02/23/2022 03:15 PM House LABOR & COMMERCE

        HB 307-EXTEND BOND AUTH FOR INTERIOR ENERGY PROJ                                                                    
                                                                                                                                
5:30:44 PM                                                                                                                    
                                                                                                                                
CO-CHAIR FIELDS announced that the  final order of business would                                                               
be HOUSE  BILL NO.  307, "An  Act relating  to the  financing and                                                               
issuance of bonds  for a liquefied natural  gas production system                                                               
and  natural  gas  distribution  system;  and  providing  for  an                                                               
effective date."                                                                                                                
                                                                                                                                
5:31:11 PM                                                                                                                    
                                                                                                                                
JOE  HARDENBROOK,  Staff,  Representative Grier  Hopkins,  Alaska                                                               
State Legislature, introduced HB  307 on behalf of Representative                                                               
Hopkins,  sponsor.   He  explained that  HB 307  is  part of  the                                                               
solution  to  a  difficult  problem faced  by  the  residents  of                                                               
Fairbanks,  North  Pole,  and surrounding  communities  who  have                                                               
struggled with some of the worst air quality in the nation.  He                                                                 
spoke from the sponsor statement, which read as follows                                                                         
(original punctuation provided):                                                                                                
                                                                                                                                
     In  2009,  the  U.S.  Environmental  Protection  Agency                                                                    
     (EPA)  designated the  more populated  portions of  the                                                                    
     Fairbanks North Star Borough  (FNSB) as a nonattainment                                                                    
     area  for air  quality related  to [particulate  matter                                                                    
     (PM)]  2.5.    Since  that  time,  the  communities  of                                                                    
     Fairbanks  and North  Pole,  State  of Alaska,  [Alaska                                                                    
     Industrial Development  and Export  Authority (AIDEA)],                                                                    
     and  Interior  Gas  Utility (IGU)  have  been  actively                                                                    
     engaged  in  expanding  the  availability  and  use  of                                                                    
     natural gas through the  implementation of the Interior                                                                    
     Energy  Project  (IEP),  a project  designed  to  bring                                                                    
     lower-cost  energy to  as many  Interior residents  and                                                                    
     businesses as possible, as quickly as possible.                                                                            
                                                                                                                                
     A key to reducing PM2.5  air pollution in the long term                                                                    
     is  expanding  the  availability of  affordable,  clean                                                                    
     burning Alaska  natural gas.   A critical  component of                                                                    
     the IEP is  financing for the development  of a unified                                                                    
     public  gas utility  with competitive  rates.   [Senate                                                                    
                                                           th                                                                   
     Bill] 23  (chapter 26  SLA 13)  was passed  by the  28                                                                     
     Alaska   Legislature   in   2013  giving   the   Alaska                                                                    
     Industrial  Development Authority  (AIDEA) the  ability                                                                    
     to provide  financing tools for the  development of the                                                                    
     IEP.                                                                                                                       
                                                                                                                                
     Among the financial tools granted  to AIDEA for the IEP                                                                    
     was the ability to issue  up to $150 million in conduit                                                                    
     revenue  bonds to  help develop  an integrated  natural                                                                    
     gas supply  chain, including  expansion of  natural gas                                                                    
     liquefaction   facilities   in  the   Matanuska-Susitna                                                                    
     Borough and expansion of natural  gas mains and service                                                                    
     lines in  the FNSB.  Authorization  under [Senate Bill]                                                                    
     23 for issuing these  bonds was originally scheduled to                                                                    
     expire June  30, 2018.   Through the passage  of [House                                                                    
     Bill]  119 (chapter  64  SLA 18)  in  2018, the  Alaska                                                                    
     Legislature  extended   access  to  AIDEA   bonding  an                                                                    
     additional five years to June 30, 2023.                                                                                    
                                                                                                                                
     Given  market conditions  and  turmoil  related to  the                                                                    
     COVID-19 pandemic, IGU has  paused the final investment                                                                    
     decision on  its Titan liquid  natural gas  (LNG) plant                                                                    
     expansion project located in  the Mat-Su Borough, which                                                                    
     will necessitate access to AIDEA  bonds.  Bonds of $136                                                                    
     million of the original $150 million authorized may be                                                                     
     issued to provide up to the $275 million financing cap                                                                     
     authorized under [Senate Bill] 23.                                                                                         
                                                                                                                                
      HB 307 extends the authorization for AIDEA to issue                                                                       
     IEP-related bonds for an additional five years to June                                                                     
     30, 2028.                                                                                                                  
                                                                                                                                
MR. HARDENBROOK drew  attention to AIDEA's letter  of support for                                                               
HB 307 in  the committee packet, as well as  AIDEA's January 2022                                                               
quarterly report to the legislature on the progress of the IEP.                                                                 
                                                                                                                                
5:34:32 PM                                                                                                                    
                                                                                                                                
MR. HARDENBROOK provided  the sectional analysis for HB  307.  He                                                               
stated that Section  1 amends the uncodified law of  the State of                                                               
Alaska enacted in 2013 to  replace the expiration date of AIDEA's                                                               
authority to issue  bonds in support of the  project from 6/30/23                                                               
to  6/30/28.   Section 2  contains the  immediate effective  date                                                               
clause.                                                                                                                         
                                                                                                                                
5:34:47 PM                                                                                                                    
                                                                                                                                
CO-CHAIR FIELDS opened invited testimony on HB 307.                                                                             
                                                                                                                                
5:35:01 PM                                                                                                                    
                                                                                                                                
DAN  BRITTON,  General  Manager,   Interior  Gas  Utility  (IGU),                                                               
provided  invited  testimony  in  support of  HB  307  to  extend                                                               
AIDEA's authorization  to finance  and issue bonds  targeting the                                                               
Interior  Energy Project  (IEP).   He stated  that AIDEA  and IGU                                                               
have been  working closely on  all aspects of the  IEP, including                                                               
liquefaction,    transport,    storage,    regasification,    and                                                               
distribution of natural gas in the Interior.                                                                                    
                                                                                                                                
MR. BRITTON stated  that to date AIDEA and IGU  have advanced the                                                               
goals of the  IEP in several ways.  He  specified that [Fairbanks                                                               
Natural  Gas  LLC (FNG)]  and  IGU  were consolidated  under  one                                                               
natural  gas utility  to expand  the availability  of lower  cost                                                               
energy to as many Interior  residents and businesses as possible,                                                               
as quickly as  possible.  Approximately 215 miles  of natural gas                                                               
distribution lines were installed  throughout Fairbanks and North                                                               
Pole.  Natural  gas mains in the City of  Fairbanks were expanded                                                               
to now  serve about 1,550  residential and  commercial customers,                                                               
up  from about  1,200 customers  a few  years ago.   Natural  gas                                                               
mains that  have been  installed in Fairbanks  could serve  up to                                                               
8,500 properties.   Gas distribution  lines in the City  of North                                                               
Pole now serve  more than 125 customers and natural  gas mains in                                                               
North Pole  could serve up to  3,000 properties.  A  5.25 million                                                               
gallon  liquefied  natural  gas (LNG)  storage  and  gasification                                                               
facility was  completed in  Fairbanks in late  2019.   A separate                                                               
150,000-gallon   LNG  storage   and  gasification   facility  was                                                               
completed in North Pole in early  2021.  The customer base of IGU                                                               
has  increased 40  percent since  these  storage facilities  were                                                               
completed.   It is anticipated  that an additional  600 customers                                                               
will convert to natural gas in 2022.                                                                                            
                                                                                                                                
MR.  BRITTON said  AIDEA bonding  is critical  for the  continued                                                               
success of the  project to help finance  increased LNG production                                                               
capacity  and   long-term  gas  distribution  expansion   in  the                                                               
Interior.   As the  IGU customer base  grows, AIDEA  bonding will                                                               
need to be utilized to  add approximately 100,000 gallons per day                                                               
of liquefaction  capacity to  the present  output of  IGU's Titan                                                               
facility located in the Matanuska-Susitna  Borough.  The existing                                                               
plant  has  a production  capacity  of  50,000 gallons  per  day.                                                               
Also, IGU plans to use the  bonding to further expand natural gas                                                               
mains and services  into more neighborhoods in  the Fairbanks and                                                               
North  Pole communities.   The  bonding  has not  yet been  fully                                                               
utilized, he  continued, given project  delays related  to market                                                               
conditions  such as  the [COVID-19]  pandemic  and resulting  oil                                                               
price  drop  and  economic  uncertainties,  and  IGU  anticipates                                                               
advancing  the projects  requiring the  funding in  the next  few                                                               
years.   Passage of HB 307  provides additional time for  the IEP                                                               
to progress  towards the Interior's goal  of realizing affordable                                                               
clean burning natural gas to as many people as possible.                                                                        
                                                                                                                                
5:38:21 PM                                                                                                                    
                                                                                                                                
CO-CHAIR FIELDS [held over HB 307].