Legislature(2023 - 2024)BUTROVICH 205
02/28/2024 03:30 PM Senate RESOURCES
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| Audio | Topic |
|---|---|
| Start | |
| SB220 | |
| SB243 | |
| Presentation: Aidea Overview | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 220 | TELECONFERENCED | |
| + | SB 243 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
ALASKA STATE LEGISLATURE
SENATE RESOURCES STANDING COMMITTEE
February 28, 2024
3:31 p.m.
MEMBERS PRESENT
Senator Click Bishop, Co-Chair
Senator Cathy Giessel, Co-Chair
Senator Bill Wielechowski, Vice Chair
Senator Scott Kawasaki
Senator Forrest Dunbar
Senator Matt Claman
MEMBERS ABSENT
Senator James Kaufman
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
SENATE BILL NO. 243
"An Act relating to the board of directors of the Alaska Energy
Authority."
- HEARD & HELD
OVERVIEW: AIDEA
- HEARD
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
02/19/24 (S) Heard & Held
02/19/24 (S) MINUTE(RES)
02/23/24 (S) RES AT 3:30 PM BUTROVICH 205
02/23/24 (S) Heard & Held
02/23/24 (S) MINUTE(RES)
02/28/24 (S) RES AT 3:30 PM BUTROVICH 205
BILL: SB 243
SHORT TITLE: ALASKA ENERGY AUTHORITY GOVERNANCE
SPONSOR(s): RESOURCES
02/19/24 (S) READ THE FIRST TIME - REFERRALS
02/19/24 (S) RES, FIN
02/26/24 (S) RES AT 3:30 PM BUTROVICH 205
02/26/24 (S) Heard & Held
02/26/24 (S) MINUTE(RES)
02/28/24 (S) RES AT 3:30 PM BUTROVICH 205
WITNESS REGISTER
RANDY RUARO, Executive Director
Alaska Industrial Development and Export Authority (AIDEA)
Anchorage, Alaska
POSITION STATEMENT: Presented an AIDEA update.
BRANDON BREFCZYNSKI, Deputy Director
Alaska Industrial Development and Export Authority (AIDEA)
Anchorage, Alaska
POSITION STATEMENT: Answered questions about AIDEA.
ACTION NARRATIVE
3:31:01 PM
CO-CHAIR CLICK BISHOP called the Senate Resources Standing
Committee meeting to order at 3:31 p.m. Present at the call to
order were Senators Wielechowski, Kawasaki, Dunbar, Claman, Co-
Chair Giessel, and Co-Chair Bishop.
SB 220-RCA REGULATE NATURAL GAS STORAGE FACILITY
3:31:57 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."
3:32:09 PM
SENATOR GIESSEL moved to adopt Amendment 1, work order 33-
LS1180\A.1, to SB 220.
[Original punctuation provided.]
33-LS1180\A.1
Nauman
2/20/24
AMENDMENT 1
Page 1, line 2, following "storage":
Insert "; and providing for an effective date"
Page 3, following line 2:
Insert a new bill section to read:
"* Sec. 5. This Act takes effect immediately under AS
01.10.070(c)."
3:32:24 PM
CO-CHAIR BISHOP objected for purposes of discussion.
3:32:50 PM
CO-CHAIR BISHOP found no further objection and Amendment 1, work
order 33-LS1180\A.1, was adopted.
3:32:57 PM
CO-CHAIR BISHOP held SB 220, as amended, in committee.
SB 243-ALASKA ENERGY AUTHORITY GOVERNANCE
3:33:01 PM
CO-CHAIR BISHOP announced the consideration of SENATE BILL NO.
243 "An Act relating to the board of directors of the Alaska
Energy Authority."
3:33:15 PM
CO-CHAIR BISHOP opened public testimony on SB 243; finding none,
he closed public testimony.
3:33:48 PM
CO-CHAIR BISHOP held SB 243 in committee.
^Presentation: AIDEA Update
^Presentation: AIDEA Overview
PrePRESENTATION: AIDEA UPDATE
3:33:53 PM
CO-CHAIR BISHOP announced the consideration of an update from
AIDEA.
3:34:15 PM
RANDY RUARO, Executive Director, Alaska Industrial Development
and Export Authority (AIDEA), Anchorage, Alaska, presented an
overview of AIDEA.
3:34:33 PM
MR. RUARO moved to slide 2 and described AIDEA's mission:
[Original punctuation provided.]
ABOUT AIDEA
Mission
Our mission is to "promote, develop, and advance the
creation of jobs and economic development in Alaska by
providing various means of financing and investment."
(AS 44.88.010)
The legislature made the creation of jobs and economic
development AIDEA's mission because "unemployment is a
serious menace to the health, safety, and general
welfare to the people in rural Alaska and in the
entire state."
Taking care of the "health, security, and general
welfare" of Alaskans is a constitutional duty under
Art. 7, sec. 4 of the Alaska Constitution as is the
development of Alaska's resources. Art. 8, sec. 1.
MR. RUARO said the legislature acknowledged decades ago that
unemployment poses a serious health risk, particularly in rural
areas. He said he is conducting background research focusing on
youth, graduating seniors, and others in Alaska communities. He
stated that he was previously a special assistant and recounted
conversations with rural youth in Alaska aimed at understanding
the root causes of these challenges. Every young person
expressed a sense of hopelessness regarding the future and job
prospects within their communities. He said one group stated
they would prefer to remain homeless in Anchorage with no job
opportunities. He stated that he expects to continue to finish
his research in the next couple of weeks. He stated he would
like to submit a written report to committee members on suicide
and other social issues resulting from a lack of jobs,
especially in rural Alaska.
He invited the committee to understand the negative effect of
job scarcity.
3:37:47 PM
CO-CHAIR BISHOP commented that he worked alongside Larry
Westlake Sr. on the Red Dog Project and commended him for his
efforts.
3:38:03 PM
MR. RUARO said Larry was a pleasure to work with on the Ambler
Roads Subsistence Committee, which recently adopted standards
from the Red Dog Mine for the protection of fish and wildlife.
He acknowledged Larry as leading a huge part of the effort.
3:38:30 PM
MR. RUARO moved to slide 3 and explained AIDEA's purpose:
[Original punctuation provided.]
ABOUT AIDEA
AIDEA, and the precursor to AIDEA, has been investing
in Alaskans since 1961 to strengthen employment
opportunities and economic development.
S.B. 153
Enacted by the Alaska State Legislature
Because investment capital was "critically needed" to
enable jobs and enhance general welfare
Approved April 24, 1961
Alaska's Development Finance Authority
• Financially Self-Sustaining Public Corporation
(no GF per AS 44.88.190(b))
• Alaska State Development Corporation established
in 1961. AIDEA created in 1967.
• More than $468 million in total dividends since
the first dividend was issued in 1997
• Directed over $3.5 billion into economic
development in Alaska
MR. RUARO said in less than two years following statehood, the
legislature understood the importance of land and access to
capital. AIDEA believes Senate Bill 153 is still important in
supporting businesses in Alaska to have access to capital. He
noted there had been an ongoing debate regarding the role the
Permanent Fund Dividend should play in economic development.
Ultimately AIDEA was selected over the PFD to provide support
and lead economic efforts.
3:39:45 PM
BRANDON BREFCZYNSKI, Deputy Director, Alaska Industrial
Development and Export Authority (AIDEA), Anchorage, Alaska,
said that is an accurate representation of the discussion that
took place when legislators were trying to figure out whether
the PFD should be a state economic development fund or the trust
that it is today. To satisfy the need for economic development,
many agencies were established.
3:40:24 PM
SENATOR GIESSEL pointed out bullet 4 and referenced the FY24
budget. She recalled that during the AIDEA Board meeting in
December 2022, $17.9 million was allocated as the FY24 dividend
to the state. She asked for confirmation of her understanding
that only $10 million was cited in the budget and the rest was
held for the Brooks Range Mustang Road project.
3:41:27 PM
MR. RUARO replied that is correct. He said Section 55(b)
provided an offset of roughly $7 million from the $17 million
dollars as a credit against the cash amount of the dividend.
3:41:48 PM
SENATOR GIESSEL said the legislature approved the inclusion of
the Brooks Range Road in the budget as part of the dividend and
the intended transfer it to the Department of Natural Resources
(DNR). She asked how it was legally possible for AIDEA to sell
the Brooks Range Road and what happened to the $7.9 million in
revenue that the road was supposed to represent to the state.
had been guaranteed to the state.
3:42:23 PM
MR. RUARO explained that following the passage of the budget, a
buyer emerged for the Mustang project, prompting AIDEA to
maintain it as a package entity sale to Finnix Operating LLC,
which is in the process of developing the pad for oil and gas
production. If successful, estimated revenue would generate
roughly $65-70 million and create job opportunities. AIDEA
decided to retain the road within the asset package sold to
Finnix, as they required it as a prerequisite for the sale.
However, this has resulted in inconsistencies in the language
regarding the dividend. He suggested deleting subsection (b) of
55(b) and eliminating all references to the road to fix the
language issue. There were also evaluation errors in assessing
the road's value that once corrected would balance out previous
dividends where the road had been overvalued. The initial
concept was to adjust the dividend in 2025 to reflect the road's
corrected value, but the sale circumvented this necessity.
Therefore, this years' $11 million dividend, as currently
proposed in the governor's budget, remains unaffected. The sale
of the road is expected to yield benefits for the dividend
calculations for 2025, which mitigates the need for an
additional $7 million offset related to the road's value. After
addressing the valuation errors, the dividend situation for 2024
is essentially balanced. He offered to follow up with detailed
data.
3:45:24 PM
SENATOR WIELECHOWSKI asked for confirmation of his understanding
that AIDEA transferred Mustang Road to Finnix as part of the
transaction finalized at the end of 2023.
3:45:36 PM
MR. RUARO replied that is correct.
3:45:41 PM
SENATOR WIELECHOWSKI asked if AIDEA was in possession of the
road at time of the transfer.
3:45:51 PM
MR. RUARO replied that the entity holding the road was a
subsidiary named Mustang Holdings LLC, which is owned by AIDEA.
3:46:02 PMS
SENATOR WIELECHOWSKI asked if AIDEA refrained from transferring
the road to DNR as a result of HB 39, the appropriations bill
passed last year.
3:46:15 PM
MR. RUARO replied that is correct.
3:46:23 PM
SENATOR GIESSEL said she would appreciate seeing what the over
evaluation of Mustang Road was that resulted in an error in the
FY24 budget. She asked for clarification that the FY25
[dividend] budget currently holds $11 million.
3:46:47 PM
MR. RUARO replied that is correct, the proposed dividend amount
is roughly $11 million, so there is no offset required for the
other half of the assumed road value for this year in FY25.
3:47:02 PM
SENATOR GIESSEL asked whether the $11 million value is cash not
assets.
3:47:09 PM
MR. RUARO replied that is correct.
3:47:15 PM
CHAIR BISHOP asked if the proposed $65-70 million in revenue is
intended for the life of the project or on an annual basis.
3:47:28 PM
MR. RUARO replied that it is equal to the life of the project.
3:47:34 PM
SENATOR WIELECHOWSKI inquired about the total value of assets
owned by AIDEA.
3:47:39 PM
MR. RUARO responded that the total value of assets owned by
AIDEA varies depending on the type of asset being referred to.
He noted that AIDEA owns buildings among other assets.
3:47:53 PM
SENATOR WIELECHOWSKI asked for information on AIDEA's investable
assets, including money assets available for investing in loans
to companies. He asked how much of the $17.9 million dividend
AIDEA invested in and what the rate of return was.
3:48:15 PM
MR. RUARO replied that AIDEA operates various programs, each
with different rates of return. The Loan Participation Program
currently has approximately $550 million out in loans
accumulated over multiple years and accounts for about half of
the programs at AIDEA He estimated that the average return rate
for the Loan Participation Program is around five percent.
Additionally, AIDEA holds other assets with varying rates of
return and lease payments, including fixed income assets. He
offered to provide a detailed breakdown of the data.
3:49:45 PM
MR. RUARO moved to slide 4 and listed AIDEA's economic tools:
[Original punctuation provided.]
OUR FINANCIAL TOOLBOX
• Loan Participation
o The Loan Participation program provides
long-term fixed and variable rate financing
to Alaska's commercial busine
• Energy & Resource Development
o The Alaska Sustainable Energy Transmission
Supply Fund (SETS) & Arctic Infrastructure
Development Fund (AIDF) created new programs
and powers within AIDEA to addresses the
State's energy, Arctic infrastructure, and
resource needs.
• Project Finance
o AIDEA can finance projects (whole or
partial) through its ability to develop &
own assets within the State.
• AIDEA Bonds
o AIDEA has the authority to issue tax-exempt
and taxable bonds.
• Strong Investment Relationships & Financial
Expertise
o AIDEA provides financial expertise and
information to assist with projects, job
creation, and infrastructure development.
• Conduit Revenue Bonds
o AIDEA is one of the State's Principal
issuers of taxable & tax Exempt Conduit
Revenue Bonds.
• Asset Ownership
o In addition to traditional financing, AIDEA
can directly own assets that generate
revenue or enable economic development.
MR. RUARO said the Loan Participation Program (LPP) currently
has roughly $550 million allocated in loans to Alaska
businesses. He noted that AIDEA partners with Alaska banks on
these loans, which have an approximate zero-default rate. At a
recent AIDEA Board meeting in January, two loans worth $25
million each were approved. He expressed his belief that these
programs could help drive businesses that might not otherwise
have survived with conventional financing methods. AIDEA does
not receive a large rate of return from the Conduit Revenue
Bonds Program. He cited the Tanana Chiefs Regional Health Center
as an example and said the primary goal is to facilitate
entities in obtaining financing, thereby benefitting the economy
and other organizations. Funds are set aside for specific types
of financing, particularly for energy and resource development,
although the capital allocation in this area is not currently
substantial. While AIDEA does not own many projects, it does own
the FedEx Hangar and the Skagway Ore Terminal that is no longer
in operation. AIDEA can issue tax-exempt and taxable bonds.
However, anything above $25 million requires legislative
authorization. AIDEA is currently reviewing its existing assets
to determine their utility, such as ports, transmission lines,
and other available authorities that could be used and would be
helpful to place on their books.
3:52:56 PM
MR. RUARO moved to slide 5 and highlighted the FY23 LPP:
[Original punctuation provided.]
FY 2023 LOAN PARTICIPATION PROGRAM (LPP) HIGHLIGHTS
• $23.36 Million Financed
• $387.5 Million in Outstanding (Existing) Loans
• $83 Million in Potential Pipeline
• 0% Delinquency
• 27 Industries Represented
• 10 Loans Financed
• 278 Construction Jobs
• 212 Permanent Jobs
MR. RUARO said AIDEA financed roughly $24 million in businesses
last year and $387 million in outstanding loans with no
delinquencies. There are several projects in the pipeline that
vary from small- to large-scale.
3:53:38 PM
MR. RUARO moved to slide 6 and spoke to AIDEA's project
investments and owned assets:
[Original punctuation provided.]
2023 Updates AIDEA Project Investments and Owned
Assets
• HEX LLC successfully repaid $7.5 million
investment eight months early.
• DeLong Mountain Transportation System (Red Dog
Road and Port) has provided more than $269
million in payments in lieu of taxes (PILT) since
1990
MR. RUARO listed some projects that AIDEA provided loans for. He
said Red Dog Mine has been the largest and most successful
project. In 1985 or 1986, the legislature approved bonding to
facilitate the construction of the port and road for the Red Dog
Mine project. At that time, Cameco, the company behind the
project, faced challenges and incurred losses of $150-250
million, leading its largest shareholder to sell their stake.
However, with the support of the legislature, bonds were
approved for AIDEA to construct the necessary infrastructure.
Since then, the Red Dog Mine has operated successfully.
3:54:39 PM
SENATOR GIESSEL asked who maintains the DeLong Road.
3:54:44 PM
MR. RUARO replied that the road is maintained by Teck Alaska,
Inc.
3:54:53 PM
MR. RUARO moved to slide 8 and spoke to statehood rights:
[Original punctuation provided.]
DEFENDING ALASKA'S STATEHOOD RIGHTS
This past year, AIDEA took significant steps to assert
Alaska's statehood rights and promote responsible
infrastructure development.
The rights offered by Congress to Alaskans for
statehood included:
• The right to select and receive ownership title
to approximately 30 percent of the state, or 105
million acres, as "statehood lands"
• Ownership of all minerals, oil, and gas beneath
statehood lands
• A right of access to "prospect for, mine, and
remove" state-owned minerals on state lands
(Section 6(i) Statehood Act)
• The right to manage and decide whether resources
should be developed on state lands according to
laws passed by the Alaska Legislature and the
Alaska Constitution
• Title to submerged lands and minerals beneath
navigable waters, and right to make development
decisions (Section 6(m) Statehood Act)
MR. RUARO said that Congress at the time of statehood expressed
concern over the lack of progress in Alaska and saw the state as
a promising opportunity. Congress granted Alaska ownership of
subsurface rights, the right of access to prospect for, mine,
and remove minerals, and it adopted art. VIII of Alaska's
constitution, which say the legislature decides what lands
should be developed to the maximum extent possible for Alaskans.
He noted that AIDEA emerged with some of the strongest statehood
rights as a result.
3:57:02 PM
CO-CHAIR GIESSEL asked to move to slide 8 that says "Defending
Alaska Statehood Rights. She acknowledged his expertise but
questioned whether he is on the Statehood Defense Team which is
comprised of commissioners.
3:57:36 PM
MR. RUARO said AIDEA has been a part of that informal working
unit within state government. The agency collaborates closely
with the Department of Law and the Attorney General,
coordinating efforts and communicating on issues related to
statehood rights. AIDEA was granted the legislative authority to
sue and be sued.
3:58:20 PM
SENATOR WIELECHOWSKI asked if any funds were used to fight in
support of the Pebble Mine project.
3:58:30 PM
MR. RUARO replied that AIDEA did not support or participate in
the appeal of that project.
3:58:55 PM
SENATOR WIELECHOWSKI clarified that he wondered if AIDEA spent
any funds in defense of or in support of opening Pebble Mine, or
in opposition to the Environmental Protection Agency's (EPA)
veto of the project.
3:59:10 PM
MR. RUARO replied AIDEA did not spend funds for that purpose.
However, it participated in an amicus brief that advocated for
general statehood rights, particularly for the right of access
and resource development.
3:59:39 PM
SENATOR WIELECHOWSKI requested the case number, name, and
details on dollars spent.
3:59:47 PM
MR. RUARO clarified that the case did indeed involve the Pebble
Mine. He said while he does not have the case number on hand, he
could provide it to the committee later. The objective was to
highlight the broader statehood rights in the hopes of affirming
the right to develop state lands. AIDEA approached the case from
a comprehensive perspective on statehood rights rather than
focusing solely on any specific mine project.
4:00:48 PM
CO-CHAIR GIESSEL clarified that her question about his
involvement with the the statehood defense team stemmed from her
lack of awareness that AIDEA was involved in matters concerning
submerged lands. She stated she is working on SB 192 and is
working on submerged lands right now with DLNR. She observed
that it appears AIDEA is expanding its scope into other
departments.
4:01:24 PM
MR. RUARO replied that he would not take the lead on any
communications with the administration regarding submerged lands
but could try to answer questions.
4:01:53 PM
CO-CHAIR GIESSEL clarified her point that she was unaware of
AIDEA's mission to expand into these other areas. She said while
she understands the interest in Arctic National Wildlife Refuge
(ANWR) leases, considering no other bids were made, she
expressed concern that the agency's scope might be spreading too
broadly.
4:02:22 PM
MR. RUARO explained that submerged lands are integral to
projects since they often form part of the routes involved.
Therefore, there is an interest in asserting the strongest
possible rights of access in these projects. AIDEA's projects
are impacted by the outcomes of these issues.
4:02:56 PM
SENATOR CLAMAN inquired about the amicus brief and questioned
whether the case in question occurred when the administration
directly sued the federal government in the Supreme Court.
4:03:18 PM
MR. RUARO replied that is correct.
4:03:23 PM
SENATOR CLAMAN sought clarification on whether AIDEA,
independent of the administration, paid a lawyer to draft an
amicus brief on AIDEA's behalf in support of the
administration's efforts.
4:03:43 PM
MR. RUARO replied that AIDEA worked in coordination with the
Department of Law (DOL) regarding the amicus brief. The
arguments put forth by AIDEA were aligned with those of the
Department of Law.
4:03:56 PM
SENATOR CLAMAN asked who wrote the amicus brief.
4:04:02 PM
MR. RUADO replied that the contractor lawyer's name is Chris
Niels.
(Timestamp)
SENATOR CLAMAN asked what firm he was with at the time.
(Timestamp)
MR. RUADO replied that he is an independent attorney.
(Timestamp)
SENATOR CLAMAN asked how much he was paid.
(Timestamp)
MR. RUADO replied that it was roughly $25,000.
4:04:22 PM
SENATOR CLAMAN inquired about the shift in AIDEA's mission from
promoting job advancement and economic development to financing
and investment in defense of statehood rights.
4:04:54 PM
MR. RUADO replied that AIDEA's ability to get projects up and
running depends on statehood rights. Nearly all projects require
federal permits. He stated his belief that if statehood rights
are correctly interpreted and applied, it would streamline and
reduce the costs associated with getting projects operational.
4:05:23 PM
SENATOR KAWASAKI expressed concern that the focus on statehood
rights issues seemed centered around extraction activities. He
stated his belief that there are other ways to enhance job
creation and economic development in Alaska that do not involve
mining or extraction. He said he would collaborate with the
committee to submit written questions.
4:06:29 PM
MR. RUARO emphasized the broad reach of federal permit
requirements, which can extend to a transmission line for a
renewable, broadband, or transmission lines project, basically,
anything in the ground, including federal wetlands. He expressed
his belief that the protections and rights of the state to
develop and access resources extend far beyond extractive
industries.
4:07:07 PM
CO-CHAIR BISHOP asked him to confirm that he previously stated
that AIDEA has a "duty to defend itself."
4:07:21 PM
MR. RUARO confirmed that AIDEA has that statutory authority.
4:07:26 PM
SENATOR DUNBAR asked about the level of independence AIDEA has
to do an amicus brief on either side of the political party. He
drew a parallel to the PFD, which is required to be independent
from political forces. He questioned how AIDEA would have
responded if a different governor had opposed the state's
position. He asked whether AIDEA has the autonomy to draft an
amicus brief independently or if it must align with the state's
stance. Given that AIDEA manages a substantial amount of funds,
he expressed his opinion that political considerations should
not overly influence revenue generation for the state. He also
noted that the governor has taken a particular stance on certain
issues, such as the Pebble Mine while there are other
politicians who have taken an opposing view.
4:09:01 PM
MR. RUARO stated that in this particular case, AIDEA aligned
with the state's position. He pointed out that AIDEA's statutes
grant the authority to sue and be sued, but also obtain legal
expertise. He said he interprets this as the ability for
independence and the discretion to file in the best interest of
AIDEA, which is focused on jobs and economic development. If
AIDEA were to stray from its statutory mission, it would move
far away from its primary goal.
4:09:43 PM
SENATOR DUNBAR clarified that he wasn't suggesting AIDEA was
deviating from its mission. He acknowledged that the agency has
the independence to take a contrary position to the state of
Alaska if necessary.
4:10:13 PM
MR. RUARO replied that while AIDEA has some independence in its
policy choice, it is constrained by AIDEA's statutory mission
focused on economic development and jobs. He said there is not
enough discretion available to take a position contrary to their
statutory purpose.
4:10:49 PM
MR. RUARO moved to slide 9 and spoke to AIDEA's jurisdictional
evaluation method (JEM):
[Original punctuation provided.]
AIDEA's JURISDICTIONAL EVALUATION METHOD (JEM)
• Wetlands are divisible into types and can be
mapped into polygons
• Wetland polygons must directly abut a non-wetland
jurisdictional water
• Wetlands must be indistinguishable from an
adjoining jurisdictional water (other than
wetlands) or relatively permanent flowing or
standing water that is either a jurisdictional
water or tributary to a jurisdictional water; and
• Relatively permanent waters are based on the
Rapanos plurality which expressly held that WOTUS
"does not include channels through which water
flows intermittently or ephemerally, or channels
that periodically provide drainage for rainfall"
MR. RUARO said AIDEA was directly affected by the Supreme
Court's Sackett decision. Following this decision, the Supreme
Court determined that the Army Corps of Engineers and the U.S.
EPA's interpretation of their authority over federal wetlands
was overly broad. Because AIDEA was impacted, it contracted a
hydrologist and worked with its attorneys to understand what the
Sackett ruling meant for AIDEA's projects.
4:11:40 PM
MR. BREFCYNSKI moved to slide 10, which displays a map of the
pre- and post-Sackett Wetlands Assessment. He explained that the
contracted hydrologist assisted in analyzing the implications of
the Sackett decision and how it would affect the definition of
"Waters of the United States" and what qualifies as wetlands.
This impacts AIDEA's projects, particularly as it is the
developer proponent and for the Ambler project and will be
handling permitting for AIDEA's portion of the West Susitna
Access Road. While the definition of a wetland remained
unchanged, the Sackett decision determined whether the federal
government or the state has jurisdiction over those wetlands.
The map illustrates an old ruling from the Ambler Project, which
demonstrates a significant reduction in the area of impacted
wetlands post-Sackett ruling.
4:13:17 PM
SENATOR CLAMAN asked whether the Sackett decision had an impact
on the two AIDEA projects: the West Susitna Road Project and the
Ambler Road Project.
4:13:32 PM
MR. RUARO replied that it includes these two projects and any
projects that involve activities touching or disturbing the
ground, potentially affecting federal wetlands.
4:13:47 PM
SENATOR CLAMAN clarified his question. He asked if there are any
other currently active projects, besides West Susitna Road and
Ambler Road, that are affected by the Sackett decision.
4:14:05 PM
MR. RUARO replied that these are the two main projects that are
affected. However, there are also projects in the pipeline that
have not yet reached a decision stage but would also be affected
by the ruling.
4:14:16 PM
SENATOR CLAMAN asked if he is referring to proposed projects and
that they have not yet decided to move forward on them.
4:14:22 PM
MR. RUARO replied that is correct.
4:14:26 PM
SENATOR CLAMAN asked if these are the only two active projects
that have been approved by AIDEA and are currently in progress.
4:14:35 PM
MR. RUARO replied while there are currently two projects in
progress, there are others being built that are impacted by
wetlands including the port and the road at Red Dog Mine. He
clarified that under the old rule, virtually any activity that
disturbed the ground could potentially be affected by wetlands
regulations, but not under the new rule.
4:15:06 PM
MR. BREFCYNSKI moved to slide 11 and spoke to AIDEA's interest
in wetland jurisdiction:
[Original punctuation provided.]
WHY SHOULD YOU CARE ABOUT WETLAND JURISDICTION?
• The presence of federal wetlands triggers federal
permit requirements which is costly and takes a
long time.
• Federal government gains significant control over
resource development decisions in Alaska.
• Federal government can force the landowner to pay
in land or money as "mitigation" for impacts to
federal wetlands.
• "Crushing" penalties can be imposed on landowners
for even accidental violations such as
imprisonment and up to $60,000 a day in fines.
• For example, each of the 348 passes with a plow
by a farmer on federal wetlands is considered a
separate violation.
The average applicant for an individual permit spends
788 days and $271,596 in completing the process." -
Rapanos
MR. BREFCYNSKI said it's all about who is issuing the permit and
AIDEA currently prefers to go through the state than the federal
administration. AIDEA is going through supplemental EIS on the
Ambler Project and had initially planned to commence the West
Susitna project last year. However, the Department of
Transportation intervened, resulting in a change in scope, and
consequently, AIDEA had to withdraw its permit application.
4:16:00 PM
CHAIR BISHOP referenced the last point on the slide and asked
for the number of acres the average permit encompasses.
4:16:18 PM
MR. RUARO replied AIDEA could work on identifying this
information.
4:16:24 PM
MR. BREFCYNSKI moved to slide 12 and spoke to project results to
jurisdictional wetlands:
[Original punctuation provided.]
RESULTS OF JEM APPLICATION TO THE AMBLER ACCESS
PROJECT
Project results to jurisdictional wetlands:
Pre-Sackett Final Environmental Impact Statement
(March 2020): 2,079 acres
Post-Sackett JEM Application of Data (October 2023):
308 acres
An 85 percent reduction of 1,771 acres!
MR. BREFCYNSKI said less impacted federal wetlands are expected
to reduce costs to a project.
4:17:06 PM
SENATOR DUNBAR inquired about the practical differences in the
size and shape of a road, as well as the mitigation efforts to
protect wetlands that would result from the Sackett ruling. He
questioned whether AIDEA would construct a significantly
different road and implement lesser environmental protective
measures due to the post-Sackett effects.
4:17:52 PM
MR. RUARO replied that the immediate impact is that AIDEA is
paying a reduced compensatory mitigation amount. He mentioned
that there are probably potential material sites which were
previously within Army Corp jurisdiction but are now subject to
state law. AIDEA has no intentions of altering the road design
that would escalate environmental impacts. However, it
anticipates having more flexibility in working with certain
material sites to help facilitate the project. He offered to
follow up with a map of these sites. AIDEA has no plans to
diminish protections due to the absence of federal wetlands
oversight.
4:19:04 PM
CO-CHAIR BISHOP said he wanted to get on the record the
reduction of 1,771 acres pre-1997 or 1998 was consistent with
the law of the land. The Army Corps of Engineers, through
regulation, broadened the definition of wetlands in the state,
extending it to 2,079 acres. It was the Sackett decision that
reverted the definition back to its original status in the Army
Corps manual of 1977.
4:19:54 PM
MR. RUARO responded that the initial jurisdiction granted by the
Army Corps was limited, but it was expanded by EPA and the Army
Corps to include any lands where there was potential for the
flow of water beneath the surface. The Supreme Court decision
effectively returns the jurisdiction closer to the original
regulations issued by the Army Corps.
4:20:31 PM
MR. BREFCYNSKI clarified that no federal agencies have
established post-Sackett guidance. However, AIDEA's initiative
was aimed at getting ahead of the ruling by initiating
discussions with federal regulators. AIDEA has collaborated with
the Department of Transportation (DOT) and the Department of
Environmental Conservation to obtain their input. Establishing a
methodology to ascertain jurisdictional wetlands would be
beneficial for Alaska. If determined that these lands are state-
owned, it would be preferable over a 404 primacy program.
4:21:40 PM
MR. RUARO moved to slide 14 and explained ANWR 1002 leases:
[Original punctuation provided.]
ANWR 1002 LEASES
• AIDEA has 10-year lease agreements with the BLM
for seven tracts in the Coastal Plain of ANWR
totaling 365,775 acres, effective January 1,
2021.
• Section 1002 of ANILCA excludes the "1002 Area"
from ANWR's wilderness designation.
• In 2005, the USGS mean estimate of technically
recoverable oil was 7.7 billion barrels.
• Revenue to state treasury from development
potentially $10s of billions.
MR. RUARO added that these leases were recently cancelled by the
federal government without due process or an avenue for appeal,
resulting in litigation by AIDEA regarding these lease rights.
AIDEA is actively advocating for the reinstatement of its leases
and is gearing up to secure the return of leases as well as
participate in the upcoming lease sale bidding process in
December 2024.
4:22:36 PM
SENATOR WIELECHOWSKI asked if AIDEA has explored the possibility
of acquiring leases in Cook Inlet. He said this would be within
its mission, and according to USGS, there is 19 trillion feet of
cubic gas there. However, companies do not currently want to
explore Cook Inlet. He asked if AIDEA has considered this
opportunity.
4:23:06 PM
MR. RUARO replied that he did consider this until the senator's
question. He said while there are active projects with
applications to AIDEA now, but they are all managed by existing
leaseholders.
4:23:29 PM
SENATOR WIELECHOWSKI asked if AIDEA would be willing to consider
exploration opportunities in Cook Inlet similar to how they are
doing with ANWR. He opined that getting the gas into the market
would uplift the economy, which would align with AIDEA's mission
and prevent the state's economy from crashing.
4:24:14 PM
MR. RUARO replied that AIDEA recognizes the significance of the
problem and is actively focusing on Cook Inlet while
collaborating with other agencies to gather their perspectives
and ideas. Although there are some ongoing projects pending in
the area, he expressed uncertainty regarding whether they will
provide a comprehensive solution.
4:24:48 PM
SENATOR DUNBAR commented that he is working to better understand
AIDEA's vision regarding its acquisition of long-term ANWR
leases. He wondered whether AIDEA could transition into an oil
company if it intends to maintain these leases over the long
term.
4:25:32 PM
MR. RUARO replied that he wasn't involved in the decision-making
process regarding the ANWR leases. He expressed his belief that
AIDEA's intention is not to transform into an oil company.
Rather, the goal is to maintain the leases, conduct seismic
studies, and identify an entity interested in acquiring the
leases. The primary objective was not to become an oil company
but rather to find a partner or buyer for the leases.
4:26:23 PM
SENATOR DUNBAR asked if he anticipates that AIDEA would generate
more revenue from acquiring the leases than the initial
acquisition costs. He sought clarification on whether the state
would recover its initial investment in the first leases and
whether it would profit more from the second round of lease
acquisitions compared to the funding required.
4:27:02 PM
MR. RUARO indicated that the amounts spent on the initial leases
have been refunded to AIDEA. He stated that AIDEA's strategy
involves identifying the most promising areas for exploration.
In 2020 or 2021, there was an update from USGS regarding the
likely locations and prospectivity of ANWR. AIDEA has engaged
the services of a petroleum geologist and aims to identify the
most prospective areas and acquire very valuable leases that
would yield returns greater than the initial investment.
4:27:58 PM
SENATOR CLAMAN asked if AIDEA is suing the federal government
for the right to those first set of leases despite the
cancellation of the first set of lease sales and the subsequent
refund of money to AIDEA.
4:28:18 PM
MR. RUARO confirmed and explained that although AIDEA accepted
the refund, it was done with the understanding that AIDEA would
not waive its rights to pursue the reinstatement of its leases.
4:28:33 PM
SENATOR CLAMAN asked if there is an ongoing lawsuit to get
leases back.
MR. RUARO replied that is correct.
4:28:44 PM
SENATOR CLAMAN asked if the lease sale in 2022 was revoked by
the federal government.
4:28:59 PM
MR. RUARO replied that the lease sale is still required to occur
under federal statute. He mentioned that the federal government
is currently in the process of conducting a Supplemental
Environmental Impact Statement (SEIS) to rectify administrative
errors in the original SEIS. He stated that AIDEA expects the
next decision regarding the SEIS to be available within the next
60 days.
4:29:33 PM
SENATOR CLAMAN said he understands the sale must be held per
statute but noted that the Biden administration has reportedly
cancelled the sale. He inquired whether the sale is currently
pending the new EIS.
4:29:46 PM
MR. RUARO replied that is correct.
4:29:53 PM
CO-CHAIR BISHOP asked if AIDEA would get its lease back if the
SEIS was reversed.
4:30:08 PM
MR. RUARO replied that AIDEA's understanding is that the SEIS is
intended to be forward-looking only to the 2024 sale and the
leases would not be returned.
4:30:43 PM
MR. BREFCYNSKI moved to slide 15 and spoke to the West Susitna
Access project locations. He said in FY22, AIDEA received a
capital budget appropriation of $8.5 million to fund the
permitting work necessary to advance the West Susitna Access
Road. Initially, AIDEA fully supported this endeavor. However,
since then, DOT has decided to invest in the project and is
proposing to construct an access road to the west side of the
Susitna River. Despite this, AIDEA is continuing its efforts to
establish a 100-mile-long road leading to prospective mining
claims and other resources.
4:32:16 PM
SENATOR DUNBAR inquired whether AIDEA initially invested in
building a toll road or a road where they could potentially earn
revenue.
4:32:32 PM
MR. BREFCYNSKI responded that while funding the road through
tolls could be one option, the final decision on how the road
would be financed is still under discussion.
4:32:44 PM
SENATOR DUNBAR suggested that some source money would be needed.
Since DOT is contributing to a portion, he wondered if that
portion would be open to the public.
4:33:17 PM
MR. BREFCYNSKI replied that is correct on the DOT portion. He
said AIDEA is considering options to allow open public access.
4:33:51 PM
MR. BREFCYNSKI moved to slide 16 and described project benefits:
[Original punctuation provided.]
PROJECT BENEFITS
Provide safe and efficient road access from the
existing highway system in proximity to existing port
facilities and population centers in Southcentral
Alaska to resources in the Fish Creek NRMU and western
Yentna and Skwentna River Basins that increase job
growth and economic development opportunities.
• Mineral Resources
Copper, gold, silver, coal, and platinum
potential; more than 3,000 active mining claims
within the basin
• Recreational Resources
Opportunities for snowmachining, fishing,
hunting, boating, recreational mining, and use of
cabins
• Oil & Gas
Active oil and gas exploration in the northern
Cook Inlet; nine oil and gas producing units and
fields in the study area
• Forestry
700,000+ acres available for harvest; enhances
emergency response & fire prevention
• Alternative Energy
Opportunities including geothermal and
hydroelectric projects, and woody biomass
resources
• Agricultural Resources
More than 65,000 acres of agricultural land
identified for potential agricultural uses
MR. BREFCYNSKI highlighted the need for certain minerals,
particularly those essential to the Department of Defense (DOD),
where the U.S. currently produces none. He stated that 85
percent of antimony is supplied by China and Russia. DNR has put
out solicitation for oil and gas exploration licenses in the
area, there is also an interest in timber sales and forestry in
parts along the road for both commercial use and fire prevention
as well. The project facilitates the allocation of land for
regular settlement, allowing Alaskans to own both agricultural
and regular settlement land close to major population centers.
4:35:31 PM
SENATOR CLAMAN asked if any companies with mineral interests
have invested into supporting the application to build the road
in West Susitna.
4:35:51 PM
MR. BREFCYNSKI explained that AIDEA has been utilizing funds
from the legislative appropriation allocated in FY22. While
mining companies have conducted their own studies, including
cultural surveys and road design studies, they haven't directly
invested funds into this effort. AIDEA has purchased certain
studies from other mining companies to speed up the process.
CO-CHAIR BISHOP noted that the committee will soon hear from
certain mining companies.
4:36:56 PM
MR. BREFCYNSKI moved to slide 17 and listed primary claims held
in the region. He said the development of these mines alone
could potentially create several hundred or even thousands of
job opportunities. Additionally, he noted that this projection
does not account for the other industries that the road would
support within the state.
4:37:39 PM
MR. BREFCYNSKI moved to slide 18 and provided an update on the
West Susitna Access project:
[Original punctuation provided.]
AIDEA WEST SUSITNA ACCESS PROJECT UPDATE
• Prior to July 2023, the West-Su Access Project
was entirely driven by AIDEA and funded by a FY22
capital appropriation of $8.5 million.
• In 2023, the Alaska Department of Transportation
& Public Facilities (DOT&PF) released the 2024-
2027 Statewide Transportation Improvement Program
(STIP) that included funding for a separate
project that provides access to the west side of
the Susitna River.
• While AIDEA's project scope has changed, work is
still underway to evaluate, permit, and
ultimately construct a road to the proposed
terminus at the Whisky Bravo Airstrip (MP 100).
• 2024 field season planning underway
MR. BREFCYNSKI added that AIDEA will have a relatively robust
set of data and information once that would enable AIDEA to
effectively draft an EIS statement, it submits its permit
application to the Army Corps. It would like to be well prepared
in advance.
4:38:25 PM
CO-CHAIR BISHOP requested that he provide a map to the committee
that shows the right-of-way for the Donlin pipeline.
MR. BREFCYNSKI replied yes and said the right-of-way is for
about half of the road.
4:39:09 PM
SENATOR DUNBAR requested an estimate regarding the return on
investment for the road project.
4:39:19 PM
MR. BREFCYNSKI replied that an estimate is not currently
available as it depends on the development of a financing
structure or model, which will be completed in the near future.
4:39:39 PM
SENATOR DUNBAR asked for a rough estimate and wondered if the
state would earn back its DOT investment.
4:40:16 PM
MR. BREFCYNSKI replied that he believes that it is likely. The
state portion for DOT is $7-8 million. Since a substantial
portion of the funding would come from federal highway dollars,
it represents an efficient use of state funds, which could be
recouped through the establishment of state parks, and park and
use fees. Since it runs through the STIP, it is also a 90/10
match with federal dollars, so the DOT would be able to recoup
significant amounts of initial investment. He offered to provide
a McKinley Research study commissioned on the economic benefits
of the West Susitna Road to establish a baseline of the economic
activity expected including mining, agriculture, recreation,
timber and more for the state and the Mat-Su Borough. More land
being brought into private ownership would result in increased
land on the borough's tax rolls.
4:41:23 PM
CO-CHAIR BISHOP asked if AIDEA would control and maintain the
road once established across the river.
4:41:42 PM
MR. BREFCYNSKI replied that it has not yet been determined.
However, he envisioned that if companies involved are
contributing, it would be similar to that of the Dalton Highway
Maintenance and Toll System (DMTS).
4:41:54 PM
CO-CHAIR BISHOP noted that DMTS is 53 or 57 miles from the port
site, and requested the cost adjusted with today's inflation.
4:42:17 PM
SENATOR WIELECHOWSKI said he was thinking about the return on
investment and the value AIDEA contributes to the state. There
are $550 in loans. He pointed out that based on the $17.9
million in dividends, the return on AIDEA's loan amounts to a
3.25 percent rate of return, which estimates that the rate may
fall within the 1-2 percent range. A report generated last year
analyzed all projects and highlighted that less than half of
AIDEA's projects have benefited the state. The 26 projects
revealed that they are more likely to incur costs rather than
generate revenue. Additionally, $294.1 million has been written
off as worthless by AIDEA's board. This amount is almost
equivalent to the $301.4 million in net contributions the state
has made to AIDEA. The report concluded that if that money was
allocated to the PFD, the state would have made $11.4 billion.
He expressed that there is widespread uncertainty about AIDEA's
genuine impact, especially considering its investment failures
in Krispy Kreme and Burger-Fi businesses. He questioned the
rationale for the state to continue supporting AIDEA since it
hasn't engaged in projects with significant impact.
4:45:17 PM
MR. RUARO responded that he reviewed the report and believes the
numbers are seriously flawed. He opined that the data does not
attribute the development of Red Dog to AIDEA's investments.
AIDEA is not a competitor to the PFD, as it has contributed
significantly to the PFD through royalties from Red Dog. He
suggested that if royalty payments from Red Dog to the PFD in
1989 were factored into the analysis, the impact would be
considerable. While acknowledging that there have been some
failed projects, he asserted that when considering the success
of projects like Red Dog, the overall numbers tell a different
story. He highlighted that many Loan Participation Programs
(LPP) initiatives support Alaskan businesses that may have
struggled to obtain traditional bank financing otherwise. He
mentioned that there are also two programs excluded from the
presentation, including loans ranging from $100,000 to $300,000
at the fair rate of interest specifically aimed at supporting
small businesses. Taking these factors into account, AIDEA
provides a significant benefit to Alaskans. He concluded by
mentioning that AIDEA has funded projects in Cook Inlet and has
several other projects in the pipeline.
4:48:08 PM
SENATOR DUNBAR said one common critique of the public-private
partnership is that it socializes the risk and privatizes the
profits. He stated that while he understands the logic of AIDEA
investing in permitting and design, the association is bullish
on investment in the West Susitna and Ambler Road projects. He
asked whether there may be a way to obtain upfront funding from
companies to shift the risk away from the people of Alaska. This
could entail either sharing the risk or ensuring that private
investors take on the risk for the construction of the road.
4:49:13 PM
MR. RUARO replied that there is a cautionary agreement in place
for the Ambler Road, so those mines are contributing 50 percent
of the cost of the studies and research needed to advance
permitting, design, and construction. AIDEA plans to utilize the
Red Dog model to ensure the project does not progress to
construction without commitments from the mines to cover the
project's costs through tolling or another financing
arrangement. However, he noted that this commitment might be
fulfilled over time, as was the case with the Red Dog project.
He emphasized that AIDEA would not proceed with the projects
without the mines financial commitments in place.
4:50:01 PM
CO-CHAIR BISHOP asked if AIDEA consults with a mining
technician.
4:50:19 PM
MR. RUARO replied that there is no mining technician on staff,
instead AIDEA has an expert it is hoping to put under contract.
AIDEA For now, AIDEA hires consultants as needed.
4:50:43 PM
SENATOR CLAMAN asked if the inclusion of this portion of the
West Susitna Road in a DOT plan was one of the reasons the
Statewide Transportation Improvement Plan (STIP) was rejected.
4:51:13 PM
MR. RUARO replied that he is uncertain of the reason but is
aware of a technical glitch or failure to include the word
"bridge" in the project description. Due to this omission, AIDEA
requested that DOT include that aspect in the project
descriptor.
4:51:40 PM
MR. BREFCYNSKI added that the department stated it was not
eligible for bridge funding.
4:51:49 PM
SENATOR CLAMAN expressed concerns about AIDEA's approach to
project costs and questioned how AIDEA decided to undertake the
risk of building the road rather than issuing a loan for it.
4:52:46 PM
MR. RUARO replied that the Reg Dog project was a decision led by
the legislature, which designated AIDEA as the financing
mechanism for the road and port. The legislature allocated $11
million to fund the permitting and pre-construction phases for
the West Susitna Road. Regarding risk and construction, he
clarified that the road would not proceed to construction
without commitments from mining companies to cover the costs.
AIDEA is thereby protected in this regard.
4:53:34 PM
SENATOR KAWASAKI pointed out that Anchorage Fish Plant was a
legislative directive that instructed AIDEA to use a $125
million loan for development, so there is some shared blame.
However, the facility has been turned into a church.
4:54:41 PM
There being no further business to come before the committee,
Co-Chair Bishop adjourned the Senate Resources Standing
Committee meeting at 4:54 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| AIDEA Presentation 02.28.24.pdf |
SRES 2/28/2024 3:30:00 PM |
|
| SB 220 Amendment 1.pdf |
SRES 2/28/2024 3:30:00 PM |
SB 220 |
| AIDEA Response to SRES 02.28.24.pdf |
SRES 2/28/2024 3:30:00 PM |
|
| AIDEA Response 2 to SRES 02.28.24.pdf |
SRES 2/28/2024 3:30:00 PM |