Legislature(2011 - 2012)BELTZ 105 (TSBldg)
03/05/2012 01:30 PM Senate JUDICIARY
| Audio | Topic |
|---|---|
| Start | |
| HB6 | |
| Confirmation Hearings: Select Committee on Legislative Ethics | |
| HB215 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| + | HB 6 | TELECONFERENCED | |
| + | HB 215 | TELECONFERENCED | |
| + | TELECONFERENCED |
HB 215-PIPELINE PROJECT: JUDICIAL REVIEW/ROW
2:16:18 PM
CHAIR FRENCH announced the consideration of HB 215 and asked for
a motion to adopt the Senate committee substitute, version X.
2:16:43 PM
SENATOR PASKVAN moved to bring Senate CS for CSHB 215, labeled
27-LS0741\X, before the committee for purposes of discussion.
CHAIR FRENCH found no objection and recognized the sponsor,
Representative Mike Chenault, Speaker of the House.
2:17:00 PM
REPRESENTATIVE MIKE CHENAULT, Speaker of the House of
Representatives and prime sponsor of HB 215, read the following
sponsor statement into the record: [Original punctuation
provided.]
The objective of House Bill 215 is to prohibit the
filing of lawsuits that have the potential to delay
construction of in-state gaslines. The provisions
under House Bill 215 modify current statute and the
provisions only apply to state land rights-of-way.
Claims may be filed only by an applicant, a competing
applicant of a person who has a direct financial
interest affected by the lease of a right-of-way. The
requests for judicial review must be filed within 60
days of the publication of notice for a right-of-way
lease application. Judicial review may only be granted
for claims challenging the validity of the statute or
challenging a denial of rights under the state
constitution. Any claim will be barred unless it is
filed within the 60-day time frame. The Department of
Environmental Conservation, under the Clean Water and
Clean Air Acts, is exempted from the provisions
pertaining to judicial review.
All claims are to be filed in Alaska Superior Court,
which will have exclusive jurisdiction to determine
the proceeding. The court will not have the
jurisdiction to grant any injunctive relief with the
exception of an issuance of a final judgment.
The legislation is modeled after the Trans-Alaska
Pipeline legislation, 43 USC, Chapter 34, that was
adopted by Congress in 1973 (43 USC, Chapter 43, Sec.
1652 (d). Similar legislation to House Bill 215 was
passed by the Alaska State Legislature in 1973, Senate
Bill 3, related to the TAPS line.
The bill also allows the Alaska Gasline Development
Authority (AGDC) to move from a common carrier
requirement to a contract carrier option. This change
is necessary to pursue a successful open season and
project financing for an in-state gasline.
2:19:56 PM
TOM WRIGHT, staff, Representative Mike Chenault, explained that
version X reflects some of the changes that the House Resources
Committee made to HB 9 and changes some provisions in HB 215 so
that it only applies to the AGDC in-state line. This was done by
adding new subsections that apply only to AGDC.
2:21:37 PM
CHAIR FRENCH asked how much overlap there was between HB 9 and
HB 215, version X, and if both were necessary to accomplish the
sponsors' purposes.
MR. WRIGHT replied three House bills that are currently residing
in the Senate were incorporated into HB 9. These are HB 189
dealing with confidentiality agreements, HB 203 that establishes
the in-state gas pipeline fund, and HB 215. If and when those
bills advance, they will be removed from HB 9. He noted that HB
9 also contains other recommendations that AGDC and the sponsors
felt was necessary.
CHAIR FRENCH asked him to confirm that none of the bills had a
Senate analog.
MR. WRIGHT confirmed there were no analogs.
CHAIR FRENCH highlighted that this was the first hearing and
asked Mr. Wright to proceed as he saw fit.
2:22:59 PM
MR. WRIGHT provided a sectional analysis of HB 215.
Section 1 amends AS 38.34.050(c), Cooperation and access to
information. It adds language that excludes covenants found in
AS 38.35.120[(a)(1), (2) and (5) from the covenants required to
be included in the lease.] It exempts the AGDC line from being a
common carrier. The ability to be a contract carrier will work
to the advantage of shippers and buyers.
SENATOR PASKVAN asked what transitioning to contract carrier
might do with gas from Nenana or the Yukon Flats if it were
discovered in the next three years, for example.
MR. WRIGHT mentioned the 500 mcf/day limitation under AGIA and
confirmed that there had been discussions with Doyon and
Anadarko about transporting gas on an in-state line. He then
deferred the question Mr. Fauske or Mr. Dubler with AGDC.
Section 2 amends AS 38.35.100(d), Decision on application.
Section 3 amends AS 38.35.120(a), Covenants required to be
included in lease. Section 4 amends AS 38.35.120(b), Covenants
required to be included in lease. These sections have conforming
changes and include clarifications and simplification of
language requested by the Department of Law (DOL).
Section 5 amends AS 38.35.200, Judicial review of decisions of
commissioner on application. The current version X narrows the
application by adding new subsections. The new subsection (c)
only applies to the in-state gas pipeline. It allows a competing
applicant or person with a direct financial interest affected by
the lease of a right-of-way to raise an objection within 60 days
of the application or 60 days after the effective date, and it
allows an applicant standing to seek judicial review anytime in
the process. This is modeled after the Trans-Alaska Pipeline
Authorization Act. Only those who have standing are allowed to
bring an action alleging that an action will deny rights under
the state constitution or challenging the validity of the
section. The complaint has to be filed in a state superior court
and the court may not grant injunctive relief with the exception
of a final judgment. It also exempts an appeal of a permitting
decision by the Department of Environmental Conservation under
AS 46.03 and AS 46.14 that is delegated to the department by the
U.S. Environmental Protection Agency. He noted that DEC intends
to offer several clarifying changes.
Section 6 amends the uncodified law by adding a new section for
transition and legislative intent. It says that if a right-of-
way lease is entered into before the bill passes, the contract
that was signed for the lease can be amended as soon as
practicable to reflect changes made in this legislation.
2:28:32 PM
CHAIR FRENCH reviewed the language in Section 6 and summarized
that a contract put in place before the bill passes can be
conformed to what is contained in this bill.
MR. WRIGHT agreed.
SENATOR WIELECHOWSKI asked for an explanation of the specific
covenants in AS 38.35.120(a)(1), (2), and (5) that were excluded
in Section 2.
MR. WRIGHT deferred to Mr. Hutchins with the Department of Law
(DOL).
2:30:45 PM
SENATOR PASKVAN asked if the AGIA statutes had a provision that
was comparable to the judicial review in Section 5.
MR. WRIGHT replied the sponsors indicated they couldn't recall
one way of the other.
2:31:39 PM
JOHN HUTCHINS, Assistant Attorney General, Civil Division, Oil,
Gas and Mining Section, Department of Law (DOL), addressed
Senator Wielechowski's question. He explained that the covenant
in AS 38.35.120(a)(1) requires the lessee to become a common
carrier. It allows the state, through contract with the lessee,
to impose common carrier regulations on the lessee.
SENATOR WIELECHOWSKI asked for an explanation of the
significance of common carrier from the standpoint of the state.
MR. HUTCHINS replied a common carrier designation means the
operator of the pipeline is required to accept, on non-
discriminatory terms, any gas that is submitted for shipment on
the line. The practice in the gas industry is that a line that
is not a common carrier is a contract carrier. As a rule there
is an open season and contracts are entered into for shipment of
defined quantities of gas at defined terms.
SENATOR WIELECHOWSKI asked if the bill would require the lessee
to be a common carrier.
MR. HUTCHINS clarified that the bill would allow the lessee to
operate the line without being a common carrier. As a rule,
pipelines in Alaska are required to operate as common carriers
if they have a lease under AS 38.35 over state land.
SENATOR WIELECHOWSKI questioned why the state would want to
grant this exemption.
MR. HUTCHINS replied it is a policy question for AGDC to
address, but in general, it is an issue of how the line can best
be filled.
CHAIR FRENCH asked if he was generally saying that a pipeline
that has a right-of-way across state land has to be a common
carrier, and the paragraph (1) exemption is because AGDC has a
business case interest for needing to be a contract carrier.
MR. HUTCHINS said yes.
CHAIR FRENCH asked for an explanation of the exemption in
paragraph (2).
MR. HUTCHINS said all the exemptions are related to common
carrier. Paragraph (2) is agreement by the lessee to interchange
gas, providing interconnections as necessary. This would support
the role as a common carrier. If someone is required to take gas
that is offered on non-discriminatory terms, it is also
important to have a means to allow connections to a line to
enable the shipment of that gas.
CHAIR FRENCH asked the meaning of the word "interchange."
MR. HUTCHINS replied he understands it to mean trade.
2:35:48 PM
CHAIR FRENCH recognized that Representative Hawker was present.
SENATOR WIELECHOWSKI asked for a layman's explanation of what
covenant in AS 38.35.120(a)(2) would be exempted.
MR. HUTCHINS replied it says AGDC does not have to accept,
transport, and allow a gas supplier to use the line to trade
with a gas purchaser gas over the line.
SENATOR WIELECHOWSKI asked for an example of how that works
under current law.
MR. HUTCHINS offered a hypothetical example of an oil discovery
in a new field on the North Slope by an explorer that was not an
owner of the Trans-Alaska pipeline. That explorer is allowed to
submit that oil for transportation on TAPS if it meets the
quality requirements of TAPS and pays the tariff set by the RCA.
If that's done, TAPS is required to accept that oil for
transport.
SENATOR WIELECHOWSKI said he was still trying to understand what
was being exempted.
CHAIR FRENCH asked Mr. Balash to supplement the explanation.
2:38:30 PM
JOE BALASH, Deputy Commissioner, Department of Natural Resources
(DNR), provided an explanation of the covenants under AS
38.35.120(a). The covenant under subsection (a)(1) goes to rates
and charges associated with pipeline costs and fees. Subsection
(a)(2) speaks to the interconnections that apply to multiple
pipelines that connect with one another. The policy call made by
the Legislature through this statute was to minimize the number
of pipelines required to cross state land. Hopefully this
achieves some efficiency in the economics as well as minimizing
the environmental footprint, he said. For example, the Kuparuk
pipeline connects to the TAPS facilities. He said he wasn't
aware of a specific example for a gas pipeline, but there were
perhaps two each in Cook Inlet and the North Slope.
CHAIR FRENCH said he was thinking about Beluga and Tyonek.
MR. BALASH pointed out that a number of those pipelines were
constructed before AS 38.35 was adopted, so a number of the gas
pipelines in Cook Inlet are not bound by that statute.
SENATOR PASKVAN offered his interpretation of subsection (a)(2).
Subsection (a) says the pipeline has to accept it because it is
a common carrier and the rates have to be fair. Paragraph (2)
says the pipeline has to provide connections and facilities at
every location where they intersect, and that's what
"interchange" means.
MR. BALASH said that's right, and read together it gives the
whole picture of what the covenants mean.
SENATOR WIELECHOWSKI questioned why it would be in the
consumers' interest for AGDC not to be a common carrier, because
it would seem to be good for the consumer to require them to
take in any gas. He asked for an explanation of the policy.
MR. BALASH opined that the question in this case is whether or
not the consumer will get the service. In the natural gas
pipeline business, particularly a long haul pipeline such as
being contemplated by AGDC, financing depends on the ability to
enter into firm transportation agreements. The common carrier
requirement that has developed in Alaska is one that requires a
pipeline to provide service on demand, as opposed to on
contract. Because of that requirement, a shipper may not be able
to count on getting their product delivered from point A to
point B. He opined that there is a need to address that
constraint, because AGDC has undertaken the covenant in AS
38.35.120 through the right-of-way that was granted in July
2011.
2:42:13 PM
SENATOR COGHILL asked if this contemplates that long-term
contracts will be necessary, that the line will be full for an
extended period, and that any new exploration will be thwarted,
but could stand in line.
MR. BALASH suggested he pose the question to AGDC because the
issue as to whether or not others may be able to gain access to
the pipeline will depend on the business model employed and the
contracts signed.
SENATOR COGHILL indicated he wanted to proceed with caution.
2:43:43 PM
MR. BALASH continued to explain that subsection (a)(5) relates
to the means of providing for offtake at a wholesale level along
the pipeline route. For example, if the pipeline goes through
Fairbanks, Senator Paskvan will not have a separate contract
with the carrier to get gas for his home and businesses; it will
go through the local utility.
CHAIR FRENCH asked if he was saying that subsection (a)(5)
requires going through a local utility and that the bill exempts
that requirement.
MR. BALASH said no, and clarified that it relates to offtake
points along the pipeline as determined [by the Regulatory
Commission of Alaska (RCA)] under AS 42.06.340, which is the
Pipeline Act.
SENATOR WIELECHOWSKI asked if the result of this particular
exemption would be to remove RCA regulation over the pipeline in
this section.
MR. BALASH replied he didn't believe that was the case; rather,
it was just with regard to this specific reference in this bill.
2:45:18 PM
SENATOR PASKVAN questioned whether, under this provision, there
would be no obligation to provide a connection at Fairbanks if
the first open season is contracted with export only and the
pipeline is at capacity.
MR. BALASH expressed uncertainty about that, because a project
with a significant export component would already be exempt from
the common carrier requirements.
2:46:36 PM
At ease from 2:46:36 p.m. to 2:47:10 p.m.
MR. BALASH directed attention to AS 38.35.120(a)(1)(A) and the
current CS, version X, on page 3, lines 8-14. That language
exempts a lessee that owns or operates a natural gas pipeline
from the common carrier requirement. In Senator Paskvan's
hypothetical, RCA would be preempted by the Federal Energy
Regulatory Commission (FERC).
CHAIR FRENCH asked if subsection (a)(7) provides exemption from
RCA and puts regulatory authority under FERC.
MR. BALASH agreed FERC jurisdiction would apply if it is granted
under the natural gas act.
CHAIR FRENCH summarized that FERC jurisdiction would apply for
exported gas, and Mr. Balash agreed.
He asked if the in-state portion of the gas would be exempt from
RCA.
2:48:33 PM
MR. HUTCHINS confirmed that the in-state portion of the gas is
exempted from the common carrier regulation. The Pipeline Act
establishes that the RCA regulates common carriers and sets a
tariff, but it is not set up to price regulate a contract
carrier. He offered his understanding that the sponsors were
considering adding conceptual amendments to HB 215 to allow a
mechanism for contract carrier price regulation by the RCA. He
continued that this specific provision, covenant (7), does
remove the agreement by the lessee to submit to RCA regulation
of tariffs in this context.
MR. BALASH clarified that the bill does not exempt the Pipeline
Act, AS 42.06; the lessee's obligation to submit to regulation
under AS 42.06 is what is being exempted.
SENATOR WIELECHOWSKI asked how tariffs would be calculated.
MR. HUTCHINS explained the open season process.
CHAIR FRENCH posed a hypothetical example where ENSTAR
contracted to get gas from the North Slope.
2:51:05 PM
MR. HUTCHINS confirmed the contract would be with AGDC or
whatever entity owned the pipeline.
CHAIR FRENCH asked if it was fair to say that, at this point, it
was unclear who would own the pipeline.
MR. BALASH responded that the legislation specifically refers to
a right-of-way owned by AGDC.
SENATOR WIELECHOWSKI questioned whether it wouldn't be good for
consumers if there was a mechanism like RCA to sideboard what
tariff could be charged.
MR. BALASH agreed that was a policy decision, but the fact that
AGDC is a state corporation offers some natural protections.
SENATOR WIELECHOWSKI asked if the bill provides some protection
in the event that AGDC no longer owns the line
2:54:00 PM
MR. BALASH deferred the question.
MR. HUTCHINS said that the transfer of the right-of-way requires
the approval of the commissioner under AS 38.35.120(a)(9).
SENATOR WIELECHOWSKI asked if some sort of consumer protection
conditions would be set on the rates if AGDC transferred the
pipeline to ENSTAR, for example.
MR. HUTCHINS replied absent some other regulation, HB 215 would
allow ENSTAR to enter into negotiations for transport of gas and
would not restrict the contracts ENSTAR might enter into.
MR. WRIGHT suggested that Mr. Dubler and Mr. Fauske address some
of the committee's questions.
2:55:52 PM
DAN FAUSKE, CEO, Alaska Housing Finance Corporation (AHFC) and
President, Alaska Gasline Development Corporation (AGDC),
introduced himself.
JOE DUBLER, Vice President and Chief Financial Officer, Alaska
Gasline Development Corporation, introduced himself.
MR. FAUSKE addressed the contract carrier issues reminding the
committee that financing is envisioned through the sale of
revenue bonds and that the line is limited to 500 mcf/day. He
mentioned discussions with Doyon, Limited regarding their Nenana
Basin field and noted that it resides below the 68th parallel.
CHAIR FRENCH clarified that someone could build a larger gas
pipeline from the North Slope, it just wouldn't qualify for
preferential state support that was granted to the AGIA
licensee.
MR. FAUSKE agreed.
SENATOR WIELECHOWSKI asked if he had a legal opinion about
whether or not it would violate AGIA to bring 500 mcf/day of gas
from the North Slope and an equal amount off the flats from
Doyon, Limited.
MR DUBLER replied they did not solicit a legal opinion because
the law is very clear that AGIA only applies above the 68th
parallel, and the foothills is well south of that.
MR. FAUSKE highlighted that similar discussions took place in
reference to potential findings in Cook Inlet. AGDC envisions a
commercial entity at the end of the line to make the tariffs
affordable to Alaskans. Judging from a confidential, non-binding
expression of interest meeting in July 2011, the line will be at
full capacity. That is critically important for Alaskan
consumers.
He continued to discuss the tariff issue. Front end loaded (FEL)
1 has been completed and after stage 3 the project will or will
not be sanctioned. He spoke in support of the independent
project analysis (IPA) on mega projects because the project can
be halted anytime it doesn't make economic sense. He continued
that the costs were currently plus or minus 30 percent on the
$7.5 billion project and the goal at sanction was to be at plus
or minus 10 percent. Under the current analysis the tariff for
Fairbanks would be about $10.33/mcf, whereas the cost now is
$23.33/mcf. The tariff for Anchorage is estimated to be
$9.63/mcf. He discussed straddle plants in both locations and
the difference in cost due to economies of scale. He noted that
the tariff estimates were based on a 70/30 debt-equity ratio.
MR. FAUSKE stated that he wanted the record to reflect that the
only money being contemplated by the state for this $7.5 billion
project is $400 million to get to FEL 3. Beyond that point
financing will be through the sale of revenue bonds. He
highlighted that that goes back to the contract carrier issue in
order to get financing. It would be impossible to finance the
project under common carrier requirements because investors
and/or companies would not be willing to risk that things could
change at any time.
CHAIR FRENCH held HB 215 in committee.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB6 Supporting Documents-Memo Legal Services 04-17-07.pdf |
HJUD 3/21/2011 1:00:00 PM SJUD 3/5/2012 1:30:00 PM |
HB 6 |
| HB6 Supporting Documents-Opinion (Informal) AG 02-02-07.pdf |
HJUD 3/21/2011 1:00:00 PM SJUD 3/5/2012 1:30:00 PM |
HB 6 |
| Sponsor Statement for HB 6.pdf |
SJUD 3/5/2012 1:30:00 PM |
HB 6 |
| HB 6 Sectional Analysis for O version.pdf |
SJUD 3/5/2012 1:30:00 PM |
HB 6 |
| Sponsor Statement-CSHB 215 (JUD) am.pdf |
SJUD 3/5/2012 1:30:00 PM |
HB 215 |
| Sectional Analysis-CSHB 215 (JUD) am.pdf |
SJUD 3/5/2012 1:30:00 PM |
HB 215 |
| Hb 215 legal document Moore V. State.pdf |
SJUD 3/5/2012 1:30:00 PM |
HB 215 |
| HB 215 Leg Legal review 04.15.11.pdf |
SJUD 3/5/2012 1:30:00 PM |
HB 215 |
| HB 215 SCS work draft.pdf |
SJUD 3/5/2012 1:30:00 PM |
HB 215 |