Legislature(1997 - 1998)
02/03/1997 03:30 PM Senate RES
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
CS HCR 1 NORTH SLOPE NATURAL GAS PROJECT(WTR)
CHAIRMAN HALFORD called the Senate Resources Committee meeting to
order at 3:30 p.m. and announced CS HCR 1 (WTR) to be up for
consideration.
REPRESENTATIVE RAMONA BARNES, Sponsor, said CSHCR 1 urges the
establishment of a stable fiscal and regulatory environment in
order to provide the best opportunity for a new LNG project to be
economically viable and attractive. She explained that to be
viable, 14 million metric tons of gas must be sold per year and the
proposed project would transport and market the North Slope gas
resources in the Asian Far East Market. It is believed there is an
opportunity in 2005 when demand in that market will rise enough to
accept the volume of gas which this project will provide.
Alaska's huge volume of gas could be displaced from the market if
smaller more easily placed projects come on line first.
SENATOR LEMAN thanked her for the work in this area and he asked if
identification of the leaseholders of rights-of-way or holders of
permits could be included. REPRESENTATIVE BARNES replied that this
resolution is directed to the holders of the gas of which the State
owns 12 1/2%. The leaseholders spoken to in this bill are those
major producers and some minor one who hold the lease for the gas
in the Prudhoe Bay fields. She thought it inappropriate to
identify Yukon Pacific in this particular resolution, although they
support the bill, because they don't own a lease at Prudhoe Bay.
Number 123
SENATOR LEMAN asked her to clarify why the terms North Slope and
Prudhoe Bay were used. REPRESENTATIVE BARNES explained that
Prudhoe Bay referred to all the fields in that area and included
the surrounding fields as well, like Pt. Thompson.
SENATOR SHARP stated in some of the meetings on this issue there
was focus on the advisability of State equity ownership in a
pipeline and he thought that it was deliberately left as one of the
options for the Governor to study. He thought that was covered in
lines 28 - 29 on page 4. REPRESENTATIVE BARNES agreed with that
and added that all of the State's participation needed to be
evaluated.
CHAIRMAN HALFORD asked if other benchmarks could be used before the
year 2005. He questioned by what date the contracts between the
parties were to be drawn up by the Governor and by what date were
they to be submitted to the legislature. REPRESENTATIVE BARNES
replied that she intentionally did not put a date there, because
she didn't want to appear inflexible or unreasonable. She restated
that she thought the year 2005 was important because of outside
competition and the support they receive when certain parties try
delaying tactics like wanting a new route opened up or
technological requirements.
SENATOR LINCOLN said that Senator Murkowski and others had used the
date 2007 and she would like to see an earlier date because it
would be better for all Alaskans. She asked how she defined 2005
as the magic date. REPRESENTATIVE BARNES replied that the only
people who say 2010 are the oil producers. No one in the
marketplace has said that. No one in foreign governments has said
that to her. They have all said between 2005 and 2007.
Number 279
JEFF LOWENFELS , President and CEO, Yukon Pacific Corporation, said
they hold permits to transport North Slope natural gas to tide
water at Valdez and hold an export license from the federal
government to export 14 million metric tons of LNG over a 25 - 30
year period starting at a date the project begins. He said they
support the resolution 100%. He said it was important to move
quickly and that 2005 is a crucial date. To suggest that it should
be later would be suicide as far as a gas project from Alaska is
concerned.
CHAIRMAN HALFORD asked when they would actually have to start
construction in order to keep the 2005 date. MR. LOWENFELS replied
that they had to start in about the next 18 months. He said it
would be very difficult, but Yukon Pacific had done a tremendous
amount of advance planning.
COMMISSIONER JOHN SHIVELY, Department of Natural Resources, said
the administration has its own working group with the producers and
they have been working with Representative Barnes. They think it
is an important step to reach an important goal.
CHAIRMAN HALFORD asked if he felt it was important to be in the
ground within 18 months in order to reach the 2005 goal.
COMMISSIONER SHIVELY responded that he didn't think Mr. Lowenfels
meant that we had to be in the ground in 18 months, but that we had
to have letters of intent for purchase in 18 months. We should be
in the ground between 2000 - 2002. Mr. Lowenfels nodded agreement.
SENATOR LINCOLN asked if 2005 was a realistic date that this
administration would also push for. COMMISSIONER SHIVELY answered
that he didn't think they were as committed to the exact 2005 date
as Representative Barnes, although there is no question that a
market opportunity starts around then. There is no question, also,
that the sooner we get to the market, the better off we are.
Number 346
GEORGE FINDLING, ARCO, supported HCR 1. He said that expeditious
passage of this resolution will help advance the project.
CHAIRMAN HALFORD asked for the ownership breakdown on the gas
reserves. REPRESENTATIVE BARNES replied 30, 30, 22.
SENATOR LINCOLN asked if 2005 was a realistic date for having the
gas line in place and into the market. MR. FINDLING replied if you
project everything going well, he thought production wouldn't
happen before 2007. But he thought that 2005 was a good target
date.
Number 376
MARK BENDERSKY , BP, said the interim work done by Representative
Barnes was very thorough and comprehensive and they are in full
support of the Resolution.
SENATOR LINCOLN asked if he thought 2005 was a realistic date. He
replied that 2005 is an excellent goal to work toward. He said
there is a lot of competition for gas supply and it will be
somewhat of a buyers market. Their job would be to make sure
Alaska's gas will be as high in the queue of supply projects as
possible.
Number 395
BEVERLY MENTZER, Business Development Manager, Exxon, said she is
responsible for commercialization of the Alaska gas reserves. She
emphasized that Exxon is very committed to commercializing Alaska's
gas reserves on the North Slope. They are very supportive of this
resolution. It is exactly what the project needs for it to move
forward at this point.
SENATOR LINCOLN asked what she thought about the 2005 date. MS.
MENTZER replied that they agree with the statement that there is an
opportunity opening up in the marketplace beginning in 2005. They
believe the opportunity continues to grow as there is economic
development in the far east. In shooting for a date she thought
there were two things to remember. One is that it's not currently
economically viable and we need to make it economically viable.
The work on fiscal terms and cost reductions will help that and
continued growth in the market will help. So they are not in total
control. Two, the market will ultimately decide which projects go
forward and which are developed. They are moving forward and they
accept that date as a target.
SENATOR LINCOLN asked what she defined as a start-up date. MS.
MENTZER replied first gas down the pipeline.
SENATOR SHARP asked if she agreed that the critical movement here
is to go forward and obtain the consumptive contracts for that
period of time as the window opens up as early as possible. MS
MENTZER replied that it is critical because the purchasers also
have quite a bit of investment to make on their side of the ocean.
They need the long lead time, too.
SENATOR LEMAN asked her about using Pt. Thompson in the earliest
stages as part of the ramp-up recognizing there is a cost to oil
left behind. MS. MENTZER replied that they had not done a rigorous
relook at Pt. Thompson since August. They have their estimates of
impact on oil recovery that are in the financial model that the
State currently uses and the economics of it are not significant to
the timing of the gas project. They plan to reevaluate it in 1997
and will be getting a new estimate. The key issue to them is if
Prudhoe Bay gas can't make the project economic now with all the
existing field infrastructure, if you take that same thing and
layer all the wells that need to be drilled at Pt. Thompson, you
are going in the wrong direction as far as trying to reduce cost.
She said they expect that the infrastructure they build would need
to support future gas sales from Pt. Thompson and other fields and
they are planning that into their design basis.
SENATOR TAYLOR noted that the Governor was being requested to do a
number of things, but was not getting a copy of the resolution.
REPRESENTATIVE BARNES responded that it does address the Governor
over and over again, and it is a House Concurrent Resolution which
means it is a message to the executive.
Number 512
SENATOR SHARP moved to pass the CSHCR 1(WTR) from Committee with
individual recommendations. There were no objections and it was so
ordered.
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