Legislature(2009 - 2010)HOUSE FINANCE 519

02/25/2010 01:30 PM FINANCE


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01:37:21 PM Start
01:37:28 PM HB300 || HB302
03:58:13 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+= HB 300 APPROP: OPERATING BUDGET/LOANS/FUNDS TELECONFERENCED
Heard & Held
+= HB 302 APPROP: MENTAL HEALTH BUDGET TELECONFERENCED
Heard & Held
+ Review of Medicaid Expenditures and TELECONFERENCED
Projections
<Above Item Rescheduled to 02/26/10>
+ Bills Previously Heard/Scheduled TELECONFERENCED
+ Briefing on Governor's FY11 Oil & Gas TELECONFERENCED
Requests
<Above Item Continued from 02/24/10>
1:37:38 PM                                                                                                                    
                                                                                                                                
HOUSE BILL NO. 300                                                                                                            
                                                                                                                                
     "An  Act making  appropriations  for  the operating  and                                                                   
     loan program  expenses of state government,  for certain                                                                   
     programs, and  to capitalize funds;  making supplemental                                                                   
     appropriations;  making  appropriations  under art.  IX,                                                                   
     sec.  17(c), Constitution  of the  State of Alaska;  and                                                                   
     providing for an effective date."                                                                                          
                                                                                                                                
HOUSE BILL NO. 302                                                                                                            
                                                                                                                                
     "An  Act making  appropriations  for  the operating  and                                                                   
     capital    expenses    of   the    state's    integrated                                                                   
     comprehensive mental  health program; and  providing for                                                                   
     an effective date."                                                                                                        
                                                                                                                                
1:39:17 PM                                                                                                                    
                                                                                                                                
Co-Chair Hawker discussed housekeeping.                                                                                         
                                                                                                                                
     Briefing on Governor's FY 11 Oil and Gas Requests:                                                                     
                                                                                                                                
PAT GALVIN, COMMISSIONER, DEPARTMENT  OF REVENUE, stated that                                                                   
prompted by the issuing of the  Alaska Gasline Inducement Act                                                                   
(AGIA),  a  portion of  the  budget  had  been set  aside  to                                                                   
fulfill  the state's  obligation  to the  AGIA  reimbursement                                                                   
fund,  and  to   ensure  that  the  department   managed  the                                                                   
responsibility  of reviewing  the  reimbursement requests  on                                                                   
order  to   determine  what   qualified  as  a   reimbursable                                                                   
expenditure. The request would  also fund the auditing of the                                                                   
reimbursement fund.                                                                                                             
                                                                                                                                
1:40:14 PM                                                                                                                    
                                                                                                                                
Commissioner Galvin  stressed that  in order for  the gasline                                                                   
project  to  become  a  reality,  discussions  regarding  the                                                                   
state's fiscal system, in relation  to gas commercialization,                                                                   
would need to  continue. He pointed out to  the committee the                                                                   
two primary  budget items  located on  the "Governor's  FY 11                                                                   
Gasline  Appropriation  Requests"  (copy  on  file).  Line  7                                                                   
illustrated the departmental request  of $1.1 million to form                                                                   
an  "AGIA Reporting  System and  Fiscal  Systems Analysis  to                                                                   
Support Negotiations  of Gasline  Fiscal Reimbursement  Fund"                                                                   
and Line 8 listed the $1,550,000  request to form the "Fiscal                                                                   
Systems Analysis  to Support  Negotiations of Gasline  Fiscal                                                                   
Terms and Audit of AGIA Reimbursement  Fund". The creation of                                                                   
the  positions  would  allow the  department  to  retain  the                                                                   
knowledge  gained in  relation to  understanding the  state's                                                                   
fiscal  system,  and  it's  involvement   in  the  commercial                                                                   
operations of  a gasline. He believed that  having commercial                                                                   
analysts within  the department  was a critical  function for                                                                   
making informed policy decisions.                                                                                               
                                                                                                                                
1:43:39 PM                                                                                                                    
                                                                                                                                
Co-Chair  Hawker  referred  to  the  handout  "Department  of                                                                   
Revenue  Status of  FY 10  Gasline  Appropriations" (copy  on                                                                   
file). Chapter 6 of the Statutory  Law of Alaska (SLA), or SB
82,  was   an  original  appropriation   of  $3   million,  a                                                                   
significant  portion of  which was  spent before  FY 10.  The                                                                   
multi-year appropriation  was outstanding thorough  FY 12. He                                                                   
queried the  spending hiatus  taken by  the department  in FY                                                                   
10. Commissioner  Galvin replied  that the funds  listed were                                                                   
in anticipation  of  the escalating  fiscal discussions.  The                                                                   
department  could  not  predict when  the  discussions  would                                                                   
occur.  The   money  was  retained   in  reserve   under  the                                                                   
assumption that  the discussions  may not follow  a budgetary                                                                   
cycle. The availability  of the funds had been  factored into                                                                   
FY  11 request.  The combination  of  the two  appropriations                                                                   
would be considered  the funds available moving in  the FY 11                                                                   
timeframe.                                                                                                                      
                                                                                                                                
Co-Chair Hawker understood that  the money would be needed in                                                                   
FY  11,   in  combination   with  the  additional   requests.                                                                   
Commissioner Galvin replied in the affirmative.                                                                                 
                                                                                                                                
Co-Chair Hawker asked if the contractor  services to finalize                                                                   
the department's  AGIA regulations were under  the commercial                                                                   
rules  required  by  statute   to  be  completed  before  the                                                                   
commencement   of  the  open   season.  Commissioner   Galvin                                                                   
answered  yes. He stated  that the  regulations dealing  with                                                                   
the value  of the gas for the  purpose of taxes needed  to be                                                                   
established.  The department had  worked with the  Department                                                                   
of Natural Resources (DNR) to  utilize the same contractor to                                                                   
provide  the   commercial  framework   for  determining   the                                                                   
methodology for valuing the gas  on the royalty side, and the                                                                   
tax side.  In the interest  of the tax  payer, work  had been                                                                   
done to keep  the taxes and royalties equal.  The expectation                                                                   
for  the  remaining  funds  was to  retain  a  contractor  to                                                                   
respond to the comments that were  received during the public                                                                   
comment period.                                                                                                                 
                                                                                                                                
1:47:01 PM                                                                                                                    
                                                                                                                                
Co-Chair  Hawker  queried  the  source  of  the  $550,000,000                                                                   
adjustment from  the Office of  Management and  Budget (OMB).                                                                   
Commissioner  Galvin   believed  that  the  funds   had  been                                                                   
released  by the Department  of  Law (LAW)  to OMB; OMB  then                                                                   
turned the funds over to the Department  of Revenue (DOR). He                                                                   
gave assurances that  the money had been with LAW  at the end                                                                   
of FY 09, but was unclear of its origins.                                                                                       
                                                                                                                                
Co-Chair Hawker  understood that with the  position requested                                                                   
on Line 7 of the governor's request,  the department intended                                                                   
to manage  the account of  the reimbursement requests  of the                                                                   
licensee. Commissioner  Galvin stated that that  was correct.                                                                   
Co-Chair  Hawker  expounded  that the  $140  million  request                                                                   
seemed  an  excessive salary  to  be  paid for  tracking  the                                                                   
reimbursement expenditures  on the development  for one year.                                                                   
He pointed  out to the commissioner  that the  department had                                                                   
$3  million  of  unspent  funds,  allocated  for  information                                                                   
technology  (IT)  improvements  that  had sat  unused  for  2                                                                   
years.                                                                                                                          
                                                                                                                                
Commissioner Galvin  clarified that the request  was intended                                                                   
to  be  a   one-time  request  in  order  to   establish  the                                                                   
information system needed. He  furthered that the information                                                                   
requirements   of  the   system  listed   on  Line   7,  were                                                                   
independent of what  would be necessary for  running the rest                                                                   
of the  tax programs operated  by the department.  The unused                                                                   
$3  million was  part  of  separate on-going  projects,  both                                                                   
related  to  the  eventual  development  of  a  comprehensive                                                                   
information system  for all tax programs, and  utilization to                                                                   
upgrade equipment  within the department. He  reiterated that                                                                   
the line  item in the current  budget was to create  a system                                                                   
that would  be unique to  the reimbursement request,  and was                                                                   
not intended to be an on-going budget item.                                                                                     
                                                                                                                                
Co-Chair Hawker wondered what  kind of information system was                                                                   
being developed.  Commissioner Galvin  said he would  need to                                                                   
refer  to an  IT technician  on the  matter. Co-Chair  Hawker                                                                   
maintained that the complexity  of the position requirements,                                                                   
that  would  garner  such  a large  salary,  eluded  him.  He                                                                   
requested further explanation  as to why it was going to cost                                                                   
the state $1 million to track  the expenditures. Commissioner                                                                   
Galvin clarified  that the line  item was a combination  of 2                                                                   
different things;  $300,000 was  for the information  system,                                                                   
and  $800,000 was  for the  commercial  analyst position.  He                                                                   
noted that  the figures were wrongly  merged into one  on the                                                                   
spreadsheet.                                                                                                                    
                                                                                                                                
1:53:55 PM                                                                                                                    
                                                                                                                                
Co-Chair Hawker  clarified that the request was  for $800,000                                                                   
to  fund  4 commercial  analyst  positions  at  $200,000  per                                                                   
analyst,  per  year.  Commissioner   Galvin  replied  in  the                                                                   
affirmative. He explained that  the intent was to hire people                                                                   
with  extensive industry  experience  in order  to provide  a                                                                   
greater understanding  within the department. He  likened the                                                                   
positions   to  the   audit  master   positions  within   the                                                                   
department. He felt  that it would add to the  knowledge base                                                                   
and  was worth  funding. He  believed that  the salary  would                                                                   
attract  the caliber  of  employee  that the  department  was                                                                   
seeking.   Co-Chair  Hawker   noted  that   there  had   been                                                                   
controversy over whether the audit  masters had been utilized                                                                   
as they  were intended.  He maintained  his concern  with the                                                                   
request.     Commissioner    Galvin     communicated     that                                                                   
representatives  from the  department  could further  explain                                                                   
the work done by the analysts and its value to the state.                                                                       
                                                                                                                                
1:55:16 PM                                                                                                                    
                                                                                                                                
Representative  Austerman  asked  if the  "Governor's  FY  11                                                                   
Gasline  Appropriation  Request"  handout  tracked  with  the                                                                   
"Historical Summary  Gasline Related Appropriations  FY 04-FY                                                                   
10"(copy on file).                                                                                                              
                                                                                                                                
Co-Chair Hawker  apologized that  the current and  historical                                                                   
requests had not been presented clearly and for comparison.                                                                     
                                                                                                                                
Commissioner   Galvin  added  that   yes,  the  sheets   were                                                                   
comparable  to  the  extent  that  they  described  the  same                                                                   
information.   The    historical   summary    listed   budget                                                                   
appropriations that were connected  to expenditures that were                                                                   
made during FY 09, and were detailed  in the "Alaska In-State                                                                   
Gas Pipeline Project  Budget Summary" packet.  He stated that                                                                   
Line  16 of  the historical  Summary tracked  to the  numbers                                                                   
under "Ch6 SLA  07 (SB82) Commercialization North  Slope Gas"                                                                   
(CAP)   illustrated  on   the   status  of   FY  10   gasline                                                                   
appropriations sheet.                                                                                                           
                                                                                                                                
Co-Chair  Hawker identified  that the  "Ch27 SLA 09,  (HB177)                                                                   
North Slope Gas  to Market (OP) could be tracked  to Line 16,                                                                   
Page 2 of the historical summary.                                                                                               
                                                                                                                                
Commissioner Galvin  interjected that Lines 17 and  18 of the                                                                   
historical  summary   pertained  to   ANGDA,  and   would  be                                                                   
discussed later in the meeting.                                                                                                 
                                                                                                                                
1:57:57 PM                                                                                                                    
                                                                                                                                
Co-Chair Hawker stated that there  was $353,000 left from the                                                                   
FY  09  appropriation  which   he  could  not  track  on  the                                                                   
historical  summary.  Commissioner  Galvin  relayed  that  he                                                                   
would  get back  to the  committee with  the information.  He                                                                   
believed that there had been no  FY 09 expenditures made from                                                                   
the appropriation that would fall  into the categories listed                                                                   
on the historical summary.                                                                                                      
                                                                                                                                
Co-Chair Hawker reminded the commissioner  that the committee                                                                   
had requested  information for  all money and  appropriations                                                                   
that were  active and available.  He apologized again  to the                                                                   
committee that the information was incomplete.                                                                                  
                                                                                                                                
Co-Chair  Hawker wondered  if  the department  had the  legal                                                                   
authority  to  make  Exxon  Mobile  Corporation  (Exxon)  and                                                                   
TransCanada  pay for  the incurred  cost  to the  state as  a                                                                   
result of the  project. He argued that Exxon  could more than                                                                   
afford to  pay the cost  to the administration.  Commissioner                                                                   
Galvin  replied   that  the  expenses   for  the   hiring  of                                                                   
commercial analysts,  and consultants  to oversee  the fiscal                                                                   
system  were  not  items  that would  be  reimbursed  by  the                                                                   
industry.                                                                                                                       
                                                                                                                                
Co-Chair   Hawker  contended   that  industry  was   directly                                                                   
benefiting from the  half billion dollars that  the state was                                                                   
spending on the project.                                                                                                        
                                                                                                                                
Commissioner  Galvin thought that  two different  issues were                                                                   
being unclearly  combined. He said  that the state  would not                                                                   
charge the industry  for the cost of implementing  the system                                                                   
necessary  for  determining  if   the  industry  expenditures                                                                   
qualified for reimbursement. He  understood that the question                                                                   
was whether  or not state had  the right to ask  the industry                                                                   
for  reimbursement  for  the  cost of  the  creation  of  the                                                                   
information system.  He felt that  the creation  costs should                                                                   
be separated from the expenditures  that were associated with                                                                   
developing a  fiscal system that  related to the  development                                                                   
of the gas project.  In the instance of the  development of a                                                                   
gas project, the  funds were not exclusive to  one project or                                                                   
the other,  if the state made  a change in the  fiscal system                                                                   
it  would  apply  to any  project  that  moved  forward.  The                                                                   
implication  that the  development of  the fiscal system  was                                                                   
for the  sole benefit  of the AGIA  licensee was  a misguided                                                                   
notion. The fiscal system was  being developed to protect the                                                                   
state's interest with any gasline  project that went forward.                                                                   
                                                                                                                                
2:03:20 PM                                                                                                                    
                                                                                                                                
Co-Chair  Hawker  maintained that  the  costs  that had  been                                                                   
specifically  identified  with the  AGIA  pipeline should  be                                                                   
charged  to  the  company  that agrees  to  the  project.  He                                                                   
thought that the company that  was causing the state to incur                                                                   
the  cost should  be  responsible  for reimbursement  of  the                                                                   
cost. Commissioner  Galvin rebutted  that the department  did                                                                   
not  believe   that  it  would  be  beneficial   to  entities                                                                   
operating in the state, whereas  a permitting expenditure was                                                                   
for the  purpose of providing  a particular applicant  with a                                                                   
particular response.  He expressed  concern with  billing the                                                                   
industry for the  cost of developing state tax  policy in the                                                                   
expectation of  a tax discussion.  He wondered how  the state                                                                   
would determine who to send the bill to.                                                                                        
                                                                                                                                
Commissioner Galvin  understood that the suggestion  was that                                                                   
the state  should find a way  to limit the amount  of general                                                                   
fund  spending for  consultants  and commercial  analysts  by                                                                   
passing the  cost onto the industry.  He claimed that  he did                                                                   
not  know a  methodology  in which  that  could  be done.  He                                                                   
wondered if  it was wise to pass  on the cost of  the state's                                                                   
decision  making  about tax  policy,  to the  companies  that                                                                   
would be paying the tax.                                                                                                        
                                                                                                                                
2:06:20 PM                                                                                                                    
                                                                                                                                
Co-Chair Hawker  repeated that a  charge back system  for the                                                                   
cost of  building a fiscal  structure to audit  the companies                                                                   
was  not  unreasonable.  Commissioner Galvin  felt  that  the                                                                   
question would depend  on how extensive the  review needed to                                                                   
be. If the cost  were going to be passed on  to the licensee,                                                                   
the licensee  could suggest that  the state be  less rigorous                                                                   
in its evaluation.                                                                                                              
                                                                                                                                
Co-Chair Hawker agreed to disagree.                                                                                             
                                                                                                                                
Representative Kelly  attempted to examine the  question from                                                                   
a different perspective. He asked  if there was a possibility                                                                   
state could  request some reimbursement.  Commissioner Galvin                                                                   
explained that  with a permit,  the applicant was  looking to                                                                   
do  something that  they do  not have  a right  to do,  which                                                                   
obligated  the applicant  under state  law to get  permission                                                                   
through  the  permit  to  do   it.  In  the  context  of  the                                                                   
reimbursement requirements, that  applicant had a contractual                                                                   
right to  reimbursement. The state  then had the  opportunity                                                                   
to evaluate the  reimbursement request to determine  how much                                                                   
should be  paid. The applicant  had the contractual  right to                                                                   
the  full amount.  The effort  that  the state  put into  the                                                                   
evaluation would be commensurate  with the amount of scrutiny                                                                   
put into determining if the full  amount of the request would                                                                   
be paid.  He felt  that passing  the cost  of the  evaluation                                                                   
onto the licensee was different  that passing the cost onto a                                                                   
permit applicant.                                                                                                               
                                                                                                                                
Representative  Kelly  asked   if  the  department  had  been                                                                   
careful to  clearly identify  the non-reimbursable  items for                                                                   
all  parties involved.  He assumed  that  the department  had                                                                   
considered  the  question  of   cost  reimbursement  and  had                                                                   
determined that it was not sound  policy. Commissioner Galvin                                                                   
clarified of  the $2.6 million  illustrated on Lines 7  and 8                                                                   
of   the   gasline  appropriation   request,   $350,000   was                                                                   
attributable   to  the   AGIA   reimbursement  account.   The                                                                   
remaining   $2.3   million   was  unrelated   to   the   AGIA                                                                   
reimbursement account,  and would fund analysts  not specific                                                                   
to AGIA.                                                                                                                        
                                                                                                                                
2:13:27 PM                                                                                                                    
                                                                                                                                
Commissioner  Galvin  said  the amounts  requested  were  for                                                                   
viable and necessary projects.  He felt the information would                                                                   
be beneficial  in  future legislative  cycle discussions.  He                                                                   
believed that the  reference to the remaining  balance was an                                                                   
example of funds being available when they were needed.                                                                         
                                                                                                                                
2:15:06 PM                                                                                                                    
                                                                                                                                
Representative Doogan requested  an explanation of Line Items                                                                   
7  and 8  of the  "Governor's  FY 11  Gasline  Appropriations                                                                   
Request".  He  understood  that  $350,000  of  the  aggregate                                                                   
amount of $2.65  million was the AGIA  reimbursement account,                                                                   
but was unclear  about what the rest of the  request was for.                                                                   
Commissioner Galvin  explained that  line 7 was  comprised of                                                                   
$800,000  for   the  4  commercial  analyst   positions,  and                                                                   
$300,000 for the AGIA information  system development. Line 8                                                                   
represented  $1.5 million  for  contractual  support for  the                                                                   
fiscal system analysis; $50,000  was for the outside audit of                                                                   
the AGIA reimbursement fund.                                                                                                    
                                                                                                                                
Representative Doogan  asked what the $1.5 million  left over                                                                   
would be  used for.  Commissioner Galvin  responded  that the                                                                   
funds  were  for the  fiscal  analysis  contractual  support.                                                                   
Representative Doogan  asked what that the  support entailed.                                                                   
Commissioner Galvin  relayed that the support  meant bringing                                                                   
in outside services to provide  contractual support as to how                                                                   
the  fiscal system  worked; both  with, and  without the  gas                                                                   
project.                                                                                                                        
                                                                                                                                
2:19:10 PM                                                                                                                    
                                                                                                                                
Representative  Doogan asked  if "fiscal  system" meant  "tax                                                                   
policies". Commissioner Galvin replied yes.                                                                                     
                                                                                                                                
Vice-Chair Thomas  inquired about  Line Item 11,  the request                                                                   
for $10,000,000  for the Municipality  of Anchorage:  Port of                                                                   
Anchorage Expansion.                                                                                                            
                                                                                                                                
KAREN  REHFELD, DIRECTOR,  OFFICE  OF MANAGEMENT  AND  BUDGET                                                                   
responded that the decision to  include the Port of Anchorage                                                                   
in the governor's capital budget  was based on the port being                                                                   
a central port that brought in  goods and services related to                                                                   
pipeline infrastructure development.                                                                                            
                                                                                                                                
Vice-Chair  Thomas asked  if any  other ports  that had  been                                                                   
identified  similarly, had  been given  the same amount.  Ms.                                                                   
Rehfeld replied  that there were  a number of  potential port                                                                   
and road  improvement  projects that would  be important  for                                                                   
the gasline.  At this point the  entire list of  projects had                                                                   
not been identified.                                                                                                            
                                                                                                                                
2:21:23 PM                                                                                                                    
                                                                                                                                
Vice-Chair Thomas  expressed concern  that only one  port was                                                                   
chosen  for funding.  He believed  that ports  in Haines  and                                                                   
Skagway were  equally important.  Ms. Rehfeld responded  that                                                                   
the Department  of Transportation  and Public Works  (DOT/PW)                                                                   
was working to identify port needs around the state.                                                                            
                                                                                                                                
Co-Chair  Hawker added  that  the house  and  the senate  had                                                                   
agreed that the  governor's request to use funds  held by the                                                                   
Alaska Housing Finance Corporation  (AHFC) for future capital                                                                   
projects was  inappropriate. He  reminded the committee  that                                                                   
the source of  the funding for projects should  be considered                                                                   
in budget discussions.                                                                                                          
                                                                                                                                
Vice-Chair  Thomas  understood   that  under  AGIA,  the  oil                                                                   
companies would  be fiscally responsible for  improvements to                                                                   
any of the ports involved in the gasline.                                                                                       
                                                                                                                                
Representative   Doogan  pointed   out  that   a  number   of                                                                   
appropriations had  been made to  the Port of  Anchorage over                                                                   
the past few  years. He asked whether the port  expansion was                                                                   
related  to  the  gasline.  Ms.   Rehfeld  replied  that  the                                                                   
administration   felt   that  the   AHFC   fund  source   was                                                                   
appropriate for the gasline and gasline related projects.                                                                       
                                                                                                                                
Co-Chair Hawker  categorized the  request as another  general                                                                   
expansion  of  the port,  not  related  to the  gasline.  Ms.                                                                   
Rehfeld concurred  that it was  another installment  into the                                                                   
Anchorage  port.  Ports  throughout   the  state  would  need                                                                   
improvements in preparation for a gasline.                                                                                      
                                                                                                                                
2:26:02 PM                                                                                                                    
                                                                                                                                
CRAIG TILLERY,  DEPUTY ATTORNEY  GENERAL, DEPARTMENT  OF LAW,                                                                   
introduced his  support staff.  He directed the  attention of                                                                   
the committee to  Page 8, Line 55 of the  historical summary.                                                                   
The original appropriation had  been for $2,950,000, of which                                                                   
$3.5 million had been allocated  to the Department of Law. At                                                                   
the  end of  the  fiscal year  it  became apparent  that  the                                                                   
department  did not  need the  entire  appropriation, so  the                                                                   
remaining  funds  were  reallocated back  to  the  governor's                                                                   
office.                                                                                                                         
                                                                                                                                
Mr. Tillery  stated that  of the  $2,950,000, the  department                                                                   
expended  $1,250,000.  The remaining  $1.7  million would  be                                                                   
approximately what  the department would need for  FY 10; the                                                                   
entire  amount was  to be spent  on one  contract. Under  the                                                                   
administrative  manual, the  department  encumbered the  $1.7                                                                   
million for the  contract, and did not have  an appropriation                                                                   
this past year. It was anticipated  that the department would                                                                   
spent the full $1.7 million this fiscal year.                                                                                   
                                                                                                                                
Co-Chair Hawker  asked what the  department was  spending the                                                                   
money on.                                                                                                                       
                                                                                                                                
Mr. Tillery  explained that in  the past, the funds  had been                                                                   
expended on  outside counsel. The  majority of the  funds had                                                                   
gone  to the  law  firm of  Greenberg-Traurig.  The firm  had                                                                   
assisted the  department with  an analysis of  Federal Energy                                                                   
Regulatory  Commission  (FERC)  rate  making  practices,  the                                                                   
federal   open   season  requirements,   use   of   precedent                                                                   
agreements for  firm transportation capacity, an  analysis of                                                                   
the  AGIA  licensee's  project   plans,  and  the  successful                                                                   
request for  a waiver of  FERC capacity provisions  to reduce                                                                   
risk to  potential shippers. A  small amount had gone  to the                                                                   
firm  of Bennett-Williams  in  order to  handle  some of  the                                                                   
Canadian aspects of the gasline.                                                                                                
                                                                                                                                
2:31:19 PM                                                                                                                    
                                                                                                                                
Mr. Tillery stated that the department  anticipated using the                                                                   
$2.5 million appropriation request  of the coming fiscal year                                                                   
to  pay  Greenberg-Traurig.  The  funds  would  be  used  for                                                                   
continued monitoring of the pre-filing  process, various FERC                                                                   
issues, transportation  agreements, and FERC  filings related                                                                   
to the certificate  of public convenience and  necessity, and                                                                   
certain  activities   related  to  the  Canadian   regulatory                                                                   
issues.                                                                                                                         
                                                                                                                                
Co-Chair  Hawker asked  if the  department anticipated  using                                                                   
the full 2.5 million in the next  fiscal year, or would it be                                                                   
a  multi-year  utilization.  Mr.  Tillery  replied  that  the                                                                   
department anticipated  fully using  the funds in  the coming                                                                   
fiscal year.                                                                                                                    
                                                                                                                                
Representative  Doogan   referred  to  the   gasline  funding                                                                   
history  handout  distributed  by  the  department  (copy  on                                                                   
file).  In  FY 09,  $3.5  million  was transferred  from  the                                                                   
governor's  office to  the department.  Then, at  the end  of                                                                   
2009, $1,697.2  was encumbered for an existing  contract with                                                                   
Greenberg-Trauig.  He  asked if  the  remainder  of the  $3.5                                                                   
million had been  spent. Mr. Tillery responded  that the rest                                                                   
of the  money had  been spent,  or had  been returned  to the                                                                   
governor's  office  for reallocation.  Representative  Doogan                                                                   
clarified that  the $550,000 was  coming from the  funds. Mr.                                                                   
Tillery replied in the affirmative.                                                                                             
                                                                                                                                
2:35:00 PM                                                                                                                    
                                                                                                                                
MARTY RUTHERFORD, DEPUTY COMMISSIONER,  DEPARTMENT OF NATURAL                                                                   
RESOURCES,  introduced  her support  staff.  She stated  that                                                                   
there  were several  components associated  with the  gasline                                                                   
that were  currently being explored  by the department.  Work                                                                   
was expected in the area of license  compliance, which was an                                                                   
obligation associated  with AGIA statute AS.  43.90. This was                                                                   
the technical and engineering  design timeline of the gasline                                                                   
project. Part of the plan involved  what was going to be done                                                                   
in  terms   of  expenditures.  Commercial   aspects  included                                                                   
ensuring  that  open  season filing  was  responsive  to  the                                                                   
requirements of AGIA and making  certain that the net present                                                                   
value did  not negatively affect  the state. There  were AGIA                                                                   
incentives   associated   with   royalty  tax   and   license                                                                   
regulations.   Then    there   were   the    regulatory   and                                                                   
environmental  aspects  of  overseeing   the  project  as  it                                                                   
progressed.   She  relayed   that   the   AGIA  project   was                                                                   
responsible for ensuring that  gas was available for in-state                                                                   
use,  and  that  there were  adequate  off-takes  located  in                                                                   
appropriate  locations.  There  were  at  least  5  off-takes                                                                   
expected.                                                                                                                       
                                                                                                                                
Co-Chair   Hawker   understood   that  the   department   was                                                                   
optimistic about the project.                                                                                                   
                                                                                                                                
Ms.  Rutherford  said that  the  department believed  in  the                                                                   
viability of  the project. She  stressed that  the department                                                                   
wanted to begin preliminary work as soon as possible.                                                                           
                                                                                                                                
MARK  MEYERS, ALASKA  GASLINE INDUCEMENT  ACT (AGIA)  PROJECT                                                                   
COORDINATOR,  all aspects  of energy  resources and  interest                                                                   
should be  considered in  competitive benchmarking.  The AGIA                                                                   
project was a gateway that would  open the entire North Slope                                                                   
to  natural gas  possibilities.  Various  things  need to  be                                                                   
examined and monitored to make the project a success.                                                                           
                                                                                                                                
Ms. Rutherford  said  that the  state was moving  into  a new                                                                   
generation  of oil  and gas  development.  She believed  that                                                                   
natural gas was going to become  a very important part of the                                                                   
state's  economy.  She urged  that  many models  and  aspects                                                                   
needed to be examined.                                                                                                          
                                                                                                                                
2:44:29 PM                                                                                                                    
                                                                                                                                
LETA SIMONS,  SUPPORT SERVICES DIVISION DIRECTOR,  DEPARTMENT                                                                   
OF NATURAL  RESOURCES,  referred to the  handout prepared  by                                                                   
the department  (copy on file).  The department  drew funding                                                                   
from four  different areas  related to  the gasline;  most of                                                                   
which had  carried over from  prior years  as far back  as FY                                                                   
05.  A multi-year  operating appropriation  for  right-of-way                                                                   
permitting had an available balance  of $2,996,700, which had                                                                   
been reappropritaed, and would be used by June 30, 2011.                                                                        
                                                                                                                                
2:46:24 PM                                                                                                                    
                                                                                                                                
Ms.   Rutherford  interjected   that  the   money  had   been                                                                   
appropriated for  use associated with right-of-way  activity,                                                                   
and was  not specific to the  AGIA licensee. The  most recent                                                                   
expenditure of  the funds had  been for a part-time  employee                                                                   
with the joint pipeline office,  who would be responsible for                                                                   
gathering  general  information   and  doing  pre-application                                                                   
work. Some  of the remaining balance  would also be  used for                                                                   
the purpose of  public access to Light Detection  and Ranging                                                                   
(LIDAR)  of the mainline  pipe  from the North  Slope to  the                                                                   
Canadian border.                                                                                                                
                                                                                                                                
2:47:54 PM                                                                                                                    
                                                                                                                                
Mr. Myers added that LIDAR was  necessary because there was a                                                                   
section  of route  near the  Canadian  border that  contained                                                                   
large geologic  faults. The corridors  for the  pipeline were                                                                   
narrow, and  a wider  one was needed  in order to  understand                                                                   
any possible  geologic hazards. Locating and  identifying any                                                                   
active  faults was  a priority  to  alleviate litigation  and                                                                   
project delay.                                                                                                                  
                                                                                                                                
Ms.  Rutherford continued.  She  stated that  work had  begun                                                                   
with  DOT/PW and  DNR  to  identify additional  raw  material                                                                   
sites. Existing  material sites were contaminated  and gravel                                                                   
would  need to  be  found elsewhere.  She  stressed that  the                                                                   
department would only use the funds when appropriate.                                                                           
                                                                                                                                
2:50:37 PM                                                                                                                    
                                                                                                                                
Co-Chair Hawker  highlighted the line  item found on  Page 9,                                                                   
Line  69,  of  the historical  summary.  He  noted  that  the                                                                   
appropriation on Line 69 had been  originally appropriated in                                                                   
2008, and  was then  re-appropriated in  the 2009 budget.  He                                                                   
understood  that   the  short  description  of   the  project                                                                   
requested   funds   for  the   permitting   and   application                                                                   
processing  for the  right-of-way  work  related to  bringing                                                                   
North Slope gas to market. He  said that entering into the FY                                                                   
10  budget year  the department  had $2.9  million, of  which                                                                   
only  $22,000   had  been  expended.  This  meant   that  the                                                                   
department   was  still   sitting   on   nearly  the   entire                                                                   
appropriation.  He  asked  if  all the  work  the  department                                                                   
needed to  do in FY  09 was  accomplished with only  $22,000.                                                                   
Ms. Rutherford  replied that the $22,000 was  only associated                                                                   
with  the  employee that  had  been  assisting in  the  joint                                                                   
pipeline  office.   The  LIDAR  purchase  was   estimated  at                                                                   
$500,000 and would be paid for out of the original balance.                                                                     
                                                                                                                                
Co-Chair  Hawker   wondered  if   the  money  spent   on  the                                                                   
permitting and  application processing should be  billed back                                                                   
to the applicant. Ms. Rutherford  replied that the department                                                                   
had worked  diligently to clarify  in the agreement  what the                                                                   
state  would be  reimbursed for.  The  licensee was  entitled                                                                   
access  to a  coordinators  office  by statute,  and  general                                                                   
funds were being  requested for that. Beyond  that, RSAs were                                                                   
in place  to reimburse the  state. The money  associated with                                                                   
the appropriation went beyond  the normal pre-application and                                                                   
application for a right-of-way.  It explored where additional                                                                   
material sites,  for any project,  were located, and  how the                                                                   
state  as   a  sovereign   held  companies  responsible   for                                                                   
contaminated  sites.  She stated  that  the  responsibilities                                                                   
covered in  the request  were sovereign responsibilities  and                                                                   
not things that could be directly billed to an applicant.                                                                       
                                                                                                                                
Mr. Myers added  that the environmental cost of  putting up a                                                                   
project of this  scale was 100's of millions  of dollars. The                                                                   
department   understood   that   changes  in   the   National                                                                   
Environmental   Policy   Act   (NEPA),   Environmental   Site                                                                   
Assessment  (ESA), fish  and stream  crossings,  and air  and                                                                   
water quality  laws had created  a challenge to  accelerating                                                                   
development  projects  in the  state. The  detail  permitting                                                                   
work was reimbursable,  but prior to that time,  the best way                                                                   
to  get  the project  going  was  help  assure  environmental                                                                   
regulatory certainty for the industry.  He furthered that the                                                                   
concept of using general funds  in the AGIA license was based                                                                   
on  the premise  that  the state  could  help  to assure  the                                                                   
certainty of a  gasline by getting agencies  working together                                                                   
to fill in data gaps prior to application.                                                                                      
                                                                                                                                
2:58:40 PM                                                                                                                    
                                                                                                                                
Representative  Doogan referred  to Page  9, Line  69 of  the                                                                   
historical  summary,  which illustrated  the  balance  amount                                                                   
$2,940,100. He compared the figure  of $2,981,000 detailed on                                                                   
the department's  handout.  He queried  why the numbers  were                                                                   
different.  Ms.  Simons  explained that  there  were  several                                                                   
multi-year appropriations,  which resulted  in more  than one                                                                   
balance on  the spreadsheet. There  was the $2,940,100,  plus                                                                   
$5,700  left over from  another appropriation  (Page  1, Line                                                                   
11), and  a balance  of $900 found  on Page  9, Line  67. She                                                                   
concluded that the total was made  up of many small balances.                                                                   
                                                                                                                                
3:01:50 PM                                                                                                                    
                                                                                                                                
Ms. Simons  continued. She  said the request  from FY  10 for                                                                   
$3.2 million was  on track with the FY 11 request.  The funds                                                                   
were used for consultants in support  of the AGIA contract. A                                                                   
list of consultants  and the different contracts  they worked                                                                   
on could be made available.                                                                                                     
                                                                                                                                
Ms.  Rutherford explained  what  had been  done with  current                                                                   
year appropriations.  Of the $3.2  million, $1.3  million had                                                                   
been spent; $1.5 million had been  encumbered. The estimation                                                                   
was that the  balance of approximately $272,000  would lapse.                                                                   
The  department  was using  $690,000  in association  with  a                                                                   
company   called  PINGO   International   for  project   plan                                                                   
monitoring  of  the AGIA  licensee's  pipeline  project.  The                                                                   
department  had also allotted  $364,325 to  be paid  to Black                                                                   
and Veatch for economic risk modeling,  which was the primary                                                                   
instrument used  to calculate  net present value  and examine                                                                   
the  risks  associated  with the  commercial  aspect  of  the                                                                   
project. The  company had also  been working on  AGIA royalty                                                                   
reduction   regulations.   Energy   Capital   Advisors/Energy                                                                   
Project Consultants  had been paid $197,876  for a commercial                                                                   
advisor to monitor  and review the licensee's  commercial and                                                                   
overall project plan, and provide  assistance to state policy                                                                   
makers regarding  various commercial  measures the  state may                                                                   
take  to increase  the  likelihood  of project  success.  The                                                                   
department had  paid Blaskovich  Services, Inc. $138,746  for                                                                   
an oil and gas planning model  and gathering large volumes of                                                                   
relevant  data  and  meeting  with  state  policy  makers  to                                                                   
determine  the framework  needed for  an Alaska  Oil and  Gas                                                                   
Energy plan model.                                                                                                              
                                                                                                                                
3:05:42 PM                                                                                                                    
                                                                                                                                
Representative  Gara expressed  that  the consulting  process                                                                   
was seemingly  unending. Ms. Rutherford explained  that Black                                                                   
and  Veatch and  Energy Capital  Advisors  had been  involved                                                                   
during the analysis  of the proposed partnership  between the                                                                   
AGIA  licensee TransCanada  and Exxon.  The relationship  was                                                                   
commercial and  the department wanted to ensure  that nothing                                                                   
in the partnership would obviate  the responsibilities to the                                                                   
state  under AGIA.  Outside experts  helped  to question  and                                                                   
analyze the  complex commercial  documents that were  part of                                                                   
the process and were not on retainer,  but hired for specific                                                                   
projects.                                                                                                                       
                                                                                                                                
Mr.  Myer  added  that  Exxon  and  TransCanada  had  varying                                                                   
business practices and expectations  in terms of contingency.                                                                   
The  state  needed  to  know  if  the  legitimate  rates  the                                                                   
companies  charged  were  fair  and reasoned  rates  for  the                                                                   
reimbursable components. The department  had a responsibility                                                                   
of due  diligence to  examine the  dynamics as the  companies                                                                   
changed and integrated.                                                                                                         
                                                                                                                                
3:08:02 PM                                                                                                                    
                                                                                                                                
Mr.  Myer said  that the  efforts  being made  to create  the                                                                   
gasline  were complex  and experts were  necessary. The  geo-                                                                   
technical  aspects   of  the  pipeline  would   also  require                                                                   
expertise. Huge cost variations  could occur depending on the                                                                   
modeling  of the  physical  pipeline.  He asserted  that  the                                                                   
state  should  have  a deep  understanding  of  the  economic                                                                   
factors  involved in  the project. He  assured the  committee                                                                   
there were many constant elements  that came into play within                                                                   
the project's viability.                                                                                                        
                                                                                                                                
3:10:14 PM                                                                                                                    
                                                                                                                                
Ms.  Rutherford  furthered  that project  changes  that  were                                                                   
significant  enough  to  negatively affect  the  state's  net                                                                   
present value needed  to be recognized early  on. The outside                                                                   
consultants   were   assisting    in   providing   up-to-date                                                                   
information  necessary for  the state  to make  knowledgeable                                                                   
decisions moving forward.                                                                                                       
                                                                                                                                
Representative  Gara   asked  if  the  administration   would                                                                   
provide  a status  report of  the continuing  viability of  a                                                                   
gasline.                                                                                                                        
                                                                                                                                
Mr.  Myer responded  that the  updates  were being  presented                                                                   
incrementally. He cited a talk  on shale gas presented to the                                                                   
committee in the  past. He believed that it  was an advantage                                                                   
to have  capacity  built with  shale gas, 90  percent of  new                                                                   
electrical generations  came from natural gas.  A trend which                                                                   
would likely  continue if the  EIA forecast was  correct. The                                                                   
growth in  natural gas demand  would force an  examination of                                                                   
the  supply balance  and cost  structure of  the product.  He                                                                   
stressed  the importance  that the  state understood  current                                                                   
commercial information  in order  to comprehend  the economic                                                                   
fluctuations  that  were expected.  He  stated  that how  the                                                                   
state's  product   would  compete   with  Shell  Gas   was  a                                                                   
legitimate question and should be explored by experts.                                                                          
                                                                                                                                
3:14:00 PM                                                                                                                    
                                                                                                                                
Mr. Myer asserted that the administration  did not anticipate                                                                   
a  fundamental  loss  in  the   financial  viability  of  the                                                                   
project.                                                                                                                        
                                                                                                                                
Ms.  Simons  continued  to  discuss the  FY  10  base  budget                                                                   
illustrated on Page 2:                                                                                                          
                                                                                                                                
     FY  10  Base  budget for  AGIA  Coordinator's  Office  -                                                                 
     $681,700, AR 37093                                                                                                         
                                                                                                                                
     Current expenditures are  $360,725 in personal services,                                                                   
     $64,576 in travel, $49,724  for services, and $6,775 for                                                                   
     commodities:  Total of $481,800  which is 72  percent of                                                                   
     the FY  10 budget. An  additional amount of  $35,100 had                                                                   
     been encumbered.                                                                                                           
                                                                                                                                
     Capital Improvement Projects  (CIP) - $4,785,160 for two                                                                 
     projects:                                                                                                                  
     Gasline Corridor Hazards  Evaluation, $785,160 available                                                                   
     from  FY 08  and  FY 09  CIPs,  AR 40774  &  AR 40841  -                                                                   
     Division of Geological and Geophysical Surveys:                                                                            
        · $267,827 had been used to pay contractors                                                                             
          including Costal Helicopters, Inc., Michael Smith,                                                                    
          University of Alaska Fairbanks, Carver Geologic,                                                                      
          and Alaska Aerofuel.                                                                                                  
        · $79,333 has been used for in-house expense in the                                                                     
          Division of Geological and Geophysical Surveys for                                                                    
          personal    services,    travel,    services    and                                                                   
          commodities for the project manager.                                                                                  
                                                                                                                                
     Reservoir Modeling  Studies, North Slope -  $4.0 million                                                                 
     available from FY09 CIP,  AR 40852 - Division of Oil and                                                                   
     Gas:                                                                                                                       
        · $657,400 was used to pay contractor PetroTel for                                                                      
          completion of a study in the NorthStar unit.                                                                          
                                                                                                                                
Ms. Simons stated that another  $2.9 million in contracts had                                                                   
been  written   against  the  $4.0  million,   but  that  the                                                                   
department encumbered  task orders and not contracts.  As the                                                                   
task  orders  were  lined  up   the  department  would  begin                                                                   
encumbering the balance.                                                                                                        
                                                                                                                                
Co-Chair Hawker  clarified that that explained  why little of                                                                   
the FY08 authority appeared to have had been spent.                                                                             
                                                                                                                                
3:17:21 PM                                                                                                                    
Ms. Simons  continued  on to the  FY 11  budget request.  She                                                                   
broke  down  the  Governor's   FY  11  Gasline  Appropriation                                                                   
Request  for  $4,217,500.  For   FY  11  the  department  was                                                                   
requesting $2.3 million to pay for consultants.                                                                                 
                                                                                                                                
Ms. Rutherford  added that  the request  was $1 million  less                                                                   
than FY  10 because  the department  would  not be doing  the                                                                   
AGIA  regulations;  the funds  were  a continuation  for  the                                                                   
requirements associated with overseeing  the AGIA activities.                                                                   
                                                                                                                                
3:18:27 PM                                                                                                                    
                                                                                                                                
Representative  Austerman  asked  what  the  FY  10  one-time                                                                   
appropriation was. Ms. Rutherford  explained that the request                                                                   
had been for $3.2 million for  FY 10, and was $2.3 for FY 11.                                                                   
                                                                                                                                
Co-Chair Hawker  understood that the $2.3 was  encompassed in                                                                   
the $4.2. Ms. Rutherford replied in the affirmative.                                                                            
                                                                                                                                
3:18:50 PM                                                                                                                    
                                                                                                                                
Ms. Simons  said that  also encompassed  in  the $4.2,  was a                                                                   
$1,444,000  increment  for  the  base  budget  for  the  AGIA                                                                   
coordinators office. The increment  would add 4 new positions                                                                   
and  would cover  travel  expenses  and office  space;  lease                                                                   
space and  telephone activity had  not yet been  written into                                                                   
the budget.  The final  item was  $477,500 for AGIA  outreach                                                                   
geared to provide information to stakeholders.                                                                                  
                                                                                                                                
Co-Chair Hawker  noted that the  governor's request  would be                                                                   
discussed in  future supplemental  request hearings.  In that                                                                   
context he wondered if the department  had asked for an after                                                                   
the fact  reimbursement  from the industry,  or was  approval                                                                   
from the legislature being sought before action was taken.                                                                      
                                                                                                                                
Mr. Myers said  the department had money to  pay salaries for                                                                   
approximately two months, and  no travel money left. The hope                                                                   
was  that the  supplemental request  would  be approved.  The                                                                   
department  was  not yet  in  deficit  spending, but  at  the                                                                   
current rate of spending, in order  to continue the necessary                                                                   
work, more  money was needed.  He referred to  a subcommittee                                                                   
document  that explained  the  level of  detailed work  going                                                                   
forward. He stressed  that because the state  passed the law,                                                                   
and the  legislature approved  the license, the  licensee was                                                                   
obligated until  2014 to acquire  the FERC certificate  which                                                                   
required an  EIS. The limited  timeframe of the  EIS required                                                                   
the regulatory work to continue  regardless of the commercial                                                                   
results  of the  open  season. The  environmental  regulatory                                                                   
work, the engineering,  and the outreach to  acquire permits,                                                                   
would  be  mandatory  per  the   obligation  under  the  AGIA                                                                   
license.                                                                                                                        
                                                                                                                                
3:21:33 PM                                                                                                                    
                                                                                                                                
Co-Chair Hawker revealed that  the committee had not received                                                                   
the sub-committee document mentioned  by Mr. Myers. Mr. Myers                                                                   
offered to provide the document to the committee.                                                                               
                                                                                                                                
Mr. Myers  relayed that FERC was  anxious to begin  the work.                                                                   
Under  federal law  they had 18  months to  complete the  EIS                                                                   
once the  application was submitted.  The permitting  work to                                                                   
complete the field  work was currently happening.  The agency                                                                   
planned on engaging  in coordination on the  GIS system. Both                                                                   
the federal  and state  government was  working to  gather as                                                                   
much  public  data  as  possible.  The  four  new  positions;                                                                   
pipeline  coordinator,   habitat  biologist,   administrative                                                                   
office support,  and project assistance  for website  and GIS                                                                   
work, were  required.  Communication with  the public  on the                                                                   
progress of the project was also a priority.                                                                                    
                                                                                                                                
3:24:24 PM                                                                                                                    
                                                                                                                                
Ms. Rutherford interjected that  public outreach needed to be                                                                   
improved and not maintained.                                                                                                    
                                                                                                                                
Co-Chair Hawker estimated that  the department was constantly                                                                   
aware  of concerns  over  the viability  of  the project.  He                                                                   
perceived that  it was the responsibility of  the legislature                                                                   
to consider the question. He wondered  if the project were to                                                                   
be assessed with  a purely objective eye, would  it appear to                                                                   
be a viable and successful project.   Ms. Rutherford believed                                                                   
that  project  was  still in  good  shape.  The  differential                                                                   
between  the price  of oil  and gas  was a  change from  past                                                                   
practices. Based  upon the information received  from outside                                                                   
experts,  she  was  65-70 percent  sure.  She  admitted  that                                                                   
various concerns  existed, but  felt that the  project needed                                                                   
to  be  moved forward.  She  asserted  that  oil was  on  the                                                                   
decline and an alternative source was greatly needed.                                                                           
                                                                                                                                
3:28:09 PM                                                                                                                    
                                                                                                                                
Vice-Chair Thomas  declared that had he known  that the state                                                                   
was going  into the joint venture  with Exxon, he  would have                                                                   
voted against  AGIA. He  asserted that  what the  corporation                                                                   
had done  to the  commercial fishing  industry in the  state,                                                                   
and Alaska  as a whole, was  disastrous. He asked if  AGIA or                                                                   
DNR was responsible  for the recommendation of  putting aside                                                                   
$10  million  for  the  Port  of  Anchorage.  Ms.  Rutherford                                                                   
believed  that  the  decision  had  been  made  by  OMB.  The                                                                   
Department of  Natural Resources  was working with  DOT/PW to                                                                   
examine all  infrastructure needs  throughout the  state. She                                                                   
emphasized  that DOT  had lead  discussions concerning  where                                                                   
infrastructure  improvements  should  occur.  She  could  not                                                                   
elaborate on the $10 million dollars for the port.                                                                              
                                                                                                                                
Ms.  Rutherford  clarified  for  Representative  Thomas  that                                                                   
TransCanada was the AGIA licensee  and not Exxon. TransCanada                                                                   
was  the entity  responsible for  ensuring  that the  project                                                                   
moved  forward under  the rules  of AGIA,  if Exxon  reneged,                                                                   
TransCanada would  still be responsible. She  stated that the                                                                   
issue had been closely scrutinized.                                                                                             
                                                                                                                                
Vice-Chair Thomas maintained that  Exxon's involvement in the                                                                   
project, in  any way,  made him  uncomfortable. He  said that                                                                   
the  people  he represented,  mainly  fishermen,  were  still                                                                   
unnerved by the idea of having Exxon involved at all.                                                                           
                                                                                                                                
3:31:35 PM                                                                                                                    
                                                                                                                                
Mr.  Myers added  that  Exxon was  a challenging  company  in                                                                   
their devotion to the bottom line.  However, in order to move                                                                   
a large project  forward, all the major producers  would need                                                                   
to  be involved.  He asserted  that Exxon  had the  expertise                                                                   
needed  to  make  the gasline  a  success.  The  company  was                                                                   
capable and engaged, and their  products were world-class. He                                                                   
shared  that  when  the  energy   mix  for  the  country  was                                                                   
examined,  and  what  the  project  could  deliver  to  North                                                                   
America   was  assessed,   the  natural   gas  pipeline   was                                                                   
environmentally  acceptable.  He said  that  natural gas  was                                                                   
supported  in  the environmental  community,  and  the  state                                                                   
could open  up a 50  to 100 year  supply for the  country. He                                                                   
contended  that the increase  in energy  demand could  not be                                                                   
ignored. He  alleged that  as the  population in the  country                                                                   
grew,  particularly  in  the   lower  48  states,  access  to                                                                   
exploration would  be restricted. Alaska natural  gas was the                                                                   
future,  and  was  a  very  valuable   resource.  The  policy                                                                   
implications  of  the  pipeline  were huge  for  the  nation.                                                                   
Strategically,  from many perspectives,  the project  makes a                                                                   
lot of sense.                                                                                                                   
                                                                                                                                
3:36:06 PM                                                                                                                    
                                                                                                                                
Mr. Myer  acknowledged that  there were  many aspects  of the                                                                   
plan  that  were still  out  of  alignment, but  queried  the                                                                   
alternative  for the nation  of not  moving forward  with the                                                                   
project.                                                                                                                        
                                                                                                                                
3:36:46 PM                                                                                                                    
                                                                                                                                
Co-Chair Stoltze  called for the administration  to follow up                                                                   
on the questions raised about  the Port of Anchorage request.                                                                   
                                                                                                                                
Representative Doogan ascertained  that the state was engaged                                                                   
in a  $500,000 endeavor to  build the gasline.  He understood                                                                   
that  the state  needed  to  be up-to-date  with  information                                                                   
concerning the  project, but expressed  concern of  using tax                                                                   
payer money to  satisfy passing concerns about  the pipeline.                                                                   
He expressed  concern  about wasting funds  on research  that                                                                   
could prove unrelated or irrelevant  to the state's interest.                                                                   
Ms. Rutherford replied that the  money spent to date had been                                                                   
spent  on  necessary research.  As  a  sidebar, some  of  the                                                                   
information  learned  would  be   important  for  the  future                                                                   
management of  gas activity, and  was learned in  response to                                                                   
AGIA demands.                                                                                                                   
                                                                                                                                
3:42:09 PM                                                                                                                    
                                                                                                                                
Mr. Myer explained  that the number of state  bodies that had                                                                   
been added to  state government to manage the  project should                                                                   
be examined.  He shared that DNR  had added 3  positions, but                                                                   
that all  the other departments  were doing the  gasline work                                                                   
part-time. The  lack of  positions had had  an effect  on the                                                                   
state's ability  to deliver final  product, and had  added to                                                                   
problems with workload continuity.  The project was a 10 year                                                                   
project  which was  long  term and  continuity  of staff.  He                                                                   
maintained that  the expertise  of the added positions  would                                                                   
be beneficial,  and that building structure into  the process                                                                   
was critical.  The state's ability  to understand  the issues                                                                   
and react  with expertise  was, and  would be, necessary.  He                                                                   
concluded that change needed be  made to handle the magnitude                                                                   
of the project, and that the financial  burden for the change                                                                   
should not rest solely on the licensee.                                                                                         
                                                                                                                                
3:46:47 PM                                                                                                                    
                                                                                                                                
Representative  Kelly voiced appreciation  for the  discovery                                                                   
process  Co-Chair  Hawker  had   orchestrated  by  requesting                                                                   
presentations from all the state  departments involved in the                                                                   
gasline project. He expressed  excitement for the project and                                                                   
the industry  players that were  involved. He  suggested that                                                                   
the public should be better informed.                                                                                           
                                                                                                                                
3:50:22 PM                                                                                                                    
                                                                                                                                
Representative  Kelly  thought   that  the  $500,000  request                                                                   
should  be  revisited.  He  expressed  that  TransCanada  was                                                                   
excited  about  the  project  and  should  be  trusted  as  a                                                                   
partner. He concluded  that there were issues  that needed to                                                                   
be examined but  that the project would pay  out steadily for                                                                   
at least 10 years.                                                                                                              
                                                                                                                                
HAROLD HEINZE,  CHIEF EXECUTIVE  OFFICER, ALASKA  NATURAL GAS                                                                   
DEVELOPMENT  AUTHORITY  (ANGDA), briefly  answered  questions                                                                   
concerning  past expenditures.  He said  that there  had been                                                                   
appropriations in the capital  budget in FY 05, FY 07, and FY                                                                   
08, to ANGDA. At the beginning  of FY 10 there was $7 million                                                                   
of  the appropriations  that was  unexpended.  Of that,  $1.7                                                                   
million had  been spent in FY  10. There was $2.6  million in                                                                   
contracts,  $1.9   million  of  which  was   in  three  large                                                                   
contracts.  Approximately  $300  thousand  was  unspent.  The                                                                   
encumbered money would be spent  within the fourth quarter of                                                                   
the  calendar  year, bringing  that  chapter  of ANGDA  to  a                                                                   
close.  At that point  the EIS  for the  Beluga to  Fairbanks                                                                   
project should be completed, and  would be ready to hand over                                                                   
to a  private sector company.  The request for  $300 thousand                                                                   
in the operating budget was intended  to pay for salaries and                                                                   
office space,  and was consistent with past  budget requests.                                                                   
He pointed out  the several bills had recently  surfaced that                                                                   
implied  future work  for ANGDA  and  that hopefully  funding                                                                   
provisions would be reflected in the fiscal notes.                                                                              
                                                                                                                                
Co-Chair  Hawker asked  how  well ANGDA  got  along with  the                                                                   
railroad.  Mr. Heinze  replied  that the  railroad and  ANGDA                                                                   
could become the best of friends.                                                                                               
                                                                                                                                
3:57:02 PM                                                                                                                    
                                                                                                                                
Co-Chair Hawker assured  Mr. Heinze that if  further work was                                                                   
requested  of ANGDA  it  would certainly  be  addressed in  a                                                                   
fiscal note.                                                                                                                    
                                                                                                                                
Mr.  Heinze said  that ANGDA  would  work with  any party  in                                                                   
order to have  a successful outcome. He hoped  there would be                                                                   
other opportunities for discussion.                                                                                             
                                                                                                                                
3:58:13 PM                                                                                                                    
                                                                                                                                
Co-Chair Hawker discussed housekeeping.                                                                                         
                                                                                                                                

Document Name Date/Time Subjects
HB300HB302MEDICAID SPENDING Report cover.docx HFIN 2/25/2010 1:30:00 PM
SFIN 3/23/2010 9:00:00 AM
SFIN 3/24/2010 9:00:00 AM
HB 300
HB 302
Medicaid-Special Report House Finance Feb 2010 HB300 HB302.docx HFIN 2/25/2010 1:30:00 PM
SFIN 3/23/2010 9:00:00 AM
SFIN 3/24/2010 9:00:00 AM
HB 300
HB 302
Medicade Ependitures & Projections PowerPoint HB300-302.pdf HFIN 2/25/2010 1:30:00 PM
SFIN 3/23/2010 9:00:00 AM
SFIN 3/24/2010 9:00:00 AM
HB 300
DNR HF Gasline Hearing REVISED.doc HFIN 2/25/2010 1:30:00 PM