SB 153-NATURAL GAS STORAGE TAX CREDIT/REGULATION  3:37:21 PM CO-CHAIR PASKVAN announced the consideration of SB 153, [CSSB 153, version 27-LS1187\D, was before the committee]. SENATOR STEVENS joined the committee. 3:37:26 PM SENATOR JOE THOMAS, Alaska State Legislature, sponsor of SB 153, said the cost of fuel in Alaska is crippling much of the state's economy, and the dramatic delivery of fuel oil to Nome this winter helped focus attention on it. In the Interior today, he said heating fuel costs are $4.68 a gallon; when he last reported they were under $4, but it is natural for the price to go up in winter. He said that when he last reported, about $660 million was being spent in the Interior on just energy. At the new rate, it would be over $800 million for the same amount of fuel. It averages out to about $8,100 per person as compared to $6,600 that it was last time he testified. He said 39 percent of Golden Valley Electric Association's (GVEA) electricity is produced from diesel fuel, which accounts for about 60 percent of the electrical generation budget. With the fuel dollar increase since he left Fairbanks, they now pay over $40/mmbtu compared to $8.67 in Southcentral. Fairbanks is currently paying $23.35 for 1 cf/gas and $.23 per kilowatt hour. He said individual heating bills of $1,000 to $1,500 a month are not unusual for the heating season which is September through April. SENATOR THOMAS said SB 153 addresses this problem by incentivizing the private sector to deliver additional trucked gas to Fairbanks over the next three years. Fairbanks has trucked gas now, but the amount is limited because Southcentral suppliers are obligated to take care of their customers first. So they cut back sometimes and Fairbanks Natural Gas (FNG), the distributor, can't get what they need. This means that some places have to shut down their natural gas generation and turn their fuel oil generation back on. The fuel oil and gas prices are not dramatically different now, because there is no competition for it. He said SB 153 would result in savings of $15 million or 50 percent of the construction cost, whichever is less. This credit is currently available to Cook Inlet's gas storage project, CINGSA. He wants Fairbanks to receive the same benefit although the storage would be above ground since there are no depleted wells to use as underground storage. He said anyone taking advantage of these tax credits must be a regulated utility, because then whatever savings is received will be passed through to the consumer through RCA regulation. It will also ensure that neither North Slope producers nor an LNG export facility that do not provide for consumption of gas at savings to Alaskans that and are not regulated utilities, will not have access to these credits. SENATOR THOMAS said storage will be needed in any event, even with a gasline from the North Slope. He noted that SB 153 has had no negative attention since it was introduced. He thanked the additional sponsors. 3:41:22 PM SENATOR MCGUIRE joined the committee. 3:43:44 PM CHAIR FRENCH said he thought it was fair to do in Fairbanks what has been done in Kenai at the Cook Inlet Natural Gas Storage, Alaska facility (CINGSA). He asked how much the state spent for the CINGSA facility and how much storage it bought. 3:44:11 PM GRIER HOPKINS, staff to Senator Thomas, Alaska State Legislature, Juneau, AK, answered that $15 million was given to CINGSA in tax credits on a volumetric calculation of $1.50/mcf of storage; 11 bcf/gas was stored in that reservoir along with 7 bcf of cushion gas for a total of 18 bcf. CHAIR FRENCH asked what sort of volumes this bill envisions. MR. HOPKINS replied about 360 mmcf/gas stored in two separate tanks, two-thirds of that on the North Slope and one-third in North Pole. 3:45:24 PM SENATOR STEDMAN said this looks more like an appropriation bill and asked him to review who could take advantage of it and why this wouldn't be done through a regular capital appropriation process for a regular utility. SENATOR THOMAS explained that there has been interest in various areas; propane storage has interest as well. Fish processing plants, Valdez and Cordova all show interest, because they have huge issues with their electrical generation and are looking for relief. He initially wanted to make sure that if the credits were given in one place that they would at least be allowable in other places. So, it looks like an appropriation bill. SENATOR STEDMAN asked if there are restrictions on it or could every town in the state make a similar request. SENATOR THOMAS replied that the only limiting factor is being a regulated utility. MR. HOPKINS added that language on page 3, line 31, lowers the size of the tank to 25,000 gallons so that smaller utilities (especially along the Railbelt) could apply for the tax credits. 3:49:29 PM SENATOR STEDMAN observed that the term used is "credits," but it's really more like an equity infusion. MR. HOPKINS said HB 280 (the CINGSA tax credit) by Representative Hawker was also perceived to be a tax credit, but the project has moved forward, it has become a limited liability corporation with a number of different entities working together in partnership to build the storage facility. It is not paying any taxes to the state, the same situation GVEA would be in with this bill. 3:51:24 PM SENATOR WIELECHOWSKI moved to report CSSB 153( ), [version D,] from committee with individual recommendations and attached fiscal note(s). There were no objections, and CSSB 153(RES) moved from the Senate Resources Standing Committee.