Legislature(2001 - 2002)
03/16/2001 03:47 AM Senate RES
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
SB 121-RIGHT-OF-WAY LEASING ACT
CHAIRMAN JOHN TORGERSON called the Senate Resources Committee
meeting to order at 3:47 pm and announced SB 121 to be up for
consideration.
MS. ANNETTE KREITZER, Staff to Senator Leman, sponsor, of SB 121
said that commercialization of North Slope gas is a legislative
priority. She explained SB 121 provides certainty to any person
with rights-of-way under the state's Right-of-Way Leasing Act. She
explained:
If a person files an amendment to the pipeline
application, that supposes a net increase in the amount
of acreage leased for the right-of-way that is 10 percent
greater than the original application. That is sufficient
change subjecting the amendment to all the provisions of
AS 38.35. If a person files an amendment to a pipeline
application that proposes changes to the design of the
pipeline that would use less effective environmental or
safety mitigation measures or less advanced technology
than in the original application, that is a substantial
change subjecting the amendment to all the conditions of
AS 38.35. When the state calculates whether or not
additional state acreage must be part of the 10 percent
calculation, it must exclude acreage attributable to an
amendment of an existing right-of-way across federal
lands originally issued by the federal government whether
or not the state or the federal government administers
the land. Likely, that would involve an applicant
aligning with the federal and state rights-of-way. The
state must also not count land under a federal right-of-
way grant that has been transferred to the state for its
administration.
Section 2 is a conforming amendment to the commissioner's
analysis and public hearing section of the Right-of-Way
Act. SB 121 continues the public process, but does not
[indisc].
MR. JIM EASON, Foothills Pipe Lines Ltd., testified in support of
SB 121 with the following:
Let me begin by describing Foothills and summarizing its
role in efforts to commercialize Alaska's North Slope gas
reserves. Foothills is jointly owned by Westcoast Energy
Ltd. and TransCanada PipeLines Limited, the two major
players in the Canadian gas pipeline business. Canadian
gas accounts for almost 20 percent of all gas consumed in
the United State and all of that gas currently moves
through pipelines owned in whole or in part by
TrnasCanada and Westcoast. Foothills corporate mission is
very specific - to build and operate the Alaska Natural
Gas Transportation System, better known as the Alaska
Highway Pipeline Project. Foothills was a leader in this
project, which was conceived twenty-five years ago and we
remain just as committed today to completing that
project.
The Alaska Highway Pipeline Project was approved in
accordance with the Alaska Natural Gas Transportation Act
of 1976 in the U.S., the 1078 Northern Pipeline Act in
Canada and the 1977 Agreement Applicable to the Northern
Natural Gas Pipeline between the two countries. As
approved, the Alaska Highway Pipeline Project is a
4,800-mile international pipeline project commencing at
Prudhoe Bay and terminating in the Midwest and California
market areas. It is important to note that the southern
part of this pipeline has been constructed and is in full
operation.
A substantial amount of work in addition to constructing
the pre-built portion of the project has been completed
by the Alaska Highway Pipeline Project sponsors to date.
Significantly, among other permits in the U.S. the
Project holds a federal right-of-way grant issued in 1980
by the Department of the Interior's Bureau of Land
Management. That grant does not expire until December
2010 and may be renewed at the request of the Project
sponsors. On state side, the Project has a pending State
of Alaska right-of-way lease application. Recently, we
have initiated discussions with state officials toward
completing the pending application.
I would like now to turn to our specific comments on SB
121. It responds to a potential problem that has been
identified in Alaska state law affecting applications for
state right-of-way leases. Specifically, AS 38.35.050(c)
currently provides that "Any amendment to an application
is subject to all provisions of the Right-of-Was Leasing
Act applying to the original application."
The potential problem arises from the fact that the words
"substantial change" as applied to an amended right-of-
way lease application are not currently defined in
statute. As a result, should any party desire to delay or
obstruct the issuance of a state right-of-way lease, they
are free to argue that any change to an application after
it is submitted constitutes a substantial change.
Without clear policy direction from the legislature,
administrative appeals and litigation over which changes
are substantial are likely, with the result being that
the courts ultimately get to decide the issue on a case-
by-case basis.
SB 121 proposes a definition for substantial change that
is intended to provide clear guidance for all parties of
interest, including applicants, the reviewing and
authorizing agencies and the public. As fully explained
below, Foothills supports Senator Leman's efforts to
amend AS 38.35.050(c) to avoid ambiguity and to minimize
the risk of specious litigation by providing clear
standards for determining whether or not changes to a
right-of-way lease application are substantial.
We believe that defining substantial change in the
context of an amendment of an application will provide
several important benefits for all projects that must
procure a right-of-way lease across state lands, as well
as for the State of Alaska. These benefits include:
· More timely processing of lease applications, especially
where much work has already been done in support of an
application; (Typically, an application for a major
pipeline can take as much as a couple of year or longer.)
· Increased certainty; and
· Reduced potential of delay in authorizing and constructing
projects of benefit to all Alaskans.
Under Senator Leman's proposed language, an amendment to
an original application would constitute a substantial
change in the application under either of two
circumstances:
· If the amendment proposes a least a 10 percent net
increase in the amount of state acreage to be leased for
the right-of -way when compared to the amount of acreage
in the original application;
· If the amendment proposes a change in the design of the
pipeline that would use less effective environmental or
safety mitigation measures or less advanced technology
than proposed in the original application.
We believe this approach to defining substantial change
is compatible with the state's goals as set out in its
Right-of-Way Leasing Act, that is, that "the development,
use, and control of a pipeline transportation system be
directed to make the maximum contribution to the
development of the human resources of this state, the
increase in the standard of living for all of its
resident, the advancement of existing and potential
sectors of its economy, the strengthening of free
competition in its private enterprise system, and the
careful protection of its incomparable natural
environment." Equally important, we believe that
incorporation of these proposed definitions will not
diminish meaningful agency and public review of an
applicant's amended right-of-way lease application.
The proposed amendment would further define how an
increase in state acreage would be calculated for the
purposes of determining substantiality. Specifically, in
calculating the percentage increase in acreage due to an
amendment, the following would each be excluded from that
calculation. First, acreage attributable to an amendment
to a right-of-way grant across federal land originally
issued by the federal government, whether administered by
the state or federal government, would be excluded.
Secondly, land subject to an existing federal right-of-
way grant held by the applicant that is transferred to
the state for its administration would also be excluded.
We believe these exclusions to be appropriate, as they
take out of the calculation land that is already subject
to a federal right-of-way lease and lands that may come
to be administered by the State of Alaska. Such land
should be taken out of the calculation because it would
not have been subject to an initial state lease
application. It includes such land in the calculation of
whether or not there has been a 10 percent increase in
the amount of state land covered by an application would
penalize unfairly those applicants that successfully
procured a right-of-way grant across federal land that
subsequently comes to be administered by the State of
Alaska.
Number 700
SENATOR ELTON said he could see many reasons for getting an
amendment, for example, rerouting a pipeline through a community.
If the net acreage gain on the new route is less than 10 percent,
he asked if that would preclude the need to do an amendment.
MS. KREITZER answered that it would not be considered to be a
substantial change if it was less than 10 percent.
SENATOR ELTON added, "Even though it would be a substantial
change to the neighborhood."
MS. KRIETZER said they had discussed this scenario with the
department and Mr. Britt could speak better to the question.
MR. BILL BRITT, State Pipeline Coordinator, he said that Senator
Elton is correct that a rerouting of a pipeline would not be
captured by the bill in front of them.
CHAIRMAN TORGERSON asked if a community didn't want it, what kind
of mitigation measures would they do.
MR. BRITT responded that:
AS 38.35 gives the commissioner a great amount of power
to place stipulations on right-of-way leases to deal with
a variety of public health, safety and environmental
issues. So we could certainly be responsive to any
concern that came out at any one process. Their normal
process would be to analyze an application. Our version
of a best interest finding is called a commissioner's
analysis and proposed decision. We public notice the
availability of that commissioner's analysis and proposed
decision along with draft lease and receive comments on
it through a comment period or a public hearing or both.
So we can receive comments from the public very late in
the process and alter the right-of-way lease in response
to those.
SENATOR ELTON said he imagined this would have tilted the balance
back toward the company that had the right-of-way in any kind of
community discussion on a pipeline reroute.
MR. BRITT responded, "It's important to remember that the
discussion is regarding an applicant, not an actual lessee. After
a lease is executed, we are dealing with different questions.
This only regards changes to an application."
Number 1000
MR. EASON added that it is important to focus on the provision of
what the substantial change does that they are trying to define.
He explained:
As the statute reads today, the undefined substantial
change triggers all the provisions of the chapter, which
quite literally means that you go back to square one and
file a new application, not just notify people of a
change in the application, and do every procedural step
that's outlined in Title 38.35. This could, again,
conceivably include steps that have gone on for 18 or
more months with a very public process. I certainly stand
to be corrected, but it was my understanding that the
intent is not to limit or change public notice so that
people should be aware of changes regardless of whether
there are substantial changes or changes that rise to the
judgment of the commissioner as requiring public notice.
It's just a question of whether or not a change is
substantial enough to trigger all the provisions of the
chapter being required to be done again.
My understanding of the example you gave of rerouting
that might occur that brings a project closer or within a
community, can happen in either of two ways. It can
happen because an applicant has requested it or it can
happen because the agencies require it. It's conceivable
that an applicant proposes something that avoids all
communities, but it could be determined for reasons of
Fish and Game or DEC or others that the preferable route
is actually closer to the community. My belief would be
that under those circumstances, those kinds of changes
would be publicly noticed and you would have an
opportunity to discuss them and review them in the
context of the application as well as the finding.
SENATOR ELTON asked if this had ever been an issue to his
knowledge - where someone has defined substantial change in a way
that has caused economic hardship or regulator hardship.
MR. EASON replied:
My research of the files and I have been able to locate
two instances in the Pipeline Office's administration
that actually addresses this question, one is a written
decision affecting not the application, but an existing
conditional lease that was issued to Yukon Pacific. In
that case, the application process had been completed and
the commissioner had actually issued the lease. Yukon
Pacific came back, as I recall, some years later, maybe a
couple of years or longer, and addressed the commissioner
with a revised project, which increased the pipeline
pressure. I believe it increased the pipeline size. It
changed the number of compression stations and it changed
the location of the compression stations, but it was
their belief that those were not substantial changes,
because the changes actually resulted in less land being
used than originally proposed, even though the system
looked quite different. There's a written finding that
the commissioner confirmed the calculation was the issue.
If it used less acreage, even though there had been
changes that in your view or others' view may very well
signal substantial changes, but there weren't.
I believe there is another instance with, I believe it
was, Badami where two alternative pipelines were
proposed, a buried pipeline and an elevated pipeline. I
apologize, I can't remember which one went in which
direction or whether they finally went from buried to
raised or raised to buried, but my understanding is that
the pipeline office determined that was a substantial
change requiring all the provisions of the chapter.
All that is sort of preliminary to the answer from our
perspective that's probably more important. In some
respects, these projects may have not have risen in
profile to invite litigation and quite honestly, in our
review of the statutes we were surprise that this term
had been in the statute since its adoption without
definition. We think that the uncertainty surrounding
that is enough given the high profile nature of a project
to deliver gas from Alaska that we see it as a great risk
and we think Alaskans should see it as a great risk - the
policy direction for what constitutes a substantial
change is not set so we don't have, perhaps, years of
delay by people being asked to refile and refile and
begin the process again for whatever change may come.
CHAIRMAN TORGERSON asked Mr. Britt if he supported the bill.
MR. BRITT responded that they are neutral, but they think it's a
good idea for the legislature to define the term. He said:
There are three instances they can think of that would be
captured by the bill. Two of those come up, one is
routing and the other is a change from below ground to
above ground mode or vice versa and the third one that
hasn't been mentioned yet, would be a change from a 12-
inch to 48-inch pipeline. Presumably that would not be
captured by these amendments.
SENATOR TAYLOR asked if he had any other suggestions for the
committee with regards to routing and pipe size. "It seems odd
that we should have to do this for every aspect of the pipeline…"
MS. KREITZER responded that they attempted to look at the routing
issue and tried to deal with that problem and it just made the
problem worse. The routing seems to be the highest concern.
Regarding the pipeline issue, she thought the department had
already answered that with its action in the Yukon Pacific case.
"It has already said that is not a substantial change. So we're
sort of codifying what they have already done."
SENATOR TAYLOR said he wanted it on the record that this is based
on a previous decision.
CHAIRMAN TORGERSON asked if the original pipeline was 12 inches.
MR. EASON replied that it was somewhere between 42 - 48 inches.
He didn't anticipate quadrupling it. "The technology is not
there."
MS. KREITZER added that a potential amendment the committee might
consider to make the clearer is on page 2, line 5 to insert, "The
acreage attributable to an amendment of a right-of-way originally
issued by the federal government."
CHAIRMAN TORGERSON said it already seemed clear to him, but they
would consider it, if that's what they need to do. He announced
they would hold the bill for further work.
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