Legislature(2013 - 2014)BARNES 124
03/15/2013 03:15 PM House LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| HB112 | |
| HB76 | |
| HB74 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 112 | TELECONFERENCED | |
| += | HB 76 | TELECONFERENCED | |
| += | HB 74 | TELECONFERENCED | |
HB 74-AIDEA: LNG PROJECT; DIVIDENDS; FINANCING
4:19:10 PM
CHAIR OLSON announced that the final order of business would be
HOUSE BILL NO. 74, "An Act relating to development project
financing by the Alaska Industrial Development and Export
Authority; relating to the dividends from the Alaska Industrial
and Export Authority; authorizing the Alaska Industrial
Development and Export Authority to provide financing and issue
bonds for a liquefied natural gas production system and natural
gas distribution system; and providing for an effective date."
4:19:49 PM
MICHAEL POLLEN informed the committee that he has served 12
years on the Fairbanks North Star Borough (FNSB) Air Pollution
Control Commission. During this past winter Fairbanks has been
experiencing what he characterized as Beijing quality air
quality with respect to 2.5 particulate matter counts. One of
the only truly sustainable answers to the air quality problem is
natural gas. He recalled the FNSB mayor, Luke Hopkins, spoke to
that problem. He reiterated that this is a very serious health
problem in Fairbanks and the proposed LNG and trucking project
is a very effective solution. Thus, on the basis of health
issues alone the project is worth it; however, this project
would have a tremendous economic impact, which many people have
highlighted. Additionally, this bill would improve the
economics in Fairbanks and would promote industry, bring jobs to
the city and to the Railbelt. In particular, he said he is
tired of buying his propane from Calgary, Alberta, Canada.
Instead, he suggested Alaska should make it in Alaska. In
essence, this bill could bring LNG to Fairbanks and provide a
short-term solution since it would mesh well with any pipeline
project. He reiterated his support for HB 74 and urged members
to support the bill.
4:21:58 PM
GEORGE BERRY offered his belief that Fairbanks, the Fairbanks
area, and those who live on the river system will be positively
affected by this bill. He said HB 74 would lower space heating
costs in Fairbanks, along the road system, and other areas of
the state as this bill has wide ranging impact for residents.
He said that natural gas and in particular propane will be able
to reach out and lower space heating costs in rural Alaska. He
explained that propane is a direct byproduct of the liquefied
natural gas (LNG) process, which would be produced on the North
Slope. Thus, once LNG is produced, propane will also be
produced and become available, which is a positive aspect for
those who do not have access to a pipeline. Furthermore, this
bill could compliment various pipeline proposals. In
conclusion, Mr. Berry expressed hope that residents can
encourage the legislature to perform its due diligence and move
HB 74 along and allow residents to invest in their families and
the future.
4:24:23 PM
DAVE MESSIER, Rural Energy Coordinator, Tanana Chiefs Conference
(TCC), explained that TCC is a nonprofit tribal consortium that
represents 42 communities in Interior Alaska. He then related
his support for HB 74 and the Governor's Interior Energy Plan.
He offered his belief that more affordable energy in Fairbanks,
the hub for most of TCC's communities, generally means cheaper,
more affordable energy for its tribes. Specifically, HB 74 has
the potential to significantly lower the cost of propane
delivered to rural communities in Alaska. Since nearly half of
TCC's tribal members live in and around Fairbanks this bill
would have a positive impact on TCC's members. He reported that
at the TCC's annual convention, the full board passed a
resolution supporting HB 74 and the governor's energy plan. He
concluded that access to low-cost energy has led to increased
economic activity and opportunity in the Lower 48, which the TCC
believes would be the case in Fairbanks as well. Therefore, he
strongly encouraged members to move HB 74 forward since it helps
address the needs of all of Interior Alaska and the state as a
whole. He stressed the importance of an energy strategy that
includes funding for energy efficiency, weatherization, or
renewable energy as a combined approach. He said the TCC
greatly appreciates the committee's support for HB 74.
4:25:43 PM
KARL GOHLKE, Outside Sales, Frontier Supply Company (FSC),
stated that FSC has been in Fairbanks since 1989 and have been
long time members of the Alliance, the Resource Development
Council (RDC), Alaska Miners Association (AMA), Association of
General Contractors (AGC), and the Greater Fairbanks Chamber of
Commerce. Originally as Co-Chair and later as the chair of the
Transportation Committee for the Greater Fairbanks Chamber of
Commerce, he has been involved in the trucking gas project for
the past five years when it was first introduced by Fairbanks
Natural Gas (FNG). The project, although it had merit when it
began, has even more merit today than five years ago. At the
time, competing projects, community politics and disagreements
regarding the North Slope trucking projects hindered its
progress. However, Fairbanks Natural Gas (FNG) stayed focused
on the project. Today, FNG, the Golden Valley Electric
Association (GVEA), and local politicians are in agreement that
the trucking project is a bridge to remove Fairbanks from the
national list as the number one city with the highest energy
cost.
MR. GOHLKE said it has always been a challenge to live and work
in Fairbanks, but in the past several years the high cost of
energy has made it much more challenging. In fact, many have
found it impossible and have moved from Alaska. The cost of
providing electricity, heating, and water combined with
rent/mortgage and food leaves little discretionary or no
discretionary income. He said that this lack of discretionary
income places a strain on businesses and families that is felt
in the Interior as well as Anchorage. Today's economic
situation has many unknowns; however, one thing that is known is
that Fairbanks is challenged with the high cost of energy. This
makes it hard for businesses to keep people employed and keeps
businesses from coming to Fairbanks. He offered his belief that
the Interior remains the place to do business; however, it has
been made more difficult by each year that passes without
actions for solutions that address the high cost of energy. The
consensus for a near-term immediate solution is trucking gas
from the North Slope as a bridge to a long-term solution of
piped natural gas. He offered that HB 74 is a great start to
provide gas to the Interior and the trucking of natural gas from
the North Slope is broader than just Fairbanks. He related that
GVEA and FNG have received inquiries and have responded with
operational plans for the extended plan to truck gas to
Southcentral Alaska. This energy project would leverage natural
gas from smaller communities and other regions of Alaska to
create a backbone for economic expansions to fit in with the
pipeline plan and be a catalyst for private sector
participation. He asked members to support HB 74 and not lose
sight of getting the lowest cost gas to as many Fairbanks,
Interior Alaskan residents, and businesses as possible by 2015
and help to make Fairbanks and the Interior a vital place to
live and to do business.
4:29:11 PM
DAN PORTWINE, noting that he has been in the plumbing and
heating business for nearly 40 years, stated that at the end of
the Trans-Alaska Pipeline System (TAPS) construction, in 1977,
his business did numerous heat conversions from electric to oil
since electricity costs had skyrocketed. He recalled that at
that time most people wanted to be sure the boiler could be
converted to natural gas; however, the community is still
waiting for that. With regard to a concern raised at a previous
hearing about the cost of conversion, he pointed out that there
has been a push in Fairbanks in recent years to replace aged
boilers with more efficient boilers. The majority if these
boilers can easily be converted to gas for a cost of $1,500 to
$2,000, he noted. Mr. Portwine related a conversation with a
retiree last year during which the retiree said he couldn't
afford the utility costs in Fairbanks and was planning his "exit
strategy," which is a term that has bothered Mr. Portwine. He
urged the committee to support and pass HB 74.
4:30:49 PM
JEREMY HOLAN, Business Representative, Teamsters Local 959,
informed the committee that prior to his current job, he worked
as a fuel truck driver when heating oil prices rose from $1 per
gallon to $4.50 per gallon. The heating oil market continues to
remain unstable, he said. In fact, the current price for number
one heating oil is $4.23 per gallon and for number two heating
fuel at $4.16 per gallon. He personally burns about 1,100
gallons of fuel oil per year, along with coal and wood use.
These energy costs are hurting Fairbanks and the rural
communities. In 2009, he noticed homes going up for sale or
going into foreclosure as he learned that people could no longer
afford to live in Fairbanks. He pointed out the choices to heat
homes in Fairbanks include electric, oil, wood, or coal.
Currently, individuals and organizations are in the process of
curbing homeowner use of wood or coal since these fuels create
health issues. He offered his support for the LNG project. He
concluded that Fairbanks and the rural communities need cheaper
costs of living and need HB 74 to pass since it will stimulate
the economy and lower fuel costs.
4:32:45 PM
BILL ST. PIERRE, speaking as a 30-year Fairbanks resident who
has owned and operated many local businesses, including
software, media, and others, including an Anchorage business
with over 30 employees, said he can vouch for the large number
of advertising dollars that come to Fairbanks from Anchorage and
other parts of the state. These advertising dollars illustrate
the investment in Fairbanks by Anchorage businesses and business
owners, including sandwich shops, furniture stores, banks and
credit unions, medical facilities, and the contractors who build
them. He hoped members would realize HB 74 does not just affect
Fairbanks residents, but relates to the hundreds of millions of
dollars in Anchorage-owned assets and investments in Fairbanks.
He said the high cost of energy is needlessly stripping away
value from these businesses and the cost of energy in Fairbanks
is simply too high causing many residents and businesses to
leave, consider leaving, or to refrain from further investment.
This trucking plan is a good plan that will solve problems and
create statewide opportunities, as well as provide a foundation
for further development of Alaska's gas resources in the longer
term, he opined. This bill, he further opined, would protect
the millions of dollars that statewide investors have in
Fairbanks and would create millions more in development and
operational opportunities. He asked members to support this
bill since it is in the interest of the entire state.
4:34:46 PM
DICK BRICKLEY, Chair, ICE Alaska, noted his appreciation for the
funding the legislature and the governor put in the budget. He
stated that it is critically important to the Interior and
Fairbanks that this bill move forward. Speaking as the Chair of
ICE Alaska, he related that HB 74 will save the company over
$40,000 in energy costs. He reiterated that it is critically
important that this bill moves forward as Fairbanks needs help
and it will be a great thing for the entire state of Alaska.
4:35:52 PM
MARIA RENSEL asked members to pass HB 74 out of the committee
for the reasons already stated, including space heating, air
quality, and electricity generation. The high cost of energy
doesn't leave people a lot of choice and many families are
leaving the Fairbanks area. She concluded that Fairbanks needs
to have HB 74 pass out of committee, signed, sealed, and
delivered this legislative session.
4:36:44 PM
TIMOTHY GUNDERSON related that he came to Alaska with his family
in 1971 and has raised three children, who have also married and
raised families here. He now has married grandchildren who want
to raise their families here as well. However, one child moved
away last year due to the percentage of income the family spent
for heating and electricity and in order to have better economic
opportunities. He asked to add his voice to those in favor of
LNG; however, he would like to focus on the propane issue since
that reaches a large group of people that have not been
discussed and certainly reaches far beyond the Fairbanks area.
He explained that propane is a byproduct of creating LNG, which
is created when natural gas is reduced to 261 degrees below zero
in order to liquefy the gas. However, propane must be removed
from the LNG since the propane will turn solid. He said that
Cook Inlet natural gas contains propane in the amount of about 1
percent, whereas Prudhoe Bay gas contains propane in the amount
of 12-15 percent. In short, when GVEA begins its [North Slope]
production, it will produce 30,000 gallons per day of propane
byproduct, which could be trucked and barged up the Yukon River.
Additionally, the infrastructure necessary for using propane is
considerably smaller since it does not require a piped
distribution system, a storage facility, or need to be kept at
below zero temperatures. Currently, all propane used in Alaska
is imported from Canada, which is shipped by rail to Prince
Rupert, then barged to Whittier, shipped by rail to Fairbanks
and Anchorage, and trucked to other points. Currently, propane
costs, he reported, are $4 per gallon in Fairbanks. He related
that the Anchorage Port Authority and FNG have estimated the
price would be reduced from $1.20-$1.50 per gallon for Prudhoe
Bay produced natural gas. He concluded that this could be a
huge consideration for energy for Bush Alaska and Fairbanks, as
well as for those who will not be served by pipeline for years
to come. He shared his background, including that he worked for
the Teamsters Training Center, has been involved in the trucking
industry for 40 years, and teaches commercial drivers how to
drive the Dalton Highway. He mentioned that he has five
students from TCC who will likely benefit from this as
commercial drivers.
CHAIR OLSON remarked that he has hit on a point, which is how to
reach people outside the core areas, noting that propane and
other liquids may be the way to do so.
4:40:51 PM
ANDREW REIMHERR said he wanted to speak to this issue since he
is very concerned with the economy in Fairbanks, particularly
since he learned from the boss of his wife, a real estate
appraiser, that Fairbanks has had a phenomenal number of
foreclosures this year, which were attributed to energy costs.
In fact, many people just packed up and left similar to what
happened in the 1980s. He offered his belief that the solution
to the heating energy and air quality issues is gas and the
necessary infrastructure.
4:42:20 PM
JIM LAITI began by relating that four generations of his family
actively live in Fairbanks as well as numerous friends and
neighbors. A common topic of conversation among them is a lack
of optimism, especially among young people. The obvious
solution, he opined, is natural gas for Fairbanks and the LNG
project is the perfect jump start to build the project. In
hindsight, bringing natural gas at that the time TAPS was
constructed by extending the pipeline to Fairbanks would have
been a benefit to the Interior. Although people are often
concerned about starting a project, good benefits result from
projects such as this one, he opined. He acknowledged that
pipeline discussions have occurred for 50 years, but he offered
his belief that this LNG project could be symbiotic with a
pipeline in that infrastructure and a consumer base would be in
place in Fairbanks and in large areas of rural Alaska as well.
He urged members to move HB 74 forward.
4:45:11 PM
JIM DODSON, President, Fairbanks Economic Development
Corporation (FEDC) stated he has seen first-hand the problems
created by the high cost of energy in Alaska, in particular, in
Fairbanks. Currently, the Fairbanks community is spending over
$600 million on energy costs, of which 68 percent or
approximately $400 million is being spent on space heating.
These costs are stifling the economy's ability to grow and
opportunities for children to live and enjoy Alaska. This bill,
HB 74, is the right legislation for the Fairbanks community at
this time, as well as being the right type of legislation for
other communities to build their energy portfolio around and
start to diversify Alaska's economy by creating jobs and
opportunities around the development of Alaska resources. He
urged members to support HB 74.
4:46:46 PM
RENE STALEY stated that she works for Birchwood Homes and is
also a city council member for the City of Fairbanks. She read
a prepared statement in support of HB 74. She said this bill is
imperative to Alaskans to take a closer look at increasing
energy costs. At Birchwood homes, the company provides heat to
400 homes on 76 acres of property. Each home is heated by a
dual boiler system, which helps keep the home quiet and energy
efficient for space heating requirements. However, with
increasing costs, the area's future and energy needs are of
utmost importance. Trucking LNG from the North Slope to the
Interior as a means to replace fuel oil needs to be addressed.
The stated goal of securing project financing by the Alaska
Industrial Development and Export Authority (AIDEA) will help
provide public interest in promoting the prosperity of new
housing development, new employment, and new business
development. She the related support for resolution number 4566
from the Fairbanks City Council. She closed her testimony by
thanking members for their service to the state.
4:48:13 PM
JACK WILBUR, President, Design Alaska, informed the committee
that Design Alaska is a small local business that employs 60
Fairbanks residents. He spoke in support of HB 74 and explained
how getting natural gas to Fairbanks will help his business.
Obviously, one reason would be to decrease utility, heating and
electricity costs; however, more importantly, this bill would
also decrease the cost for the 60 families he supports. He
stated that with the high cost of energy, his employees look to
him to increase their wages in order for them to be able to pay
their bills. He said he essentially not only pays the high cost
of energy for his own business, but he also pays for the high
cost of energy for his employees' homes. He encouraged support
for HB 74 because he is concerned about Fairbanks's economy,
particularly as the president of an architectural engineering
company that depends heavily on the economic health of the
community. Unless the community can grow and be healthy, Mr.
Wilbur said his business cannot continue to grow and be healthy,
either. He concluded by saying it is very important to him as a
businessman in Fairbanks that HB 74 be supported and bring gas
to Fairbanks in a timely fashion.
4:50:12 PM
CAM CARLSON related that her electric heating bills run $1,100
to $1,200 in the winter. If GVEA can benefit from this and
decrease her heating bills, she would be elated. She echoed
earlier comments regarding conversations about people who have
to leave due to the percentage of their income that is used for
energy costs. Although the aforementioned might be hard for
Anchorage residents to believe since their costs are so low, it
is tough in Fairbanks and she appreciated the opportunity to
express this.
4:51:49 PM
BOB SHEFCHIK, Chair, Fairbanks Chamber of Commerce Energy
Committee; Chair, Interior Gas Utility Board, related he would
not make repetitive comments since many of his comments have
already been made. He informed the committee that the groups he
represents have consistently supported HB 74 and SB 23; this
support has been conveyed during the legislative session in
writing and in public testimony. He said that the leadership of
Governor Parnell on energy issues Alaskans face is truly
appreciated. This bill, HB 74, would provide authorization to
AIDEA to participate in the development of a gas trucking
project designed to lower the space heating and other energy
costs in Fairbanks. The governor's goal of low cost gas to as
many residents as quickly as possible in Interior Alaska is
broadly supported. The combined effects of the high cost of
energy on homeowners, small business, and industry and the
impending consequences of non-attainment to community growth,
state highway funding, and community health threaten the
economic viability of Fairbanks. All of these impacts are real
and immediate. He stated that the provision of low-cost LNG
trucking via the North Slope has combined the lowest capital
cost and the quickest delivery schedule of any energy project on
the horizon. He highlighted that although gas trucking is
considered a near-term solution, it will also provide a bridge
to a long-term pipeline, building the demand and capacity that
helps the economic future of any future pipeline project. This
bill would provide a means for the state to create
infrastructure critical to the Interior and would bring benefits
to FNSB residents, the highway system across the Interior, and
over time to the more difficult areas to reach. He urged
committee members to support HB 74.
4:54:08 PM
JOMO STEWART, Energy Project Manager, Fairbanks Economic
Development Corporation (FEDC), stated that he also sits on the
Fairbanks Chamber of Commerce's energy committee. He said that
sometimes there is a tendency to let the perfect stand in
opposition to good projects by delaying them while waiting for
projects farther down the horizon. Although this is no
different, he opined that it is an opportunity for the state to
begin to take good steps on the way to a better future, which he
hoped the legislature would agree with and help the community
move forward. He acknowledged that the LNG trucking option is
not the perfect solution, nor is it the most efficient or
cheapest way to move gas; however it is a good option. Every
analysis that has been done has shown that it will make an
appreciable savings in the cost of energy to the community.
Furthermore, the LNG trucking project would open the gateway off
the North Slope, which are good things. He also acknowledged
that the funding package isn't perfect, but it is good since it
will create a more sustainable funding mechanism to allow the
state to participate in projects and advance them. He said that
[the community] may not be able to participate in large scale
grants in the future, but the state can make an investment and
the target investment will allow those projects to move forward.
In essence, instead of allowing the perfect to stand in
opposition to the good, he reiterated this is a very good step
on the way to a brighter future using sustainable funding
mechanisms. Moreover, the LNG trucking option offers a short-
term solution that brings real benefits to the community and
sets up Fairbanks and other communities statewide to tap into
larger, better, cheaper solutions. He asked members for their
support.
4:56:53 PM
WES MADDEN, Owner, Madden Estate, said as a real estate broker,
he has been able to help people buy, sell, and manage their
property. He offered his belief that no single threat is
greater than the high cost of energy in Interior Alaska. He
said that families are struggling to heat their homes, make ends
meet, and with their confidence in the state's ability to what
is right for Alaska's sustainable future. He recalled earlier
testimony by the homebuilders on behalf of HB 74. The
homebuilding profession has been all but decimated in Interior
Alaska due to the lower demand for housing and lack of profits
due to slowly declining property values and the increasing cost
to build. Additionally, new construction home sales have
dropped 71 percent, from 157 in 2007 to 45 last year. He
reiterated that the high cost of energy affects everyone and
everything. For instance, rental costs are at an all-time high,
which is solely due to cost of energy that is passed through to
the tenants who struggle to make rent payments.
MR. MADDEN said that his property management firm manages
several multi-family apartments and homeowner associations and
he does not know how his company can get through another winter
let alone this one due to fuel cost increases. In Fairbanks an
abundance of commercial property sits vacant while investors
spend money in other states. Last year, he said his company
lost a sale on an apartment complex to an out-of-state investor,
mostly due to Alaska Housing Finance Corporation's assessment of
the Fairbanks market. Calls from property owners in rural
communities in Interior Alaska come through his office; however,
their property is unsellable since there are not any buyers. He
related that the communities are losing long time generational
Alaskan families, some with names that appear on street signs;
these families aren't just leaving the Interior, they are
leaving the state. He said that HB 74 is the good news that
will ignite the spirit of the Interior Alaskan since it
represents hope and will provide the much needed confidence in
[the state's] leadership and decision making. "However, we need
action and we need action this session," he said. He concluded
by echoing that there's no such thing as a perfect plan, and a
good plan executed now is better than a perfect plan executed
next week. He expressed hope that his business will grow as he
does not want to plan his own exit strategy and be able to
confidently suggest to high school students that Interior Alaska
is a great place to start a career. He also would like his
community to develop, keep Alaskans in Alaska, and raise his
family in this great state. He urged members to support HB 74.
5:00:04 PM
LISA HERBERT, Executive Director, Fairbanks Chamber of Commerce,
stated that the Fairbanks Chamber of Commerce's critical
priority this year is reducing the high cost of energy since
space heating and electricity is driving away business. She
related comments from one of her members, Auto Trim Alaska.
Steve Vincent, General Manager, Auto Trim Design, has a 2,000
square foot house and his friend in Kenai has a 1,900 square
foot home. The natural gas cost to heat the Kenai home is
$1,080, but the cost to heat Mr. Vincent's home in Fairbanks is
$5,040 and is supplemented by oil heat with a wood stove. Mr.
Vincent's 13,000 square foot store has heating costs of $70,000
annually, just three years ago after investing $40,000 in better
roofing and insulation. To offset his utility costs, his entire
staff of 34 employees had to take a 10 percent pay cut and loose
some benefits in order for them to keep their jobs. He foresees
probable layoffs without changes on the horizon. As the
committee has heard, and has continued to hear, the Fairbanks
community has mobilized and stands before the committee this
afternoon offering its wholehearted support for HB 74. She said
the Fairbanks Chamber of Commerce continues to advocate that the
target goal of $15 per thousand thousand British thermal units
(MMBtu) for delivered natural gas will effectively act at
conversion by cutting space heating bills in half, bringing in
$200 million of disposable income to the Fairbanks and statewide
economy. The Fairbanks Chamber of Commerce looks forward to
continuing to be the legislature's partner in what the governor
has referred to as a persistent unrelenting effort to bring low
cost energy to Interior Alaska.
5:02:38 PM
LISA PEGER stated that such a project would give residents
relief year after year. She urged members to move forward with
HB 74. She suggested savings will result in the social welfare
arena from this proposal. Drawing from her experience as a
landlord, she informed the committee that she has fielded phone
calls from families living on top one another since they cannot
afford two or three bedrooms. She then related her support for
the bullet line since having an open season will give
proprietary information and encourage movement since the
producers will know the state can build its own gasline for
several hundred million dollars. She suggested these projects
complement one another since having the trucking will give a
larger bid for gas on the open market of a gasline since the
area will have a larger consumer base. She could not see any
downside to the plan except [the need] to fix the Dalton Highway
from time to time. The LNG plant will be on skids and can be
sold, moved, or repurposed. Ms. Peger expressed interest in
having some good movement on some good projects.
5:05:53 PM
CHAIR OLSON, after first determining no one else wished to
testify, closed public testimony on HB 74.
[HB 74 was held over.]