Legislature(1993 - 1994)

02/14/1994 05:00 PM House O&G

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
  (Tape 94-6 - Side 1)                                                         
                                                                               
            CHAIRMAN GREEN:  I call the Special House                          
  Committee on Oil and Gas Matters together at five minutes                    
  after five.  We are on teleconference with Anchorage and                     
  Fairbanks.                                                                   
                                                                               
            Can you hear us in Anchorage?                                      
                                                                               
            ANCHORAGE LIO:  Anchorage hears you just fine.                     
  Fairbanks has not joined the conference as yet.                              
                                                                               
            CHAIRMAN GREEN:  Is there anybody in Anchorage                     
  that will be wanting to testify?                                             
                                                                               
            ANCHORAGE LIO:  Mr. Ottesen is here to answer                      
  questions.  He is from the Department of Transportation.                     
                                                                               
            CHAIRMAN GREEN:  Okay.  He just wants to answer                    
  questions, rather than testify?                                              
                                                                               
            ANCHORAGE LIO:  If you have any of them.                           
                                                                               
            CHAIRMAN GREEN:  Okay.  Thank you.                                 
                                                                               
            Well, we are going to take up House Concurrent                     
  Resolution 12, natural gas as a fuel for motor vehicles                      
  first, and then we will be fortunate to actually get an                      
  overview from the Joint Pipeline Coordinator's Office to                     
  discuss the overview, oversight of the Alyeska Pipeline.                     
                                                                               
            So first we are going to have the -- is there                      
  someone here -- okay.  If you would like to come up and give                 
  us a run through.  Please identify yourself for the record,                  
  David, and we will be off on House Concurrent Resolution 12.                 
                                                                               
            REPRESENTATIVE FINKELSTEIN:  Thank you, Mr.                        
  Chairman, members of the committee.  My name is David                        
  Finkelstein.                                                                 
                                                                               
            Where we left off last year was, we discussed the                  
  resolution.  The department and others had a number of                       
  suggestions.  So the CS that is before you, has a couple                     
  added from that hearing that members of the committee showed                 
  an interest in.                                                              
                                                                               
            One of them was, "Whereas natural gas could                        
  benefit the commercial motor carriage through the                            
  availability of reliable inexpensive fuel, meet the pending                  
  low sulphur requirements of the Clean Air Act, and whereas                   
  natural gas has improved and performed the arctic conditions                 
  of Alaska, having been in use in the North Slope Borough for                 
  more than ten years on a year round basis.  And then there                   
  is some other changes made that were comments from committee                 
  members, and exactly who the copies of the resolution were                   
  sent to, which is getting to be quite a list.                                
                                                                               
            Other than that, the situation is basically the                    
  same.  I did attend some of the meetings that the state                      
  sponsored during the interim on their cooperative approach                   
  in trying to advance natural gases as a fuel in vehicles.  I                 
  think there is a lot of optimism.  I just passed out an                      
  article from February 7 in the Anchorage Daily News on the                   
  same subject.  And other than that, I would be glad to                       
  answer any questions.                                                        
                                                                               
            CHAIRMAN GREEN:  Are there any questions from any                  
  of the committee members, for Representative Finkelstein?                    
                                                                               
            (No audible response.)                                             
                                                                               
            Do -- are there currently places that people can                   
  get natural gas, if they had the conversion, in Alaska.                      
                                                                               
            REPRESENTATIVE FINKELSTEIN:  There are some.  In                   
  Anchorage there is basically a fast fueling spot and a slow                  
  fuel spot out.  The conclusion of the working group to date,                 
  from the meetings I attended, and the minutes I've read, is                  
  that is the bottle neck of the system at this point, that --                 
  of private fleets, especially, are not about to convert                      
  until they have some minimum level which, I think, the                       
  Department, the state views as about four -- four to five in                 
  Anchorage, so that it is reasonably convenient.                              
                                                                               
            There are other communities, though, that can                      
  operate off of just one fueling spot for the town.  It's                     
  just the nature of Anchorage, that is relatively inefficient                 
  to travel beyond that to get to the fueling spot.                            
                                                                               
            The view of those who might be in the business of                  
  selling natural gas is -- it's hard for them to make the                     
  commitment without any sense that the Department is going to                 
  follow through, as well as the municipality, private fleets,                 
  and the federal government are going to follow through, that                 
  there really will be a market out there, if they make the                    
  expenditure.                                                                 
                                                                               
            But in all levels that is happening, there is                      
  still strong support within the municipality of Anchorage,                   
  at least for that one city.  And on the federal level,                       
  Clinton has recently imposed to a higher level of                            
  expectation for natural gas vehicles in the federal fleet.                   
  And from my understanding, in talking to the Department of                   
  Transportation people, the private fleet managers seem to be                 
  as interested as ever.                                                       
                                                                               
            So I've got faith that -- and I've been fairly                     
  impressed with the efforts the department has made in trying                 
  to work cooperatively with industry, and sort of move                        
  together, so that by the time these refueling stations might                 
  be put in, there really will be enough demand out there.                     
                                                                               
            CHAIRMAN GREEN:  Is there a preferred -- is it,                    
  like, a cryogenic compartment that this gas would go into                    
  and be stored as a compressed gas, or would it be liquified,                 
  or...                                                                        
                                                                               
            REPRESENTATIVE FINKELSTEIN:  I think all --                        
  someone from the department could add to this, once I'm                      
  finished.  But I don't think they have operated any                          
  liquified stations.  There is a bit more technology involved                 
  there.  I think, generally, they unloaded, and they have the                 
  transfer station, and from then on out, the distribution                     
  system is just compressed gas.  But, they can correct me if                  
  I'm wrong.                                                                   
                                                                               
            CHAIRMAN GREEN:  How does it compare economic                      
  wise, if you had the conversion?  Say, your vehicle was                      
  ready to run on natural gas?                                                 
                                                                               
            REPRESENTATIVE FINKELSTEIN:  The range of figures                  
  that I've seen, and, again, the department's experience is                   
  much more relevant here -- but the range of figures that                     
  I've seen is anywhere from 40 percent of the cost, up to 80                  
  or 90 percent.  That it's always lower per BTU, and lower --                 
  I think BTU is the term used, rather than "thermal unit."                    
  And, usually, 50 to 60 percent of the figures that I hear.                   
                                                                               
            It is very efficient, and it can be argued -- if                   
  you have refueling available, it can be argued it's worth                    
  the investment for even each of us right now.  It's just the                 
  refueling station issue, that's, you know, created the                       
  problem.                                                                     
                                                                               
            It has a variety of other benefits on the engine                   
  as well.  It's a more clean burning fuel.  It doesn't have                   
  the tendency to build up deposits.                                           
                                                                               
            CHAIRMAN GREEN:  Do you suppose it would ever be                   
  clean enough that you wouldn't have to have a certificate                    
  inspection, if you had a gas car?                                            
                                                                               
            REPRESENTATIVE FINKELSTEIN:  Well, those are a lot                 
  after carbon monoxide.  I don't know how we deal with the                    
  particular exemption program, but I don't think you get the                  
  variation you get in traditional gasoline powered engines,                   
  where it's dependant on a complex technology to reduce the                   
  emissions.                                                                   
                                                                               
            It's, you know, inherent in the engines, so even                   
  the -- a more poorly tuned engine isn't going to be off to                   
  the extreme.  But all these things, you should ask, again,                   
  the department, if they have any thoughts beyond mine,                       
  because I would not pretend to be an automotive expert.   I                  
  can barely keep my car running.                                              
                                                                               
            CHAIRMAN GREEN:  Anybody else have any questions                   
  for Representative Finkelstein?                                              
                                                                               
            (No audible response.)                                             
                                                                               
            Any questions from Anchorage?                                      
                                                                               
            JEFF OTTESEN (VIA ANCHORAGE):  Mr. Chairman?                       
                                                                               
            CHAIRMAN GREEN:  Yes, sir.                                         
                                                                               
                                                                               
       JEFF OTTESEN (VIA ANCHORAGE):  This is Jeff Ottesen.                    
  I'm with the Department of Transportation, and have been, I                  
  guess, spearheading, more or less, the -- our conversion of                  
  our fleet -- partial conversion to natural gas for the last                  
  few years.                                                                   
                                                                               
            It is interesting that your meeting is today.  I                   
  spent the last three days riding one of our first new CNG                    
  vehicles here in Anchorage around.  I drove a CNG vehicle to                 
  this meeting in the last 15 minutes.  And I could tell you                   
  that they operate every bit as well as a gasoline vehicle;                   
  you can't tell the difference.                                               
                                                                               
            To answer a couple of questions that were raised.                  
  The exemption for I & M.  If your vehicle is a dedicated CNG                 
  vehicle, that is, it only can burn CNG, yes, it can be                       
  exempt.  If it's a dual fuel vehicle, which is probably the                  
  most practical choice, that is a vehicle that can burn                       
  either gasoline or CNG -- it's a switch -- then it has to                    
  maintain the I & M, because of the gasoline that is present                  
  there.                                                                       
                                                                               
            As far as the LNG versus CNG, that's really the                    
  same chemical fuel source, it's only a matter of how it is                   
  stored.  Either being delivered to the refueler, or,                         
  ultimately, to the vehicle.                                                  
                                                                               
            LNG is simply natural gas that has been liquified.                 
  It can (indiscernible) many temperatures.                                    
                                                                               
            CNG is simply natural gas that has been compressed                 
  to very high pressures, but it's not being stored at                         
  cryogenic temperatures.                                                      
                                                                               
            There are advantage to the LNG that we have                        
  available there at Kenai, that's a very economical method of                 
  transporting natural gas.  It can be put in a truck like                     
  gasoline.  It can be carried to the refueling location,                      
  beyond the range of the current pipelines.  To places like                   
  Fairbanks.  Stored there at refueler, and then loaded into                   
  automobiles or heavy trucks, for ultimate use by the                         
  vehicle.                                                                     
                                                                               
            So I think Representative Finkelstein is right.                    
  The problem now is the refueling infrastructure.  There is a                 
  lot of interest in fleet owners here in Anchorage, from what                 
  I hear, in getting into the business of having CNG.  They                    
  have no place to buy the gas right now.                                      
                                                                               
            CHAIRMAN GREEN:  Would it be a fair assumption,                    
  then, that the -- if you were going to a cryogenic system,                   
  that you would have a greater range than you would under                     
  compression?                                                                 
                                                                               
            JEFF OTTESEN (VIA ANCHORAGE):  That is correct.                    
  If you go to cryogenic as your source on board, that is                      
  beginning to show up more and more in the commercial side of                 
  the industry.  That is the -- I know the bus system in                       
  Seattle has just opted to go to LNG, because they get                        
  greater range than tanks.  Likewise, the long over-the-road                  
  carriers now, around the country, are converting to natural                  
  gas.                                                                         
            But once the gas is being used by the engine                       
  itself, it's the same gas as if it were stored in the                        
  compressed form.  The LNG is just a more dense form of                       
  storage.                                                                     
                                                                               
            CHAIRMAN GREEN:  And I guess my last questions --                  
  I don't want to monopolize the questions.  But how would,                    
  say, either a compressed gas, or a liquified gas, be safety                  
  wise, as compared to conventional gasoline?                                  
                                                                               
            JEFF OTTESEN (VIA ANCHORAGE):  Well, I'm not an                    
  expert, but I've listened to a lot of experts talk.  And my                  
  own skepticism, I think, has come full circle -- or, I                       
  should say, half circle.  I have come from being a skeptic                   
  of safety, and now believing that natural gas is probably                    
  safer.  And I will give you a few reasons why.                               
                                                                               
            One, the tanks, themselves, are much more durable,                 
  much stronger than a conventional gasoline tank.  They are                   
  capable of withstanding a high velocity of rifle rounds.                     
  They are capable of being dropped off a six-story building,                  
  and surviving in tact.  So just their durability, as                         
  compared to sheet metal, which is how gasoline is stored, is                 
  much better.                                                                 
                                                                               
            Secondly, the fuel has a lower range of ignition.                  
  The range that it will ignite, the amount of gasoline versus                 
  the atmospheric conditions, has a much narrower band of                      
  accountability than gasoline.                                                
                                                                               
            And then, finally, the gas, if it does have a                      
  spill, you do have a break in storage, it's lighter than                     
  air.  It quickly dissipates and blows away.  Where,                          
  gasoline, being heavier than air, pools and settles down.                    
                                                                               
            But for all those reasons, it's really a safer                     
  fuel.                                                                        
                                                                               
            CHAIRMAN GREEN:  Thank you, Jeff.                                  
                                                                               
            Any questions from anyone in the audience?                         
                                                                               
            (No audible response.)                                             
                                                                               
            What we need to do, I think, is first adopt the                    
  substitute as the bill.  I would entertain a motion to that                  
  effect.                                                                      
                                                                               
            REPRESENTATIVE KOTT:  Well, Mr. Chairman, I wonder                 
  if I might be able to ask Jeff a question.                                   
                                                                               
            CHAIRMAN GREEN:  Sure.                                             
                                                                               
            REPRESENTATIVE KOTT:  It seems to be in order at                   
  this particular point in time.                                               
                                                                               
            Jeff, Representative Kott here.  I just have a                     
  question for you regarding the number of natural gas                         
  vehicles that are currently in operation in the state of                     
  Alaska.  Do you have any estimate as to how many those are?                  
                                                                               
            JEFF OTTESEN (VIA ANCHORAGE):  I don't have a hard                 
  estimate.  I think, from what I've heard at the various                      
  conferences we've held, I think it's well over 100 now, and                  
  growing.  The state fleet here is just in the process of                     
  adding six to its inventory.  That will be our first six.                    
  We have a variety of vehicle types, as well as some that are                 
  dedicated natural gas.  That is, that is the only fuel.  We                  
  also have a Ford Taurus that is a bi-fuel.  Some are off the                 
  factory assembly line conversions, and some are being                        
  converted -- after-market conversions.  That is, the state                   
  has done it itself.                                                          
                                                                               
            So we even have these vehicles available for                       
  people that are visiting Anchorage, and need to use a state                  
  car for a day or three.  They could be made available.  Give                 
  me a call there in Juneau, and I could put you in touch with                 
  people that could schedule that car.                                         
                                                                               
            REPRESENTATIVE KOTT:  I would be more than happy                   
  to oblige you in using one of those vehicles, as long as I                   
  don't have to report it on my ethics report.                                 
                                                                               
            Those numbers that you cited, over 100, are those                  
  state owned vehicles, or is that a combination of public and                 
  private?                                                                     
                                                                               
            JEFF OTTESEN (VIA ANCHORAGE):  I believe that's                    
  public and private.  There are people that own these                         
  vehicles as individual citizens.  There are various                          
  businesses that are using them now.  There is a new                          
  coalition of public and private fleet managers here in                       
  Anchorage that are just this week, I believe, going to sign                  
  their resolution as -- basically, their bylaws, and that                     
  includes one of the Anchorage taxi cab fleets, the                           
  municipality and state fleet, and other fleet owners,                        
  basically getting together and trying to work -- get a                       
  teamwork environment to make this happen.                                    
                                                                               
            In the three or four days here in town that I've                   
  had a vehicle, driving around, and I have been stopped three                 
  times with people wanting to know what this car is all                       
  about, and how does it drive.  Does it work?  There's a lot                  
  of difference.                                                               
                                                                               
            REPRESENTATIVE KOTT:  Thank you for your comments.                 
                                                                               
            CHAIRMAN GREEN:  Jeff, I have another comment.                     
  This is Representative Green.                                                
                                                                               
            How does the maintenance compare on a natural gas                  
  engine to a gasoline engine?                                                 
                                                                               
            JEFF OTTESEN (VIA ANCHORAGE):  We held a                           
  conference a year ago December, where we brought fleet                       
  managers from around the country here to talk about that,                    
  and they all reported the same thing.  The engines simply                    
  burn cleaner on natural gas.  It doesn't put the                             
  contaminates into the oil.  It doesn't foul the spark plugs.                 
  You don't get the (indiscernible) on valves, and that sort                   
  of thing, in the engine, or the rings.  they'll last a long                  
  time.                                                                        
                                                                               
            CHAIRMAN GREEN:  Thank you.                                        
            Any other questions?                                               
                                                                               
            (No audible response.)                                             
                                                                               
            Okay.  I would entertain a motion to adopt the                     
  committee substitute.                                                        
                                                                               
            REPRESENTATIVE KOTT:  So moved.                                    
                                                                               
            CHAIRMAN GREEN:  It's been so moved by                             
  Representative Kott.  Any objections?                                        
                                                                               
            (No audible response.)                                             
                                                                               
            So ordered.                                                        
                                                                               
            I would now entertain a motion...                                  
                                                                               
            UNIDENTIFIED MALE:  Mr. Chairman, do we have                       
  anybody from the oil and gas industry in the audience that                   
  can give us an estimation as to how many natural gas                         
  vehicles are currently in operation on the North Slope                       
  Borough, since they've been up there for about 10 years or                   
  so?  Any idea?                                                               
                                                                               
            CHAIRMAN GREEN:  I don't know whether industry --                  
  I see, we have a member, Department of Environmental                         
  Conservation.                                                                
                                                                               
            Do you happen to know, or have a feel for -- I                     
  guess what you're really after, is just kind of an                           
  approximation.                                                               
                                                                               
            UNIDENTIFIED SPEAKER:  Yes.                                        
                                                                               
            MEAD TREADWELL:  Mr. Chairman, Mead Treadwell,                     
  Deputy Commission, ADEC.                                                     
                                                                               
            As I understand it, the firm NORGAS, which is one                  
  of the people you are directing this to, has been operating                  
  its truck fleet on the North Slope.  I don't know how many                   
  it is, but it's not a large fleet.  My guess is five to 10                   
  vehicles at this point.  There has been -- there is also a                   
  source of natural gas, as you know, that's not connected to                  
  Prudhoe Bay, that operates in Barrow.  And we had at the                     
  conference last year, a representative of the North Slope                    
  Borough, and I believe they had, with that gas utility,                      
  maybe three to five vehicles, as well.                                       
                                                                               
            They actually -- it was kind of an interesting                     
  situation there, because the price of gasoline was far more                  
  expensive than the price of natural gas, and you would think                 
  that many more vehicles would have converted.  But the                       
  explanation given at the conference was that the owners --                   
  the people who sold gasoline had a major choice in the                       
  decision of what kind of cars were purchased, and that's why                 
  they stuck with gasoline.                                                    
                                                                               
            But the utility that controlled its own vehicles,                  
  has been running on natural gas for some time, and that's                    
  the gas utility fleet there.  So the two North Slope gas                     
  utilities have it.                                                           
                                                                               
            Mr. Chairman, I had raised my hand when you were                   
  asking for questions, and if Jeff is still on the line, I --                 
  perhaps a colloquy between the two departments.                              
                                                                               
            Jeff had asked me the other day what additional                    
  incentives DEC might be able to come up with to help on                      
  this.  And as you may be aware, our state implementation                     
  plan for clean air is in the Department of Law right now for                 
  review.  It's a 3,000 page document.  It's probably the                      
  weightiest set of regulations ever contemplated, much less,                  
  had anything to do with developing.  But that's what we were                 
  required to do, and that's about one-eighth the size of                      
  Oregon's 20,000 page submission on the Clean Air Act.                        
                                                                               
            But anyway, that is in the Department of Law right                 
  now for review, and as soon as that is adopted, we have the                  
  authority to trigger a mechanism that would allow the                        
  Department of Transportation to use some of its so-called                    
  CMAC funds to help buy a gas refueling station.  And if we                   
  do that, I know that -- Jeff, you might want to explain the                  
  public-private partnership that you have in mind that could                  
  help get some greater refueling facilities in the                            
  marketplace.                                                                 
                                                                               
            JEFF OTTESEN (VIA ANCHORAGE):  Would that be                       
  appropriate?                                                                 
                                                                               
            CHAIRMAN GREEN:  Yes, please go ahead.                             
                                                                               
            CHAIRMAN GREEN:  The notion is, we could give some                 
  of our -- some of our highway funds are dedicated to a                       
  purpose called CMAC, or Conjunction Mitigation/Air Quality.                  
                                                                               
            How we use that money is controlled by the state                   
  implementation plan that Mead just talked about.  He needs                   
  to adjust this plan to make our spending, in this fashion,                   
  legitimate.  What then happens -- what we are hoping to                      
  envision would be, some form of a joint public-private                       
  partnership allowing one or more stations to go in the                       
  Anchorage area, that would be available to both public                       
  fleets and to private fleets.                                                
                                                                               
            I think, just in kind of a broad brush thinking                    
  proposal, or strong (indiscernible) proposal, we're                          
  imagining an RFP, which would basically say, we have this                    
  much money available to install the system.  We are looking                  
  for a private partner to come in, make that installation,                    
  operate it and maintain it, and to sell the natural gas                      
  automotive fuel back to the state's fleet, on a long term                    
  basis, at a discounted cost.  So that we would recoup that                   
  investment.                                                                  
                                                                               
            At the same time, those (indiscernible) system                     
  would be available to any other user that would care to come                 
  in and get refueled.                                                         
                                                                               
            CHAIRMAN GREEN:  Thank you.  Thank you, Mead, and                  
  thank you, Jeff.                                                             
                                                                               
            Representative Kott?                                               
                                                                               
            REPRESENTATIVE KOTT:  Thank you, Mr. Chairman.  I                  
  would just call your attention to page 2, line 8, where it                   
  talks about the number of natural gas vehicles currently in                  
  operation within Alaska.  And per the testimony of Jeff, I                   
  think we can probably make this -- tighten it up a little                    
  more, and make it a little more palatable to those who would                 
  not seemingly think it's a good idea, by, perhaps, offering                  
  a friendly amendment, making that number 50 to 100.  Since                   
  we do have over 600,000 registered vehicles in the state, I                  
  think it would add a little more thrust to the proposal.                     
                                                                               
            I'm certainly not wanting to hold this up in this                  
  committee, because it does have two additional committees,                   
  plus finance, which it probably ought to be away from, but                   
  -- I think it would give it a little more teeth in the                       
  matter, if we substantiated the number to a higher number.                   
                                                                               
            CHAIRMAN GREEN:  Do you feel comfortable with                      
  that, David, that -- is that still a number that you can                     
  live with?                                                                   
                                                                               
            REPRESENTATIVE FINKELSTEIN:  Actually, Jeff's view                 
  is more important.  If Jeff thinks it is correct, then                       
  that's more correct.  I just...                                              
                                                                               
            REPRESENTATIVE KOTT:  I'd offer that as a friendly                 
  amendment, then.                                                             
                                                                               
            THE COURT:  And the sponsor has no problem with                    
  that?                                                                        
                                                                               
            (No audible response.)                                             
                                                                               
            Anybody else have any comment on that?                             
                                                                               
            (No audible response.)                                             
                                                                               
            You're offering that as an amendment?                              
                                                                               
            (No audible response.)                                             
                                                                               
            Okay.  That will then read, over 100 natural gas                   
  vehicles.                                                                    
                                                                               
            REPRESENTATIVE OLBERG:  Should we ask for                          
  unanimous consent?                                                           
                                                                               
            CHAIRMAN GREEN:  Beg your pardon?                                  
                                                                               
            REPRESENTATIVE KOTT:  And I would ask unanimous                    
  consent of this amendment, with no objection.  Don't think                   
  about it too long.                                                           
                                                                               
            CHAIRMAN GREEN:  Any objection to that change?                     
                                                                               
            REPRESENTATIVE GARY DAVIS:  Good observations.                     
                                                                               
            CHAIRMAN GREEN:  If not, so ordered.                               
                                                                               
            REPRESENTATIVE KOTT:  And, Mr. Chairman, I make a                  
  motion, I would move this out of committee, with unanimous                   
  consent, as amended, to the next committee referral, which                   
  is Resources.  I think this is a good idea.  We've ridden                    
  this horse around the corral for a long time, and it's time                  
  to open the corral door and let it loose.                                    
                                                                               
            CHAIRMAN GREEN:  Any objection?                                    
                                                                               
            (No audible response.)                                             
                                                                               
            So ordered.                                                        
                                                                               
            REPRESENTATIVE FINKELSTEIN:  Thank you, sir.                       

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