Legislature(2007 - 2008)BELTZ 211
03/20/2007 01:30 PM Senate LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| SB18 | |
| SJR4 | |
| SB121 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SJR 4 | TELECONFERENCED | |
| *+ | SB 121 | TELECONFERENCED | |
| += | SB 99 | TELECONFERENCED | |
| += | SB 18 | TELECONFERENCED | |
SJR 4-NATURAL GAS FOR STATE RESIDENTS
CHAIR ELLIS announced SJR 4 to be up for consideration.
1:44:57 PM
SENATOR WIELECHOWSKI, sponsor of SJR 4, explained how the people
of Southcentral Alaska have seen soaring heating costs in the
past five years and there are about 340,000 Alaskans that use
Cook Inlet gas to heat their homes from Fairbanks and Anchorage
to the Kenai Peninsula. Since 2002 the prices of natural gas
have increased 97 percent with a 30 percent increase this year
alone. The average cost of heating a home has approximately
doubled from about $750 five years ago to about $1,544 today.
He said the increases have caused severe hardship especially to
those on fixed incomes. Constituents are looking to the
legislature to control the costs. The company that delivers gas
to residents of Southcentral Alaska, Enstar Natural Gas Company,
reports that its share of gas costs have declined. The big issue
according to them is the cost at which they are securing gas
from Cook Inlet producers because the Inlet's known gas supplies
are being depleted. The DNR estimates there is approximately 1.7
tcf of gas reserves remaining out of about 8.8 tcf that have
been discovered in the Inlet.
At the same time the Southcentral businesses and residents are
struggling to pay their soaring heating costs, the owners of the
Kenai Liquefied Natural Gas Plant are applying for a two-year
extension of their license to export natural gas to Japan.
ConocoPhillips and Marathon currently export 1.3 metric tons of
LNG or about 36 percent of the gas produced each year in the
Inlet to Tokyo Japan for use by the Tokyo Electric Power Company
and Tokyo Gas.
SJR 4 calls on the Attorney General, in consultation with the
Department of Natural Resources, to evaluate whether the
extension of the export license is in the interests of local
consumers in the state and whether the non-renewal of the
license will result in lower prices for local businesses and
residents. It also calls on the producers of natural gas in Cook
Inlet to work with local utilities to provide more affordable
gas for Alaskans.
SENATOR WIELECHOWSKI said he has been told by several
knowledgeable individuals that the cost of producing gas from
Cook Inlet, particularly from the Legacy Fields, is less than $1
per mcf while Enstar consumers are paying $6. He has also heard,
but cannot verify because the information is proprietary, that
Tokyo utilities are paying roughly the same or less for their
gas than local consumers despite the fact it has to add the cost
of transportation over 6,600 nautical miles round trip to Japan
and the cost of liquification and regasification to it.
In a recent proposed contract between Marathon and Enstar,
Enstar agreed to pay Marathon at a rate tied to the Henry Hub
pricing point in Louisiana. Over the last two years the Henry
Hub rate has averaged about $7.60. This rate spiked in 2005
because of Hurricane Katrina, so local consumers are paying high
prices in part because of a hurricane that occurred thousands of
miles away. The Henry Hub benchmark for pricing Cook Inlet gas
is relatively new. Prior to 2004, the contracts relied primarily
on the price of oil. Gas under these contracts cost Enstar
significantly less than the Henry Hub rate.
SENATOR WIELECHOWSKI said the intent of SJR 4 is to express the
will of the legislature that producers offer terms as beneficial
as possible to local consumers recognizing that natural gas
sells on a world market and Alaska is competing in it for
exploration dollars and that high prices may serve as an
incentive for more exploration.
1:46:55 PM
SENATOR WIELECHOWSKI said a first reasonable step is to evaluate
whether continuing the export of Cook Inlet's gas is in the best
interests of those who rely on it. The third thing SJR 4 does is
it calls on the Regulatory Commission of Alaska to expedite
review of any contract that will provide long-term affordable
gas for Alaskans. He has heard from both the utilities and the
producers that the timelines under which the RCA operates need
to be tightened in the interests of everyone.
1:47:12 PM
CHAIR ELLIS said he has heard the same from his constituents and
he appreciated him addressing the issue.
SENATOR BUNDE pointed out that people in the Cook Inlet have had
below-market natural gas prices for a long time and going to
market price would naturally be shocking because of that. He
asked Senator Wielechowski if people realize that prohibiting
commercialization of the gas will probably make the price go up
even more and that commercialization of the gas allows a volume
to be produced that reduces consumers' price overall. Household
consumption would not use the large volume that would help
amortize the cost of exploration.
1:48:51 PM
SENATOR WIELECHOWSKI responded that he is just asking that the
Attorney General consider whether it is in Southcentral's best
interest to export 36 percent of its gas.
SENATOR BUNDE said he hoped the Attorney General would consider
that the resource belongs to the whole state, not just
Southcentral and if the state's economy would be negatively
impacted by subsidizing Southcentral.
SENATOR WIELECHOWSKI replied that Cook Inlet supplies natural
gas to 473,000 people, two-thirds of all Alaskans.
1:51:28 PM
SENATOR STEVENS asked if Agrium's use is part of the 64 percent
that remains in Alaska. He also didn't quite understand where
the cost of gasification fit in with his comparison of the gas
prices in Tokyo and Alaska. What happens to the gas that would
make him think the cost would be higher?
SENATOR WIELECHOWSKI replied that the percentages vary, but
roughly 36 percent of the gas goes oversees; roughly 20 percent
goes to Agrium; 36 percent to ConocoPhillips and Marathon; 16
percent goes to EnStar users, and varying percentages go to
utilities. The vast majority is going to users in Kenai.
He thought one of the reasons Tokyo users pay less is because
they have a longer term contract, which is coming up for
renewal. The price might go up then. But when all the costs of
getting the gas up, liquification, regasification and
transportation are factored in, the residents of Japan are
paying roughly the same, if not less, than the residents of
Southcentral are paying.
1:54:12 PM
SENATOR STEVENS asked how many years he expected this to
continue before the gas supply goes into decline.
SENATOR WIELECHOWSKI replied that the 1.7 tcf of gas is
estimated to last eight years at current use. While there is a
dispute over how much gas Alaska has to fill its needs,
Southcentral now doesn't have enough. Agrium cannot operate in
the winter because a spike of natural gas is needed then for
Enstar consumers and businesses. He stated:
Some people say that we don't have a shortage. I guess
I would like to point to the fact that we have
consumers who aren't using as much gas as they would
like to and I would also point to the fact that we've
had increases of 97 percent - supply and demand.
1:55:42 PM
CHAIR ELLIS asked for his suggested amendments.
SENATOR WIELECHOWSKI responded that he has three amendments.
AMENDMENT 1
On page 2, line 12: after "many benefits to the
state," replace the existing clause with "the state
must have as a priority the availability of affordable
gas to meet the needs of its people."
1:56:48 PM
SENATOR BUNDE asked if the state could subsidize the cost of gas
for people in Southcentral, how would "affordable" be defined.
SENATOR WIELECHOWSKI replied when people are making choices
between paying rent, buying food or buying gas. He repeated that
prices have increased 97 percent.
CHAIR ELLIS asked Senator Wielechowski to think about this point
for a CS and asked him to go on to the next amendments.
SENATOR WIELECHOWSKI went on.
AMENDMENT 2
On page 2, line 15: after "attorney general" add "in
coordination with the Department of Natural
Resources,"
AMENDMENT 3
On page 2, line 17: replace "termination" of the
license with "non-renewal" of the license.
1:58:26 PM
SENATOR BUNDE saw a potential financial penalty to the state
from terminating someone's license and he also wanted to know if
there would be possible litigation involved in non-renewal of a
license.
BARBARA WILLIAMS, Alaska Public Interest Research Group
(AKPIRG), related how some families couldn't afford gas at all
because they needed to eat. Some people who qualify for energy
assistance aren't getting it because of the numbers of people
who live in their households. Her own gas price has doubled. She
concluded saying she wants affordable gas for all Alaskans.
SENATOR BUNDE asked if natural gas should be added to welfare
benefits.
MS. WILLIAMS replied yes.
2:02:44 PM
PAUL KENDALL, Anchorage resident representing himself, supported
SJR 4. He advocated establishing an Energy Bill of Rights for
single-family homeowners and residential dwellings stating the
four essential needs: clean air, clean water, a balanced
environment and energy. He said a raise in energy prices
translates many times over into the prices people pay for the
four essentials.
He said they need a "true and actual impact cost
accounting....at the wellhead of where that gas comes in at." He
reasoned that public utilities were set up so that the public
has to have some secure position beyond normal capitalism or
free enterprise.
MR. KENDALL suggested adding language saying that all
information has to be made available to the general public. Now
the companies say the information is proprietary and many
companies have a history of manipulating the price for their own
welfare.
He also said he heard that a private company put in an offer to
purchase Enstar and he thought allowing that would be a terrible
mistake. When that happens a company can seal its records and
you'll never get to distribution networks, points and profit
additions without a major legal undertaking. He also said he
wanted to know more about the hydrogen production and if it is
being generated where it is sent.
2:09:34 PM
SENATOR BUNDE said he didn't want Mr. Kendall to have any
illusions that this is just a resolution and has no force of
law.
2:10:06 PM
PAT LUBY, Advocacy Director, AARP, said he has no expertise in
gas issues, but if SJR 4 could help bring down heating costs for
older and younger Alaskans, he would welcome it. He said the
Enstar increase in January hit many of his members hard and it
has additional increase proposals before the RCA at this time.
He said that consumers in the Lower 48 often do pay more for
their gas, but their constituents are unaware of that and don't
care. They're worried about what they have to pay each month.
Alaska has a means-tested welfare program that does include
utilities called the Low Income Home Energy Assistance Program
(LIHEAP) and both Senators have been very good about increasing
the federal emergency funding for that in the past.
CHAIR ELLIS held SJR 4 for a CS.
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