Legislature(2003 - 2004)
01/21/2004 03:35 PM Senate RES
| Audio | Topic |
|---|
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SB 247-AK NATURAL GAS DEV. AUTHORITY INITIATIVE
MS. MARY JACKSON, Staff to Senator Tom Wagoner, prime sponsor of
SB 247, explained to members that SB 247 adds another route for
ANGDA to review. Senator Wagoner believes it is in the public's
best interest to study another route to provide points of
comparison. She told members she distributed copies of a
resolution unanimously passed by the Kenai Peninsula Borough
Assembly that supports this legislation. Regarding the fiscal
note, she discussed the legislation with Deputy Commissioner
Porter and Mr. Heinze and they determined that SB 247 would cost
more money. Mr. Heinze was forthcoming about the design costs
involved. She asked Deputy Commissioner Porter to compare the
fiscal note for SB 247 to the governor's bill and two
differences were apparent. The governor's bill asks for a work
plan - an outline of how to develop, which will cost less. SB
247 provides for a development plan. She said the dollar values
should be available to the committee at the next hearing of the
bill. She said that Senator Wagoner believes that due diligence
is appropriate.
5:00 p.m.
CHAIR OGAN expressed concern that he has studied this issue for
10 years. Yukon Pacific representatives testified in the past
that the route from Prudhoe Bay to Cook Inlet could not be done.
He also expressed concern that Yukon Pacific spent over $100
million on research, development and design and the committee is
now discussing reinventing the wheel. He said the clock would
have to start again for another environmental impact statement
(EIS) and permits, and that route would run alongside Denali
National Park. He speculated that the fiscal note could be huge
and the project would be delayed for years.
MS. JACKSON said, according to her conversation with Mr. Porter
and Mr. Heinze, the fiscal note is expected to be about $1
million. She repeated that the issue is one of due diligence and
to provide for a thorough discussion.
CHAIR OGAN said his district would benefit greatly from having
the route go through it.
SENATOR WAGONER said one reason he submitted this legislation is
that the Kenai Peninsula currently has the only two
petrochemical manufacturing plants in Alaska that manufacture
products other than fuels. Agrium manufactures urea and ammonia
and Phillips manufactures LNG. He believes it is well worth the
state's while to look at an expansion of this nature given the
supply problems those two manufacturers have. He added:
It doesn't have to be gas in Cook Inlet Basin in the
Kenai, just gas supplies coming into and gridding into
the system that serves the Mat Valley - Wasilla, your
area and Anchorage, would alleviate the demand on the
gas that is currently being produced on the Peninsula
and being shipped to Anchorage on both the west side
and from the Cook Inlet. There's currently pipeline
capacity that runs to Anchorage - there's two
pipelines. Their total capacity is a little over 200
mcf per day and, the other side coming across the
Inlet, if it could be put together, there could be
another 100, 150 mcf. So, the capacity is there to
bring that gas down if needed on the Peninsula or we
could stop pushing the gas through the lines up into
Anchorage by bringing a supply from the Slope to
Anchorage. That's one of the main reasons.
The other reason is, like I said, maybe the LNG plant
won't be feasible. Maybe the LNG project won't be
feasible and the one thing you have to understand,
while LNG is a very desirable fuel, LNG does not
produce a large amount of jobs and a large payroll for
Alaska.
To just give you a cost benefit of wages, the Agrium
plant throughput on the Kenai Peninsula is less than
that throughput for the gas that feeds the LNG plant
there. The LNG plant, including the platform, which
produces their gas, employs close to 50 people. Agrium
employs 250. So the value really in this gas, when you
start manufacturing with this gas, is with the jobs
produced so if we bring that gas down there and
supplement what they're getting now for Agrium and
they can run at full capacity again, that holds those
jobs in place. If we develop somewhere along that
system a method to use the liquids to provide
feedstock for the plastics industry, that also would
be much more labor intensive in those plants than an
LNG plant. So I think we should look at all aspects.
That's why I did the bill. I think the people of
Alaska should demand that we broaden the scope of the
project.
CHAIR OGAN said he finds the Kenai Peninsula Borough Assembly's
policy to be inconsistent given it has passed a resolution
asking for the buy back of other gas uses.
SENATOR WAGONER suggested asking the Assembly to explain next
week.
SENATOR SEEKINS said his understanding of the intent of SB 247
is to try to find a market for gas that can be sold for a profit
for the citizens. He said to make a profit, one not only has to
have a product, but also a willing buyer. He said in the near
future there would be a market for natural gas in the Anchorage
Bowl. If the state can meet that market by selling a resource
that belongs to the people of Alaska at a profit, he supports
that. He has never believed the state needs to support one
project over another. He informed members he was a member of the
Governor's North Slope Natural Gas Economic Advisory Committee
under Governors Hickel and Egan, which was when the state began
talking about trying to find a market for the gas and gas
liquids. At that time he was told the gas liquids could fuel
five world-class petrochemical facilities. He said he is looking
to find the value - where the gas can be sold soon for its worth
for the long run. He asked if he is correct in assuming the
liquid markets and the ANGDA project would be looking at the
same markets.
SENATOR WAGONER said he does not believe [ANGDA] has gone that
far into the project since it has only talked about LNG
production. He does not believe it has looked at markets or what
it would do with the liquids.
TAPE 04-2, SIDE A
SENATOR WAGONER continued that there are a lot of liquids and a
lot of potential, which would be accompanied by jobs and
increase the economic base.
MR. HEINZE said that ANGDA's board hasn't taken a position on SB
247, partially because ANGDA's project brings gas into the Cook
Inlet area and would be dealing with industrial, commercial and
residential uses as well as power generation. He said it is
very important to the Authority that gas is brought in via the
spur line that has been specified in the initiative, from
Glennallen to the Cook Inlet area. That reference is found not
only in the benefit analysis but also in the schedule and the
funding request. Additionally, sufficient feedback regarding
the route from Fairbanks to the Cook Inlet area indicates there
will be difficulties. He added that the hardest situation from
a project management perspective is when one is faced with
several difficult choices, and one has to choose "the least
worst."
MR. HEINZE continued that at least one company, or a group of
companies, has invested millions of dollars in studying the
direct route to Cook Inlet, and that information is not
available to the public. He said that gaining access to that
information is one of the first things he would do. That
company also operates the LNG plant and he said he has asked for
cooperation in the past but has not received it, and therefore
it's difficult for him to get excited about "working their
problem."
SENATOR ELTON asked what amount of money would be required if
ANGDA's statutory authority is expanded. He said a precise
answer would be helpful when the bill is due for passage.
5:11 p.m.
CHAIR OGAN said that an analysis of the regulatory hurdles and
inclusion of the approximate timelines would be helpful.
MS. JACKSON if Chair Ogan was requesting information for both SB
247 and SB 241.
CHAIR OGAN responded that work had been done from the North
Slope to Fairbanks but he questioned how long it would take to
get an EIS and the necessary permits, and what the approximate
timelines would be to continue on from Fairbanks.
MR. NELS ANDERSON, JR. testified from Dillingham via
teleconference and said that SB 247 makes sense if it doesn't
delay moving SB 241 as quickly as possible. If the Authority
has the available money, then the needs of Cook Inlet can be
considered. He said, "It's been said before that the oil and
gas companies have been holding 35 trillion cubic feet of gas
hostage up there in the North Slope, and we've just got to get
it moving." The $250 million that the Authority needs would
help to answer a lot of the questions that have been asked. He
said as a supporter of the initiative and of ANGDA, it is
imperative that SB 241 be enacted.
MR. HEINZE said he would contract out the additional work that
this would place on ANGDA. The additional considerations of an
alternate route, in terms of the business question, would not
add to the cost, but clearly, design considerations would cost
additional money. He said, "Don't give me any unfunded
allocations or initiatives in this case. If you want me to do
something, I'd be very happy to do it, but give me the resources
to do it with at the same time."
MR. SCOTT HEYWORTH, speaking on his own behalf, testified via
teleconference from Anchorage and provided the following
testimony:
If Senator Wagoner's SB 247 to amend ANGDA law passed,
ANGDA would be burdened with an impossible situation.
And all of this diversion is going against the law
voters passed approving the Valdez route - not the one
to Kenai. Yukon Pacific Corporation [YPC] started with
the Kenai route. It was rejected. A Kenai routing can
never be permitted. And it would only delay us
forever.
I had an expert, maybe one of the best in Alaska, even
the United States, do a complete review of the YPC
SEIS. The SEIS is bullet proof, impossible to
overturn, it would take from 5-10 years to even get to
a new EIS ruling, but you cannot possibly get past the
Congressional approval part. Then and only then can
you start the permitting process - another 10 years -
total of a 20-year delay - plus the environmental
lawsuits.
There are two main reasons it will never fly: 1) It
is physically impossible to use the railroad right-of-
way for a gas pipeline because of the physical
limitations of avalanches, geo-technical, and sloping
problems. For instance, the Alaska Railroad is just
cut right into the sloped banks of hillsides in places
- it leaves no room on either side for the siting of a
pipeline. And, 2) To date, since 1980, no one has
even tried to get a right-of-way through the ANILCA,
Title 11 statute/law. No one even knows how you go
about it. And if you can't use the ARRC right-of-way,
which you can't, you MUST then get a congressional
vote to go through Denali Park in some new right-of-
way alignment - which Congress will never ever allow
per the existing EIS law. We can't get ANWR through
folks, and somebody wants Congress to put a gas line
through Denali Park? It's not going to happen.
This is directly stated out of the EIS: 'All three
Cook Inlet alternatives are considered to be highly
unfavorable due to the project time delays that would
be involved in any attempt to secure congressional
approval when the proposed route to Anderson Bay would
avoid the Denali National Park entirely,' the EIS said
because this route to Anderson Bay [indisc.] far less
likely to meet with permitting delays. And that's
absolutely true because it took YPC 14 years to get
this permit...to sum it up, this delay would be 20
years or longer and we can't wait any longer and we
have a permitting project, and, as Mr. Heinze
explained to you, we have all the infrastructure and
with the spur line, to get all the gas Kenai will ever
need.
I'll sum it up here. Kenai will get gas quickly with
the existing infrastructure Enstar has, if we just
build a 140-mile spur line from Glennallen to Palmer.
This spur line from Glennallen comes after the main
line is built, is made economical by the huge revenues
from the main line going into LNG exportation from
Valdez. It's called economies of scale. The spur
line then hooks into the existing Enstar
infrastructure that Senator Wagoner referred to
earlier that goes right into Kenai today. Using the 2
twin gas lines - 12 inch and 16 inch - you can push
gas right into Kenai using the Enstar system by simply
reversing the flow of direction. Enstar has confirmed
this for us in front of ANGDA.
When we expect capacity from 2.2 feet per day to 3.0
the extra 800 million cubic feet per day can go down
to spur to Southcentral and into Agrium and Nikiski.
Our studies show potential cheap new gas under $3.00
delivered. New Cook Inlet gas is coming into the
basket today at over $4.00, per Tony Izzo from Enstar,
who testified here. Kenai will then have all the
cheapest, plentiful gas it wants. And all of
Southcentral gets very cheap gas forever with ANGDA.
So please, I just bring to your attention that the EIS
[indisc.] will take 10 or 20 years to have a permitted
project. We're going to help Kenai. Kenai can expand
the LNG plant, they can expand ANGDA. But Alaska
cannot wait 10 or 20 more years.
SENATOR WAGONER asked if a spur line could be built to the Cook
Inlet without a 20-year delay, why a larger line couldn't be
built over the same terrain without delay.
MR. HEYWORTH responded that it would be impossible to obtain
Kenai's export permit; the permit has already been issued to the
highway project and to the LNG project down to Valdez. He
stated that the amount of gas off the slope has already been
allocated to those two projects and permitting a third export
project won't happen.
SENATOR WAGONER said, "We already have permits to export
product."
MR. HEYWORTH replied that there is not license to export 2.2
bcf, to date.
SENATOR SEEKINS said that having flown through Windy Pass
hundreds of times in his own aircraft and knowing the lay of the
land, he asked if, by following the power line route from Healy
to Cantwell, the challenge of the Denali Park area could be
bypassed.
CHAIR OGAN remarked that there would be time for this debate
later.
SENATOR WAGONER asked if Mr. Heyworth was speaking for himself,
ANGDA, or for Yukon Pacific [Corporation].
MR. HEYWORTH responded that he was speaking for himself. He
explained that his knowledge of the EIS and the permitting
process was thorough and that he didn't write the initiative
because he knew the spur line to Kenai wouldn't be permitted and
because the large time delay of 5, 10, or 15 years didn't make
sense to him.
CHAIR OGAN asked if there was any further testimony. Hearing
none, he thanked committee members and adjourned the Senate
Resources Standing Committee meeting at 5:25 p.m.
| Document Name | Date/Time | Subjects |
|---|