00 CS FOR HOUSE BILL NO. 290(RES) 01 "An Act relating to pipeline carriers of natural gas produced from the North 02 Slope of Alaska and to the intrastate regulation by the Regulatory Commission 03 of Alaska of pipelines and pipeline facilities of that natural gas." 04 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 05 * Section 1. AS 38.35.120(a) is amended to read: 06 (a) A noncompetitive lease of state land for a right-of-way for an oil or natural 07 gas pipeline valued at $1,000,000 or more may be granted only upon the condition that 08 the lessee expressly covenants in the lease, in consideration of the rights acquired by 09 it under the lease, that 10 (1) it assumes the status of and will perform all of its functions 11 undertaken under the lease as a common carrier and will accept, convey, and transport 12 without discrimination crude oil or natural gas, depending on the kind of pipeline 13 involved, delivered to it for transportation from fields in the vicinity of the pipeline 14 subject to the lease throughout its route both on state land obtained under the lease and 01 on the other land; however, a lessee that [WHO] owns or operates a natural gas 02 pipeline 03 (A) subject to regulation either [(A)] under the Natural Gas Act 04 (15 U.S.C. 717 et seq.) of the United States [,] or [(B)] by the state or political 05 subdivisions with respect to rates and charges for the sale of natural gas, is, to 06 the extent of that regulation, exempt from the common carrier requirement in 07 this paragraph; it will accept, convey, and transport crude oil or natural gas 08 without unjust or unreasonable discrimination in favor of one producer or 09 person, including itself, as against another but will take the crude oil or natural 10 gas, depending on the kind of pipeline involved, delivered or offered, without 11 unreasonable discrimination, that the Regulatory Commission of Alaska shall, 12 after a full hearing with due notice to the interested parties and a proper finding 13 of facts, determine to be reasonable in the performance of its duties as a 14 common carrier; 15 (B) that is a North Slope natural gas pipeline (i) is required 16 to operate as a common carrier only with respect to the intrastate 17 transportation of North Slope natural gas, as that term is defined in 18 AS 42.06.630, and (ii) is not required to operate as a common carrier as 19 to a liquefied natural gas facility or a marine terminal facility associated 20 with the pipeline, and is not otherwise required to perform its functions 21 under the lease as a common carrier; for purposes of this subparagraph, 22 "North Slope natural gas pipeline" means all the facilities of a total system 23 of pipe, whether owned or operated under a contract, agreement, or lease, 24 used by a carrier for transportation of North Slope natural gas, as defined 25 by AS 42.06.630, for delivery, for storage, or for further transportation, 26 and including all pipe, pump, or compressor stations, station equipment, 27 tanks, valves, access roads, bridges, airfields, terminals and terminal 28 facilities, including docks and tanker loading facilities, operations control 29 centers for both the upstream part of the pipeline and the terminal, tanker 30 ballast treatment facilities, fire protection system, communication system, 31 and all other facilities used or necessary for an integral line of pipe, taken 01 as a whole, to carry out transportation, including an extension or 02 enlargement of the line; 03 (2) it will interchange crude oil or natural gas, depending on the kind 04 of pipeline involved, with each like common carrier and provide connections and 05 facilities for the interchange of crude oil or natural gas at every locality reached by 06 both pipelines when the necessity exists, subject to rates and regulations made by the 07 appropriate state or federal regulatory agency; 08 (3) it will maintain and preserve books, accounts, and records and will 09 make those reports that the state may prescribe by regulation or law as necessary and 10 appropriate for purposes of administration of this chapter; 11 (4) it will accord at all reasonable times to the state and its authorized 12 agents and auditors the right of access to its property and records, of inspection of its 13 property, and of examination and copying of records; 14 (5) it will provide connections, as determined by the Regulatory 15 Commission of Alaska under AS 42.06.340, to facilities on the pipeline subject to the 16 lease, both on state land and other land in the state, for the purpose of delivering crude 17 oil or natural gas, depending on the kind of pipeline involved, to persons (including 18 the state and its political subdivisions) contracting for the purchase at wholesale of 19 crude oil or natural gas transported by the pipeline when required by the public 20 interest; 21 (6) it shall, notwithstanding any other provision, provide connections 22 and interchange facilities at state expense at such places the state considers necessary 23 if the state determines to take a portion of its royalty or taxes in oil or natural gas; 24 (7) it will construct and operate the pipeline in accordance with 25 applicable state laws and lawful regulations and orders of the Regulatory Commission 26 of Alaska; 27 (8) it will, at its own expense, during the term of the lease , 28 (A) maintain the leasehold and pipeline in good repair; 29 (B) promptly repair or remedy any damage to the leasehold; 30 (C) promptly compensate for any damage to or destruction of 31 property for which the lessee is liable resulting from damage to or destruction 01 of the leasehold or pipeline; 02 (9) it will not transfer, assign, or dispose of in any manner, directly or 03 indirectly, or by transfer of control of the carrier corporation, its interest in a right-of- 04 way lease, or any rights under the lease or any pipeline subject to the lease to any person 05 other than another owner of the pipeline (including subsidiaries, parents , and affiliates of the 06 owners), except to the extent that the commissioner, after consideration of the protection of 07 the public interest (including whether the proposed transferee is fit, willing , and able to 08 perform the transportation or other acts proposed in a manner that will reasonably protect the 09 lives, property , and general welfare of the people of Alaska), authorizes; the commissioner 10 shall not unreasonably withhold consent to the transfer, assignment , or disposal; 11 (10) it will file with the commissioner a written appointment of a 12 named permanent resident of the state to be its registered agent in the state and to 13 receive service of notices, regulations, decisions , and orders of the commissioner; if 14 it fails to appoint an agent for service, service may be made by posting a copy in the 15 office of the commissioner , [AND] filing a copy [OF IT] in the office of the lieutenant 16 governor , and [BY] mailing a copy to the lessee's last known address; 17 (11) the applicable law of this state will be used in resolving questions 18 of interpretation of the lease; 19 (12) the granting of the right-of-way lease is subject to the express 20 condition that the exercise of the rights and privileges granted under the lease will not 21 unduly interfere with the management, administration, or disposal by the state of the 22 land affected by the lease, and that the lessee agrees and consents to the occupancy 23 and use by the state, its grantees, permittees, or other lessees of any part of the right- 24 of-way not actually occupied or required by the pipeline for the full and safe utilization of the 25 pipeline, for necessary operations incident to land management, administration, or disposal; 26 (13) it will be liable to the state for damages or injury incurred by the 27 state caused by the construction, operation , or maintenance of the pipeline and it will 28 indemnify the state for the liabilities or damages; 29 (14) it will procure and furnish liability and property damage insurance 30 from a company licensed to do business in the state or furnish other security or 31 undertaking upon the terms and conditions the commissioner considers necessary if the 01 commissioner finds that the net assets of the lessee are insufficient to protect the 02 public from damage for which the lessee may be liable arising out of the construction 03 or operation of the pipeline. 04 * Sec. 2. AS 42.05.711 is amended by adding a new subsection to read: 05 (n) The provisions of this chapter do not apply to a person who owns or 06 operates a natural gas pipeline as a North Slope natural gas pipeline carrier, as that 07 term is defined in AS 42.06.630. 08 * Sec. 3. AS 42.06.230(b) is amended to read: 09 (b) The commission's jurisdiction and authority extend to 10 (1) an oil or gas pipeline facility operating in a municipality, whether 11 home rule or otherwise ; if [. IF] a conflict between a certificate, order, decision, or 12 regulation of the commission and a charter, permit, franchise, ordinance, rule, or 13 regulation of such a local governmental entity occurs, the certificate, order, decision, 14 or regulation of the commission prevails ; and 15 (2) the intrastate transportation of North Slope natural gas through 16 a North Slope natural gas pipeline . 17 * Sec. 4. AS 42.06.240 is amended by adding a new subsection to read: 18 (f) In addition to other requirements of (a) - (e) of this section, the provisions 19 of this subsection apply to a certificate of public convenience and necessity for a North 20 Slope natural gas pipeline carrier or person that will be a North Slope natural gas 21 pipeline carrier under this chapter: 22 (1) the person making application shall dedicate a portion of the 23 pipeline's initial capacity sufficient to transport the total volume of North Slope natural 24 gas that has been committed by producers and shippers of North Slope natural gas to 25 tendering for intrastate firm transportation service at the time that the operation of the 26 North Slope natural gas pipeline commences; 27 (2) upon receipt of the certificate application under this subsection, the 28 commission shall issue a public notice inviting prospective intrastate shippers of North 29 Slope natural gas to file requests for service; a request for service submitted by a 30 shipper in response to a notice issued under this paragraph must include a proof of the 31 shipper's commitment to use the North Slope natural gas pipeline for intrastate firm 01 transportation service, specifying the volume of North Slope natural gas that the 02 shipper will tender for initial intrastate firm transportation service; 03 (3) in its review of an application submitted under this subsection, 04 (A) for purposes of evaluating the total volume of intrastate 05 transportation of North Slope natural gas to be accepted for initial intrastate 06 transportation, the commission shall determine total volume based upon written 07 commitments to tender North Slope natural gas for intrastate firm transportation 08 service continuously for a period of not less than three years after the operation 09 of the North Slope natural gas pipeline commences as follows: 10 (i) each request for service by an intrastate shipper that 11 is a public utility, as that term is defined in AS 42.05.990, for the 12 purpose of furnishing natural gas for ultimate consumption within the 13 state by its customers that individually consume an average annual 14 volume of less than 20,000,000 standard cubic feet of gas per day shall 15 be supported by a written commitment by the public utility that sets out 16 the utility's best current estimate of the average annual volume that the 17 utility will require during the three-year period; 18 (ii) each request for service by an intrastate shipper that 19 is not a public utility, as that term is defined in AS 42.05.990, and each 20 request for service by a public utility for the purpose of furnishing 21 natural gas for ultimate consumption within the state by a customer that 22 individually consumes an average annual volume of 20,000,000 or more 23 standard cubic feet of gas per day, that purchases North Slope natural 24 gas from a North Slope natural gas producer, must be supported by one 25 or more contracts for the purchase of the North Slope natural gas on a 26 take-or-pay basis that extends for a period of not less than three years 27 after the operation of the North Slope natural gas pipeline commences; 28 (iii) the commission may consider peak volumes 29 specified in the written commitments of North Slope natural gas 30 producers and purchase contracts; and 31 (B) the commission shall set out in its order granting a 01 certificate of public convenience and necessity the total volume of intrastate 02 North Slope natural gas that the North Slope natural gas pipeline carrier shall 03 accept for intrastate transportation; the total volume may not exceed the volume 04 substantiated by written commitments and contracts that comply with the 05 requirements of this chapter; 06 (4) if the North Slope natural gas pipeline carrier wants to transport 07 North Slope natural gas within the state in excess of the amount set out in the 08 statement of total volume in the pipeline carrier's certificate of public convenience and 09 necessity, the pipeline carrier may apply for authority to transport a greater volume of 10 North Slope natural gas within the state than the carrier is required by the commission 11 to transport in its order entered under (3)(B) of this subsection; the commission shall 12 grant the authority requested by the pipeline carrier if the commission determines that 13 the pipeline carrier's transportation of a greater volume is consistent with public 14 convenience and necessity. 15 * Sec. 5. AS 42.06.310 is amended by adding a new subsection to read: 16 (d) The requirement of (c) of this section does not apply to a North Slope 17 natural gas pipeline carrier to the extent that the capacity of the carrier's North Slope 18 natural gas pipeline does not allow for expanded capacity, and does not apply to 19 require a North Slope natural gas pipeline carrier to enlarge or extend its North Slope 20 natural gas pipeline system. However, the commission may require a North Slope 21 natural gas pipeline carrier to expand, enlarge, or extend its North Slope natural gas 22 pipeline system if, after notice and opportunity for hearing, the commission determines 23 that 24 (1) a person making a request for expanded, enlarged, or extended 25 service by a North Slope natural gas pipeline carrier has made a firm contractual 26 commitment to the North Slope natural gas pipeline carrier to transport North Slope 27 natural gas; and 28 (2) the expansion, enlargement, or extension will not result in 29 (A) substantial injury, including economic injury, to the North 30 Slope natural gas pipeline facility or its customers; 31 (B) substantial detriment to the services furnished by the North 01 Slope natural gas pipeline facility; or 02 (C) the creation of safety hazards. 03 * Sec. 6. AS 42.06.350 is amended by adding a new subsection to read: 04 (c) In its tariff filed with the commission under (a) of this section, a North 05 Slope natural gas pipeline carrier may charge separate rates for firm transportation 06 service and for interruptible transportation service. A North Slope natural gas pipeline 07 carrier 08 (1) may, in addition, impose a reservation fee or similar charge for 09 reservation of capacity in a North Slope natural gas pipeline as a condition of 10 providing firm transportation service; the reservation fee or charge imposed by the 11 carrier may not include any variable costs or fixed costs that are not attributable to the 12 provision of firm transportation service; 13 (2) may not impose a reservation fee or similar charge for reservation 14 of capacity in a North Slope natural gas pipeline for interruptible transportation 15 service. 16 * Sec. 7. AS 42.06.630 is amended by adding new paragraphs to read: 17 (11) "capacity" means, with reference to a North Slope natural gas 18 pipeline, the average daily volume throughput of the North Slope natural gas pipeline, 19 calculated at the normal operating pressure of the North Slope natural gas pipeline as 20 set out in the pipeline design; 21 (12) "firm transportation service" means service by a North Slope 22 natural gas pipeline carrier that is not subject to a prior claim by another shipper or 23 another class of service; service constitutes "firm transportation service" if the service 24 receives the same priority as any other class of firm transportation service; 25 (13) "interruptible transportation service" means service by a North 26 Slope natural gas pipeline carrier in which the carrier's pipeline system capacity may 27 be subject to a prior claim by another shipper or another class of service; a service 28 constitutes "interruptible transportation service" if the service is given a lower priority 29 than another class of service, resulting in noncontinuous service to a shipper of North 30 Slope natural gas; 31 (14) "intrastate," as applied to the transportation of North Slope natural 01 gas, means the transportation of North Slope natural gas between any point within the 02 state and another point within the state, for ultimate consumption of the North Slope 03 natural gas within the state; 04 (15) "North Slope natural gas" means gas that is produced from the 05 area of Alaska lying north of 68 degrees North latitude and that, but for a pipeline 06 subject to regulation under this chapter, had not been committed for sale and delivery 07 in a commercial market due to the prevailing costs or price conditions; 08 (16) "North Slope natural gas pipeline" or "North Slope natural gas 09 pipeline facility" means all the facilities of a total system of pipe, whether owned or 10 operated by a North Slope natural gas pipeline carrier under a contract, agreement, or 11 lease, in this state used by a North Slope natural gas pipeline carrier for transportation 12 of North Slope natural gas for delivery, storage, or further transportation, including all 13 pipe, pump, and compressor stations, station equipment, gas processing plants, treaters, 14 separators, and all other facilities used or necessary for an integral line of pipe to carry 15 out the transportation from point to point, but excluding marine terminal facilities and 16 the integrated plant, facilities, and equipment, including pollution control equipment, 17 used for conditioning, storage, handling, or processing of North Slope natural gas into 18 liquefied natural gas; 19 (17) "North Slope natural gas pipeline carrier" means the owner, 20 including a corporation, company, or other entity organized under the laws of the 21 United States or of a state, of a North Slope natural gas pipeline, or an interest in it, 22 or a person, including a corporation, company, or other entity, organized under the 23 laws of the United States or of a state, authorized to construct, operate, or extend 24 North Slope natural gas pipeline facilities under this chapter.