Legislature(2003 - 2004)
03/23/2004 01:45 PM House FIN
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
CS FOR SENATE BILL NO. 241(FIN)
An Act making an appropriation to the Department of
Revenue for work related to bringing North Slope
natural gas to market; and providing for an effective
date.
SENATOR GENE THERRIAULT explained the intent of SB 241. The
appropriation is proposed to provide funding for the
administrative agencies and Alaska Natural Gas Pipeline
Development Authority (ANGDA) in order to move forward in
the effort to bring natural gas to market. The funding
would be provided through the Department of Revenue, which
would provide the accounting mechanism.
Senator Therriault pointed out that the original bill
provided $2 million dollars. In a Senate Finance Committee
meeting, there was discussion regarding funding for 2005,
and it was agreed that should be contained in next years
budget. Thus, the funding was decreased to $1 million
dollars addressing the items critical at the present time.
He stressed that it is important to provide funding at this
time for contracts associated with the Stranded Gas Act.
STEVE PORTER, (TESTIFIED VIA TELECONFERENCE), DEPUTY
COMMISSIONER, DEPARTMENT OF REVENUE, ANCHORAGE, noted that
the Department of Revenue had requested $1 million dollars
for the purpose of supporting stranded gas development and
the work of ANGDA. He pointed out that the total amount,
which could be spent, obviously would exceed $1 million
dollars, made available through the legislation. The amount
would be spent in FY04 to deal primarily with tariff issues,
fiscal terms, petro-chemical analysis, social impacts and
understanding route assessment.
HAROLD C. HEINZE, (TESTIFIED VIA TELECONFERENCE), CHIEF
EXECUTIVE OFFICER, ALASKA NATURAL GAS PIPELINE AUTHORITY
(ANGDA), ANCHORAGE, stated that he had faxed a handout,
identifying how ANGDA is doing concerning the taxes, funding
and then identifying current contracts that are underway.
(Copy on File). He added that the handout indicate work
skills performed under the contracts.
The work currently done by ANGDA continues to be positive
and encouraging to the Authority's role as a mechanism to
help the financing improve the marketability of the North
Slope gas as well as providing benefits to Alaskans by
delivering gas to the Cook Inlet region. The Board has
considered SB 241 and has taken a positive view toward that
legislation. Additionally, the operating budget proposed by
the Administration has been amended to provide a total of
$256 thousand dollars in FY05. Mr. Heinze offered to
provide contract details, pointing out several needing
immediate attention through the approval of the proposed
legislation. Mr. Heinze urged that the project move
forward.
Representative Chenault questioned the projected scenario of
delivering gas to the Cook Inlet area at $1 to $1.25 dollars
and asked if that would be the total cost including the
tariffs to Cook Inlet. Mr. Heinze explained that those
amounts are estimates determined for various approaches of
getting gas to Cook Inlet. They are the numbers projected
for getting the North Slope conditioning, pipelining and
delivery into the Cook Inlet natural gas system.
BOB FAVRETTO, (TESTIFIED VIA TELECONFERENCE), ALASKA NATURAL
GAS DEVELOPMENT AUTHORITY BOARD, ANCHORAGE, offered to
address the amendments as they are brought forward.
JERRY MCCUTCHEON, (TESTIFIED VIA TELECONFERENCE), ANCHORAGE,
noted his concern that the Legislature understand "What they
are dealing with on the North Slope", particularly regarding
Prudhoe Bay. He commented on a suit that occurred in that
area in which "records had been sealed". He claimed that
the current Administration is "blinded". The oil is two-
thirds recoverable if the gas is kept in the reservoir. He
projected that oil prices will increase the first few years
and then they will crash. Mr. McCutcheon recommended that
there be a commitment on record to find out how much really
exists.
Representative Croft MOVED to ADOPT Amendment #1, #23-
LS1279\I.1, Utermohle, 3/22/04. (Copy on File). Co-Chair
Williams OBJECTED.
Representative Croft noted that the amendment attempts to
change the amount back to $3 million dollars, creating an
equal distribution between ANGDA and the Department of
Revenue. He acknowledged that the Department would need
some funding under the Stranded Gas Act but that money
should be separate from the purpose of funding ANGDA. ANGDA
is an independent body with an independent Board, which
needs and deserves full funding.
Senator Therriault advised the proposed funding passed
through the Department of Revenue and was endorsed by the
th
ANGDA Board through a resolution passed at the February 16
meeting. ANGDA has indicated that they are "comfortable"
with the current plan. He pointed out that in the Senate
Finance Committee meeting, both the Majority and the
Minority members agreed that it was more appropriate for
ANGDA to come back to the FY05 budget process for further
allocations. Senator Therriault stated that his preference
would be to stick with the original amount.
Co-Chair Harris asked if Mr. Heinze was aware of the
amendment and the on-going negotiations between both bodies
regarding the amount being made available to ANGDA. Mr.
Heinze replied that he was aware of the proposed amendment
and that he had responded to Representative Croft. The
response included that while the original bill funded both
FY04 and FY05, it was clear during the discussions in the
Senate Finance Committee that the preference was to decide
only about FY04 funding. That Committee proposed that it
would be a better process to address only the FY04 budget
needs at this time. He added that the $1 million dollar
allocation for the two remaining months could be sufficient
and that ANGDA would look forward to additional funding in
the FY05 budget for the stranded gas effort.
Co-Chair Harris asked if ANGDA was satisfied with the $1
million dollar appropriation at this time, knowing that
there would be fair opportunity in the FY05 Capital Budget
for more funding. Mr. Heinze reiterated that they would,
submitting that ANGDA prefers the adoption of the Senate
version of the bill, hoping that it would move to the floor
as quickly as possible.
Mr. Favretto spoke to Amendment #1. He voiced concern with
the funding mechanisms to support ANGDA. He understood and
appreciated Representative Croft's concern with the funding
level for ANGDA but noted his concern with getting the bill
back through the Senate in time for adjournment. He
emphasized that ANGDA could live with the $1 million dollar
allocation to finish the tasks at hand.
Representative Croft elaborated that his interests in ANGDA
rests with the independence of the Board and hope it will
bring the issues to the State. The Administration and the
Legislature have shown over 1.5 years of neglect,
compromising that independence. The Board does not have any
choice left, as they never have had the funding needed to do
the appropriate studies. Their requests have continually
been reduced. Representative Croft doubted that the $1
million appropriation would be sufficient with the funds
passing through the Department of Revenue. He emphasized
that the Amendment would provide enough funding and is "the
right thing to do", by providing ANGDA some financial
security. He noted that he was disappointed that ANGDA was
willing to settle for only the $1 million dollars
allocation.
A roll call vote was taken on the MOTION.
IN FAVOR: Moses, Chenault, Croft
OPPOSED: Hawker, Joule, Meyer, Stoltze, Fate, Foster,
Harris, Williams
The MOTION FAILED (3-8).
Representative Croft MOVED to ADOPT Amendment #2, #23-
LS1279\I.2, Utermohle, 3/22/04. (Copy on File). Co-Chair
Williams OBJECTED.
Representative Croft explained that if the amount allocated
to the request is $1 million dollars, then it should be
guaranteed that at least half of that amount goes to ANGDA.
The amendment would provide an allocation within the $1
million dollar appropriation.
Senator Therriault advised that on the Senate side, he had
directed that the money pass through the Department of
Revenue, which is the manner in which the Legislative Budget
and Audit (LBA) Committee had routed it. Members of the
ANGDA Board have indicated that their relationship with the
Department has improved. They are comfortable with routing
the money through the Department of Revenue. Acceptance of
th
the routing was included in their February 16 resolution
passed by the entire ANGDA Board. If the Legislature sees
that the Department and the Board are not working well
together, then the FY05 budget could be handled differently.
He did not foresee problems.
In response to Co-Chair Harris, Mr. Heinze explained that in
addition to the authority provided by the voters in the
November 2002 election, the State has entered into the
stranded gas process with a number of applicants. There are
a myriad of issues facing the State related to natural gas.
The basic idea of ANGDA working with the Department of
Revenue contributes to the total effort. There have been
"honest hearings regarding the efforts proposed". He
elaborated that he was comfortable at this time working in a
team effort with the Department of Revenue.
Representative Croft commented that he was not sure that the
treasurer handling the "purse strings" for ANGDA would agree
with Mr. Heinze. He thought that at this point, ANGDA was
putting forward a "desperate plea" for anything. Board
members are still not confirmed and ANGDA is not going to
exist in the manner that the voters intended. He suggested
that ANGDA has become a "weird" subdivision of the
Department of Revenue and that it is not independent.
A roll call vote was taken on the motion.
IN FAVOR: Joule, Moses, Stoltze, Croft
OPPOSED: Meyer, Chenalut, Fate, Foster, Hawker,
Williams, Harris
The MOTION FAILED (4-7).
PAUL FUHS, BACK BONE 2, JUNEAU, testified in support for the
proposed legislation. He noted that Back Bone 2 is a
citizen's organization to advocate for the fulfillment of
Proposition #3, which was overwhelmingly adopted by the
citizens of Alaska. He believed that information that would
come forward from studies through the Department of Revenue
and would be thoroughly utilized. He referenced his
handouts. (Copy on File).
Mr. Fuhs stressed that Alaska is in a "race" for the
development market. There are a number of companies that
are interested in Alaskan gas. The three major producers
have noticed the continual delays on the pipeline projects
in Alaska. Mr. Fuhs indicated his concern with the funding
being provided, wanting to accept and believe the word from
the Department of Revenue by Mr. Steve Porter. The
contracts are ready to go and the people of the State will
know immediately if the Department has not followed through
on them. He encouraged member's to check out the Back Bone
2 website for more in-depth information regarding these
concerns.
Vice Chair Meyer inquired if an application had been
received from Mid America. (Mr. Porter was no long on line
to respond). Co-Chair Williams said that he did not know
about that application.
Representative Foster MOVED to report CS SB 241 (FIN) out of
Committee with individual recommendations. There being NO
OBJECTION, it was ordered.
CS SB 241 (FIN) was reported out of Committee with a "do
pass" recommendation.
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