Legislature(2009 - 2010)HOUSE FINANCE 519
03/23/2010 01:30 PM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB369 | |
| HB50 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 316 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HB 50 | TELECONFERENCED | |
| += | HB 369 | TELECONFERENCED | |
HOUSE BILL NO. 369
"An Act relating to an in-state natural gas pipeline,
the office of in-state gasline project manager, the
Joint In-State Gasline Development Team, and the In-
State Gasline Steering Committee; and providing for an
effective date."
1:42:04 PM
Co-Chair Hawker provided history of the measure in
committee. He referred to a CS that had been adopted and a
new combined fiscal note that would replace all previous
fiscal notes.
BOB SWENSON, DIRECTOR, DIVISION, GEOPHYSICAL AND GEOLOGICAL
SURVEY, DEPARTMENT OF NATURAL RESOURCES and ALASKA IN-STATE
NATURAL GAS PIPELINE MANAGER, confirmed that the format of
the fiscal note had been changed to combine all previous
fiscal notes. He pointed out that the money would go
through the governor's office and be distributed through
reimbursable service agreements (RSAs) to various agencies.
Co-Chair Hawker queried the fiscal plan for the coming
year. Mr. Swenson responded that the request for FY 11
comes first in the fiscal note narrative; each of the
agency's requests for the FY 11 budget is broken out. In
addition, the RSA requests (which are indeterminate at this
time) are listed.
Co-Chair Hawker requested fiscal analysis for the bill
beginning with the coming year. Mr. Swenson continued that
the fiscal request from the governor's office would
specifically fund positions (through personal services) for
the team of seven members (reduced later to six):
· Project manager: Mr. Swenson
· Engineering manager: would manage engineering work on-
going and work on the project plan outlined in the
bill
· Commercial manager: management of both upstream and
downstream activities
· Legislative liaison and public outreach
· Finance and budget analyst
· Schedule coordinator
· Technical writer: one-year position to develop of the
plan outlined in the bill
Mr. Swenson informed the committee that the FY 11 request
also included the original $6.5 million put forth in the FY
11 appropriations request addressed in a previous meeting.
He detailed that the amount was for:
· Completion of environmental permitting by the U.S.
Army Corps of Engineers;
· State and federal right-of-way approvals;
· Project management development and coordination of
permitting;
· Working with stakeholders such as local communities
and Native Corporations, the Bureau of Land Management
(BLM), and others;
· Beginning studies on wetlands, stream crossings,
culture impacts, lake studies, wildlife and bird
surveys, air and noise surveys associated with the
U.S. Army Corps of Engineers' Section 404/Section 10
permit;
· Project management on the engineering data acquisition
and further refinement of the engineering design;
· Refinement costs of service estimates and tariff
modeling associated with using the data provided by
the cost of transport (underway in the current fiscal
year); and
· Preparing and completing documentation for in-state
pipeline assets for consideration for private
developer or entity.
1:47:34 PM
Mr. Swenson pointed to an additional request for $2.599
million for contractual work and RSA needs, making the
total request $10.653 million. He noted that the RSA
request would be distributed as outlined in the fiscal note
narrative to various agencies affected by the bill, as well
as the work towards developing the pipeline.
Co-Chair Hawker acknowledged the detailed narrative
provided with the fiscal note.
Representative Gara stated that he did not want to spend
$100 million on a project that might not go ahead, but he
was comfortable with the request to do preliminary
planning. He noted that the FY 11 amount was $10 million
and queried costs after that. Mr. Swenson directed
attention to page 2 of 10 of the fiscal note narrative that
specifically relates to the indeterminate contractual
request; he remarked that the fiscal responsibility to the
state will be determined by the outcome of the project
plan. He declared that a very significant factor would be
the ability to get a private entity to partner with the
state or take the entire project on; the costs to the state
from FY 12 on could vary between zero (if the entity takes
over the entire project) up to the full cost of
construction. The cost-of-production [projections] are not
currently done; on-going engineering work is currently
underway.
Co-Chair Hawker agreed with the analysis. He added that
fiscal notes are adopted as though they were budget
appropriations, so the 2011 Conference Committee would
adopt the $10 million fiscal note; considering the
contractual level for FY 12, FY 13, and FY 14,
"indeterminate" means that nothing will be anticipated in
the draft budget for those years unless a determination is
made to fund something. The personnel services will
continue as full-time positions are hired with the
presumption of continuing on. However, that does not mean
the project cannot be terminated at the end of the
preliminary development stage if so desired.
1:50:53 PM
Representative Gara wanted assurance that the sponsors
would have to come to the legislature first in FY 12 or
after if there is a new contract obligating the state to
spend a large amount of money. Mr. Swenson responded in the
affirmative. He stated that the plan would be presented to
the legislature, and the legislature and the governor would
make the decision based on the cost estimates and plans.
Representative Doogan recalled that 28 positions had been
included in the previous set of fiscal notes; he asked if
the number was still the same. Mr. Swenson answered that
the original fiscal note was from the original CS, which
had a construction date of July 1, 2011; it would have been
very challenging to meet that deadline. The change from a
construction date to a gas pipeline plan has reduced the
number of required employees. He did not know the exact
number off-hand, although the fiscal note listed the
required positions.
Co-Chair Hawker added that in the detailed narrative there
are partial positions representing time that would be
required from existing agency personnel; there is a
difference between increasing personnel and using personnel
already in place. He detailed that the FY 11 fiscal note
provides for seven new full-time employees.
1:54:13 PM
Representative Austerman referred to a project coordinator
at the Department of Environmental Conservation listed on
page 2 of the narrative. He asked whether the position was
separate from the seven already mentioned. Mr. Swenson
answered that in the FY 11 budget they had tried to break
out the exact personnel required; the positions may or may
not already exist in the agency. He wanted the department
to answer.
Representative Austerman did not want to delve into each
component for each of the six departments involved. He
pointed to the fact more than seven employees would be
required.
Representative Gara wanted to know the cheapest way to get
natural gas to Alaskans. He asked whether the plan would be
presented with information about cost-effectiveness. He
referred to potential gas reserves in Cook Inlet and asked
whether the plan would consider the cost of in-state gas
from Cook Inlet as compared to building a larger pipe
south. Mr. Swenson responded that the bill was aimed at
bringing North Slope natural gas to Southcentral Alaska
(including Valdez); the relative cost of possible Cook
Inlet gas would not be determined through the project.
Representative Gara was concerned about choosing the most
expensive option. He asked whether comparative information
would be available to the legislature before going ahead
with North Slope gas plans. Mr. Swenson replied that there
were on-going studies. He referenced a presentation at the
recent Anchorage Resource Development Council by ENSTAR
Natural Gas Company using a Department of Natural Resources
(DNR) study of costs associated with accessing gas
reserves. He thought the comparison information should be
brought into discussions with the legislature when
decisions are made. He pointed out that HB 369 did not say
that, but he maintained that all options related to [in-
state use of] North Slope would be considered and that
there would be comparative cost analysis.
Representative Gara believed the public did not have all
the information and stated for the record that a big
gasline would result in cheaper gas than a smaller bullet
line; the question was whether the state could wait for the
big line. He maintained that there is no analysis showing
that a small bullet line would produce cheaper gas than a
big gasline. Mr. Swenson replied that current analysis did
not show the costs associated with a spur line from a large
diameter line, whether the larger line went to Alberta or
Valdez.
1:59:38 PM
Co-Chair Hawker interjected that HB 369 (page 4, lines 10
and 11) stipulates that the first requirements of the
development team are analysis of routes and selection of
routes; Item 1 states that it must be economically feasible
and Item 2 requires that natural gas be available to
residents [of the state] at the lowest possible cost.
Representative Gara asserted that he had been told in the
past that a big gasline would result in lower cost than
smaller line. Mr. Swenson replied that the volume
transmitted down a larger line would be larger. Without
proper economic analysis, he opined that costs [of a
smaller line] would be less than a stand-alone line to the
North Slope.
Representative Gara did not want the public to think that
the state could build a smaller line with more expensive
gas and then switch over to cheaper gas when the bigger
line is built. He asked whether the public would be
obligated to keep paying for the gas from the smaller line
for a certain number of years. Mr. Swenson noted that there
was a letter regarding the issue that the committee had not
yet received. He opined that the answer would depend on the
configuration of the pipeline with different commitments. A
contract carrier or a common carrier with financing through
normal means would mean a 20-year commitment. The length of
commitment would be less if the state chose to buy down the
debt. Commitments would not be related to financing if the
state fully financed the line.
Co-Chair Hawker echoed that there are many complex
variables at work and stressed that the choice is not
narrowed to between only two alternatives. He did not
believe there was a dilemma. He wanted to keep the state's
options open to make sure gas was available to Alaskans.
2:03:56 PM
Representative Joule asked whether the difference between
importing gas and using in-state gas would be clear when
the legislature gets the plan in 2011. Mr. Swenson answered
that liquid natural gas (LNG) imports were not contemplated
in HB 369; the bill considered using the current LNG export
market and vying for that.
Representative Joule pointed out that the state would not
know whether it would be cheaper to import gas than using
in-state gas. He thought the information should be
available to the legislature before making final decisions.
Mr. Swenson agreed that there were significant issues
related to imported LNG that should be looked at, including
the Federal Energy Regulatory Commission (FERC) license
associated with the import as well as the volumes that
could come through in a re-gasification plant and
associated issues.
Co-Chair Hawker acknowledged that the question deserved an
acceptable response, but pointed out that HB 369 does not
address the issue. He asked whether feasible information
would be available to the legislature regarding comparative
costs for LNG (presuming HB 369 goes forward and a project
plan is considered after July 1, 2011). Mr. Swenson
believed that was correct.
Representative Joule understood that expecting short-term
gas might be challenging when considering a big line.
Co-Chair Hawker referred to a report released in March 2010
compiled by Resource Alaska at the request of the three
major Southcentral public utilities. He noted that the
report had a "stark" premise and conclusion: unless there
is significant new development in Cook Inlet in the
immediate future, the state will have to import LNG as a
short-term solution. The report also indicated that the
long-term solution involved in-state gas. He did not
believe the HB 369 proposal was incompatible with the
possible need for a short-term solution as well.
2:09:00 PM
Representative Gara stated that his major concern with the
legislation was that it only provides a cost analysis
comparing other in-state gasline projects from the North
Slope. He wanted cost analysis of all other options as
other options might be less expensive.
Representative Kelly believed all the pieces were in place,
such as temporary gas storage and the utility study.
Co-Chair Hawker commented that his personal vision included
the evolution of the hydrocarbon potential of the Cook
Inlet region. He believed the region could become a global
trading hub for natural gas because of its position
relative to Asian trade routes and the North Slope as well
as its gas storage capacity. He asserted that the state
could become a major trading center, the "Henry Hub or the
Alberta of the North."
2:13:20 PM
Representative Austerman directed attention to page 4,
starting at line 7, regarding what the development team's
work product would include, especially making natural gas
available to residents at the lowest possible cost. He
stated that he supported the bill because he believed the
least expensive route was the state paying for the line. He
noted that the state had the assets to back up the project,
including the Permanent Fund. He suggested building the
line and recovering the costs through the tariff.
Co-Chair Hawker observed that the CS had been crafted to
provide for a broad array of options for the state.
Vice-Chair Thomas pointed to page 4, line 20 related to the
transfer of assets. He asked who would decide to sell and
when.
TOM WRIGHT, STAFF, REPRESENTATIVE MIKE CHENAULT, SPONSOR,
responded that the legislature would ultimately decide
after the project plan was developed and presented.
Vice-Chair Thomas turned to page 4, line 27 regarding
rights-of-way. He queried the authority to purchase rights-
of-way before the money is appropriated. Mr. Wright
responded that some of the rights-of-way can be purchased
with funds available through the fiscal note; any further
funds needed would require an appropriation from the
legislature.
2:17:23 PM
Vice-Chair Thomas directed attention to page 4, line 29
regarding purchase contracts. He asked who the contracts
would be purchased from. Mr. Wright believed that shippers
would be the primary purchasers.
Representative Fairclough stated concerns related to page
5, line 12 regarding the transfer of eminent domain to a
private entity. She requested language that would ensure
that the state would maintain possession of any additional
rights-of-way taken from a private property owner upon
construction or failure of a project. She wanted the
property to be used later if it did not need to be
maintained for right-of-way purposes.
FRANK RICHARDS, DEPUTY COMMISSIONER, HIGHWAYS & PUBLIC
FACILITIES, DEPARTMENT OF TRANSPORTATION AND PUBLIC
FACILITIES, replied that he had posed the question to the
legal team but had not yet received the answer. He had
discussed the issue of state assets and permanent rights-
of-way for the pipeline with the state pipeline
coordinator's office. He reported that only the rights-of-
way would be provided, not the underlying interest of the
land. He noted that at the next level, land purchased by
the state through any means, either through purchase
agreement or eminent domain, would become an asset of the
state. He envisioned that the project would purchase just
the rights-of-way for pipeline use and that the state would
retain the fee simple interest to the land. The state would
not divest itself of the asset.
Representative Fairclough thought the intent was noble but
did not think the language was adequate to protect the
public's interest. She noted that the attorney general had
stated that the language had to be explicit. She questioned
whether the sponsor was amenable to an amendment on the
floor regarding the issue.
REPRESENTATIVE MIKE CHENAULT, SPONSOR, responded that he
wanted the information and would be open to an amendment.
2:21:38 PM
Representative Kelly asked whether anything in the bill
would prevent the state from having anywhere from zero to
100 percent ownership in the line. Representative Chenault
responded that the only thing that would prevent that was
the legislature and the governor not coming to that
agreement.
Representative Kelly asked whether the bill itself would
prevent state ownership. Representative Chenault responded
in the affirmative.
Representative Doogan spoke in support of the legislation
but stated that he did not think Alaska should go in the
direction. He believed sincere efforts were being made to
figure out how much the project would cost, but noted that
there have been many "can't miss" projects in Alaska. He
did not think the fastest route was necessarily the
smartest. He stated that he had not made his mind up on the
issue.
Representative Gara emphasized that he did not want to do
anything that would harm the chances of a large gasline
that would bring revenue to the state. He noted that in-
state gas would not produce revenue; gas going outside the
state would. He intended to honor a requirement in past
legislation that that the state not jeopardize a big
pipeline through more than .5 bcf/day of gas into an
alternative project. He stated that he did not want it
reported outside the state that there was any intent to not
honor the obligation.
2:26:12 PM
Co-Chair Stoltze spoke in support of the legislation. He
did not have as much confidence in the TransCanada line. He
emphasized the need for in-state gas, especially in
Southcentral. He did not know whether the legislation was
the right route but wanted something moving forward with a
promise of in-state gas.
Representative Austerman did not think HB 369 would break
or intended to break the Alaska Gasline Inducement Act
(AGIA) contract in any way.
Co-Chair Stoltze MOVED to report CSHB 369(FIN) out of
Committee with individual recommendations and the
accompanying fiscal note with the ten-page fiscal analysis.
There being NO OBJECTION, it was so ordered.
CSHB 369(FIN) was REPORTED out of Committee with a "do
pass" recommendation and with accompanying new fiscal
impact note by the Office of the Governor.
2:30:46 PM AT EASE
2:44:53 PM RECONVENED
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 316 Gov.Trasmittal Letter.pdf |
HFIN 3/23/2010 1:30:00 PM |
HB 316 |
| HB 316 Sectional.pdf |
HFIN 3/23/2010 1:30:00 PM |
HB 316 |
| HB 50 Thomas Amendment #1.pdf |
HFIN 3/23/2010 1:30:00 PM |
HB 50 |