Legislature(1997 - 1998)
03/26/1998 10:05 AM House O&G
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 393 - DEVELOP STRANDED GAS RESOURCES Number 0035 CHAIRMAN HODGINS announced the committee would hear HB 393,"An Act relating to contracts with the state establishing payments in lieu of other taxes by a qualified sponsor or qualified sponsor group for projects to develop stranded gas resources in the state; providing for the inclusion in such contracts of terms making certain adjustments regarding royalty value and the timing and notice of the state's right to take royalty in kind or in value from such projects; relating to the effect of such contracts on municipal taxation; and providing for an effective date." He stated that he hoped to move the bill out today. He stated that the committee is working on CSHB 393(O&G), 0-GH2006\B. He stated that the committee has dealt with Amendments 1-13 and now has Amendments 14-17 before the committee. He stated that there is an additional amendment to replace the gas-to-liquids (GTL) language but in order to consider that amendment, there needs to be a motion to rescind the committee's actions at the previous meeting. Number 0064 REPRESENTATIVE CON BUNDE made a motion to rescind Amendment 3 0- GH2006\B.8, which read: Page 2, lines 8-11: Delete all material. Renumber the following paragraphs accordingly. Page 2, lines 23-28: Delete all material. Insert "tankers;" Number 0093 REPRESENTATIVE JOE RYAN stated that it would not bother him at all if the committee rescinded all his amendments and went back to the version of the bill that was amended by the committee and Representative Rokeberg. He stated that he did not plan on offering his other amendments. Number 0100 CHAIRMAN HODGINS stated that there is already a motion on the table. Number 0120 CHAIRMAN HODGINS called for a brief at ease at 10:15 a.m. Number 0120 CHAIRMAN HODGINS called the meeting back to order at 10:18 a.m. He asked if there was an objection to the motion. REPRESENTATIVE ALAN KEMPLEN objected for purposes of discussion. He asked why the committee felt it is necessary to rescind Amendment 3. Number 0155 REPRESENTATIVE ROKEBERG responded that the reason for rescinding Amendment 3 is to talk about the merits of the amendment. REPRESENTATIVE BUNDE stated that there is no requirement in the legislative process for anyone to explain why they choose to vote one way or another on any item. Number 0165 REPRESENTATIVE KEMPLEN removed his objection. Number 0172 CHAIRMAN HODGINS asked if there were any further objections. He stated that Amendment 3 is now back in front of the committee. REPRESENTATIVE ROKEBERG made a motion to amend Amendment 3 to read: Page 2, lines 8-11: Delete all material. Renumber the following paragraphs accordingly. Number 0185 REPRESENTATIVE SCOTT OGAN objected. He stated that at the last meeting there was some discussion to include GTL technology. He suggested that the idea of the bill is to provide an incentive and to defer various taxes to help a liquefied natural gas (LNG) pipeline project be economical. GTL technology would not require building a new pipeline or new infrastructure. He stated that he is supportive of getting whatever technology is needed to get the gas developed, however he believed that it is a separate issue. He stated that when the state has a viable GTL project, then they could come before the legislature. He stated that the bill is about building LNG facilities and the impact of taxes. He stated that he objects to the GTL language being added back into the bill. Number 0242 REPRESENTATIVE ROKEBERG stated that he agrees with everything that Representative Ogan has said, however, he felt that it would be premature to remove what is only intent language from the legislation without further debate by the entire House and Senate on the issue. He stated that it is up to the industry to make their case before this legislature. He stated that it would not be prudent for this legislature to do something that would send a negative signal to the industry that the state of Alaska is or isn't interested in the GTL technology, when in the long run this technology may be very important to Alaska. He explained that the requirement in the legislation for legislative review, the review of whatever administration is in place and the contract that results from this legislation, is going to have extraordinary public scrutiny. He stated that he believed that the whole tax and incentive regime for an LNG project is going to be entirely different for a GTL project. However, he felt it would be premature to send a negative message to the industry and that is why he has brought Amendment 3 up. Number 0280 REPRESENTATIVE BUNDE stated that he has a broader view of the bill. It is an attempt to develop the gas field on the North Slope and one way is through the pipeline and the other way is through GTL technology. He stated that if he were to follow the reasoning of waiting for technology to be further developed, then he could argue that there be not any incentives for the pipeline until there are definite markets available. He stated that this is a preparatory bill and he would like to be able to market gas in all forms. He stated that he has yet to see that it is economically viable to build a pipeline, even with the bill. He asserted that the legislature needs to do all they can to extend the life of the existing pipeline and a GTL option for the use of stranded gas would extend the lifeline of the existing pipeline. Therefore, he stated he supports Amendment 3. Number 0306 REPRESENTATIVE KEMPLEN stated that there are distinct differences which relate to the process. He stated that by allowing the language to remain in the bill it is giving permission to the administration to negotiate a contract with the private sector for GTL technology and when the contract is negotiated it will come to the legislature for approval. He stated that there is a contract now with Mapco and there has been concerns raised by various members of the state to the structure of that contract. He stated that it is a yes or no issue for the approval. He stated that there will be economic development and jobs due to the expansion of the Mapco refinery, so it is important for it to proceed but that is not to say that the contract is perfect. He explained that for the legislature to not have input into the development of a contract, that is using a public resource, is not prudent. It is important for a legislature to be able to have a say and be able to adjust the contracts if the merit is proven. He stated that if this language was to remain in the bill, it would say to the industry that they could negotiate everything they want to. The GTL technology is continually being updated to be economically viable. He questioned if it would need fiscal regime adjustments. He stated that the purpose of the bill is to provide a mechanism for the construction of the LNG pipeline. He stated that it would be prudent for the legislature to keep its options open in terms of the GTL technology and if adjustments are needed in the fiscal regime, then at that point, the players should come before the legislature and make their case for it. Number 0405 CHAIRMAN HODGINS stated that the idea behind the bill to get the 4 trillion cubic feet of gas to market and receive revenue from the sale of those resources. He stated that various technologies and ways need to be weighed. It is enabling legislation to produce a contract. He stated that there are a lot of hoops that the GTL technology needs to jump through in order for it to be considered. He asserted that there has been testimony that the GTL technology has not been viable at this time but there is the possibility that it could and it should not be excluded. He stated that the original language regarding the GTL technology had already been toned down and Amendment 3 is not giving license to the administration to start pumping GTLs through the pipeline. Number 0447 REPRESENTATIVE OGAN stated that he is going to vote to get the language out of the bill because he wanted to send the message that the legislature is interested in having a LNG pipeline built and did not want to send a mixed signal or give a reason to delay the building of a gas pipeline. Number 0455 CHAIRMAN HODGINS stated that this bill is not a pipeline bill, it is a bill to establish payments in lieu of other taxes by a qualified sponsor group for projects to develop stranded gas resources in the state. Number 0465 CHAIRMAN HODGINS called for a roll call vote on the amendment to Amendment 3. A roll call vote was taken. Representatives Brice, Bunde, Rokeberg and Hodgins voted in favor of the motion. Representatives Kemplen and Ogan voted against the motion. The amendment to Amendment 3 passed. REPRESENTATIVE ROKEBERG made a motion to adopt Amendment 3 as amended. Number 0505 CHAIRMAN HODGINS asked if there was an objection. Hearing none, Amendment 3, as amended, is adopted. Number 0509 CHAIRMAN HODGINS stated that the sponsor of the additional amendments removed those amendments. He stated that he would like to have the committee move CSHB 393(O&G) 0-GH2006\L. Number 0515 REPRESENTATIVE BRICE asked if the version L incorporated the amendment. He believe that proper motion would be to move CSHB 393(O&G) 0-GH2006\B, as amended. Number 0523 REPRESENTATIVE ROKEBERG made a motion to move CSHB 393(O&G) version B, 0-GH2006, as amended, with individual recommendations and attached fiscal note. Number 0530 CHAIRMAN HODGINS asked if there was an objection. Hearing none, CSHB 393(O&G) version B, 0-GH2006, as amended was moved out of the House Special Committee on Oil and Gas. Number 0540 MR. PAT CARTER, Legislative Assistant to Representative Hodgins, stated that by moving CSHB 393(O&G) version B, 0-GH2006, as amended, it will not be able to be heard in the House Resources Standing Committee this afternoon, because there will not be a final version done. He stated that CSHB 393(O&G), version L, reflects all the amendments up to the conclusion of the meeting on March 24, 1998. He recommended that Amendment 3 be attached to CSHB 393(O&G) version L. Number 0547 REPRESENTATIVE ROKEBERG made a motion to rescind the motion to move CSHB 393(O&G) version B, 0-GH2006, as amended. CHAIRMAN HODGINS asked if there was an objection. Hearing none, CSHB 393(O&G) version B, 0-GH2006, as amended was rescinded. Number 0560 REPRESENTATIVE ROKEBERG made a motion to move CSHB 393(O&G) version L, 0-GH2006, before the committee. CHAIRMAN HODGINS asked if there was an objection. Hearing none, CSHB 393(O&G) version L, 0-GH2006 was so moved. Number 0566 REPRESENTATIVE ROKEBERG made a motion to adopt Amendment 1 before the committee, which read: Page 2, line 19, following "tankers": Insert "although experimental research is being conducted other alternative technologies such as gas to liquids, this technology is not yet commercially viable; if this research results in a commercially viable technology, and after economic analysis by the state of the application of this technology, it is shown that local or state tax or regulatory changes are necessary to commercialize an Alaska project using this technology, then this technology may be considered in regard to this legislation." Number 0572 CHAIRMAN HODGINS asked if there was an objection. Hearing none, Amendment 1 was adopted. Number 0576 REPRESENTATIVE ROKEBERG made at motion to move CSHB 393(O&G) version L, 0-GH2006, as amended, with individual recommendations and the attached fiscal note. CHAIRMAN HODGINS asked if there was an objection. Hearing none, CSHB 393(O&G) version L, 0-GH2006, as amended, moved out of the House Special Oil and Gas Committee. Number 0580 CHAIRMAN HODGINS stated that he hoped to create a lot of jobs for Alaskans and bring a lot of revenue into the state's coffers.
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