Legislature(2015 - 2016)BUTROVICH 205
04/10/2015 03:30 PM Senate RESOURCES
Note: the audio ![]()
and video ![]()
recordings are distinct records and are obtained from different sources. As such there may be key differences between the two. The audio recordings are captured by our records offices as the official record of the meeting and will have more accurate timestamps. Use the icons to switch between them.
| Audio | Topic |
|---|---|
| Start | |
| HJR18 | |
| SB101 | |
| SB50 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HJR 18 | TELECONFERENCED | |
| *+ | SB 101 | TELECONFERENCED | |
| += | SB 50 | TELECONFERENCED | |
| + | TELECONFERENCED |
SB 50-AIDEA: BONDS;PROGRAMS;LOANS;LNG PROJECT
4:32:38 PM
CHAIR GIESSEL announced consideration of SB 50. [CSSB 50(NRG)
was before the committee.]
4:32:59 PM
At ease from 4:32 to 4:34 p.m.
4:34:23 PM
FRED PARADY, Deputy Commissioner, Department of Commerce,
Community and Economic Development (DCCED), Anchorage, Alaska,
said he had an abbreviated set of slides to refresh people on SB
50.
NICK SZYMONIAK, Energy Infrastructure Development Officer,
Alaska Industrial Development and Export Authority (AIDEA),
Anchorage, Alaska, introduced himself.
MR. PARADY said the goals of the Interior Energy Project (IEP)
are straightforward, to supply natural gas to the Interior at
the lowest possible cost to as many customers as possible and as
soon as possible.
Investments in the IEP complement the eventual sources of gas
supply from a natural gas pipeline which everyone hopes will
come forward. A key goal, he said, is the lowering of the
particulate matter (PM) 2.5 in the non-attainment areas of the
Interior, a serious health issue that the legislature has
directed to address through previous SB 23.
MR. PARADY said the current status of the IEP is that they
diligently pursued development of a North Slope liquefied
natural gas supply agreement through a concession agreement.
That agreement did not work out. AIDEA and the Alaska Energy
Authority (AEA) are now evaluating infrastructure to develop
natural gas from Cook Inlet and are seeking authority to source
gas from Cook Inlet.
He said AIDEA is financing the build out of the natural gas
distribution systems in Fairbanks and North Pole. It has
allocated a $15 million loan to Fairbanks Natural Gas (FNG) and
a $37.78 million loan to the Interior Gas Utilities (IGU) for
those distribution systems - a total of $52.78 million.
4:38:22 PM
MR. PARADY revisited the reason the North Slope project under
the concession agreement did not proceed was because it did not
pass AIDEA's due diligence process and receive board approval.
That is why they are now looking at sourcing gas from the Cook
Inlet.
CHAIR GIESSEL asked him to explain the chart he was referencing.
4:38:58 PM
MR. PARADY said AIDEA takes its loan portfolio very seriously.
Phase 1 is the project suitability assessment which consists of:
proposal information, sponsor information, estimated cost and a
timeline. The AIDEA process that would follow those project
sponsor submittals answers the following: Is the project
consistent with AIDEA's initiatives? Is it feasible? What is the
proponent's experience and capability? Are they capable of
delivering what they are proposing? And, is AIDEA the right
source for financing?
The output is a suitability report; the decision-making would
come from a project evaluation committee.
Phase 2 has the full-blown feasibility analysis, which is the
business and financing plan, the schedule, its execution and
development plan. The AIDEA process is the asking whether the
building and financing plan is attainable. Is there public
support for it? What is the timing and status of the project?
What are the risks? The output of that piece of due diligence,
which comes from the Investment Committee, is the reimbursement
agreement and term sheet and that goes to the AIDEA board.
Phase 3 asks for the deal's structuring and due diligence, which
is the final execution plans and final financing plans.
Phase 4 is the finalization and closing. The North Slope project
did not reach this finalization and closing phase.
MR. PARADY said the concession agreement for the North Slope
project with MWH, was a long involved process. The equity
partner in that agreement offered $80 million for private
capital through North Leaf, but the details surrounding the
liquefaction plant soared to $280 million, the deliverables
weren't there in terms of timing and so it did not reach phase 4
finalization and closing. The concession agreement was
terminated prior to phase 4.
4:41:23 PM
MR. PARADY provided a quick snap shot of project comparisons. He
said the natural gas supply for Cook Inlet is not certain, but
indications are positive. On the North Slope there was an
abundant supply at low cost and other contracts in place for
some of it, but designing and constructing an LNG plant for
North Slope conditions is expensive. That will be cheaper coming
from the south as that has lower trucking costs and a large
trailer potential. He noted the declaration of emergency on the
Dalton Highway and if the project were connected to an LNG plant
on the North Slope, not one single truck would be moving for a
substantial period of days. If that were to occur in deep winter
conditions in Fairbanks, an ultimate storage facility would be
needed to assure reliable supply.
4:42:43 PM
Trucking is more expensive from the North Slope, but it is
feasible. He said the Dalton Highway risk which is a somewhat
new development and that storage and distribution is essentially
the same in either project.
4:43:32 PM
MR. SZYMONIAK took over the presentation. He noted that the
supply of natural gas is not certain and being explored through
a competitive commercial process. He exhibited a slide that
indicated an 80 bcf of Interior gas demand for 10 years. That
compares with about 1 tcf of existing natural gas reserves not
including undiscovered fields or recently discovered fields like
Kitchen Lights or Cosmo, which are anticipated to have
significant, producible commercial volumes of natural gas. A
scale of the last 10 years of LNG exports out of the
ConocoPhillips LNG plant indicated exports approaching 400 bcf
in the last 10 years, which is vastly greater than what is
expected to go to Interior Alaska over the next 10 years. If the
Agrium Plant were restarted, it would mean about 30 bcf/year. At
full build out the Interior demand is expected to be about 9.5
bcf. This includes both natural gas utilities as well as Golden
Valley Electric Association (GVEA) - and it would take a number
of years to complete very ambitious customer conversions to
natural gas.
4:45:14 PM
SENATOR COGHILL said he couldn't anticipate this project going
forward more, but there was the question of gas supply a couple
of years ago and asked why this gas concept is different now.
MR. SZYMONIAK explained that AIDEA is a market driven authority;
they respond to the market and support the private sector. One
of the big indications that Cook Inlet may be a viable source
was that the private sector - Hilcorp and Westpac - started
proposing solutions to bring natural gas for LNG from there into
the Interior market. In addition, Cook Inlet gas discoveries
that were in large part due to the tax incentives as well as the
two jack up rigs, one of which AIDEA participated in the
financing of, are significant. So they have been in preliminary
discussions with producers and Cook Inlet utilities to get a
sense of where the market is heading. There is reason to be
optimistic that gas could be available. Before they commit to
Cook Inlet that will all be vetted through a commercial
solicitation to determine what gas is available and if it's
available at a level of security that is adequate for Interior
utilities.
MR. PARADY offered that the gas supply team - DCCED, AIDEA, AEA,
and DNR - is developing the best information to understand the
Cook Inlet gas situation. The question they have been asked is
how they can be confident with the gas supply today in relation
to the brown-outs people worried about three years ago and the
answer is a function of Cook Inlet Natural Gas Storage Alaska
(CINGSA) that has improved gas storage, a function of incentives
that have been operating in Cook Inlet. It is also a function of
the success of independent operators that have come into play
beginning with Hilcorp, which acquired Marathon and Chevron
assets. There have been 75 new oil and gas exploration and
development wells drilled since 2009; 36 have been completed as
gas wells, an average of 7.2 new wells a year. The Kenai Loop
gas field was discovered in June 2011 with sustained production
beginning in January 2012. Gas reserve additions have come from
production enhancements, compression additions, new completions
of high probability pay intervals, and new completions of
potential pay intervals. And then the DNR analysis to this point
has excluded the Kitchen Lights and Cosmopolitan gas
discoveries, both of which are in development but are not yet
producing.
So, one of the questions to be ascertained in the gas supply
agreement will be essentially the deliverability of gas to the
pipe for the Fairbanks demand and sustainability of the gas
reserves. Mr. Parady said the major utility operator in the
Anchorage area, Enstar, has gas supply under contract through
2018 and is looking to place contracts for their forward demand.
Gas supply will be put under contract for Fairbanks through the
utilities - FNG, IGU, and GVEA - for a 5-10 year period. It is
worth contemplating that this project is viewed as a bridge to a
future gas line, but as the uncertainties are weighed, decisions
will have to be made about the longevity of terms they seek from
the market in placing the contracts. Those will be private
sector decisions rather than AIDEA decisions.
SENATOR COGHILL said IGU is not private sector.
MR. PARADY clarified that a better way to say that is that they
are non-AIDEA.
4:51:04 PM
MR. SZYMONIAK said slides 7 & 8 show the project plan for the
North Slope that has been pursued for the last two years and the
one after showed the Cook Inlet alternative. He next reviewed
the value chain to describe AIDEA's approach to allowing the
private parties to put together the financing.
For the North Slope LNG project, two of the Interior utilities
came to the project with executed natural gas supply contracts
in hand. AIDEA anticipated using one of those contracts through
project development. For LNG production, AIDEA's plan was to
partner with the private developer. They went through a
competitive process and selected MWH and then spent a
significant period of time advancing the project with it.
Legally, that resulted in a concession agreement on which AIDEA
would own the LNG plant and MWH's private investor they brought
to the project would finance, operate and construct the LNG
plant. MWH would lead the process under the concession
agreement; they were responsible for getting the construction
contract, the operating contract, and signing the offtake
agreements with the utilities. Once the concession agreement was
signed, AIDEA took the backseat and hoped to assist and
facilitate. Ultimately the costs came in too high for this
project and the contracts with the utilities were not signed and
it did not make it through AIDEA's due diligence process.
4:52:43 PM
AIDEA explored the trucking component and discussed owning some
trailers with the utilities, but at no point did AIDEA have any
interest in operating the trucking operation. They expected that
component to be resolved through a competitive private market.
The three Interior Utilities - Fairbanks Natural Gas, Interior
Gas Utility and Golden Valley Electric - cooperated on LNG
storage and regasification and worked together to plan the
entire value chain.
4:53:37 PM
MR. SZYMONIAK said the Cook Inlet LNG alternative is visually
much the same project with the big difference being that the
Cook Inlet alternative has a gas supply in hand. AIDEA will
evaluate the proposed projects and determine which ones are the
most promising, move through the competitive process into
negotiation and then determine which one is the best partner to
finance.
The utilities will be engaged the entire way through, he said.
While AIDEA is working with DCCED to explore and secure gas
supply and go through the RFP process for liquefaction, it is
known that all the way through that it's not going to be AIDEA
that owns or even signs the contracts with the private
developers. It will be the utilities. AIDEA is playing a
facilitating role to aggregate and rationalize the demand from
the three Interior utilities and come up with one commercial
approach as opposed to forcing the private developers to try to
negotiate three individual gas supply and LNG capacity
agreements with three different utilities.
4:55:25 PM
MR. SZYMONIAK moved to the transportation pieces saying the
options were trucking or railroad and at this point their plan
is to use trucks. Just like the North Slope, they expect the
trucking cost to be much lower than off the North Slope, but
they are working with the Railroad to determine if rail is a
cost effective alternative. He noted that SB 50 includes
provision for AIDEA to finance a small diameter pipeline. If
that is the case it will replace the LNG production as well as
the transportation. The mechanism for that to happen would be
through this competitive RFP process that is exclusively open to
pipeline developers. If a developer can demonstrate that it is
the preferred means to transport natural gas to Fairbanks, AIDEA
will work with them and try to come to a financing agreement
where the private developer builds and operates the pipeline
with some AIDEA financing to achieve the goals of the IEP. The
limit of that pipeline is 12 inches or less.
SENATOR MICCICHE said it not only cuts out the LNG production
and transportation, but it also cuts out the storage and re-gas
facilities unless there was a supplemental system with the
existing liquefaction capacity.
MR. SZYMONIAK said that was correct.
CHAIR GIESSEL said AIDEA and DCCED are state government and were
also working together in competitive solicitation for contracts
and she was uncomfortable with government stepping in to
contract negotiations that should be done by the utilities.
MR. PARADY said that AIDEA's role is to facilitate that ongoing
process with the utilities. Looking at the history of energy
supply issues in the Interior, it is arguable that the private
market has not succeeded in supplying what amounts to relatively
small levels of demand. One of AIDEA's successes to this point
with this project is the Pentax acquisition, which is under due
diligence review now, where there is an opportunity to combine
the two utilities - FNG and IGU - and not have two separate
entities operating, not have two separate administrative
structures, two different metering systems, and two different
warehouse systems. The market, itself, is small and combining
the two entities is a success.
CHAIR GIESSEL noted that the state gives credits and incentives
to develop the gas supply in Cook Inlet and now it is stepping
in and negotiating contracts with those same folks. It doesn't
sound too free "market-ish."
MR. PARADY responded that, however it sounds to her, that AIDEA
is applying its analytical skills and its investment tools to
support the market. It is not trying to bypass the private
sector; it is trying to find a way to help the system
rationalize itself.
4:59:28 PM
SENATOR STOLTZE said he was wrapped around the HB 132 argument
and asked how a competing gas line fits in.
CHAIR GIESSEL said time has run out and others still want to
testify so she would continue the discussion of SB 50 at a later
time.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HJR18 Ver. H.PDF |
SRES 4/10/2015 3:30:00 PM |
HJR 18 |
| HJR18 Ver. E.PDF |
SRES 4/10/2015 3:30:00 PM |
HJR 18 |
| HJR18 Explaination of Changes.pdf |
SRES 4/10/2015 3:30:00 PM |
HJR 18 |
| HJR18 Sponsor Statement.pdf |
SRES 4/10/2015 3:30:00 PM |
HJR 18 |
| HJR18 Fiscal Note.PDF |
SRES 4/10/2015 3:30:00 PM |
HJR 18 |
| HJR18 Supporting Documents -NPCA National Monuments List.pdf |
SRES 4/10/2015 3:30:00 PM |
HJR 18 |
| HJR18 Supporting Documents-ADN Article.pdf |
SRES 4/10/2015 3:30:00 PM |
HJR 18 |
| HJR18 Supporting Documents-Deseret News Editorial.pdf |
SRES 4/10/2015 3:30:00 PM |
HJR 18 |
| HJR18 Supporting Documents-KUCB News Article.pdf |
SRES 4/10/2015 3:30:00 PM |
HJR 18 |
| HJR18 Supporting Documents-Legislation and Policy Article.pdf |
SRES 4/10/2015 3:30:00 PM |
HJR 18 |
| HJR18 Supporting Documents-NPS Antiquities Act 1906.pdf |
SRES 4/10/2015 3:30:00 PM |
HJR 18 |
| HJR18 Supporting Documents-S. 437.pdf |
SRES 4/10/2015 3:30:00 PM |
HJR 18 |
| HJR18 Supporting Documents-S.437 News Release.pdf |
SRES 4/10/2015 3:30:00 PM |
HJR 18 |
| SB 101.pdf |
SRES 4/10/2015 3:30:00 PM |
SB 101 |
| SB 101 Transmittal Letter.pdf |
SRES 4/10/2015 3:30:00 PM |
SB 101 |
| SB 101 Fiscal Note.pdf |
SRES 4/10/2015 3:30:00 PM |
SB 101 |
| SB 101 Briefing Paper.pdf |
SRES 4/10/2015 3:30:00 PM |
SB 101 |
| SB50 Transmittal Letter.pdf |
SRES 4/10/2015 3:30:00 PM STRA 3/10/2015 3:30:00 PM |
SB 50 |
| SB50 Fact Sheet.pdf |
SRES 4/10/2015 3:30:00 PM STRA 3/10/2015 3:30:00 PM |
SB 50 |
| SB50 Fiscal Note-DCCED-AIDEA-Zero-2-11-15.pdf |
SRES 4/10/2015 3:30:00 PM STRA 3/10/2015 3:30:00 PM |
SB 50 |
| SB50 Sectional Analysis.pdf |
SRES 4/10/2015 3:30:00 PM STRA 3/10/2015 3:30:00 PM |
SB 50 |
| FBX North Star Borough R2015-08.pdf |
SNRG 3/10/2015 3:30:00 PM SRES 4/10/2015 3:30:00 PM |
SB 50 |
| Fairbanks Chamber Letter of Support for HB 105 & SB 50.pdf |
SNRG 3/10/2015 3:30:00 PM SRES 4/10/2015 3:30:00 PM |
HB 105 SB 50 |
| SB50 ver A.pdf |
SNRG 3/10/2015 3:30:00 PM SRES 4/10/2015 3:30:00 PM |
SB 50 |
| SB50 Fact Sheet.pdf |
SNRG 3/10/2015 3:30:00 PM SRES 4/10/2015 3:30:00 PM |
SB 50 |
| SB 50 CS NRG version W dated 3-26-15.PDF |
SNRG 3/26/2015 3:30:00 PM SRES 4/10/2015 3:30:00 PM |
SB 50 |
| SB50 Summary of Changes ver A to ver W.pdf |
SRES 3/30/2015 3:30:00 PM SRES 4/3/2015 3:30:00 PM SRES 4/10/2015 3:30:00 PM |
SB 50 |
| SB50 Supporting Documents-Furie LLC letter 3-2015.pdf |
SRES 3/30/2015 3:30:00 PM SRES 4/3/2015 3:30:00 PM SRES 4/10/2015 3:30:00 PM |
SB 50 |
| SB 50 Letter of Support Merrick Peirce.pdf |
SRES 3/30/2015 3:30:00 PM SRES 4/3/2015 3:30:00 PM SRES 4/10/2015 3:30:00 PM |
SB 50 |
| SB50-AIDEA PowerPoint.pdf |
SRES 4/10/2015 3:30:00 PM |
SB 50 |
| CSHJR18 Explanation of Changes Version E to N.pdf |
SRES 4/10/2015 3:30:00 PM |
|
| SB 50 - Coghill Amendment 29-GS1019 W.2.pdf |
SRES 4/10/2015 3:30:00 PM |
SB 50 |
| CSHJR18-Version N.pdf |
SRES 4/10/2015 3:30:00 PM |
HJR 18 |