Legislature(2009 - 2010)BARNES 124

02/03/2009 03:00 PM ENERGY


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
*+ HCR 2 IN-STATE GAS PIPELINE TELECONFERENCED
Moved Out of Committee
*+ HCR 3 IN-STATE GAS PIPELINE TELECONFERENCED
Moved Out of Committee
*+ HCR 4 IN-STATE GAS PIPELINE TELECONFERENCED
Moved Out of Committee
*+ HCR 5 IN-STATE GAS PIPELINE TELECONFERENCED
Moved Out of Committee
HCR 2-IN-STATE GAS PIPELINE                                                                                                   
HCR 3-IN-STATE GAS PIPELINE                                                                                                   
HCR 4-IN-STATE GAS PIPELINE                                                                                                   
HCR 5-IN-STATE GAS PIPELINE                                                                                                   
                                                                                                                                
3:03:36 PM                                                                                                                    
                                                                                                                                
CO-CHAIR MILLETT  announced that  the order  of business  would be                                                              
HOUSE  CONCURRENT RESOLUTION  NO.  2, Requesting  the governor  to                                                              
provide energy  security for all Alaskans by  pursuing development                                                              
of a natural gas bullet pipeline  from the North Slope to the Cook                                                              
Inlet  region;  and  requesting   the  governor  to  identify  and                                                              
negotiate with  one or more  persons capable of  producing natural                                                              
gas from  the Gubik area,  and other areas  on the North  Slope if                                                              
necessary, in sufficient  quantities to support  a bullet pipeline                                                              
project;  HOUSE  CONCURRENT  RESOLUTION   NO.  3,  Requesting  the                                                              
governor to  provide energy  security for  all Alaskans  by taking                                                              
and  encouraging  all action  that  would  support a  natural  gas                                                              
bullet pipeline  from the  North Slope to  the Cook Inlet  region,                                                              
including  initiating any  necessary  negotiations  to reopen  the                                                              
Agrium  plant  in  Kenai;  HOUSE   CONCURRENT  RESOLUTION  NO.  4,                                                              
Requesting the  governor to provide  energy security  for Alaskans                                                              
by taking and  encouraging all action to support  development of a                                                              
natural  gas bullet  pipeline from  the  North Slope  to the  Cook                                                              
Inlet region  including advocating  an increase  in the  amount of                                                              
natural gas  that may be exported  under authority granted  by the                                                              
United  States   Department  of   Energy;  and  HOUSE   CONCURRENT                                                              
RESOLUTION  NO.  5,  Requesting the  governor  to  provide  energy                                                              
security for all  Alaskans by working on significant  elements and                                                              
components  to support the  timely construction  of a natural  gas                                                              
bullet pipeline from the North Slope  to the Cook Inlet region and                                                              
to take necessary action to assist  and facilitate the process for                                                              
a private entity to make a final  investment decision to commit to                                                              
the pipeline before November 1, 2010.                                                                                           
                                                                                                                                
3:03:49 PM                                                                                                                    
                                                                                                                                
CO-CHAIR EDGMON moved to hear as  a block HCR 2, HCR 3, HCR 4, and                                                              
HCR  5, and  objected for  discussion purposes.   [Therefore,  the                                                              
committee heard the resolutions individually.]                                                                                  
                                                                                                                                
HCR 4-IN-STATE GAS PIPELINE                                                                                                   
                                                                                                                                
CO-CHAIR MILLETT announced  that the next order  of business would                                                              
be HOUSE CONCURRENT  RESOLUTION NO. 4, Requesting  the governor to                                                              
provide  energy security  for Alaskans by  taking and  encouraging                                                              
all  action  to  support  development  of  a  natural  gas  bullet                                                              
pipeline from the  North Slope to the Cook Inlet  region including                                                              
advocating an  increase in the amount  of natural gas that  may be                                                              
exported under  authority granted by the United  States Department                                                              
of Energy.                                                                                                                      
                                                                                                                                
3:45:22 PM                                                                                                                    
                                                                                                                                
CO-CHAIR EDGMON moved  to hear HCR 4 and objected  for purposes of                                                              
discussion.                                                                                                                     
                                                                                                                                
3:45:38 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  RAMRAS  reiterated  that a  500  mcf per  day  gas                                                              
pipeline requires an  annual flow of 180 bcf to fill  the pipe and                                                              
allow for a minimum tariff.  As discussed,  all of the residential                                                              
and  light commercial  gas usage  in  the Railbelt  area would  be                                                              
approximately 60 bcf per year and  the Agrium plant would also use                                                              
60 bcf  per year.  Since  the annual capacity  of the pipe  is 180                                                              
bcf, there  is a potential  shortage of  60 bcf; therefore,  HCR 4                                                              
encourages the governor and her administration  to advocate for an                                                              
increase in the  amount of natural gas that may  be exported under                                                              
authority  granted  by the  United  States Department  of  Energy.                                                              
Representative  Ramras related  that  an official  of the  Federal                                                              
Energy Regulatory  Commission (FERC) conveyed that  it is critical                                                              
to  Alaska that  the U.  S. Department  of Energy  be involved  in                                                              
securing gas  for the pipeline;  in addition, the  official warned                                                              
that  export licenses  are  difficult to  grant  because the  U.S.                                                              
energy supply is sometimes robust and sometimes very lean.                                                                      
                                                                                                                                
3:48:16 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  RAMRAS emphasized  that  it is  important for  the                                                              
administration to open  a dialog for the purpose  of expanding the                                                              
capacity of  Alaska's export license.   Expanding the  capacity of                                                              
the license  would lessen the  tariffs for Alaskans.  Furthermore,                                                              
exported  gas is  subject to  a production  tax  thus creating  an                                                              
important  additional  income  stream for  Alaska's  general  fund                                                              
(GF).                                                                                                                           
                                                                                                                                
3:49:24 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE PETERSEN  asked whether  studies have been  done as                                                              
to how the $4  billion construction cost of the  bullet line would                                                              
affect the price of natural gas.                                                                                                
                                                                                                                                
3:49:48 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE RAMRAS  reminded members that  HCR 4 speaks  to the                                                              
export component of  the bullet gas pipeline project.   He further                                                              
explained that gas  coming from the Gubik area, or  near the North                                                              
Slope,  is   subject  to   negotiations  between  the   Regulatory                                                              
Commission  of Alaska  (RCA) and  the supplier  of gas.   In  this                                                              
case,  Cook  Inlet  is  a  depleted   field  and  exploration  and                                                              
production  costs there  would be  higher than  in the Gubik  area                                                              
where  gas is  abundant.   He  stressed that  the  tariff cost  to                                                              
consumers will increase with a pipeline  that is only partly full.                                                              
He advised  Representative Pedersen that  the state is  far better                                                              
off  to be  early  in  applying for  an  expansion  of the  export                                                              
license in order to reduce the tariff by filling the pipe.                                                                      
                                                                                                                                
3:51:34 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TUCK  asked for the amount of natural  gas that was                                                              
exported out of the Kenai peninsula at its height of production.                                                                
                                                                                                                                
3:51:51 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE RAMRAS  estimated 12 bcf per year  and deferred the                                                              
question to Mr. Thayer.                                                                                                         
                                                                                                                                
3:52:46 PM                                                                                                                    
                                                                                                                                
MR. THAYER offered to provide an estimate at a later date.                                                                      
                                                                                                                                
3:53:08 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TUCK  asked whether there  will be a need  to build                                                              
another gas  liquids plant  or will  the existing  one be  able to                                                              
handle the full capacity of the bullet line.                                                                                    
                                                                                                                                
3:53:25 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE RAMRAS  assured the  committee that there  will not                                                              
be  a need  to  expand  the LNG  plant  if  the dialog  with  U.S.                                                              
Department  of  Energy  to  expand   the  export  license  is  not                                                              
initiated right away.                                                                                                           
                                                                                                                                
3:54:09 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TUCK further asked  whether there will be a uniform                                                              
price for gas,  or differences in price for Agrium,  exported gas,                                                              
and  in-state commercial  and residential  use: In  short, one  is                                                              
subsidizing another.                                                                                                            
                                                                                                                                
3:54:39 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  RAMRAS said  that has  not been  determined.   The                                                              
pipeline  company  has  two  businesses:    negotiating  for  gas,                                                              
selling it, and collecting a premium  for the transmission of gas;                                                              
and shipping  gas for  large consumers.   He assumed  that Agrium,                                                              
because it would  be consuming one-third of the gas  in the bullet                                                              
line, would  receive pricing preferential  to that  of residential                                                              
and  commercial   customers;  however,  Alaskan   residential  and                                                              
commercial  customers  will  still  see relief  from  the  present                                                              
situation of paying  the highest prices for natural  gas in the U.                                                              
S.                                                                                                                              
                                                                                                                                
3:55:53 PM                                                                                                                    
                                                                                                                                
CO-CHAIR MILLETT opened public testimony.                                                                                       
                                                                                                                                
3:56:06 PM                                                                                                                    
                                                                                                                                
MR. ABEGG expressed his frustration  with the extension of the LNG                                                              
license for ConocoPhillips Alaska,  Inc., (Conoco) because in some                                                              
ways the  extension has  precipitated the  problem of limited  gas                                                              
supplies  in Cook  Inlet; however,  Conoco's  past investment  has                                                              
also provided  opportunities for Alaska.   He agreed that  the gas                                                              
pipeline  does  need a  large  industrial  user and  he  supported                                                              
extending the  license for  the LNG plant  in Kenai for  a limited                                                              
number  of  years,  based  on  in-state  uses for  the  gas.    He                                                              
suggested that in-state  opportunities for the use of  gas such as                                                              
development  of  the  Susitna Dam,  a  possible  cement  industry,                                                              
mining  discoveries,  and  the coal-to-liquids  plant,  will  come                                                              
along.   Mr. Abegg concluded  that he was  in favor  of [expanding                                                              
the export license] on a limited basis.                                                                                         
                                                                                                                                
3:58:08 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE RAMRAS remarked:                                                                                                 
                                                                                                                                
     Wouldn't  it  be  great  if   we  didn't  have  a  legal                                                                   
     limitation of 500 million cubic  feet a day and we could                                                                   
     afford to have an export component  and, a, pursue other                                                                   
     value-added  opportunities instead  of being capped  off                                                                   
     like we  are because  of the  AGIA legislation that  was                                                                   
     signed into law last year?                                                                                                 
                                                                                                                                
3:58:36 PM                                                                                                                    
                                                                                                                                
MR. ABEGG  agreed, because there is  a lot of potential  gas along                                                              
the bullet  line, he said.   Producers in  the Nenana  fields area                                                              
are expecting  reserves of  two trillion cubic  feet (tcf)  to ten                                                              
tcf, additionally  gas reserves  are anticipated  in Yukon  Flats,                                                              
Stevens  Village, North  Slope,  and Gubik  field.   Although  500                                                              
[mcf  of gas]  will make  the line  work,  additional capacity  is                                                              
desirable.                                                                                                                      
                                                                                                                                
3:59:25 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE RAMRAS asked:                                                                                                    
                                                                                                                                
     If we  were successful in  getting the export  expansion                                                                   
     of  the license  and  that bumped  us  up  right at  500                                                                   
     million  cubic   feet,  and  then  the   development  of                                                                   
     International  Tower Hills  ... came  up, and  if ...  a                                                                   
     gas-to-liquids  [plant]  opened up,  and  if the  Mat-Su                                                                   
     concrete  plant   opened  up,  and  we   were  otherwise                                                                   
     committed and  we couldn't take  our usage up  above 500                                                                   
     million cubic feet because we  had promised those rights                                                                   
     away to a  Canadian company, Transcanada, that  would be                                                                   
     a shame, wouldn't it?                                                                                                      
                                                                                                                                
4:00:00 PM                                                                                                                    
                                                                                                                                
MR. ABEGG said yes.                                                                                                             
                                                                                                                                
4:00:08 PM                                                                                                                    
                                                                                                                                
CO-CHAIR MILLETT closed public testimony.                                                                                       
                                                                                                                                
4:00:28 PM                                                                                                                    
                                                                                                                                
CO-CHAIR EDGMON  removed his objection  and moved to report  HCR 4                                                              
out of committee  with individual recommendations  and no attached                                                              
fiscal note.  Hearing no objections, it was so ordered.                                                                         
                                                                                                                                
4:00:48 PM                                                                                                                    
                                                                                                                                
The committee took an at-ease from 4:00 p.m. to 4:03 p.m.                                                                       
                                                                                                                                
4:03:02 PM                                                                                                                    
                                                                                                                                

Document Name Date/Time Subjects
Sponsor Stmt HCR 2 020309.pdf HENE 2/3/2009 3:00:00 PM
Sponsor Stmt HCR 3 020309.pdf HENE 2/3/2009 3:00:00 PM
Sponsor Stmt HCR 4 020309.pdf HENE 2/3/2009 3:00:00 PM
Sponsor Stmt HCR 5 020309.pdf HENE 2/3/2009 3:00:00 PM