Legislature(2011 - 2012)HOUSE FINANCE 519
04/15/2012 09:00 AM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| SB53 | |
| SB25 | |
| SB119 | |
| SB136 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | SB 136 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | SB 25 | TELECONFERENCED | |
| += | SB 53 | TELECONFERENCED | |
| += | SB 119 | TELECONFERENCED | |
CS FOR SPONSOR SUBSTITUTE FOR SENATE BILL NO. 25(FIN)
"An Act establishing the sustainable energy
transmission and supply development program in the
Alaska Industrial Development and Export Authority;
relating to the interest rates of the Alaska
Industrial Development and Export Authority; and
relating to taxes paid on interests in property owned
by the Alaska Industrial Development and Export
Authority and to the local contribution for public
education funding related to that property."
MICHAEL PAWLOWSKI, STAFF, SENATOR LESIL MCGUIRE, addressed
the legislation. He pointed to numerous letters of support
included in members' packets (copy on file). He explained
that the bill represented a piece of the legislature's
ongoing work related to energy infrastructure. In 2010 the
sponsor had identified a major gap in the need for
financing and access to capital. He discussed that the
legislature had done an excellent job of developing grant
programs and support for energy and infrastructure, but no
real mechanism existed to provide capital for projects to
move forward on their own.
Mr. Pawlowski walked the committee through the legislation.
Section 1 included the short title "the Alaska Sustainable
Strategy for Energy Transmission and Supply." Section 2
(pages 1 through 3) included conforming language that added
the word "energy" into the findings section that
established the Alaska Industrial Development and Export
Authority (AIDEA) within the state's public laws. Section 3
added conforming language related to AIDEA in the duties
section. He accentuated the importance of Section 4 that
established a separate fund within AIDEA and empowered the
fund to finance energy infrastructure projects with the
private sector. The sponsor did not want to displace
efforts of the private sector; therefore, Section 4
included amendments to AIDEA's existing loan participation
program adding qualified energy developments. The authority
could work with banks to provide credit backstops if
commercial lending institutions were interested in
financing energy projects.
Mr. Palowski moved to Section 6 (pages 5 through 7),
outlining that AIDEA was not allowed to give away money and
was required to earn a rate of interest that exceeded the
cost of its funds when making loans. The sections required
AIDEA to achieve an interest rate similar to existing
requirements; it had to exceed the minimum cost of funds.
Section 11 (page 7) allowed AIDEA to provide an incentive
interest rebate of up to 1 percent under certain
circumstances; page 7, line 24 allowed the rebate for
renewable energy and rural and economic development.
Section 12 created the fund separately within AIDEA in
order to protect the authority's existing credit rating on
its existing programs. The authority's powers were expanded
on page 9 in two material ways: (1) the ability to defer
principal payments or capitalize interest on qualified
energy developments, which would help to drive project
economics down and (2) the ability to guarantee loans and
bonds to extend out for hydroelectric development to 50
years.
Mr. Palowski addressed that page 10, lines 9 through 12
included a limitation specifying that AIDEA could only
finance one-third of a project's costs without additional
approval by the legislature. He detailed that the fund was
intended to be co-invested capital along with the private
sector; the goal was not to have AIDEA go "whole into
projects." The goal was to leverage investment that
utilities, mineral development companies, and developers
were making around the state. The fund was limited to
qualified energy developments (defined on page 10, line 23)
including transmission, generation, conservation, storage,
or distribution of heat or electricity, natural gas (except
large pipelines in Cook Inlet or the North Slope), and
refined petroleum products.
11:08:32 AM
Vice-chair Fairclough MOVED the bill before the committee.
Representative Neuman asked for a definition of the term
"rural development" included on page 7, line 23. He had
many areas of his district that were without electricity
transmission lines. Mr. Pawlowski deferred the question to
the department.
MARK DAVIS, DEPUTY DIRECTOR, ALASKA INDUSTRIAL DEVELOPMENT
AND EXPORT AUTHORITY, DEPARTMENT OF COMMERCE, COMMUNITY AND
ECONOMIC DEVELOPMENT, replied that AIDEA was in the process
of adopting regulations underneath an existing rural
provision. The agency intended to adopt a broad definition
that would encompass small communities; the distinction
made between "roadless" and "road" was not effective from
an economic standpoint. He expounded that AIDEA looked at
economic data on how each community was doing, the amount
of capital in each community, and census data on poverty
levels.
Representative Neuman explained that Houston, Alaska only
had 1,500 residents and that there were areas three blocks
from his house that were without electricity. He asked
whether the bill would allow the Matanuska Electric
Association (MEA) to get loans to expand the community's
current system through AIDEA loans. He stressed that
"rural" did not just encompass off the road-system areas.
Mr. Davis responded that the bill would allow for MEA to
work with AIDEA to expand the area's grid.
Representative Edgmon discussed a bill that had passed the
prior day related to new tax credits. He wondered whether
an applicant would be able to utilize both programs
established in the bills. Mr. Davis responded in the
affirmative.
Co-Chair Thomas CLOSED public testimony.
Representative Wilson asked whether the liquid natural gas
plant on the North Slope would qualify under the program.
Mr. Pawlowski pointed to language on page 10, lines 27
through 29 that specifically excluded a gas pipeline
project for the transportation of gas from the North Slope
or Cook Inlet to market; however, liquefaction
regasification distribution was included; the bill had been
designed specifically to work with the project.
11:12:47 AM
Representative Doogan discussed that AIDEA had a history of
projects going bankrupt. He wondered how AIDEA's policies
had changed in order to prevent the issue from happening.
Mr. Davis replied that AIDEA had issued a strategic plan in
2008 in which underwriting standards had been changed. The
bill was consistent with board policy that allowed the
authority to only invest up to one-third without
legislative approval. The change had been implemented to
reduce risk and to work with partners who did their due
diligence. He relayed that the agency would probably aim
for a 1.25 to 1.34 debt service ratio on a revolving fund
such as the one included in the legislation and would
establish the guideline in regulation.
Vice-chair Fairclough directed attention to the two fiscal
notes. The first fiscal note was fund capitalization with
an allocation to the Sustainable Energy Transmission and
Supply Development Fund in the amount of $1.25 million. The
second fiscal note had zero fiscal impact and affected the
Department of Commerce, Community and Economic Development
related to AIDEA.
Co-Chair Thomas asked whether there would be a regional
spread required to prevent all of the money from going to
one region. Mr. Davis responded that the AIDEA board wanted
to achieve a geographic disbursement of investment and
included related requirements. The board was provided with
statistics about how each loan in the Loan Participation
Program affected each region; the same thing would be done
for the program under the bill.
Representative Neuman asked why the language on page 10,
line 29 was limited to the North Slope and Cook Inlet. He
wondered why language did not just read "within Alaska." He
detailed that there was a significant amount of industry
including Native corporations looking at non-conventional
gas plays and exploration within the state that could
probably take advantage of the legislation.
Mr. Pawlowski clarified that the North Slope language was
an exclusion. He detailed that the other areas be
acceptable under the bill including the Nenana Basin
Pipeline and other. The only items excluded under the bill
were related to specific pipeline projects from the North
Slope or Cook Inlet to market.
11:16:26 AM
Co-Chair Thomas noted that the operating budget conference
committee had closed out with the bill funding in its
fiscal notes. He explained that the fiscal note needed to
travel with the bill.
Vice-chair Fairclough MOVED to report HCS CSSSSB 25(L&C)
out of committee with individual recommendations and the
accompanying fiscal notes. There being NO OBJECTION, it was
so ordered.
HCS CSSSSB 25(L&C) was REPORTED out of committee with a "do
pass" recommendation and with one previously published zero
fiscal note: FN2 (CED); and one previously published fiscal
impact note: FN3 (SFIN/CED).
11:17:25 AM
AT EASE
11:22:55 AM
RECONVENED