Legislature(2021 - 2022)ADAMS 519

04/08/2022 01:00 PM House FINANCE

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Moved SB 168 Out of Committee
Heard & Held
Heard & Held
HOUSE BILL NO. 307                                                                                                            
     "An  Act  relating to  the  financing  and issuance  of                                                                    
     bonds  for a  liquefied natural  gas production  system                                                                    
     and natural gas distribution  system; and providing for                                                                    
     an effective date."                                                                                                        
3:12:18 PM                                                                                                                    
REPRESENTATIVE  GRIER   HOPKINS,  SPONSOR,   introduced  the                                                                    
legislation. He read from a prepared statement:                                                                                 
     I'm pleased  to offer HB  307 -  a simple bill  that is                                                                    
     part  of  a  long-term,  comprehensive,  and  paradigm-                                                                    
     shifting solution to a difficult problem.                                                                                  
     In 2009,  the  U.S.   Environmental  Protection  Agency                                                                    
     (EPA) designated  portions of the Fairbanks  North Star                                                                    
     Borough (FNSB) as a nonattainment  area for air quality                                                                    
     related to  PM2.5. Since that time,  the communities of                                                                    
     Fairbanks and  North Pole, State  of Alaska,  AIDEA and                                                                    
     the Interior Gas Utility have  been actively engaged in                                                                    
     expanding  the  availability  and use  of  natural  gas                                                                    
     through   the  Interior   Energy  Project,   a  project                                                                    
     designed  to   bring  lower-cost  energy  to   as  many                                                                    
     Interior  residents  and  businesses  as  possible,  as                                                                    
     quickly as possible.                                                                                                       
     A critical component of the  Interior Energy Project or                                                                    
     IEP  is  financing for  the  development  of a  unified                                                                    
     public gas  utility with competitive  rates. SB  23 was                                                                    
     passed by  the 28th  Alaska Legislature in  2013 giving                                                                    
     the  Alaska  Industrial Development  Authority  (AIDEA)                                                                    
     the  ability   to  provide  financing  tools   for  the                                                                    
     development of the IEP, including  the ability to issue                                                                    
     up to  $150 million  in conduit  revenue bonds  to help                                                                    
     develop  an   integrated  natural  gas   supply  chain,                                                                    
     including   expansion  of   natural  gas   liquefaction                                                                    
     facilities   in  the   Matanuska-Susitna  Borough   and                                                                    
     expansion  of natural  gas mains  and service  lines in                                                                    
     Fairbanks and North Pole.                                                                                                  
     Authorization  for issuing  these bonds  was originally                                                                    
     scheduled to expire June 30,  2018. Through the efforts                                                                    
     led by  Rep. Thompson and  former Senator Pete  Kelly -                                                                    
     the  Alaska   Legislature  extended  access   to  AIDEA                                                                    
     bonding an additional five years to June 30, 2023.                                                                         
     Given  market conditions  and  turmoil  related to  the                                                                    
     COVID-19 pandemic, IGU has  paused the final investment                                                                    
     decision on  its Titan liquid  natural gas  (LNG) plant                                                                    
     expansion project located in  the Mat-Su Borough, which                                                                    
     will necessitate access to AIDEA bonds.                                                                                    
     Bonds  of $136  million  of the  original $150  million                                                                    
     authorized  may be  issued to  provide up  to the  $275                                                                    
     million financing cap authorized under SB23.                                                                               
     HB  307 extends  the authorization  for AIDEA  to issue                                                                    
     IEP-related bonds for an additional  five years to June                                                                    
     30, 2028.                                                                                                                  
     Members will  find in their packets  letters of support                                                                    
     for HB  307 from AIDEA  as well as the  Fairbanks North                                                                    
     Star  Borough and  the  January  2022 quarterly  report                                                                    
     from AIDEA  to the legislature  on the progress  of the                                                                    
JOE HARDENBROOK, STAFF, REPRESENTATIVE GRIER HOPKINS,                                                                           
provided a sectional analysis on the bill (copy on file):                                                                       
     Section 1:                                                                                                                 
     Amends  the  uncodified  law of  the  State  of  Alaska                                                                    
     enacted in 2013  to replace the expiration  date of the                                                                    
     authority of AIDEA to issue bonds in support of the                                                                        
     project from June 30, 2023, to June 30, 2028.                                                                              
     Section 2:                                                                                                                 
     Contains an immediate effective date.                                                                                      
Representative   Carpenter   wondered    how   the   current                                                                    
announcement of a natural gas  pipeline from the North Slope                                                                    
to the Interior of Alaska impacted the IEP.                                                                                     
Representative   Hopkins  replied   that  the   IEP  project                                                                    
expanded natural  gas lines  throughout the  Fairbanks area.                                                                    
He emphasized  that the  Fairbanks area  needed to  be ready                                                                    
for the time  the gas line was completed.  He explained that                                                                    
when more affordable  gas was supplied from  the North Slope                                                                    
customers  would pay  a lower  interest  rate through  their                                                                    
utility  bill   by  extending  the  bonding   authority  and                                                                    
expanding the infrastructure.                                                                                                   
Co-Chair Merrick moved to invited testimony.                                                                                    
ELENA  SUDDUTH,  MANAGER,  CUSTOMER SERVICE  AND  MARKETING,                                                                    
INTERIOR  GAS UTILITY,  FAIRBANKS (via  teleconference), was                                                                    
in favor of HB 307. She  related that AIDEA and the Interior                                                                    
Gas Utility  (IGU) had been  working closely on  all aspects                                                                    
of  the  IEP  that  included  liquefaction,  transportation,                                                                    
storage,  regasification, and  distribution of  natural gas.                                                                    
She listed the ways both  entities had advanced the project.                                                                    
Fairbanks  Natural Gas  and IGU  had  consolidated into  one                                                                    
natural  gas utility  to extend  the  availability of  lower                                                                    
cost  energy  to  as  many   businesses  and  residences  as                                                                    
possible.  She delineated  that approximately  215 miles  of                                                                    
natural  gas distribution  lines had  been installed  to the                                                                    
core non-attainment  areas of Fairbanks and  the North Pole.                                                                    
In  Fairbanks, 1,550  residential  and commercial  customers                                                                    
were using natural gas. The  natural gas utility could serve                                                                    
8,500  properties if  everyone  with access  to natural  gas                                                                    
mains converted.  The North  Pole distribution  lines served                                                                    
125 customers with the main  lines reaching 3,000 commercial                                                                    
and  residential properties.  She furthered  that AIDEA  and                                                                    
IGU had  been working on  two storage projects. There  was a                                                                    
5.25 million gallon Liquified Natural  Gas (LNG) storage and                                                                    
gasification  facility that  was completed  in Fairbanks  in                                                                    
late  2019 and  a separate  150,000 gallon  LNG storage  and                                                                    
gasification facility  completed in the North  Pole in 2021.                                                                    
The  IGU's  customer base  had  increased  about 40  percent                                                                    
since  the   storage  facilities   were  completed   and  it                                                                    
anticipated  600 more  customers converting  to natural  gas                                                                    
for  heating in  2022. She  noted that  AIDEA   bonding  was                                                                    
critical to  the continuing success  of the project.  As the                                                                    
customer base grew, IGU would  need to utilize further AIDEA                                                                    
bonding to add approximately 100,000  gallons per day of LNG                                                                    
capacity  to the  present output  of the  Titon Liquefaction                                                                    
Facility located  in the Mat-Su Borough.  The existing plant                                                                    
had a capacity of about  50,000 gallons per day. The utility                                                                    
planned to utilize AIDEA bonding  to expand more natural gas                                                                    
mains  into more  neighborhoods in  the Fairbanks  and North                                                                    
Pole  communities.  The  bonding  authority  was  not  fully                                                                    
utilized due  to the COVID-19 pandemic,  resulting oil price                                                                    
drop, and economic uncertainty.  She anticipated needing the                                                                    
bonding  over the  following few  years.  The bill  provided                                                                    
additional  time for  the IEP  to progress  and realize  the                                                                    
project's  goal  of  affordable   natural  gas  to  as  many                                                                    
customers as possible.                                                                                                          
3:22:12 PM                                                                                                                    
Co-Chair Merrick  set an amendment  deadline for HB  307 for                                                                    
Wednesday, April 13, 2022, at noon.                                                                                             
Representative  Hopkins thanked  the  committee for  hearing                                                                    
the bill.                                                                                                                       
HB  307  was  HEARD  and   HELD  in  committee  for  further                                                                    

Document Name Date/Time Subjects
SB 9 Intent letter to AMCO Director_lic conversion and auctions 04.04.22.pdf HFIN 4/8/2022 1:00:00 PM
SB 9
SB 9 Amenement Pkt. 1 - 27 040722.pdf HFIN 4/8/2022 1:00:00 PM
SB 9