Legislature(2001 - 2002)
03/19/2001 03:40 PM Senate RES
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
SB 143-RIGHT-OF-WAY LEASING ACT:APPLICATION COST
CHAIRMAN TORGERSON announced SB 143 to be up for consideration.
MR. DARWIN PETERSON, staff to Senator Torgerson, told members:
One of the legislature's priorities is commercialization
of North Slope gas. Any sponsor of a pipeline project
will have to obtain a right-of-way across state lands.
this bill would authorize the state to be reimbursed for
work performed by the State Pipeline Coordinator's Office
[SPCO] in preparing to receive and process an application
for a right-of-way lease. It also clarified that an
applicant must reimburse the SPCO for costs incurred in
processing an application whether or not the application
is granted.
AS 38.35.140 provides that lessee shall reimburse the
state for all reasonable costs incurred in processing an
application filed for a right-of-way lease. Although the
SPCO has entered into an agreement with a lessee seeking
renewal of a lease to reimburse the state for costs
incurred before receipt of the renewal application,
legislative legal services has questioned whether this is
authorized under existing law and whether the state can
be reimbursed for costs incurred before the receipt of an
application. The SPCO anticipates that it will be asked
to perform substantial work by prospective gas pipeline
lessees this year in anticipation of filing applications
later this year or early next year. Much of the cost of
this work would clearly be reimbursable to the state if
the prospective lessee actually had a pending
application. It is important to insure that the state is
reimbursed for the significant cost that it will incur in
performing work in anticipation and furtherance of the
application process.
Additionally, the SPCO, in the past, has required a
prospective lessee to reimburse the state for costs
incurred in processing [an] application even if the
application has not been granted. This bill would conform
the law to existing practice between the SPCO and
prospective lessees to make clear that the state must be
reimbursed for the costs of processing an application
whether or not the lease is ultimately granted.
Prospective lessees cannot expect the state to pay for
services requested by them on routes that ultimately are
not selected or on applications that may ultimately be
withdrawn, suspended, or otherwise not granted.
SENATOR ELTON said, "I think this is a great idea." He asked Mr.
Coughlin how much it cost for the pre-application process.
MR. PATRICK COUGHLIN, Special Assistant to the Resources Committee,
answered that this hasn't ever happened in this large of an amount
before. Mr. Britt's fiscal note indicates they expect to need $4
million through the first half of the fiscal year. His best
estimate is that at least 50 percent would otherwise be
reimbursable.
SENATOR PEARCE said she noticed on page 1, line 9, the word
"reasonable" is already in statute and asked what a reasonable cost
would be versus one that the state would not expect to have
reimbursed.
MR. COUGHLIN said he was just reading the fiscal note and that his
understanding based on a conversation with Mr. Britt is that 100
percent of this current budget is based on program receipts which
are based on agreements that his office negotiates with lessees to
cover the cost of running that office.
SENATOR PEARCE asked if these were written agreements.
MR. COUGHLIN answered yes and their purpose is to detail the scope
of work between the Pipeline Office and the prospective lessee or
an applicant, in the case of this bill, so it is clear to the SPCO
what is being asked of them and how they are going to be
compensated.
CHAIRMAN TORGERSON asked Mr. Britt why he estimates he can only
collect 50 percent of the application fees.
MR. BRITT, Pipeline Coordinator, answered:
In normal circumstances, my office is entirely funded
through program receipts. The difference here is
procuring the amount of starting up a gas pipeline office
that didn't previously exist and coordinating with our
Canadian and federal counterparts. In the normal course
of things, we would be working on a specific application
with a specific project proponent and 100 percent of our
costs would go to that project proponent….This is
unprecedented. We have a number of project proponents and
allocative costs between as many as nine separate
potential gas pipeline project proponents for costs that
are likely to be applicable. Whichever route comes in is
going to prove to be challenging, I expect. I really
won't know what percentage of the total costs will be
reimbursable until I have completed negotiations with a
suite of those project proponents.
CHAIRMAN TORGERSON said he appreciated that explanation, but he
knows that the fiscal note says 50 percent is all they are going to
get back and that is incorrect. He stated, "If it was me, I'd have
a long discussion with you in Finance [Committee] about what the
other 50 percent was going to be for before I'd approve the fiscal
note."
MR. BRITT responded that he expects to negotiate aggressively. He
thought 50 percent was a low-end estimate.
CHAIRMAN TORGERSON said he didn't think they would have a project
by 2003 and he wouldn't vote for a large appropriation for setting
this office up.
MR. BRITT responded that his challenge at this point is simply
having enough resources to interact with the proponents. "They are
making more requests of my office than I have people and money to
support at this point. Rather than being ahead of the curve, we are
actually behind, at this point."
CHAIRMAN TORGERSON said he understood that, but the intent of this
bill is that, "You should respond to them, but they should pay you
for it. Not us go out and make trips to Canada or wherever else
you're talking about going. The Canadians - you should take
something off their sheet. They're way ahead of you anyway….We
couldn't have that much overhead cost until we actually have a
project."
SENATOR TAYLOR moved to pass SB 143 from committee with the
accompanying fiscal note and individual recommendations. There were
no objections and it was so ordered.
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