Legislature(2001 - 2002)

03/05/2002 10:20 AM O&G

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
HJR 44 - ALASKA NATURAL GAS PIPELINE ROUTE                                                                                    
Number 0060                                                                                                                     
CHAIR OGAN  brought before the  committee HOUSE  JOINT RESOLUTION                                                               
NO. 44,  Urging the  President of the  United States,  the United                                                               
States  Congress, and  appropriate federal  officials to  support                                                               
the construction and operation of  the Alaska Highway Natural Gas                                                               
Pipeline route.                                                                                                                 
CHAIR  OGAN introduced  a delegation  from the  Yukon Legislative                                                               
Assembly:    Mike  McLarnon,  the   Honorable  Scott  Kent,  Eric                                                               
Fairclough, Gary  D. McRobb,  and Peter W.  Jenkins.   He invited                                                               
Mr. Kent to testify.                                                                                                            
Number 0191                                                                                                                     
THE  HONORABLE  SCOTT  KENT, Minister  of  Economic  Development,                                                               
Minister  of Government  Services, and  Minister Responsible  for                                                               
the  Yukon  Development   Corporation/Yukon  Energy  Corporation,                                                               
Government  of  Yukon,  provided  an update  on  what  the  Yukon                                                               
Government has been  doing to promote the  Alaska Highway natural                                                               
gas pipeline on the Canadian side of the border.                                                                                
MR. KENT noted  that he'd met Representative  Green in Vancouver,                                                               
British Columbia, approximately  a month and a half  ago, as part                                                               
of  the  joint  committee  chaired  by  Senator  Torgerson.    He                                                               
indicated  the  Yukon  Government  is  working  on  opportunities                                                               
including access  to gas, training,  and other  opportunities for                                                               
his constituents.   He also indicated that  Senator Torgerson had                                                               
relayed  the desire  to have  "real Alaskans  and real  Yukoners"                                                               
working on this project when it becomes a reality.                                                                              
Number 0267                                                                                                                     
MR.  KENT reported  that $750,000  has been  put in  the upcoming                                                               
budget  to support  the Pipeline  Unit in  the Yukon  Territory's                                                               
Department  of Economic  Development;  he indicated  the unit  is                                                               
doing an economic study that  it can share with other governments                                                               
in Alaska,  British Columbia,  and Alberta, as  well as  with the                                                               
Canadian  and United  States federal  governments.   He explained                                                               
that  his  government is  lobbying  [the  federal government  in]                                                               
Ottawa to have  the "NPA office" reestablished and set  up in the                                                               
Yukon, as  well as making  a streamlined  regulatory environment,                                                               
once this  project becomes a  reality, to  ensure that it  can be                                                               
done as seamlessly as possible.                                                                                                 
Number 0371                                                                                                                     
MR. KENT addressed First Nations and infrastructure issues:                                                                     
     On  the  First  Nations  front,  the  premier  and  the                                                                    
     Federal  Minister of  Indian and  Northern Affairs,  as                                                                    
     well  as  the  First   Nations  with  outstanding  land                                                                    
     claims,  are   working  ...  towards  the   March  31st                                                                    
     deadline.   ...  It's   hard   work,   and  it's   hard                                                                    
     negotiating at  the tables, but we're  committed to it,                                                                    
     ... as are  the other two parties that ...  sit at that                                                                    
     table, which  will provide even more  certainty ... for                                                                    
     the  Alaska Highway  pipeline  once  ... the  producers                                                                    
     come around and make their decision ... on the route.                                                                      
     As far  as infrastructure  in the Yukon  Territory, ...                                                                    
     we're improving  the Alaska Highway  significantly, not                                                                    
     only at the Shakwak project  that is funded by the U.S.                                                                    
     federal government  on the north Alaska  Highway, north                                                                    
     of Haines  Junction, but our  government is  also doing                                                                    
     some ...  work between ... Champagne,  Yukon, and north                                                                    
     towards Haines Junction to ...  improve that stretch of                                                                    
     highway, too,  so that ... the  infrastructure is there                                                                    
     and in place when ... the project proceeds.                                                                                
Number 0484                                                                                                                     
MR. KENT  emphasized the importance  to Yukoners and  Alaskans of                                                               
having  access to  the gas  once the  pipeline is  in place.   He                                                               
noted the  benefits that will  come from having that  access, "to                                                               
fuel future  industries and to  provide a  keep-clean alternative                                                               
energy source to our communities  and to ... the industry," which                                                               
will lead  to strong, long-term  economic development.   Mr. Kent                                                               
offered to  answer questions regarding  "our undying  support for                                                               
the Alaska Highway pipeline project."                                                                                           
Number 0553                                                                                                                     
CHAIR OGAN remarked that he has  been impressed with the level of                                                               
support  for  a  gas  pipeline   project  offered  by  the  Yukon                                                               
Government  in  particular.   He  noted  that he,  Representative                                                               
Green,  and other  members of  the joint  committee went  through                                                               
Canada this  past summer  and met  with Mr.  Kent and  others; he                                                               
expressed  appreciation for  the premier's  meeting with  them at                                                               
the airport as well.                                                                                                            
CHAIR  OGAN  indicated  he  looks   forward  to  a  good  working                                                               
relationship in trying  to facilitate the project;  he noted that                                                               
its fate  is in the  federal government's hands now,  but offered                                                               
his understanding that  there is support in Washington,  D.C.  He                                                               
referenced the  upcoming Energy Council meeting  there, which he,                                                               
Representative Green, Representative  Fate, Representative Joule,                                                               
and a few other legislators would attend.                                                                                       
Number 0671                                                                                                                     
CHAIR  OGAN  briefly turned  attention  to  efforts to  open  the                                                               
Arctic  National Wildlife  Refuge  (ANWR) [to  exploration].   He                                                               
said there are  six times as many caribou at  Prudhoe Bay as when                                                               
oil drilling  began, but  noted that  the premier  [the Honorable                                                               
Pat  Duncan,  Premier,  Yukon  Government]  has  said  it  is  an                                                               
emotional argument for her constituents.                                                                                        
MR. KENT reported  that in the following week he  would travel to                                                               
Ottawa   to  "check   in"  and   remind  federal   ministers  and                                                               
politicians about  the importance of the  Alaska Highway pipeline                                                               
project  to Yukoners  and  the  benefits to  all  Canadians.   He                                                               
     We've always said [there are  going to] be two projects                                                                    
     in the  north, one that  will carry North Slope  gas to                                                                    
     market via ... the  TAPS [Trans-Alaska Pipeline System]                                                                    
     right-of-way  and  the  Alaska Highway,  and  a  second                                                                    
     project  that  will  take Beaufort  delta  gas  up  the                                                                    
     Mackenzie valley and ... towards southern markets.                                                                         
MR. KENT, with regard to ANWR, said:                                                                                            
     There's  certainly some  things that  we can  agree on,                                                                    
     such as  the Alaska Highway pipeline,  and there's some                                                                    
     things that  we ... agree  to disagree on, such  as ...                                                                    
     the debate  over ANWR.   So I prefer to  concentrate on                                                                    
     the things  that ...  we both want  to see  happen, and                                                                    
     the  Alaska  Highway pipeline  is,  of  course, one  of                                                                    
Number 0925                                                                                                                     
CHAIR OGAN  turned attention  to HJR 44,  sponsored by  the House                                                               
Special Committee  on Oil  and Gas.   He  offered a  new proposed                                                               
committee substitute (CS), Version C.                                                                                           
Number 0960                                                                                                                     
REPRESENTATIVE FATE moved  to adopt the proposed  CS [version 22-                                                               
LS1577\C, Chenoweth,  2/28/02] as a  work draft.  There  being no                                                               
objection, Version C was before the committee.                                                                                  
CHAIR OGAN  explained that HJR  44 urges Congress to  support the                                                               
construction  and operation  of  the Alaska  Highway natural  gas                                                               
pipeline route; this  is being debated currently  on Capitol Hill                                                               
in Washington,  D.C.  He  emphasized the importance of  sending a                                                               
unified message from the legislature.                                                                                           
Number 1065                                                                                                                     
REPRESENTATIVE  JOULE requested  that  Chair  Ogan highlight  the                                                               
differences between the original version and Version C.                                                                         
CHAIR  OGAN called  an  at-ease  at 10:31  a.m.    [A draft  bill                                                               
version  used  in preparing  Version  C  was  handed out  by  the                                                               
committee aide.  Like the  original, it was labeled "22-LS1577\A"                                                               
in  the   upper  right-hand  corner;  however,   it  was  labeled                                                               
"HJR044A"  in the  lower left-hand  corner, whereas  the original                                                               
version  was "HJR044a."    Furthermore, the  draft  was typed  on                                                               
numbered legal  paper so that  the first page and  all subsequent                                                               
pages  had 25  lines numbered.   Members  noted that  Version C's                                                               
title used the words "Strongly urging" rather than "Urging".]                                                                   
CHAIR OGAN called the meeting back to order at 10:37 a.m.                                                                       
Number 1145                                                                                                                     
CHAIR OGAN  explained that  on page  3, the  subsistence language                                                               
has  been dropped  out of  respect to  those with  concerns about                                                               
subsistence on the  North Slope; he said he believed  it was best                                                               
left  silent.   On page  4,  the following  language was  dropped                                                               
[after "terms,"  on line 22]:   "do not have to  pay for pipeline                                                               
services that they do not use".                                                                                                 
CHAIR OGAN further noted that  on page 5, three "WHEREAS" clauses                                                               
have  been  added  [beginning  at  lines  6  of  Version  C];  in                                                               
addition, the word  "strongly" was added to lines [12  and 16, so                                                               
it read  "strongly urges" in both  places].  He said  the concern                                                               
is that  if momentum  might be  lost.  He  offered as  an example                                                               
that John  Brown of BP, to  paraphrase him, has said  the project                                                               
is not economically viable.                                                                                                     
CHAIR OGAN  referred to  page 5,  lines [20, 23,  and 27,  at the                                                               
beginning of paragraphs (1) through (3),  Version C].  He said he                                                               
believes   the   word   "provisions"    is   better   here   than                                                               
CHAIR  OGAN referred  to language  regarding fair  and reasonable                                                               
access [remaining  language in  Version C, page  5, line  21, and                                                               
new language  that read "fair  and reasonable tariffs" on  page 5                                                               
[line 24].   He said it  is to continue to  encourage exploration                                                               
by independent  companies on the  North Slope, in  the foothills,                                                               
and other  places; without  fair access  and fair  and reasonable                                                               
tariffs, he explained, they may be discouraged from doing that.                                                                 
Number 1336                                                                                                                     
CHAIR OGAN referred to page 6  of the draft [page 5, beginning at                                                               
line  30, of  Version C],  noting that  it contains  new language                                                               
[paragraph  (4)].   He pointed  out that  the amount  of any  tax                                                               
credit would be limited to  periods when gas prices are extremely                                                               
low, and it would be paid back when  the gas prices are high.  He                                                               
commented,  "I feel  that if  ... we're  asking the  taxpayers to                                                               
share in  the risk,  that there's an  upside, that  the taxpayers                                                               
should get  a rebate."  He  pointed out that often  taxpayers are                                                               
asked to share high risks, but  don't enjoy the benefits when the                                                               
risks  are low.   He  suggested it  would make  the resolution  a                                                               
little more "salable."                                                                                                          
Number 1417                                                                                                                     
REPRESENTATIVE  GUESS requested  a copy  of the  enabling federal                                                               
legislation, S. 1766.                                                                                                           
CHAIR  OGAN called  an  at-ease  at 10:41  a.m.    He called  the                                                               
meeting back to order at 10:43 a.m.                                                                                             
Number 1448                                                                                                                     
REPRESENTATIVE  GUESS moved  to  adopt Amendment  1,  on page  5,                                                               
line 8, to  change "will" to "may".   [Thus lines 8-9  would read                                                               
in  part:   "WHEREAS the  large volume  of gas  delivered to  the                                                               
lower 48  states may  initially stabilize gas  prices at  a lower                                                               
level,  bringing financial  benefit  to the  lower 48  economy".]                                                               
Representative Guess explained that  perhaps the economist in her                                                               
makes her  worry about  such a strong  statement when  she hasn't                                                               
analyzed the gas market.                                                                                                        
CHAIR OGAN  asked whether there  was any objection.   There being                                                               
no objection, Amendment 1 was adopted.                                                                                          
Number 1496                                                                                                                     
REPRESENTATIVE GUESS  began discussion of the  rationale for what                                                               
would  become  Amendment 2.    Given  that  federal S.  1766  has                                                               
changed several times in the past  week and that there are "a few                                                               
hundred  amendments  floating  around,"  she  asked  whether  the                                                               
committee  is comfortable  strongly urging  passage of  something                                                               
whose final form is unknown.                                                                                                    
CHAIR OGAN replied that the  committee is strongly urging passage                                                               
[by  Congress] of  something that  incorporates these  provisions                                                               
[in Version C  under the "FURTHER RESOLVED"  clause in paragraphs                                                               
REPRESENTATIVE GUESS  brought attention  to page 5,  lines 16-19,                                                               
which read:                                                                                                                     
     FURTHER  RESOLVED that  the legislature  strongly urges                                                                    
     passage during  the first  half of  2002 of  the Alaska                                                                    
     Gas   Producers   Pipeline  Team's   federal   enabling                                                                    
     legislation  contained  in  S.   1766  so  long  as  it                                                                    
     contains a provision similar to  that in H.R. 4 banning                                                                    
     the over-the-top route and the following amendments:                                                                       
Number 1558                                                                                                                     
REPRESENTATIVE GUESS said  she didn't know how  much a resolution                                                               
means,  but if  S.  1766  turns out  to  contain provisions  that                                                               
"we're not comfortable with, as  Alaskans," she was wondering how                                                               
Chair Ogan was reconciling it.                                                                                                  
CHAIR OGAN remarked  that if a resolution contains  an issue that                                                               
he'll be  voting on  or is particularly  interested in,  he reads                                                               
it, but otherwise he may not.   He said the legislature obviously                                                               
cannot control Congress, and this  just says what the legislature                                                               
would like Congress to do.                                                                                                      
Number 1666                                                                                                                     
REPRESENTATIVE  JOE GREEN,  Alaska State  Legislature, offered  a                                                               
suggestion that would become Amendment  2.  Noting that he agreed                                                               
with Representative  Guess, he said  there will be  a significant                                                               
number  of amendments  [to  the  federal legislation],  including                                                               
some by  Alaska's own  U.S. Senator [Ted  Stevens].   He proposed                                                               
saying   "federal   [enabling]    legislation",   then   deleting                                                               
"contained in S. 1766" and having  the paragraph continue on.  In                                                               
that  way, it  would encourage  something similar  to H.R.  4 and                                                               
banning  the  over-the-top  route;  it  would  then  contain  the                                                               
provisions [in paragraphs (1)-(4), beginning  on page 5, line 20,                                                               
of  Version C].   It  wouldn't say  anything different,  but just                                                               
wouldn't specify the particular [federal] bill.                                                                                 
CHAIR OGAN said it is a good suggestion.                                                                                        
Number 1729                                                                                                                     
REPRESENTATIVE GUESS moved to adopt Amendment 2, on page 5,                                                                     
line 18, to delete "contained in S. 1766".  There being no                                                                      
objection, Amendment 2 was adopted.                                                                                             
CHAIR OGAN called an at-ease at 10:48 a.m.  He called the                                                                       
meeting back to order at 10:53 a.m.                                                                                             
Number 1840                                                                                                                     
PAUL FUHS, Lobbyist for Yukon Pacific Corporation (YPC), came                                                                   
forward to testify.  He stated:                                                                                                 
     I'm here  to speak in  favor of House  Joint Resolution                                                                    
     Number 44,  and you  might find that  interesting since                                                                    
     we're supporting  a project  which goes  through Alaska                                                                    
     to tidewater.   But I want to explain to  you why we're                                                                    
     supporting this resolution. ...                                                                                            
     First, there are two ways  that Alaska gas could get to                                                                    
     the U.S.  market.   And one could  be the  overland ...                                                                    
     by-the-highway  route, or  the  other could  be as  LNG                                                                    
     [liquefied  natural gas].   Now,  people have  said the                                                                    
     LNG  project is  uneconomic, but  none of  the economic                                                                    
     analyses  that have  been  done  included shipments  of                                                                    
     Alaskan gas  to the U.S. as  LNG.  So we've  done that,                                                                    
     and on the  14th we'll be announcing  an economic model                                                                    
     to you,  before this  committee, of  a project  that we                                                                    
     think works.                                                                                                               
     So  why are  we supporting  this?   Well, when  you get                                                                    
     down  into the  "BE  IT RESOLVED"  of  this, there's  a                                                                    
     couple [of]  really important provisions here,  and one                                                                    
     of these  is the  recognition of ANGTA  [Alaska Natural                                                                    
     Gas Transportation Act  of 1976].  And  we do recognize                                                                    
     the  validity of  ANGTA, and  I want  to make  it clear                                                                    
     that  also our  presidential  authorizations to  export                                                                    
     gas   from  Alaska   are  included   under  the   ANGTA                                                                    
     framework.  So  this is very important  to our project,                                                                    
     also, that ANGTA is identified.                                                                                            
Number 1932                                                                                                                     
MR. FUHS continued:                                                                                                             
     Also, the  issues here on financial  incentives, income                                                                    
     tax credits, and  when the prices are  extremely low --                                                                    
     I did  want to  let you  know that what  I read  in the                                                                    
     Peninsula Clarion, that ... when  the prices went below                                                                  
     [$]3.75, that it would kick  in, that it was [a] $1.25-                                                                    
     a-thousand-cubic-foot  subsidy  of   the  project,  and                                                                    
     prices  are about  [$]2.20  today.   So  this would  be                                                                    
     fully in effect  as long as the price is  below $2.50 a                                                                    
     thousand cubic  feet in the U.S.   So I don't  know how                                                                    
     successful it's going  to be to get  the Rocky Mountain                                                                    
     states and the  Gulf states to agree to  a subsidy that                                                                    
     would essentially displace their  gas anytime that it's                                                                    
     below [$]2.50, but  if you can pull it  off, that would                                                                    
     be  great, because  it's probably  what's necessary  to                                                                    
     make the  highway project  economic, according  to what                                                                    
     the producers  have been saying about  the economics of                                                                    
Number 1968                                                                                                                     
     Our fear is not that  the Canadian route will be built.                                                                    
     If  it  was,  then  a  "Y-line"  concept  is  the  most                                                                    
     economic configuration  for both  projects.  You  go to                                                                    
     Canada; you  take a  spur line to  Valdez -  that's the                                                                    
     most economic.   Our  fear is  that the  Canadian route                                                                    
     will not be  built, even after all the  tax credits and                                                                    
     everything else.                                                                                                           
     And  we  still  haven't  seen these  studies  that  the                                                                    
     producers said  that they  were going  to bring  to the                                                                    
     legislature and talk  to you about.   ... But according                                                                    
     to what  John Brown [of  BP] said, as you  referred to,                                                                    
     they believe  it may  still ... not  be economic.   Our                                                                    
     point is that  we do not require the  Canadian line for                                                                    
     our project  to be economic,  we don't believe.   We're                                                                    
     going  to bring  that  before  you and  see  if we  can                                                                    
     justify it.                                                                                                                
     Our biggest  concern if  this goes  through -  we heard                                                                    
     talk, and  [U.S.] Senator Murkowski said  it, and other                                                                    
     people have  said it - if  they are going to  mandate a                                                                    
     Canadian  highway  route  for this  project,  what  you                                                                    
     could end up with down  there is that the Canadian line                                                                    
     never gets built, and then  because of this mandate, we                                                                    
     could not  even sell  Alaskan gas  to our  own country.                                                                    
     Now, that  would be a  perverse outcome, if  that's how                                                                    
     it's stated, that we are mandating the highway route.                                                                      
     It should  be treated  fairly.  And  we don't  have any                                                                    
     problem with  the subsidies; if  this goes,  it's great                                                                    
     for us, and  it's great for Alaska, and  it's great for                                                                    
     Canada.    But  if  it  doesn't,  we  may  be  blocking                                                                    
     our[selves]  in the  end.   ... I  think ...  you don't                                                                    
     want to do that.                                                                                                           
Number 2053                                                                                                                     
MR.  FUHS   proposed  a  further  amendment   [later  adopted  as                                                               
Amendment 3], to add the following:                                                                                             
        these provisions are not intended to exclude the                                                                        
      supply of Alaska North Slope gas to U.S. markets as                                                                       
He explained, "Support the whole  package.  Do everything you can                                                               
to try  to get this  line to go.   But  make sure that  you don't                                                               
exclude the  potential of LNG  sales of  Alaskan gas to  the U.S.                                                               
That's all we're asking you."                                                                                                   
MR. FUHS expressed  pleasure at how the  joint pipeline committee                                                               
has  treated  both  projects  equally.     He  conveyed  concern,                                                               
however, that  HJR 44's  title says  "the Alaska  Highway Natural                                                               
Gas Pipeline route",  but noted that the "BE  IT RESOLVED" clause                                                               
[on page 5]  says "a natural gas pipeline through  Alaska along a                                                               
southern  route".   Mr. Fuhs  said that  is more  equal language,                                                               
adding, "That could also even include  our project.  When you put                                                               
'Alaska  Highway  Natural  Gas  Pipeline  route',  you  might  be                                                               
playing into something that mandates  it and excludes Alaskan gas                                                               
from going as  LNG.  That's our only concern  with the resolution                                                               
as it's written."                                                                                                               
Number 2113                                                                                                                     
CHAIR OGAN asked  whether anyone else wished to  testify; he then                                                               
closed public testimony.  He called  an at-ease at 10:58 a.m. and                                                               
brought the meeting back to order at 11:03 a.m.                                                                                 
Number 2152                                                                                                                     
REPRESENTATIVE  FATE  moved  to  adopt  Amendment  3  [Mr.  Fuhs'                                                               
proposed language,  provided in  handwritten form during  the at-                                                               
ease],  to be  placed  under  the "BE  IT  RESOLVED" section,  as                                                               
[paragraph  (5),  page  6,  after   line  3].    There  being  no                                                               
objection, Amendment 3 was adopted.                                                                                             
Number 2203                                                                                                                     
REPRESENTATIVE  GUESS  moved  to  report CSHJR  44  [version  22-                                                               
LS1577\C, Chenoweth, 2/28/02], as  amended, out of committee with                                                               
individual  recommendations and  the attached  zero fiscal  note.                                                               
There  being no  objection, CSHJR  44(O&G) was  moved out  of the                                                               
House Special Committee on Oil and Gas.                                                                                         

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