Legislature(2001 - 2002)

04/18/2002 02:05 PM FIN

Audio Topic
* first hearing in first committee of referral
+ 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                                                                   
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                                                                   
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                                                                   
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                                                                   
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                                                                   
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                                                                   
IN FAVOR: Harris, Moses, Croft, Davies                                                                                          
OPPOSED:  Hudson,   Lancaster,   Whitaker,   Bunde,   Foster,                                                                   
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                                                                   
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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