Legislature(2023 - 2024)BARNES 124
04/03/2024 01:00 PM House RESOURCES
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| Audio | Topic |
|---|---|
| Start | |
| HB394 | |
| HB393 | |
| HB388 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 393 | TELECONFERENCED | |
| *+ | HB 394 | TELECONFERENCED | |
| += | HB 388 | TELECONFERENCED | |
| += | HB 359 | TELECONFERENCED | |
| + | TELECONFERENCED |
HB 394-RCA REGULATE NATURAL GAS STORAGE FACILITY
1:04:36 PM
CHAIR MCKAY announced that the first order of business would be
HOUSE BILL NO. 394, "An Act relating to the Regulatory
Commission of Alaska and regulation of the service of natural
gas storage and liquefied natural gas import facilities;
relating to records of the Regulatory Commission of Alaska;
relating to rates established by the Regulatory Commission of
Alaska; and providing for an effective date."
1:05:08 PM
CHAIR MCKAY, on behalf of the sponsor, the House Resources
Standing Committee, on which he serves as chair, presented the
sponsor statement for HB 394 [copy included in the committee
packet] which read as follows [original punctuation provided]:
HB 394 is aimed at enhancing the energy security of
Southcentral Alaska by providing a clear regulatory
framework for third-party natural gas storage. This
bill was designed to establish a regulatory framework
that not only encourages the expansion of natural gas
and liquefied natural gas (LNG) storage facilities but
also ensures these critical pieces of energy
infrastructure operate efficiently and remain
economically viable.
HB 394 provides for the Regulatory Commission of
Alaska (RCA) to have clear oversight authority over
natural gas and LNG storage facilities, which will
bring stability and predictability to the sector and
make it more attractive to operators and investors. HB
394 defines principles for the determination of just
and reasonable rates, ensuring that operation costs,
tax incentives, and the fair market value of storage
assets are all considered. This approach aims to
foster fair pricing practices that benefit both
consumers and businesses.
This bill also introduces measures to protect
sensitive financial information, mandating
confidentiality for certain records. This move strikes
a balance between protecting commercial sensitivities
and fulfilling the need for regulatory transparency.
Additionally, the bill recognizes the complexities of
state and federal regulations by exempting LNG import
facilities that are already regulated by the federal
government from state oversight.
HB 394 is a necessary piece of legislation if the
state of Alaska wants to see third-party gas storage
from the private sector. I urge my colleagues of the
33rd legislature to join me in supporting this bill
which represents a decisive step towards reinforcing
Southcentral Alaska's energy infrastructure and
ensuring the well-being of our state.
1:08:30 PM
TREVOR JEPSEN, Staff, Representative Tom McKay, Alaska State
Legislature, on behalf of the sponsor, the House Resources
Standing Committee, on which Representative McKay serves as
chair, presented HB 394 via a PowerPoint presentation [hard copy
included in the committee packet]. He began on slide 2, stating
that HB 394 would address the regulations for the storage of
liquefied natural gas (LNG) and the Regulatory Commission of
Alaska (RCA). Considering the projected gas production
shortage, he stated, the proposed legislation was created to
encourage third-party gas storage in Cook Inlet. He stated that
currently Cook Inlet Natural Gas Storage Alaska (CINGSA) is the
only gas storage facility in Cook Inlet, on which Southcentral
Alaska is dependent. In order to increase storage volume, he
argued, the state needs to capitalize on the depleted reservoirs
in Cook Inlet for storage, and this storage would need to be
regulated in a manner to attract the private sector. He noted
the gas production issues CINGSA had during the winter, as this
brought attention to the need for more gas storage.
1:10:03 PM
MR. JEPSEN discussed the four depleted reservoirs in the state,
which are currently acting as active gas storage facilities, as
seen on slide 3. He listed the following: CINGSA, Kenai Gas
Pool 6, Pretty Creek, and Swanson River.
MR. JEPSEN moved to slide 4 and directed attention to the
graphic to explain gas storage in depleted reservoirs. He
defined the types of gas stored, as follows: cushion or pad
gas, working gas, and inventory gas. In an example, he pointed
out the amounts of each type of gas CINGSA maintains in a
reservoir.
MR. JEPSEN moved to slide 5, which delineated the duties between
the three state organizations that engage in gas storage
activities. The organizations listed were the Alaska Oil and
Gas Conservation Commission (AOGCC), the Department of Natural
Resources (DNR), and RCA.
1:13:22 PM
MR. JEPSEN moved to slide 6, titled "HB 394 Overview," which
read as follows [original punctuation provided]:
• Clarifies the regulation of natural gas storage
operations liquified natural gas storage to the RCA
under Chapter 5 of Title 42
• Exempts LNG import facilities already regulated by
the Federal Energy Regulatory Commission (FERC)
• Clarifies that fair market value (FMV) costs related
to gas storage operations will be considered when
determining a just and reasonable rate under 42.05
• Creates confidentiality requirements related to
financial statements of entities providing gas storage
operations
1:15:04 PM
BECKY ALVEY, Manager, Advisory Section, Regulatory Commission of
Alaska, provided a PowerPoint presentation, titled "House Bill
394: RCA Regulation of Gas Storage Facilities" [hard copy
included in the committee packet]. On slides 2 through 4, she
discussed the changes that HB 394 would present to RCA. She
stated that the proposed legislation would require RCA to
regulate natural gas storage and LNG storage, including those
that are connected to a facility by a pipeline. The legislation
would also address the rates and costs of storing gas, classify
records as confidential, exempt some requirements concerning
pipeline facilities, and exempt LNG facilities that are under
the Federal Energy Regulatory Commission (FERC). She noted that
HB 394 would also amend some definitions.
MS. ALVEY moved to slides 5 and 6 and addressed the potential
impacts of the proposed legislation on RCA, which include that
RCA would need to process applications for instate pipeline
carriers with storage facilities, review and approve tariff
filings for these carriers, and implement terms and rates for
natural gas service. She continued that RCA would also need to
review and approve tariff filings for natural gas and electric
utilities that request cost recovery for using storage
facilities. She stated that application forms and regulations
may need to be revised and additional regulations may need to be
implemented on the cost recovery provisions. She added that new
regulations may be needed to address the confidentiality of
records.
1:19:31 PM
CHAIR MCKAY asked whether RCA is in support of HB 394.
1:19:56 PM
ROBERT DOYLE, Chair, Regulatory Commission of Alaska, expressed
support for the proposed legislation on behalf of himself,
clarifying that because RCA had not yet voted on the issue, he
was not speaking for the commission.
1:20:08 PM
REPRESENTATIVE SADDLER questioned how the role of the fair
market value of oil and gas fields would affect the setting of
rates.
COMMISSIONER DOYLE expressed the understanding that there would
need to be a level playing field among all the storage
facilities, and to do this all the investments and depreciation
would need to be considered, as these are pieces of revenue
requirements. In terms of gas contracts that utilities are
signing, he said, RCA does not negotiate these; however, RCA
would review and approve them. He stated that the wellhead
price of natural gas would not be regulated, so the negotiations
would address this.
REPRESENTATIVE SADDLER questioned how the value of the gas
fields would be determined when they are contributing to
recoverable costs.
COMMISSIONER DOYLE provided an example with CINCA's two new
wells. He pointed out that there would need to be a reasonable
return on CINCA's investment, depreciation would need to be
determined, and the overall operating cost of the field would
need to be considered. He stated that this would all go through
a hearing process. He added that this would also depend on the
statute and regulations enacted from the proposed legislation.
REPRESENTATIVE SADDLER expressed the understanding that only
injection wells were used with the CINGSA example. He
questioned whether the proposed legislation would concern gas
fields currently producing gas, with the potential for storage
in a facility.
COMMISSIONER DOYLE expressed the understanding that BRU [Beluga
River Unit] is operated in a partnership, and it is an operating
field that is being considered for gas storage. He deferred to
DNR on whether an operating oil and gas field could be
segregated out for storage.
1:23:36 PM
CHAIR MCKAY clarified that BRU stands for "Beluga River Unit,"
and the two CINGSA wells in the example are producer wells, not
injector wells.
1:23:55 PM
REPRESENTATIVE MEARS pointed out the confidentiality part of HB
394 and the fact that RCA already deals with the financial
details of utilities throughout the state. She questioned how
this would be different from the confidentiality that already
exists within RCA.
COMMISSIONER DOYLE answered that RCA deals with confidentiality
issues frequently, but the proposed legislation would make this
a specific piece of the statute.
1:25:12 PM
MS. ALVEY added that the current statutes provide
confidentiality upon request. She stated that the proposed
legislation would make the pipeline records confidential
immediately. Otherwise, currently RCA's regulations provide
that records are public.
REPRESENTATIVE MEARS questioned whether having blanket
confidentiality for an entire regulated service would be
unusual.
MS. ALVEY stated that in regulation some items are already
deemed confidential; however, she expressed uncertainty on any
specifics. She expressed the understanding that having these
records confidential from the beginning would be different.
1:27:03 PM
REPRESENTATIVE BAKER questioned whether the proposed legislation
would affect any operations at Point Thomson, where gas
condensate is collected.
MR. JEPSEN responded that it would not affect Point Thomson, as
this area would still be regulated under the Trans-Alaska
Pipeline Authorization Act.
1:27:52 PM
REPRESENTATIVE SADDLER referenced slide 2 of RCA's presentation
and questioned the language concerning storage furnished by
facilities that are operated by pipeline carriers.
MR. JEPSEN responded that the proposed legislation would use the
same language as the Trans-Alaska Pipeline Authorization Act.
He explained that, per the proposed legislation, storage
facilities that are now regulated under this Act, including
those related to pipeline carriers, would be regulated under
RCA.
1:29:54 PM
REPRESENTATIVE MEARS expressed the understanding that FERC would
not be setting rates; therefore, there would not be an overlap
between RCA and FERC on imported LNG. She requested a
conversation on this. She questioned how the fair market rate
would be determined in a constrained market place.
COMMISSIONER DOYLE answered that regardless of whether
production is coming from current fields or BRU, the negotiating
parties would set the negotiated agreements for LNG and the fair
market price, with a review by RCA. He reiterated that RCA's
role is not to negotiate; rather, it is to approve the final
rates charged by the utilities to the customers.
1:32:04 PM
JOHN SIMS, President, Enstar Natural Gas, expressed the opinion
that what the entities would regulate is a good question. He
expressed the belief that the utility companies currently do not
know whether they would own the infrastructure, or the gas would
be bought at a determined rate. If it is a utility-type asset
where the services are purchased, he expressed the support for
RCA to be the regulatory body, and this is because of
transparency purposes; however, he expressed the opinion that it
would be too early to make a determination which entity should
regulate this.
1:33:54 PM
MR. JEPSEN addressed why the FERC regulation would be necessary.
He stated that FERC regulates plants participating in interstate
commerce with LNG. He stated that the carveout was put in the
proposed regulation because without it these plants would also
be regulated by RCA. He noted that double regulation is not
being sought.
1:35:09 PM
REPRESENTATIVE RAUSCHER pointed out that the bill would
"encourage" third-party gas storage. He questioned whether the
intention of the proposed bill would be to provide a framework
for utilities, as they understand that future gas storage would
be needed.
MR. JEPSEN expressed confusion by the question. However, per
the addressed language, he explained that the word "encourage"
was used so private sector companies would allow their storage
to be used for third-party gas storage. He added that if
legislation does not address this, private storage might not be
opened for use by utilities.
1:36:44 PM
CHAIR MCKAY expressed the understanding that HB 394 was not
written to impact CINGSA; rather, it would be asking the private
sector in Cook Inlet to provide additional storage so any future
shortages would be addressed.
1:37:18 PM
REPRESENTATIVE SADDLER questioned whether the proposed
legislation was written so storage facilities could accept
imported gas.
MR. JEPSEN responded that HB 394 would apply to local and
imported gas.
CHAIR MCKAY pointed out that this is important because the year
2030 would be the earliest that LNG could be imported;
therefore, the proposed bill looks to the future.
1:38:52 PM
MR. JEPSEN gave the sectional analysis for HB 394 [copy included
in the committee packet], which read as follows [original
punctuation provided]:
Sec. 1 Adds new subsections to AS 42.05.141 to include
the regulation of natural gas storage and liquefied
natural gas storage under the jurisdiction of the
Regulatory Commission of Alaska (RCA), including
storage facilities operated by a pipeline carrier or
part of a pipeline facility.
Sec. 2 Amends AS 42.05.381(k) to further specify cost
considerations for storing gas in a gas storage
facility or liquefied natural gas in a liquefied
natural gas storage facility in determining just and
reasonable rates.
Sec. 3 Provides a definition of "gas storage
facility".
Sec. 4 Adds a new section to AS 42.05 to address the
confidentiality of records related to the finances of
gas storage facilities, liquefied natural gas storage
facilities, or public utilities providing natural gas
storage services.
Sec. 5 Amends AS 42.05.711(q) to limit the exemption
from RCA gas storage regulatory authority to gas
storage associated with a North Slope natural gas
pipeline facility operated by a North Slope natural
gas pipeline carrier.
Sec. 6 Adds a new subsection to AS 42.05.711 to
specify an exemption from RCA gas storage regulatory
authority for liquefied natural gas import facilities
under the jurisdiction of the Federal Energy
Regulatory Commission (FERC).
Sec. 7 Adds new subsections to AS 42.06.140 to clarify
RCA regulation of natural gas and liquefied natural
gas storage under 42.05, including storage facilities
operated by a pipeline carrier or part of a pipeline
facility.
Sec. 8 Conforming language which adds a new subsection
to AS 42.06.370 to specify cost considerations related
to pipeline carriers in determining just and
reasonable rates.
Sec. 9 Amends AS 42.06.445(a) by adding the new
subsection (g) to the exceptions related to the public
inspection of records in the possession of the
commission.
Sec. 10 Adds a new subsection (g) to AS 42.06.445
which specifies the confidentiality of records held by
the commission related to the finances of pipeline
carriers.
Sec. 11 Conforming change repealing AS
42.05.990(10)(B) and AS 42.05.990(11)(B) which exempt
natural gas and liquefied natural gas storage which is
incidental to the production or sale of natural gas to
third-party customers from 42.05.
Sec. 12 Provides for an immediate effective date.
1:42:34 PM
REPRESENTATIVE MCCABE questioned whether the proposed
legislation would apply to carbon sequestration storage.
MR. JEPSEN expressed uncertainty, and he deferred the question
to DNR. He expressed the understanding that the storage would
need to be separated into natural gas or carbon sequestration.
REPRESENTATIVE MCCABE clarified that his question concerned
whether the incentives would be the same.
CHAIR MCKAY expressed the opinion that this would be impractical
because carbon dioxide is considered a waste product.
1:43:54 PM
DEREK NOTTINGHAM, Director, Division of Oil and Gas, Department
of Natural Resources, expressed the understanding that carbon
capture and sequestration would be separate, handled under
different regulatory authorities.
CHAIR MCKAY expressed agreement that carbon dioxide cannot be
stored in a natural gas well.
REPRESENTATIVE MCCABE interjected that he was not speaking about
putting carbon dioxide in a natural gas reservoir. He
questioned whether the natural gas sector would be given the
same incentives as companies storing carbon dioxide.
MR. JEPSEN explained that carbon sequestration would not be
economical without the federal government tax subsidy. He
stated that because third-party gas storage would be regulated
by RCA, with a fair market value, it would be economical. He
continued that carbon sequestration and gas storage would be
done by different processes, and he expressed uncertainty
concerning the comparative economics.
1:46:29 PM
CHAIR MCKAY stated that HB 394 would be setting up the
regulatory framework so gas can be stored on a temporary basis
for use during winter conditions. He stated that the only
economic component would be the sell of the gas. He pointed out
that there would be no tax breaks or discounts.
MR. SIMS concurred with Chair McKay.
1:48:14 PM
REPRESENTATIVE SADDLER questioned the difference between a
pipeline carrier and a pipeline facility.
MS. ALVEY answered that "pipeline facilities" is defined in
statute as all the facilities of the total system, while
pipeline carriers would reference the owners, including any
corporations.
1:51:02 PM
REPRESENTATIVE MEARS expressed support for HB 394 and spoke to
the importance of gas storage.
1:52:03 PM
MR. JEPSEN clarified that under HB 394 third-party gas storage
would be available to any utility company that wanted to
purchase the storage, not just Enstar Natural Gas.
1:52:39 PM
MR. SIMS reiterated the importance of having short-term, medium-
term, and long-term storage planning for utilities. He noted
that most of the language in the proposed legislation would be a
policy call.
1:53:11 PM
BRETT HUBER, Commissioner, Alaska Oil and Gas Conservation
Commission, stated that the commission currently regulates the
wells, whether producers or injectors. He expressed the
understanding that under HB 394 the commission would continue to
do this.
1:54:00 PM
CHAIR MCKAY stressed that this would create a tool for immediate
action that the legislature and the state government could take
to protect the Railbelt during the winter.
1:54:39 PM
CHAIR MCKAY opened public testimony on HB 394. After
ascertaining there was no one who wished to testify, he closed
public testimony.
CHAIR MCKAY announced that HB 394 was held over.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB0394A.pdf |
HRES 4/3/2024 1:00:00 PM |
HB 394 |
| HB 394 Sponsor Statement ver. A.pdf |
HRES 4/3/2024 1:00:00 PM |
HB 394 |
| HB 394 Sectional Analysis ver. A.pdf |
HRES 4/3/2024 1:00:00 PM |
HB 394 |
| HB 394 Presentation ver. A.pdf |
HRES 4/3/2024 1:00:00 PM |
HB 394 |
| HB 394 Fiscal Note DCCED-RCA.pdf |
HRES 4/3/2024 1:00:00 PM |
HB 394 |
| HB 394 RCA Presentation to HRES 4.3.24.pdf |
HRES 4/3/2024 1:00:00 PM |
HB 394 |
| HB0393A.pdf |
HRES 4/3/2024 1:00:00 PM |
HB 393 |
| HB 393 Sponsor Statement Version A.pdf |
HRES 4/3/2024 1:00:00 PM |
HB 393 |
| HB 393 Sectional Analysis Version A.pdf |
HRES 4/3/2024 1:00:00 PM |
HB 393 |
| HB 393 Presentation Version A.pdf |
HRES 4/3/2024 1:00:00 PM |
HB 393 |
| HB 393 Fiscal Note #1 DNR-DOG.pdf |
HRES 4/3/2024 1:00:00 PM |
HB 393 |
| HB 393 Fiscal Note #2 DOR-TAX.pdf |
HRES 4/3/2024 1:00:00 PM |
HB 393 |
| CSHB 388(RES) LS-1237R Summary of Changes.pdf |
HRES 4/3/2024 1:00:00 PM |
HB 388 |
| CSHB 388(RES) LS-1237R.pdf |
HRES 4/3/2024 1:00:00 PM |
HB 388 |