALVI, Advisory Section Manager, Regulatory Commission of
Alaska (RCA), Anchorage, Alaska, co-presented an overview of the
RCA and spoke to SB 220. She moved to slide 9 and explained
RCA's core services:
[Original punctuation provided.]
What We Do: Regulate Public Utilities & Pipeline
Carriers
RCA Core Services
Certification ?
• Reviews applications for Certificates of Public
Convenience & Necessity (CPCN) and determines if
applicants are fit, willing, and able to provide
service. Tariff Review Reviews tariff filings
made by utilities or pipeline carriers that seek
to change their rates or terms of service
Regulation of Rates and Services ?
• Determines the rates a utility charges its
customers are just and reasonable, and that
rates, services and practices of public utilities
abide by their filed tariff.
Dispute Resolution
• Investigates complaints regarding utility service
quality, billing or management practices.
Calculation of Power Cost Equalization
• Calculates the power cost equalization amounts
for each participating electric utility and the
base rate.
4:06:53 PM
MS. ALVIE moved to slide 10 and spoke to utilities exempt from
rate regulation:
[Original punctuation provided.]
Utilities Exempt from Rate Regulation
• Utilities owned by political subdivisions of the
State (city or state owned).
• Small water and sewer utilities (e.g. community
wells).
• Electric or telephone utilities that do not gross
more than $50,000 revenues annually.
• Refuse utilities that does not gross more than
$300,000 revenues annually.
• The commercial portion of refuse utilities that
provide service in the Municipality of Anchorage,
Portage, Whittier, and the Fairbanks North Star,
Matanuska-Susitna, and Kenai Peninsula Boroughs.
• Electric and telephone cooperatives that elect to
be exempt through Deregulation Election (member
votes). Cable, Internet, and Wireless Services.
• Telephone utilities that provide service other
than inmate calling service.
• Utilities granted exemption where the Commission
has found exemption in the public interest.
MS. ALVIE added that utilities that are not rate-regulated do
not need to justify their rates to the RCA. A utility may be
exempt from economic regulation and a portion of the statutes.
SB 220 would modify those exemptions outlined in statute [AS
42.05.711].
4:07:31 PM
MS. ALVIE briefly moved to slide 11 and commented on the tariff
review process. She said staff analyze findings to determine if
rates are just and reasonable. They also review tariff
provisions to determine if they are reasonable and supported.
4:07:43 PM
MS. ALVIE moved to slide 12 and explained the tariff review
process:
Tariff Review Process
Tariff Revision:
• Entity files a tariff filing.
• Public notice is issued for public comment:
o 30-day comment period for utilities
o 21-day comment period pipelines
o 20-day comment period for electric
reliability organizations
• Review Period:
o 45 days for utilities
o 30 days for pipeline carriers
o 45 days for electric reliability
organizations
• Prior to the end of the review period the
Commission will approve, reject, or suspend the
filing.
Tariff Suspension into a Docket:
• Suspended for further investigation.
• A commission panel and administrative law judge
are assigned. ? May invite participation to
intervene, include the Attorney General
(Regulatory Affairs and Public Advocacy).
• Hold evidentiary hearings.
• Issue a final order (AS 42.05.175): ?
o Within 450 days for changes to a revenue
requirement or rate design ?
o Within 270 days for changes other than a
revenue requirement or rate design
4:08:36 PM
MS. ALVIE moved to slide 13 and explained the Power Cost
Equalization (PCE) program:
[Original punctuation provided.]
Power Cost Equalization (PCE) Program
Under the Power Cost Equalization Program, the State
of Alaska pays a portion of the electric bills for
consumers served by utilities participating in the
program.
The RCA establishes the PCE amount (cents/KWh)
applicable to each utility, regardless if the utility
is otherwise subject to RCA's economic regulation.
More than 150 communities participate in the PCE
program.
AS 42.45.110(c)(2) provides that the Commission will,
during each fiscal year, adjust the power costs for
which PCE may be paid to an electric utility based on
the weighted average retail residential rate in
Anchorage, Fairbanks, and Juneau, and subject to the
statutory ceiling.
The PCE program is administered by the Alaska Energy
Authority (AEA).
4:08:53 PM
MS. ALVIE moved to slide 14 and provided a brief history of
natural gas storage in Alaska. She said in December of 2009,
CINGSA filed a petition to the RCA contesting RCA's jurisdiction
over CINGSA's proposed natural gas storage facility. In the
final order in the dockets, the commission found that RCA
statutes did not grant explicit authority to regulate gas
storage, nor did they definitively set natural gas storage
outside of the RCA's jurisdictional boundaries. The RCA declined
to issue a declaratory ruling in those dockets.
4:09:30 PM
MS. ALVIE moved to slide 15 and spoke to the Cook Inlet Recovery
Act (CIRA):
[Original punctuation provided.]
Cook Inlet Recovery Act
In January 2010, House Bill 280, also known as the
Cook Inlet Recovery Act, was introduced. This bill, as
it relates to the RCA, added new subsections in AS
42.05 related to natural gas storage, approval of gas
supply contracts, and provided for exemption of
certain natural gas storage facilities.
The natural gas storage facilities that would be
exempt were 1) those that are part of a pipeline
facility operated by a pipeline carrier, 2) part of a
natural gas pipeline facility operated by a natural
gas pipeline carrier, and 3) part of the North Slope
pipeline facility operated by a North Slope natural
gas pipeline carrier. On July 9, 2010, Governor Sean
Parnell signed the Cook Inlet Recovery Act into law.
4:10:03 PM
MS. ALVIE moved to slide 16 and detailed natural gas storage:
[Original punctuation provided.]
Natural Gas Storage
The RCA has certificated 2 gas storage facilities Cook
Inlet Natural Gas Storage Alaska, LLC (CINGSA) in
2011(Docket U-1 0-051)
Interior Alaska Natural Gas Utility (IANGU) in 2019
(Dockets U-1 9-002 AND U-1 9-004)
CINGSA is economically regulated by the RCA.
IANGU is owned by the Alaska Industrial Development
And Export Authority (AIDEA), a political subdivision
of the state and exempt from regulation under AS
42.05.711(b).
IANGU provides liquid natural gas storage.
MS. ALVIE noted that a certificate for liquid natural gas (LNG)
storage was granted to Fairbanks Natural Gas in 2019. In 2020,
that certificate was merged with IANGU and subsequently revoked.
4:11:01 PM
MS. ALVIE moved to slide 17 and provided an overview of CINGSA:
[Original punctuation provided.]
CINGSA
• CINGSA provides natural gas storage service in
Southcentral Alaska.
• CINGSA was certificated in 2011.
• CINGSA receives, injects, stores, withdraws, and
delivers natural gas.
• CINGSA is economically regulated and subject to
AS 42.05 and the Alaska Administrative Code,
Title 3 that is applicable to utilities (Chapters
47 and 48 specifically).
• Rates and rules are set out in CINGSA's tariff.
• Changes to those rule or rates are filed as
tariff filings and are subject to approval by the
RCA.
• CINGSA files Firm Storage Service (FSS)
Agreements and Interruptible Storage Service
(ISS) Agreements with the RCA.
• CINGSA currently has 5 wells in operation and the
RCA recently approved an expansion agreement
which would add two additional wells.
MS. ALVIE added that the RCA regulates CINGSA's rates,
provisions, and rules.
4:11:59 PM
MS. ALVIE moved to slide 18 and read the provisions under SB
220:
[Original punctuation provided.]
Senate Bill (SB) 220
SB 220 adds a new subsection to AS 42.05.141 (General
powers and duties of the Commission) to provide that
the RCA regulate natural gas storage service and
liquified natural gas storage service, including
storage furnished by operating a natural gas storage
facility that is part of a pipeline facility operated
by a pipeline carrier or a natural gas pipeline
facility operated by a natural gas pipeline carrier.
The bill amends the exemption at AS 42.05.711(q),
eliminating the exemption from AS 42.05 for a natural
gas storage facility that is part of a pipeline
facility operated by a pipeline carrier or a natural
gas pipeline facility operated by a natural gas
pipeline carrier.
SB 220 adds new subsections to AS 42.06.140, to
provide that the RCA will regulate natural gas storage
service and liquified natural gas storage service,
including storage furnished by operating a natural gas
storage facility that is part of a pipeline facility
operated by a pipeline carrier or a natural gas
pipeline facility operated by a natural gas pipeline
carrier.
The bill amends definitions in AS 42.05.990 and adds
definitions to AS 42.06.140 related to natural gas
storage.
4:13:03 PM
MS. ALVIE moved to slide 19 and explained the potential impacts
of SB 220 on the RCA:
[Original punctuation provided.]
Potential impacts of SB 220 on the RCA
Passage of SB 220 would require the RCA to:
1. Process certificate applications for pipeline
carriers and natural gas pipeline carriers with
storage facilities that are part of an in-state
pipeline facility operated by the carrier,
2. Review and approve periodic tariff filings by
these carriers to implement or revise terms and
rates for natural gas storage service, including
charges for reserving or utilizing capacity in
storage facility and for injecting or withdrawing
stored natural gas or liquified natural gas, and
3. Review and approve tariff filings by regulated
electric and natural gas utilities requesting to
recover the costs of using the storage service
through their cost of power or gas cost
adjustment.
The RCA is currently evaluating if modifications to
its regulations and/or certificate application forms
will be necessary.
4:14:11 PM
SENATOR DUNBAR asked for RCA's perspective on the effectiveness
of the regulation process over CINGSA.
4:14:42 PM
MS. ALVEY replied she has had several regulatory proceedings
with CINGSA. She stated she is uncertain whether it has caused
the RCA additional stress. However, the process has allowed the
commission some oversight into gas costs that are then passed
through electric or gas rate payers that use the storage
facility.
4:15:23 PM
CO-CHAIR BISHOP invited outside counsel for ENSTAR and CINGSA to
present on SB 220.
4:15:43 PM
JP WOOD, Outside Counsel, Dillon Findley and Simonian, P.C.,
Anchorage, Alaska, said he is outside counsel for ENSTAR and
CINGSA. He stated that he was an administrative law judge for 12
years prior to joining the law firm and for the majority of that
time, was Chief Administrative Law Judge for RCA.
4:16:53 PM
MR. WOOD moved to slide 2 and provided the presentation focal
points:
[Original punctuation provided.]
Topics to Discuss
• Cook Inlet Recovery Act (2010) and RCA Regulation
of Natural Gas Storage Service
• Natural Gas Storage Service by a Pipeline is
Exempt from AS 42.05
• Questionable Whether Natural Gas Storage Service
by a Pipeline is Regulated Under AS 42.06
• Senate Bill 220 Resolves Ambiguities and Creates
Level Playing Field
MR. WOOD added that AS 42.06 led to the exemption of natural gas
storage service by a pipeline under CIRA. He relayed that ENSTAR
values SB 220 because it resolves ambiguities between the two
statutory schemes. It also creates transparency and a level
playing field for a third-party storage service.
4:18:46 PM
MR. WOOD moved to slide 3 and spoke to the regulation of CIRA:
[Original punctuation provided.]
CIRA (2010) and RCA Regulation
• Amended Public Utility Statutes to Include Natural
Gas Storage Service
• Policy Call that Third-Party Open-Access Facility
Would be Regulated by the RCA
• Cook Inlet Natural Gas Storage Alaska, LLC is
Certificated and Economically Regulated
• Fairbanks Natural Gas, LLC and Interior Natural Gas
Utility, LLC Certificated for LNG Storage
MR. WOOD emphasized that ENSTAR believes the intent of SB 220 is
to ensure all third-party open access storage services are
regulated by RCA. He relayed that in 2010, Mike Hawker, former
representative, described the natural gas storage provision in
CIRA as a directive for RCA to regulate third-party open access
facilities. Proprietary service by a producer for its own needs
production is not currently regulated under RCA statutes and
would not be impacted by current statutory structure on the
proposed changes in SB 220.
4:21:35 PM
SENATOR CLAMAN said Hilcorp owns three facilities in Cook Inlet
and only stores their own gas. He asked if third parties would
have RCA-regulated storage access with Hilcorp under SB 220
while RCA would not regulate Hilcorp's storage of its own gas.
4:22:12 PM
MR. WOOD responded with his understanding that regulation would
apply to a third party storing gas with Hilcorp even though
Hilcorp gas is not regulated as long as Hilcorp exclusively uses
those facilities for their own production without extending
storage service to third parties, it would not be subject to
regulation under the statutory amendments.
4:22:51 PM
SENATOR CLAMAN asked whether a third party that stored gas in
the Hilcorp unit would be subject to regulation.
4:23:04 PM
MR. WOOD replied that unless Hilcorp offers storage fields for
third party service, it would remain unregulated.
4:23:22 PM
SENATOR CLAMAN asked if a third party could compel Hilcorp to
take its gas for storage or if at Hilcorp's discretion, would
regulation apply to the portion of the work accepted.
4:23:44 PM
MR. WOOD opined that there is no language in statute that would
obligate Hilcorp to accept third-party storage.
4:24:07 PM
MR. WOOD briefly moved to slide 4 and spoke to the regulation of
CINGSA:
[Original punctuation provided.]
Exemption from AS 42.05 for Storage by Pipeline
• Natural Gas Storage Facility that is Part of a
Pipeline Facility is Exempt from Public Utility
Act AS
• 42.05
• Legislative History Presumes there will be
Regulation
• Under Pipeline Act AS 42.06
• Exemption Included in CIRA to Avoid Duplicative
Regulation
MR. WOOD added that economic regulation of CINGSA began in 2011,
giving RCA more than a decade of storage facility regulation
experience. He reiterated that various proceedings have
contributed to RCA's expertise in regulating this utility.
4:25:17 PM
MR. WOOD moved to slide 5 and spoke to the legal review of RCA
regulation:
[Original punctuation provided.]
RCA Regulation of Storage by Pipeline is Uncertain
• Legal Review has Raised Questions on Whether
Natural Gas Storage by Pipeline Facility Would be
Regulated Under AS 42.06
• 2009 Presentation by Assistant Attorney General
to RCA Concluded No Jurisdiction in Some
Circumstances
• RCA Has Recognized that Pipeline Storage
Facilities are Not Included or Excluded from
Pipeline Act Regulation
4:28:54 PM
MR. WOOD moved to slides 6 and listed amendment objectives for
SB 220:
[Original punctuation provided.]
SB 220 Amendments Provide Clarity
• Natural Gas and LNG Storage Service for Third-
Party Customers Regulated Under AS 42.05
• Includes Storage Facility that is Part of a
Pipeline Facility
• Level Playing Field
• Consistent with Intent of CIRI [CIRA]
4:30:30 PM
MR. WOOD briefly moved to slide 7 and noted he agreed with the
other testifiers regarding the changes in meaning to specific
sections of SB 220:
[Original punctuation provided.]
SB 220 Amendments
• Amend Public Utilities Act General Powers Statute
AS 42.05.141 to Specify Jurisdiction over Natural
Gas and LNG Storage Service
• Remove Public Utilities Act Exemption for Storage
Service by Pipeline Facility (Retain North Slope
Pipeline Exemption)
• Amend Pipeline Act General Powers Statute AS
42.06.140 to Specify Regulation of Natural Gas
and LNG Storage is Under AS 42.05
4:31:17 PM
CO-CHAIR BISHOP concluded invited testimony and held SB 220 in
committee.
4:31:59 PM
There being no further business to come before the committee,
Co-Chair Bishop adjourned the Senate Resources Standing
Committee meeting at 4:31 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB 220, version A.pdf |
SRES 2/19/2024 3:30:00 PM |
SB 220 |
| SB 220 Sectional Analysis, version A 2.19.24.pdf |
SRES 2/19/2024 3:30:00 PM |
SB 220 |
| SB 220 Fiscal Note DCCED RCA 2.16.24.pdf |
SRES 2/19/2024 3:30:00 PM |
SB 220 |
| SB 220 Supporting Documents_DOG Cook Inlet Gas Storage SRES Presentation 2.19.24.pdf |
SRES 2/19/2024 3:30:00 PM |
SB 220 |
| SB 220 Supporting Documents_RCA SRES Presentation 2.19.24.pdf |
SRES 2/19/2024 3:30:00 PM |
SB 220 |
| SB 220 Supporting Documents_CINGSA & ENSTAR SRES Presentation 2.19.24.pdf |
SRES 2/19/2024 3:30:00 PM |
SB 220 |
| SB 220 Sponsor Statement 2.19.24.pdf |
SRES 2/19/2024 3:30:00 PM |
SB 220 |