Legislature(2007 - 2008)SENATE FINANCE 532
07/29/2008 01:00 PM Senate SENATE SPECIAL COMMITTEE ON ENERGY
| Audio | Topic |
|---|---|
| Start | |
| SB3001|| HB3001 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB3001 | TELECONFERENCED | |
| += | HB3001 | TELECONFERENCED | |
SB 3001-APPROVING AGIA LICENSE
HB 3001-APPROVING AGIA LICENSE
CHAIR HUGGINS announced the consideration of SB 3001 and HB 3001
(EFD FLD) and said that today the committee would address what
he called "policing" items. He asked Commissioner Galvin to
review the bidding and how the concept for the $500 million
matching contribution evolved.
1:14:13 PM
PATRICK GALVIN, Commissioner, Department of Revenue, explained
that the $500 million matching contribution is the primary AGIA
inducement to attract applications that would meet the state's
"must haves." Regulations have been developed to define
qualified expenditures and as the project proceeds and
expenditures are made, the licensee will submit those to the
Department of Revenue for review. If the expenditures are deemed
qualified, a percentage payment will be made based on the
particular time of the project and up to the $500 million limit.
CHAIR HUGGINS asked him to provide information on the two
reimbursement plateaus.
COMMISSIONER GALVIN explained that reimbursement is basically
50/50 up to an open season; after an open season reimbursement
becomes 90 percent state and 10 percent licensee until reaching
either the $500 million total or FERC certification.
CHAIR HUGGINS asked if his recollection is accurate, that there
is legislation for an additional $6.2 million to look at
financing attractive open seasons.
COMMISSIONER GALVIN replied there is a $15 million request for
the departments of natural resources, revenue, law, and the
governor's office. One component of that is to look at changes
the state has to make to ensure a successful open season, but no
dollar figure has been tied to that particular component of the
"task list."
CHAIR HUGGINS questioned why the reimbursement split increases
from 50/50 to 90/10 after an open season.
COMMISSIONER GALVIN replied that the AGIA statute provides for a
contribution of up to 50 percent leading up to an open season
and up to 90 percent following an open season. Applicants could
include a state matching contribution rate as part of their
application. The TransCanada Alaska application specified 50/50
up to an open season and 90/10 after an open season.
1:17:42 PM
CHAIR HUGGINS clarified that he's trying to make sure everyone
grasps the concept of why the reimbursement would change.
COMMISSIONER GALVIN related that when the bill was originally
introduced the reimbursement was 50/50 throughout and a number
of potential applicants expressed concern about the risk
associated with advancing the project past an unsuccessful open
season. Although it would be to the state's advantage to advance
the project beyond an unsuccessful open season, it wouldn't
necessarily be in the licensee's and best business interest. To
attract an applicant willing to make the commitment, the
statutory rational was that it was appropriate for the state to
increase its matching contribution past an open season - the
more risky portion of the project.
1:18:53 PM
CHAIR HUGGINS observed that the trigger assumes an unsuccessful
open season and after that time the reimbursement rate ratchets
up to 90 percent.
COMMISSIONER GALVIN said that was the statutory rationale but
the TransCanada application did not distinguish between a
successful and unsuccessful open season. The contribution
increases in either case, up to the $500 million total.
CHAIR HUGGINS asked which is binding: the application or AGIA.
COMMISSIONER GALVIN replied that the AGIA statute is silent with
respect to whether the open season is successful or not. It
states, "After the open season the applicant could propose, in
their application, a greater matching contribution." TransCanada
chose to increase the match and not condition it upon the
outcome of the open season.
1:20:03 PM
CHAIR HUGGINS asked what parties brought forward the idea to
increase the contribution up to 90 percent.
COMMISSIONER GALVIN said the discussion proceeded in steps. He
recalled from a year ago, that initially there was a 50/50 match
throughout the entire process. Early on there was testimony
about the perceived risk associated with moving beyond the open
season and so an earlier committee increased the [state]
contribution up to 80 percent.
Senator Elton joined the committee.
CHAIR HUGGINS asked the source of the amendment to increase the
match to 80 percent. "Who brought that forward - not the person
but the initiative?"
COMMISSIONER GALVIN answered that he didn't recall if a
committee substitute was submitted or a particular legislator
brought an amendment forward.
CHAIR HUGGINS asked if it was brought forward by someone
sponsoring the administration's position, or a legislator's
initiative.
COMMISSIONER GALVIN said it was both; The administration
supported the amendment but the legislators would have to have
supported it as well in order for it to pass. The administration
worked with the legislature throughout and supported the
increase from 50 percent to 80 percent and then to 90 percent.
CHAIR HUGGINS said he assumes that legislators did not talk to
pipeline companies and other people who might have an interest.
"There has to be some intermediary in there someplace that
brings forward the concept of 50 percent is not adequate, hence
we go to 80 percent."
COMMISSIONER GALVIN disagreed. He said he believes there were a
number of potential pipeline applicants that talked directly to
legislators about their concerns and suggested changes to make
participation more attractive.
CHAIR HUGGINS asked what companies were present other than
Enbridge and TransCanada.
COMMISSIONER GALVIN named MidAmerican, BG and the producers.
They all participated in the legislative process at the hearings
and had individual discussions with both the administration and
legislators.
1:23:12 PM
CHAIR HUGGINS asked him to address how the contribution
increased from 80 percent to 90 percent.
COMMISSIONER GALVIN said it was primarily the administration's
request because pipeline companies continued to be reluctant to
proceed past an unsuccessful open season. The administration
felt that rather than eliminating that key requirement, it would
be more appropriate to increase the state match in order to
encourage applicants to commit.
1:24:14 PM
CHAIR HUGGINS recalled reading somewhere that the match was
increased to 90 percent primarily for TransCanada.
COMMISSIONER GALVIN said he didn't recall that. TransCanada was
interested in eliminating the entire obligation to go beyond the
open season. He clarified that it was a process in which the
administration and the legislature had to identify how far to
push in order to attract applicants. None of the applicants said
they would participate under certain conditions. TransCanada, in
particular, stated reluctance about participating in a process
that required going beyond an unsuccessful season. The
administration decided to alter the state match to induce
reluctant pipeline companies to take on that obligation. "At no
point did any of the companies, TransCanada included, say that
if you bring it to 90 percent we're in."
1:25:47 PM
SENATOR STEDMAN said he remembers that through the AGIA process
there was a lot of talk about how to move beyond an unsuccessful
open season and encourage a company to go on to a FERC
certificate. He did not recall the intent of AGIA being that the
state would continue a reimbursement process after a successful
open season. At that point the risk exposure to the applicant
would have gone down substantially. He asked, "Why would we want
to breach what I recall is the intent of the legislative
process, to allow TransCanada's application to override that?"
1:27:02 PM
COMMISSIONER GALVIN responded that it would not be correct to
say the legislative process determined the state's contribution
should go down or be eliminated after a successful open season.
Discussion did focus on the implication of an unsuccessful open
season and that is the primary reason for increasing in the
incentive; but most of the committee discussion was silent about
what the state's contribution should be after a successful open
season. He agreed with the statement that the risk to the
pipeline goes down with a successful open season but, he said,
this is the application we have and it is consistent with the
statute.
SENATOR STEDMAN asked what the outcome would be if the
TransCanada application had been silent on that point.
COMMISSIONER GALVIN replied their application could not have
been silent. The statute says that the application is obligated
to state what the contribution rate will be "up to" a certain
amount. "Their application was 50 [percent state match] and then
to 90 [percent state match]."
1:28:55 PM
SENATOR STEDMAN said he understands the unsuccessful open season
process, but the successful process is counterintuitive to what
he recalls the legislature was attempting to accomplish with the
$500 million subsidy. He recalled that the intent was not to
expense the entire $500 million; the intent was to have a
successful open season, minimize impact on the state and move
forward toward construction of the pipeline.
1:29:24 PM
COMMISSIONER GALVIN reiterated that there was not a lot of
legislative discussion about the impact of a successful open
season; but a successful open season means that the state is
contributing to a project that has a high likelihood of success.
The economic analysis indicates it is a favorable investment
opportunity in the sense that the state contributions will
provide a significant return in the form of increased taxes and
royalties because of the impact that the contribution has on the
tariff. Although the discussion did not take place, it can't be
concluded at this point that it wouldn't have been seen as an
appropriate role for the state to contribute to lowering the
tariffs of a project that is now even more likely to succeed.
1:30:29 PM
SENATOR MCGUIRE asked whether, since the percentage was not
specified after a successful open season, the state could have
paid 100 percent.
COMMISSIONER GALVIN replied that the statute said the state's
contribution was up to 50 percent before an open season and up
to 90 percent after an open season. The statute did not
distinguish between a successful and an unsuccessful open season
because, in part, there is no globally accepted definition for a
successful or an unsuccessful open season. Whether or not the
commitments are sufficient to consider an open season a success
depends on a myriad of potential interpretations. "The idea of
actually trying to define within the statute what would be
considered a successful or unsuccessful open season was
something that we didn't feel was necessary."
1:32:23 PM
SENATOR MCGUIRE agreed with Senator Stedman. She recalled the
committee discussed what the percentage would be after an
unsuccessful open season and that was to reflect the risk of
asking a pipeline company to proceed without FT commitments. She
said it is a shock to some members that the state would pay a
90/10 split after a successful open season. She understands the
difficulty in defining a successful open season, but she wonders
if this doesn't go to her original point about synthesizing this
into a contract. The specific point is that when AGIA is set up
as a structure, bids come back that have unanticipated gaps. "I
can pretty much guarantee that the votes in this committee would
be against giving a 90/10 reimbursement after a successful open
season." The committee reflected on this for a month and didn't
see that, she said. That's the problem with dealing with
something so complex and it's led to an almost absurd
consequence. "I don't blame TransCanada at all." It's a great
business practice, but is a concern because it wasn't the intent
and the people of Alaska probably wouldn't be supportive. She
asked if this makes him think about the need to synthesize
everything and put it into terms that are concrete and
understandable.
1:35:11 PM
COMMISSIONER GALVIN said the administration strongly believes
that the agreement between the state and TransCanada is clear
with regard to what TransCanada's obligations are to the state
and what the state's obligations are to TransCanada. He
suggested that she was not concerned about a lack of clarity;
she wanted to renegotiate the terms after a year had passed and
the process had played out.
SENATOR MCGUIRE said she meant "clarify" because there are 60
different views on how to interpret the statute.
COMMISSIONER GALVIN thought what Senator McGuire was getting at
was whether or not the application reflects the statute. He
believed there was full recognition that the state was offering
up to $500 million. That was the price on the table and there
was little, if any, discussion about creating an off-ramp so the
state could get out of the contribution if the project were to
get "legs." The expectation was that the state would put out a
proposal with an offer of $500 million and allow a sense of
competition between projects to be the driver as to whether or
not any of those projects would leave money on the table. The
discussion was whether an applicant would give their application
a leg up by deciding that if they had a successful open season
they would forgo part of the match. That was not a statutory
requirement; the applicants were allowed to dictate at what
point the contribution would increase and at what point it would
go down.
COMMISSIONER GALVIN said TransCanada made a proposal through
this process, and now a number of legislators have expressed a
desire to renegotiate. That isn't how the process was set up;
the process is that a company makes an application and it is
either accepted or rejected. "I don't think that the idea of
moving to a contract resolves that unless the intent is to go to
a contract and basically renegotiate these terms with
TransCanada and negotiate things out that we had offered
originally."
1:39:23 PM
SENATOR MCGUIRE said she is trying to highlight the feeling that
this process is slightly absurd. "We know that TransCanada will
be a part of building a gas pipeline. We know they have the
right-of-way. They're good people; they're good partners" she
said. But the legislature is not all-seeing and all-knowing;
that is why the legislative process is dynamic - why there are
amendments, committee substitutes and two bodies. The idea that
at one moment in time the legislature could think of everything
that has to be considered and lock into a position feels wrong.
At some points this feels absurd because there are things that
wouldn't benefit the state - things like paying someone 90
percent of their reimbursable costs when they clearly have a
successful open season and the project is moving forward. "And
we're going to be paying that because we just didn't think of it
and that's just the way it is."
1:41:00 PM
COMMISSIONER GALVIN suggested that to say the state will be
paying just because they didn't think of it sooner is an
overstatement. He continued:
If we had thought of it a year ago, we would have gone
down into the hole of can we define what is a
successful or an unsuccessful open season and we
probably would have thrown up our hands at some point.
… If the ultimate goal is to get a pipeline and if we
recognize that the pipeline's going to provide
tremendous benefit to the state - and the fact that
the state is contributing to that is going to pay back
that contribution as well - I think that it's very
likely that we would have reached the same conclusion
in the end, which was to allow the application process
to define whether or not there's going to be a change
in the state's contribution.
When you go back to the global position that you were
taking when you were talking about your perceived
absurdity about this process, one of the things that
we're going to go through as we advance this gasline,
is the entire process is one of taking one step and
collecting information that we have at that particular
time and making the best decision we can based upon
the information we had then about what the next step
is, recognizing that at that point we're going to
collect information and reassess and then make another
step.
And to expect that we're going to, again, like you
said, be able to look into our crystal ball and know
where the end point is going to be and strategically
position ourselves all the way through is an
unrealistic expectation. All we can do is make the
best decision that we can with the information we have
before us at that time. The decision that we made last
year with regard to what the parameters of AGIA should
be were based upon the best information we had at the
time with regard to the competitive nature of what was
going to drive people to ultimately take up the
state's opportunity that we present in there, and what
was the best balance for the state in terms of what
we're going to give, from what we're going to get.
This year we have a discussion about, and I accept
that the discussion has been twofold: whether or not
this is the right thing to move ahead, and then
looking back and saying is there something that we
should have done differently a year ago. I would
suggest that if we continue to do this as we move
forward, we're going to tie ourselves in knots.
Because every year we advance and make a decision, if
we beat ourselves up over whether or not the previous
decision was the right one we're not going to get
anywhere.
I'm still confident that the decisions that we made a
year ago were the best decisions we could make upon
the information that we had then. And there was no way
that we were going to anticipate where we were going
to be today.
But the next question goes to where do we go from
here. Do we go from here with an AGIA licensed project
or not? Now I guess I will somewhat disagree with the
premise of your question when you said we know that
TransCanada is going to be part of this project. I
don't think we know that for sure at all. I thing that
there are a number of factors that are going to play
out as this project moves forward that's going to
dictate that one way or the other. And there are going
to be commercial decisions that are made among a
variety of players that's going to end up influencing
that. And the state, as a commercial player in this,
is going to have a role in how that shakes out.
1:44:36 PM
Now, when we look at what our options are right now,
we have to make the best decision that we can based
upon the information that we have today. And based
upon that, we look at… OK what's the scenario if we
are going forward without an AGIA licensed project.
What's the situation we find ourselves in? Granted,
ideally we'd like to see the producers and TransCanada
get together and form a project that ends up
benefitting both them and the state.
SENATOR MCGUIRE asked what efforts the state made on that point.
She felt this is a very cutthroat, high-risk way to cut a deal.
Many of the people at the table might vote no and still support
a gas line; it's just a question of how to get there.
1:46:05 PM
SENATOR MCGUIRE said she had two final questions. She asked
first what the administration would have done if another
application had stated that the 90/10 would apply only in the
event of an unsuccessful open season; and second, what this
administration, the Department of Revenue (DOR), and the
Department of Natural Resources (DNR) had done to try to bring
the parties into alignment prior to taking this route.
1:47:07 PM
COMMISSIONER GALVIN explained that in the first instance they
would look at the evaluation criteria in statute, which is net
present value to the state and likelihood of success. It is not
possible to evaluate the likelihood of success without knowing
who the other applicant is, but evaluating net present value
would be a matter of looking at the overall economics of the
project. Under a scenario where net present value is the same
for the two projects, it would be a toss-up as to whether the
state's net present value would be improved by dropping the
state contribution after a successful open season. "I think that
without any other adjustment the answer would be no, because our
analysis has shown that the state contributing to the costs and
having those reduce the tariff ends up paying us back and
increasing our net present value by $200 million out of the
$500." If the applicant dropped the state contribution and
instead put its own equity in, that might increase the tariff
and reduce the state's net present value. So it's not at all
clear that a project that foregoes the state's contribution
after a successful open season would come out higher under an
analysis that follows the statutory parameters.
COMMISSIONER GALVIN turned to the second question and stated
that before a license is granted it would be inappropriate for
the state to try to bring the producers to a TransCanada
project. However, discussions regarding what the producers need
to advance their project are ongoing and tend to center on
fiscal certainty, the terms for taxes and the judiciary system.
He admitted that from the administration's perspective those
discussions are going nowhere; but having a project that's
moving ahead allows the state to have those discussions in the
context of actual project economics as opposed to subjective
numbers.
1:51:34 PM
SENATOR MCGUIRE opined that people don't like to be boxed into a
position. From her perspective the state is using force rather
than bringing people into a process that they feel a part of. "I
see a reserves tax and I see litigation and I see quagmire and
opportunity costs for this state and the people in this state
who need these jobs and need this gas." She said she's tried to
see things the way he's describing, but they could go very
differently and lock the state up for a decade.
1:52:54 PM
COMMISSIONER GALVIN referenced her earlier comment about this
being a cut-throat business and pointed out that the idea of
taking a commercial position that's to your advantage over a
competing party is a way of life. The state isn't doing anything
in this effort that another commercial player wouldn't do if
they had more than one option to develop their resource. "We're
not backing them into a corner; we're not putting them in a
position where they're going to react emotionally because these
companies don't react emotionally to these things."
SENATOR MCGUIRE clarified that her point is that the producers
have options about where to put their gas. "You just have a
pipeline builder; you've got to have the gas."
1:54:17 PM
COMMISSIONER GALVIN agreed that it's been about getting the gas
from the very beginning. The producers have to make a decision
about where to put their gas in any event, because they're
obligated to develop the gas when it is marketable. The state is
presenting a path for doing that; but they could choose a
different path without state concessions. What they cannot do is
to move on to somewhere else in the world and do nothing with
Alaska gas. Waiting is no longer going to be an option if there
is a pipeline company with an economic project willing to
develop it. These are serious business people, he said, who will
do what is best for their companies. The state is simply
providing motivation so they will move in a direction that is in
the state's interest.
1:55:59 PM
CHAIR HUGGINS stated that this is an important conversation
because a number of constituents do not understand the $500
million. He said he hasn't been able to embrace the idea, but
hopefully this will give them a better grasp of it.
1:56:33 PM
SENATOR THOMAS stated the belief that the AGIA process has moved
things forward dramatically. In fact, over the last seven months
two of the three producers have a precertification before the
FERC. With that in mind, he asked, how much would TransCanada be
able to claim under treble damages if the license were issued
and then in August 2009 the state saw potential for something
else to take place? If the state and TransCanada had each spent
$25 million, what would be the total payments TransCanada could
claim against the state if it decided to assist the other
project?
1:58:45 PM
COMMISSIONER GALVIN said, based on those figures, the treble
damages would be $75 million.
1:59:20 PM
SENATOR STEDMAN asked Commissioner Galvin why the legislature
would not go back and clarify this if the legislature's intent
was not to give reimbursements after a successful open season.
2:00:36 PM
COMMISSIONER GALVIN explained that the state created a
competitive process to create a contractual relationship, which
is not subject to amendment by the legislative process. If it is
determined that a contribution after a successful open season is
inconsistent with statute, that would go back to the legality of
the license itself.
2:01:53 PM
SENATOR STEDMAN clarified that the question was not the statute
but the intent of the legislature.
2:02:33 PM
COMMISSIONER GALVIN said the scenario Senator Stedman is
painting is one in which the legislative intent contradicts the
statute. He said he doesn't know where to go with that. If the
conclusion at this time is that the statute does not reflect
what the legislature wanted it to, then the legislature has to
decide the ramifications of going back and amending it.
2:03:11 PM
SENATOR STEDMAN asked if he'd had the opportunity to go back and
check the record of the resources and Finance Committees to see
what the intent was.
COMMISSIONER GALVIN answered that he's had no reason to do so
because the statute is clear. Usually legislative intent is
relevant when there is an ambiguity in a statute. When the clear
language of the statute reads a particular way, they usually
accept that the language means what it says.
2:03:37 PM
SENATOR WIELECHOWSKI said he thinks it's reasonable to assume
the producers will commit their gas to their own pipeline. He
asked if Commissioner Galvin agrees with that.
COMMISSIONER GALVIN "Not necessarily."
SENATOR WIELECHOWSKI asked why he didn't believe they'd commit
to their own pipeline.
COMMISSIONER GALVIN thought there would be a number of issues
associated with the decision and they would commit their gas to
the project with the best combination of economic and strategic
values to them and the best likelihood of success. He said the
administration believes, with the AGIA license for TransCanada,
they will be able to provide an extremely attractive opportunity
for the producers to commit their gas to the TransCanada line.
2:05:24 PM
SENATOR WIELECHOWSKI continued, "Let's assume there are two open
seasons and Denali does have significantly lower tariffs. Is the
state forced to move ahead with TransCanada?"
COMMISSIONER GALVIN countered that the question is whether
TransCanada would want to move ahead.
SENATOR WIELECHOWSKI asked where the legislature would go next
if they deny the license.
2:07:07 PM
COMMISSIONER GALVIN admitted plan B isn't very palatable. They
would have to choose between going forward with discussions with
the Denali project, which would basically put them back in the
same dynamic as stranded gas development when the state had no
leverage. Or they would have to go with the all-Alaska option,
which would subject the state to tremendous risks because they
don't have the gas or any expectation they could get gas
committed to an LNG project. That is an extremely high-risk
venture, to believe that "if you build it, they will come" and
it isn't a direction they feel is prudent.
2:08:36 PM
CHAIR HUGGINS contended it isn't the same as stranded gas; the
difference is the price of gas.
2:09:38 PM
COMMISSIONER GALVIN disagreed that things have changed that
dramatically. The issue is what options are available to the
state.
2:10:31 PM
SENATOR DYSON asked, if the legislature now realizes that the
intent of the law they passed a year ago was not clear and they
went back and modified it, would any of the applicants have a
cause of action against the state for the time and money they
spent preparing their response to the RFP as it was originally
put out?
2:11:38 PM
COMMISSIONER GALVIN did not want to speculate on that; the
question is one of good faith. If the committee now changes the
terms, they will basically cast aside the competitive process
the administration has gone through over the last 9 months, in
which case is probably cleaner to just vote no on the license
and do something different later on.
2:12:51 PM
CHAIR HUGGINS referred to Commissioner Galvin's term "reluctant
partner" to describe why the state agreed to give 90 percent
after a failed open season.
COMMISSIONER GALVIN did not recall using that term.
CHAIR HUGGINS agreed that he might not have, but continued to
say that all of the conversation he has heard about the 90
percent was with regard to a failed open season. He reminded
Commissioner Galvin that he had said the statute is silent on
the issue of a successful open season and whether or not the
state would continue to reimburse, and that TransCanada's
application specified continuation of the reimbursement. If the
statute is silent, he said, why would the legislature want to
continue to reimburse a partner that is no longer "reluctant"
for a project that is clearly economic instead of spending that
money elsewhere?
2:15:18 PM
COMMISSIONER GALVIN answered that it would be ironic to go back
to your constituents and say you voted against the license
because you were afraid it would be successful. He said that
seemed to be what Chair Huggins was saying, that he was afraid
TransCanada would actually get the gas and the state would
continue to contribute to them, recognizing that it would
actually increase the value to the state.
2:15:55 PM
CHAIR HUGGINS interrupted that he did not say anything about
voting against the license; he was talking about modifying or
clarifying the license. Since the statute is silent regarding
the success of the open season, the legislature will have a
voice in it.
COMMISSIONER GALVIN said Senator Huggins can characterize it as
he wants; the bottom line is that the statute says an applicant
can apply for a matching contribution that is up to 50 percent
before an open season and up to 90 percent after an open season.
There was a lot of discussion about this and the legislature
clearly had the opportunity to make a distinction between a
successful and an unsuccessful open season. They did not. They
said the applicant could determine the contribution rate after
an open season. To say now that the legislature is going to go
back and modify that is to say they don't like the deal the
state struck and are going to cast aside the TC Alaska
application and do something different at some point in the
future. In the end, it would come down to the fact that the
legislature was afraid TransCanada was going to be successful
and actually get gas and they didn't want to continue to
contribute to their project if it was successful. Frankly, he
said, he doesn't think that is in the state's interests. If the
project is successful, it is a good investment.
2:18:41 PM
CHAIR HUGGINS called a 10 minute break.
CHAIR HUGGINS called the meeting back to order at 2:32:45 PM.
2:33:11 PM
DONALD BULLOCK, Attorney, Legislative Legal and Research
Services and lead drafter on AGIA, commented on legislative
intent with regard to the $500 million and what options are
available to the legislature. He said that the clearer the
language in the statute, the greater the burden to prove that
legislative intent was something else. The $500 million, from
the administration's standpoint, was clearly intended to be an
investment that would reduce the tariff; so the amount had a
purpose in itself, regardless of how it was paid out. The issue
of how it would be paid out defined two periods; one was on or
before the close of the first binding open season and the second
was after the first binding open season. Those are both clear
points and neither term contains any mention of a "successful"
open season. The payments are not discretionary, the state
"shall" reimburse, not "may" reimburse. As far as the maximum
amount, in 43.90.130 (9), among the "must haves" it said the
applicant shall propose a percentage and the total dollar amount
for the state's reimbursement. It is not simply a question of
whether or not the state needs to continue to pay out the money.
So to prove that legislative intent was so completely different
from the letter of the law would be a challenge.
When the proposals went out, everyone who looked at this project
saw what the state was offering. The state was primarily
offering three things:
· Money to help move the project along in return for the
commitments the applicants make to the state;
· A gasline coordinator to help "grease the skids" as the
permit process goes forward;
· The Project assurance that the state will not provide
inducements to another project that would endanger the gas
available for the licensed project.
So, he said, the legislature has to be aware of whether they are
changing the conditions under which the offer was made and
whether, in negotiating with the licensee before them, they are
giving that proposed licensee a benefit that other applicants
might have considered at the time [they applied].
MR. BULLOCK insisted the job of the legislature during this
special session is simple; it is to decide if they agree with
the commissioners that this is the licensee whose project
maximizes the benefits to the people of Alaska. If they agree
that the applicant has met every requirement in AGIA and yet
still doesn't provide a project that maximizes benefits to the
state, then maybe there really is a problem with AGIA. But the
issue right now is whether this project maximizes the benefits
to the people of the state. If it doesn't do that without
additional conditions, then perhaps the legislature should vote
it down. If it meets the conditions and satisfies the intent of
AGIA, then it would be reasonable to vote in favor of it. But,
he cautioned, the legislature needs to compartmentalize their
issues; is the problem with AGIA, or is it with this
application?
He said a number of amendments had been offered in the House
that had to do with putting preconditions on payments for
qualified expenditures. However, AS 43.91.10 states if the
licensee makes qualified expenditures within the 7 year time
period those will be paid. If the payments are withheld, as
would be the case with the indemnification amendment that was
offered, it affects the viability of the project and the
applicant's ability to carry forward with it. That is one of the
issues that was specifically addressed within AGIA; not only
whether the applicant has committed to everything that was
expected in AGIA, but whether it has the capability to actually
carry out the project.
CHAIR HUGGINS asked Commissioner Galvin and Bonnie Harris,
Department of Law, to come forward to address the issue of
withdrawn partner indemnification and any place that is covered
in the state's "contract."
2:41:01 PM
COMMISSIONER GALVIN explained that the issue of withdrawn
partners has two components: the risk that any potential
liability would be transferred into the tariff and increase the
shipping rates; and the risk that a party entering into a
partnership with TC Alaska in this project may somehow become
liable for some portion of any liability that is successfully
brought against TransCanada.
In response to the first component, the state has TC Alaska's
commitment that if there is any liability from withdrawn
partners, they will not attempt to recover it in the tariff. The
administration is also confident that the FERC would not add it,
even if it was somehow included in an application. The second
component has been discussed in two contexts. First is whether
the issue of withdrawn partners adversely affects TransCanada's
ability to attract partners, financing or FT commitments so as
to diminish a project's likelihood of success. Second is whether
any potential liability is transferred to the state in this
relationship or in anticipation of the state taking on a
different role in the future and whether or not the state should
seek indemnification today to shield itself from that liability.
He assured the committee that the administration has not been
advised by any of the legal consultants that simply executing a
license somehow creates exposure to the state with regard to
withdrawn partners. If the state changed its relationship with
TC Alaska and became an equity partner or somehow joined
TransCanada as an owner of this project, then there would be a
discussion about withdrawn partner liability in the context of
the type of relationship created and the indemnification
associated with that.
COMMISSIONER GALVIN reiterated that the execution of the license
itself does not create a risk of liability; therefore the
administration does not feel it is necessary to discuss
indemnification at this time.
2:47:36 PM
BONNIE HARRIS, Senior Assistant Attorney General, Department of
Law, Juneau AK, advised that her legal perspective is consistent
with Commissioner Galvin's explanation. The Department of Law's
research has not shown any way that issuing a license could
result in a liability to the withdrawn partners. She said the
idea that by issuing a license the state would somehow become
liable would be analogous to the state issuing a drivers license
to someone to enjoy the privilege granted by the state to drive,
and that somehow making the state liable for the car payments.
There just isn't that kind of legal connection in licensing.
2:48:58 PM
SENATOR STEVENS asked the commissioner how the state can trust
the guarantee that any liability won't be rolled into the
tariff.
2:49:33 PM
COMMISSIONER GALVIN answered that as he understands it, there
would have to be a finding of a liability to the withdrawn
partners of a subsidiary of TransCanada and that liability would
have to be considered to extend to TransCanada Corporate. That
is where the "deep pocket" is and where the liability would most
likely rest. The question is whether TransCanada could try to
mitigate or be reimbursed for that through the tariff rate. The
FERC would not ask the shippers to pay for the liability without
a request from TransCanada; so if the liability were added to
the tariff, it would be a breach of the state's contract with
TransCanada and TransCanada would be liable for the damages
associated with that.
2:51:12 PM
SENATOR MCGUIRE asked where that guarantee is found.
COMMISSIONER GALVIN replied that it was received on January 24,
2008 in response to a request for additional information that
was forwarded to TransCanada on January 16, 2008. In their
response, TransCanada stated that they would not add the
contingent liability into the tariff rate. The response was
signed by the applicant and was included in the license itself
as a binding portion of the contract. He read TransCanada's
response into the record:
In the highly unlikely event the TransCanada AGIA
applicants or any of their affiliates or subsidiaries
were to somehow be required to pay an obligation to
the withdrawn partners of ANGPA, the TransCanada AGIA
applicants hereby commit not to include such payments
in the rates for the project proposed in the AGIA
application. We confirm that this commitment will be
binding on the TransCanada AGIA applicants if they are
awarded the AGIA license.
2:53:03 PM
SENATOR MCGUIRE asked what legal forum was designated in the
event of contract dispute.
COMMISSIONER GALVIN responded "Alaska State courts."
SENATOR MCGUIRE observed that the legislature could do requests
for additional information on some of these other subjects. If
that is a method the administration has used to "shore up"
ambiguities in the contract, she queried, what would be the harm
in the Senate identifying areas of clarification that could be
reduced to writing, signed and notarized?
COMMISSIONER GALVIN explained that the administration has looked
at that issue of requesting additional information at this time;
the legal problem is that the commissioners have already made
their finding and have found the license is in the state's
interest. So it would not be something the state could add to
the license as an additional, binding component. However the
state does have the testimony that was provided and the
clarifications that were made during this process, which serve
to interpret any ambiguous aspects of the license. TransCanada
could not contradict an explicit aspect of the license, but to
the extent that something is found to be ambiguous, the
testimony provided will go to clarify and establish the intent
of the language.
2:55:56 PM
SENATOR MCGUIRE persisted, if it [TransCanada's commitment not
to recover withdrawn partner liability in the rates] has been
agreed to and signed and notarized, what would be the harm in
amending AGIA to clarify that was the legislature's intent?
COMMISSIONER GALVIN said he did not understand what Senator
McGuire was looking to clarify.
SENATOR MCGUIRE wanted to know if the legislature could go back
and say that one of the "must haves" was indemnification from
outstanding liabilities that don't directly pertain to the
state. Mr. Bullock explained that if the legislature went back
and redefined the terms in a way that would have affected the
outcome, that could be a problem; but in this case it is clear
it was never the intent that the state would be liable so, she
reiterated, what would be the harm in making that part of the
statute?
COMMISSIONER GALVIN said the primary distinction is that to say
the state would have no liability with regard to the withdrawn
partners in its entirety would probably be an over statement.
There is a chance the state may decide to become a full partner
with TransCanada at some time in the future or to join the TC
Alaska project in a different capacity and in that case, the
state will have to look at the issue of withdrawn partners and
whether it implicates that relationship. If the legislature were
to retroactively amend AGIA and add indemnification as an
additional "must have," it would change the terms in such a way
that it would invalidate the competitive process that brought
the state to this point.
SENATOR MCGUIRE recalled being initially concerned about it
[withdrawn partner liability] and then getting information from
Mr. Palmer that led her to believe it would not be a factor;
that the state would be indemnified and it wouldn't impact the
tariff structure. Since that time she said, the legislature has
heard conflicting opinions from the FERC representatives: first
that the FERC wouldn't allow the liability to be factored into
the rates and then, in more recent communications, that it could
be. She did not recall anything in the Senate Resources
Committee's deliberations that would be inconsistent with the
concept of the state reaffirming that any withdrawn partner
liability will not be added to the rates and that the state will
be indemnified.
3:00:23 PM
COMMISSIONER GALVIN stressed that the tariff issue is absolutely
clear. TransCanada has already indemnified the state with their
testimony. As for the FERC testimony, the question is only
whether FERC would or would not include the liability [in the
rates] if it was requested; the state has TransCanada's
commitment that they will not request it and, if they do, they
will be liable to the state for having done so. That is an
indemnification as it relates to the tariff issue and that is
the only aspect of the state's relationship with TransCanada
that is being implicated by the issuance of an AGIA license. As
for whether the state should deal with the withdrawn partner
issue now in anticipation of a change in the state's
relationship to TransCanada in the future, the administration's
position is that it would be premature to even get into that
discussion.
SENATOR MCGUIRE respectfully disagreed. She said she wrote a
brief to the ninth circuit [court] on the "DEW line." [DEW line,
a network of cold war era radar monitoring stations in Canada
and Alaska that have now been abandoned.] An oil and gas company
had a platform on federal land and someone was mauled by a polar
bear. The victim settled with the oil and gas company and then
came back to reach into the deep pocket of the federal
government, because the platform sat on the DEW line. Things
like that happen, she said, and she would feel more comfortable
going into this potential partnership if it were made very clear
that the state is indemnified and is not part of this withdrawn
partner liability.
3:03:22 PM
COMMISSIONER GALVIN said the administration has looked at it
very closely. The fact that some people refer to the AGIA
license as a "partnership" is not a legally significant issue;
it's a matter of what is the true relationship that's being
created. The legal opinion is clear that it is not creating a
risk of liability on this particular issue. But, he stressed,
the administration does not want to provide the impression that
the AGIA license takes care of any liability in the event that
the state changes its relationship to TransCanada at some point
in the future. It isn't an issue today; but if the state changes
its position the liability issue will have to be considered.
3:06:14 PM
SENATOR STEDMAN said he understands that there is some
possibility the liability could be included in the rates,
depending upon whether the court ever asks the FERC to make a
ruling.
COMMISSIONER GALVIN responded that there are two aspects to
Senator Stedman's question. The issue of whether or not the
liability exists is one. In that case, someone would first have
to make a claim; then a court would have to substantiate it.
Then TransCanada would have to seek to have that liability paid
for by shippers on the Alaska portion of the line; and finally,
the FERC would have to agree that it is an appropriate cost to
be added [to the rates].
SENATOR STEDMAN said it seemed very clear from TransCanada's
testimony that they would not request that it be rolled into the
tariff.
COMMISSIONER GALVIN agreed. And if TransCanada doesn't request
it, the state does not have a risk regardless of what a court
might find on the liability issue.
SENATOR STEDMAN was not sure the language from TransCanada was
strong enough.
COMMISSIONER GALVIN said he would get Senator Stedman a copy of
TransCanada's response.
SENATOR STEDMAN said the conversation he had with the
commissioners at the FERC seemed very clear that it was an
unknown. If the court ever ruled for the FERC to look at it, the
liability could be in, it could be out.
3:09:36 PM
COMMISSIONER GALVIN thought the nature of the question was "if
it were requested... if it were put into the application...
would FERC include it or not" and it sounds as if there isn't a
clear answer to that. The premise of the question is that it is
requested by the applicant; and the state has a commitment that
TransCanada won't request it, which means that it will not be
before the FERC commissioners for them to rule one way or the
other.
SENATOR STEDMAN said he didn't interpret it that way. His
understanding is that it could be challenged in court by one of
the withdrawn partners and, if they were successful in that
arena, FERC might or might not look at it.
3:11:03 PM
COMMISSIONER GALVIN reiterated that without an applicant
bringing it forward, it will not come before the FERC
commissioners. There may be a liability established by a court
somewhere on TransCanada Corporate; they have liabilities that
will be established continually on different things and FERC is
not out there looking for liabilities that haven't been
requested by a pipeline to include in a rate.
3:11:36 PM
SENATOR THOMAS was looking at the concept of withdrawn partners
with regard to changing language that could be a potential
problem. He asked who the withdrawn partners are and whether any
have actually written off their interest.
3:12:42 PM
COMMISSIONER GALVIN did not have the information with him but
said he would provide it.
3:12:56 PM
SENATOR WIELECHOWSKI wondered what would be the harm if the
legislature amended the "must haves" to include a statement that
anyone with withdrawn partner liability must indemnify the state
against it. It would only impact TransCanada and he assumed they
would agree to it.
COMMISSIONER GALVIN reiterated that changing the "must haves"
would add an additional requirement to the state's completeness
review, which TransCanada would not have met. Therefore the
state's completeness determination regarding TransCanada's
application would be eliminated, changing the state's ability to
come forward with the license now before the legislature. That
is Mr. Bullock's determination, he said, and Ms. Harris agrees
with it. It would basically eliminate the existing license
before the legislature.
3:14:49 PM
SENATOR WIELECHOWSKI asked Ms. Harris if she would expand on
that.
MS. HARRIS agreed with Mr. Bullock that it would take the
process back to the beginning. In the law of public contracts in
general, when the public body solicits bids, there is an offer
and the acceptance. The application in this case is the offer
and if the acceptance has different conditions than the offer,
it isn't the same contract.
SENATOR MCGUIRE asked Ms. Harris about change orders. She opined
that there are mechanisms to amend a contract if both parties
are in accord.
3:17:55 PM
MS. HARRIS agreed that there are methods to do that in public
contracts however, those contracts generally have a provision
for how change orders will work. AGIA has a provision that is
similar to that. TransCanada's offer, if accepted by issuing a
license, becomes a contract; and there is a provision in AGIA
that allows for changes to the project plan under certain
conditions: the change has to be approved by the commissioners;
it cannot diminish the value to the state; and it cannot negate
any of the "must haves." That is consistent internally with AGIA
and allows necessary changes in the project plan after the
contract is established.
3:19:44 PM
COMMISSIONER GALVIN clarified that the RFA [Request for
Applications] would establish the parameters of any change
orders. Similarly within AGIA, there can be changes to the
project plan within the parameters established in AS 43.90.210
and the RFA, which established how modifications would be done.
That is a different scenario than going back and actually
changing the underlying statute, which would change the terms
under which the RFA was issued and implicate the actual bid
process.
3:20:45 PM
MS. HARRIS agreed with Commissioner Galvin's explanation.
3:21:00 PM
SENATOR HOFFMAN pointed out that the goal is to get a gasline.
Once the license is issued, both the majors and TransCanada have
said the line is not going to be built unless there is fiscal
certainty. He asked if Commissioner Galvin agreed with that
statement.
3:21:54 PM
COMMISSIONER GALVIN said he believes the producers have taken a
strong position that they want fiscal predictability before
making their gas commitments. AGIA reflects that in the
provisions with regard to upstream fiscal certainty. The
question becomes "what is meant by fiscal certainty?" The
state's assurance of predictability in the gas tax for the first
10 years is something that is appropriate for the state to offer
to gas shippers and is an inducement. The administration has
stated throughout that it will be evaluating whether or not that
is sufficient and appropriate as the project moves toward an
open season. However, at this point the administration feels the
economics of the project are sufficiently strong that the
inducements offered should be enough to get gas committed to
this line. Whether the producers may ultimately decide to forego
fiscal certainty in favor of control over the pipe and go after
the Denali project is something they will have to balance
against other interests going forward. The finding and the
administration's public statements recognize that they could
decide that those other interests are more important to them
than fiscal certainty.
3:24:40 PM
SENATOR HOFFMAN asked if the administration has spoken with Mr.
Palmer and does he agree that the 10 years on the books is
enough fiscal certainty for them to proceed building the gasline
under the provisions of this license.
COMMISSIONER GALVIN said the administration has not had
discussions with TransCanada about that, but he believes the
application speaks for itself. However, the issue has been
raised that TransCanada remains on the sidelines with regard to
discussions between the state and the shippers on fiscal terms.
3:25:48 PM
SENATOR HOFFMAN opined, therein lies the nut that needs to be
cracked. If the administration has not discussed with
TransCanada whether 10 years fiscal certainty is sufficient,
then what can we do. If we go back and give fiscal certainty for
a longer term, the producers may have applied under AGIA so it's
a discussion we should have had before the application process.
3:27:34 PM
COMMISSIONER GALVIN said he sees the issue from the opposite
side. That is, the state is placed at a disadvantage in
negotiations if it has to reach an accord on fiscal certainty
without sufficient information about the economics of the
project and the implications on the decisions the shippers are
making. The administration believes that continuing those
discussions as the project moves forward and the economics are
clearer will put the state in a better negotiating position.
3:30:07 PM
SENATOR HOFFMAN insisted that the administration should have
asked the one remaining applicant, which had stated that the
line would not be built without fiscal certainty, whether 10
years would provide enough fiscal certainty for them to proceed
with the project.
3:31:10 PM
COMMISSIONER GALVIN said he must have misinterpreted Senator
Hoffman's question. If the question is whether the 10 years of
fiscal certainty is sufficient for TransCanada to advance the
project, the answer is "Yes" and Tony Palmer has made that clear
on the record. He thought the Senator was addressing a statement
within TransCanada's application, which states that they expect
the state to work with the shippers to identify whether there
are additional concessions that need to be made to get the
producers to commit gas to the line. TransCanada did not take a
position regarding whether the state needs to make additional
concessions; but they are saying that they hope the state is
willing to entertain those discussions. TransCanada and TC
Alaska are not the ones that will dictate what fiscal certainty
terms are needed in order to get the producers to this line.
3:32:39 PM
SENATOR HOFFMAN said it seems the legislature must be part of
the process for any changes in the gas tax structure.
COMMISSIONER GALVIN agreed that any subsequent discussion about
fiscal certainty will definitely have to include the
legislature. As to when fiscal certainty will be established,
the administration feels the best approach is to advance this
project through the AGIA process until enough information is
available to determine what fiscal certainty is appropriate.
SENATOR HOFFMAN asked what time frame that would be.
COMMISSIONER GALVIN believed it would be between now and the two
open seasons, that is during the next 24-30 months.
SENATOR HOFFMAN queried, what are the chances of getting that
question answered before the first open season?
3:35:52 PM
COMMISSIONER GALVIN felt they were fairly good.
SENATOR HOFFMAN said the problem he has is that the legislature
has the time to answer that question now, before entering into
the license and a one year delay will improve the net present
value to the state of Alaska. He felt that if the administration
will have the answer to that question before the first open
season, the legislature should wait until that time and start
the process over after making any adjustments to AGIA that may
be necessary.
COMMISSIONER GALVIN responded, in reference to Mr. Dickinson's
statement that "it's OK to delay this project for a year because
it increases the net present value," that Mr. Dickinson was
referring to an anomaly in the state's NPV analysis. If they
drop the state's discount rate low enough, it appears that the
value to the state increases with delay. He opined that everyone
would agree getting the gasline built sooner rather than later
is in the state's interest; it is not logical to think the state
increases the value of the project by delaying it indefinitely.
He continued that there are a lot of moving parts right now, a
lot of negotiation and positioning going on among the players.
If the state wants closure on some of the major issues, they
will have to stop some of the pieces from moving. Some of that
comes down to what the state is willing to accept and to give
up. Some of that has to be locked in at some point in order to
move forward; they have to establish deadlines and a fixed
timeline.
3:40:30 PM
SENATOR HOFFMAN agreed that more moving parts need to be
eliminated and the biggest moving part he saw was fiscal
certainty.
3:40:56 PM
COMMISSIONER GALVIN said he agreed that is something they need
to get closure on; but that isn't some thing the administration
can decide unilaterally. They have to position themselves for
discussions with the shippers.
3:41:30 PM
SENATOR WAGONER read a letter to Representative Samuels from
Francis S. Chang, Senior Council for Pacific Gas and Electric
Corporation, dated July 22, 2008. He said he felt it was
important to have this on the record and that he wanted to know
if Legislative Budget and Audit had received any other letters
of this nature.
Regarding your letter to Mr. Stanford-Hartman, you
asked several questions regarding rights and
obligations owed to PG&E Corporation under the
partnership agreement of the Alaska Northwest National
Gas Transportation Company and in connection with
TransCanada Corporation license application under the
Alaska Gasline Inducement Act. As you know, PG&E
Corporation is the ultimate corporate parent of
Sealaska Energy Company, which is a withdrawn partner.
Mr. Hartman requests that I respond to your letter. We
have reviewed our files and based on this review, we
do not believe that PG&E Corporation currently has any
rights to waive with respect to TransCanada
Corporation's application.
SENATOR WAGONER emphasized that this letter was not distributed
to the Special Committee on Energy and wondered if any others
had been received and had not been distributed.
CHAIR HUGGINS assured him that they would get the answer to
that.
3:43:45 PM
CHAIR HUGGINS questioned Commissioner Galvin about the
administration's capital request for $3.5 million over the next
ten months and asked what sort of inducements were on the table.
COMMISSIONER GALVIN said he was not familiar with the $3.5
million request.
CHAIR HUGGINS explained that it is by the Department of Natural
Resources, part of a $15 million request that is expected to be
expended between August of 2008 and June 2009 "to ensure success
of the first open season and subsequent open seasons and to
develop additional state inducements."
COMMISSIONER GALVIN said that is a direct follow-up to the
discussion with Senator Hoffman. The administration anticipates
discussions with regard to potential changes in the state's
fiscal system in order to attract gas to the initial open
season. As part of that, they anticipate the need for a
tremendous amount of analysis in order to evaluate the financial
impacts to the state associated with any particular proposal or
idea that may come out of those discussions and will need access
to expertise similar to that they used in analyzing the TC
Alaska application. They are asking for the funds so that the
state will be in the strongest position to participate in those
discussions.
3:45:59 PM
CHAIR HUGGINS said he understands that. The question is what
sort of inducements the administration is looking at for $3.5
million. What's the menu of inducements?
3:46:49 PM
COMMISSIONER GALVIN clarified that the $3.5 million is not to
develop or identify additional inducements as much as it is to
evaluate issues and information that relate to discussions
associated with upstream fiscal issues.
CHAIR HUGGINS re-read the statement from the capital request.
3:47:26 PM
COMMISSIONER GALVIN could not respond.
CHAIR HUGGINS suggested Commissioner Galvin confer with DNR and
get back to him. Assuming the legislature does whatever it is to
spend that, he asked, when is the legislature going to be asked
to consider that expenditure?
3:48:32 PM
COMMISSIONER GALVIN answered that it isn't a unilateral
decision-making process. The money is for the administration to
design terms based on discussions they will have with the
shippers; so they have not developed a list of inducements.
3:52:39 PM
CHAIR HUGGINS commented that it is $6.25 million over multiple
years through June of 2013, so there is some kind of plan to
spend a lot of money on this. He was not sure how they came to
the conclusion that it would take that long to come up with the
terms and inducements; but felt the legislature should be able
to anticipate when they are going to be dealing with this huge
issue.
3:54:08 PM
COMMISSIONER GALVIN agreed that as the administration reaches
the point of needing legislative action, they would want to do
it during a regular session; but he insisted that they have to
remain flexible to deal with these parties successfully.
3:56:05 PM
SENATOR GREEN was curious why this request was not included in
the spring 2008 budget.
COMMISSIONER GALVIN said it was tied to issuance of the license.
During the spring 2008 budget the administration did not know
the outcome of the licensing decision.
SENATOR GREEN asked what would happen if this request was not
funded until spring 2009.
COMMISSIONER GALVIN asserted that if the entire amount was not
funded, it would be detrimental to the state's ability to engage
in discussions with regard to fiscal certainty, because they
might not have the funds to properly evaluate the issues as they
come forward in those discussions.
SENATOR GREEN queried "This is primarily for consultants?"
COMMISSIONER GALVIN responded that is most likely.
3:58:00 PM
SENATOR GREEN noted that supplemental budgets are very
convenient but can distort the totals and she is always in favor
of including things in the actual budget cycle. She was
disappointed that it didn't come sooner.
3:58:39 PM
SENATOR STEDMAN agreed. He thought it would have been more on
point for the administration to come in with contingency
language. In the event that they selected an applicant through
the AGIA process, these are the expenditures they would like to
include for the current fiscal year.
3:59:46 PM
CHAIR HUGGINS wondered, assuming the state has a fiscal package
after spending this amount of money, who is this fiscal package
applicable to?
4:00:39 PM
MS. HARRIS said it would not be for a specific company, but
would apply to the category of activity.
CHAIR HUGGINS asked Commissioner Galvin about that because he
thought that fiscal certainty applied exclusively to
TransCanada.
4:01:31 PM
MS. HARRIS clarified that she answered within the general
framework of the application of law rather than this specific
scenario. She had no understanding of the specific fiscal
package to which he referred.
4:03:14 PM
COMMISSIONER GALVIN responded that at this point, any question
related to the fiscal package is premature because they don't
know if they will need one or what it will look like. The root
of the question goes back to the treble damages issue. The
language of the project assurance section of AGIA says the state
will not pass a preferential tax treatment to advance a
competing project. If there is a general change in the
production tax law, it would not trigger that. The question was
asked, "What if we make a change that applies to everyone
equally, but is actually intended to help advance one particular
project." If the state does that, he feels they should admit it
and accept treble damages.
4:06:41 PM
SENATOR WAGONER asked if the committee would deal with
amendments and possibly move the bill tomorrow.
CHAIR HUGGINS stated that the culmination will be to vote on
moving the bill. He held SB 3001 and HB 3001 in committee.
There being no further business to come before the committee,
Chair Huggins adjourned the meeting at 4:07:28 PM.
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