Legislature(2015 - 2016)BARNES 124
03/18/2015 03:15 PM House LABOR & COMMERCE
Note: the audio ![]()
and video ![]()
recordings are distinct records and are obtained from different sources. As such there may be key differences between the two. The audio recordings are captured by our records offices as the official record of the meeting and will have more accurate timestamps. Use the icons to switch between them.
| Audio | Topic |
|---|---|
| Start | |
| HB132 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 132 | TELECONFERENCED | |
HB 132-AGDC SUPPORT OF NATURAL GAS PROJECTS
3:18:27 PM
CHAIR OLSON announced that the only order of business would be,
HOUSE BILL NO. 132, "An Act relating to the support of the
Alaska liquefied natural gas project by the Alaska Gasline
Development Corporation." [Before the committee was CSHB
132(RES)].
3:19:00 PM
RENA DELBRIDGE, Staff, Representative Mike Hawker, Alaska State
Legislature, stated that HB 132 would prohibit the Alaska
Gasline Development Corporation (AGDC) from working on anything
other than the Alaska LNG project and the ASAP backup in-state
gasline project as previously described, until the legislature
and the state obtain certainty as to the outcome of the Alaska
LNG project. Therefore, AGDC would be prohibited from embarking
on a competing type of project until the earliest of three
dates: the date at which point the state and other parties to
Alaska LNG enter the next development phase called FEED [Front
End Engineering & Design]; or when the state or another party to
Alaska LNG withdraws from Alaska LNG; or July 1, 2017. The bill
would also prohibit Alaska Gas Development Corporation (AGDC)
from marketing gas that it does not have written consent or
title to market. Further, it would prohibit use of the In-State
Natural Gas Pipeline Fund (AS 31.25.100) for work on a project
that would carry more than a majority of gas intended for
export.
3:20:33 PM
ALAN LEMASTER, President; Owner, Gakona Junction Village, stated
that he has resided at his current location for over 30 years,
offering king salmon fishing, providing housing for travelers,
and storing gas. He spoke in opposition to HB 132. He
suggested that the primary purpose seemed to deny any work that
will allow the state to consider an alternative to the Alaska
LNG project. If the committee agrees that Alaska LNG was the
only definitive line to provide Alaskans the best and lowest
cost for natural gas, there is little to be concerned about, but
if something happens in the ongoing negotiations and studies
over the next two years that would preclude the Alaska LNG
project from progressing, it seemed wise to have an alternative
plan and avoid losing time or money in gearing up again from the
beginning. He offered his belief that the ASAP is a poor choice
to obtain natural gas given that there is ample natural gas to
power the Anchorage bowl and its neighbors for decades from the
Cook Inlet natural gas reserves. Further, with a $3.5 billion
shortfall of funds available to run the state for the
foreseeable future, he suggested backup plans must provide as
many reasonable alternatives as possible to ensure that Alaskans
can have access to natural gas over diesel fuel and wood to heat
and power their homes and businesses should the Alaska LNG
project fail to meet the levels of economics needed to proceed.
Given these issues, and the fact that the Governor has publicly
stated he will veto this bill, doesn't the legislature have more
important issues to turn its attention to that will benefit the
state far greater than playing with these seemingly politically-
motivated delaying tactics. He thanked members for allowing him
an opportunity to testify.
CHAIR OLSON responded that the bill does have sideboards. He
welcomed Mr. Lemaster to call the bill sponsor or his office for
further clarification.
3:24:03 PM
SCOTT DAVIS, Owner, Davis Block and Concrete Company, stated
that he has been a business owner for over 36 years in the Kenai
Peninsula area. He recalled struggles just to keep his
company's doors open over the years and said he was fully
committed to getting the Alaska Gasline completed. He said the
Alaska LNG project plans to come directly to Nikiski, where a
tremendous amount of future economic activity that will be
generated from this location. He said he has invested in the
oil and gas industry, working directly or indirectly for
companies that produce oil and gas or the companies that service
them. The Point Thomson project in particular has allowed his
companies to invest in new employees, new facilities, and new
equipment. He said he has been worried that the state will miss
the opportunity to get a gasline in the state. It seemed that
the governor wanted to pursue a second gasline, which has
created substantial confusion about the state's priorities in
getting a gasline developed. The state was not competing with
producers to create a gasline, but is competing with other
projects globally. With so many questions not answered, he
sympathized with the legislature's desire to create clarity
around the governor's plan. He offered his support for any
efforts to inject clarity into the future of the proposed
gasline as Kenai businesses have a lot to gain or lose. He
suggested many reasons exist for Alaskans to be optimistic about
the state's future prospect for an LNG project, especially for
small businesses. The state was closer today than at any other
point in history to see a gasline project developed, despite the
impact of low oil prices and big fiscal deficits, the Alaska LNG
project appears to be moving forward. Alaskans need to know
whether the state is on board with the Alaska LNG project or
not. He concluded that as a business owner, he deserves clarity
and would like clarity provided.
3:26:32 PM
CHAIR OLSON thanked him for participating in the Iron Dog race.
3:26:48 PM
PAMELA THROOP, Real Estate Broker, Alaska Commercial Properties,
stated that she has been in business for herself for 35 years as
a commercial real estate broker. She asked members to defeat HB
132 since the state has often limited itself to one project and
ended up without any project. She said that Fairbanks continues
to be in terrible shape in terms of high fuel costs. She urged
member not to tie the governor's hands. She expressed interest
in the most economic [gasline] project possible so it makes
sense that the state needs to have alternatives. She offered
her belief that markets are available and the controlling
producers are selling natural gas all over the world. Thus,
Alaska's gas needs to be in the marketplace, too. She has
traveled to Texas for medical purposes and she has family who
live in Houston. Her brother-in-law works for Cheniere Energy,
Inc. and that company has been selling LNG to countries all over
the world. In 2010, his company had come to Alaska but could
find no interest. At that time Cheniere did not have a plant,
now they have four trains in Sabine Pass and are also building
in Corpus Christi. She said Cheniere Energy Inc. is selling gas
to Korea, Japan, India, and China. She expressed frustration
that Alaska's hands have been tied, artificially, and as an
Alaskan she wants to have the benefit of gas revenues for her
children and grandchildren. She concluded her testimony by
saying she wants the governor to have an opportunity to do what
is best for the state.
3:29:40 PM
RANDY ELEDGE, Marsh Creek LLC, said he had opportunity to talk
with one of the producers on the North Slope today concerning
what his company wants to do to foster this opportunity. He
said there are investment dollars today going to the LNG
opportunity by major oil companies. He predicted independent
oil companies will also follow suit. He stated that turbine
manufacturers have been exploring more opportunities in the LNG
market, which he viewed as the bright star in terms of
profitability for oil companies today. He said he was proud to
have worked for 33 years with oil producers, but he did not wish
to limit their investment in Alaska. He acknowledged that
global competition exists today and companies make decisions on
the best investment dollars. However, Alaskans have changed
their oil and gas method of taxation five times in the last
several years so Alaska doesn't really offer a solid climate for
the producers since the tax climate constantly changes. He
sympathized with the Alaska legislature's desire for clarity.
He said he was concerned about the governor since he has been
"on and off." For example, Governor Walker has been looking
into the recent changes of the oil tax structure; however, he
previously said he would not do so. In addition, Governor
Walker has now threatened to veto this bill, which Mr. Eledge
said is of concern to him.
3:33:05 PM
MR. ELEDGE acknowledged that currently the price of oil is
extremely low and the price of natural gas is also depressed,
but through LNG the state can enjoy some of the investment and
support from oil companies that can provide an opportunity for
the state's economic engines. These investments could create
opportunities for Alaska's employees working within the state.
Further, jobs represent the key to Alaska's wellbeing, he said.
He concluded by stating that Alaska's businesses deserve clarity
from the governor. Further, legislators are expected to do their
part so he appreciated the committee doing its part. He thanked
members for the opportunity to speak today.
3:34:14 PM
CHAIR OLSON, after first determining no one else wished to
testify, closed public testimony on HB 132.
3:34:36 PM
The committee took an at-ease from 3:34 p.m. to 3:37 p.m.
[The committee treated it as though public testimony was
reopened.]
3:37:36 PM
MERRICK PEIRCE, Chief Financial Officer and Member, Alaska
Gasline Port Authority (AGPA), stated that HB 132 was designed
to tie the hands of the governor, who was recently elected
governor. He characterized the aforementioned as appalling. He
opined that for about two decades Governor Walker has
articulated the right way to move forward on a project and
always advocated for large diameter gasline with an economy of
scale to bring Alaska new revenue. The aforementioned would
also benefit parts of the state that badly need affordable
energy. He related conceptually that two natural gas pipelines
were possible. First, the bullet line - which he viewed as
uneconomic since it would be an $8 million capital expenditure
that would take gas to the Cook Inlet, which has a 200-year gas
supply. Therefore, he opined that the bullet line doesn't make
sense to him. Secondly, a large diameter pipeline with an
economy of scale was another option.
MR. PEIRCE said the stark reality was that Alaska must compete
with 25 other LNG projects worldwide. Furthermore, it isn't a
secret that the producers have an economic interest in these
competing projects. In his view, from the producer's
perspective, the producers prefer to have Alaska gas stay
warehoused to avoid competing with projects in Australia and
Papua New Guinea. He asked members to reacquaint themselves
with the Heads of Agreement, which is the fundamental agreement
to the Alaska LNG project.
MR. PEIRCE referred members to the"Heads of Agreement" between
the SOA, AGDC, TransCanada and ExxonMobil, Conoco Phillips, BP
Exploration. Jan 14, 2014. [to Article 13.4.1, and read,
"Nothing in this HOA requires any party to reach or execute any
legally binding or enforceable agreement(s) or to refrain from
engaging in any business whatsoever, nor does any party have any
liability in connection with the subject matter of this HOA."
This means that the ExxonMobil Corporation and similar producers
can go forward to work on projects that compete with Alaska
without any obligation in the HOA that requires Exxon to do any
project of any kind in Alaska. Thus, the fiduciary obligation
of Exxon is to its shareholders, he said, not to Alaskans, which
is why it will move forward with projects that make the most
economic sense for the corporation, and not necessarily Alaska.
3:40:00 PM
MR. PEIRCE provided a couple of examples of bringing markets to
Alaska in which the producers have simply refused to commit gas
to a project. In 2012, under the Alaska Gasline Inducement Act
(AGIA) there was a solicitation of interest in which a half
dozen companies came in with the aggregated volume of gas was
2.8 billion cubic feet (Bcf) of gas per day. Another entity
from Japan represented a consortium also looking for 2.5 Bcf gas
per day, which was more than enough to do a large diameter
gasline, he said, noting the consortium wanted first gas by
2019. Exxon refused to engage, he reported. In fact, some of
the companies that wanted to engage were told that Exxon had
projects in Canada and Australia and would be happy to sell them
gas from those areas. The former governor and legislature
started over with a new study to supply first gas in 2025 using
a new route. In addition, very large companies have offered to
buy gas at the wellhead only to be rejected. Those same
companies were also told by Exxon that other projects could
provide them with LNG. He characterized this bill, HB 132, as a
pretty "sad piece of legislation." He emphasized that Alaska
needs to move forward with the understanding that the only way
to get Alaska's gas to the world markets is by first and
foremost putting "Alaska's interest first" and not allowing
companies that compete with Alaska to determine when and if
Alaska ever gets a gasline. He thanked members for the
opportunity to testify.
3:41:51 PM
CHAIR OLSON, after first determining no one else wished to
testify, closed public testimony on HB 132.
3:41:59 PM
REPRESENTATIVE HUGHES moved to adopt Amendment 1, labeled 29-
LS0623\I.3, Nauman, 3/17/15, which read
Page 3, line 5, following "party":
Insert "that holds natural gas leases in the
state"
Page 3, line 16, following "party":
Insert "that holds natural gas leases in the
state"
Page 4, line 13, following "party":
Insert "that holds natural gas leases in the
state"
CHAIR OLSON objected for the purpose of discussion.
3:42:37 PM
MS. DELBRIDGE appreciated the committee entertaining Amendment
1. She explained that the need for the amendment arose in
response to a question Representative Josephson asked at an
earlier meeting. One of the three dates in time in which the
temporary restriction on Alaska Gas Development Corporation
(AGDC) would be lifted, which was the date that the state or
another party withdrew from Alaska LNG. She acknowledged that
Representative Josephson raised a good point, which was what if
one of the parties was TransCanada. She noted that TransCanada
and AGDC are both parties to the Alaska LNG, along with
separately, the state, BP Exploration (Alaska) Inc., ExxonMobil
Corporation, & ConocoPhillips Alaska, Inc. However, AGDC and
TransCanada do not have gas or hold leases so they are somewhat
different than the other four parties - the three producers and
the state - who do in fact hold an interest in gas in the
project. So if one of the three producers or the state
withdraws from project, there would be a much greater likelihood
that everyone would reevaluate the project in terms of it moving
forward. However, if TransCanada or AGDC withdraws from the
project, the circumstances would be important, but would not
rise to the same level of significance.
MS. DLEBRIDGE explained that Amendment 1 would make clear that
AGDC's temporary restriction goes away at one of three dates,
including the date that the state or another party who holds
natural gas leases in the state withdraws from Alaska LNG.
Therefore, if TransCanada or AGDC withdraws from the project,
the restriction will stay in place, but if the state or one of
the three producers withdraws, the restriction on AGDC will be
lifted and the corporation would be able to pursue a larger
export geared project.
3:44:41 PM
CHAIR OLSON removed his objection.
There being no further objection, Amendment 1 was adopted.
3:45:13 PM
CHAIR OLSON stated that he had also received a second amendment
but it was four hours after the committee's cut off time to
receive amendments for consideration by the committee. The
committee strongly supports members having adequate time to
consider amendments prior to the meeting. He anticipated the
proposed amendment would be presented on the floor.
3:45:57 PM
REPRESENTATIVE HUGHES moved to report the proposed committee
substitute (CS) for HB 132 (RES), as amended, out of committee
with individual recommendations and the accompanying fiscal
notes.
3:47:06 PM
REPRESENTATIVE JOSEPHSON objected.
3:47:15 PM
REPRESENTATIVE JOSEPHSON explained that the testifiers before
the House Resources Standing Committee, Mr. Fauske and Mr.
Richards, Alaska Gas Development Corporation (AGDC), said
nothing precluded what they were doing, which was limited in
scope to moving from a 600 level of pipe to a 900 level, that
would move from 1.4 billion cubic feet (Bcf) to potentially 2.4
billion Bcf. He recalled they were ordered to do that by the
board and will merely "run some numbers"; however,
fundamentality there was nothing in House Bill 4 that precluded
this, notwithstanding that Senate Bill 138 was supposed to be
directional and was to "be the game." However, once that was
lifted, House Bill 4 was freed up and could become other things,
and the legislature needs to wait and see what that will be.
Therefore, he will be voting no.
3:48:26 PM
A roll call vote was taken. Representatives Hughes, LeDoux,
Colver, Tilton, and Olson voted in favor of reporting the CSHB
132(RES) from committee, as amended. Representatives Kito and
Josephson voted against it. Therefore, CSHB 132(L&C) was
reported out of the House Labor and Commerce Standing Committee
by a vote of 5-2.
3:49:05 PM
REPRESENTATIVE COLVER asked to comment for the record that he
supported moving the bill from committee to provide an
opportunity for the entire house to vote; however, he has some
trepidation on this bill.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB132 Draft Proposed Amendment I.3.PDF |
HL&C 3/18/2015 3:15:00 PM |
HB 132 |