02/23/2024 03:30 PM Senate RESOURCES

        SB 220-RCA REGULATE NATURAL GAS STORAGE FACILITY                                                                    
                                                                                                                                
3:33:22 PM                                                                                                                    
CO-CHAIR BISHOP  announced the consideration  of SENATE  BILL NO.                                                               
220 "An Act  relating to the Regulatory Commission  of Alaska and                                                               
regulation of the service of natural gas storage."                                                                              
                                                                                                                                
3:33:50 PM                                                                                                                    
CO-CHAIR BISHOP announced invited testimony.                                                                                    
                                                                                                                                
3:34:10 PM                                                                                                                    
TONY IZZO, CEO, Matanuska  Electric Association (MEA), Anchorage,                                                               
Alaska,  invited  testimony for  SB  220,  said MEA  is  Alaska's                                                               
oldest electric  cooperative and  serves the fastest  growing and                                                               
second  largest population  center  in the  state. He  emphasized                                                               
that the state  is at a critical time with  regard to energy. The                                                               
Southcentral region  recently experienced declining  gas reserves                                                               
coupled with  colder than normal  temperatures and  record demand                                                               
for heat and  power, almost resulting in  rolling blackouts. Cook                                                               
Inlet  has reached  a point  where there's  no ability  to secure                                                               
firm gas  contracts beyond the expiration  of existing contracts.                                                               
However, utilities  require firm  gas that  can be  delivered for                                                               
home  heating and  power  production. Natural  gas  storage is  a                                                               
proven  method by  which gas  volumes  available during  off-peak                                                               
periods  like the  summer months  can  be saved,  set aside,  and                                                               
stored  for periods  of  higher demand.  Gas  storage needs  will                                                               
continue to increase  as gas volumes decline while  the future of                                                               
reliable power in the Southcentral  area depends upon having more                                                               
storage.  MEA  aims  to  diversify  its  energy  sources  and  is                                                               
reviewing  various options  including wind,  solar, nuclear,  and                                                               
carbon sequestration.  It hopes to  reach its goal of  50 percent                                                               
clean energy by 2050.                                                                                                           
                                                                                                                                
3:36:25 PM                                                                                                                    
MR. IZZO said pending legislation  would require high percentages                                                               
of  non-firm power  like  wind and  solar.  Even with  aggressive                                                               
legislative targets, MEA's annual gas  demand would drop from 5.6                                                               
billion cubic  feet per year  to almost three billion  cubic feet                                                               
in 2040, which is approximately  a 50 percent reduction. However,                                                               
a substantial  three billion cubic  feet would still  be required                                                               
in  a scenario  that  achieved 80  percent  renewable power.  Gas                                                               
storage would  allow MEA  to manage a  diversified mix  of energy                                                               
including non-firm renewables like wind and solar.                                                                              
                                                                                                                                
3:37:20 PM                                                                                                                    
MR.  IZZO stated  that as  the CEO  for a  regulated utility,  he                                                               
fully  supports  the  regulation of  third-party  storage.  While                                                               
significant gas  storage exists  in Cook  Inlet, the  majority is                                                               
non-regulated.  It  is  essentially   used  to  meet  contractual                                                               
obligations by producers. He  supports legislation that clarifies                                                               
that  any provision  of third-party  storage must  be subject  to                                                               
economic  regulation  by  the  Regulatory  Commission  of  Alaska                                                               
(RCA).  Having gas  storage  regulated by  the  RCA provides  the                                                               
necessary  transparency and  will ensure  that rates  for storage                                                               
are reasonable. SB  220 is an important step  to offset declining                                                               
energy security.                                                                                                                
                                                                                                                                
3:38:20 PM                                                                                                                    
CO-CHAIR BISHOP asked for confirmation  of his understanding that                                                               
the goal of a 2 bcf reduction is targeted for 2030.                                                                             
                                                                                                                                
3:38:32 PM                                                                                                                    
MR. IZZO replied  that the goal was established last  year and is                                                               
subject  to change,  but the  objective  is to  reach 50  percent                                                               
clean, diversified,  and carbon-free energy through  any means by                                                               
2050.                                                                                                                           
                                                                                                                                
3:39:07 PM                                                                                                                    
CO-CHAIR BISHOP asked  if despite MEA's goals,  must MEA maintain                                                               
spinning reserves  with base  load power or  hard assets  that do                                                               
not rely on renewable energy sources.                                                                                           
                                                                                                                                
3:39:29 PM                                                                                                                    
MR. IZZO replied that is correct.                                                                                               
                                                                                                                                
3:39:44 PM                                                                                                                    
CO-CHAIR BISHOP concluded invited testimony on SB 220.                                                                          
                                                                                                                                
3:39:50 PM                                                                                                                    
CO-CHAIR BISHOP opened public testimony;  finding none, he closed                                                               
public testimony.                                                                                                               
                                                                                                                                
3:40:20 PM                                                                                                                    
CO-CHAIR  GIESSEL  stated  she was  asked  whether  the  Marathon                                                               
facility  and its  energy storage  tanks on  the Kenai  Peninsula                                                               
would be  subject to RCA  regulations under SB 220.  According to                                                               
the Department  of Law's  (DOL) interpretation,  Section 3  of SB
 would  give RCA  jurisdiction over gas  storage service  in a                                                               
situation  where a  small  producer like  Furie  stores gas  with                                                               
Hilcorp. She  conveyed that  Mr. Izzo mentioned  there is  a huge                                                               
amount of additional  storage besides CINGSA in  Cook Inlet which                                                               
is held  by Hilcorp.  Under the first  scenario, if  Furie stores                                                               
gas with Hilcorp, RCA's jurisdiction  would extend over Hilcorp's                                                               
facilities for  gas storage because two  different entities store                                                               
gas  for  commercial  purposes. Under  the  second  scenario,  if                                                               
Marathon imported LNG and stored it  in its own storage tanks and                                                               
it  took that  gas  and sold  it  to ENSTAR,  they  would not  be                                                               
regulated.  Under the  third scenario,  if  ENSTAR imported  LNG,                                                               
stored it at Marathon, and used  its own gas, it would be covered                                                               
under SB  220. One entity would  own the gas while  the other one                                                               
would store it, so that would fall under this regulation.                                                                       
                                                                                                                                
3:43:21 PM                                                                                                                    
CO-CHAIR BISHOP  held SB  220 in committee  and turned  the gavel                                                               
over to Co-Chair Giessel.