Legislature(2007 - 2008)CAPITOL 120
04/12/2007 03:00 PM House OIL & GAS
| Audio | Topic |
|---|---|
| Start | |
| Alaska Oil and Gas Conservation Commission | |
| HJR13 | |
| HB183 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 183 | TELECONFERENCED | |
| *+ | HJR 13 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| + | TELECONFERENCED |
HJR 13-NATURAL GAS FOR STATE RESIDENTS 3:31:02 PM REPRESENTATIVE BERTA GARDNER, Alaska State Legislature, sponsor, explained that HJR 13 is designed to ensure that any decision regarding the exportation of Cook Inlet gas is made with appropriate consideration of the all interests. She said that the state has an interest in its citizen's welfare, in the development of natural resources, in economic development and in revenue. Representative Gardner pointed out that since 2002, gas prices in Southcentral Alaska have increased by 97 percent. Citizens, especially those on fixed incomes, are struggling to pay heating and fuel bills. ENSTAR Natural Gas Company reports that the problem is increasing costs due to the depletion of known reserves. Alaska's isolation creates an effective natural gas monopoly although there are three major oil companies, ConocoPhillips Alaska, Inc., Marathon Oil Corporation, and Chevron Oil Company, operating in the region. There are also problems with deliverability issues; storage problems and a wide variation in supply and demand. Representative Gardner emphasized that the supply of natural gas in this region is not by a free market system; in fact, regulation by the Regulatory Commission of Alaska (RCA) is required. 3:33:18 PM REPRESENTATIVE GARDNER further explained that ConocoPhillips Alaska, Inc. and Marathon Oil Company, owners of the Kenai Liquefied Natural Gas plant, have applied for a two-year extension of their license to export natural gas to Japan. The extension request states that there are sufficient reserves to support local and export needs. However, local utilities have unmet gas needs. She said that Alaska consumers realize that gas is sold on the world market and high export prices and profits will support the facility and its employees, but the possibility of exporting one-third of Alaska's natural gas needs to be considered by a "holistic" view. Representative Gardner informed the committee that since HJR 13 was filed, the state has opposed the extension of the export license, unless certain conditions are met. Those conditions are: local utility gas needs are guaranteed for two years, maintenance of an eight year reserve ratio, and open access to the natural gas plant by third party buyers. In spite of the state's intervention, she urged the committee to adopt HJR 13 to assure citizens that the legislature approves of the state's policy to protect the best interests of all of Alaska. 3:36:47 PM REPRESENTATIVE OLSON observed that the U. S. Department of Energy, Office of Fossil Energy, deadline for testimony has passed and the resolution will have no effect on its decision. 3:37:10 PM CHAIR KOHRING asked for justification to continue with the resolution. 3:37:26 PM REPRESENTATIVE GARDNER responded that HJR 13 also requests the RCA to expedite any review of utility contracts and encourages natural gas producers in the Cook Inlet region to ensure an adequate and affordable long-term supply of natural gas for Alaskans. 3:38:06 PM REPRESENTATIVE DOOGAN asked why the resolution calls on the attorney general to evaluate the extension request application. 3:38:19 PM REPRESENTATIVE GARDNER answered that the attorney general can represent the interests of all Alaskans regarding a federal application extension request. 3:38:41 PM REPRESENTATIVE DOOGAN further asked whether the attorney general is the appropriate arm of the state government to intervene. REPRESENTATIVE GARDNER said yes. 3:38:54 PM CHAIR KOHRING referred to HJR 13, page 2, line 12, and asked what measures the state will take to "ensure the availability of affordable natural gas". 3:39:23 PM REPRESENTATIVE GARDNER responded that it would be irresponsible of the state to contemplate exporting one-third of the natural gas reserves if Alaskans do not have access to fuel to heat their homes. She noted that a careful decision should be made considering the profitability of the plant and the local access to gas issue. 3:40:15 PM CHAIR KOHRING assumed that the facts presented in the resolution have come from reliable sources. REPRESENTATIVE GARDNER assured the committee that the facts are reliable. 3:41:17 PM REPRESENTATIVE OLSON observed that the contract has been in place for forty years and that previous extensions have been for periods of six to nine years. 3:41:36 PM JOHN K. NORMAN, Chair, Alaska Oil & Gas Conservation Commission (AOGCC), Department of Administration, confirmed that this extension request is for a period of two years. 3:41:51 PM REPRESENTATIVE KOHRING questioned whether the sponsors of the resolution had considered approaching the industry for support for individuals who are impacted by high natural gas prices for home heating fuel. 3:42:35 PM REPRESENTATIVE GARDNER replied that she had not. She pointed out that Alaska is a northern state, but also an energy producing state. When contacted by constituents about high home heating costs, her legislative office will often suggest programs to assist home owners with conserving energy. CHAIR KOHRING said that he was not enthusiastic about the resolution. 3:43:35 PM REPRESENTATIVE GARDNER replied that, although the attorney general is acting on this issue, she said that she decided to pursue the passage of HJR 13 to demonstrate the legislature's support. 3:44:55 PM REPRESENTATIVE OLSON requested that ConocoPhillips Alaska, Inc. and Marathon Oil Corporation have an opportunity to respond to the legislation before moving HJR 13 out of committee. 3:45:14 PM REPRESENTATIVE RAMRAS said that he also wants to hear from the industry, due to the precedent the legislature may set. He noted that he agreed with the concept and that Fairbanks has also seen increases in the cost of natural gas. Representative Ramras expressed his concern that passage of the resolution will render Cook Inlet gas less valuable. 3:46:54 PM REPRESENTATIVE GARDNER reiterated that natural gas exportation should not be banned; however, all impacts of the export license extension should be considered. 3:47:20 PM REPRESENTATIVE OLSON expressed his concern that the resolution may send mixed signals to the industry. This resolution potentially nationalizes a production facility in the Cook Inlet at the same time the state is debating passage of the Alaska Gas Inducement Act (AGIA). 3:48:11 PM REPRESENTATIVE GARDNER informed the committee that the sponsors spoke with the industry prior to filing HJR 13. 3:48:33 PM MARIE DARLIN, volunteer coordinator for the Capital City Task Force of the American Association of Retired Persons (AARP), expressed her organization's support for the resolution. She said that AARP's hope is that this resolution will afford some stabilization of utility costs for members who want to spend their retirement in Alaska on a limited income. 3:50:56 PM REPRESENTATIVE RAMRAS expressed his belief that the days of low gas prices are over. He explained that Alaska gas prices are now tied to the Henry Hub Natural Gas Index and prevailing national gas prices. Representative Ramras pointed out that Fairbanks has a refinery 12 miles away and should have low gas available; however, Alaska royalty oil is priced on the world market. Representative Ramras opined that even North Slope gas, when it becomes available, will be more expensive for Anchorage consumers due to transportation costs. When gas prices are low, the cost of transportation makes the production of gas uneconomic. Even gas priced at $7.95 must be discounted for transportation. In Fairbanks, he added, utilities buy gas, liquefy it, transport it, and regassify it, resulting in a cost of over $20. He concluded that, as contracts have expired and markets for higher priced gas are available, higher gas prices are to be expected for everyone. 3:57:23 PM MS. DARLIN expressed her understanding of the situation, and repeated that any assistance in the cost of utilities is appreciated. 3:57:52 PM REPRESENTATIVE OLSON shared his concerns about the cost of gasoline in his district, where 80 percent of the gasoline in the state is produced. He informed the committee that Tesoro Alaska Petroleum Co. provided pricing information that indicated that a percentage of its gas is purchased on the spot market and imported, and a percentage is local or from the North Slope. Representative Olson stated that gasoline refined in Soldotna is 25 cents per gallon less to buy in Anchorage, than in Soldotna. 3:59:58 PM MS. DARLIN added that Southeast pays the highest prices due to the cost of transportation. 4:00:12 PM KEVIN BANKS, Acting Director, Central Office, Division of Oil and Gas, Department of Natural Resources, expressed his belief that HJR 13 will demonstrate the efforts of the state to serve the residents of Southcentral Alaska. He indicated that the administration supports the conditioned approval of the extension for the liquefied natural gas (LNG) plant and that the plant itself is central to the market dynamics in the region. Mr. Banks stated that the committee has an understanding of the reasons behind the increase in prices and his hope is that the exhaustion of the Cook Inlet supply of natural gas and subsequent importation of gas will be forestalled by construction of a gas pipeline from the North Slope. 4:04:23 PM REPRESENTATIVE DOOGAN expressed his understanding that the consumer demand for Cook Inlet gas is insufficient to make exploration worthwhile, unless influenced by demand from the Agrium plant. 4:05:08 PM MR. BANKS explained that the domestic demand for gas for heating and electricity is about 50 billion cubic feet (Bcf) per year. The LNG plant requires 60 to 70 Bcf per year and Agrium, at capacity, could require 50 to 55 Bcf per year. The large consumers will draw gas supplies all year around. He continued to explain that Cook Inlet gas field prospects vary in size and a lower demand will mean that smaller prospects will not be developed. 4:07:15 PM CHAIR KOHRING announced his intention to hold the resolution for additional testimony. 4:08:22 PM REPRESENTATIVE GARDNER said there are amendments to HJR 13 that will conform to the senate companion bill, and that will be offered at the next meeting. 4:08:34 PM CHAIR KOHRING announced that HJR 13 was held in committee with public testimony closed. 4:08:57 PM
| Document Name | Date/Time | Subjects |
|---|