Legislature(2013 - 2014)HOUSE FINANCE 519
03/26/2013 01:30 PM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB4 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 4 | TELECONFERENCED | |
| + | TELECONFERENCED |
HOUSE BILL NO. 4
"An Act relating to the Alaska Gasline Development
Corporation; making the Alaska Gasline Development
Corporation, a subsidiary of the Alaska Housing
Finance Corporation, an independent public corporation
of the state; establishing and relating to the in-
state natural gas pipeline fund; making certain
information provided to or by the Alaska Gasline
Development Corporation exempt from inspection as a
public record; relating to the Joint In-State Gasline
Development Team; relating to the Alaska Housing
Finance Corporation; relating to judicial review of a
right-of-way lease or an action or decision related to
the development or construction of an oil or gas
pipeline on state land; relating to the lease of a
right-of-way for a gas pipeline transportation
corridor, including a corridor for a natural gas
pipeline that is a contract carrier; relating to the
cost of natural resources, permits, and leases
provided to the Alaska Gasline Development
Corporation; relating to procurement by the Alaska
Gasline Development Corporation; relating to the
review by the Regulatory Commission of Alaska of
natural gas transportation contracts; relating to the
regulation by the Regulatory Commission of Alaska of
an in-state natural gas pipeline project developed by
the Alaska Gasline Development Corporation; relating
to the regulation by the Regulatory Commission of
Alaska of an in-state natural gas pipeline that
provides transportation by contract carriage; relating
to the Alaska Natural Gas Development Authority;
relating to the procurement of certain services by the
Alaska Natural Gas Development Authority; exempting
property of a project developed by the Alaska Gasline
Development Corporation from property taxes before the
commencement of commercial operations; and providing
for an effective date."
Co-Chair Stoltze noted the presence of Representative's
Herron, Hawker, and Chenault. He discussed the agenda for
the afternoon.
1:40:49 PM
JOHN DAVIES, FAIRBANKS NORTH STAR BOROUGH, FAIRBANKS, spoke
in favor of the legislation. He pointed to a Fairbanks
North Star Borough Assembly resolution related to the
assembly's 2013 legislative priorities; the list included
an instate gas pipeline that would deliver gas to the
Interior and other state regions. He relayed that the
borough was in favor of any solution that would bring gas
to the Interior. He referred to the assembly's support for
separate legislation that offered a near-term solution via
the trucking of liquid natural gas (LNG) to the Interior.
The assembly was supportive of an LNG line to Valdez. He
stressed that the need was immediate.
Representative Gara asked how Mr. Davies would view the
option of a larger pipeline to Valdez that would provide
cheaper in-state gas and increased revenue. Mr. Davies
replied that a larger or smaller pipeline option would be
fine. He noted that there would be advantages and
disadvantages to either option. The borough believed it was
most important to move forward to address the need.
Co-Chair Stoltze asked for verification that the borough
preferred a plan that would bring gas to Fairbanks by 2015.
Mr. Davies responded in the affirmative.
1:45:51 PM
TIM NAVARRE, COUNCIL MEMBER, CITY OF KENAI and CO-CHAIR,
ASAP COMMUNITY ADVISORY COUNCIL, testified in support of
the legislation. He shared that the ASAP council had met
throughout the state to gain information for the public. He
believed HB 4 was the right move. He applauded the
legislature for bringing the issue forward in 2009. He
discussed that in 2009 Southcentral utilities had not been
looking at importing LNG and Fairbanks had not been looking
at a 25 CMF utility cost. He spoke to the $120 million in
funding provided to the Alaska Gasline Development
Corporation (AGDC) and the need to determine whether an
open season would be successful. He did not believe a
statewide energy plan that included imported LNG was the
answer. He urged the committee to support the legislation.
He believed it was the only option available under the
Alaska Gasline Inducement Act (AGIA). He opined that the
option gave the state leverage in the promotion of AGIA. He
believed the bill was in the best interest of Alaskans. He
stressed that even a failure would bring more success than
no action.
1:50:20 PM
RICK ROGERS, EXECUTIVE DIRECTOR, RESOURCE DEVELOPMENT
COUNCIL, ANCHORAGE (via teleconference), vocalized support
for the bill. He spoke to the council's diverse membership
and noted the importance that the bill did not pit one
energy resource against another. The council believed the
best energy solutions for Alaskans were the ones that would
balance low cost with reliability over the long-term. He
stated that the bill would provide the resources to advance
an instate pipeline to an open season. The open season
would enable the project to compete for transportation
commitments; it would succeed or fail on its economic
merits. The council was hopeful that a larger diameter
pipeline to tidewater would be sanctioned in the future. He
stated that HB 4 positioned the gasline authority to help
expand intrastate gas transportation from the off-take
points required under AGIA. The council did not believe
that a standalone gasline project diminished the prospects
of a larger capacity line. He stated that private
enterprise and the marketplace would dictate the best
gasline option. The council encouraged the addition of a
sunset provision to the AGDC enabling legislation should
the entity be rendered obsolete in the future. He furthered
that the viability of the project would not be known until
an open season took place. He stressed that the delivery of
reliable and cost-effective energy to Alaskans was critical
to the future prosperity of its people. He stated that HB 4
was an appropriate means to advance a pipeline project
forward.
1:55:10 PM
RON LONG, ALASKA GASLINE DEVELOPMENT CORPORATION COMMUNITY
ADVISORY COUNCIL, SEWARD (via teleconference), spoke in
favor of the legislation. He urged the committee to keep
the process moving forward. He supported a large line to
Seward, but believed a near-term solution was necessary to
address the problem. He did not believe the crisis
confronting the Railbelt utilities had been foreseen when
the AGIA process had begun in the past. He noted that dire
and drastic options had been discussed to accommodate for
the projected revenue shortfall. He spoke to high heating
costs. He stated that the near-term and long-term projects
were not exclusive. The project under HB 4 had permitting
and background work that would enable a project to proceed
in the near-term and included the possibility of extending
gas to other areas of the state in the future. He did not
believe that the project would do any harm to other
proposals.
Co-Chair Stoltze remarked that he believed Port MacKenzie
was export port of the future.
1:58:36 PM
BILL SHEFFIELD, FORMER GOVERNOR OF ALASKA, JUNEAU (via
teleconference), voiced support for the legislation. He
stated that the passage of HB 4 would be an important step
towards delivering a long-term and affordable source of
energy to a large portion of the state's population. He
elaborated that the bill would provide near-term and
ongoing employment opportunities. He added that the bill
would allow for the potential reopening of Kenai's Agrium
plant. He stated that HB 4 could help the Foothills
refinery in Fairbanks to return to full operation; it would
also help Fairbanks to resolve its air quality problems and
reduce monthly energy costs. He discussed that proposed
mining operations would benefit from affordable energy and
increased jobs would result. He recalled that Foothills had
shipped a substantial amount to the Anchorage port on the
Alaska Railroad in the past; the company had shut down a
large portion of its plant and its shipment had declined
dramatically. He pointed to vehicle gasoline coming from
the Lower 48. He emphasized that the creation of thousands
of jobs and a reduced cost of living for residents was
significant. He stated that the instate line prospect
headed up by the Alaska Housing Finance Corporation (AHFC)
had moved "leaps and bounds" forward; an Environmental
Impact Statement (EIS) and most right-of-way approvals had
been secured. He stressed that passing HB 4 was critical to
moving the project forward to an open season.
2:02:41 PM
Former Governor Sheffield stated that an open season could
be concluded by the end of 2014 and the gasline could
subsequently be completed in 2019. He believed gas was for
Alaskans to use and was separate from the oil revenues the
state depended on for public services. He elaborated that
the project would allow the state to support its own energy
needs at an affordable cost for generations to come. His
interest in the project related to the well-being of
Alaskans and his long-term residency in the state. He
thanked the committee for its time.
REPRESENTATIVE MIKE HAWKER, SPONSOR, thanked former
Governor Sheffield for supporting the legislation.
Representative Gara asked if the former governor had
testified that the pipeline would be directed towards the
Kenai area to help the Conoco and Agrium plants. Former
Governor Sheffield replied that the gasline was planned to
travel through the Matanuska Valley where gas was currently
taken and trucked to Fairbanks. There were pipelines
underneath the inlet towards Nikiski. He answered that the
pipeline would connect up to transport gas to Nikiski if
the state wanted to sell excess gas to another location.
2:06:00 PM
Co-Chair Stoltze thanked Governor Sheffield for his
continued interest in government and the issue. He
acknowledged the former governor's success in bringing
economic development to rural Alaska. He pointed to the
implementation of the Red Dog Mine and the creation of
Alaska Industrial Development and Export Authority,
(AIDEA). He noted that without the former governor's work
some of the current opportunities for the state would not
exist.
2:07:29 PM
DAVID PRUHS, SELF, FAIRBANKS (via teleconference), thanked
the sponsors for introducing the bill that he hoped would
provide a long-term solution to reduce energy costs
throughout the state. He stated that the gasline would
benefit approximately 75 percent to 80 percent of the
state. He pointed to high fuel costs. He stressed that HB 4
offered a solution that would fit the needs of residents
and government.
2:09:31 PM
BOB SHEFCHIK, CHAIR, CHAMBER ENERGY COMMITTEE, AND CHAIR,
INTERIOR GAS UTILITY BOARD, FAIRBANKS (via teleconference),
testified in support of the legislation. He explained that
the ASAP line and HB 9 had been priorities of the Fairbanks
Chamber Energy Committee the prior year; the support was
maintained for HB 4. He remarked that piped gas was seen by
most as the best form of transport from the North Slope. He
stated that piping gas would require more demand and a
longer-time frame than a proposed gas trucking project;
however, he believed piped gas remained the long-term
solution to provide access to Alaskans. He stated that the
bill created the entity and provided the underpinnings for
an instate line from the North Slope. He opined that the
economic viability would be proven in the development of
the project. He spoke in support of building on work
conducted by AGDC. He shared that the bill was supported by
the chamber and the utility board. He stated that although
the community's focus had been on addressing immediate
solutions, the work towards developing a long-term solution
was valued.
2:11:29 PM
JIM PLAQUET, ALASKA SUPPORT INDUSTRY ALLIANCE, FAIRBANKS
(via teleconference), spoke in favor of the bill. He
stressed that the bill would provide the most cost-
effective and time sensitive schedule for developing a
long-term, affordable energy solution for Fairbanks and the
state. He stated that the bill would allow AGDC to work to
provide Alaskans with energy needed for space heating and
economic survival. He discussed that the bill directed AGDC
to develop a pipeline at the lowest cost without delay. He
discussed items allowed under the legislation. He stated
that the legislation called on state and local governments
to participate in lowering costs for Alaskans. He stressed
that high energy costs were crippling the Interior and
rural Alaska. He emphasized that the bill would provide low
cost energy for Alaskans in the long-term.
2:13:48 PM
JOMO STEWART, FAIRBANKS ECONOMIC DEVELOPMENT CORPORATION,
FAIRBANKS (via teleconference), testified in support of HB
4. He discussed that energy was a fundamental component of
any modern economy. He stressed that the availability and
affordability of energy was critical. He stated that in
general the corporation was supportive of any project that
linked Alaska's two oil and gas producing regions to make
energy more available and accessible to Alaskans in the
near-term and in the future. The corporation was also
generally supportive of the advancement of mechanisms that
allow Alaska to more actively participate in the
development of its resources. He believed the bill
supported the corporation's goals.
Co-Chair Stoltze noted that Representative Wilson had
joined the meeting.
2:15:41 PM
MERRICK PEIRCE, SELF, FAIRBANKS (via teleconference), spoke
in opposition to the bill [back up documents were provided
to the committee (copy on file)]. He discussed Asian
interest in gas and that the state's partner in AGIA had
been nonresponsive. He stated that the concept of a bullet-
line had been rejected by voters in a 2002 election. He
believed that the bullet-line project under the legislation
did not have economy of scale. He noted that debt and
equity returns were enormous. He detailed that a 75 percent
to 25 percent debt-to-equity ratio would mean combined
service costs of $500 million to $600 million per year,
which was approximately $1,400 per user per year.
Mr. Peirce mentioned items related to gaining buyers for
expensive bullet-line gas including the large supply of
shale gas in the Lower 48. He wondered why a buyer would
pay two to three times the Henry Hub price for gas from a
bullet-line. He stated that a gasline through the Cook
Inlet basin would be more cost effective. He acknowledged
AGDC technical staff for providing new tools for the state.
He pointed to a publicly owned right-of-way between Big
Lake and Fairbanks. He mentioned new spool-able high
pressure pipe that offered a cheaper option than steel
pipe; it was possible to run an 8 inch flex-steel pipeline
from Big Lake to Fairbanks for a much lower cost in the
upcoming year. He provided additional information about the
benefits of the flex-steel pipe; costs were low and
installation was simple. He detailed that an 8 inch pipe
could deliver between 8.4 billion to 11 billion cubic feet
of gas per year depending upon the number of compressors
used. He suggested giving the project to AGDC. He believed
the concept of using a small pipeline integrated well with
Cook Inlet development; developers would like to have
Fairbanks as a market for gas. He discussed other ways the
flex-steel pipeline would integrate well. He would provide
the information in writing.
Co-Chair Stoltze asked Mr. Pierce to follow up with written
documents.
2:22:07 PM
DEANTHA CROCKETT, EXECUTIVE DIRECTOR, ALASKA MINER'S
ASSOCIATION, ANCHORAGE (via teleconference), spoke in
strong support of the legislation. She discussed that the
legislation and its pursuit of large energy projects would
work to relieve Alaskan residents from the dire energy
situation. She communicated that large mines in Alaska
struggled with power at a substantial level; therefore the
association was very supportive of the bill. She shared
that mining companies faced a perpetual cost-benefit
analysis due to the high expense of operating in the state.
She furthered that mining in Alaska had great prospects,
but the lack of infrastructure was a deterrent to
companies. She stressed that energy solutions were very
beneficial to the industry. She relayed that the mining
industry would provide demand for the project. She noted
that the industry was pursing gas pipelines that would
connect directly with mining projects. She stated that the
project would also allow Alaska to viably market its gas
commercially in other outside locations. She added that a
letter of support had been submitted to the committee (copy
on file).
2:25:03 PM
ALAN LEMASTER, DIRECTOR, ALASKA NATURAL GAS PIPELINE
COALITION, COPPER VALLEY (via teleconference), spoke in
opposition to the bill. He discussed the coalition's
membership that was in support of a gas pipeline from the
North Slope to Prince William Sound. He noted that some of
the member organizations included the Fairbanks North Star
Borough, the City of Fairbanks, Delta, North Pole, the
Copper Valley Chamber of Commerce, the City of Valdez, and
other. He stated coalition's concern was that HB 4 appeared
to be targeted at placing natural gas in the Anchorage bowl
and surrounding areas in a way that would not benefit many
residents along the Trans-Alaska Pipeline System (TAPS)
corridor.
Mr. LeMaster stressed the importance of adopting a solution
that would benefit all Alaskans. He had recently attended a
House Resources Committee meeting where producers had
presented findings. Producers had spoken about conditions
that would determine the feasibility of building a gasline
in Alaska; producers specified that a pipeline must be high
pressure, a minimum of 42 inches, run from the North Slope
to tidewater, and able to carry sufficient natural gas for
liquefaction and sale to Pacific Rim countries from a deep
water port. He stated that all of the issues raised by the
producers seemed to support an option that would run along
the TAPS corridor as presented by the Alaska Natural Gas
Development Authority (ANGDA) and supported by AGIA. He
observed that the line proposed under HB 4 would be low
volume, low pressure, carry dry gas with no export
component, and would be available only to certain
communities.
Mr. LeMaster remarked that natural gas liquids would remain
on the North Slope and would not be available. He mentioned
recent open seasons that had occurred under AGIA in 2012;
the results remained confidential. He expounded that HB 4
took the state to another open season, which could take
more than two years and provided no guarantee that
producers would agree to send product through the line. He
stressed that the ASAP line would not carry LNG and would
not provide needed revenue from the export of gas to
Pacific Rim countries. He stated that the line would not
lower energy costs for Southcentral Alaska. He communicated
that the line would be sold to private companies for
operation and costs would likely increase with little
control from state or regulatory agencies. The coalition
believed it was a dangerous prospect. He stated that there
was a viable project under AGIA for which the state had
already paid $300 million. He noted that significant work
had been done by ANGDA over the past 10 years, costing the
state over $11 million as a result of a public vote for a
line to Valdez. He wondered why $400 million more would be
spent on something that had already been done. He
emphasized that a large volume line would lower energy
costs and would provide revenue to the state from an export
component. He reiterated support for a line along the TAPS
Richardson Highway to Valdez.
2:31:20 PM
Mr. LeMaster communicated the coalition's recommendation to
use the $400 million remaining under AGIA for an LNG
trucking project for Fairbanks, to retrofit the Nikiski
plant for regasification from Cook Inlet, and to approve a
large volume gasline to tidewater. He urged the committee
to vote against the bill.
Representative Wilson asked if Mr. LeMaster was speaking on
behalf of the Fairbanks North Star Borough. Mr. LeMaster
replied that he was speaking on behalf of the coalition;
the borough was a member of the coalition. Representative
Wilson asked for verification that the coalition was
speaking on behalf of the borough. She relayed that the
borough had testified in support of the bill. Mr. LeMaster
answered that the coalition had presented its position on
the proposal the prior year to the borough and the City of
Fairbanks; subsequently the borough had provided a
resolution to the coalition in support of the coalition's
position. He noted that the resolution had been provided to
the House Resources Committee.
Representative Wilson requested that the coalition provide
a copy of the borough resolution specifically in opposition
to HB 4.
Co-Chair Stoltze requested that the information be sent to
his office for distribution.
2:33:59 PM
Representative Thompson pointed to resolutions from the
Cities of North Pole and Fairbanks expressing support for
HB 4.
Mr. LeMaster understood that Fairbanks had serious
difficulty with the cost of energy. He stated that in past
discussions Fairbanks had been paying $0.21 per kilowatt
hour for electricity; Copper Valley was paying $0.35 to
$0.36 per kilowatt hour and the price had recently risen
exponentially. He stated that businesses in the area were
considering closing due to high costs, which would cause
the diminishing population to decline further. He believed
the same was true for Valdez, Delta, Tok, and other. He
stated that low-cost energy was critical if the region was
going to survive as a viable community for commerce. He
stated that he would fully support HB 4 if it would reduce
energy costs for eastern Alaska.
Co-Chair Stoltze noted that the copies of the resolutions
would be reviewed.
2:36:52 PM
JASON HOKE, REGIONAL ARDOR, COPPER VALLEY DEVELOPMENT
ASSOCIATION, COPPER VALLEY (via teleconference), spoke in
support of the bill. He believed the state needed to move
forward. He opined that HB 4 would provide a solution for
some of the energy issues facing Alaskans. He agreed that
another pipeline would be nice, but the research and
numbers did not indicate the viability of the option. He
believed the bill provided for networking with other small
gas lines in the future. He reiterated the importance of
moving forward. He urged the committee's support for the
bill.
2:38:41 PM
KEN HALL, SELF, FAIRBANKS (via teleconference), voiced
support for the bill. He stressed that the status quo was
not serving Alaska well. He believed an instate gasline was
a tremendous benefit for Interior and Southcentral
residents and for Alaska in general. He mentioned the
trucking of LNG as a short-term option for high cost energy
relief. He discussed that a large diameter gasline would be
an expensive and significant undertaking. He pointed out
the benefits of gas in Fairbanks including relief of health
issues related to coal and wood smoke. He opined that the
bill would provide opportunity for the state.
2:41:13 PM
TODD WEGNER, ASSISTANT CITY MANAGER, VALDEZ (via
teleconference), urged the committee to vote no on HB 4. He
stated that the ASAP line would not solve the short-term
energy crisis in the Interior or Cook Inlet and it would
not solve the ongoing energy crisis facing rural Alaska. He
believed the project would not answer the state's long-term
energy and fiscal needs. He remarked that the bill would
spend $400 million for another open season; two open
seasons had been held previously under the AGIA process. He
elaborated that during one of the prior open seasons Asian
buyers had expressed interest to ship and purchase twice
the amount of gas for a viable project. He opined that the
only project addressing the long-term energy and fiscal
needs of the state was a maximum volume line to tidewater
with an export component. He detailed that a large volume
line would provide lower cost energy to all Alaskans due to
economy of scale. He stated that interim solutions for Cook
Inlet and the Interior would be necessary under any gasline
scenario. He asked the committee to spend the $400 million
on a LNG trucking project for the Interior and the
renovation of the Nikiski plant in Cook Inlet. He asked the
committee to focus on a project that would benefit Alaskans
for many generations.
Co-Chair Stoltze stated that the City of Valdez would have
the ability to provide further comment during invited
testimony at a later date.
2:43:51 PM
JOHN BITNEY, STATE GOVERNMENT LIAISON, NORTH SLOPE BOROUGH,
spoke in support of the legislation. He referenced a letter
of support written by the North Slope Borough mayor, dated
February 28, 2013 (copy on file). He detailed that the
letter addressed developing the state's natural gas
resources in order to lower energy costs for Alaskans. He
relayed the borough's excitement related to North Slope
development. The letter spoke to the importance of working
together for a long-term solution. He added that a letter
had been written in support of legislation proposing an
[LNG] trucking project as well.
2:45:43 PM
Representative Wilson asked why the North Slope Borough had
withdrawn support for an alternative port authority plan.
Mr. Bitney was unsure of the reason, but would follow up
with the information.
2:47:29 PM
AT EASE
2:48:38 PM
RECONVENED
TOM MALONEY, SELF, ANCHORAGE (via teleconference), read
testimony for his son Sam Maloney:
I fully support House Bill 4, which has been
introduced by my representative Mr. Hawker. As a
lifelong Alaskan I have enjoyed a fine education at
South High, King Career Center, and I'll graduate from
UAA in May with a degree in welding and non-
destructive technology. We need new energy for Alaska
to lower heating costs particularly in the Interior of
Alaska, but also in other locations including
Anchorage where I reside. We also need to provide high
pay job opportunities to folks like myself who like to
learn and even more so, love to earn. Let's get energy
for Alaska and get Alaska moving again. Thank you.
Co-Chair Stoltze CLOSED public testimony. He discussed that
there would be invited testimony at a subsequent meeting.
He spoke to the schedule for the following day.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB4 Support-Kenai Pen Borough.pdf |
HFIN 3/26/2013 1:30:00 PM |
HB 4 |
| HB 4 AKHLA Support.pdf |
HFIN 3/26/2013 1:30:00 PM |
HB 4 |
| HB 4 Valdez Resolution Opposition.pdf |
HFIN 3/26/2013 1:30:00 PM |
HB 4 |