Legislature(2001 - 2002)
03/05/2002 10:20 AM O&G
* first hearing in first committee of referral
= bill was previously heard/scheduled
= 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 added: 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 them. 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 "protections". 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 (1)-(4)]. 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 it. 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 LNG. 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.