Legislature(2007 - 2008)SENATE FINANCE 532
03/21/2007 03:30 PM Senate RESOURCES
| Audio | Topic |
|---|---|
| Start | |
| SB104 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 104 | TELECONFERENCED | |
SB 104-NATURAL GAS PIPELINE PROJECT
CHAIR HUGGINS announced the consideration of SB 104,
establishing the Alaska Gasline Inducement Act (AGIA).
3:36:37 PM
KEVIN TABLER, Land Manager and Government Affairs, Chevron, said
SB 104 will require a lot of discussion and corporate approval,
so Chevron's comments are preliminary.
VINCE LEMIEUX, Manager, New Ventures Alaska, Chevron, said
Chevron has been working, exploring, and producing in Alaska
continuously for over 50 years. He said last year Unocal was at
the heart of Cook Inlet and "very much a participant in driving
the industry in the inlet, and Chevron purchased Unocal."
Without that purchase both companies might not be in Alaska. It
is one of the few companies that both produces and actively
explores in the state. Chevron is the third largest operator and
the fourth largest producer in Alaska.
3:41:32 PM
MR. LEMIEUX said over 300,000 acres were acquired by Chevron
last year for exploration on the North Slope, so there is "a
real commitment in terms of looking at…how to grow Alaska within
the Chevron system." It is building a new rig to conduct a two-
year exploration in the inlet. The rig will drill two or three
wells, and then in October it will be placed on the North Slope.
"That commitment doesn't really come to a company like Chevron,
lightly." Cook Inlet is impacted by this change in ownership, he
stated. Chevron will have at least two or three rigs running in
the inlet developing oil over the next few years. One thing that
Chevron has not gotten credit for is its underlying commitment
to resources in Alaska. It spends a lot of money, and that is a
change in the last year, "to the degree that they changed the
name of the business unit, which used to be Mid-Continent
Business Unit for Chevron, and now it's Mid-continent/Alaska."
The change of a name is very significant in how people within
the company identify with the opportunities that are there, he
stated. Chevron has a large presence and commitment in Alaska.
3:45:13 PM
CHAIR HUGGINS asked Chevron's expenditures in Alaska.
MR. LEMIEUX said the expected capital budget for 2007 is about
$170 million, which is split evenly between oil and gas.
Regarding AGIA, "This pipeline is a unique undertaking. There
aren't any other pipelines like this in the world." It is unique
from construction and resource-to-market perspectives. There are
not many places in the world that are trying to move "this
amount of product, multi-nation-type pipeline, and it really
creates a lot of complexity…that we are concerned about." Big
projects require the alignment of objectives and economics of
all the parties. Managing misalignments through contracts are
just "Band-Aids to a fundamental practically, which is alignment
of parties that are participating in a project-becomes an
important success criteria for long-term projects." He said
alignment means: who is taking risk and how that risk is
mitigated. If one party takes more risk than others, that is
misalignment, he said. The financial incentives are critical and
how they are divided is absolutely critical. The stake holders
must share in the benefits, he stated.
3:49:48 PM
MR. LEMIEUX said a phase gate system is required for managing a
large, complex project. First, the framework must be understood
and how elements are put together and how they are aligned. Then
the alternatives must be evaluated and the planning must be
detailed. He said it is dangerous to get ahead of yourselves in
large projects.
3:51:51 PM
MR. LEMIEUX said Chevron views this project in the first phase
of development. So it is assessing the proposal. The project
definition is important. It is not a new topic. There is a very
large range of variability in how to view the pipeline including
big swings in proposals and that is a challenge for Chevron. He
asked what the key elements are and where the truth is and added
that there is uncertainty around the economics including the
material costs of the line and competition of industry
resources. It amazes him that there isn't more discussion about
the cost of the pipeline. "No matter how you put together the
economics, if you really don't understand the building blocks at
the top, it's hard to access how the economics are going to be
run." The pipeline is an amazing undertaking and will push
technology, he opined. There has never been a pipeline like this
regarding the pressures, volumes, environment, and distance, he
stated. He said the pipeline is big enough "to create its own
weather; in and of itself it will drive behaviors within the
world markets," including the steel and labor markets.
3:57:13 PM
MR. LEMIEUX spoke of industry capability and said that "when you
have a project that is this big…I'm starting to worry about if
I'm successful in exploration, I better get my facilities in
before the pipeline comes along, because when the pipeline comes
along, and that's the focus, other projects aren't going to get
done." He said there isn't enough capacity in the world to do
everything, and the project will soak up the resources. He said
he is amazed that there isn't a more vibrant discussion about
the real cost of the pipeline. He worries about that. The fiscal
certainty is a hot button, and if the tax rate is going to
change, that adds a lot of risk. It is an important area. "If
you're making a 20 or 30-year commitment-firm transportation
commitment-you're going to pay that bill no matter whether the
gas gets shipped or not." He said 10 years doesn't seem like a
lot in the context of this project.
4:00:08 PM
MR. LEMIEUX said the tariff structure means how the rent is
going to be shared up and down the value chain. "We're going to
take all these uncertainties around cost and schedule and
design, and those are all going to be wrapped up into the tariff
structure, and even that tariff structure can change over time."
The structure can also change, he said. So how the values are
shared between shippers, producers, and the state has huge
uncertainty. It will make it difficult to make a commitment.
MR. LEMIEUX said access to explorers is one of the elements that
can be misaligned. Chevron has been asked how it is going to
participate with gas on the North Slope, and he wonders what
that gas actually is. "With the uncertainty around Pt. Thompson,
it's not clear that Chevron has a big stake in this discussion.
We certainly want one." Pt. Thompson is important to Chevron,
but there is a lot of uncertainty with how explorers get access
to the pipeline. He said he wants to be an explorer and he wants
to participate in the initial open season. Chevron is exploring
the implication of a 15 percent potential rise in tariff over
the course of the pipeline. "Now we have AGIA, now how does it
fit into all of these elements within the overall project?"
4:03:21 PM
SENATOR STEDMAN noted Mr. Lemieux's chart of the keys to success
that deals with a five-phase gate path. There has been a lot of
discussion about certainty. "We actually have some form of a
tighter structure than we have had in the past in other
proposals. How tight do you feel the state can make those
particular dates of those gates?"
MR. LEMIEUX suggested against being too prescriptive on schedule
to the detriment of planning or allowing the pipeline builder to
manage contracts and relationships. If the teams feel that the
only goal is to meet a deadline, risk is increased. This project
is pushing the envelope on new technology and techniques, so it
would be more important to align the participants instead of
focusing on a schedule, he said.
MR. HOUSTON said the five steps should run in series, and
decisions should be one step at a time. He doesn't suggest
committing to anything beyond one step. On a mega project,
outcomes are either as expected or disastrous, he said. All the
stakeholders need to be comfortable from one step to the next.
4:08:45 PM
SENATOR STEDMAN asked how the phases move forward and who makes
those decisions--the foreman or the board of directors.
MR. LEMIEUX said the standard approach is to create a decision
review board with expertise that is objective and not
necessarily involved in the project. It also includes key
stakeholders who will own the project. It is typically senior
management determining if the team is doing a good job. He said
his legacy is Unocal, and it was bought by Chevron. He asked
what was going wrong that it got purchased by Chevron, and he
concluded Unocal was not good at project management with the
large projects on the horizon, and senior management decided
that the projects would have more value in a company that could
execute the projects more effectively.
4:11:52 PM
MR. LEMIEUX said it is a real eye-opener to see the rigor of
another company. The phase-gate decision must be made by the
right people who have a vested interest in the outcome and who
have some objectivity, he emphasized. It is absolutely not done
at the working team level, he stated.
4:12:30 PM
SENATOR WAGONER asked what new technology, other than higher
compression, he was referring too.
TIM HOUSTON, Commercial Management, Alaska Chevron, said the
proposed operating pressures are higher and diameters are larger
than exists anywhere else. More steel or higher strength steel
is needed, so it is new technology because it hasn't yet been
applied, he said.
SENATOR WAGONER said that technology is not known yet because
that project may not [indisc.]. That was last year when that was
being discussed, and whoever brings up a proposal may come up
with something different. There are a lot of [indisc.] inch
lines. "I'm just trying to find out, other than those two
variables, what would be the other technologies."
4:14:20 PM
MR. HOUSTON said if it were a 48-inch line at 1,500 pounds, it
runs into a more expensive project and it might not fit some of
the other parameters. "It's all a matter of trying to pick the
right decisions from a number of different combinations to come
up with an overall fit."
REPRESENTATIVE SAMUELS asked about the review board process and
if the same process is followed if Chevron is just bidding gas
into somebody else's pipeline.
4:15:10 PM
MR. LEMIEUX said each company has its own culture, and within
Chevron that way of thinking permeates all elements of the
business. It is a standard process for any decision, he said.
REPRESENTATIVE SAMUELS said between an open season and Federal
Energy Regulatory Commission (FERC) certification, if the open
season doesn't have enough gas to get the financing to build a
line, "and we continue down the road to the certification
anyway, what work is being done along those lines?" How much
detail is required to get certified by FERC, he asked, and how
much work needs to get done after an open season that did not
have enough gas bid into it?
MR. HOUSTON said regulatory approval requires sufficient market
support and enough of a finding to be able to view that it would
be used and useful and in the public interest. So if only 60 or
70 percent is there, but the rest is expected, and the project
proponent is willing to go through the permit process, it can do
so and not build until the numbers are there.
4:17:56 PM
REPRESENTATIVE SAMUELS said, "You assume that Congress said that
there is a need, and you did not need FTs [firm transportation
commitments] to go through. And you have an open season that
fails, how much can you design a project without talking to your
customers about their needs? If I know I am going to ship 4
[bcf] of gas, and the first open season fails, but I know that I
need to ship 4 [bcf] of gas, can I design a pipeline that would
ship 4 [bcf] of gas without being a huge problem to my customers
at the other end if I did not include them in the design work,
if Congress has assumed that the need for the pipeline exists?"
MR. HOUSTON said the pipeline has to meet the needs of its
customers, and there are many terms and conditions that go along
with the service that's being provided. The provisions in the
contract and the mechanisms are best worked out by discussion
and through alignment of the stakeholders rather than being
dictated by one of the parties at the table, he stated. It is
important to try to understand the customer's needs rather than
reduce the risk of the pipeline at the expense of the customers.
4:19:19 PM
SENATOR WIELECHOWSKI asked what Chevron thinks of the bill.
MR. LEMIEUX said it is a great step forward to engage people in
the discussion and how to frame the project. He wants more
information. The bill can't change the fundamental economics,
and that is important. "Do I understand what the project is and
how it's going to make money for the participants all the way up
and down the line?" He said the bill brings forward inducements,
but he asked if it goes far enough. He said everyone ought to be
happy to be on that path.
CHAIR HUGGINS asked for an explanation of Chevron's presentation
connecting fiscal certainty with waiting for expansion.
4:21:45 PM
MR. LEMIEUX said the project's timeframe makes fiscal certainty
an important element. The greater the fiscal certainty, the more
alignment there will be with the participants. He noted that
fiscal certainty doesn't mean lower taxes, only predictable
ones. Ten years is a start, but it is not long enough.
CHAIR HUGGINS said some people have said that open season is a
major risk point in a project of this magnitude. He asked if
that is true, and what other risks are in AGIA.
4:24:29 PM
MR. HOUSTON said, "If you've met with the customers ahead of
time, if you've designed a package--terms and conditions--that
is responsive to the needs of the customers, and you've properly
gauged the market as far as how much demand there will be so
that your rough design, cost estimate, and schedule are all
realistic for that. And then you hold the open season and it
fails--that would not be good." It would mean the market was
overestimated or there was some other misalignment. If the open
season succeeds, it validates that all assessments were right.
CHAIR HUGGINS said multiple parties have to make decisions and
there's a risk about decisions not going the way you want them.
He asked what other places have risk in the AGIA process.
MR. HOUSTON said fiscal certainty. Risk for the customer is
different from the pipeline risk. The cost of the pipeline is
the biggest risk for the customer, he said. There is a wide
range of pipeline costs that people have discussed, and it is
quite scary. The amount of gas moving through the pipeline is
another question. Spreading the costs over just 35 tcf will cost
twice what 70 tcf will cost over the life of the pipeline. If
the pipeline will recover the full costs from the first 35 tcf,
it translates into more risk "for me as a customer."
4:27:43 PM
MR. HOUSTON said the schedule is another risk. The date when the
pipeline is ready is important. Chevron has to spend money to
get the gas ready to move because it will have to start paying
for that capacity on a certain date, he explained. The risk is
in pre-investing. All parameters have a risk component that
falls to the customers, depending on the alignment.
CHAIR HUGGINS asked if Chevron were an applicant, could it
predict the tariff.
MR. HOUSTON surmised that over 90 percent of projects have
higher rates when they go into service than what the customers
were told to expect during the open seasons.
MR. LEMIEUX said one real risk is around the ability of Alaska
to become aligned. It is one aspect of AGIA that needs to be
addressed. He worries about the alignment of the pipeline,
producer, and Alaska. He asked how the teamwork will be managed
over the next few years so the open season won't be a surprise.
4:31:54 PM
SENATOR STEDMAN said last summer the oil tax was restructured
with a 20 percent investment tax credit to stimulate exploration
and expansion in the North Slope basin. And he asked if that is
motivating Chevron to explore.
MR. LEMIEUX said he doesn't perceive that the PPT structure is
changing Chevron's investment strategy in Alaska. About Cook
Inlet, he said, "The recognition that there are opportunities to
redevelop the oil and given the macro-economics of oil today,
that that made a lot of sense…It is turning out to have a large
implication to how we view individual decisions. Obviously the
individual decisions then roll up into the large strategic
positions that the company takes. So I know it's embedded in
there, but it is not quite as explicit as perhaps you might have
characterized it in you question." He was not sure that the tax
credit was driving behavior or activity.
4:34:26 PM
SENATOR STEDMAN said if you don't need it, we will be glad to
take it back.
4:35:45 PM
REPRESENTATIVE SAMUELS asked what Chevron thinks about the
rolled-in tariffs of 15 percent over the original rate.
MR. HOUSTON replied that different parts of Chevron have
different views on how appropriate rolled-in tariffs are
compared to incremental. He said the 15 percent is set up as a
cap to limit rolled-in rates, so he is not quite sure how
incremental rates would work once that cap is reached. If the
stakeholders have allocated the risks and there are other
benefits to offset the risks, it makes sense. If it is layered
on top of an existing arrangement, it may not fit. It has to be
approached from an overall alignment perspective, he stated.
REPRESENTATIVE SAMUELS asked about other places that Chevron
does business. Canada rolls in its tariffs, so what would be the
difference if Alaska did it.
MR. HOUSTON replied that it depends on the allocation of all the
other risks and if it meets all the other stakeholders' needs.
He said Chevron Canada loves rolled-in rates.
4:38:44 PM
MR. LEMIEUX said AGIA provides a nice step to get an active
conversation going on how to move the project forward. It
doesn't change the economic fundamentals, and it is important to
know the economic drivers. Some of the areas that will create
alignment are covered through AGIA, and other areas need work.
Chevron is still assessing the inducements on the economics of
the project. It hasn't had the time to do the work on the
economics, he concluded.
4:41:15 PM
CHAIR HUGGINS thanked the witnesses for being candid and
forthright. The cost, parameters, and timelines are important
and need to be thought through.
The committee took an at-ease from 4:42:17 PM to 4:46:15 PM.
DAVID KEANE, Vice President, Policy and Corporate Affairs, BG
North America, said Alaska presents a lot of opportunity for BG.
He said BG is an integrated gas major, and its primary interest
is to find natural gas and monetize it. BG has a long history in
natural gas and was once the monopoly provider in Great Britain.
It now explores and produces all over the world. It also has
income from liquefied natural gas (LNG) and is one of the
largest transmitters and distributors of natural gas in Brazil,
India, and Buenos Aires. BG's market cap is about $45 billion
U.S. dollars. As an integrated gas major, BG's strategy is to
secure resources, which is why it is in Alaska. North America
and Europe is its market focus. It is building markets in Brazil
and Bolivia, and Bolivia is a tough place to do business, "so we
are happy to be in Alaska."
4:50:14 PM
MR. KEANE said BG is the largest supplier of LNG to the United
States; it supplied nearly 50 percent in 2006. The global gas
trade is important to Alaska. Up until just recently there were
just three regions for supplying natural gas around the world
and they didn't intermix. Producers in North America didn't send
to another continent. Australian gas stayed in the Far East. But
today the market has evolved considerably. "You have…the
beginnings of a global gas trade, and BG is really in the
vanguard of that global gas trade," he stated, "and Alaska does
have a window of opportunity in order to secure some of the
demand in the Lower 48."
4:52:27 PM
MR. KEANE said BG is heavily involved in Trinidad, Tobago, and
Egypt. He emphasized that BG is "a project company and a heavily
engineering company." He said Atlantic LNG is one of the largest
providers of LNG to the world, and 73 percent of all the LNG
coming into the U.S. comes from Trinidad and Tobago. The company
took lessons learned there and applied them to projects in
Egypt, "and we brought Egyptian LNG train-one on stream a good
six months before it was scheduled and it was under budget." BG
has 100 percent of the entry capacity at the Lake Charles LNG
import terminal, and that was the impetus to move "our center of
excellence for our LNG business from the UK to Houston, where
today we also manage all of our shipping businesses." After
acquiring that capacity, the base-load send-out went from 630
mcf per day to 1.8 bcf per day, primarily because of the
projects that BG has sponsored with its partner. He spoke of the
Elba Island import terminal and gas supplies to northern
Florida. It will be the first time that northeastern Florida
will have gas from somewhere other than the Gulf of Mexico. "As
we found out during Hurricanes Katrina and Rita, it was
absolutely critical because of our ability to divert some of our
cargos that were destined for Lake Charles to Elba Island."
4:55:13 PM
MR. KEANE showed a slide of the U.S. LNG imports, and said BG
has been its largest supplier in the last four years. That might
change in a few years with all the big projects coming on stream
from the Gulf of Mexico. BG's pipelines include five ships that
it owns. He said BG is partnering with Anadarko and PetroCanada
in the foothills of the North Slope. There are 2.1 million
acres, and exploration is expected to begin next year. The
partners are building a rig to move there to do the drilling,
where there are good prospects for finding gas. "It is a new
frontier for BG." It hopes to be able to participate in the
pipeline. "We are a leading player in the natural gas chain
throughout the world. We support the pipeline contract, and as
my colleagues from Chevron said, I think that we have to insure,
as a new explorer, that we have access to pipeline capacity."
That is critical when looking at North Slope investments, he
stated. He said there are real opportunities.
4:58:40 PM
MR. KEANE said he is an optimist and nothing has changed in the
supply picture since last year, and "if everybody was going to
show up last year, why wouldn't they show up this year?" He
believes Alaska will get to an open season and there will be
participants to sign up for capacity. He said BG supports AGIA
as the vehicle to start the ball rolling.
SENATOR WIELECHOWSKI referred to the prior testifiers and asked
if AGIA gets the players in alignment or if changes need to be
made.
MR. KEANE agreed that alignment is important. "You have the
water trough and it is full, and I'm not sure what you can do to
lead all horses to water." He thinks AGIA is a good opportunity
and "once we see what the applicants provide, and BG is not
going to be an applicant, I think there are opportunities for
everybody to sit down and discuss what the real issues or
concerns are." It is a good way to begin discussions, he said.
5:01:02 PM
REPRESENTATIVE SAMUELS noted that BG owns pipelines around the
world. "Would you be willing to put your $500 million up?"
MR. KEANE said he can't answer that question. BG will not be an
applicant, but he believes AGIA is an inducement to get the
serious pipeline companies involved and an opportunity to
demonstrate that Alaska is serious about bringing this project
forward. When independent pipeline companies come in, this mega-
project will require a tremendous effort on a number of fronts.
An independent pipeline company will need to spend $1 billion to
get the $500 million, he surmised. There is a lot of regulatory,
permitting, and environmental work "that will have to go into
developing what we're all going to be sitting down and talking
about at the end of the day, which are the tariffs and what the
project will look like." It is a good inducement.
REPRESENTATIVE SAMUELS said, "But you're not going to come and
play."
5:02:44 PM
MR. KEANE said BG will sign up for capacity once it finds out it
has gas supply.
SENATOR STEDMAN said $500 million shows a commitment by the
state. He asked if there are other ways of showing commitment.
5:03:25 PM
MR. KEANE said the bill is a show of commitment, including the
speed with which it came to the legislature. The governor's
staff talking to the players is also a show of commitment.
SENATOR STEDMAN noted that BG does projects all over the world,
including Kazakhstan and Bolivia. Many feel that Alaska is very
stable, and there have been comments that don't quite line up
with that. He asked Mr. Keane's opinion of Alaska's fiscal
stability.
MR. KEANE said Alaska has a lot to offer in terms of fiscal
stability. "That doesn't mean that I wouldn't want to see some
fiscal certainty in bringing gas to the surface and getting gas
to markets." He believes Alaska offers a great deal of political
and fiscal certainty for new explorers.
5:05:09 PM
CHAIR HUGGINS noted that BG was drilling for oil and looking for
gas in Alaska. He surmised that BG would like a successful
pipeline, an expansion to accommodate the gas BG discovers, and
a low tariff. Mr. Keane said he agreed. Chair Huggins asked, "As
a company with an international presence, what can you do to
help us out on the front end of this process to get that
pipeline that you can put your gas in at that low rate?"
MR. KEANE said BG is very interested in participating in the
discussions. Once the applicant is chosen, BG wants to have
numerous opportunities to interact with the state and federal
authorities in terms of pipeline design and rate structure. AGIA
is a good vehicle for beginning that process. He doesn't know
what the economics will look like, but he would like low tariffs
in order to get the gas to market in a competitive manner. It
will require tremendous effort by all participants, he said.
5:07:41 PM
CHAIR HUGGINS said he assumes that his company has made an
estimate of the costs of this project.
MR. KEANE said it will cost a lot.
SENATOR WAGONER said BG is encouraging the state to enter into
discussion with independent pipeline companies. He asked about
working with the producers instead.
5:08:32 PM
MR. KEANE said BG prefers an independent pipeline company to
develop and manage the pipeline. As a new explorer, it gives BG
a great deal of comfort for getting access to the pipe once BG
finds gas. He has heard concerns that an independent pipeline
company won't be monitoring the costs, "but we're a producer as
well and we will be a shipper on the pipeline, and we will not
allow a pipeline company to gold plate a system." He believes
FERC will do a good job determining what will be allowed in the
rate base. Everyone will be able to provide comments to FERC, he
explained.
5:10:09 PM
SENATOR WIELECHOWSKI asked the difference between having an
independently-owned pipeline or a producer-owned pipeline.
MR. KEANE said the big difference is that the independent will
increase revenue by increasing throughput and will want to see
companies like BG get capacity on the pipeline and ship it to
market. It may not be an advantage to a producer to give others
access to the pipeline. BG would rather have an owner with an
incentive to increase throughput rather than an owner whose
incentive for increasing revenues would be by decreasing it.
SENATOR STEDMAN said FERC testified that it didn't matter who
owned the pipe as far as "how they're going to rank folks that
are going to have access to it." He asked Mr. Keane if he is
saying that the rate base will be structured and managed
different from FERC standards.
MR. KEANE said it will be regulated and the rates set by the
FERC, so it won't, now, be managed any differently. "In terms of
whether it should be a producer or not goes back to really our
concerns that we had with the contract from last year."
SENATOR STEDMAN asked who owns the other large pipelines around
the world. Is it common for major producers to be involved in
the construction of a pipeline and then divest themselves of it?
5:12:59 PM
MR. KEANE said it varies. In the U.S. it is predominantly
independent pipeline companies transporting natural gas. In the
early 1980s, FERC forced those companies to allow open access
and mandated access to available capacity for companies that had
their own gas supply. In the 1990s, Order 636 forced the
pipelines to unbundle. There is a long history of having
independent third-party pipelines that do a very good job of
developing, managing and operating pipelines. In other parts of
the world, it depends. Some pipelines are government operated.
The producers will get involved in building pipelines when and
where it is necessary to get the product to market.
SENATOR STEDMAN asked if Mr. Keane has the impression that FERC
is not interested in the Arctic basin opening up.
5:14:47 PM
MR. KEANE said FERC is absolutely committed to Alaska gas coming
into the lower 48. He said he is not sure what the basin is.
SENATOR STEDMAN asked if FERC is interested in having more
exploration and development of the Arctic area.
MR. KEANE said he didn't know. "I do know that they are
extremely interested in and focused on the Alaska gas pipeline
getting built and supplying natural gas to the Lower 48.
CHAIR HUGGINS said his interpretation is that AGIA makes it
irrelevant in the evaluation process because it will be based on
the capitalistic approach in who brings the best plan. "So what
the person or persons bring forward would be irrelevant." One of
the beauties of AGIA is guaranteed access for BG; is that true?
5:16:26 PM
MR. KEANE said yes; it guarantees that whoever submits the
application will have to provide access to the new explorers.
CHAIR HUGGINS asked if AGIA provides enough access to ship BG
gas in the future or if it could use modifications.
MR. KEANE said it does provide sufficient access. AGIA is the
mechanism to encourage applicants to submit an application to
build the pipeline, and once the applications come in everyone
will have a better feel for it. He is much more comfortable
today than he was 12 months ago on getting access to pipeline
capacity if BG finds gas on the North Slope.
5:17:31 PM
CHAIR HUGGINS surmised that it is irrelevant who builds the
pipeline under AGIA because BG will get the access.
MR. KEANE said technically it is irrelevant. But looking at this
mega-project, clearly anybody can submit an application. He
expects some of the "big players" will apply. If the
applications meet BG's requirements, then it wouldn't oppose it,
but his company needs certainty on access.
CHAIR HUGGINS asked if he would have a higher level of comfort
if there was a requirement to divest if the producers built it.
MR. KEANE said yes; he would be quite happy with that.
CHAIR HUGGINS said he is excited that BG is excited. BG has a
performance record and is the type of partner the state wants.
SENATOR WAGONER asked if the producers will pass up the open
season if they don't own the pipeline.
5:20:15 PM
MR. KEANE said he can't speak for the producers.
SENATOR WAGONER asked if BG would do that if it were a producer.
MR. KEANE replied no. "If I'm involved in the process going
forward and we have a seat at the table discussing what the
design of the pipeline will be, what the tariff structure will
be. … I don't see what's changed between this year and last year
and in terms of how much gas supply I have available and whether
or not I want to get that supply to market. So for BG…if we hit
the mother lode and find 10 tcf of reserves, you can bet that we
will be bidding on putting 10 tcf of reserves in the pipeline."
CHAIR HUGGINS thanked them on behalf of Alaskans and
particularly the legislature for their comments. He recessed the
meeting at 5:21:38 PM.
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