Legislature(2013 - 2014)SENATE FINANCE 532
04/07/2013 02:00 PM Senate 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 |
CS FOR SPONSOR SUBSTITUTE FOR HOUSE BILL NO. 4(FIN)
"An Act relating to the Alaska Gasline Development
Corporation; establishing the Alaska Gasline
Development Corporation as 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 and its subsidiaries 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;
repealing the statutes relating to the Alaska Natural
Gas Development Authority and making conforming
changes; 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."
2:07:34 PM
DANIEL R. FAUSKE, CHIEF EXECUTIVE OFFICER AND EXECUTIVE
DIRECTOR, ALASKA HOUSING FINANCE CORPORATION, DEPARTMENT OF
REVENUE AND PRESIDENT, ALASKA GASLINE DEVELOPMENT
CORPORATION, introduced himself.
Co-Chair Meyer noted that Senator Bishop had joined the
committee.
FRANK RICHARDS, MANAGER, PIPELINE ENGINEERING, ALASKA
GASLINE DEVELOPMENT CORPORATION, observed that in addition
to the upcoming PowerPoint presentation, committee members
had been provided with a project plan update that specified
how the Alaska Gasline Development Corporation (AGDC) had
moved forward with and made optimizing changes to the
project. He discussed the PowerPoint presentation, "ASAP
Scope, Schedule and Budget" (copy on file).
Mr. Richards looked at slide 2, "ASAP Project Scope."
· Mainline
-36" diameter pipe
-737 miles long
-1,480 psi max operating pressure
· Fairbanks Lateral
-12" diameter pipe
-35 miles long
-Tie-in w/mainline at MP 458
· North Slope Gas Conditioning Facility (GCF) at
Prudhoe Bay
· More off-takes possible
Mr. Richards stated that the Alaska Stand Alone Pipeline
(ASAP) project had originally been given to the Alaska
Housing Finance Corporation (AHFC) under HB 369 and offered
that the project's purpose had been to deliver gas to
Alaskans at the lowest possible cost and at the earliest
possible date. He explained that as a result of a project
plan amendment at the end of 2012, ASAP had shifted from
the original plan to what was referred to as the
"optimized" plan. He discussed slide 2's second bullet
point and stated that it would deliver utility grade gas
into a "college gate"; from this point, the gas could be
put into a distribution system that would "hopefully" be
built out in order to provide gas to the Fairbanks and
North Pole areas. He spoke to the slide's third bullet
point and stated that the gas conditioning facility (GCF)
was a major component of the project through which gas
would be provided by the producers and impurities would be
removed. He relayed that the GCF would deliver a gas
composition of methane with a small amount of propane. He
explained that a major compression station would be added
to the GCF. He shared that as a result of the optimized
plan, the intermediate compressor stations had been removed
and elaborated that there would only be one compressor
station on the North Slope; the major compressor would push
the gas at 1480 pressure per square inch (psi) with a
pressure drop of approximately 500 psi. He expounded that
the utility contract amount would be about 950 psi. He
spoke to the slide's fourth bullet point and shared that
the optimized plan also enabled take-off points along the
line. The take-off points would allow communities,
industrial users, etc. to tap into utility grade gas at a
fairly low cost; the original plan would have required a
more expensive facility that would have caused the price of
the gas to be higher coming into Fairbanks than it would
have been in Anchorage and South Central Alaska.
2:12:20 PM
Mr. Richards discussed slide 3, "Scale of Construction
Activities."
· Considerable construction workforce
-Over 8,000 direct jobs
-Over 15,000 indirect jobs
· 335,000 tons of steel for the pipeline
· 9,000 truckloads of pipe travelling 4 million
miles
· 10 million cubic yards of earthwork
· 15 construction camps
Mr. Richards spoke slide 3 and related that ASAP would be a
multi-year project that would employ a large number of
Alaskans.
Mr. Richards highlighted slide 4, "ASAP Project Schedule &
Highlights." He related that the top portion of the slide's
chart represented the schedule that was given to AHFC as
mandated by HB 369 and pointed out that it had the first
gas flowing in 2015. He offered that HB 369's schedule was
extremely aggressive. He stated that AHFC had done its due
diligence work, provided a project plan, and developed the
optimized schedule that was represented on the bottom part
of the chart and showed a gated or front-end loaded (FEL)
approach. He discussed the chart on the bottom of the slide
and pointed out that the FEL Phase 1 work had been
conducted prior to the July 2011 project plan. He stated
that the current work was in FEL Phase 2 and was
progressing towards an open season. He shared that AHFC had
completed a final environmental impact statement (EIS) and
had received an unconditional 604 miles of state right-of-
way. He added that AHFC was currently awaiting a decision
by the Bureau of Land Management (BLM), which would lead to
the next 100 miles of federal right-of-way. He mentioned
that AHFC was working on the major federal and state
permits that were required for the next phase of the
project. He pointed out that the FEL Phase 2 would
terminate during the end of 2014 to the beginning of 2015
when the open season began. He explained that during the
open season, the cost of transporting the gas would be
determined and delivered to potential shippers and buyers;
at this time, the economics would "come into play" and the
market would dictate whether or not ASAP was a viable
project. He stated that with a successful open season, ASAP
would enter into FEL Phase 3, otherwise known as the bridge
engineering phase; during this phase, desired design
changes by the shippers or buyers could be addressed. He
explained that the class 3 estimate would be a more defined
estimate that consisted of approximately 30 percent
engineering; at this point, a decision would be made on
whether to move forward with the project. He discussed the
chart's timeline for procurement, construction, and
culmination of the project.
Mr. Richards discussed slide 5, "Stage Gate Approach." He
related that each of the slide's individual gates had a
decision point at the end that allowed the project to be
refined to the next stage. He stated that the timelines
were depicted on the bottom of the trumpet curve.
Mr. Richards displayed slide 6, "Stage Gate Approach."
· Forces logical planning sequence
· Requires deliverables to be complete before
starting new tasks
· More effective, timely process with issue
identification and an evaluation framework early
in the process-avoids cycles back-to-start-of-
project causing delays and added costs
· Provides clear opportunities to stop project at
gates if not meeting business objectives
· Improves communication with stakeholders
· Provides a clear path for project team
Mr. Richards addressed slide 6's first bullet point and
related that it represented a logical sequence that had
successfully been used by all kinds of mega projects;
furthermore, it allowed the decision makers, financial
markets, and engineering to have definitive opportunities
to evaluate the economics and make a decision on whether to
proceed at the gates.
2:17:10 PM
Mr. Richards discussed slide 7, "ASAP Budget."
· Cost to Alaskans: $400M up-front budget (~5
percent of Total)
· Cost Benefit: Long term natural gas supply for
Alaskans
· Project Cost: $7.7 Billion* in 2012 dollars, +/-
30 percent
Mr. Richards addressed slide 7's first bullet point and
reported that the state would usually pay for 15 percent of
the design efforts and 15 percent of the construction
management. He concluded that the state would normally fund
30 percent of the total project costs. He spoke to the
slide's second bullet point and pointed out that the
project would provide in-state use for consumers and
industry, but also would hopefully provide more economic
opportunities for Alaskans in the future. He discussed the
shaded blue table on the bottom of the slide and indicated
that the components of the project were the GCF, which
would cost approximately $2.8 billion and the pipeline
section from the GCF to Dunbar. He explained that Dunbar
was an Alaska Railroad site west of Fairbanks and was where
the lateral into Fairbanks would be started; the lateral
was expected to cost $70 million. He furthered that the
pipeline would also proceed south from Dunbar to Big Lake
and would cost an additional $1.8 billion. He addressed the
red colored text on the bottom of the slide and related
that it depicted that an inflation rate of 2.5 percent
equaled about $210 million of additional costs for every
year of delay. He offered that the inflation would
represent a considerable sum of money that would be borne
by the consumers of the gas.
Mr. Richards spoke to slide 8, "ASAP Cost to Consumers."
Cost of Gas To Consumers (burner tip)
Anchorage
· Optimized $9 to $11.25/MMBtu in 2012 dollars
· Base case $9.63/MMBtu in 2011 dollars
Fairbanks
· Optimized $8.25 to $10/MMBtu in 2012
· Base Case $10.45/MMBtu in 2011 dollars
Mr. Richards discussed slide 8 and relayed that the
reduction in Fairbanks was due to the elimination of the
straddle plant. He concluded that the consumers in
Fairbanks would be playing less than those in Anchorage
because they would be closer to the source.
Mr. Richards highlighted slide 9, "AGDC Budget to Project
Sanction." He related that the total state appropriations
to the project had been $72 million, which left
approximately $328 million needed to advance to project
sanction. He offered that the slide depicted the major
engineering functions that would be needed over the next 2
years in order to advance the project and refine the cost
levels to industry standards. He discussed the slide's
facilities engineering component and related that it would
have the highest cost because it had received the least
amount of effort. He explained that AGDC had conducted
environmental and pipeline work, but had only done very
preliminary engineering work. He pointed out that a
facility that had a cost of over $2 billion would require a
significant amount of engineering in order to advance to
the level of detail that would meet the open season
requirements. He addressed the slide's pipeline engineering
component and explained that AHFC would be looking at the
route, composition, and hazards associated with it. He
discussed frost heaving issues with a potential pipeline.
He spoke to the program management component and explained
that rather than creating an organization within AGDC to
operate the project, an outside consulting team would be
brought in for project management. He discussed other
industries and projects in which outside consultants were
brought in for project management and relayed that it was a
common and successful practice. He explained the merits of
project management and briefly discussed the slide's other
components.
Mr. Richards displayed slide 10, "Funding Required to
Advance."
· Achieving legislative objectives to advance an
in-state natural gas pipeline for Alaskans is
contingent on legislative funding
· Full funding will keep project on schedule
o Advance facilities and pipeline engineering
o Regulatory permitting activities and agency
engagement
o Engineering field investigations
· Partial funding will cause schedule delays
o Limited pipeline and facilities engineering
o Limited field investigation
2:23:53 PM
Senator Bishop directed the presentation back to slide 2
and queried the shortest distance from the pipeline to
Minto, Alaska. Mr. Richards agreed to provide the requested
information.
Senator Bishop inquired which technical experts in the
areas pipeline and facilities engineering were used to
determine the project's calculations. Mr. Richards replied
that AGDC had recently consummated a contract with a joint
partnership, Arctic Solutions, which was a joint venture of
Fluor and WorleyParsons. He explained that Fluor and
WorleyParsons were two preeminent process engineering
companies that had conducted a lot of work in the Arctic;
the two companies had experience with large projects,
Arctic conditions, and in particular, Prudhoe Bay. He added
that Fluor and WorleyParsons had been working in Prudhoe
Bay since the beginning of the oil and gas industry there.
Co-Chair Meyer inquired if Mr. Fauske had a comment to add
to the record. Mr. Fauske wondered if Senator Bishop was
interested in the firms that AGDC currently used to gather
data.
Senator Bishop thought that H.C. Price might have been
contracted for the "cross country" numbers. Mr. Richards
responded that Senator Bishop was correct. He elaborated
that Michael Baker, which was AGDC's primary pipeline-
engineering company, had used H.C. Price for some of the
cost estimating work.
Senator Bishop queried if AGDC's construction schedule
spanned the winter, summer, or a combination thereof. Mr.
Richards responded that the work would be conducted via a
combination of summer and winter work. He explained that
AGDC wanted to keep the ground frozen in the areas of
permafrost and discussed the challenges of winter work
along areas of wet ground.
Vice-Chair Fairclough inquired if HB 4 had been formulated
in response to a recommendation by ASAP's advisory board.
Mr. Richards replied that ASAP was the project that was in
the inception of HB 369, which had given the responsibility
to AHFC to deliver a project plan in July 1, 2011. He
explained that the project plan provided the concepts,
suggestions, recommendations, and in particular, the
legislation that was necessary to move forward. He
discussed HB 9 from the previous year, which had evolved
into the current bill before the committee.
Mr. Fauske interjected that AGDC was a subsidiary of AHFC
and that ASAP was the project name. He apologized for any
confusion regarding the acronyms and explained that the
project's current governing board was AHFC's board of
directors.
2:28:35 PM
Vice-Chair Fairclough inquired if HB 4 was consistent with
the recommendations made to move ASAP forward. Mr. Fauske
replied in the affirmative.
Vice-Chair Fairclough further inquired if there was
anything in HB 4 that was inconsistent with the direction
that AGDC had recommended for moving ASAP forward. Mr.
Fauske responded that although AGDC was in support of the
changes, he wanted to make people aware of the 6 month
shift to the project's schedule that had arisen through
discussions in the House. He explained that the original
tariffs were based on a 30-day review model and that he
wanted people to be aware of the change to the schedule. He
added that he was not condemning or opposing the schedule
change, but that he wanted people to be aware of it because
it was the one significant change from the recommendations.
He expounded that the recommendations regarding the
Regulatory Commission of Alaska (RCA) and other fine tuning
of the bill represented a good, thorough review. He
explained that normally the RCA reviewed projects from
scratch; however, in the case of ASAP, most of that work
would already have been completed. He stated that although
the period of review was extensive, AGDC was confident that
supplying good and accurate data would enable the RCA to
conduct a timely review. He discussed the large scope of
the project and the effects of delays.
Vice-Chair Fairclough surmised that an amendment had been
added to HB 4 that created a 30-day RCA review. She
requested further explanation of the amendment, as well as
the changes it enacted. Co-Chair Meyer interjected that he
had heard the review would be a 90-day period and requested
further explanation. Mr. Fauske deferred the question to
Rena Delbridge.
2:32:04 PM
Vice-Chair Fairclough requested an explanation of the
amendment to HB 4, as well as why the House made the
change.
RENA DELBRIDGE, STAFF, REPRESENTATIVE MIKE HAWKER,
explained that that the amendment would add a suspension
period timeline of 90 days to the review of the initial
recourse tariff. She expounded that in the version of HB 4
that had passed the House Resources Committee, there had
been a 30-day timeline for the RCA to review the initial
recourse tariff. She explained that the review would cover
whether or not the cost-based rate had an appropriate
capital structure, rate of return, the depreciation method,
as well as whether or not the terms and conditions were
unduly discriminatory. She recalled that during the time
that HB 4 was between the House Resources and House Finance
Committees, the sponsor had taken the bill to the RCA for a
public hearing in Anchorage; the hearing was for discussion
and soliciting input from the RCA regarding timelines,
clarity, and whether the legislation provided the tools it
needed fulfill its charged tasks. She related that she
would be happy to provide the committee with a transcript
of the public hearing, but stressed that the RCA had been
clear that the 30-day review for the initial recourse
tariff was too short a period for it to fulfill its
charges; as a result, the sponsors had recommended changing
the 30-day period to a 90-day one. She stated that the
House Finance Committee had added the 90-day period to the
bill; by recommendation of the administration, the
committee also added an additional 90-day, optional
suspension period. She explained that if the RCA found
that, in the review of the initial recourse tariff, it
needed to conduct further investigation, it would be able
to add the additional 90-day period on.
Ms. Delbridge continued to respond to Vice-Chair
Fairclough's question and related that the sponsor
understood the RCA's desire to have adequate time. She
expressed a concern that the uncertainty of the additional
time might create some problems. She stated that ASAP would
be waiting for a decision in order to hold its open season
and conduct commercial activities and pointed out that
currently, the pipeline would be waiting the 90-day initial
review period; furthermore, at the end of period, the RCA
may decide to extend the process by an additional 90 days.
She stated that although potential delays would add costs
to the project, the sponsor also wanted the RCA to have
adequate time and tools to conduct its review.
2:35:00 PM
Vice-Chair Fairclough recalled that at least two RCA
decisions had cost Anchorage possible opportunities at a
secured supply of natural gas. She queried if "the same
change" was made the bill that had been made to the RCA and
if the RCA would not only be required to consider costs in
its decision, but also the consequences of not approving a
contract. Ms. Delbridge surmised that Vice-Chair Fairclough
was referencing a provision in the Cook Inlet Recovery Act,
which essentially gave the RCA the statutory authority to
add to their decision making process the concept that there
might be consequences of failing to approve a contract that
was before them, beyond the immediate prices or rates
involved in the contract. She related that there was a
reference to the Cook Inlet Recovery Act within HB 4 that
pertained directly to the RCA's consideration of contracts
between affiliated parties that underwent the heightened
review; this might come into play in an instance in which a
large anchor tenant had negotiated a better rate because of
its large volume and great exposure to risk. She explained
that the RCA would now be required to consider the
consequences of failing to approve the contract in its
deeper review of the aforementioned anchor tenant; however,
a provision for contracts pertaining directly to public
utilities was not specifically included in HB 4 because the
RCA had a different standard for a contract carrier
pipeline than the rate review process that was in a typical
public utility regulation. She observed that in "this case"
there was the initial recourse tariff and an RCA approved
cost-based rate as the backstop and that if there was a
different rate in the contract between a carrier and
utility, it would likely be less than the cost-based rate;
in this situation the utility would be presumed to be
negotiating a better deal for its rate payers.
Co-Chair Meyer inquired if the request to change the review
period from 30 days to 90 days came from the RCA, the
attorney general, the Department of Law, or all of the
above. Ms. Delbridge replied that the request had been made
by the RCA in a public hearing on the legislation. She
added that the bill's sponsor had sent her to anchorage to
appear before the RCA for the public hearing; furthermore,
the RCA had made 3 other recommendations at the hearing
that had been addressed and enacted in the House Finance
Committee.
2:39:16 PM
Co-Chair Meyer expressed concern that extending the review
period to 90 days might encourage people to use the whole
90 days. He recalled a recent bill in committee regarding a
possible Liquid Natural Gas (LNG) route. He referenced
slide 8 and its cost per million British thermal units
(MMBTu) figures and inquired if HB 4 would result in lower
costs per BTU than the LNG bill proposed. Ms. Delbridge
replied that she did not recall specifically what the LNG
costs would be, but believed that they were $15-$19 per
MMBTu. She added that she did not recall with certainty
what the components of the LNG trucking were. She stated
that AGDC's estimate had an assumption of $2 gas per MMBTu,
as well as $2 in local distribution charges. She explained
that slide 8 depicted the tariff to the burner tip and that
if the $2 per MMBTu and the $2 in distribution charges were
subtracted, the actual pipeline tariff to the city gate
could be determined.
Co-Chair Meyer noted that Ms. Delbridge was very
knowledgeable on the bill's subject matter.
Senator Bishop recalled that the last LNG trucking estimate
to the burner tip in Fairbanks was $13.90-$15 per MMBTu.
Senator Dunleavy wondered how the diameter of the HB 4's
pipeline had been decided upon. Mr. Fauske deferred the
question Frank Richards.
Mr. Richards replied that the design premise was based on
limitations placed by the Alaska Gasline Inducement Act
(AGIA) statute, which specified a maximum flow rate of 500
million cubic feet (Mcf) per day; based on the limit and
expressed interest, the legislation's pipeline was designed
to flow rate of 500 Mcf per day. He stated that there was
tradeoff between pipeline diameter, strength, and
compression and that AGDC had examined various options from
a 24 inch, a 32 inch, and a 36 inch pipe in order to
determine the lowest cost for pipe diameter and
compression. He stated that a sole compressor station
married to a 36 inch diameter pipe had been determined to
be the lowest cost diameter pipe at a flow rate of 500 Mcf
per day.
2:42:02 PM
Senator Dunleavy inquired if the AGIA agreement was a
driver behind some aspect of ASAP. Mr. Richards replied
that AGIA dictated the maximum flow rate of 500 Mcf per
day.
Mr. Fauske noted that the pipeline would be capable of
flowing more than 500 Mcf per day, which was not depicted
on the slides because AGDC did not want to indicate that it
was designing something to exceed the 500 Mcf per day
limitation.
Mr. Richards interjected that at 1480 psi and the 1
compressor station, the pipeline would flow 500 Mcf per
day.
Senator Dunleavy queried if the assumption was that the
AGIA agreement would be in place for some time, given that
a pipeline was being based "to some extent" on limitations
of the agreement. Mr. Richards responded that because the
AGIA licensee was working with the state administration on
moving forward with a project and because the AGIA statute
was still in place, AGDC was required to comply with the
AGIA limitations.
Senator Dunleavy inquired if it would be possible to have a
48 inch pipeline that only delivered the amount of gas just
under the AGIA limit. Mr. Richards replied that
theoretically, AGDC could use a 48 inch pipeline, but that
it would have additional costs associated with it that
would have to be borne by the state. He surmised that the
RCA would not want to put additional costs on Alaskan rate
payers.
Senator Dunleavy inquired why HB 4's route was chosen as
opposed to another route. Mr. Richards responded that the
route was given to AGDC by its predecessors on the project.
He explained that the ENSTAR Natural Gas Company had
originated the concept for ASAP, which in turn had handed
the project off to the governor's office and the Department
of Natural Resources (DNR). He continued to explain that
when HB 369 had passed into law, AHFC and its subsidiary,
AGDC, were given ASAP.
Senator Dunleavy queried if ASAP was designed for the
purpose of delivering gas in state and not for exporting.
Mr. Richards responded that the concept of ASAP was to
deliver gas for Alaskans needs, which included consumers
and industries. He pointed out that the in-state use of
natural gas was approximately 240 Mcf per day, which left a
capacity of about 260 Mcf per day that could be consumed by
other large industrial uses; these large industrial uses
could include mining developments, export facilities, or
reestablishing a fertilizer facility.
Senator Dunleavy inquired if the pipeline could
theoretically be geared for export as the project neared
the build phase. Mr. Richards responded that the "proof in
the pudding" would be when ASAP went to an open season.
Senator Dunleavy inquired if the pipeline was designed so
that if things changed with AGIA, it could also be used for
exports in order to generate revenue for the state. Mr.
Richards replied that the open season would reveal who was
interested in shipping and buying gas and would represent a
decision point to see if there would be additional
accommodation required.
2:47:56 PM
Mr. Fauske interjected that AGDC had held and expression of
interest in July of 2011, which was a non-binding,
confidential hearing in which firms and other interests in
the project attended; AGDC had signed documents that it
would not divulge who was at the meeting. He noted that
AGDC knew that there was approximately a 240 Mcf to 260 Mcf
per day use in Alaska and that at the end of the hearing,
there was more than 500 Mcf per day in non-binding
agreements; in other words, there was an "absolute" stated
interest by commercial or industrial users for the gas. He
observed that AGDC viewed the commercial interest in the
gas very positively because it indicated that even at a
smaller scale, there was an opportunity. He noted that if
ASAP could fill the 500 Mcf per day limit, it would drive
the tariffs down for everyone.
Mr. Fauske recalled working on AGIA a number of years back
and noted that the original plan had been to ship 4 billion
cubic feet (Bfc) or 5 Bfc of gas per day down through
Canada; the plan had since been restructured. He pointed
out that when the route for ASAP had been handed to AGDC,
HB 369 specified that gas would be brought to Alaskans at
the lowest possible costs; although there had already been
a route established, AGDC had conducted analysis that
revealed that the current route satisfied the language in
HB 369. He acknowledged that there had been questions
regarding why the pipeline would not go to Valdez. He
explained that Valdez was another 110 miles and that at a
cost of $5 million per mile the lowest possible cost
calculation would be quickly exceeded. Secondly, the line
did not extend to Valdez because at the time, AGIA was
already proposing to export 3.5 Bcf of gas per day out of
Valdez. He concluded that beyond the distance and the
mandates of HB 369, AGIA's significant export plans in
Valdez discouraged the line being extended to the city. He
observed that ASAP was looking for what was referred to as
an "anchor tenant" that would take care of Alaskans and
hopefully expand abilities and capacity in some of the
state's rural areas; the project would be selling the
excess gas that was not needed on an immediate basis. He
stated that ASAP's pipeline could be used for exports if
that was what one of the customers wanted to do with the
gas.
Mr. Fauske observed that there had been concerns raised
that the ASAP pipeline would not transport liquids and
stated that the original 24 inch line was design to run at
maximum pressure to sustain the liquids at a state where
they could be transported down the line. He explained that
the straddle plants that were mentioned earlier in the
meeting had a cost $250 million each and were where all the
liquids were pulled out of the line; after the liquids were
removed, utility grade gas, or methane, was left over. He
stated that the advancement of the shale oil market in the
Lower-48 had changed the industry drastically and that AGDC
was not opposed to a liquids market; however, the liquids
market was extremely difficult currently due to the
"feedstock" or abundance of gas. He shared that AGDC had
conducted a study on LNG, Natural Gas Liquids (NGL) [NGLs
are the liquids that Mr. Fauske is referring to for
industrial use.], and Gas to Liquids (GTL) and that the
analysis had revealed that LNG was the most likely
candidate for marketing; he surmised that AGDC had been
proven correct in its analysis. He concluded that AGDC had
left itself the option of entertaining activities like NGLs
at the open season if there was stated interest. He noted
that there were a lot of good ideas out there and that it
be ideal if there was 3.5 Bfc to 4 Bcf of gas for export
sales. He offered that if the "big line" was successful, it
would be a wonderful day for state; however, oil filled the
treasury, while gas should supply for the security of its
residents. He stated if Alaska could sell enough gas to add
to treasury, it would be a wonderful thing, but indicated
that it was difficult to move forward in all those
directions.
Mr. Fauske observed that oil and gas represented a world-
market driven enterprise that involved large numbers. He
referenced a letter released by an alignment of North Slope
producers and applauded Governor Sean Parnell for setting
benchmarks. He discussed the producers' schedule to have a
42 inch pipeline that would flow up to 3 Bcf per day by the
year 2025 or 2026. He stated the urgency of getting gas to
Alaska's residents.
2:55:01 PM
Co-Chair Meyer wondered if the governor's proposal for the
big line would follow the same route as ASAP. Mr. Richards
thought that the big line, which was currently known as the
South-Central Liquefied Natural Gas (SCLNG) Project, would
share a route with ASAP from Prudhoe Bay to Livengood. He
indicated that the route from Livengood would depend on
where the destination point was for the LNG facility. If
the SCLNG Project's LNG facility was in Prince William
Sound, the route would veer off with the Trans-Alaska
Pipeline System (TAPS); however, if the facility was in the
Cook Inlet Basin, the route might be parallel to that of
ASAP's across Minto Flats.
Co-Chair Meyer wanted to make sure that the money being
spent on ASAP wouldn't be wasted if the state opted for the
bigger line. Mr. Fauske observed that AGDC had been
concentrating its work on the route from Livengood and
south. He stated that AGDC had promised the legislature
that it would not duplicate other work being done with the
idea in mind that the two projects might be aligned one
day. He offered that if the SCLNG Project line went
through, the work that AGDC had conducted would not be
wasted and could be utilized.
Co-Chair Meyer inquired if the military was part of AGDC's
due diligence work regarding potential in-state needs for
gas. Mr. Fauske replied that AGDC had based the Fairbanks
model on absolute military use. He added that the Fairbanks
model assumed 70 Mcf per day, which included the military
bases.
Mr. Richards furthered that the 70 Mcf per day included the
Fairbanks North Star Borough. He explained that the number
AGDC had come up with had been derived from a study that
was done for Alaska Pipeline Project (APP) for in-state
needs.
Mr. Fauske added that AGDC had briefed military leaders on
ASAP and indicated that they had expressed a great deal of
interest.
Vice-Chair Fairclough inquired if Mr. Fauske had previously
stated that extending ASAP's route to Valdez would add 110
miles to the current route. Mr. Fauske replied in the
affirmative.
Vice-Chair Fairclough queried the cost of adding the
additional 110 miles of route to Valdez. Mr. Fauske
responded that he had been referencing the large cost of
adding 110 miles of route at a cost of $5 million per mile.
2:59:05 PM
Senator Hoffman directed the presentation back to slide 9,
"AGDC Budget to Project Sanction" and indicated that he was
trying reconcile the budget on the slide with the fiscal
notes that were attached to the bill. He referenced page 6
of fiscal note number 2 and pointed out that the facilities
engineering costs of the note were $182.962 million, while
slide 9 listed the same costs at $105.984 million. [Fiscal
note number 2 has since been renumbered to number 4; it is
the note showing an appropriation to AGDC.] He continued to
discuss page 6 of the fiscal note and pointed out that it
showed pipeline engineering costs of $93.784 million, while
the slide showed $69.139 million; additionally, the total
costs for project sanction/construction on page 4 of the
note was $330 million, while the slide showed a figure of
$328.331 million. He inquired if the $330 million on page 4
of the fiscal note represented the same figure as the
$328.331 million on slide 9 and further queried how the
differences between the fiscal note and AGDC's slide could
be reconciled. Mr. Richards replied that fiscal note number
2 was very comprehensive and that the $400 million on page
4 of the note was the total target that AGDC had
recommended for developing the engineering work through
project sanction. He continued to discussed page 4 and the
table of additions and subtractions that ultimately led to
a total of $330,000. He stated the numbers shown on page 6
of the note had been provided in the original project plan
and identified in gross terms the four major components of
project plan completion, commercial operations, pipeline
engineering, facilities engineering, as well as support
activities; these totaled $400 million. He shared that what
was depicted on slide 9 were detail cost estimates on all
the major activities as the project had advanced toward
project sanction. He added that the $400 million on page 6
of the note represented gross numbers and related that a
portion of it had already been spent. He pointed to the $72
million in prior year appropriations on page 4 of the note
and shared that it accounted for the reduction to the $400
million on page 6. He offered apologies for any confusion
regarding the fiscal notes. He concluded that the "detail
going forward" was on slide 9.
Senator Hoffman wondered if the fiscal note's cost figures
included or excluded the $25 million in the governor's
request. Mr. Richards stated that the request represented
the actual need going forward, as opposed to what the
appropriation would be.
Senator Hoffman inquired from what starting date the actual
need of the project was calculated. Mr. Richards responded
that the date range was from FY14 through FY16 and
represented only the funding needed for AGDC.
3:03:42 PM
Senator Hoffman observed that the bottom of page 4 of the
fiscal note showed that the funds needed to project
sanction were $330 million and inquired if that was
correct. Mr. Richards replied in the affirmative.
Senator Hoffman queried if the $330 million on the fiscal
note represented the same number that was shown on slide 9.
Mr. Richards responded in the affirmative.
Senator Bishop requested a ballpark cost estimate for the
permitting costs from Fairbanks to Prince William Sound and
then to Valdez. Mr. Richards inquired if Senator Bishop was
requesting the costs for AGDC to go through the National
Environmental Policy Act (NEPA) process, which included an
EIS, from Livengood to Valdez. Senator Bishop responded on
the affirmative. He observed that AGIA had probably done
some of the permitting work to Big Delta and that the
information might be available. Mr. Richards replied that
AGIA had done some of the work and had published a
considerable amount of data through its resource reports
through the Federal Energy Regulatory Commission (FERC).
Senator Bishop added that Mr. Richards might just supply
the permitting costs from Big Delta to Valdez. Mr. Richards
requested a clarification and inquired if the request was
for the permitting for a lean-gas pipeline or a rich-gas
pipeline. Senator Bishop replied that he wanted the
permitting costs for a LNG export pipeline.
3:06:00 PM
AT EASE
3:14:36 PM
RECONVENED
3:14:46 PM
Vice-Chair Fairclough remarked on Senator Hoffman's line of
question regarding fiscal note number 2 and felt that there
might need to be more clarity on the issue. She observed
that the fiscal note included other agency needs and
requested an explanation of the note for the purpose of
clarity. Mr. Richards apologized for any confusion and
replied that the fiscal note was all inclusive of costs for
not only AGDC, but also for the Department of Law (DOL),
DNR, the Department of Environmental Conservation (DEC),
the Department of Transportation and Public Facilities
(DOT), and many subdivisions within those agencies. He
explained that slide 9 of the presentation represented a
detailed look at AGDC's costs alone going forward to
project sanction.
Senator Olson mentioned AGDC's work on right-of-ways and
wondered if the project had secured the right-of-ways on
federal and private lands. Mr. Richards referred to a
pending right-of-way decision from the BLM and stated that
there were approximately a 100 miles of federal land that
AGDC was currently awaiting a decision on. He stated that
there were about 70 miles of remaining lands that consisted
of Native regional and village corporations, other private
holdings, and several Native allotments. He added that
other than Native lands, private holdings only accounted
for approximately 2 percent of the entire line; he added
that the non-Native, private holdings probably represented
about 12 miles of actual right-of-way alignment.
Senator Olson inquired if AGDC was planning on exercising
its right of imminent domain on some of the private lands
alone the line. Mr. Richards responded that currently, AGDC
had not even entered into discussions with the private land
holders because ASAP was not yet at the stage of actually
defining the actual center line. He added that it was a
little premature in the process to enter into those
discussions with the private land holders.
Senator Olson inquired if it was in the realm of
consideration that AGDC might exercise its right of
imminent domain. Mr. Richards replied that HB 4 provided
the imminent domain authority to AGDC.
Senator Olson directed the presentation back to slide 3. He
remarked on the 335,000 tons steel that needed to be
shipped in for the project. He inquired if the road
maintenance had been taken into consideration and queried
if the increased maintenance would be shouldered by DOT.
Mr. Richards replied that while the port of entry had not
been determined, the 335,000 tons of steel would likely be
transported by the Alaska Railroad. He reported that other
loads, including construction loads, would be hauled on the
state highway. He related that AGDC hoped to enter into a
highway-use agreement with DOT; he noted that DOT was
included in the fiscal note. He stated that AGDC would
conduct a condition survey before the initiation of the
work, as well as a survey at the end; the agreement would
be worked out with DOT in advance of the project.
3:19:24 PM
Senator Olson pointed out that some bridges might not be
able to carry the increased loads over an extended period
of time and inquired if the state would be bearing the
costs to upgrade bridges. Mr. Richards replied that the
bridges along the Parks Highway and Dalton Highway routes
had been upgraded over the last 10 years; these bridges
were sufficient to allow module hauls of up to almost
450,000 lbs. He stated that AGDC did not expect a load as
heavy as 450,000 lbs. to be associated with ASAP and
furthered that the major modules for the GCF would likely
be sea-lifted.
Senator Olson discussed ASAP's proposed terminus in Big
Lake, as well as issues surrounding HB 4's pipeline route
versus alternate routes. He inquired if AGDC was open to
using an alternative route and not going to Big Lake. Mr.
Richards replied that the route that had been worked
through EIS was given to AGDC by its predecessors. He
explained that the route would bring gas to the south-
central market and would provide gas to residents where it
was needed; currently, there were potential gas shortages
from the Cook Inlet system. He related that the open season
would be the determining factor of where the shippers and
buyers wanted the pipeline to be and the product to flow
to.
Senator Olson inquired if the route down to Big Lake was
etched in stone. Mr. Richards responded that as it
currently stood, the current route was what AGDC had been
provided with and it was the route that it had the right-
of-way alignments and federal EISs on.
Senator Bishop urged AGDC to use the University of Alaska
system for engineering research services whenever possible
and noted that he would appreciate the use of in-state
services for that work. Mr. Richards replied that AGDC had
summer field work to conduct and that it was exploring all
the in-state options to do the work, including the
University of Alaska.
3:23:23 PM
JOE DUBLER, VICE PRESIDENT AND CHIEF FINANCIAL OFFICER,
ALASKA GASLINE DEVELOPMENT CORPORATION AND DIRECTOR OF
FINANCE, ALASKA HOUSING FINANCE CORPORATION, DEPARTMENT OF
REVENUE, discussed the PowerPoint, "ASAP, Financing Mega
Projects" (copy on file).
Mr. Dubler looked at slide 2, "Financing Overview."
· Objective is to achieve the lowest cost of financing
possible for a given project
· Look at financing from the other side--that of the
investor
· Structure financing package to attract as many
investors as possible
· Typically two sources of funding a project - equity
and debt, each of which has its own advantages and
disadvantages
· Rates of return for both debt and equity are
determined based upon several factors that basically
reward investors for taking on risk
· Investment yield = inflation rate + risk factor +
liquidity factor
Mr. Dubler addressed slide 2 and related that the financing
on mega projects was not much different than other
projects, except that the numbers were a lot larger. He
discussed the fifth bullet point and stated that equity
investors tended to take on more risk and received a higher
yield; the bond holders typically took less risk and
received a lower yield.
Mr. Dubler discussed slide 3, "Equity Financing."
Equity is riskier (and higher cost) due to:
· Equity investors usually put the first dollars
into a project often with no guarantee the
project will even make it to a sanction
decision
· Equity shares are not very liquid. It is much
more difficult to sell equity in a project than
a bond issued for the same project
For these reasons it is advantageous to a project's
overall cost of funds to keep the equity portion as
small as possible and the debt portion as large as
possible
Mr. Dubler spoke to slide 3. He discussed the first bullet
point and related that bond holders were hesitant to lend
at the beginning of a project because they took completion
risk in doing so. He explained that bond holders did not
like to take completion risk; completion risk is the risk
that the project is never finished and never generates
revenues. He discussed the second bullet point and related
that a bond traded on a national market, while equity
shares typically did not. He spoke to the last paragraph on
the bottom of the slide and offered that the paragraph's
conclusion was why the state had specified a debt to equity
ratio in the AGIA legislation; the prescribed ratio was
meant to keep producers from setting a higher equity to
debt ratio in order to increase investment returns.
3:26:45 PM
Mr. Dubler highlighted slide 4, "Equity Financing."
· Equity financing options include 100 percent state-
owned, 100 percent private owned, or some
combination of the two
· One of the advantages of a State-owned pipeline is
that the State would have more control over the
components of the pipeline
· Some might say this is also a disadvantage of a
State-owned pipeline as the private sector is better
equipped to own and operate large projects
· The main advantage to a privately owned pipeline is
that the private sector may be best equipped to
complete such a project. There are many companies
whose only business is to build, own and operate
pipelines, and they are very good at doing so
· The disadvantage is that the State loses the control
it would otherwise have with the State ownership
option
Mr. Dubler addressed slide 4 and discussed the first bullet
point. He related that the Knick Arm Bridge and Toll
Authority (KABATA) was an example of an entirely state-
owned project; AGIA and APP were examples of two entirely
private owned projects.
Mr. Dubler discussed slide 5, "Debt Financing."
· While there are many different vehicles available to
finance a project, we will focus on three today:
general obligation bonds; project finance bonds; and
state moral obligation bonds
· General Obligation Bonds
o would get the State's rating, which would lower
the cost and make for a more straightforward
credit analysis
o However, general obligation bonds require voter
approval and a general fund appropriation in
the future (which will be offset by project
revenues)
Mr. Dubler spoke to slide 5 and discussed the second main
bullet point. He stated that general obligation bonds were
typically used for state infrastructure projects and added
that Alaska's credit rating was currently AAA. He discussed
the slide's final sub-bullet point and shared that a
majority vote of the people for bond issuances have been
historically difficult to achieve in Alaska. He stated that
AGDC was not recommending a general obligation bond
issuance for ASAP because it did not feel that it was
necessary.
Senator Hoffman inquired when the last time was that the
voters turned down a state-wide general obligation bond.
Mr. Dubler responded that he had been referring more to
local, municipal elections and mentioned Anchorage's
difficulties getting bonds passed.
Senator Hoffman surmised that state voters had never turned
down a general obligation bond. Mr. Dubler responded that
he was not aware of state voters doing so.
Co-Chair Meyer agreed with Senator Hoffman and added that
he could not recall a state-wide general obligation bond
failing. He noted that locally, the general obligations
bonds failed to pass votes from time to time.
Co-Chair Meyer inquired if the general obligation bonds
referenced on the slide would be state bonds. Mr. Dubler
responded in the affirmative.
3:30:26 PM
Mr. Dubler highlighted slide 6, "Debt Financing."
· Project Financing
· Would have no impact on the State of Alaska as
the project would be rated as a stand-alone
credit; therefore no general fund appropriation
would be required.
· State Moral Obligation Bonds
· Would have similar benefits of general
obligation bonds in that they would result in
lower interest rates and a simpler credit
analysis based upon the State's credit rating.
· Likewise, the negative effects of moral
obligation bonds would be similar to the
general obligation bonds in that there would be
a potential State downgrade resulting in a real
cost to the State of Alaska and its political
subdivisions.
Mr. Dubler discussed slide 6. He addressed the first main
bullet point and stated that AGDC was recommending the
project financing model for ASAP; in this model, the
revenues of the project were at risk to make the debt
service on the bonds. He stated that with project
financing, the debt was structured to match the revenues
off of the project, which in this case were the tariffs
from customers that were signed during an open season.
Mr. Dubler discussed slide 7, "Ownership Model."
· The goal for project financing is to strike an
appropriate balance between debt and equity
components such that the lowest overall yield
(cost) can be achieved.
· A typical ownership model could include a pro
rata equity for shippers in the share of the gas
in that they are shipping in the line.
· This allows shippers a percentage control in line
with the risk their taking in committing their
gas to the project.
· A target capital structure of 75 percent-25
percent is consistent with the APP and Denali
Pipelines' assumptions used in their Open
Seasons.
Mr. Dubler addressed slide 7 and discussed the fourth
bullet point. He pointed out that the debt to equity ratio
of 75 percent to 25 percent was a higher debt to equity
ratio than the AGIA ratio; AGDC had used a higher ratio to
decrease the amount of equity and increase the amount of
debt in order to keep gas as the lowest possible costs.
Senator Bishop requested more information about the
ownership model of AGDC. He specifically wondered what
revenue could be returning to AGDC, as well as potential
dividends from the revenue that could benefit Alaskans. Mr.
Dubler replied that in the case of the ownership model, the
state would not get dividends from the pipeline because it
was not making an investment as an equity partner. He
continued that since an eight of the gas would be the
state's royalty share, the state might be able to invest an
eight of the equity in the pipeline and receive the return
on one-eighth of the equity ownership. He added that the
return was anticipated to be 10 percent to 13 percent.
3:35:10 PM
Co-Chair Meyer wondered if AGDC was recommending one
finance model over another. Mr. Dubler replied that AGDC
felt the financing model could be best determined after the
open season; ideally, if the open season was successful, he
felt that the private sector would be best suited to build
the pipeline. He explained that optimally, the project
would be at a point where it had enough customers to fill
the pipe, had firm transportations agreements, was ready to
go, and would be taken over by a pipeline company.
Co-Chair Meyer inquired if there would be options at some
state ownership if the pipeline were taken over by a
private company. Mr. Dubler responded in the affirmative.
Vice-Chair Fairclough surmised that Alaska was taking 100
percent of the risk in moving ASAP through the first 2
gates. She observed that Alaska was completely risking $400
million and queried why the state was not already an equity
owner in the project. She pointed out that including the
AGIA funding, Alaskans had made a significant investment
and had covered all of the risk up front. Mr. Dubler
replied that Alaska was taking all the risk with both AGIA
and ASAP. He explained that typical gaslines would have a
very large source, which Alaska had, and very large use,
such as Los Angeles or Chicago; all a pipeline company did
was look as uses and sources and connected the two. He
explained that the use that Alaska had in the south-central
and Fairbanks areas was only 240 Mcf per day, which was
substantial, but not in the context of a $7 billion to $8
billion project. He expounded that companies were not
willing to put a $400 million risk upfront and hope that
they would get customers. He offered that for a much larger
market, companies might be willing to risk $400 million up
front; however, to date, companies had been unwilling to do
so in Alaska. He responded to the second part of Vice-Chair
Fairclough's question and stated that Alaska was a 100
percent owner of ASAP currently; the project would not be
handed over to a third party gratis, but would be sold. He
concluded that the project was currently generating assets
to the State of Alaska and pointed out that if the project
went forward after a successful open season, those assets
would be sold to the project.
3:39:06 PM
Vice-Chair Fairclough noted that the intent of providing
energy to Alaskans was to do so at the lowest possible
cost. She inquired if Alaska was not the full owner of the
project, if it would be beneficial to have all of Alaska's
investments in the project reduce the overall burner tip
cost in order to try and recoup the state's investment. Mr.
Dubler replied that it would have to be a policy at the
time on what amount, if any, the state wanted to negotiate
in a sales price for those assets.
Vice-Chair Fairclough discussed the fourth bullet point on
slide 7. She requested an explanation on how a 75 percent
to 25 percent ratio would save on overall project costs
versus a 70 percent to 30 percent split. Mr. Dubler
responded that the return on equity on a project like ASAP
was expected to be in the 10 percent to 13 percent range,
while debt would be roughly in the 5 percent to 7 percent
range. He explained that the more debt that was sold, as
opposed to equity, the lower the overall cost of funds
would be. He stated that because the project was financed
over 30 years, a major component of the project was the
cost of the capital.
Vice-Chair Fairclough inquired if the state would receive
more money in interest as an equity owner versus the
interest it would pay on borrowing the money or whether it
was the opposite. Mr. Dubler replied that the project would
not be receiving money on the equity, but would be paying
the equity investors. He concluded that the project would
pay more to the equity holders than it would it would to
the bond holders. He concluded that having 30 percent of
the total capital in equity versus 25 percent would result
in a higher cost.
Senator Olson inquired if HB 4 allowed the issuance of
bonds by AGDC or whether AGDC had to return to the
legislature for a "go or no go" situation. Mr. Dubler
responded that bond issuance by AGDC was allowed for on
pages 16 through 20 of the bill.
Vice-Chair Fairclough recalled that the legislation
specified that AGDC, or the future owner of the project,
would only be able to bond its own assets and not the State
of Alaska's. Mr. Dubler responded that no entity could
issue general obligation bonds for the State of Alaska
without a vote of the people. He pointed out that the
language that gave AGDC the option of utilizing the moral
obligation of the State of Alaska in issuing its debt had
been in the bill; however, the legislation had since been
modified in the other body to require AGDC to return to the
legislature for approval to use that tool. He concluded
that the State of Alaska would not have liability on any
bonds issued by ASAP without further action by the
legislature.
3:43:31 PM
Vice-Chair Fairclough requested more information regarding
the validity of pledge. Mr. Dubler deferred the question to
Ken Vassar.
Vice-Chair Fairclough directed the committee's attention to
page 20, Section 31.25.180 of the bill. She pointed to the
validity of pledge and read from lines 12 and 13 on page
20. She pointed out that while a lien was not a bond, it
was still a liability and requested additional explanation
of the validity of pledge.
KEN VASSAR, GENERAL COUNSEL, ALASKA GASLINE DEVELOPMENT
CORPORATION, ANCHORAGE (via teleconference), explained that
Section 31.25.180 was a standard section included in bond
statutes; it served the purpose of allowing AGDC to pledge
whatever revenues may be available as security for the
bonds that it issued, as well as to give the purchasers of
the bonds confidence that the pledge was a valid lien
against the revenues. He shared that the essence of a
revenue bond was the revenue that was available to repay
the bond holders/lenders; therefore, there would be a very
clear description in the bond documents of what that
revenue was, as well as a clear statement of the lien on
that revenue. He concluded that the section assured the
bond holders in writing that the pledge of revenues was
valid and could not be removed.
Senator Hoffman remarked that it had been previously stated
that the debt to equity ratio for AGIA was fixed in
statute. He surmised that ASAP's ratio was a target of 75
percent to 25 percent and was not set in statute. Mr.
Dubler replied that Senator Hoffman was correct and that
the only thing that HB 369 fixed in statute was that AGDC
bring gas to Alaskans at the lowest possible cost; the
split of 75 percent to 25 percent was derived from HB 369's
directive to bring gas to Alaskans at the lowest possible
cost.
Senator Hoffman reiterated his question and asked if the 75
percent to 25 percent debt to equity ratio for ASAP was
fixed in statute. Mr. Dubler replied that it was not.
Mr. Richards recalled several questions from Vice-Chair
Fairclough during the prior hearing that Mr. Dubler would
be able to answer, specifically regarding the interest on
the project's capital fund.
3:47:41 PM
Vice-Chair Fairclough directed the committees page 13,
Section 31.25.100 of the bill, which dealt with an in-state
natural gas pipeline fund. She discussed the use of the
word "may" on line 15 and inquired where an appropriation
to the fund would reside.
Vice-Chair Fairclough wondered if an appropriation to the
natural gas pipeline fund would stay in the General Fund
and would be managed by the Department of Revenue (DOR) or
if it would be managed by an outside organization. She
further inquired if the interest earned off the fund would
return to the general fund if that was where fund was
housed or if the interest would go in a sub-account. Mr.
Dubler replied that for budgetary and accounting purposes,
the natural gas pipeline fund would reside under AGDC and
the money would be reported on AGDC's financial statements
and budget reports; however, investments from the fund,
which is what was referenced on page 13, line 15 of the
bill, were treated differently. He explained that DOR had a
fund called General Fund and Other Non-Segregated
Investments (GEFONSI), which worked as an internal fund
that state agencies could utilize. He explained that
currently, all of the assets of the Alaska Housing Capital
Corporation were invested in GEFONSI; even though the
corporation's financial statements listed the investments,
they were actually invested by DOR's Treasury Division. He
expounded that AGDC recognized and had decided to utilize
DOR's expertise. He pointed out that DOR charged very
little for the services it provided and related that DOR
had achieved a very good return on investments in the past.
He concluded that the actual location of the cash for
accounting purposes was within AGDC; however, it would be
invested in DOR.
Vice-Chair Fairclough inquired why the legislation was
using the word "may" on page 13, line 15 instead of the
word "shall." Mr. Dubler believed that the intent of the
wording was to give flexibility to AGDC. He pointed out
that AHFC had been investing with DOR with positive results
for about 10 years. He furthered that there was no reason
that AHFC would not invest with DOR, but thought that the
language was there to maintain flexibility.
Vice-Chair Fairclough pointed out that Alaskans trusted the
Permanent Fund Board, the rate of return on the permanent
fund, as well as the ability to receive a permanent fund
dividend on a regular basis. She pointed out that DOR had a
done a good job on rates of return for the Permanent Fund.
She inquired what the other options for investment besides
DOR were and why there needed to be flexibility, given that
DOR had such a good track record with investments. Mr.
Dubler explained that DOR currently provided the investment
services; however, if the DOR stopped its investment
services, AGDC would be unable to invest the money if the
word "shall" were put in place of "may" on page 13, line 15
of the legislation. He offered that the language allowed
AHFC to invest the in-state natural gas pipeline fund
somewhere else if DOR ever stopped providing the services
without having to come back for a statutory revision.
3:53:00 PM
Vice-Chair Fairclough inquired if Alaska would earn the
interest returns from the in-state natural gas pipeline
fund if the fund were managed and invested by a third party
or whether in this case, the money would be managed, for
all practical purposes, by the State of Alaska. Mr. Dubler
responded that as long as AHFC had the money, it would be
under the governance of the state. He related that the
interest earnings on the fund were subject to appropriation
by the legislature every year. He explained that there was
a state constitutional clause regarding dedicated funds and
dedicated fund prohibitions that prevented the state from
designating how the revenue from a specific chunk of
funding would be spent.
3:54:30 PM
Vice-Chair Fairclough noted there was lapse money in the
Building Fund for the state that was looped around even
though it was appropriated every year. She recalled that
the committee had recently heard a bill that would create a
building fund for the University of Alaska and that it had
language that showed the lapse funds as circular; the
legislation did not dedicate the funds because it stated
that the money rolled through with each successive
legislature. She assumed that the project wanted the money
rolled back over, but was allowing flexibility by having it
go in the General Fund, which would give the legislature
control over the funds. She inquired if her assumption was
correct. Mr. Dubler replied that the bill's sponsor would
be better suited to answer questions regarding intent, but
added that the language came from AHFC statutes and very
cleanly addressed the constitutional issue at hand.
Ms. Delbridge responded that the language in the bill was
specifically recommended by Legislative Legal Services in
order recognize the constitutional prohibition on dedicated
funds, while also ensuring that the legislation had
language that indicated the current legislature's intent
without legally binding the reappropriation of the funds;
the language was on page 13, line 19 of the bill and read
"and may be appropriated to the fund." She related that the
language was a de facto indication to future legislators
that the intent of the current legislature was that the
money be returned to the fund; furthermore, the language
did so without violating the constitution. She stated that
she was not aware of the particular differences between HB
4 and the recently referenced university bill, but that she
would be happy to look in the matter to see if it could be
beneficial.
Vice-Chair Fairclough noted that HB 4 and University of
Alaska building fund legislation were for different
purposes, but that both made sure that the state was in
constitutional compliance.
Vice-Chair Fairclough inquired if the $330 million request
reflected the total project cost or whether the time value
of money included the interest that the project expected to
receive. Mr. Richards replied that the amount shown
represented the total request through project sanction. He
stated that AGDC had worked the time value of money into
its tariff calculation and that the numbers were not
inflated.
Vice-Chair Fairclough inquired if the project would still
have the funding to get to project sanction if the
legislature did not appropriate the interest from the
General Fund back to the project. Mr. Richards responded
that the amount shown was the cost to project sanction and
was exclusive of interest.
Co-Chair Meyer asked about the next section.
3:58:26 PM
DARYL KLEPPIN, COMMERCIAL MANAGER, ALASKA GASLINE
DEVELOPMENT CORPORATION, related that the tariff model was
where all the costs on a project came together and that it
determined the costs for building, owning, and operating a
pipeline throughout its useful life. He pointed out that
AGDC did have some estimates, but that uncertainty factors
had been calculated into the tariff model. He stated that a
pipeline carrier was the shipper of the gas, but would not
be the owner of the gas.
Mr. Kleppin discussed the PowerPoint, " ASAP, Tariff Model
Presentation" (copy on file).
Mr. Kleppin discussed slide 2, "Tariff Model Purpose."
· Estimate the cost of building, owning, and
operating a gas pipeline over its useful life
· Estimate tariff rates that need to be charged to
recover the cost of service
· Assure that financial commitments obtained during
the open season will cover all required costs
Mr. Kleppin spoke to slide 3, "Primary Factors Impacting
Tariff Rates."
· Capital costs
· Operating costs
· Volume (throughput)
· Currently all are estimates and in the early
phases of engineering
Mr. Kleppin discussed the first bullet point on slide 3. He
indicated that the uncertainty around the capital cost
estimates were plus or minus 30 percent, but shared that
the estimates would be more accurate as more engineering
was conducted. He stated that the current estimate of
capital costs was about $7.7 billion. He discussed the
slide's second bullet and stated that the operating costs
were things like staffing, maintenance, supplies, etc. over
the life of the pipeline; at the current stage, the
operating costs estimate was based on an industry-standard
rule-of-thumb based on the percentage of total the capital
costs. He spoke to the slide's third bullet point and
shared that for the purposes of the AGDC's model, the
tariff was calculated in BTUs; 1 MMBTu was roughly 1,000
cubic feet of gas.
Mr. Kleppin discussed slide 4, "Tariff Model Structure."
· Cost of service model
· Capital cost estimates input into FERC code of
accounts and broken down by segment
· Industry standard
· RCA familiar with cost categories & FERC accounts
· Operating cost estimates based on industry
standards
· Gas volume/usage and allocated based on in-state
demand study (2010)
Mr. Kleppin spoke to slide 4 and related that the first
bullet point included capital costs, the cost of financing
that capital, and the operating costs; in AGDC's tariff
model, the costs were input into a standard code of FERC
accounts. He added that FERC used the standard code of
accounts that all the pipelines in the Lower-48 used. He
pointed out that FERC regulated about 200,000 miles of
liquids pipelines in the Lower-48 and a similar mileage of
gas pipelines; the tariff model calculation was very
commonly used in the Lower-48. He reiterated that the
operating costs were an estimate at this stage. He
discussed the final bullet point and related that the in-
state demand study was used in the APP open season, as well
as the Denali open season; AGDC had input similar usage
data into its cost model.
4:03:27 PM
Mr. Kleppin detailed slide 5, "Key Financial Assumptions."
· Depreciation methodology and depreciable life
· Capital structure: percent debt and percent
equity
· Cost of capital components
Mr. Kleppin spoke to the first bullet point on slide 5 and
related that the methodology that was typically used was
straight-line depreciation; the other component was the
length of the depreciable life. He discussed the second
bullet point and stated that AGDC's tariff model used a 75
percent to 25 percent debt to equity ratio; AGIA statutes
specified that the equity could not exceed 30 percent. He
explained that a lower percentage of equity would tend to
drive the tariff lower because the cost of equity was more
than the cost of debt. He stated that the current tariff
model used 5.7 percent as the cost of debt and an 11
percent cost of equity. He shared that the APP and the
Denali projects assumed a cost of debt of 5.1 percent and
was lower than that of AGDC's model; the two projects' cost
of equity ranged from about 12 percent to 14 percent.
Senator Bishop asked if the differential in the increase in
equity was a direct result of the 70 percent to 30 percent
debt to equity ratio of the APP project. Mr. Kleppin
replied that AGDC's tariff model assumed a 75 percent debt
to 25 percent equity ratio and that the AGIA limit was a 70
percent to 30 percent ratio. AGDC's original calculation in
the 2011 project plan had used the 70 percent to 30 percent
ratio; however, the APP and Denali projects used a 75
percent to 25 percent split, which was why AGDC's model had
opted for that ratio.
Mr. Kleppin detailed slide 6, "Model Outputs."
· Revenue requirements calculated for each segment
· Volume (billing units) estimated for each segment
· Recourse tariff calculated
Mr. Kleppin spoke to slide 6 and discussed where and what
the different segments were. He explained that one segment
was all the capital and operating costs associated with the
GCF on the North Slope; another segment was essentially the
cost of the pipeline from the North Slope to Dunbar. One
segment was the cost of the Fairbanks lateral and another
was the cost of the pipeline from Dunbar to Anchorage. He
explained that AGDC did not currently know how many offtake
points there would be and that there could be other
segments that depended on where the offtake points were. He
discussed a hypothetical scenario of how another segment
could be formed. He stated that AGDC had allowed for a
large number of offtake points because it would not know
how many there would be until open season; furthermore,
AGDC was not constrained to 5 offtake points like AGIA. He
addressed the billing units component, which was measured
in MMBTu and was a function of the composition of the gas.
He explained that there was a small amount of propane in
the gas and that there could be a separate calculation on
that. He addressed the final bullet point and related that
the recourse tariff would represent the list price for the
service if the tariff was not negotiated.
4:07:59 PM
Mr. Kleppin discussed slide 7, "Recourse Tariff."
· Initial tariff that is based on Class III
estimates for gas conditioning
facility/compressor and pipeline
· Sticker price
· Ceiling not floor
· Shippers can negotiate for better rate
· Who would use recourse tariff
· Small volume shipper
· Shipper with short term need
Mr. Kleppin discussed the fourth bullet point on slide 7
and noted that a shipper that was moving a large volume of
gas might be able to negotiate a tariff that was lower than
the recourse tariff. He explained that a long-term use
commitment, such as a 40-year period, might enable a
shipper to negotiate a lower tariff. If the shipper chose
not to negotiate the tariff, the recourse tariff, which
would be reviewed and approved by the RCA under HB 4, could
be utilized.
Senator Hoffman inquired if there would be one recourse
tariff for the line, or if there would be different
recourse tariffs at the different off take points. Mr.
Kleppin responded that the rates for the recourse tariff
would differ depending on where the offtake point was.
Senator Bishop inquired if there would be distance
sensitive rates built into the pipeline. Mr. Kleppin
replied in the affirmative.
Senator Dunleavy queried if a negotiated price could become
higher than the recourse tariff. Mr. Kleppin responded that
it was possible that a negotiated rate would become higher
than the recourse tariff if an entity wanted a particular
specialized service, but that this was not typically the
case.
Mr. Kleppin discussed slide 8, "Updated ASAP Tariff
Assumptions."
· Longer term
· 30 year levelized vs. original 20 years
· Updated capital cost estimates
· Now $7.70 Bn
· was $7.52 Bn (all estimates +/- 30
percent)
· More appropriate contingency
· Pipeline now 10 percent vs. 5 percent
(facilities 30 percent)
4:11:27 PM
Vice-Chair Fairclough addressed slide 8 and inquired if the
pipe would be depreciated over 30 years in order to
levelize the tariff. Mr. Kleppin replied in the
affirmative.
Vice-Chair Fairclough queried what using the 30-year versus
the 20-year depreciation was based on. She assumed that
leveraging longer years would result in a lower tariff for
Alaskans. She further inquired if there was a standard
reason that ASAP was using a 30-year schedule and noted
that TAPS was already more than 30-years old. Mr. Kleppin
responded that the 30-year schedule was consistent with
what other pipelines had done. He added that the pipeline
could be depreciated over a longer life and confirmed that
the longer the life, the lower the tariffs would be. He
explained that the typical depreciation life in the Lower-
48 was 30 to 45 years and in some cases reached 60 years.
He pointed out that the issue with smaller contracts
regarded the risk of obtaining another contract when the
shorter one ran out.
Vice-Chair Fairclough inquired if there was something
unique in the projects that had a 45-year depreciation life
cycle that made them choose that length. She noted that a
45-year cycle might not be reasonable with smaller deposits
of gas. She further requested more information on why ASAP
had chosen a 30-year depreciation life cycle and offered
that it was a conservative estimate. Mr. Kleppin responded
that a 30-year depreciation life seemed to be consistent
with the original assumption in TAPS; the Denali and APP
projects used a similar life of 25 years for roughly 80
percent of the depreciation. He stated that Vice-Chair
Fairclough brought up a fair point and that AGDC could
fine-tune the issue with the tariffs going forward.
Mr. Dubler added that the depreciation methods and
depreciable lives tended to be driven by the tax code and
that companies did not want to have large differences
between their book depreciation and tax depreciation. He
explained that because the project would use a straight-
line depreciation for its books, there was already an
accelerated depreciation under the taxes. He added that
AGDC had been trying to keep a lot of things in mind and
that 30 years was a number that seemed to work out well in
many instances.
Vice-Chair Fairclough pointed out that a longer
depreciation life cycle would mean lower rates for
Alaskans. She understood the concept of aligning with
straight-line depreciation, but was trying to understand if
it was reasonable to have a longer depreciable life.
4:15:29 PM
Senator Hoffman inquired if the depreciation life depended
on the ownership and further queried if the state having
more interest in the line would warrant extending the
depreciation. He queried if there was any correlation
between ownership and the depreciation life. Mr. Dubler
replied that if the state had 100 percent ownership of the
line, it could decide what life it wanted to depreciate the
line over. He explained that the state did not have tax
implications associated with any depreciation and observed
that if Alaska was the sole owner of the line, it could
elect to not depreciate the line at all and just donate the
capital. He offered that Alaska would have many options if
was a 100 percent owner. He reported that if the state was
a minority or majority owner in the line, it would have to
take its partners' fiscal options under consideration in
any determination.
Vice-Chair Fairclough inquired if the estimated 18 trillion
cubic feet (Tcf) of natural gas on the North Slope from
known resources would last more than 30 years at ASAP's
flow rate. Mr. Kleppin replied that if 500 Mcf per day were
moved through the line over 30 years, the total volume
would be a little over 5 Tcf of gas.
Vice-Chair Fairclough surmised that there was a possibility
of the gas lasting much longer than 30 years.
Senator Hoffman inquired about the extent of the proven
reserves on the North Slope. Mr. Kleppin cautioned to be
careful how reserves versus resources were viewed. He
stated that Prudhoe Bay had roughly 25 Tcf to 30 Tcf of gas
and that Point Thomson had roughly 10 Tcf to 12 Tcf. He
concluded that the Prudhoe Bay and Pt. Thomson numbers were
ones that he had heard. He did not want to speak to the two
fields' exact volumes, but offered that the numbers were
reference points.
Senator Bishop wondered how much propane would come down
the line at a flow rate of 500 Mcf of gas per day. Mr.
Kleppin replied that the percent of propane in the gas was
1.5 percent and that the line would supply roughly 3,500 to
4,000 barrels per day, depending on how it as processed.
4:19:19 PM
Mr. Kleppin discussed slide 9, "Updated ASAP Tariff
Assumptions."
· Equity share and return on equity adjusted
· Debt/equity split now 75/25 vs. 70/30
· ROE 11 percent vs. 12 percent
· Year delay ($2011 -> $2012)
· 2.5 percent inflation per year ($200 mm)
· Fewer billing units (MMBTUs)
· 523 MMBTUs vs. 584 MMBTUs
Mr. Kleppin discussed the final main bullet point on slide
9. He stated that with the lean gas scenario, which would
not inject NGLs into the stream, the BTU content of the
pipeline was lower and resulted in fewer billable units. He
stated that all of the slide's bullet points worked
together in a revised tariff calculation and explained that
a BTU was amount of energy that was required to raise the
temperature of 1 gallon of water 1 degree Fahrenheit; it
was the standard unit for heat.
Mr. Kleppin discussed slide 10, "Updated ASAP Tariffs." He
related that the slide showed the tariff calculations that
were completed at the end of 2012 that were based on the
new cost estimate assumptions. He stated that the slide
depicted the tariff in constant dollars, as well as nominal
or inflated dollars; it also reflected a range in the
tariff because of the uncertainty in a lot of the
estimates. He related that the tariff, which was the cost
of shipping the gas from the North Slope to Fairbanks,
would be between $4.25 and $6 per MMBTu; the tariff to Big
Lake would be $5 to $7.25 per MMBTu. He related that the
tariff numbers in the last several sentences were in
constant, 2012 dollars; the tariffs were the cost in
shipping the gas and did not include its cost or the cost
of local distribution. He stated that if you added the $4
cost of the gas and local distribution [Each had a $2
dollar cost.], the Fairbanks cost of gas at the burner tip
would be between $8.25 and $10 per MMBTu; the burner tip
cost to anchorage would be between $9 and $11.25 per MMBTu.
He discussed the blue section titled "Cost Drivers" and
related that the next column underneath it showed rules-of-
thumb that reflected what would happen to the tariff if the
cost of capital went up by roughly $1 billion; in this
case, the tariff would go up roughly 50 cents to 80 cents,
depending on several factors. He explained that the next
column down depicted what would happen if Alaska put in a
$1 billion contribution that was not included in the
tariff. The next column down added a sensitivity to return
on equity of 1 percent. The next column down depicted what
would happen if the bond length was extended.
4:23:07 PM
Mr. Dubler compared slide 9's burner tip cost estimates to
the current costs. He explained that Fairbanks was
currently playing about $23 per MMBTu and that Anchorage
was paying about $9.70 per MMBTu.
Senator Bishop inquired if the Fairbanks burner tip price
under ASAP would be in the range of $8 to $10 per MMBTu.
Mr. Kleppin replied in the affirmative, but related that it
would be in the range of $8.25 to $10 per MMBTu.
Co-Chair Meyer requested clarification and wondered if the
rates would double if the open season only achieved
commitments for 250 Mcf per day instead of 500 Mcf per day.
Mr. Kleppin replied that if the line only secured 250 Mcf
and did not change its cost structure, it would have the
same capital costs and the tariff would effectively double.
Vice-Chair Fairclough discussed the anticipation of a 6
month delay going to the RCA and remarked on the costs of
project delays to Alaskans. She pointed out that the
committee was looking for consumer protection and inquired
if the RCA would set the segment-based recourse tariff rate
once, or whether the agency would be responsible multiple
times during the process to examine the number. Mr. Kleppin
responded that as it was currently outlined in the bill,
the RCA would be required to look at the recourse tariff
prior to an open season and then approve that tariff; the
legislation also allowed for revisions at the project
startup, when the project had actual costs. The bill also
allowed for expansions of the pipeline. He discussed a
hypothetical scenario under which gas was discovered in the
Nenana Basic and the pipeline was expanded to incorporate
the discovery; in the case of an expansion, if there had
not been a revised recourse tariff in the last 2 years, a
new tariff would have to be recalculated and offered during
an open season for that expansion.
Vice-Chair Fairclough wondered if there were risks
associated with a gas discovery the Nenana Basin, which the
state was currently incentivizing, to the segmented
delivery cost to Fairbanks. She observed that if the state
went "all in" on the project but found producible gas in
the Nenana Basin or another closer source, the project
would not have to extend or build the Fairbanks component.
She inquired if this was an option. Mr. Kleppin replied in
the affirmative and added that it could be a possible
option.
Senator Bishop surmised that it was important to get the
right pipeline contractor with the right experience to
bring ASAP in or below the advertised price, so that there
was not a disparity between the first recourse rate and the
true up after project completion; this would keep the
tariff where it should be. Mr. Kleppin responded that
Senator Bishop was correct and that if the actual costs
were higher than the initial estimates, the recourse tariff
would typically have a mechanism to incorporate how costs
overran or came under with flow through to the tariff.
4:29:03 PM
Senator Bishop observed that it would make sense to have
the project come in on budget so that the consumer was not
paying for the overrun. Mr. Kleppin responded in the
affirmative.
Vice-Chair Fairclough wondered if there was a reclamation
clause in the bill. Ms. Delbridge responded that part of
the terms of the lease covenants for the state right-of-way
lease included dismantle, remove, and restore (DR&R)
provisions. She pointed out that because natural gas
pipelines were underground and operated for a long period
of time, the process for DR&R was usually less costly; it
was less environmentally damaging to leave the line in the
ground, empty it, and cap it at its ends than it was to
excavate it for removal.
Vice-Chair Fairclough wondered how a possible reclamation
could affect the tariff rate and inquired if there was a
cost or number that was established inside the tariff that
included the reclamation cost. She further inquired if the
money for the reclamation would reside with the owner of
the asset, as with TAPS, or with the State of Alaska. Mr.
Kleppin replied that AGDC needed to acquire a better
estimate for what the DR&R cost would be in the tariff;
typically the DR&R cost would be included in the tariff. He
added that normally, the money collected in the tariff for
the reclamation would reside with the pipeline company.
Senator Hoffman queried the cost of acquiring the right of
way for the project. Mr. Kleppin replied that there were
estimated costs for the right-of-way, but that he was
unsure of the exact estimates.
Senator Hoffman requested AGDC to provide the estimated
costs for the project's right-of-way. Mr. Kleppin agreed to
provide the requested information.
Senator Hoffman inquired how detailed the estimate of the
right-of-way costs was. Mr. Richards explained that the
estimate was based on the project's current alignment and
that he would be glad to provide the committee with the
requested information.
4:32:15 PM
AT EASE
4:37:59 PM
RECONVENED
4:38:21 PM
Co-Chair Meyer commented that the state's investment of
$330 million could be at risk if there a large gas
discovery in the Cook Inlet that resulted in non-
participation at the open season. He added that neither he
nor the utility companies thought there was that much gas
in the Cook Inlet. He thought that Ms. Delbridge also had
the answers to some previous questions asked in committee.
Ms. Delbridge discussed Co-Chair Meyer's concern regarding
a gas discovery in the Cook Inlet risking the state's
investment of $330 million. She acknowledged that the co-
chair's concerns could be seen as a risk, but added that
because the $330 million would bring the project to
sanction, the state would potentially not have spent the
entire amount if the open season did not bring sufficient
shipper commitments to finance the pipeline; the state
would also have valuable assets in form of right-of-ways,
leases, and other data. She observed that Speaker Chenault
and Representative Hawker, who were the bill's sponsors,
had approached the legislation carefully in order to
prevent harm to the Cook Inlet oil and gas industry. She
stated that the bill's sponsors had heard non-objection and
support from the producers in Cook Inlet regarding the
legislation; some of the companies in the Cook Inlet had
also stated that providing that the state did not subsidize
a pipeline from the North Slope, the other companies should
not be in business in the inlet if they were unable to
provide a better price than Cook Inlet gas. She noted that
if there was a large discovery in Cook Inlet, there might
be an opportunity to re-open an export mark in the Inlet,
through which North Slope gas could still play a beneficial
role after its journey through Fairbanks, the Interior, and
other communities.
Senator Meyer observed that some believed that the state
should build a pipeline from Cook Inlet to Fairbanks, but
that he was not one of those people.
4:41:46 PM
Ms. Delbridge discussed a question from the previous day's
committee meeting regarding the repositioning of AGDC from
a subsidiary corporation of AHFC into a stand-alone
corporation of the state. She also recalled a question from
the current meeting regarding how much of the current
legislation in HB 4 was in direct response to what AGDC's
recommendations were. She stated that the shift of AGDC to
a stand-along corporation and its empowerment to look
beyond ASAP to consider other pipelines in the future was a
significant policy call that was made during the crafting
of the legislation and was not necessarily part of AGDC's
recommendations. She believed that the transition was
something AGDC was supportive of, but stated that AGDC
would have needed a number of the corporate authorities and
permissions that were attached to it. She concluded that
the change was not in AGDC's recommendation. She pointed
out that the bill's sponsors believed that AHFC was a
strong state entity in which to incubate an idea and
concept to advance in-state gas pipelines; with the release
of the project plan in 2011, which demonstrated that the
project had merit, the sponsors believed that it was the
prudent choice to create an independent entity with own
strong, mission-specific board of directors and its own
mission-specific duties and responsibilities. She added
that AGDC had also experienced confusion from potential
bond markets and others from the financing world regarding
its placement within AHFC; the shift would help the rest of
the world see that Alaska had a strong intent and meant
business with creating a corporation that was going out to
advance the mission that it had been given. She stated that
the final component to the legislation's transition of AGDC
to a stand-alone corporation was the desire to make sure
that AHFC was able to continue the strong course that it
had maintained in its keys functions, particularly as ASAP
grew in intensity; the sponsors did not want the project to
inadvertently affect AHFC's ability to pursue its mission.
Senator Hoffman wondered where the 32 positions in the
bill's fiscal note would be employed. He inquired if the
positions would be housed in AHFC's office or whether space
would be leased. Ms. Delbridge deferred the question to
AGDC.
4:45:14 PM
Mr. Dubler explained that the positions in the fiscal note,
some of which were from other state agencies, would be
housed within AGDC and not AHFC. He stated that AGDC had
many options available regarding where the location for the
positions would be, one of which was a building that AHFC
fully owned on International Avenue in Anchorage.
Co-Chair Meyer noted that there had been a request to hear
some opposing views to HB 4 and asked that the names of
potential testifiers be supplied to his office.
CS SS SB 4(FIN) was HEARD and HELD in committee for further
consideration.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 4 ASAP-Project-Plan-Update_11Jan2013_WEB.pdf |
SFIN 4/7/2013 2:00:00 PM |
HB 4 |
| HB 4 Opposition Letter - Lee.msg |
SFIN 4/7/2013 2:00:00 PM |
HB 4 |
| HB 4 AML Resolution.pdf |
SFIN 4/7/2013 2:00:00 PM |
HB 4 |