03/30/2010 09:00 AM Senate FINANCE

HOUSE CONCURRENT RESOLUTION NO. 2                                                                                             
                                                                                                                                
     Requesting the governor to  provide energy security for                                                                    
     all Alaskans  by pursuing development of  a natural gas                                                                    
     bullet pipeline from the North  Slope to the Cook Inlet                                                                    
     region;  and requesting  the governor  to identify  and                                                                    
     negotiate  with   one  or   more  persons   capable  of                                                                    
     producing natural  gas from the  Gubik area,  and other                                                                    
     areas on  the North  Slope if necessary,  in sufficient                                                                    
     quantities to support a bullet pipeline project.                                                                           
                                                                                                                                
Senator Huggins  MOVED to ADOPT work  draft 26-LSO264\M. Co-                                                                    
Chair Stedman OBJECTED.                                                                                                         
                                                                                                                                
REPRESENTATIVE  JAY  RAMRAS  disclosed  that  this  was  the                                                                    
second  hearing  of the  resolution  by  the Senate  Finance                                                                    
Committee. He commented on the issue's maturation.                                                                              
                                                                                                                                
Co-Chair Stedman  asked about  the changes  made in  the CS.                                                                    
Representative Ramras  explained the  changes in the  CS. He                                                                    
commented on  Line 14 and discussion  regarding jeopardizing                                                                    
the supply to consumers relying  on production from the Cook                                                                    
Inlet  region.  He highlighted  Page  3,  Lines 19-22  which                                                                    
reflects  the  Senate  Resource Co-chairs  studying  gas  to                                                                    
liquids programs. He  informed that Fischer-Tropsch projects                                                                    
were large for the Alaskan  marketplace. He claimed that the                                                                    
technology is now advanced and appropriate.                                                                                     
                                                                                                                                
9:21:57 AM                                                                                                                    
                                                                                                                                
Co-Chair  Stedman asserted  that  Representative Ramras  was                                                                    
detailing the CS.                                                                                                               
                                                                                                                                
Representative  Ramras explained  the  CS through  sectional                                                                    
analysis.  He noted  that Alaska  now has  a standalone  gas                                                                    
Pipeline  project  advanced by  the  plan  created by  Harry                                                                    
Noah.  He  discussed Line  14,  which  mirrors some  of  the                                                                    
aspirations in HB 369. He  commented on Line 17 through Line                                                                    
20  concerning  a  precipitous  decline  in  the  taps  line                                                                    
necessitating alternative revenue sources  for the export of                                                                    
lesser  priced energy  for those  Alaskans living  along the                                                                    
Yukon  River. Line  21 and  22 recognize  two imminent  open                                                                    
seasons. He  highlighted Lines 23 through  26 that recognize                                                                    
a  heavily conditioned  open season  for  the pipeline.  The                                                                    
open  season  would provide  the  most  efficient method  of                                                                    
delivery for the  least expensive gas to  Alaskans, which is                                                                    
impossible if  the project is  so heavily conditioned  to be                                                                    
delayed for  an indeterminable amount of  time. He continued                                                                    
with  Line  27  through  29  which  reinforces  the  concern                                                                    
regarding moving  forward into the construction  phase for a                                                                    
large diameter  gas pipeline. He  discussed Page 5,  Lines 5                                                                    
through  10  which  addressed necessary  permits,  right  of                                                                    
ways, and  specifications. He mentioned Lines  11 through 17                                                                    
and the  two facilities  discussed including  the importance                                                                    
of maintaining  the existing export  license for  the Conoco                                                                    
Phillips Marathon Liquefied Natural  Gas (LNG) facility. The                                                                    
export permit  is the  only one  of its  kind in  the United                                                                    
States and  serves as an  industrial anchor for  the purpose                                                                    
of  establishing  an  instate  gas  pipeline.  He  expressed                                                                    
concern for  a project  without an  industrial anchor  as it                                                                    
becomes simply a concept and no longer a project.                                                                               
                                                                                                                                
9:28:49 AM                                                                                                                    
                                                                                                                                
Representative Ramras discussed Lines  18 thorough 21, which                                                                    
reinforce   the  need   for  the   administration  and   the                                                                    
Department of Natural Resources  (DNR) to pursue the renewal                                                                    
of the license issued by  the Department of Energy (DOE). He                                                                    
mentioned the  instate gas caucus which  enjoys a membership                                                                    
of 17  members in the  state legislature. He  recognized the                                                                    
continued  negotiations with  the commercial  working group.                                                                    
He  stressed the  need  for a  robust  discussion amongst  a                                                                    
commercial working group of buyers  and sellers to encourage                                                                    
the governor and  the stand alone pipeline  team to continue                                                                    
those discussions.  He stressed the  importance of a  gas to                                                                    
liquids program.                                                                                                                
                                                                                                                                
9:31:34 AM                                                                                                                    
                                                                                                                                
Co-Chair  Stedman  removed  his  objection.  Version  M  was                                                                    
adopted.                                                                                                                        
                                                                                                                                
Co-Chair  Stedman  asked  for   an  explanation  of  HCR  2.                                                                    
Representative  Ramras responded  that  global market  place                                                                    
dynamics have changed. Version M  is recognition of the fact                                                                    
that the dynamics of shale  gas and of equatorial tide water                                                                    
projects  have  changed in  the  last  year. He  thought  it                                                                    
better to  take advantage of Japanese  Crude Cocktail, which                                                                    
is  a  barrel of  energy  equivalent  price computation.  He                                                                    
stressed mindfulness  about the necessity of  acting quickly                                                                    
to  export  natural  gas.  He   felt  a  responsibility  for                                                                    
determining means  of delivering  energy to  all communities                                                                    
including the Railbelt.  He stated that an  economy built on                                                                    
inexpensive   and   abundant   energy  is   exemplified   by                                                                    
Anchorage.  He noted  the initiatives  to move  in-state gas                                                                    
forward.                                                                                                                        
                                                                                                                                
9:37:12 AM                                                                                                                    
                                                                                                                                
Senator Ellis  asked about the  interplay between  hydro and                                                                    
natural  gas.  He  commented  on  the  interest  in  instate                                                                    
natural gas.  He asked  about the  tradeoff between  the two                                                                    
options.                                                                                                                        
                                                                                                                                
Representative Ramras  responded that Alaska is  referred to                                                                    
as a state in civil war.  He noted that one project competes                                                                    
against  another. One  project, the  Susitna, is  large. The                                                                    
interior  comprises the  largest  coldest  community in  the                                                                    
circumpolar globe  still tethered  to diesel. He  noted that                                                                    
the transportation  tariff makes electric heat  unlikely. He                                                                    
opined that HCR 2 speaks  to the commercial working group in                                                                    
addressing the component  of demand. He spoke  to the likely                                                                    
hood of a transportation tariff  if the proposed pipeline is                                                                    
only  partially  full. He  stated  that  he  did not  see  a                                                                    
contest  between  large  scale  hydro and  instate  gas.  He                                                                    
calculated  that   the  contest  was  the   gathering  of  a                                                                    
commercial  working group  to match  buyers and  sellers and                                                                    
create   enough   demand   to   allow   for   a   reasonable                                                                    
transportation tariff. The state's  future is in hydro power                                                                    
and the  benefit of  hydrocarbons and  gas molecules  is the                                                                    
bridge fuel for the next 50 to 100 years.                                                                                       
                                                                                                                                
9:41:10 AM                                                                                                                    
                                                                                                                                
Senator  Huggins commented  that the  inside support  in the                                                                    
governor's office  is helpful. He observed  that the process                                                                    
expressed  by Representative  Ramras  was  sound. He  agreed                                                                    
with   the  various   alternatives.  He   opined  that   the                                                                    
psychology of  Alaska selling  gas was  important especially                                                                    
in-state  gas. He  underlined that  the issue  was not  only                                                                    
about the  Railbelt, but the logistical  distribution system                                                                    
that allows  transport of  gas products  to remote  areas is                                                                    
important.  He  asked  about  key  elements  concerning  the                                                                    
package  and  the timeline  to  allow  the project  to  move                                                                    
forward.  He stressed  that the  final decision  or solution                                                                    
must be economically viable.                                                                                                    
                                                                                                                                
9:43:34 AM                                                                                                                    
                                                                                                                                
Representative  Ramras   stressed  the  importance   of  the                                                                    
project's sanction  date. He believed  that the  state could                                                                    
see a  sanction date in  a year  or two. He  elaborated that                                                                    
Alaskans are  interested in  the short  term plan.  He noted                                                                    
that HCR  2 recognizes  that if the  state does  not proceed                                                                    
with the  project it  must consider  the importation  of gas                                                                    
into  the  South  Central region.  He  cautioned  that  Cook                                                                    
Inlet's  gas supply  is depleted  and expanding  communities                                                                    
and businesses will  have to employ diesel as  a fuel source                                                                    
for the next  10 or 20 years. He advocated  for a discussion                                                                    
between buyers and sellers in  the commercial working group.                                                                    
He advised  that the governor's office,  administration, and                                                                    
the Department of Natural Resources  engage in the extension                                                                    
of  the export  license  for the  Marathon Conoco  Liquefied                                                                    
Natural  Gas (LNG)  facility. He  encouraged the  members of                                                                    
both legislative bodies to seek alignment.                                                                                      
                                                                                                                                
9:50:00 AM                                                                                                                    
                                                                                                                                
Senator   Thomas    appreciated   the   resolution    as   a                                                                    
comprehensive  solution.   He  expressed  support   for  the                                                                    
instate  gasline. He  guessed that  if Alaska  were to  lose                                                                    
their  export license  it  would be  their  last leading  to                                                                    
dependence on gas importation.                                                                                                  
                                                                                                                                
9:51:18 AM                                                                                                                    
                                                                                                                                
Co-Chair Stedman asked  about Page 2, Line 22 of  the CS. He                                                                    
wondered about  the date  of 2016  for transport  of natural                                                                    
gas  along the  pipeline. He  inquired about  the optimistic                                                                    
timeline   and   wondered  if   it   was   a  print   error.                                                                    
Representative  Ramras opined  that Alaska  would not  see a                                                                    
large diameter gas  pipeline until after the  year 2016. The                                                                    
focus of the resolution is an in-state gas pipeline.                                                                            
                                                                                                                                
9:52:30 AM                                                                                                                    
                                                                                                                                
Co-Chair  Stedman mentioned  one zero  fiscal note  from the                                                                    
Senate Finance Committee.                                                                                                       
                                                                                                                                
Co-Chair Hoffman  MOVED to  report SCSCSHCR  2 (FIN)  out of                                                                    
Committee   with   individual    recommendations   and   the                                                                    
accompanying fiscal  note. There being NO  OBJECTION, it was                                                                    
so ordered.                                                                                                                     
                                                                                                                                
HCR  2  was REPORTED  out  of  Committee  with a  "do  pass"                                                                    
recommendation  and with  a new  zero fiscal  note from  the                                                                    
Senate Finance Committee.                                                                                                       
                                                                                                                                
9:55:42 AM