03/30/2015 03:30 PM Senate RESOURCES

         SB  50-AIDEA: BONDS;PROGRAMS;LOANS;LNG PROJECT                                                                     
                                                                                                                                
4:48:46 PM                                                                                                                    
CHAIR  GIESSEL  announced  the  consideration  of  SB  50.  [CSSB
(NRG) was before the committee.]                                                                                              
                                                                                                                                
4:49:12 PM                                                                                                                    
GENE THERRIAULT, Deputy Director,  Alaska Energy Authority (AEA),                                                               
Fairbanks, Alaska,  introduced himself and noted  that Mr. Parady                                                               
would start the presentation on SB 50.                                                                                          
                                                                                                                                
4:49:20 PM                                                                                                                    
FRED  PARADY,   Deputy  Commissioner,  Department   of  Commerce,                                                               
Community and Economic Development  (DCCED), Juneau, Alaska, said                                                               
that Administrative Order 272 directed  the DCCED commissioner to                                                               
collaborate  and  facilitate  at   the  highest  levels  work  on                                                               
consumer  energy issues  across Alaska,  but of  more germane  to                                                               
this  committee and  this bill  to  work on  the Interior  Energy                                                               
Project  (IEP) to  provide affordable  energy to  Interior Alaska                                                               
customers as  soon as  possible and to  possibly provide  for gas                                                               
elsewhere  after the  Interior was  supplied and  to use  private                                                               
sector mechanisms  as much  as possible.  The goal  was initially                                                               
envisioned  to  deliver natural  gas  to  Interior homes  with  a                                                               
$15/thousand  cubic  feet at  the  burner  tip cost  (the  energy                                                               
equivalent of $2/gallon fuel oil).                                                                                              
                                                                                                                                
4:50:55 PM                                                                                                                    
MR. TERRIAULT stated that much of  the language in the bill makes                                                               
adjustments to a number Alaska  Industrial Development and Export                                                               
Authority (AIDEA) bond and loan  authorizations. Sections 4 and 5                                                               
of the bill apply to the  Interior Energy Project and so he would                                                               
discuss those changes when they came up.                                                                                        
                                                                                                                                
He explained that section 1  adjusts an authorization requirement                                                               
that has  been in  place since  1990. The  original amount  of $6                                                               
million  was  set for  AIDEA  bonding  needing approval  for  the                                                               
citing of  the project from  the local government. That  is being                                                               
proposed to go up to $10 million.                                                                                               
                                                                                                                                
Section 2 on page 2 deals  with the bonding authorization for $10                                                               
million that  has been on the  books since 1990 and  the proposal                                                               
is to adjust  it up to $25 million to  account for inflation, the                                                               
size of typical  projects coming to AIDEA  for participation, and                                                               
to bring  a number of sections  of statute up to  the same dollar                                                               
amount.                                                                                                                         
                                                                                                                                
4:52:57 PM                                                                                                                    
The $25 million  new suggested level appears in  section 3, also.                                                               
Section 3  deals with AIDEA's ability  to issue loans out  of the                                                               
Enterprise Development  Account and that  was set in 2006  at $20                                                               
million.  On line  30, the  existing $20  million amount  for the                                                               
original Sustainable  Energy Transmission and Supply  (SETS) fund                                                               
is proposed to go up to $25 million, also.                                                                                      
                                                                                                                                
4:53:56 PM                                                                                                                    
Page 3 has  existing statutory language with  no proposed change.                                                               
Page 4 starts  dealing with the Interior  Energy project. Section                                                               
4 was added by the  Senate Energy Committee. Senator Micciche, in                                                               
particular,  was very  interested if  the Interior  was going  to                                                               
look for  a source  of natural  gas and  potentially look  to the                                                               
Cook  Inlet  area  to  source   those  gas  molecules,  in  AIDEA                                                               
evaluating  the possibility  of delivering  those molecules  on a                                                               
small diameter pipeline.                                                                                                        
                                                                                                                                
AEA committed  to working with Enstar  on the pricing of  such an                                                               
enterprise  and  the  manufacture  of Flex  steel  pipe  and  has                                                               
provided  information  to  Senator Micciche  indicating  that  it                                                               
looks like that  type of delivery would  be severely economically                                                               
challenged,  although   it  would   continue  to   be  evaluated.                                                               
Suggested language deals with a  previous prohibition in the SETS                                                               
statutes that precluded SETS money  from being used for a natural                                                               
gas pipeline.  This exemption is  structured to  specifically say                                                               
they can  look at a  12 inch  or smaller pipeline  to potentially                                                               
deliver gas to the Interior.                                                                                                    
                                                                                                                                
4:55:44 PM                                                                                                                    
Section  5  proposes  changing  the  financing  tools  that  were                                                               
previously approved  by the legislature  for the  Interior Energy                                                               
Project. Language on  page 5, line 4, deletes the  North Slope as                                                               
the only source of gas  molecules. It appears that delivery price                                                               
off the North Slope would not  be economical for the community to                                                               
pay for  conversion, and  if you  can't get  demand up,  then the                                                               
per-unit  price will  be prohibitive.  This doesn't  preclude the                                                               
possibility that  North Slope  gas still could  be a  solution or                                                               
part  of a  solution,  but it  opens  it up  for  AIDEA and  AEA,                                                               
through the IEP  process, to look at the  possibility of sourcing                                                               
the  gas molecules  elsewhere in  the state.  The expectation  is                                                               
that  producers in  Cook Inlet  could come  forward with  private                                                               
partners that could propose a  delivered price that would get the                                                               
needed number of conversions in the Interior.                                                                                   
                                                                                                                                
As the North  Slope language was removed, there  was some concern                                                               
by Interior  delegation members  that that would  just open  up a                                                               
project that  gets developed in  the Cook Inlet that  is targeted                                                               
at  serving   Western  or  Southeast  Alaska.   So,  the  drafter                                                               
recommended using Interior Alaska  as being the "primary market,"                                                               
but  secondary markets  could be  served by  this infrastructure,                                                               
because serving  other needs  would make the  per unit  price for                                                               
everybody go down.                                                                                                              
                                                                                                                                
4:58:58 PM                                                                                                                    
Language on line 5 talks  about a distribution system in Interior                                                               
Alaska,  and  through RCA  action  the  state has  two  certified                                                               
utility gas distribution systems. That is why "s" was added.                                                                    
                                                                                                                                
Sections   6   and  7   clean   up   old  existing   AIDEA   bond                                                               
authorizations; section  6 repeals  an unused  bond authorization                                                               
that was part of airline  maintenance facilities at the Anchorage                                                               
Airport. He  explained that  part of  the bond  authorization was                                                               
not used and  once they get passed a certain  age AIDEA won't use                                                               
them, because  they are "stale,"  but because they remain  on the                                                               
books  as a  possible debt  to  the authority,  bond counsel  has                                                               
advised that  they need to  be taken into consideration  when new                                                               
ratings  are done  for the  entity, and  their suggestion  was to                                                               
clean up  the old authorizations. Section  7 has a number  of old                                                               
authorizations that were never used  but are being proposed to be                                                               
just be taken off the books.  Section 8 is an immediate effective                                                               
date.                                                                                                                           
                                                                                                                                
5:00:38 PM                                                                                                                    
MR. THERRIAULT  explained that it  is standard now that  new bond                                                               
authorizations  for potential  projects have  a five-year  sunset                                                               
date, so this goes away as an issue.                                                                                            
                                                                                                                                
SENATOR STOLTZE  noted the history  of AIDEA's failures  had been                                                               
from  legislative involvement  in micromanagement,  and he  wants                                                               
the  parts of  the  bill  that didn't  come  from the  Industrial                                                               
Authority to be thoroughly vetted.                                                                                              
                                                                                                                                
MR. THERRIAULT  said that language  just allows the  authority to                                                               
consider it;  it doesn't  direct that it  be selected.  So, AEA's                                                               
view is that  would probably have been part of  the due diligence                                                               
in delivering a better smarter way to do it to the Interior.                                                                    
                                                                                                                                
SENATOR COGHILL asked  him to bring a table  of authority repeals                                                               
to the next meeting.                                                                                                            
                                                                                                                                
MR. THERRIAULT said the governor's transmittal letter for the                                                                   
legislation has a list of them.                                                                                                 
                                                                                                                                
CHAIR GIESSEL thanked Mr. Therriault for the explanation and                                                                    
announced she would hold SB 50 in committee.