Legislature(2007 - 2008)HOUSE FINANCE 519
05/10/2007 01:30 PM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| SB27 | |
| HB177 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 177 | TELECONFERENCED | |
| + | SB 27 | TELECONFERENCED | |
| + | TELECONFERENCED |
HOUSE BILL NO. 177
An Act relating to the Alaska Gasline Inducement Act;
establishing the Alaska Gasline Inducement Act matching
contribution fund; providing for an Alaska Gasline
Inducement Act coordinator; making conforming
amendments; and providing for an effective date.
2:28:54 PM
Co-Chair Meyer stated a conflict of interest because he
works for ConocoPhillips; he asked to be excused from the
Committee voting process. Vice Chair Stoltze OBJECTED. Co-
Chair Chenault stated that Co-Chair Meyer would be required
to vote on amendments and the bill.
Representative Hawker disclosed that his wife was an
employee at ConocoPhillips. He stated that he does not have
a direct financial interest in the outcome of the
legislation. He stated it would be inappropriate to be
disenfranchised from voting given the interest within each
district.
2:30:55 PM
Co-Chair Chenault MOVED to ADOPT AGIA 1, 25-GH1060\V.2,
Bullock, 5/10/07. Representative Gara OBJECTED.
PAT GALVIN, COMMISSIONER, DEPARTMENT OF REVENUE, explained
that the amendment clarifies that a State match would be in
the form of a reimbursement. The licensee would make the
expenditure and then submit a billing to the State for
reimbursement.
Representative Gara WITHDREW his OBJECTION. There being NO
further OBJECTION, AGIA 1 was adopted.
2:32:34 PM
Co-Chair Chenault MOVED to ADOPT AGIA 2, 25-GH1060\V.4,
Bullock, 5/10/07. Representative Gara OBJECTED.
Commissioner Galvin noted that the amendment moves language
on Page 19, Lines 26-28, regarding payments the State makes
to a licensee in order to acquire products needed under the
license. The description is more expansive.
Representative Gara WITHDREW his OBJECTION. There being NO
further OBJECTION, AGIA 2 was adopted.
2:35:19 PM
Co-Chair Chenault MOVED to ADOPT AGIA 3, 25-GH1060\V.3,
Bullock, 5/10/07. Vice Chair Stoltze OBJECTED.
Commissioner Galvin noted the amendment provides clarifying
language regarding the date when a licensee receives their
certificate to move through the judicial review process.
Vice Chair Stoltze WITHDREW his OBJECTION. There being NO
further OBJECTION, AGIA 3 was adopted.
2:36:41 PM
Co-Chair Chenault MOVED to ADOPT AGIA 4. Vice Chair Stoltze
OBJECTED.
Commissioner Galvin commented that the language would
clarify the section dealing with modification references
issued by the Alaska Oil and Gas Conservation Commission
(AOGCC).
Vice Chair Stoltze WITHDREW his OBJECTION. There being NO
further OBJECTION, AGIA 4 was adopted.
2:37:56 PM
Co-Chair Chenault MOVED to ADOPT AGIA 5. Vice Chair Stoltze
OBJECTED.
Commissioner Galvin indicated that the amendment provides
clarifying language, Page 16, Line 27, Subsection (d)(2),
deleting "when and as issued" and inserting on Page 16, Line
27, "when and as".
Vice Chair Stoltze WITHDREW his OBJECTION. There being NO
further OBJECTION, AGIA 5 was adopted.
2:38:58 PM
Co-Chair Chenault MOVED to ADOPT AGIA 6. Vice Chair Stoltze
OBJECTED.
Commissioner Galvin advised that AGIA 6 was a technical
amendment to Page 20, Line 20, deleting "inducement" and
inserting "inducements".
Vice Chair Stoltze WITHDREW his OBJECTION. There being NO
further OBJECTION, AGIA 6 was adopted.
2:39:45 PM
Co-Chair Chenault MOVED to ADOPT AGIA 7, #25-GH1060\V.5,
Bullock, 5/10/07. Vice Chair Stoltze OBJECTED.
Commissioner Galvin explained that AGIA 7 provides
clarifying language as it was recognized that TransCanada
was potential applicant and language was added throughout
the bill to define the certification process and add a
singular definition of certificate.
Commissioner Galvin identified the need for a "friendly"
amendment to AGIA 7, Page 2, Line 20, after the words
"Alaska or" insert "an amendment to" and then again on Line
23, following "1976", delete remaining language.
Representative Nelson MOVED the amended language to AGIA 7
as requested by Commissioner Galvin. There being NO
OBJECTION, AGIA 7 was amended.
Vice Chair Stoltze WITHDREW his OBJECTION. There being NO
further OBJECTION, amended AGIA 7 was adopted.
2:43:11 PM
Co-Chair Chenault MOVED to ADOPT AGIA 8, 25-GH1060\V.6,
Bullock, 5/10/07. Vice Chair Stoltze OBJECTED.
Commissioner Galvin said that the changed language would
address the Regulatory Commission of Alaska's involvement in
the definition section of open season.
Vice Chair Stoltze WITHDREW his OBJECTION. There being NO
further OBJECTION, AGIA 8 was adopted.
2:44:27 PM
Co-Chair Chenault MOVED to ADOPT AGIA 9, 25-GH1060\V.11,
Bullock, 5/10/07. Vice Chair Stoltze OBJECTED.
Commissioner Galvin explained that AGIA 9 provides a series
of language clean-ups and addresses the modification
section. He explained that AGIA 10 would not be needed if
AGIA 9 was passed.
Vice Chair Stoltze WITHDREW his OBJECTION. There being NO
further OBJECTION, AGIA 9 was adopted.
2:46:58 PM
Co-Chair Chenault WITHDREW AGIA 10.
Co-Chair Chenault MOVED to ADOPT AGIA 11. Vice Chair
Stoltze OBJECTED.
Commissioner Galvin pointed out the amendment addresses
issues of abandonment, Page 18, Lines 19-20, revising the
first sentence to read: "If the commissioners [or] and the
licensee do not agree [find] that the project is uneconomic
[and the other party disagrees], the". The language offers
clarification.
Representative Gara inquired if the Department requested
AGIA 10. Commissioner Galvin replied it had been included
in AGIA 9.
Vice Chair Stoltze WITHDREW his OBJECTION. There being NO
further OBJECTION, AGIA 11 was adopted.
2:49:08 PM
Co-Chair Chenault MOVED to ADOPT AGIA 12. Commissioner
Galvin noted that AGIA 12 was included in AGIA 9. Co-Chair
Chenault WITHDRAWN AGIA 12.
2:49:37 PM
Representative Kelly MOVED to ADOPT AGIA 13. Vice Chair
Stoltze OBJECTED.
Commissioner Galvin stated that the amendment addresses
language on Page 2, Line 18, deleting "five" and inserting
"seven", providing a reimbursement time line.
Vice Chair Stoltze WITHDREW his OBJECTION. There being NO
further OBJECTION, AGIA 13 was adopted.
2:52:40 PM
Representative Thomas MOVED to ADOPT AGIA 14. Vice Chair
Stoltze OBJECTED.
Commissioner Galvin explained that the amendment was made to
Page 2, Line 30, deleting "80" and inserting "90". The
language identifies the risk profile & possibility of an
unsuccessful open season.
Co-Chair Chenault inquired why 100% had not been used.
Commissioner Galvin responded that it is important that the
licensee has involvement. He hoped that the split would be
less than 90/10; it is important to allow applicants a sense
of ownership. Co-Chair Chenault encouraged that the State
take their role of being stewards of Alaskan's money
seriously. There will be economic gain for any partner in
the project.
Vice Chair Stoltze WITHDREW his OBJECTION. There being NO
further OBJECTION, AGIA 14 was adopted.
2:56:43 PM
Representative Kelly MOVED to ADOPT AGIA 15. Vice Chair
Stoltze OBJECTED.
Commissioner Galvin discussed AGIA 15. The amendment
attempts to capture legislative interest regarding how the
State can receive reimbursement for the contributions, if
the project is successful. There could be a possibility of
profit sharing, in which the State would share in the
proceeds of the revenue generated by the project. The
amendment proposes opening the door for passive-equity
interest. It does not change the provision of in-State
contributions. Any payment offers would not increase the
tariff or be passed on to the shippers.
Representative Gara summarized that the goal is to guarantee
that the State become an equity owner. He said if the
project is successful, the producers would be willing to pay
back some or all of the $500 million dollars. Commissioner
Galvin agreed, clarifying that if there was a linkage of
their payment to the State and the contribution, it could
not be done through offering contribution considered a loan.
The contribution must be deducted from the tariff & not
included in the rate base.
Vice Chair Stoltze WITHDREW his OBJECTION. There being NO
further OBJECTION, AGIA 15 was adopted.
3:02:12 PM
Representative Kelly MOVED to ADOPT AGIA 16. Vice Chair
Stoltze OBJECTED.
REPRESENTATIVE RALPH SAMUELS explained that the Federal
Energy Regulatory Commission (FERC) made a presumption that
they would have rolled-in tariffs. The Administration
feared that those regulations could be changed so that the
presumption of rolled-in tariffs would no longer exist. The
bill clarifies that as long as the presumption is there and
the pipeline entity exists, individual shippers could argue
their own economic interest.
Representative Gara asked how the current language works.
Commissioner Galvin explained that if the shipper took
advantage of the upstream inducements offered in the bill,
as a condition of receiving those inducements, they would
have to commit to not oppose the application of rolled-in
rates. The amendment removes the commitment to not oppose
those.
Representative Gara commented that the shippers [the majors]
would be receiving a good deal from the State with a tax
lock-in. In exchange, he hoped to see a commitment that
they not get rolled-in rates. The tariff should be held
down in order that new explorers will be able to get into
the pipeline. He acknowledged that the difference between
the bill and the amendment is a small degree. He felt
strongly to make the shippers stand with the State to
produce the gas. Rolled in rates keep the tariff lower for
the new shippers.
Representative Hawker understood that the Administration
supports AGIA 16. Commissioner Galvin recognized there is
an issue, however, the Administration believes that the
concern could keep producers from making a commitment. The
Administration will support the amendment, a gradation
issue.
Representative Gara maintained his OBJECTION.
A roll call vote was taken on the motion.
IN FAVOR: Thomas, Crawford, Foster, Hawker, Joule,
Kelly, Nelson, Stoltze, Chenault, Meyer
OPPOSED: Gara
The MOTION PASSED (10-1).
3:12:04 PM
Representative Kelly MOVED to ADOPT AGIA 17, 25-GH1060\V.10,
Bullock, 5/10/07. Representative Crawford OBJECTED.
Representative Kelly explained that the amendment takes
language from a prior version that was more inclusive.
Representative Crawford emphasized that the amendment is
very important. Project Labor Agreements (PLA) do not
preclude non-Union workers from working. PLA's do guarantee
that everyone working on a project makes the same wage and
same working conditions; everyone is treated equally.
Collective bargaining is the only thing that guarantees
local Alaska hire; if there is no collective bargaining
agreement, the door remains open for out-of-state labor.
Co-Chair Chenault voiced support for the amendment, agreeing
on the need for a project labor agreement. He understood
that villages need job opportunities and that no one should
be excluded; all Alaskans need to have a job. He referenced
the construction project of the proposed pipeline,
commenting that the language should remain open enough to
cause no concern for either non-Union or Union companies.
No one should be left out.
Representative Gara accepted the response from the
Administration. Current language guarantees that there will
be a project labor agreement for the right of Union labor on
the work site. The risk is that the Courts will not agree
to the provision of Alaskan hire requirements. One way to
guarantee Alaska-hire is through the PLA. Representative
Gara reiterated the need for Alaska hire. He projected that
there would be people coming from out of State, living in
the communities and then leaving the State when the project
is complete. There will be social costs.
Co-Chair Chenault commented on his previous experience
hiring out of Union halls. He believed that the issue is to
make sure the agreement is open enough that every Alaskan
has the opportunity to work.
3:23:30 PM
Representative Crawford clarified his intent that every
qualified person in Alaska be considered to work first. A
collective bargaining agreement would guarantee that
Alaskans are first.
Representative Thomas commented that his district is mostly
non-Union. He thought that the amendment would leave the
door open for Alaska hire. He addressed the fiscal note for
the State Training Employment Program (STEP) attached to the
bill. Representative Crawford pointed out that the State
already spends over $10 million dollars a year to offer
training for Alaskans. Those are statewide outreach
programs; he did not think that the amendment would close
the door. Non-Union workers are not being discriminated
against.
Vice Chair Stoltze noted that he was committed to voting for
a PLA and was sensitive to Alaska hire. He pointed out that
the Governor has a strong moral ethic and force to push the
Alaska hire.
Representative Joule summarized that all Committee members
were hoping for the same goal, which is having Alaskans
hired to build the pipeline.
3:35:26 PM
Representative Gara asserted that the amendment reduces the
chance for Alaska hire. The State can not mandate Alaska
hire. Unions are the only entity that can be forced to
provide Alaska hire. The stronger the PLA, the more likely
the State will be able to enforce Alaska hire.
Co-Chair Chenault interjected that the agreement would be
negotiated when the project was sanctioned.
3:38:11 PM
Representative Kelly noted that the intent of the amendment
is to send a message to all Alaskans regarding the hire of
Union and non-Union. He stated that negotiations should
occur in statute. He pointed out that Unions are well
represented in the State's capitol. The message remains
that all Alaskans be represented in the process. The
legislation does not "put shackles" on Unions.
A roll call vote was taken on the motion.
IN FAVOR: Foster, Hawker, Kelly, Stoltze, Thomas,
Chenault, Meyer
OPPOSED: Crawford, Gara, Joule, Nelson
The MOTION PASSED (7-4).
3:40:48 PM
Co-Chair Chenault MOVED to ADOPT AGIA 18. Vice Chair
Stoltze OBJECTED.
REPRESENTATIVE BOB ROSES spoke to the amendment, which would
insert "50 percent of" on Page 15, Line 25 and Page 19, Line
27. He provided members with a spreadsheet. (Copy on
File).
Representative Roses explained if the project proved to be
uneconomic, the State could buy them out of the project. If
a licensee spent $200 million dollars during open season,
they would have a 50/50 split. After open season, the split
would go to 90/10, equating to $450 million dollars with a
$500 million dollar limit. The licensee would be up to $200
million dollars. He asserted that provision encourages
investors to spend less up-front and then the State pays
more. The amendment provides a 50% pay-out at the net cost.
He provided examples.
3:46:39 PM
Commissioner Galvin stated that the Administration opposes
AGIA 18, which they believe will drive applicants away.
Under the current bill, the State would have to make the
expenditure in order to own the asset. The licensee would
have nothing but the cost of their time. He did not feel
that they would take advantage of that option.
3:48:41 PM
Representative Gara noted that if a producer did back out,
their certificate would not be worth that much. He
acknowledged the cost savings but expressed concern that the
message to investors would be that if producers do not
provide the gas they would stand to lose 50% of their
investment.
Representative Roses argued that the State does have "skin
in the game", pointing out that the State would be left with
a less than marketable product. The intent is the
incentive. If the potential licensee looses, they will
fight harder than if they have no risk; past that point,
there is a 100% guarantee. Once the licensee goes to FERC,
the risk is over.
3:52:25 PM
A roll call vote was taken on the motion.
IN FAVOR: Foster, Gara, Hawker, Joule, Kelly, Nelson,
Stoltze, Thomas, Crawford, Meyer
OPPOSED: Chenault
The MOTION PASSED (10-1).
AT EASE: 3:53:37 PM
RECONVENE: 5:47:08 PM
Representative Gara MOVED to ADOPT AGIA 19, 25-GH1060\V.8,
Bullock, 5/10/07. Vice Chair Stoltze OBJECTED.
Representative Gara stated that AGIA 19 provides for the
Alaska hire provision, with the intention to maximize the
number of those hired in State when it is "feasible and
economic".
Co-Chair Chenault MOVED to AMEND AGIA 19, changing Page 19
to Page 9. Commissioner Galvin recognized the intent to
maximize Alaska hire and the use of Alaska businesses. He
did not see any issues with the language & is consistent
with the intent of the provision.
5:51:33 PM
Representative Hawker asked if the amendment had been
sponsored by the Administration. Commissioner Galvin said
it had not. Representative Hawker worried about using
"economic"; he recommended using "economical" instead.
Representative Gara accepted that recommendation.
Representative Hawker MOVED a conceptual amendment to AGIA
19, deleting "economic" on Page 1, Lines 2 & 5 and inserting
"economical". There being NO OBJECTION, it was amended.
Representative Hawker spoke against the amended AGIA 19. He
stated that the language reaches beyond layers of counsel &
worried about forthcoming court cases. He reiterated that
he did not support the amendment.
5:54:40 PM
Representative Gara commented that current language
encourages hiring qualified residents. He thought that an
applicant could claim that the language does not require
maximizing the use of Alaska labor. Commissioner Galvin
responded that the manner in which the Department
interpreted the language was "to the extend permitted by
law", intended to dictate the level of the State's ability
to obligate to commit to make the promise. The
Administration recognizes that they cannot require them to
hire Alaskans. Creating some sense of maximum-extent could
help accomplish that by adding "maximum" on Line 16
following "the".
Representative Gara WITHDREW AGIA 19.
5:58:33 PM
Representative Crawford interjected that the language is
"academic" and that the law qualifies that the State can not
require Alaska hire. The only enforceable option would be
to have an enforceable quota licensed through a PLA.
Representative Gara MOVED to ADOPT AGIA 19(a), inserting
"maximize", Page 9, Line 16. There being NO OBJECTION, AGIA
19(a) was adopted.
6:00:42 PM
Representative Gara agreed with Representative Crawford that
the Alaska hire provision is important and that the only way
to accomplish it would be through federal law.
6:01:32 PM
Representative Kelly MOVED to ADOPT AGIA 20, 25-GH1060\V.12,
Bullock, 5/10/07. Representative Hawker OBJECTED.
REPRESENTATIVE PAUL SEATON commented that the amendment in
Section (B), clarifies that the State of Alaska would remove
their ability to take royalty in-kind as long as the leasee
agrees to sell gas at that value and rates and to provide
gas for in-State residential & commercial uses.
He noted that he had worked through the language and if the
leasee had failed to provide at those rates or below, then
it would switch to the previous 90-day situation. The
Committee worked with the Administration to make sure that
there were no unintended consequences to up-stream unit
agreements. He pointed out that two of the major producers
are no longer worried about switching and do not see the
value in the language. It would not provide a significant
bar.
Representative Seaton requested that AGIA 20 be withdrawn.
6:05:48 PM
Representative Nelson asked the definition of the acronyms.
Representative Seaton apologized, clarifying Royalty in
Value (RIV) and Royalty in Kind (RIK).
6:07:24 PM
Representative Kelly WITHDREW AGIA 20.
6:07:53 PM
Representative Crawford noted that he supports the gas
pipeline, however, without including a strong Alaska hire
provision, he would be a no vote.
6:09:29 PM
Representative Foster MOVED to REPORT CS HB 177 (FIN) out of
Committee with individual recommendations and with the
accompanying fiscal notes. Representative Crawford
OBJECTED.
A roll call vote was taken on the motion.
IN FAVOR: Hawker, Joule, Kelly, Nelson, Stoltze,
Thomas, Foster, Gara, Meyer, Chenault
OPPOSED: Crawford
The MOTION PASSED (10-1).
CS HB 177 (FIN) was reported out of Committee with a "do
pass" recommendation and with a new fiscal note by the
Department of Natural Resources, zero note #1 by the
Department of Administration, zero note #2 by the Department
of Commerce, Community & Economic Development, zero note #3
by the Department of Natural Resources, fiscal note #5 by
the Department of Revenue, fiscal note #6 by the Office of
the Governor, and fiscal note #7 by the Department of Labor
& Workforce Development.
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