Legislature(2003 - 2004)
01/26/2004 03:35 PM Senate RES
| Audio | Topic |
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SB 271-NATURAL GAS DEVEL AUTHORITY PROJECTS
CHAIR SCOTT OGAN, sponsor of SB 271, informed members that SB
271 expands the scope of the Alaska Natural Gas Development
Authority [ANGDA, the "Authority"]. Currently the Authority has
the scope to build an LNG line to Valdez, but if the scope were
expanded to build to the border, the tax-free status of a state-
owned pipeline could be taken advantage of. As chairman of the
Energy Council, he reported that he attended meetings over the
summer and spoke with people interested in hooking up to
Alaska's line, possibly at the Canadian border. TransCanada
Pipeline indicated a hook up of about 2 billion cubic feet (bcf)
per day in their current capacity. SB 271 also asks ANGDA to
evaluate private sector involvement in the planning,
development, construction, and management of the operation of
the gas transmission pipeline project. He said that
philosophically he feels better about the private sector having
more of a risk-taking role in this project, given the history of
state-owned projects in the past; the more private sector money
invested, the better.
CHAIR OGAN told the committee that a cursory review with
legislative attorney Jack Chenoweth indicated that state
ownership with private sector investment wouldn't hurt the tax
re-status. He said he doesn't feel SB 271 is mutually exclusive
to one particular group; producers can take advantage of this
and use the tax re-status.
CHAIR OGAN noted that Senator Lincoln had joined the meeting at
3:40 p.m.
SENATOR KIM ELTON asked if, in addition to the request for $2.15
million, the Authority would require more money.
CHAIR OGAN responded that more money would probably be necessary
to permit and plan a new pipeline route. Although the producers
have done a fair amount of engineering work on the Alaskan
Highway route, he doesn't suspect that much of that work will be
shared. He stated that SB 271 does not currently have a fiscal
note.
SENATOR ELTON asked if, rather than changing the provisions of
SB 241 [Approp: Natural Gas Development Authority], a fiscal
note was anticipated [for SB 271].
CHAIR OGAN confirmed this to be so and said he didn't think it
was appropriate to tack money onto SB 241, a bill that may or
may not pass.
MR. HAROLD HEINZE, CEO, ANGDA, testified that the proposed
changes would expand the scope of ANDGA's feasibility study to
include the highway project in addition to the LNG project to
Valdez. The bill provides for an additional six months to
address the project's feasibility and also evaluates the private
sector's involvement in the project. He believes the Authority
can be of value to the state by contributing to the success of
any private sector project that's undertaken on behalf of North
Slope gas. ANGDA also stands ready to work with any group on
the LNG project. Both opportunities are very important, he
said.
CHAIR OGAN asked Mr. Heinze if he agreed that this approach was
not mutually exclusive of one group over another. He also asked
whether producers would be interested in this tax-free status.
MR. HEINZE replied that this was a friendly approach. In
looking at the Authority and how it provides for the benefit of
all Alaskans, he felt that its ability to provide a business
structure offering definite advantages over any commercial
enterprise was very important in terms of commercializing North
Slope gas. The associated tariffs are at the edge of
commerciality and these efforts could probably reduce those
tariffs by about one-third, which would make a significant
difference in the economics and competitiveness of a project.
The first 530 miles, whether it moves LNG or goes down the
highway, shares a common route from the North Slope following
the TAPS to Delta. One project continues down the highway while
the other project continues down the Richardson Highway to
Valdez. To the extent that both projects could share in the
cost, building, and use of the 530 miles, offers tremendous
potential for cost-reduction, tariff reduction, and better
economics. Mr. Heinze said that there was nothing incompatible
about this kind of approach.
CHAIR OGAN said that earlier this year ANGDA was looking at
building a much larger line to Delta; he asked what bcf capacity
an LNG project would require per day.
3:49 p.m.
MR. HEINZE replied that at the end of last year, the ABC [a big
capacity] line was proposed with the idea that, depending on the
timing of the highway project, there would be six months to look
at what could be done to move ANGDA's project forward and still
provide the best opportunities for further uptake of gas off the
North Slope. With a 36- or a 48-inch pipe and the proper design
modifications, facilitation of production and transportation off
the North Slope could be at least twice as big. The Authority
initially looked at a 36-inch design, carrying up to 3 bcf per
day. The initials were 2 bcf per day but expandable to 3 [bcf].
This kind of project implies reserves of 15 to 20 trillion cubic
feet. The producer described line was initially 4.5 bcf per
day, described at times as a 48-inch line or bigger. The
implied reserve is 35 trillion cubic feet (tcf). For instance,
two 48-inch pipelines could handle about 10.5 trillion cubic
feet per day, with the implied resource being about 75 trillion
cubic feet. Mr. Heinze said there was some advantage to
building the 530 miles, if not bigger than needed, at least with
the ability to be easily expanded so it could have a high
capacity for the future.
CHAIR OGAN asked how much gas the LNG plant anticipated using,
in bcf per day.
MR. HEINZE responded that the proposed LNG project was based on
2 bcf per day. By adding compression, this could be expanded to
3 bcf per day. He said the producers' proposal was similar to
MidAmerican's; their project would be designed initially for 4.5
bcf per day, and with the addition of compression, it could be
expanded to 6 bcf per day. In both cases, expansion is
dependent upon market availability.
CHAIR OGAN suggested that the committee consider the effect that
the drawdown of gas would have on the North Slope's production
of oil. He said efforts would be made to get the anticipated
report by the Alaska Oil and Gas Conservation Commission
[AOGCC]. Large quantities of gas are being addressed, and if it
comes from Prudhoe Bay, there is a significant loss of revenue
to the state because oil is worth much more than gas. The AOGCC
has the authority to regulate the waste of hydrocarbons, but not
economic waste, which is more of a DNR function. He mentioned
being mindful of not producing so much gas for export from the
North Slope that it would offset long-term revenues. He asked
if ANGDA was planning to export to the Lower 48.
MR. HEINZE responded that the market would include the West
Coast of the U.S. and that projections of the LNG needs of the
U.S. grow dramatically over the next decade, from 2010 to 2020.
Also, Japan, Taiwan, and Korea represent substantially good
markets with an interest in North Slope gas, so those markets
would be pursued. He said he didn't know how the 4.5 bcf would
penetrate the Lower 48 market.
CHAIR OGAN said that every analyst who has talked with the
Energy Council has factored in the natural gas pipeline down the
highway as a basic assumption. Even with the 4.5 coming down
the highway, America will be [importing] 11 to 20 percent of its
energy needs in LNG by 2020. He said that although there is a
demand, site-permitting will be a big hurdle. He said he was
glad ANGDA is supportive and that [SB 271] dovetails with what
ANGDA is trying to do.
SENATOR GEORGIANNA LINCOLN referred to Section 4 and asked how
many plans ANGDA was envisioning and what the effect would be on
the request for $2.15 million.
MR. HEINZE referred to Section 4, and told the committee that
the addition of private sector evaluation wouldn't be adding to
ANGDA's work. He referred to the twelve items delineated in
Section 4 as constituting a "feasibility study." He said the
intention was to produce one feasibility study by June 15, 2004,
as required by law and also as required by pursuit of the LNG
market, which is dynamic. He said ANGDA has asked for an
additional $2.15 million of funding, of which probably 25 to 30
percent will involve the business structure of the Authority and
would be applicable to almost any project. About $1.5 million
involves questions that are project-specific, and adding another
project would require money to provide for engineering design,
cost estimates, project schedules, and so forth. In reference
to going down the highway, he said that a lot of money that's
needed would be determined by what is available to base the work
on. Luckily, Yukon Pacific [YPC] has been forthcoming regarding
the Valdez project, and monies are being spent in review rather
than in new design. The producers have just spent over $100
million; he said he would like to do this more cheaply and
thinks this is possible.
MR. HEINZE continued that SB 241 provides for the $2.15 million
as a supplement to this fiscal year's funding so that the work
th
can be finished by June 15. That money is not allocated for
the next fiscal year. If SB 271 passes, because of the change
in the timeline, he suggested that the funding be considered as
FY05 funding and the second development plan be produced as
required under this bill.
CHAIR OGAN referred to Section 4, page 3, paragraph (12), noting
that maybe a private sector entity would bring work that's
already been done in the last 25 years, since the highway route
has certainly been studied by producers and others who have
proposed building the pipeline. He said he hoped someone would
take advantage of this state-owned, tax-free opportunity by
planning, building, and thereby bearing a lot of the costs.
SENATOR ELTON asked if the supplemental $2.15 million went
ahead on its own, and if the deadline was pushed back to
January, 2005, could the fiscal impact of SB 271 be handled in
the [FY]05 budget.
MR. HEINZE said this was correct. He explained that a lot of
information is available from Yukon Pacific on ANGDA's LNG
project and that he didn't know what price tag to put on this,
but it was worth well over 15 years, or $100 or $200 million
worth of information. This information is not public but has
been made available to ANGDA; contractors will need to verify
that the information is reasonable. That's an incredible amount
of work, and because of that, he said he preferred to stick with
the funding and project schedule and to finish the feasibility
study. He said he appreciates SB 271 and with the recent entry
of a new applicant, different from the producer, it would be
interesting to see if more information would be forthcoming in
the next few months.
SENATOR ELTON asked if the scope of the Authority's involvement
expanded to include the highway route, was it anticipated that
protocols would have to be worked out with DNR and DOR, now that
applications have been received. He asked how ANGDA would work
with those two departments.
MR. HEINZE responded that the Authority would continue to work
very closely with the departments. He explained that the
Authority contributes to the state's effort by working on the
feasibility of the "people's pipeline" to Valdez, the LNG export
project, which is the will of the people. At the same time, the
Authority has unique business structures that can be useful to
the state. He said he is employed by the state's Department of
Revenue, and works to ensure that the administration is aware of
opportunities that ANGDA offers to lower the costs of projects.
The supplemental funding request reveals that almost $0.5
million dollars is included to further study business structure
issues because that's an absolutely crucial part of what ANGDA
is doing.
4:07 p.m.
SENATOR RALPH SEEKINS referred to a proposed bill that came out
of the initiative on September 20, 2001, which states, "10. The
permits necessary for an Alaskan gasline project have been
pledged to the Alaska Natural Gas Development Authority,
operating as a port authority, to facilitate the development of
the project;" - he asked if this was still true.
MR. HEINZE responded that Yukon Pacific would make anything
deemed good and valuable available for purchase, and until that
determination was made, everything could be examined; however,
ownership is not acquired by looking. For example, if YPC holds
an engineering design of the exact alignment of the pipe from
Prudhoe Bay to Valdez, it might be a lot cheaper to purchase
that rather than doing the detailed work to re-create it.
Although the price is to be determined and negotiated, it will
be for sale. Mr. Heinze said he thought this was a reasonable
business structure at this point.
SENATOR SEEKINS asked if the rights-of-way or permits had been
priced.
MR. HEINZE responded that money had been included in the
supplemental request to have an expert advise on what was
important and valuable, but that determination had not yet been
made. As an agency of the state, ANGDA's right-of-way situation
may be entirely different from that of a private company.
SENATOR SEEKINS asked if it was in Yukon Pacific's best interest
for ANGDA to build or propose their line on YPC's permitted
right-of-way.
MR. HEINZE replied that there was no doubt that YPC's
cooperation "has a motive at the end of the day."
SENATOR SEEKINS asked if YPC also holds right-of-way permits
that go from Delta to the Canadian border.
Mr. HEINZE said he understands that they do not. He said he
believes there are other parties who are certified under federal
legislation.
CHAIR OGAN mentioned this was Foothills [Foothills Pipe Line
Ltd.], acquired by TransCanada.
SENATOR SEEKINS said he assumed that if MidAmerican [MidAmerican
Energy Holdings Company] or the producers wanted to build this
pipeline from Delta to the Canadian border, then if the
Authority's scope was extended, it would need to be determined
whether permits necessary for an Alaskan gas project to the
Canadian border have been pledged to the Authority. He asked,
if SB 271 passed, would there be the same pledge of cooperation
from Foothills, or whoever owns that right-of-way.
MR. HEINZE said no, the right-of-way permits and other things
involved are not necessarily exclusive, but there is a time and
cost advantage to dealing with those who have permits, rights of
way, and so forth. The basic concept of right-of-way as
embodied in both the federal and state Natural Gas Act is that
people providing the service of delivering the public resource
ought to be able to work through the system. He said it was
practical to work with people who have already studied the
problem and have some of the permits and permission necessary.
SENATOR SEEKINS commented that there is something for sale here
that is causing an economic vested interest in those who would
influence which route of delivery of natural gas would take
place. He noted that caution should be exercised to evaluate
the reasons behind certain recommendations.
CHAIR OGAN said that SB 271 addresses public and private
partnership. The private sector, regarding the route down the
highway, involves several companies that have researched this
for 25 years, both the producers on the North Slope and those
who proposed building pipelines 25 years ago. It is mutually
beneficial. He said it was something to be entered into
cautiously, with willingness to exercise due diligence.
SENATOR SEEKINS recalled being on the governor's economic
advisory committee on North Slope Natural Gas; the report
produced for the state was the birth certificate for Yukon
Pacific's looking to get that gas to market. He said the
Legislature and Alaskans need to be flexible regarding how the
gas gets to market because, "I don't know where the market is."
He said if it was determined that a long-term and a beneficial
market was in the Midwest, he would be more excited about the
route through Canada benefiting people of Alaska versus gas that
was liquefied and shipped elsewhere. He also suggested
consideration of other spin-offs such as petrochemical
possibilities and opportunities for employment from in-state
processing of natural resources, not just the exportation.
Senator Seekins said he wanted to make sure that options weren't
being precluded and that the door was somewhat open to consider
all avenues.
CHAIR OGAN said that through the Energy Council, he's had the
opportunity to have first-hand discussions with people
interested in acquiring Alaska's gas. World experts have said,
"We need all of Alaska's gas and more." He told the committee
that he had the opportunity to tour TransCanada's control room
in Alberta, and it was impressive, with pipelines running the
east-to-west coast across Canada. Alberta is a major supplier
of natural gas to the United States. Their equivalent of the
AOGCC ordered 100 gas wells shut-in because it was hurting oil
production; there are supply/demand problems. He said he would
like to hear testimony from MidAmerican, TransCanada and the
producers.
SENATOR ELTON stated that SB 247 similarly adds to the scope of
ANGDA's work, and asked if it made sense to add, under the
purview of the Authority, any route "except for over-the-top."
CHAIR OGAN responded that this is a major policy call, as it is
a change in the voter initiative that said, "LNG to Valdez." He
said in light of the new opportunities that were revealed last
week and the applications under the Stranded Gas Act, this was
an amazingly well-timed bill.
SENATOR TOM WAGONER concurred that the desire was to streamline
the process as much as possible and avoid duplication of effort.
CHAIR OGAN suggested that competition among projects was good,
and said that this was an exciting time to chair the Resources
Committee.
TAPE 04-3, SIDE B
4:25 p.m.
SENATOR LINCOLN referred to [meeting of 9/10/03] when Deputy
Commissioner Porter said, "There isn't enough gas to build two
lines. The state should focus on passing the energy bill with
the incentives to build a highway route pipeline. If more gas
is found, then it would be appropriate to build the LNG line to
Valdez or expand the pipeline or other alternatives." She asked
for his response to questions that had been asked of him in a
previous meeting [meeting of 1/21/04]. In response to CHAIR
OGAN's question regarding relevancy, she said this was relevant
because the Authority had produced development plans and she
assumed that those plans were "all the routes."
MR. STEVE PORTER, Deputy Commissioner, Department of Revenue
(DOR), testified that the state believes that both the Stranded
Gas Act and ANGDA are important to moving gas to market in order
to benefit Alaskans. In September, they thought the most
effective way was to move gas through Canada, and now there are
two applications proposing to do that. Additionally, the state
thought ANGDA would be a strong complement to that, possibly by
moving LNG to Valdez, the Cook Inlet, or implementing other
alternatives to benefit the state such as barging gas on rivers
such as the Yukon to transport gas.
SENATOR LINCOLN asked if his previous statement about focusing
on the highway route had changed.
DEPUTY COMMISSIONER PORTER replied that it hasn't changed; it's
unknown if there is enough gas in known reserves today to
simultaneously have a 4.5 bcf pipeline to the Lower 48 and a 2
bcf LNG project. Although exploration might find 20 - 30
additional tcf on the slope, making expansion and additional
opportunities available, the September [2003] testimony refers
to a sequence, which is to build the major line first and then
look at future expansion whereby the possibility of an LNG line
might make sense as well.
CHAIR OGAN said the issue of whether there's enough gas depends
on which gas is accessed. If access is wide open, if there is a
pipeline company whose business is trucking gas, and there is an
open season allowing people with leases in areas other than
Prudhoe Bay, then the gas resource expands tremendously. If
Foothills gas and Point Thompson gas get to the pipeline first,
then Prudhoe Bay gas can be used to enhance oil production.
There is an inherent conflict - not a bad thing - and companies
have different interests; if one group builds a pipeline, they
want to sell their gas and aren't as interested in being a
charitable organization to help others to sell their gas. The
state has an interest in making sure that the right gas is there
first to preserve the oil; that will be the topic of a future
hearing. Chair Ogan said he thought there is more than enough
gas if all the gas is utilized, especially gas that hasn't been
explored.
SENATOR SEEKINS asked Deputy Commissioner Porter if, when the
state looks at potential markets for North Slope natural gas, it
includes residential and commercial markets in the Anchorage
Bowl and the Kenai Peninsula.
DEPUTY COMMISSIONER PORTER responded that the state has done a
limited amount of research on that issue and has encouraged
ANGDA to look at what might be potential and appropriate uses of
gas in the state; a more thorough analysis needs to be done.
SENATOR SEEKINS referred to the demand and availability of
natural gas for the Anchorage Bowl appears as a dwindling
resource and that a lot of oil or coal will need to be imported
to heat homes in the Anchorage Bowl in the not too distant
future. He commented that there doesn't seem to be significant
concern regarding those projections.
DEPUTY COMMISSIONER PORTER asked for further clarification.
SENATOR SEEKINS clarified that there is an eagerness to get the
gas to market and convert it to cash. He said that the state is
trying to authorize and encourage getting this natural resource
to market to convert it to cash and he usually hears talk about
either liquefying it, sending it to some unknown port in the
Pacific Rim, or shipping it overland to the Lower 48. He asked,
"What are we doing to provide for the markets from an in-state
consumption and from an in-state value-added processing basis in
the state?"
DEPUTY COMMISSIONER PORTER replied that the state is looking at
in-state gas benefits. One reason the governor opposed the
over-the-top route is because it's seen as an exclusively
financial deal, without in-state gas benefit. Once gas is
brought down through the state, it provides for the opportunity
to negotiate the contract - there are additional options for in-
state gas.
SENATOR SEEKINS said he wanted that response on record because
what he hears from constituents is, "You're gonna sell it
someplace else and my house is gonna go dark and cold."
CHAIR OGAN said that 60 percent of the population of the state -
the Anchorage Bowl, Mat-Su Valley and Kenai - has a serious
shortage. Enstar projects that in four years it won't know
where 15 percent of the gas will come from; in eight years that
figure will rise to about 80 percent. They won't know what
field their supply is coming from. That's not very much time,
he added.
SENATOR SEEKINS said he almost agrees with Senator Elton's
comment, "any place except over-the-top," adding that he's after
wherever there's cash and secondary benefits.
SENATOR WAGONER said that one of the reasons for his bill [SB
247] was the continuation of existing industries,
infrastructure, and jobs. He said that a shortage of gas from
Enstar in the Anchorage Basin compounds problems on the [Kenai]
Peninsula, which is part of the equation.
SENATOR ELTON referred to the need under the application process
for market reviews and referred to Deputy Commissioner Porter's
earlier comment of allocating the review for Cook Inlet to the
Authority. He asked, if SB 271 passes, if the state would
interface with, or allocate responsibilities to the Authority.
He said he couldn't imagine the state ceding authority under
Stranded Gas to the Authority, and asked, "Do you see using them
in any way, as you're reviewing the applications?"
DEPUTY COMMISSIONER PORTER replied that the state sees using the
Authority and is also interested in efforts not being
duplicated. Both the state and the Authority need information
regarding in-state gas use and it doesn't make sense to hire two
contractors or to produce two reports; it makes sense to
coordinate efforts.
SENATOR ELTON asked if SB 271 would get in the way of duties
that need to be accomplished under the Stranded Gas Act. He
asked if Deputy Commissioner Porter viewed SB 271 as problematic
or if he was in favor of SB 271.
DEPUTY COMMISSIONER PORTER responded that the Authority's view,
different from that of the Stranded Gas Act, sees whether there
is an opportunity for the Authority to build a pipeline as a
state entity rather than a private entity building a pipeline.
He said the question was to determine the scope of the Authority
- whether it should deal with the Alaska Highway line, a line to
Valdez, a line to Cook Inlet. The governor's office has
historically recommended that the Authority focus on Alaska
issues - basically Prudhoe Bay to tidewater - and to look at in-
state gas uses and the benefits that may arise from a gas line
that goes to Canada and to the Lower 48. He said that is
currently the easiest way to move forward. "Does that mean
we're opposed to this?" He said it doesn't necessarily signify
opposition or support of [SB 271], but things would coordinate
better if ANGDA focused primarily on Alaska and on in-state
uses.
4:44 p.m.
CHAIR OGAN said it was important to look at how SB 271
interfaces with the Stranded Gas Act and that this is probably a
topic of discussion the next time the bill is before the
committee because the Stranded Gas Act allows the administration
to negotiate with whoever applies for payment in lieu of taxes -
on ad valorem taxes. SB 271 makes the pipeline basically tax-
free because it is owned by the state. How are those two going
to interface? Chair Ogan asked [Deputy Commissioner Porter] to
think about this and perhaps to prepare something in writing
when SB 271 comes up again.
MR. LEONARD HERZOG, Assistant Attorney General, Oil, Gas &
Mining Section, Department of Law (DOL), testified that he was
available to answer questions.
CHAIR OGAN suggested that DOL answer the same question that was
just asked of DOR - that is, how SB 271 interfaces with the
Stranded Gas Act, and whether there are conflicts.
MR. HERZOG said he thought this would not be a legal problem,
but rather would be a policy question for the administration and
the Legislature to decide regarding how broadly to expand the
initiative and ANGDA's responsibilities.
CHAIR OGAN asked if there was any difficulty, specifically
asking how it works if there is a tax-free entity, the state,
owning the pipeline, and yet the Stranded Gas Act allows the
assets to hit the ground as a payment in lieu of taxes. He
asked if it was correct to assume that if the state owned the
pipeline, those assets would not be taxed by local government.
MR. HERZOG said that one example of things happening without
real issues arising would be if the applicant, MidAmerican
Energy, approached ANGDA and the state with an interest in
building a pipeline, and also looked into taking advantage of
some of the state's tax-free possibilities. He said there are
ways that the proponents of the applications for stranded gas
could approach the state and possibly work in that manner.
ANGDA, specifically, was not contemplated by the Stranded Gas
Act and doesn't have authority right now to deal with the
applications in that manner.
CHAIR OGAN asked if a deal was made with ANGDA whereby somebody
built and operated a pipeline, would the equipment that hits the
ground be subject to stranded gas negotiations whereas the pipe
wouldn't be?
MR. HERZOG said he thought ANGDA would be receptive to working
with private entities that wanted to take advantage of the
state's tax situation.
SENATOR SEEKINS asked if the state owns the pipeline, is it
subject to local property taxes.
CHAIR OGAN said he didn't think so.
SENATOR SEEKINS asked if it is partially owned by the state, is
it subject to a pro-rata property tax, and what would happen, if
the state were a partial owner, to taxability regarding the
local political subdivisions along the route.
MR. HERZOG responded that he was not prepared to give such tax
counsel.
CHAIR OGAN said it seemed to him that if the state owned the
pipeline, the local governments couldn't tax the state entity,
whether it's the LNG line, a pipeline to Canada or both. He
wondered if there was a need to look at the Stranded Gas Act and
amend it regarding making payment in lieu of taxes, to
compensate local communities for state ownership of the
pipeline.
MR. HERZOG mentioned getting outside counsel as well as
consulting with the attorneys in his office who work on the
Stranded Gas Act before the next hearing.
CHAIR OGAN asked if it was correct to assume that if ANGDA owned
any gas line then it wouldn't be subject to local municipality
taxation.
MR. HEINZE replied that the law created through the initiative
and the other realities is that the Authority's assets would not
be taxable by local entities; this would be the property of the
State of Alaska, because ANGDA is a public corporation of the
state. He explained that this was similar to local entities not
taxing the International Airport or other state-owned
facilities. Recognizing that construction activity would impact
local communities, ANGDA would, as a matter of policy, look for
ways to produce something of value for the community. For
example, if ANGDA was exempt from property taxes in Fairbanks,
it might be reasonable to provide for the building of some sort
of gas distribution system in that area, or some other facility
that might be of great value to the community. Because the
Authority is a nonprofit, with motives of public service, not
profit, he drew an analogy to how AHFC [Alaska Housing Finance
Corporation] uses its margin to help homebuyers throughout
Alaska, saying that ANGDA would find ways to help communities
that would be impacted. He said the focus on the tax issue was
on the federal income tax, which in many cases constitutes 25 to
30 percent of the cost structure, and that ANGDA's intent is not
to use savings in state taxes to any big advantage.
CHAIR OGAN asked if anything mandated this in-kind payment in
lieu of taxes.
MR. HEINZE said that the board of directors has nothing personal
to gain from this and there is no profit motive associated with
the Authority. He said he was a state employee and the board he
works for are members of the public and are appointed by the
governor. As such, the broad structuring of the business is to
gain the advantage for the people of Alaska. The right way for
the people's pipeline to achieve that is to construct certain
ancillary facilities of value in the communities along the way.
The spur line into the Cook Inlet area and other projects are
viewed as important opportunities to make that contribution very
directly.
CHAIR OGAN re-stated the question, asking if they are nice guys
who are civic minded or if this was mandated.
MR. HEINZE replied that [ANGDA] is as public-spirited as AHFC,
and that if Chair Ogan felt the need for a mandate, then he
probably ought to "lay a mandate on us."
CHAIR OGAN said, "I think I got my answer."
SENATOR SEEKINS said it appeared to him that every $1 that was
part of that public corporation would be $1 held in trust for
the people in Alaska and would be subject to legislative
appropriation. As nice guys, they couldn't allocate money to
help impacted communities unless it was legislatively
appropriated.
CHAIR OGAN said this was a good discussion and suggested that
the question be put on the back burner for now.
MR. NELS ANDERSON, Jr., testified via teleconference from
Dillingham, saying that he was a lifelong resident of Alaska.
He said he previously spoke [meeting of 1/21/04] in favor of SB
241. He said if SB 271 does not slow down the work of the
ANGDA, it would be appreciated. As a member of the public, he
was hoping to seize some of the gas at some point in time to
convert it into energy in order to help lower the cost of
energy. He clarified that he saw the gas from the North Slope
as a potential source of energy that could bring down the cost
of living and energize the salmon industry, which has suffered
from low prices and fewer fish. He said low-cost energy,
necessary to produce value-added products in the Bay, could be
an important part of that strategy.
MR. ANDERSON proposed an amendment, referring to page 3, Section
4, (10) of SB 271, and suggested that following the language, "a
plan to maximize Alaska hire, including project labor
agreements;" that the following be added: "including a work
force development advisory council". He suggested this as a way
to address criticism of the construction of the oil pipeline
that very few rural Alaskans worked on that pipeline. Few rural
Alaskans work at Alyeska, although the percentage rate has gone
up. He said inclusion of this phrase would allow the
development authority in the state to work closely with Native
groups, unions, the state, and the Denali Commission to
coordinate a plan to maximize Alaska hire. He urged the
committee to expedite passage of SB 241 and SB 271.
CHAIR OGAN said this was a laudable goal and he would like to
look at ways to incorporate Alaskans in pipeline construction.
He said timing was critical and if it looked like this was a
sanctioned project then such language might kick in. He said he
wasn't excited about creating another council or task force as a
way to spend state money to study things.
SENATOR SEEKINS suggested checking with the Commissioner of the
Department of Labor & Workforce Development.
CHAIR OGAN confirmed that this department addressed this issue,
and thanked Mr. Anderson for his testimony.
SENATOR ELTON pointed out that the language in SB 271, "(10) a
plan to maximize Alaska hire" would automatically include
workforce development issues, but he would check with the
Department of Labor and contact Mr. Anderson.
CHAIR OGAN asked if there was any further testimony. Hearing
none, he adjourned the Senate Resources Standing Committee at
5:04 p.m.
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