Legislature(2013 - 2014)BARNES 124
02/06/2013 01:00 PM House RESOURCES
| Audio | Topic |
|---|---|
| Start | |
| HB4 | |
| HB77 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| += | HB 4 | TELECONFERENCED | |
| += | HB 77 | TELECONFERENCED | |
HB 4-IN-STATE GASLINE DEVELOPMENT CORP
1:03:47 PM
CO-CHAIR SADDLER announced that the first order of business is
SPONSOR SUBSTITUTE FOR HOUSE BILL NO. 4, "An Act relating to the
Alaska Gasline Development Corporation; making the Alaska
Gasline Development Corporation, a subsidiary of the Alaska
Housing Finance Corporation, an independent public corporation
of the state; establishing and relating to the in-state natural
gas pipeline fund; making certain information provided to or by
the Alaska Gasline Development Corporation and its subsidiaries
exempt from inspection as a public record; relating to the Joint
In-State Gasline Development Team; relating to the Alaska
Housing Finance Corporation; relating to the price of the
state's royalty gas for certain contracts; relating to judicial
review of a right-of-way lease or an action or decision related
to the development or construction of an oil or gas pipeline on
state land; relating to the lease of a right-of-way for a gas
pipeline transportation corridor, including a corridor for a
natural gas pipeline that is a contract carrier; relating to the
cost of natural resources, permits, and leases provided to the
Alaska Gasline Development Corporation; relating to procurement
by the Alaska Gasline Development Corporation; relating to the
review by the Regulatory Commission of Alaska of natural gas
transportation contracts; relating to the regulation by the
Regulatory Commission of Alaska of an in-state natural gas
pipeline project developed by the Alaska Gasline Development
Corporation; relating to the regulation by the Regulatory
Commission of Alaska of an in-state natural gas pipeline that
provides transportation by contract carriage; relating to the
Alaska Natural Gas Development Authority; relating to the
procurement of certain services by the Alaska Natural Gas
Development Authority; exempting property of a project developed
by the Alaska Gasline Development Corporation from property
taxes before the commencement of commercial operations; and
providing for an effective date."
1:04:13 PM
RENA DELBRIDGE, Staff, Representative Mike Hawker, Alaska State
Legislature, on behalf of Representatives Mike Chenault and Mike
Hawker, joint prime sponsors of SSHB 4, continued review of the
sectional analysis of SSHB 4, directing attention to Section 3,
which creates the Alaska Gasline Development Corporation's
(AGDC) corporate identity in statute, including its powers,
responsibilities, and duties. She paraphrased from page 5 of
the sectional analysis [original punctuation provided]:
Sec. 31.25.180, Validity of pledge, declares as valid
and binding any pledge of assets or revenue of the
corporation to payment or interest.
(From AHFC 18.56.120. This is a standard statement
that lenders need to see. It assures lenders that AGDC
has the statutory authority to pledge revenue; in
turn, that protects AGDC contracts under the U.S.
Constitution contracts clause so that future state
legislative action cannot violate protected
contracts.)
Sec. 31.25.190, Capital reserve funds, allows AGDC to
establish capital reserve funds to secure its
obligations, and directs fund management. Requires
annual reports to the governor and legislature.
(From AHFC 18.56.125 with structural modifications per
legal counsel. This section includes a moral, but not
legal, obligation of the state to replenish, if
necessary, a reserve fund created to cover interest
payments due on bonds.)
Sec. 31.25.200, Remedies, permits enforcement of
rights by those holding AGDC obligations.
(From AHFC 18.56.130 with structural changes by legal
counsel. Lenders need to see this standard statement.)
Sec. 31.25.210, Negotiable instruments, declares that
obligations are promises to pay an amount of money.
(From AHFC 18.56.135. This is a standard statement
that lenders need to see.)
MS. DELBRIDGE noted that proposed "Sec. 31.25.200 and Sec.
31.25.210" are a standard bond authority term that lenders would
want to see within the bonding statutory authority.
1:06:58 PM
MS. DELBRIDGE continued her review of the sectional analysis
from which she paraphrased [original punctuation provided]:
Sec. 31.25.220, Obligations eligible for investment,
AGDC obligations as legitimate investments.
(From AHFC 18.56.150. This allows investment in AGDC
bonds by the state and by other private institutions
in the state.)
MS DELBRIDGE explained that the aforementioned proposed statute
provides that Alaska banks and others with fiduciary duties to
their investors can buy into these bonds. She characterized it
as a certified investment. Returning to the sectional analysis
from which she paraphrased [original punctuation provided]:
Sec. 31.25.230, Refunding obligations, permits the
corporation to refund obligations and provides
direction for managing refunds.
(From AHFC 18.56.160. This is a standard statement
that lenders need to see. Bond refinancing is common.
As refinancing occurs, this section allows AGDC to
refund prior obligations.)
MS. DELBRIDGE stated that refinancing is common with revenue
bonds, and therefore there needs to be the ability to refund
their previous obligations as the new ones are assumed.
1:07:55 PM
REPRESENTATIVE SEATON, regarding refunding of obligations, posed
a scenario in which there is a takeover of those obligations
such that the money is refunded to AGDC. If there is an actual
refund, he asked if the money would stay in AGDC or return to
the general fund if it is advanced.
MS. DELBRIDGE related her understanding that because AGDC is
exempt from the Executive Budget Act under this legislation, the
money does not necessarily return to the general fund. She
offered to obtain a more definitive answer on that question.
1:08:44 PM
MS. DELBRIDGE returned to the sectional analysis from which she
paraphrased [original punctuation provided]:
Sec. 31.25.240, Credit of state not pledged, prohibits
AGDC from pledging the state's credit. AGDC
obligations are limited to AGDC's backing.
(From AHFC 18.56.170)
1:08:57 PM
Sec. 31.25.250, Limitation on personal liability,
protects corporation officers from personal liability.
(From AHFC 18.56.180)
MS. DELBRIDGE said that there is an expectation that this
provision should be valuable in terms of attracting qualified
board members. She then returned to the sectional analysis from
which she paraphrased [original punctuation provided]:
Sec. 31.25.260, Tax exemption, exempts AGDC from
paying state and local taxes on corporation property
or property income.
(From AHFC 18.56.190. This exemption applies to the
corporation. The state and local property tax
exemption in HB 4, section 32, applies to a project
owned or financed by, in whole or in part, AGDC.)
Sec. 31.25.270, Annual report, requires an annual
report to the governor, legislature and public,
including an independent audited financial statement.
(From AHFC 18.56.200; omits an additional reporting
requirement for mortgage loans investments.)
1:09:47 PM
REPRESENTATIVE SEATON asked whether the property would be tax
exempt if AGDC becomes a partner in a property. He recalled
that there is a provision [in SSHB 4] that [such property] would
be exempt until commercial operation began. However, this
proposed provision, Sec. 31.25.260, would exempt the property
from all taxation for the life of the project.
MS. DELBRIDGE indicated that both [exemptions] exist. Later in
the bill is a provision that would exempt any AGDC partnership
property, that is a pipeline in which ADGC is involved
regardless of the ownership, from paying state and local
property taxes during construction. Within its corporate
authority, any property AGDC has is always exempt when it is the
owner of the property. Ms. Delbridge said that it is fairly
standard within the state that one state entity does not tax
another state entity, which is why it is included in the
corporate provision.
1:11:07 PM
REPRESENTATIVE SEATON requested a legal analysis regarding this
tax exemption. For instance, he asked whether the Ketchikan
Shipyard for which the state is a partner with the Alaska
Industrial Development and Export Authority (AIDEA) would become
a nontaxable entity. Representative Seaton said that he had no
problem with a tax exemption during construction, but providing
one project a competitive advantage over another project that is
not financed by the state would essentially be picking winners
and losers in the commercial realm.
MS. DELBRIDGE agreed to provide confirmation as to how this
provision would play out.
REPRESENTATIVE SEATON agreed that is what he is seeking, as well
as the limitations as far as the partnership and whether it
would change the competitive status between a project financed
by AGDC and a project independently. Although he did not
believe that to be the case, he expressed the need to be sure.
1:12:51 PM
CO-CHAIR SADDLER inquired as to which section of SSHB 4 has the
provision regarding exemption of AGDC partnerships.
MS. DELBRIDGE specified that the property tax exemption is in
Section 34, which is an exemption of AGDC owned or financed
project from state and local property taxes during construction.
The sponsors included this provision in SSHB 4 because it is one
way the state, having declared AGDC its designee to do pipeline
projects that are in the interest in the state, can help the
project succeed by keeping costs down and not taking taxes from
it during the critical period when risk is high.
1:13:45 PM
REPRESENTATIVE TARR inquired as to the amount of lost revenue to
the state due to the aforementioned property tax exemption.
MS. DELBRIDGE deferred to the AGDC representative.
1:14:22 PM
FRANK RICHARDS, Manager, Pipeline Engineering & Government
Affairs, Alaska Gasline Development Corporation (AGDC), Alaska
Housing Finance Corporation (AHFC) Department of Revenue (DOR),
said that although he did not have those numbers, he recalled
that the taxation rate is about 20 mills. He offered to make
the calculations and provide the information to the committee.
1:14:46 PM
MS. DELBRIDGE continued paraphrasing from the sectional
analysis, as follows [original punctuation provided]:
Sec. 31.25.270, Annual report, requires an annual
report to the governor, legislature and public,
including an independent audited financial statement.
(From AHFC 18.56.200; omits an additional reporting
requirement for mortgage loans investments.)
Sec. 31.25.390, Definitions.
MS. DELBRIDGE informed the committee that definitions in SSHB 4
were from pieces of the former AS 38.34 statute, which was
created through the passage of House Bill 369 [from the 26th
Alaska State Legislature].
1:15:22 PM
MS. DELBRIDGE then moved on to Section 4 of SSHB 4 and
paraphrased from the sectional analysis [original punctuation
provided]:
Section 4 (procurement code exemption), adds new paragraphs
to AS 36.30.850(b), Public Contracts, State Procurement
Code, Application of this chapter, exempting AGDC, its
subsidiaries, and ANGDA contracts from the state
procurement code. The exemption is reinforced in AGDC's
statutes (HB 4 Section 3) and in ANGDA's statutes (HB 4
Section 22).
1:15:50 PM
REPRESENTATIVE TUCK asked why AGDC is being placed under the
Department of Commerce, Community & Economic Development (DCCED)
rather than the Department of Transportation & Public Facilities
(DOT&PF), which already has a solid procurement system in place
and is an agency that deals with infrastructure. He
characterized this as "quite a piece of infrastructure." He
recalled that the Alaska Energy Authority (AEA) does not have
subsidiary powers, and then asked whether DCCED has subsidiary
powers.
MS. DELBRIDGE replied that she is unsure as to whether DCCED has
subsidiary powers, but suggested that it probably does not as it
is a department not a corporation. With regard to why AGDC was
placed under DCCED, she related the sponsors' belief that in-
state gasline projects are about more than simply the project
construction. Such in-state gasline projects are about putting
together the financial deal and terms and negotiate with many
diverse commercial entities. Putting together a package is of
as great importance as the construction process and DCCED fully
represents the benefits to the state the sponsors believe AGDC
will bring in commerce, economic development, and developing
communities.
1:17:36 PM
REPRESENTATIVE TUCK related his understanding that Ms. Delbridge
will provide the committee with a written explanation as to why
the state's procurement codes do not work for a project such as
this.
MS. DELBRIDGE replied yes.
1:18:16 PM
MS. DELBRIDGE, returning to the sectional analysis, directed
attention to Section 5 [original punctuation provided]:
Section 5 (RCA accounting, conforming) amends AS
37.05.146(c)(22), Public Finance, Fiscal Procedures
Act, Definition of program receipts and non-general
fund program receipts.
MS. DELBRIDGE explained the RCA collects fees from the entities
it regulates under its regulatory framework. The fees are
intended to cover the RCA's costs, and therefore are not
accounted for within the general fund. This legislation adds
another kind of regulatory framework to the RCA's jurisdiction,
and thus this new framework, Chapter 42.08, needs to be added to
the regulatory frameworks from which the RCA can collect fees
without being subject [to being placed] back in the general
fund.
1:19:04 PM
MS. DELBRIDGE continued paraphrasing from the sectional
analysis, which read [original punctuation provided]:
Section 6 (gas or electric utilities, conforming)
amends AS 38.05.180 (bb)(1), Public Land, Alaska Land
Act, Oil and gas and gas only leasing, to conform with
Section 11 creating covenants specific to a contract
carrier pipeline.
MS. DELBRIDGE explained that since a second set of covenants
reflecting contract carriage has been created, statute referring
to covenants for a common carrier would have to now include the
[second set of covenants].
1:20:14 PM
MS. DELBRIDGE, returning to the sectional analysis, directed
attention to the following [original punctuation provided]:
Section 7 (definitions)repeals and reenacts AS
38.34.099, Public Land, In-State Natural Gas Pipeline,
Definitions, to refer to the definitions in the new
31.25 (HB 4, Section 3).
This relocates definitions relevant to AGDC from the
In-State Natural Gas Pipeline statute -created by
[House Bill] 369 in 2010 - to the AGDC corporate
statute in Section 3. As portions of the In-State
Natural Gas Pipeline statute remains, this section
refers to the new location for definitions.
MS. DELBRIDGE pointed out that when House Bill 369 passed, AS
38.34 was created and included definitions specific to this type
of a project and AGDC's work. Since a new corporate structure
for AGDC has been created in statute, the definitions have been
moved into that new corporate structure for AGDC. She then
continued to paraphrase from the sectional analysis:
Section 8 (right-of-way leases, conforming) amends AS
38.35.100(d), Public Land, Right-of-Way Leasing Act,
Decision on application, to conform to Section 11,
right-of-way leasing for a contract carrier.
Section 9 (right-of-way leases, conforming) amends AS
38.35.120(a), Public Land, Right-of-Way Leasing Act,
Covenants required to be included in lease, to conform
to Section 11, right-of-way leasing for a contract
carrier.
Section 10 (right-of-way leases, conforming) amends AS
38.35.120(b), Public Land, Right-of-Way Leasing Act,
Covenants required to be included in lease, to conform
to Section 11, right-of-way leasing for a contract
carrier.
Section 11 (contract carrier covenants) adds a new
section to AS 38.35, Public Land, Right-of-Way Leasing
Act, to establish covenants for a contract carrier gas
pipeline. This section does not alter the existing
covenants in the Right-of-Way Leasing Act. A carrier
must agree to abide by the covenants in order to
receive a state right-of-way lease. Of 14 existing
covenants for common carriers, 11 still apply to a
contract carrier. The others are adapted to reflect
contract carrier principles, while retaining the
policy that pipelines on state rights-of-way should
encourage broader development of oil and gas resources
by expanding when commercial opportunities exist and
shipping without unreasonable discrimination.
1:21:04 PM
MS. DELBRIDGE explained that a carrier would apply to the state
for a right-of-way lease, under either the common carrier
covenants or the contract carrier covenants. A great deal of
negotiating and application is involved before the commissioner
grants the right-of-way lease. Addressing the new covenants,
she said any pipeline wanting to apply as a contract carrier for
a state right-of-way lease could apply under these covenants as
they are not specific only to AGDC. The contract carrier
covenants are very similar to the common carrier covenants as
they require services from the pipeline be offered without
unreasonable discrimination. Therefore, the laws of the state
must be followed and one must not abandon a pipeline until
appropriate and clean up any damages. Ms. Delbridge noted that
there are some key differences in that the common carrier
covenants require expansion as deemed necessary by the RCA while
the new contract covenants respect that under the regulatory
framework the contracts between a shipper and a pipeline have
been used to set the terms for such things as expansions. Thus,
expansions are still required for a contract carrier, but when
that carrier is presented with a commercially feasible
opportunity to expand and not simply do so when told to by
another body.
1:22:56 PM
REPRESENTATIVE SEATON, noting there are a number of contract
carriers on the Kenai Peninsula, inquired as to whether an
application can be made to change from a common carrier pipeline
to a contract carrier pipeline.
MS. DELBRIDGE said she believes that would largely be left to
the Department of Natural Resources (DNR) to govern how they
would manage applications to amend existing right-of-way leases.
She opined that it is a very long and complex process. She then
noted that the DNR commissioner always retains the authority to
decide whether or not an applicant should be issued a right-of-
way lease under whatever set of covenants they apply. The DNR
commissioner, in issuing a lease, determines the kind of a
pipeline [the applicant is].
1:25:00 PM
REPRESENTATIVE SEATON surmised that this authority may provide
pipelines the ability to reapply for existing pipelines and
change gas pipelines from common carrier to a contract carrier
pipeline.
MS. DELBRIDGE said she understands the question, but does not
know the existing DNR process for amending a right-of-way lease,
particularly when the covenants are a key part of that lease.
"It's not a small modification," she stated.
1:25:53 PM
MS. DELBRIDGE returned to the sectional analysis [original
punctuation provided]:
Section 12 (right-of-way leases, costs) adds a new
subsection to AS 38.35.140, Public Land, Right-of-Way
Leasing Act, Payment of rental and costs, requiring a
right-of-way lease to be issued at no cost to AGDC.
This reinforces in the Right-of-Way Leasing Act the
provision in HB4, Section 3 (31.25.090, Interagency
cooperation; confidentiality) that leases should be
made at no rental fee/cost to AGDC.
MS. DELBRIDGE highlighted that currently AGDC is paying close to
$200,000 annually for each right-of-way lease it has through the
state. Again, if, through SSHB 4, the legislature finds that
AGDC is doing gas pipelines in the best interest of the state,
it is perhaps, in the sponsors' view, not productive to have to
pay a fee to a state agency as a lease payment. In response to
Co-Chair Saddler, she specified that the current annual payment
is $180,000.
1:26:49 PM
MS. DELBRIDGE continued review of the sectional analysis
[original punctuation provided]:
Section 13 (judicial review) adds new subsections to
AS 38.35.200, Public Land, Right-of-Way Leasing Act,
Judicial review of decisions of commissioners on
application, limiting judicial review of state lease,
permit or other authorization decisions. Claims
challenging this provision must be brought within 60
days of the effective date of HB 4; future claims
alleging a constitutional violation must be brought
within 60 days of the action and must be filed in
superior court. The court may not grant injunctive
relief.
One of the significant risks in megaproject
development is costly delays triggered by lawsuits
and/or injunctive relief while a lawsuit is being
decided. There is precedence for limiting injunctive
relief on projects the state determines are in the
best interests of the public (TAPS and the federal
Alaska Natural Gas Pipeline Act of 2004).
1:27:36 PM
REPRESENTATIVE TARR questioned whether the legislature has the
ability to limit the judicial branch in terms of timing,
particularly on a constitutional issue. She asked if someone
with the Department of Law (DOL) is present to address her
question.
MS. DELBRIDGE answered that no one with DOL is present today.
However, she offered that there are other instances in which
judicial review has been limited. Judicial review was limited
for the Trans-Alaska Pipeline System (TAPS) and on federal
decisions through the Alaska Natural Gas Pipeline Act of 2004.
The intent is that in those instances in which the state has
declared something in the best interest of the public of the
state, it is reasonable to place boundaries on the process of
objecting to those activities.
CO-CHAIR SADDLER said the committee could invite DOL to answer
that question and others.
1:28:49 PM
MS. DELBRIDGE returned to the sectional analysis [original
punctuation provided]:
Section 14 (personnel act exemption) exempts AGDC and
subsidiaries from AS 39.25.110, Public Officers and
Employees, State Personnel Act, Exempt service. This
exemption is reinforced in AGDC's corporate statutes.
1:29:12 PM
CO-CHAIR FEIGE inquired as to the reasoning behind Section 14.
More specifically, he asked whether Section 14 is in place to
pay people what they are worth or get outside of the salary
scales the State Personnel Act requires.
MS. DELBRIDGE confirmed that AGDC expects to need to hire a
number of experts in particular fields, and thus needs to be
competitive with the private sector entities with which it will
work to put the pipeline together.
1:29:45 PM
MS. DELBRIDGE continued review of the sectional analysis
[original punctuation provided]:
Section 15 (public officials disclosures) makes the
board of directors of AGDC and subsidiaries subject to
public official financial disclosure rules in AS
39.50.200, Public Officers and Employees, State
Personnel Act, Definitions.
1:30:08 PM
REPRESENTATIVE SEATON inquired as to whether members of the
board of directors are considered employees, and therefore
exempt as well.
MS. DELBRIDGE specified that the members of the board of
directors are not employees of the corporation. The board of
directors receives compensation per day on official board
business and receives per diem and travel when needed to do so
for board meetings. The members of the board of directors are
not salaried.
1:31:10 PM
CO-CHAIR SADDLER pointed out that the legislation includes many
provisions in which expediency and importance of the project
have motivated some exemptions and streamlining limitations,
whereas Section 15 seems to be contrary to that. Therefore, he
inquired as to the reasoning behind [Section 15].
MS. DELBRIDGE opined that the sponsors have tried to balance
being responsible to Alaskans while at the same time providing
for expediency and eliminate road blocks. The sponsors believe
that Alaskans need to know whether the board members have any
financial interests that would cause a conflict.
CO-CHAIR SADDLER noted his agreement with such public
disclosure, but cautioned that the expansion of public
disclosure to other boards and commissions service has tended to
inhibit people from serving, and thereby limiting the number of
applicants.
1:32:28 PM
REPRESENTATIVE TARR asked if there is a conflict of interest
that one could foresee that would cause a board member to be
dismissed.
MS. DELBRIDGE explained that the governor appoints the members
of this board and they can be removed for cause by the governor.
Part of the reason for Section 15, she opined, is that there
seems to be less of a genuine conflict of interest once one
publicly discloses a conflict of interest.
1:33:09 PM
CO-CHAIR SADDLER asked if there is a provision allowing AGDC
board members to exempt themselves from a vote if there is a
conflict, as is the case in the legislature.
MS. DELBRIDGE replied no.
CO-CHAIR SADDLER then asked whether that would cause any
problems with the voting of the board.
MS. DELBRIDGE clarified that the majority of the board, three
members, would have to vote in the affirmative for something
substantive to pass. She then said that Co-Chair Saddler raises
a good point that the sponsors would like to address.
1:34:00 PM
MS. DELBRIDGE returned to the sectional analysis [original
punctuation provided]:
Section 16 (confidentiality) amends AS 40.25.120(a),
Public Records and Recorders, Public Record
Disclosures, Public records; exemptions; certified
copies, to exempt eligible information and information
covered by an AGDC confidentiality agreement from
disclosure under the state Public Records Act. This
relates to HB 4, Section 3, allowing AGDC to keep
certain information confidential.
MS. DELBRIDGE reminded members that Section 3 specifies at
length what types of things can be kept confidential and how
confidentiality agreements with private sector entities and
other state entities would work. She characterized Section 16
as a backstop in that those things that are allowed to be
confidential do not get to be released under the State Public
Records Act.
1:34:41 PM
REPRESENTATIVE SEATON requested identification of the duration
of confidentiality of the various confidential items. He opined
that the public would have more confidence knowing that at some
point confidential items, such as the bids, will be made public
once it is not necessary for them to be confidential. He
suggested that perhaps it could be submitted in the form of a
written spread sheet.
MS. DELBRIDGE agreed to do so.
1:37:05 PM
CO-CHAIR FEIGE asked whether there is anything in SSHB 4 that
limits what can be held confidential versus not confidential.
He further asked whether AGDC could make all its business
confidential or is it limited to particular items. He requested
that the aforementioned be included in the spreadsheet Ms.
Delbridge agreed to provide the committee.
MS. DELBRIDGE said that there are some limits that reflect
commercial harm, which she said she would clearly articulate in
a document.
1:37:48 PM
MS. DELBRIDGE proceeded with the sectional analysis from which
she paraphrased [original punctuation provided]:
Section 17 (ANGDA as gas marketer) amends AS
41.41.010(a), Public Resources, Alaska Natural Gas
Development Authority, Establishment of the authority,
enabling ANGDA to act as a gas marketer instead of a
gas transporter, and eliminating proscriptive language
regarding gas supply and gas markets.
This section retains ANGDA's purpose of acquiring
natural gas produced in the state and delivering it to
market, in sufficient quantity to help assure the
long-term viability of a pipeline, but removes other
purposes including designing, constructing, operating
and maintaining a pipeline and other facilities.
MS. DELBRIDGE noted the purposes of designing, constructing,
operating, and maintaining a pipeline and other facilities is
given to AGDC.
1:38:52 PM
REPRESENTATIVE SEATON recalled that ANGDA had been a bidder on
firm transportation for some other entities/utilities. He then
inquired as to the status of those bids were this legislation to
pass. Upon a request for clarification from Ms. Delbridge,
Representative Seaton said the bids were either those in the
Alaska Pipeline Project for which TransCanada held an open
season or the small diameter pipeline project.
MS. DELBRIDGE related her understanding that ANGDA did place
some bids on the in-state gas arm of the large pipeline
TransCanada put through an open season. However, TransCanada
has closed its open season and moved on to another project.
Therefore, she understood from the Department of Revenue (DOR)
that there are no ongoing debts or liabilities associated with
ANGDA.
1:40:06 PM
CO-CHAIR SADDLER surmised that ANGDA would be "a subsidiary, it
would not be the only subsidiary AGDC would be allowed to have."
He further surmised that the legislation would not limit ANGDA
to be the only gas marketer subsidiary.
MS. DELBRIDGE said Co-Chair Saddler is correct on both counts.
1:40:22 PM
MS. DELBRIDGE moved on to Section 18 of the sectional analysis,
from which she paraphrased [original punctuation provided]:
Section 18 (ANGDA as AGDC subsidiary) amends AS
41.41.010(b), Public Resources, Alaska Natural Gas
Development Authority, Establishment of the authority,
to make ANGDA a subsidiary of AGDC. ANGDA is currently
situated in the Department of Revenue.
Section 19 (ANGDA as gas marketer) amends AS
41.41.010(d), Public Resources, Alaska Natural Gas
Development Authority, Establishment of the authority,
to clarify ANGDA's role as a gas marketer.
Section 20 (ANGDA board) repeals and reenacts AS
41.41.020, Public Resources, Alaska Natural Gas
Development Authority, Authority governing body, to
state that ANGDA will be governed by the AGDC board of
directors.
Section 21 (ANGDA board compensation) amends AS
41.41.060, Public Resources, Alaska Natural Gas
Development Authority, Compensation of board members;
per diem and travel expenses, to reflect the new
31.25.020, entitling AGDC's board to receive
compensation when serving as ANGDA's board.
AGDC's board will receive $400 per day compensation
when acting as ANGDA's board; this is the same amount
board members receive while acting as AGDC's board.
1:41:01 PM
MS. DELBRIDGE, in response to Representative P. Wilson,
confirmed that ANGDA's board will be the same board as AGDC's
board, which she remarked is relatively common with subsidiary
corporations.
1:41:05 PM
REPRESENTATIVE TUCK questioned why it is necessary to have a
subsidiary, an extra layer, a middleman if it is all the same.
MS. DELBRIDGE opined that a middleman or marketer is important
to have with this pipeline. Furthermore, there is a chance that
the smaller entities, including electric utilities, may not have
the credit worthiness or the financial backing to commit to
long-term shipments on this pipeline on their own. Therefore, a
middleman/marketer who can make those long-term commitments and
ship the gas for them could be very important.
1:42:14 PM
REPRESENTATIVE TUCK clarified that he is asking why not just
make that a function of AGDC.
MS. DELBRIDGE specified that it is necessary to have some level
of a firewall between the pipeline company that is offering
space for shipment/sale and those who are buying space, whether
it is a marketer or individual. She characterized it as similar
to ExxonMobil Production Company and ExxonMobil Pipeline
Company, which are the same corporate entity with firewalls
between the parent and its subsidiary.
REPRESENTATIVE TUCK said he understood that ExxonMobil
Corporation would have such a firewall due to liability concerns
and such. Is liability the concern, he asked. He then asked if
Ms. Delbridge could inform the committee why the firewall is
necessary.
CO-CHAIR SADDLER suggested that would be a good question for the
attorneys.
1:43:23 PM
REPRESENTATIVE SEATON asked if this addresses the conflict of
interest that is created when one builds, regulates, and is a
shipper of the pipeline such that one is on both sides of the
table at once. He related his understanding that as a legal
entity, those need to be separated.
MS. DELBRIDGE agreed that is one reason to want to separate
these. Certainly, private sector partners will want to know
that their shippers are getting a fair deal and fair
negotiations made at an arm's length and that there is not a
special deal for a marketer. A marketer, for example, may not
specifically ship just the state's utility gas. "It is a matter
of keeping things fair and very clear," she said.
1:44:25 PM
REPRESENTATIVE SEATON requested that Ms. Delbridge follow-up
regarding the tax consequences, the tax non-liabilities for
taxes, and whether SSHB 4 places ANGDA in a different tax
situation than another shipper.
MS. DELBRIDGE nodded in that she would do so.
1:45:47 PM
REPRESENTATIVE P. WILSON inquired as to why ANGDA is necessary
and expressed interest in further clarification of the firewall
concept.
MS. DELBRIDGE clarified that the board of directors for AGDC and
ANGDA would be the same, but the firewall exists so that the two
corporations are distinct. Distinct in that they would not talk
to each other when making a deal. With regard to the specific
legal recourse with a subsidiary and its parent corporation, she
offered to provide the committee with that information.
1:48:07 PM
DAN FAUSKE, President, Alaska Gasline Development Corporation
(AGDC), CEO/Executive Director, Alaska Housing Finance
Corporation (AHFC), Department of Revenue (DOR), pointed out
that currently the board of directors for the Alaska Housing
Finance Corporation is the same as the board of directors for
the Northern Tobacco Securitization Corporation, the Alaska
Capital Management Corporation, and the Alaska Corporation for
Affordable Housing. As mentioned by Ms. Delbridge, the board
would have to be very careful as it conducted its business with
the individual corporations. The federal government, under the
Federal Energy Regulatory Commission (FERC) guidelines and
others, is very strict in reference to a pipeline company and a
shipping company. There has to be a clear firewall as there
cannot be an association in which the two are doing business as
one. Although there can be a board that oversees it and a
separate board meeting to conduct the business of that
organization separately, there are very strict guidelines as to
how that business activity occurs. The goal is to prohibit a
situation in which the same people who run AGDC, for instance,
building the pipeline are in a room with the people who will
ship it with no public input or oversight in conducting
business. However, he stated that there are ways to do it that
are efficient. For instance, AHFC held its meeting, adjourned,
and then called to order the annual Northern Tobacco
Securitization Corporation meeting and conducted a separate
meeting.
1:50:06 PM
REPRESENTATIVE P. WILSON surmised that it is just a way of
getting around the rules and regulations.
MR. FAUSKE disagreed. If SSHB 4 proceeds as it is written, the
authority will be created and the board members will have an
equal opportunity to serve on the AGDC Board for the pipeline
activities as well as the gas marketing because the job
descriptions and requirements will seek people in the industry.
The idea of the same board handling similar business is very
common. The day-to-day operations of the separate entities have
to be very clearly delineated. He highlighted that the bonds of
the Northern Tobacco Securitization Corporation are not a
liability of AHFC, even though it is a subsidiary of AHFC. The
structure was such that when the bonds were sold there was a
premium paid.
1:51:54 PM
REPRESENTATIVE TARR, regarding the liability, asked whether that
would also be true of this proposed separation such that a
financial obligation through ANGDA that is not met would only
impact the subsidiary corporation while not having a financial
impact on the parent corporation.
MR. FAUSKE said that is the way he would advise structuring it,
but the individual transaction would have to be reviewed. For
instance, if AGDC were involved in the issuance of the debt on
behalf of this pipeline, it would be a wholly owned debt of the
corporation not a debt of the state, AHFC, or ANGDA; it would be
a wholly owned subsidiary separate and clear from other
activities. Mr. Fauske highlighted that investors are made
aware of this situation.
1:53:50 PM
REPRESENTATIVE TARR noted that AHFC makes very large capital
expenditures, but related her understanding that the Northern
Tobacco Securitization Corporation will eventually dissolve as
the payments dwindle. She then requested a comparison of the
relative size and scale of the financial obligation that the
other few are making in comparison to the relationship of this
one. She asked whether the examples with AHFC are the same
scale in terms of financial obligations through the separate
corporations as is the entities involved in SSHB 4.
MR. FAUSKE replied no, for instance on an annual basis he
requests from the legislature the authority for a specific
amount of bonding activity. There are no further dealings with
the legislature in regard to that transaction unless he needs to
exceed the amount specified. Therefore, there are checks and
balances on the amount of debt. He reminded the committee that
AHFC has its own general obligation credit, which is used on a
limited basis. The majority of the work is revenue anticipation
notes, revenue bonds, mortgage revenue bonds; the full faith and
credit of the deal is based on the security of the economy and
the state, the credit scores of the borrowers, and all the
things that go into analyzing where the money comes to pay the
bonds. A mortgage revenue bond is based on the credit
worthiness of those paying their mortgages because in the
secondary market [AHFC] sells bonds in the market and uses that
cash to purchase mortgages from the banks.
1:56:17 PM
MR. FAUSKE then turned to AGDC and the potential $7.5-$8 billion
project. He said, "This, too, is a revenue bond." However, it
is not based on the full faith and credit of the state nor is it
based on the full faith and credit of AHFC. Rather, it will be
a stand-alone deal, which means one must go before the investors
and the rating agencies, and other checks and balances because a
product is being sold. The product has to be creditworthy and
noteworthy, in the sense that there are many choices for
investors. Therefore, the due diligence and scrutiny is severe.
For instance, the revenue bonds that could be sold by AGDC could
be purchased by pension funds, insurance companies,
municipalities, and others that actively pursue such. The bonds
would be about the last transaction made. Before going to Wall
Street to initiate a deal, all the firm transportation,
precedent agreements, etcetera will have to be in place for the
investor to see a clear path between the investment and the
project in which the investor invests. Often the contracts span
10-20 years. The bonds would then be sold to help pay off the
project.
1:59:13 PM
REPRESENTATIVE SEATON, referring to Section 21 and the $400 per
day compensation of the board members, surmised that the
compensation would not be received concurrently.
MS. DELBRIDGE deferred to Mr. Fauske regarding how it would work
for AHFC.
MR. FAUSKE advised that although there can be a situation in
which the board meetings occur on the same day, the meetings
would be activities of two separate boards. He noted that over
the years there have been attempts to increase the AHFC Board
stipend as it remains at $100, which was established in 1972.
The board members for the Northern Tobacco Securitization
Corporation Board are paid more as it was modeled after the
Permanent Fund Board in an attempt to attract board members.
Mr. Fauske said it is possible the board members could draw pay
for each board meeting, but he expressed the need to research it
further and get back to the committee.
MS. DELBRIDGE added that the sponsor's intent is that if a
person has to be prepared and invest the time for any meeting,
even when separate meetings are held concurrently, that person
is compensated as that board member for that official business.
2:01:17 PM
REPRESENTATIVE SEATON inquired as to how ANGDA is going to bring
assets to the table to secure this gas marketing deal if ANGDA
is not pledging the bonding or assets of AGDC.
MR. FAUSKE reminded the committee that ANGDA would be a
marketing arm of the corporation that is separate and would
negotiate the price of the gas and market the gas. Whereas,
AGDC is a pipeline company and thus ANGDA would serve as AGDC's
marketing arm.
2:02:51 PM
REPRESENTATIVE SEATON related his understanding that ANGDA has
value because it is bringing security assets.
MR. FAUSKE stated that one of the advantages when this was first
discussed a year ago was that the enabling legislation that
created ANGDA was already in place, and therefore there would be
no need to reinvent the wheel. One of the primary factors to
utilize the existing statutes was it also honors that the voters
had voted to create ANGDA.
2:04:00 PM
REPRESENTATIVE TUCK requested documentation of the pros and cons
of having the ANGDA marketing subsidiary with this particular
project in SSHB 4.
MS. DELBRIDGE agreed to do so.
2:05:17 PM
MS. DELBRIDGE returned to the sectional analysis from which she
paraphrased [original punctuation provided]:
Section 22 (ANGDA procurement) amends AS 41.41.070(d),
Public Resources, Alaska Natural Gas Development
Authority, Authority staff, to include legal and bond
counsel in the services for which ANGDA may contract,
and exempts contracted services from the state
procurement code.
With the repeal (HB 4, Section 35) of the provision
making the attorney general the legal counsel for
ANGDA, this section enables ANGDA to contract for
legal and bond services.
Section 23 (ANGDA disclosure) amends AS 41.41.090(b),
Public Resources, Alaska Natural Gas Development
Authority, Conflicts of interest, to remove
involvement with a "project" from the circumstances
requiring disclosure. ANGDA board members must
disclose conflicts of interest; as ANGDA will no
longer be developing projects, an interest in a
project in which ANGDA has invested assets does not
need to be disclosed.
2:05:48 PM
CO-CHAIR SADDLER requested that Ms. Delbridge return to the
committee with information regarding why it is necessary for
ANGDA to have its own bond and legal counsel.
MS. DELBRIDGE agreed to do so.
2:06:30 PM
REPRESENTATIVE P. WILSON, referring to Section 22, asked whether
the provision eliminates or gives the attorney general as legal
counsel for ANGDA.
MS. DELBRIDGE explained that in the repealer section the statute
that makes the attorney general legal counsel for ANGDA is
repealed. In order to provide some statutory direction for
ANGDA, language allowing ANGDA to contract for legal counsel is
inserted.
2:07:36 PM
MS. DELBRIDGE continued to paraphrase from the sectional
analysis [original punctuation provided]:
Section 24 (ANGDA confidentiality) amends AS
41.41.150(a), Public Resources, Alaska Natural Gas
Development Authority, Public access to information,
to expand ANGDA's existing confidential records
authority to include information in a confidential
agreement between ANGDA and AGDC.
2:08:12 PM
REPRESENTATIVE JOHNSON remarked that Section 24 is not a very
effective firewall.
MS. DELBRIDGE acknowledged that Section 24 could cause some
firewall problems. She offered to clarify in conjunction with
the discussion regarding why a marketing subsidiary is required
and a firewall should be in place to include how the exchange of
confidential information through confidential agreements would
impact that.
2:08:44 PM
MS. DELBRIDGE returned to the sectional analysis [original
punctuation provided]:
Section 25 (ANGDA as gas marketer) amends AS
41.41.200, Public Resources, Alaska Natural Gas
Development Authority, Powers of the authority. This
removes ANGDA's authority to exercise eminent domain,
as ANGDA would serve as a marketing arm and not as a
pipeline builder.
Section 26 (ANGDA property) amends AS 41.41.450,
Public Resources, Alaska Natural Gas Development
Authority, Property of the authority. As HB 4 deletes
the definition of "project" from ANGDA's statutes,
references to a "project" are changed to mean 'for the
purposes of the corporation.' With this change, ANGDA
is able to acquire property for the corporation's
purpose, but not for a project.
2:09:32 PM
MS. DELBRIDGE, in response to Co-Chair Saddler, specified that
"the corporation" refers to ANGDA.
2:09:46 PM
REPRESENTATIVE P. WILSON inquired as to what type of property
could be acquired for the corporation's purpose, but not for a
project.
MS. DELBRIDGE explained that a corporation might have property
for a project that is tangible property on which the project
sits, such as a pipeline; whereas a corporation could have
property that is not physical property/land such as information,
financial property, and other assets. She clarified that
financial property would be money, investments, accounts, debts,
liabilities, and bonds. At one point ANGDA had a conditional
EIS for some right-of-way, which would be considered to be
property of the corporation. In further explanation, Ms.
Delbridge specified that the sponsors' intent was that ANGDA
would remain a corporation, a subsidiary of AGDC, even if it no
long performed projects. Therefore, ANGDA would need to retain
the ability to have and manage property.
2:11:22 PM
REPRESENTATIVE SEATON asked whether that property would include
gas. Would ANGDA have the ability to purchase gas or is that
excluded as a conflict of interest, he further asked.
MS. DELBRIDGE answered that ANGDA, as a marketing subsidiary,
would pay AGDC a fee to ship gas on the pipeline. Therefore,
ANGDA could own gas that it is then contracting with AGDC for
shipment of.
2:12:05 PM
REPRESENTATIVE SEATON expressed discomfort with going from a
marketer to an owner of gas, and therefore he requested a
written explanation regarding the difference between AGDC as an
owner and shipper of gas versus as a marketer of gas. This, he
opined, seems to be outside the discussions of what the purpose
of ANGDA would be.
MS. DELBRIDGE agreed to do so. However, she clarified that in
the context of SSHB 4 the term marketer means to take a
commodity and then market it - that is move it from sellers to
buyers. She said that if "marketer" means owning it in the
middle that is the intent of the middle man/aggregator concept.
2:13:33 PM
MS. DELBRIDGE returned to the sectional analysis [original
punctuation provided]:
Section 27 (ANGDA PLAs) amends AS 41.41.500, Public
Resources, Alaska Natural Gas Development Authority,
Contract terms relating to use of Alaska resources. As
HB 4 deletes the definition of "project" from ANGDA's
statutes, references to a "project" are changed to
mean 'for the purposes of the corporation.' With this
change, ANGDA shall have project labor agreements that
secure timely completion of a project of the
corporation.
Section 28 (ANGDA definitions) amends AS 41.41.990,
Public Resources, Alaska Natural Gas Development
Authority, Definitions. The definition of "board" is
changed to mean the AGDC board acting as ANGDA's
board.
2:14:29 PM
REPRESENTATIVE TUCK related his understanding that projects were
eliminated from ANGDA's capabilities, and therefore he inquired
as to what exactly Section 27 is doing.
MS. DELBRIDGE, noting that she had to ask the same question to
Legislative Legal Services, explained that when the definition
of "project" was deleted in another part of ANGDA statute, the
term "project" had to be eliminated from this section as well.
CO-CHAIR SADDLER mentioned "corporate purposes labor agreement."
2:15:05 PM
REPRESENTATIVE TUCK clarified he was referring to "project" in
terms of "secure timely completion of a project of the
corporation," for which the corporation has been identified as
ANGDA. He acknowledged that the intent is to keep the ANGDA
wishes of the public, but Sections 19-28 seem to strip ANGDA of
what it once was.
MS. DELBRIDGE said Representative Tuck's comment was duly noted.
She then stated that the sponsors' did not intend to strip ANGDA
but rather intended to find a continuing role for ANGDA within a
gasline project that is going forward, although ANGDA no longer
has offices, personnel, or funding.
REPRESENTATIVE JOHNSON reiterated his question as to why
maintain ANGDA. He remarked he has yet to hear a good reason to
maintain ANGDA.
MS. DELBRIDGE acknowledged there is no need since AGDC has the
ability to create other subsidiaries for whatever purposes it
deems necessary to carry out its corporate mission. The
sponsors recognize that ANGDA was created by the voters, and
thus it is politically difficult to eliminate. However, ANGDA
had a specific mission to have a pipeline operational by 2007, a
legislative audit in 2010 recommended that ANGDA sunset as it
had likely exceeded its statutory authority in pursuing some of
the other projects it pursued after no longer able to deliver on
its original mission. She characterized it as a balancing act.
2:18:52 PM
CO-CHAIR SADDLER held over SSHB 4.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB04 AMA Letter.pdf |
HRES 2/6/2013 1:00:00 PM |
HB 4 |
| HB04 Leg Audit ANGDA Summary.pdf |
HRES 2/6/2013 1:00:00 PM |
HB 4 |
| HB04 Leg Audit ANGDA.pdf |
HRES 2/6/2013 1:00:00 PM |
HB 4 |
| HB 77 AK State Chamber.pdf |
HRES 2/6/2013 1:00:00 PM |
HB 77 |
| HB77 Archibald-SEACC.PDF |
HRES 2/6/2013 1:00:00 PM |
HB 77 |
| HB77 Laura Stats.PDF |
HRES 2/6/2013 1:00:00 PM |
HB 77 |
| HB77 RDC.pdf |
HRES 2/6/2013 1:00:00 PM |
HB 77 |
| HB77 Sullivan - SEACC.PDF |
HRES 2/6/2013 1:00:00 PM |
HB 77 |