Legislature(2013 - 2014)BARNES 124

03/24/2014 03:15 PM LABOR & COMMERCE


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+= HB 230 AIDEA BONDS FOR PROCESSING FACILITIES TELECONFERENCED
Heard & Held
+= HB 316 WORKERS' COMPENSATION MEDICAL FEES TELECONFERENCED
Heard & Held
+= HB 60 UNIFORM REAL PROPERTY TRANSFERS ON DEATH TELECONFERENCED
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
          HB 230-AIDEA BONDS FOR PROCESSING FACILITIES                                                                      
                                                                                                                                
3:29:04 PM                                                                                                                    
                                                                                                                                
CHAIR OLSON  announced that the  first order of business  would be                                                              
HOUSE  BILL  NO.  230, "An  Act  allowing  the  Alaska  Industrial                                                              
Development  and Export  Authority to  issue bonds  for an  oil or                                                              
gas   processing  facility;   and   creating  the   oil  and   gas                                                              
infrastructure fund  to finance construction or improvement  of an                                                              
oil or gas processing facility."                                                                                                
                                                                                                                                
3:30:03 PM                                                                                                                    
                                                                                                                                
LOUIS  FLORA,  Staff, Representative  Paul  Seaton,  Alaska  State                                                              
Legislature,   stated  that   HB  230  would   allow  the   Alaska                                                              
Industrial Development  & Export Authority (AIDEA)  to issue bonds                                                              
for an  oil and gas  processing facility on  the North Slope.   It                                                              
would   also  create   an   oil   and  gas   processing   facility                                                              
infrastructure fund  to allow the legislature to  allocate funding                                                              
to the  facility.   He highlighted a  number of specific  findings                                                              
that  demonstrated   the  difficulty   of  some  of   the  smaller                                                              
operations on the  North Slope to access processing  facilities on                                                              
the North  Slope.   The intent  is to  increase oil throughput  in                                                              
the Trans-Alaska Pipeline System (TAPS) pipeline, he said.                                                                      
                                                                                                                                
3:31:20 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  REINBOLD  moved to  adopt  the proposed  committee                                                              
substitute  (CS)   for  HB   230,  labeled  28-LS1053\N,   Nauman,                                                              
3/17/14, as the working document [Version N].                                                                                   
                                                                                                                                
CHAIR OLSON objected for the purpose of discussion.                                                                             
                                                                                                                                
3:31:38 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SADDLER  referred to page 2, line  4, and suggested                                                              
inverting  "for"  and "allow"  such  that  it would  read,  "would                                                              
allow for new production ...."                                                                                                  
                                                                                                                                
MR. FLORA acknowledged the suggested change.                                                                                    
                                                                                                                                
3:32:01 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  JOSEPHSON  asked  him to  identify  the  perceived                                                              
target or beneficiary of the bill.                                                                                              
                                                                                                                                
MR.  FLORA answered  that  the bill  is  not  intended for  anyone                                                              
specifically, but  it will generally  allow anyone  who approaches                                                              
AIDEA to hold  discussions on project financing.   He specifically                                                              
referred  to  page  2,  line  8,  paragraph  (6),  the  "findings"                                                              
language that  discusses access  issues.  More specifically,  this                                                              
language  would   remove  the  limit  on  bonding   authority  for                                                              
processing  facilities and  other  infrastructure  to allow  small                                                              
companies  without  capital  to  finance oil  and  gas  processing                                                              
facilities  to  move more  oil  from  new fields  and  essentially                                                              
reach out and expand oil and gas throughput.                                                                                    
                                                                                                                                
3:33:19 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  JOSEPHSON asked whether  he has discussed  maximum                                                              
credits and foregone revenue with the Department of Revenue.                                                                    
                                                                                                                                
MR. FLORA deferred to the Department of Revenue to answer.                                                                      
                                                                                                                                
3:33:46 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE REINBOLD  wondered why bonding is  necessary, since                                                              
a good project would be able to obtain private funding.                                                                         
                                                                                                                                
MR. FLORA  answered that the bill  is being offered as  a concept,                                                              
which  was previously  adopted  in  SB 21  as  part  of a  broader                                                              
package to  increase throughput  in the TAPS  and provide  a range                                                              
of incentives.                                                                                                                  
                                                                                                                                
3:34:41 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  REINBOLD  offered  her  belief  the  only  way  to                                                              
obtain additional throughput is by drilling for more oil.                                                                       
                                                                                                                                
REPRESENTATIVE   CHENAULT  commented   that   throughput  can   be                                                              
increased for TAPS  without drilling any new wells.   He suggested                                                              
that the current  problem of constriction in the  process facility                                                              
is that  the pipeline  was designed  to transport  more crude  oil                                                              
than  water.   However, today's  oil  wells are  putting out  more                                                              
water and  gas than crude oil.   Thus, the production  facility is                                                              
limited by throughput  for each category.  Again,  the wells today                                                              
produce  more  water and  gas,  which  limits  the amount  of  oil                                                              
production.   For example, a well  might put out 1,000  barrels of                                                              
water, oil,  and gas  per day, he  said.  It  makes more  sense to                                                              
run that  capacity through the pipeline  rather than to  have five                                                              
other  wells that  might  produce  300 barrels  of  oil, with  the                                                              
remaining  production being  gas and  water.   He noted that  this                                                              
can  be remedied  and configured;  however, that  process is  very                                                              
expensive.    He  addded  that  throughput  can  be  increased  by                                                              
expanding   the  production   facility   or   by  providing   more                                                              
opportunities, which  is what HB 230 proposes  by building another                                                              
production facility to allow others to input oil.                                                                               
                                                                                                                                
3:36:48 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  JOSEPHSON  understood  the  bill  would  allow  an                                                              
additional  $200  million  increase  in the  AIDEA  allowance  for                                                              
maximum  bond  capacity.    He asked  whether  the  Department  of                                                              
Revenue has an idea of the maximum dollar credit under the bill.                                                                
                                                                                                                                
3:37:31 PM                                                                                                                    
                                                                                                                                
MATT   FONDER,   Director,   Anchorage   Office,   Tax   Division,                                                              
Department of  Revenue (DOR), answered  that the  division doesn't                                                              
"have a good  handle on that"  since it is difficult  to determine                                                              
the number of  taxpayers who might take advantage  of this credit.                                                              
It's  also  important to  note  that  any  taxpayer will  need  to                                                              
invest a significant  amount of money to utilize the  credit.  The                                                              
credit amount  under the  bill is  the "lesser  of 10  percent" or                                                              
$10  million.   Therefore,  the  taxpayer  would have  90  percent                                                              
"skin in the  game" so the bill  will help, but it will  not offer                                                              
much of an incentive  to move forward with the project.   Thus, he                                                              
did not  believe it would  be the "deal  breaker," but it  is hard                                                              
to tell how many taxpayers will take advantage of the credit.                                                                   
                                                                                                                                
3:38:37 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   JOSEPHSON   asked  him   to   predict  what   new                                                              
facilities would be built with the AIDEA bonding.                                                                               
                                                                                                                                
MR.  FONDER  said   he  really  didn't  know;   the  legislature's                                                              
"crystal ball" is probably just as good as his.                                                                                 
                                                                                                                                
REPRESENTATIVE  CHENAULT asked  whether any  companies have  asked                                                              
for this type of enhancement for a project.                                                                                     
                                                                                                                                
3:39:32 PM                                                                                                                    
                                                                                                                                
TED LEONARD, Executive  Director, Alaska Industrial  Development &                                                              
Export  Authority (AIDEA),  Department of  Commerce, Community,  &                                                              
Economic Development,  answered yes;  AIDEA has been  working with                                                              
Brooks Range  Petroleum Corporation, who  would like to  finance a                                                              
production  facility to  develop  the Mustang  Oil  Field [of  the                                                              
southern Miluveach Unit].                                                                                                       
                                                                                                                                
3:40:04 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SADDLER  asked for  a  general assessment  of  the                                                              
impact of an  additional $200 million in lending  authority and if                                                              
it  will  affect  AIDEA's  interest   rates,  AIDEA's  ability  to                                                              
finance  other projects,  or Alaska's  bond rating.   He asked  if                                                              
this process  would stand  alone or  if it  would have  any ripple                                                              
effects.                                                                                                                        
                                                                                                                                
MR. LEONARD answered  that AIDEA believes this  financing will not                                                              
affect its capacity  to finance other projects or its  rating.  He                                                              
explained that  these bonds will  be AIDEA bonds and  could either                                                              
be general  obligation  (GO) bonds  or revenue  bonds.  It  should                                                              
not affect  the state's  rating since the  project will  be funded                                                              
by  revenue generated  by  the project  or  will  be supported  by                                                              
AIDEA's assets,  but none of the  state's assets would  be pledged                                                              
for a project under this bond authorization.                                                                                    
                                                                                                                                
3:41:27 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SADDLER  recalled   discussions  on  the  possible                                                              
liquefied  natural gas  (LNG) transmission  line  with respect  to                                                              
the state's  general debt-to-equity ratio  such that 8  percent of                                                              
the general  fund principal  would be allowed.   He  asked whether                                                              
an informal  policy exists  in terms of  what AIDEA  cannot exceed                                                              
in terms of GO bonding.                                                                                                         
                                                                                                                                
MR. LEONARD  answered yes;  the rule of  thumb under  the capacity                                                              
model  is $500  million of  bonding  capacity.   He reported  that                                                              
AIDEA  has  approximately  $70 million  in  outstanding  bonds  so                                                              
AIDEA has significant  capacity available.  In  addition, it would                                                              
also depend on the  type of bond, for example,  revenue bonds will                                                              
not affect  AIDEA's  capacity.   Overall, it  would depend  on the                                                              
individual  project whether  AIDEA will  want to  use its  general                                                              
bonding  capacity or  if  it will  issue  revenue bonds;  however,                                                              
AIDEA has the  capacity to issue  up to $200 million in  bonds for                                                              
these types of  facilities.  Again, just because  AIDEA would have                                                              
the  bonding  authority  doesn't  mean  it will  use  all  of  its                                                              
authority.   He indicated  that AIDEA  will consider its  capacity                                                              
for  each and  every  project  under  this bond  authorization  to                                                              
ensure  AIDEA  has  sufficient  capacity  and  that  it  will  not                                                              
adversely  affect AIDEA's  ability  to fund  other  projects.   He                                                              
assured members  that AIDEA undergoes  the same capacity  analysis                                                              
on every project it considers in terms of bond financing.                                                                       
                                                                                                                                
3:43:45 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SADDLER  asked  how much  Brooks  Range  Petroleum                                                              
Corporation would need for its processing facility.                                                                             
                                                                                                                                
MR. LEONARD was offline.                                                                                                        
                                                                                                                                
CHAIR  OLSON,  after  first  determining  no one  else  wished  to                                                              
testify, closed public testimony on HB 230.                                                                                     
                                                                                                                                
[HB 230 was held over.]                                                                                                         

Document Name Date/Time Subjects
HB316 Amendment O.4.PDF HL&C 3/24/2014 3:15:00 PM
HB 316
HB316 Draft Conceptual Amendment 1.pdf HL&C 3/24/2014 3:15:00 PM
HB 316
HB60 Sectional Analysis-Draft Proposed Blank CS ver C.pdf HL&C 3/21/2014 3:15:00 PM
HL&C 3/24/2014 3:15:00 PM
HB 60
HB60 Legal Services Memo regarding Changes from Ver A to Ver C.pdf HL&C 3/21/2014 3:15:00 PM
HL&C 3/24/2014 3:15:00 PM
HB 60
HB60 Draft Proposed Blank CS ver C.pdf HL&C 3/21/2014 3:15:00 PM
HL&C 3/24/2014 3:15:00 PM
HB 60
HB60 Supporting Documents-Testimony of Ben Orzeske.pdf HL&C 3/21/2014 3:15:00 PM
HL&C 3/24/2014 3:15:00 PM
HB 60
HB60 Supporting Documents-AS 34.15.130.pdf HL&C 3/21/2014 3:15:00 PM
HL&C 3/24/2014 3:15:00 PM
HB 60
HB60 Supporting Documents-Legal Memo re Changes in CS ver C 3-18-14.pdf HL&C 3/21/2014 3:15:00 PM
HL&C 3/24/2014 3:15:00 PM
HB 60
HB60 Supporting Documents-Letter American Bar Association 1-14-10.pdf HL&C 3/21/2014 3:15:00 PM
HL&C 3/24/2014 3:15:00 PM
HB 60
HB60 Supporting Documents-Letter American College of Real Estate Lawyers 3-31-10.pdf HL&C 3/21/2014 3:15:00 PM
HL&C 3/24/2014 3:15:00 PM
HB 60
HB60 Supporting Documents-Memo re Transfer On Death States List 1-31-14.pdf HL&C 3/21/2014 3:15:00 PM
HL&C 3/24/2014 3:15:00 PM
HB 60
HB60 Supporting Documents-ULC Summary of URPTODA 1-25-13.pdf HL&C 3/21/2014 3:15:00 PM
HL&C 3/24/2014 3:15:00 PM
HB 60
HB60 Supporting Documents-URPTODA Draft with comments from Uniform Law Commission 9-30-09.pdf HL&C 3/21/2014 3:15:00 PM
HL&C 3/24/2014 3:15:00 PM
HB 60
HB230 Draft CS ver N.pdf HL&C 3/24/2014 3:15:00 PM
HB 230
HB230 Draft Proposed Amendment N.1.pdf HL&C 3/24/2014 3:15:00 PM
HB 230