Legislature(2005 - 2006)CAPITOL 124
04/28/2005 05:00 PM House OIL & GAS
| Audio | Topic |
|---|---|
| Start | |
| HCR8 | |
| Alaska Oil and Gas Conservation Commission | |
| HB254 | |
| HB286 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| *+ | HCR 8 | TELECONFERENCED | |
| *+ | HB 286 | TELECONFERENCED | |
| += | HB 234 | TELECONFERENCED | |
| *+ | HB 254 | TELECONFERENCED | |
HB 254 - NAT. GAS SPUR LINE AND DISTRIBUTION GRID [Contains mention of HB 253.] 5:23:22 PM CHAIR KOHRING announced that the next order of business would be HOUSE BILL NO. 254, "An Act directing the Alaska Natural Gas Development Authority to use money appropriated from the Railbelt energy fund and from other sources for preliminary engineering and related work for the construction of pipeline facilities to transport Alaska North Slope natural gas to the Southcentral Alaska gas distribution grid, and amending the definition of 'project' as applied to the work of the Alaska Natural Gas Development Authority; and providing for an effective date." REPRESENTATIVE ROKEBERG, speaking as the sponsor, presented HB 254 to the committee. He explained: This legislation creates the statutory authority for the Alaska Natural Gas Development Authority [ANGDA] to use money appropriated from the Railbelt energy fund to initiate and continue the preliminary engineering design and construction of a gas transmission pipeline, or spur line, for delivering gas from the principal North Slope natural gas pipeline to [the] Southcentral Alaska gas grid system. What this bill does is somewhat different: it clarifies the project definition and expands the ANGDA scope of work to include a spur line route, adjacent to the Parks Highway, to "Southcentral" from an appropriate northern point of the main gas line. So if we build the main gas line, we could look elsewhere rather than Glennallen. It also ... provides that another route, a direct or so-called "bullet line," all the way from Prudhoe Bay to Southcentral, could be undertaken and looked at by the authority. It also keeps and reiterates the spur line from Glennallen to Southcentral, and the primary pipeline from Prudhoe Bay to Valdez. ... So it doesn't diminish any of its authority; it actually just expands it in two ways: to clarify that they can look at the so- called "Parks Highway route" as a spur, and then a straight bullet [line]. ... 5:25:21 PM REPRESENTATIVE ROKEBERG continued: Additionally ... I would point out that in Section 2, ... subsection (c) on page 3, ... there are provisions here that [specify] the authority shall include provisions to implement ... "recovery of costs" methodologies for the expenditure of the fund that's included in the companion bill [HB 253], of some $8 million, from the private sector, and also, in subsection (d) on page 3, will agree to cooperate with federal grantees. When [we] worked on this bill, it came to my attention ... [that] a consortium of the Cook Inlet Tribal Council and a subsidiary of ENSTAR Natural Gas Company have been granted $3 million to work on the Parks Highway route that a lot of people weren't really aware of. So what [subsection] (d) does is recognize that there may be some activity on that particular spur line, and with [the] ANGDA now working and looking at permitting the Glennallen/Mat-Su Valley gas distribution hook-up, that there's already work underway. So this language is intended to have cooperation so there can be trading of material, and we don't want to duplicate these precious dollars for planning. ... REPRESENTATIVE ROKEBERG concluded: The main difference here is that [the bill] ... recognizes that we ought to start looking at a bullet line in terms of our long-range future and this other routing, so we don't get locked into just one system. So if we don't get a line that goes all the way to Valdez, we have alternatives, albeit there's certainly been conversations about, even if the highway route were the primary transportation route, [the fact that] you might want to come through Glennallen, given costs. But until we do this type of work, we don't know. ... REPRESENTATIVE ROKEBERG asked for the committee's support [of the legislation]. 5:27:33 PM REPRESENTATIVE GARDNER asked whether the fund that Chugach Electric [Association] has been talking about using for other projects is the Railbelt energy fund. REPRESENTATIVE ROKEBERG replied: There are, right now, two fund sources. One is the so-called Railbelt energy fund: it's the balance that's worth some $28 million, [and] it's the refunded portion of [an] electrical gridline that was planned to go from Glennallen into the Sutton area, I believe, and that didn't work out, and [so] the money was refunded or reappropriated back into the Railbelt energy fund. There's additionally another pot of money, if you will, that's under [the Alaska Industrial Development and Export Authority (AIDEA)] of $40 million, which was the interest earned on monies that [were] appropriated through the legislature and [the] AIDEA for what's called the new Southern Intertie route, which was a direct electrical transmission line between Anchorage and the Kenai peninsula. ... [It] was ultimately decided that that project would not go forward. So there is approximately $68 million, if you will, available in designated money sources. What I did to avoid the "intermural" utility wars between competing interests was [to] just focus the thrusts of my bill and its companion bill on the $28 million. The companion appropriation bill provides $8 million for the gas line spur study, and a cumulative $20 million to the City of Seward, Homer Electric Association, and Chugach Electric [Association] to upgrade the old, existing southern intertie and increase the repair and maintenance on that line. I believe there is significant deferred maintenance when they were talking about doing this other route, and there is some controversy about whether or not they should do that. My opinion is: I think it's appropriate for the legislature to appropriate this money because it removes that cost from the ratepayer's base. 5:30:06 PM REPRESENTATIVE ROKEBERG added: The utility could go out and bond this money, or borrow it, but then they can turn around and increase the costs to our constituents. This money has been sitting here for a long time. We've been talking about the northern intertie. Fairbanks got their money. I mean, the Railbelt in the southern section really hasn't received good benefit for the balance of that money, and I'd like to see those monies used for that purpose ... [and] spend them before somebody else spends them. ... 5:31:07 PM JERRY McCUTCHEON stated: Just because you see lots of activity on the gas line, you should not assume it's for real, or that they are actually trying to secure gas or a gas line. They make money churning; the cost of churning plus profit is then stuck in the gas consumer's bill as if it were real. It is only the illusion of the pursuit of [the] gas and a gas line that counts. For example, a recent full page ad by the Alaska Gas Port Authority offering to purchase four billion cubic feet of gas a day ... [was paid for by] a Lower 48 gas company, [Sempra Energy], who will stick their gas customers with the costs - (indisc.) all the costs they can plus profit. Sempra [Energy] will probably charge off $25 million to $50 million before they are done. It is the illusion and your gullibility that counts, not reality. The oil companies are doing the same thing to their customers - it's a game they play. You, as a taxpayer, are being stuck with the state costs of this charade by [Governor] Murkowski. Back in the late '70s and early "80s, the gas promoters stuck the ... [Lower] 48 gas bill payers with over a billion dollars in costs. That's so much for the ads. Mr. Chairman, HB 254, whatever reason there was for [the] ANGDA, [the] ANGDA has been eclipsed when the [Alaska Gas] Port Authority acquired the rights to [Yukon Pacific Corporation's] right-of-way permits. And, more importantly, when [ENSTAR Natural Gas Company] went public with ENSTAR's gas line studies, the operation of [the] ANGDA is at best been a study in sophistry. Mr. Heinze has gone around the state espousing wildly optimistic [sophistic] statements that [the] public is desperate to hear and have been led to believe are possible. There is no longer a reason to fund [the] ANGDA, for there is nothing [the] ANGDA can do that private enterprise could not do better, at substantially less cost, but also more realistically - private enterprise without (indisc.) state funds. Every route that [the] ANGDA may wish to study, ENSTAR has already studied or is studying. ENSTAR has most of the answers; [the] ANGDA has confusion, sophistry, and waste. 5:33:58 PM MR. McCUTCHEON continued: A most important thing is, ENSTAR cannot rely on anything [the] ANGDA does; it has to do it for itself. It's got its whole system at stake. I've listened to Mr. Heinze peddle his sophistry for hours at [the] ANGDA's board meetings, for meeting after meeting. There is nothing that [the] ANGDA can do that ENSTAR can't do ... [and do] it without state funds. [The] ANGDA is just duplicating ENSTAR; ENSTAR must do it's own studies, ENSTAR's whole investment is in Alaska - it's at stake - and ENSTAR cannot and will not rely on somebody else's studies, least of all [the] ANGDA's. It is time to let [the] ANGDA die in committee. If [Governor] Murkowski wants to fund [the] ANGDA out of his budget, that is his call, but not a wise one - it is not one the legislature should aid and abet. Thank you, Mr. Chairman, ... for allowing the public to testify. 5:35:13 PM WARREN KEOGH said: I would first voice my reservations with HB 254, [which] ... further defines the ANGDA project, but especially to the use of money appropriated from the Railbelt energy fund, particularly the $8 million earmarked for [the] ANGDA in the companion bill, HB 253. And my concerns come about in part because it's my feeling that [the] ANGDA has moved too quickly in its preliminary planning work for the so-called spur line from Glennallen to Palmer. And [the] ANGDA has rather rapidly expended, I think, ... about [$300,000] to $500,000 for preliminary engineering, environmental, financial, public outreach, and other efforts in the past five or six months. And things have moved a bit too quickly, in my estimation, and, as a result, some mistakes have been made in the pipeline routing and also in the ANGDA right-of-way application to [the] DNR that was submitted ... just a couple of weeks ago. And I'll just give three quick examples. ... The first would be an issue of public process. The ANGDA board meeting [on] April 4 was not properly noticed - public notice appeared in an obscure Department of Revenue web page on late Friday morning for a 10 a.m. ANGDA meeting the following Monday, [and] public notices did not appear in print in the newspapers 'til Monday morning of the meeting day. Another example of public outreach: this is about a 150-mile long pipeline, the terminus of which goes through numerous parcels of private property in the City of Palmer. Those of us in Chickaloon ... have recently become aware of the pipeline routed through our community; I took it upon myself to call numerous people - private homeowners and property owners in [the] Palmer area. The pipeline, in case you're not aware, is routed to end in the vicinity of a gravel pit where the Trunk Highway hits the Parks Highway. So I called some folks along the Trunk "road" and places further up the line - approximately a dozen this past Sunday afternoon ... - and not a single person, with the possible exception of one person, was ... aware that the pipeline was planned or routed through their private property. And I suggest, with a project of this magnitude, where an application has already been submitted, that people should be better informed. 5:38:25 PM MR. KEOGH continued: One last example ...: in my community of Chickaloon we were not apprised, that I am aware of, as a community, of this pipeline being routed through our property along a proposed route until rather late in the stage, when the route has already been determined without our input or advice. As a result of that, last night the Chickaloon community council, after approximately 20 or more citizens have worked on a resolution for the past 2 weeks, we passed a resolution, which the community council will deliver to [the] ANGDA here in the next couple of days. ... Basically it's a resolution stating, generally, that we support the efforts of [the] ANGDA to bring North Slope gas to Southcentral Alaska, but request further study of other routes and it's impacts. And it's about a two-page statement, but essentially ... our community respectfully requests that [the] ANGDA suspend their permit and right-of-way acquisition process until all routes from the Alaska North Slope to Southcentral have been thoroughly assessed for their suitability and their economic, social, and environmental impacts, and that the public process for this project include proper notice and sufficient time for meaningful comments from the Chickaloon community council. 5:39:49 PM MR. KEOGH asked that if the ANGDA is to receive further funding, that the ANGDA be held accountable for "what they do and what they don't do." He commented, "This testimony comes about as a result of what, in my view, is the rather hurried efforts of [the] ANGDA to acquire the pipeline right-of-way. 5:40:30 PM REPRESENTATIVE ROKEBERG commented that the bill should be consistent with the Chickaloon community council's goal in that it looks at other routes. 5:41:00 PM CHAIR KOHRING asked the representative from the ANGDA to give consideration to Mr. Keogh's concerns. HAROLD HEINZE, Chief Executive Officer, Alaska Natural Gas Development Authority (ANGDA), Department of Revenue (DOR), testified in support of HB 254. He went on to say: There are probably just two major points I'd like to make about the bill, and then I would like a little bit of chance, maybe, to respond to the previous testimony. Two things. One, this bill is the bill that will facilitate the looking at what I consider to be a more direct route from the North Slope to the Cook Inlet area. Right now, our funding and our efforts ... have been looked at from the point of view of tying into either a highway pipeline going down through Canada, or a pipeline following a route to Valdez, Alaska, along the Trans-Alaska Pipeline System [TAPS]. And that's why we've focused on the Glennallen to Palmer connection, because it was the missing link in terms of different ways that one might get gas to Cook Inlet. But it was done very clearly with the intention of fitting in with those projects on it. Representative Rokeberg's bill represents an opportunity to expand that horizon; HB 254 very clearly is directed towards the other parts of those efforts to find a way down. Currently we are aware that there is a proposal involving Cook Inlet Tribal Council, [ENSTAR Natural Gas Company], and some other parties, that is looking for federal funding to study that route. There have been some previous studies, but in terms of ... the spur line, we would believe that this would provide the kind of grubstake we would need to really look seriously at that route and bring it to a level of design and engineering and permitting and other things that would make it real. 5:43:28 PM MR. HEINZE went on to say: The other point ... I'd really wanted to make about the bill is that we view this funding as a grubstake. We believe that the Railbelt energy fund provides that opportunity to get the project going. The project would be financed of itself at a much larger sum and, once it was financed, we would expect that it would generate revenues sufficient to pay back the fund very quickly. And that would be [the] ANGDA's intent, ... to pay this money back. We look at this as a loan, a grubstake, whatever you want to call it, for us. [And] ... just in brief comment as to the previous testimony, on the record, [the] ANGDA started, seriously, both public notice and contracting processes related to this spur line last September. We were very open about it; as a matter of fact, we ran some ads in the "Frontiersman" and other local publications - full-page color ads indicating what we were doing and why we were doing it in terms of meeting the energy needs of Southcentral. At that time, then, ... one of our first efforts, as we started our contractors around the first of this year, was to actually have an individual go out and do a certain amount of public outreach. At that time, the funds and the time were limited, but we did contact a few people in the Chickaloon area. 5:44:48 PM MR. HEINZE continued: Since then, I personally have gone up there and I have spent time in both Sutton and Chickaloon. We had some good meetings at the community council, received some very good suggestions, and we've actually been able to incorporate a number of those suggestions into the application. The exact routing in the Chickaloon area is something that we will study further, just as [in] several other places along the line, ... as we go through it. The application, right now, on the table, is for state land only. It has nothing to do with the private land. And, in particular in the Palmer area, we've felt that we would probably be using existing utility right-of-ways that have been granted there by both ... the state and the borough. So again, we've not addressed, in any great detail - and the funding was not sufficient at this point to address in any great detail - what we would do with the private contractors. There [are] ... additional funds in the supplemental budget to allow us to do those kind of efforts, and we look forward to, hopefully, that being approved, and moving on. 5:46:27 PM REPRESENTATIVE ROKEBERG referred to the supplemental budget vetoed by the governor, and asked whether the money earmarked for the ANGDA, assuming it is budgeted in another bill, would be sufficient to sustain the ANGDA through all of 2006. MR. HEINZE offered his understanding that the $2.17 million that was passed by the legislature in the fast track supplemental bill but vetoed by the governor is now part of the "working amendments" to the supplemental bill currently in the Senate Finance Committee. He added: That $2.17 million is the sum of money to take this next step ... [of] - once we receive a right-of-way to cross the state the land, which is the dominant land position along the way - ... dealing with issues of very specific design in certain areas along the pipeline, acquiring right-of-way, doing the permitting and other types of work like that, that are necessary to basically put together the funding package for the project. And, again, this will be a bonded-type package as a utility company, and the $2 million gets us towards that next step. ... We would be prepared to issue those contracts at a time that is fairly coincident with whatever contract or whatever agreement is made, or reached, on the North Slope project, whether it be down the highway or to Valdez. And the reason for that is, we believe that it is wisest to do the spur line as a pre-build into the big project, to cut the time delay in getting the critically needed gas to the Cook Inlet area. ... That is all that money does, and it, very frankly, barely does that. That's cutting it pretty tight on a number of items in that budget. But that is entirely different from what we would see as the need for the broader issue of getting North Slope gas to Cook Inlet, if necessary, even by some direct route or some other route. 5:50:17 PM PAUL FUHS, Volunteer Lobbyist for Backbone 2, explained that Backbone 2 is a citizen organization promoting gas line development in Alaska. He stated that [the bill] is important in order for Alaska to maintain all of its options for bringing gas down [from the North Slope]. He said, "While we support the bigger projects and hope that they go through, ... there's no guarantee that any of the big projects are going to move forward quickly." He added: The other thing that's important about this, from the strategic sense of bringing the gas to Southcentral Alaska, is that we know the biggest battle is to secure a gas supply for the project, and there's been a lot of discussions about that lately, ... [regarding the things] that the state might do to help make that happen if, in fact, there's no willingness on the part of the producers to either produce the gas themselves or to sell it to anybody else. This project, as proposed as a bullet line, is a 24-inch line and could operate with the state's royalty gas from the North Slope, and it is critical that we bring the gas to Southcentral. 5:51:58 PM MR. FUHS noted that the price for gas has been going up and is projected to double in the next five years. He also predicted that "without getting Alaska gas, we're going to lose the LNG [Liquid Natural Gas] plant in Kenai," and noted that LNG is not considered a manufactured product. He mentioned that there is also propane in the gas, and therefore propane could be shipped to coastal and rural Alaska to provide relief regarding high energy prices. He opined, "I do think this is an appropriate use of the Railbelt energy fund because energy's critical, both to the cost of living [for] ... people in Southcentral and to the competitiveness, as a region, as a place for businesses to operate." In addition, he offered his belief that the ENSTAR Natural Gas Company would be interested in "this" because it would be a tax-exempt corporation. Such accounts for about 35 percent in federal taxes and net proceeds, and those savings can be passed on to the consumers and users of gas in Southcentral. 5:53:47 PM CHAIR KOHRING asked if the proceeds from the Alaska Railroad bonds could be used to build a gas line. MR. FUHS replied affirmatively, and added that the "federal guarantees" could also be used for this project. CHAIR KOHRING mentioned passage of a bill a few years ago authorizing the use of up to $18 billion in low interest rate tax-exempt bonds as a funding source to build a gas line. 5:54:31 PM REPRESENTATIVE ROKEBERG asked Mr. Fuhs if he could work with Representative Rokeberg's office on that issue. MR. FUHS replied that he would. 5:54:52 PM CHAIR KOHRING, after ascertaining that no one else wished to testify, closed public testimony on HB 254. 5:54:56 PM REPRESENTATIVE KERTTULA asked if the bill was written such that it is in essence a loan to the ANGDA. REPRESENTATIVE ROKEBERG referred to subsection (c) on page 3, and explained that it is actually an appropriation. He said: The idea is ... to look and see if we can get the recovery of those costs, pay it back to the Railbelt energy fund from the private sector. ... The idea here is to get the preliminary work done in a more timely manner and seek to form an organization ..., some type of authority which can take advantage of the taxes and funding perhaps, but it would be a project entity from which this group could recover the funding. 5:56:38 PM REPRESENTATIVE McGUIRE moved to report HB 254 out of committee with individual recommendations and the accompanying fiscal notes. There being no objection, HB 254 was reported from the House Special Committee on Oil and Gas.
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