Legislature(2001 - 2002)
04/18/2002 02:05 PM House FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE BILL NO. 302
"An Act establishing the Alaska Gas Corporation, a
public corporation, and providing for its structure,
management, responsibilities, and operation, and
requiring the development of a project plan to evaluate
whether construction and operation of a natural gas
transmission pipeline project by the corporation is
feasible."
Representative Whitaker, Sponsor, spoke in support of the
legislation. The legislation would form the Alaska Gas
Corporation in order to guarantee access, ensure in-state
usage without significant argument or negotiation and
provide revenue to the state. The intent is also to provide
motivation to the industry. He observed that an initiative
has been introduced, which could "muddy the waters" in
relationship to an Alaskan natural gas pipeline. The
initiative speaks to the routing and would restrict the
project to the Prudhoe Bay - Valdez routing and liquid
natural gas (LNG) processing. He pointed out that HB 302
does not preclude any options, and would therefore be
preferable to route specific legislation.
Representative Harris questioned if the legislation could
replace the initiative. Representative Whitaker noted that a
legal opinion by Jack Chenoweth, Legislative Legal Counsel,
indicated that there is no reason that the legislation would
be found to be other than substantially the same.
Representative Croft questioned how the corporation would
work to compel the sale of the gas on the [north] slope.
Representative Whitaker responded that the corporation would
have powers inherent to the state, including imminent
domain.
Representative Hudson observed that there is a zero fiscal
note accompanying the legislation. He questioned what the
legislation would buy. Representative Whitaker responded
that the legislation would provide an opportunity to act in
the state's best interest. He observed that significant
amounts of money would be spent if a decision were made by
the legislature that a course of action would be followed.
Representative Hudson questioned if some funding would be
needed to describe the project and do the research. He
emphasized the importance of the project and questioned why
sufficient funds would not be made available.
Representative Whitaker noted that a special joint
legislative committee has done significant work on the
subject. He maintained that data could be drawn together at
no additional cost. A recommendation would be made and
forward by the first 30 days of second session of the next
legislature.
Representative Lancaster questioned if there is a potential
to link railroad bonding. Representative Whitaker expressed
the hope that the revenue could be pursued and observed that
tax-free financing could reduce the tariff by 18 percent.
Representative John Davies questioned when the joint
committee would terminate and asked if it required separate
action to continue. Representative Whitaker did not know the
answer.
Vice-Chair Bunde noted that litigation could occur.
Representative Croft referred to the memo by Mr. Chenoweth.
He noted that there are a number of differences between the
legislation and the initiative. He questioned why the
legislation diverged from the initiative. Representative
Whitaker observed that the legislation was drafted before
the initiative.
SCOTT HEYWORTH, CITIZEN'S INITIATIVE FOR AN ALL ALASKA
GASLINE, ANCHORAGE, testified via teleconference. He noted
that he was the lead sponsor of the initiative:
This bill would create the Alaska Natural Gas
Development Authority (Authority) as a public
corporation of the State. The Authority would acquire
and condition North Slope natural gas, and construct a
pipeline to transport the gas. The Authority's powers
would include buying property or taking it by eminent
domain, and to issue state tax-exempt revenue bonds.
The gasline route would be from Prudhoe Bay to
tidewater on Prince William Sound and the spur line
from Glennallen to the Southcentral gas distribution
grid. The Authority would operate and maintain the gas
pipeline, ship the gas, and market the gas.
Mr. Heyworth observed that the Lieutenant Governor certified
the precise legal language, which does not use the word
Canada. He argued that Mr. Chenoweth's conclusion was based
on the false premise that the initiative omits over land
domestic north American market considerations and focus on
overseas shipments and opportunities for instate use. He
maintained that the project has always contemplated
delivering Alaska gas to the United States west coast as
LNG.
Mr. Heyworth reviewed differences between the legislation
and the initiative.
Under House Bill 302 the corporation would provide for:
(1) The design and construction of the project; and
(2) The operation and maintenance of the project.
The initiative would provide for:
1. The acquisition and conditioning of North Slope
natural gas;
2. The design and construction of the pipeline system;
3. The operation and maintenance of the pipeline system;
4. The design, construction, operation, of other
facilities necessary for delivering the gas to market
and to Southcentral Alaska; and
5. The acquisition of natural gas market share
sufficient to ensure the long-term feasibility of the
pipeline system project.
Mr. Heyworth compared the legislation to the initiative. He
observed that under HB 302 "project" means the gas
transmission pipeline, together with all related property
and facilities, to extend from the Prudhoe Bay area on the
North Slope of Alaska to the interior of Alaska and from
there either along a route proximate to the Alaska Highway
to interconnect with a gas transmission pipeline in Canada
or to tidewater at a point on Prince William Sound, or both,
and includes planning, design, and construction of the
pipeline and related facilities. The initiative does not
mention Canada. The initiative states that: The acquisition
of natural gas from the North Slope and its delivery to
tidewater for shipment to market by the authority is an
essential government function of the state. He maintained
that HB 302 would continue the study. The initiative is
designed to encourage a project. He stressed that the fiscal
note associated with the initiative is $250 million dollars
because it is a project, while the legislation has a zero
fiscal note. He maintained that the initiative is not
similar to the legislation and would not stand up in court.
He stated that he did not have a problem with HB 302, but
emphasized that it would not replace the initiative.
In response to a question by Representative John Davies, Mr.
Heyworth disagreed that the cost of the initiative would be
$250 million dollars. He estimated the cost at $1 - $2
million dollars. He observed that Senator Torgerson
estimated the cost at $3.5 million dollars. He maintained
that the cost of HB 302 is zero because it is only a study.
The total cost of the initiative would only be $1 - $3
million dollars because it would only require that
professionals be hired to put the project together to go to
the producers, make an offer at the well head, go to Asia to
find the sellers and put it out to the market. Nothing would
be bought. Everything would be on contingency until after
the project is put in place. If the financed project sells
on Wall Street then money would be owed.
Representative Davies questioned if the intent is a serious
determination of feasibility. Mr. Heyworth agreed and
explained that until someone offers the gas to the market
there will not be an answer. He questioned why people are
pushing for the Canadian route and maintained that the
producers are not pushing for the Canadian route.
Representative Hudson noted that the concern of the House
Finance Committee is which route would maximize the returns
to Alaskans. He noted that the legislation leaves the
question open to further review. He questioned why the study
provided by the legislation would not compliment the
initiative. He pointed out that the route in the initiative
would still need legislative appropriation.
Mr. Heyworth responded that the legislature should demand
access to the studies compiled by the industry. He
maintained that the numbers are good and the project is
ready to go forward. He stressed that the gas needs to stay
in Alaska.
Representative Whitaker acknowledged the validity of many of
Mr. Heyworth's remarks, but emphasized that there are
different approaches. He concluded that the state does not
have the expertise or the political will yet. The question
is which approach would result in quicker action. He felt
that HB 302 would achieve the quickest results.
Vice-Chair Bunde expressed concern that the legislation
would increase the cost to the state and result in [the
hiring of] additional state employees.
Representative Whitaker stated that it is not his intent to
build a state gas pipeline dynasty, staffed with thousands
of state employees. The intent is to provide the state the
opportunity to assert its ownership obligation and manifest
the obligation through a corporate entity that would provide
for a basic infrastructure transportation system.
Representative Croft MOVED to ADOPT Amendment 1: add to the
findings section on page 2, line 14: "The legislature finds
that this is not substantially similar to the initiative";
and add to the intent section that: "It is not the intent of
the legislature that it replace the ballot initiative."
Representative Croft explained that [the initiative and the
legislation] would move the state toward asserting its owner
responsibility. He did not believe that they were
substantially similar. He stated that he is hesitant to
remove an initiative and observed that the maker of the
initiative indicated that signers were clear that the intent
was to keep the project inside the state. He felt that the
legislation should stand on its own.
TAPE HFC 02 - 88, Side B
Co-Chair Williams stated that if the legislature can improve
on the initiative that there would be no reason not to.
Vice-Chair Bunde pointed out that the decision [of
similarity between the imitative and the legislation] would
be the Lieutenant Governor's.
Representative John Davies spoke in support of the
amendment. He pointed out that the legislation would provide
a feasibility study. The initiative asserts that the only
way to prove that the project is feasible is to take it to a
proposal. He suggested that the legislation compliments the
initiative. He suggested that the amendment would prevent a
lawsuit and move both simultaneously.
Representative Whitaker observed that although substantially
similar they do have differences regarding the route
selection. He suggested that the initiative would restrict
the route selection. He maintained that all options should
remain open. The legislation isn't only a feasibility study.
The study would only be the beginning, assuming a positive
study. A mechanism would be established to control the
state's destiny in regards to the resource.
Representative Hudson noted that the initiative would be
approved in Nov. 2002 and would require appropriation in
2003. The action of the initiative comes a year earlier than
the outcome of the study required by the legislation. He
questioned if the study should come earlier to coincide with
the initiative.
Representative John Davies observed that passage of an
initiative does not require an appropriation. A study would
be compiled if the initiative passes and a feasibility study
of the project would follow. An appropriation would be
dependent on the results. He felt that the timelines for the
two approaches would be substantially similar and questioned
why get involved in a lawsuit up front.
Representative Whitaker stressed that the purpose of HB 302
is not to get involved in a lawsuit. He stressed that HB 302
was introduced before the initiative and pointed out that
the lieutenant governor would make the decision. He
reiterated concern that the initiative is route specific.
Vice-Chair Bunde observed that intent language has no
influence on the lieutenant governor. The state of Alaska
has no control over lawsuits.
A roll call vote was taken on the motion to pass Amendment
1.
IN FAVOR: Harris, Moses, Croft, Davies
OPPOSED: Hudson, Lancaster, Whitaker, Bunde, Foster,
Williams
Co-Chair Mulder was absent from the vote.
The MOTION FAILED (4-6).
Representative Whitaker MOVED to ADOPT Amendment 1A. He
explained that the amendment would update the legislation to
allow the Twenty-Third Legislature to review the finding.
There being NO OBJECTION, it was so ordered.
Representative Whitaker MOVED to ADOPT Amendment 2.
(a) The governor shall appoint the initial members of
the board of directors of the Alaska Gas Corporation
under AS 41.41.020, added by sec. 2 of this Act, not
later than 30 days after the date of submission of the
report to the governor under sec. 5(a) of this Act and
only if the report that is submitted to the governor
concludes that construction and operation of a natural
gas transmission pipeline project, as defined in AS
41.41.990, added by sec. 2 of this Act, by a public
corporation is feasible.
There being NO OBJECTION, it was so ordered.
Vice-Chair Bunde referred to page 3, line 29 and observed
that the governor could remove any member without cause.
Representative Whitaker agreed.
Vice-Chair Bunde MOVED to ADOPT Amendment 3: insert "for
cause" on page 3, line 30. There being NO OBJECTION, it was
so ordered.
Vice-Chair Bunde referred to page 4, line 23. He questioned
if there should be any limitations on the executive
director's selection of the staff. Representative Whitaker
stated that he would not object to reasonable
considerations.
Representative Foster MOVED to report CSHB 302 (FIN) out of
Committee with the accompanying fiscal note. There being NO
OBJECTION, it was so ordered.
CSHB302 (FIN) was REPORTED out of Committee with a "do pass"
recommendation and with previously published fiscal note:
REV (#1).
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