Legislature(2009 - 2010)BARNES 124

02/04/2009 01:00 PM RESOURCES


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ HCR 2 IN-STATE GAS PIPELINE TELECONFERENCED
Moved CSHCR 2(RES) Out of Committee
+ HCR 3 IN-STATE GAS PIPELINE TELECONFERENCED
Moved Out of Committee
+ HCR 4 IN-STATE GAS PIPELINE TELECONFERENCED
Moved Out of Committee
+ HCR 5 IN-STATE GAS PIPELINE TELECONFERENCED
Moved Out of Committee
HCR 2-IN-STATE GAS PIPELINE                                                                                                   
HCR 3-IN-STATE GAS PIPELINE                                                                                                   
HCR 4-IN-STATE GAS PIPELINE                                                                                                   
HCR 5-IN-STATE GAS PIPELINE                                                                                                   
                                                                                                                              
1:07:32 PM                                                                                                                    
                                                                                                                                
[The committee heard  an overview of and testimony on  HCR 2, HCR
3, HCR 4, and HCR 5.]                                                                                                           
                                                                                                                                
CO-CHAIR  JOHNSON  announced that  the  first  order of  business                                                               
would  be  HOUSE  CONCURRENT RESOLUTION  NO.  2,  Requesting  the                                                               
governor to provide energy security  for all Alaskans by pursuing                                                               
development  of a  natural  gas bullet  pipeline  from the  North                                                               
Slope to  the Cook Inlet  region; and requesting the  governor to                                                               
identify  and  negotiate with  one  or  more persons  capable  of                                                               
producing natural  gas from  the Gubik area,  and other  areas on                                                               
the  North  Slope  if  necessary,  in  sufficient  quantities  to                                                               
support a bullet pipeline project.                                                                                              
                                                                                                                                
1:07:45 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE JAY  RAMRAS, Alaska State Legislature,  sponsor of                                                               
HCR 2,  first noted that in  Fairbanks the price of  home heating                                                               
oil reached nearly  $5 [per gallon] in recent times  and the cost                                                               
of natural  gas is  the nation's highest  at $22.91  per thousand                                                               
cubic feet  (Mcf).  Fairbanks  residents therefore have  a vested                                                               
interest  in  seeing  an  in-state  "bullet  line"  completed  as                                                               
quickly as possible, he said, and HCR  2, HCR 3, HCR 4, and HCR 5                                                               
incrementally approach such a gas line.                                                                                         
                                                                                                                                
REPRESENTATIVE RAMRAS  explained that HCR 2  addresses the supply                                                               
of natural  gas, a critical  component to any in-state  gas line.                                                               
An  in-state gas  line would  need to  supply nearly  500 million                                                               
cubic feet per day (Mmcf/day) or  180 billion cubic feet per year                                                               
(Bcf/year)  or  3.6 trillion  cubic  feet  (Tcf) over  a  20-year                                                               
pipeline  lifespan.   The Gubik  gas field  presently has  proven                                                               
reserves  of about  600 Bcf  and  Anadarko Petroleum  Corporation                                                               
("Anadarko") is currently drilling a  third exploratory well.  He                                                               
said HCR 2  asks the governor to help secure  a contingent supply                                                               
of commercial gas from other areas  on the North Slope should the                                                               
Gubik field not have enough gas for the full 20 years.                                                                          
                                                                                                                                
1:11:12 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE KAWASAKI  asked whether the term  "bullet line" is                                                               
defined in the resolution.                                                                                                      
                                                                                                                                
REPRESENTATIVE  RAMRAS responded  he does  not think  there is  a                                                               
legal definition, but the synonym  would be an in-state gas line.                                                               
He  said   he  is  referring   to  ENSTAR  Natural   Gas  Company                                                               
("ENSTAR"), the  only company presently interested  in building a                                                               
private sector  pipe from where the  gas is in the  Gubik area to                                                               
where the people are that need it.                                                                                              
                                                                                                                                
CO-CHAIR JOHNSON  interjected that  unlike a  statutory document,                                                               
definitions  are  probably  not  consistent  with  a  resolution.                                                               
Therefore,  the definition  is  what the  sponsor  or the  reader                                                               
wants it to be.                                                                                                                 
                                                                                                                                
1:12:33 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  NEUMAN  asked how  the  administration  would go  about                                                               
meeting the resolution's request on  page 2, line 20, to identify                                                               
entities  capable of  producing natural  gas from  the Gubik  and                                                               
other areas on the North Slope.                                                                                                 
                                                                                                                                
REPRESENTATIVE RAMRAS  replied that  for the  purposes of  an in-                                                               
state bullet line,  not for a petrochemical industry,  there is a                                                               
supply  of inferior  wet  gas  only 60  miles  farther north  [of                                                               
Gubik]  owned  by  ConocoPhillips Alaska,  Inc.  ("Conoco").  The                                                               
tariff would  need to  incorporate the cost  of building  60 more                                                               
miles  of  pipe through  rough  terrain  and constructing  a  gas                                                               
treatment plant, but  nevertheless the gas is there.   Having the                                                               
state  as  a guarantor  of  a  contingent  supply of  proven  gas                                                               
reserves would  assist ENSTAR in  marketing the financing  of the                                                               
pipeline.   He related that  ENSTAR previously stated  before the                                                               
Senate Resources  Standing Committee  that it  has $1  billion to                                                               
put down  and $3 billion of  financing to put together,  and does                                                               
not require  anything from  the state  except to  get out  of the                                                               
way.  The  unique quality of Gubik  gas, he added, is  that it is                                                               
dry  like  Cook Inlet  gas  and  does  not  require any  sort  of                                                               
treatment before use.                                                                                                           
                                                                                                                                
1:15:56 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE KAWASAKI  expressed his concern that  the language                                                               
"all  action  necessary" on  page  2,  line  18, might  cede  the                                                               
legislature's  authority and  taxing  ability.   In addition,  he                                                               
said he  is not in favor  of having the governor  negotiate this,                                                               
as directed  on page 2,  [lines 23-24],  unless it comes  back to                                                               
the legislature for finalization.                                                                                               
                                                                                                                                
REPRESENTATIVE RAMRAS answered, "Okay."                                                                                         
                                                                                                                                
1:17:04 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  OLSON  understood  there  is  already  a  certain                                                               
amount of capacity for natural  gas liquids (NGLs) in Cook Inlet.                                                               
He offered his belief that  the liquefied natural gas (LNG) plant                                                               
in Nikiski  sells its gas on  a British Thermal Unit  (BTU) basis                                                               
rather than  on a  volume basis  and the  non-gas liquids  act to                                                               
increase the BTUs.                                                                                                              
                                                                                                                                
REPRESENTATIVE  RAMRAS said  he  thinks  Representative Olson  is                                                               
correct.  He  related that Cook Inlet is  currently showing signs                                                               
of being a depleted field and will  be much more so in five years                                                               
when the bullet  line is complete.  The question  is how much gas                                                               
will be there  and Representative Olson's issue  is very relevant                                                               
in that context.                                                                                                                
                                                                                                                                
1:18:44 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  OLSON added  that  it is  probably  a moot  point                                                               
because he  does not think there  is an export license  that runs                                                               
out that far.                                                                                                                   
                                                                                                                                
REPRESENTATIVE RAMRAS responded  that the point is  made and this                                                               
is addressed in HCR 4.                                                                                                          
                                                                                                                                
1:19:00 PM                                                                                                                    
                                                                                                                                
CO-CHAIR   NEUMAN,  in   regard   to  Representative   Kawasaki's                                                               
concerns, said he thinks the  governor and the administration are                                                               
in the  position to solicit  requests because this is  likely the                                                               
first place  that entities go  when they  come to the  state with                                                               
their needs.                                                                                                                    
                                                                                                                                
CO-CHAIR JOHNSON  offered his  belief that  the governor  and the                                                               
administration are  the ones that  negotiate those  contracts and                                                               
then bring  them to  the legislature  for approval.   He  said he                                                               
therefore does not think the legislature is ceding any power.                                                                   
                                                                                                                                
1:20:05 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE WILSON understood  that HCR 2 deals  with a bullet                                                               
line for use of the gas in-state only.                                                                                          
                                                                                                                                
REPRESENTATIVE RAMRAS  answered correct,  HCR 2  simply addresses                                                               
the  supply component  for an  in-state  bullet line  only.   The                                                               
assumption  for tariff  purposes is  that  the line  will have  a                                                               
capacity of 180  Bcf/year over a minimum of 20  years for a total                                                               
of 3.6 Tcf  of gas, he reiterated.  Potential  financiers of such                                                               
a project  will want to know  how much gas the  project owner has                                                               
and whether there is enough gas,  as well as the pipeline's cost,                                                               
who the customers will be,  and how robust the target marketplace                                                               
is.   The anticipation  is that this  in-state bullet  line would                                                               
start  on the  North Slope.   The  farther south  it starts,  the                                                               
shorter  the pipeline.   The  farther north  it starts,  the more                                                               
rugged  the terrain  and the  more expensive  the pipeline.   The                                                               
ideal  gas  source would  be  the  Nenana  Basin because  of  its                                                               
proximity  to Fairbanks  and Southcentral  Alaska, he  continued.                                                               
However, prevailing wisdom suggests  that rather than large pools                                                               
of  gas, Nenana  has puddles  of gas  that may  total as  much as                                                               
there is  in Cook  Inlet.   The thought,  therefore, is  that the                                                               
area with proven  reserves of 600 Bcf in a  currently capped well                                                               
is  more likely  to yield  the commercial  volumes necessary  for                                                               
such a pipeline.                                                                                                                
                                                                                                                                
1:23:23 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   GUTTENBERG   understood  that   the   industry's                                                               
definition of  proven reserves is  when the resource  is actually                                                               
being extracted.  The number  for proven reserves is always lower                                                               
than the amount  that is suspected.  He referred  to page 2, line                                                               
18,  "all action  necessary", and  asked how  far would  this go.                                                               
For example, could it be to such  an extent that it goes over 500                                                               
Mmcf and supplants the contract with TransCanada?                                                                               
                                                                                                                                
REPRESENTATIVE  RAMRAS replied  that proven  reserves is  a legal                                                               
term  that allows  a company  to book  reserves onto  its balance                                                               
sheet.   There are other gradations  such as known reserves.   He                                                               
agreed that  estimated amounts are often  a great deal more.   In                                                               
regard to page 2, lines 18  and 19, Representative Ramras said he                                                               
hopes  this  legislature will  have  the  courage to  cancel  the                                                               
Alaska  Gasline   Inducement  Act  (AGIA)  contract   because  he                                                               
believes that  it is  fundamentally flawed.   Under  current law,                                                               
the state  has ceded  to TransCanada any  project that  is larger                                                               
than 500 Mmcf/day.   Thus, "all action necessary" is  meant to be                                                               
within the  state's current  framework of  statutes, he  said, so                                                               
the bullet line would be 500 Mmcf/day or less.                                                                                  
                                                                                                                                
1:27:49 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE RAMRAS,  at Co-Chair Johnson's  request, presented                                                               
an overview  of all  four of his  in-state gas  line resolutions.                                                               
He said HCR 2 addresses gas supply  while HCR 3 and HCR 4 address                                                               
demand.    Annual demand  for  residential  and light  commercial                                                               
throughout  the   Interior  and  Southcentral  totals   about  60                                                               
Bcf/year,  or one-third  the capacity  of the  in-state pipeline.                                                               
Therefore,  HCR  3 addresses  industrial  use  - restart  of  the                                                               
Agrium plant on the Kenai Peninsula  - which would be 60 Bcf/year                                                               
and  would  make   the  pipe  two-thirds  full.     A  supply  of                                                               
inexpensive gas  for Agrium  would re-capture  the 250  jobs that                                                               
were  formerly provided  by  the urea  plant.   Under  HCR 4  the                                                               
governor is urged to pursue a  dialog with the U.S. Department of                                                               
Energy  regarding  expansion of  the  gas  export license  by  60                                                               
Bcf/year.  Lastly,  HCR 5 addresses the release of  wood bison by                                                               
asking the  governor to assist  in getting government out  of the                                                               
way  so  that  a  private  entity can  make  a  final  investment                                                               
decision by year-end 2010.                                                                                                      
                                                                                                                                
CO-CHAIR JOHNSON  requested that any questions  related to demand                                                               
be  held until  HCR 3  and  4 are  taken  up.   He opened  public                                                               
testimony  on  HCR 2.    For  the  convenience of  witnesses,  he                                                               
allowed for testimony to include discussion  of HCR 3, HCR 4, and                                                               
HCR 5.                                                                                                                          
                                                                                                                                
1:34:00 PM                                                                                                                    
                                                                                                                                
ELIZABETH  GRAY,  Assistant Manager,  Matanuska-Susitna  Borough,                                                               
testified  that   the  Matanuska-Susitna  Borough   supports  the                                                               
construction of  a natural  gas line to  help meet  the immediate                                                               
gas  needs of  Southcentral and  Interior Alaska  and to  provide                                                               
energy  security for  the state.    Cook Inlet  gas supplies  are                                                               
dwindling  and existing  supplies are  increasingly difficult  to                                                               
reach, she  said, but the  demand for  gas in Alaska  is growing.                                                               
By  2012  there will  be  an  estimated  shortfall in  the  local                                                               
natural gas  supply of  11 Bcf.   If  the state  runs out  of gas                                                               
supplies  in  the next  few  years,  52  percent of  the  state's                                                               
population will be  affected.  She said the  proposed bullet line                                                               
would:     meet   near-term  gas   needs,  create   new  economic                                                               
activities,  and  facilitate   natural  resource  extraction  and                                                               
value-added processing.                                                                                                         
                                                                                                                                
MS. GRAY  pointed out that  the proposed rail extension  from the                                                               
Alaska Railroad mainline  to Port MacKenzie would  help lower the                                                               
cost of building  the bullet line by  approximately $100 million.                                                               
She  related that  according  to  an October  2008  study by  the                                                               
Institute of Social and Economic  Research (ISER), the additional                                                               
resource extraction investment that  would be facilitated by this                                                               
rail extension  would generate  500-1,000 direct  full-time jobs.                                                               
According to this  same study, the rail  extension project itself                                                               
would provide  a statewide benefit  and an  estimated 3,200-3,400                                                               
construction  jobs.    She  said  the  Matanuska-Susitna  Borough                                                               
wholeheartedly  supports the  immediate  construction  of a  rail                                                               
extension  as well  as a  natural gas  line to  further diversify                                                               
Alaska's economy.                                                                                                               
                                                                                                                                
1:37:05 PM                                                                                                                    
                                                                                                                                
MS.  GRAY, in  response  to Representative  Wilson,  said the  52                                                               
percent figure is  projected from the number  of people currently                                                               
using gas.                                                                                                                      
                                                                                                                                
REPRESENTATIVE WILSON  understood Ms. Gray  to be saying  that 52                                                               
percent of the state's population is using gas now.                                                                             
                                                                                                                                
MS. GRAY responded, "Yes."                                                                                                      
                                                                                                                                
1:38:05 PM                                                                                                                    
                                                                                                                                
MS. GRAY, in  response to Representative Tuck,  clarified that it                                                               
would be a future rail to Point MacKenzie.                                                                                      
                                                                                                                                
CO-CHAIR   JOHNSON,  in   response  to   another  question   from                                                               
Representative  Tuck,  understood  Ms.  Gray to  have  said  that                                                               
building a  rail line would  reduce the cost of  constructing the                                                               
line  by bringing  in  the pipe,  not that  the  rail line  would                                                               
reduce the cost of delivery of the gas.                                                                                         
                                                                                                                                
MS. GRAY agreed that Co-Chair Johnson's answer is correct.                                                                      
                                                                                                                                
1:39:26 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GUTTENBERG asked  if the  bullet line  would come                                                               
into the  Matanuska-Susitna Borough in  a convenient place  if it                                                               
were  to come  down the  Richardson Highway  into Glennallen  and                                                               
then  across  as proposed,  rather  than  coming down  the  Parks                                                               
Highway.                                                                                                                        
                                                                                                                                
CO-CHAIR JOHNSON  explained that there  would be "a line  on both                                                               
ends  that would  join prior  to it  coming to  even Anchorage  -                                                               
there is one up in Palmer and one north of Palmer."                                                                             
                                                                                                                                
REPRESENTATIVE  GUTTENBERG surmised  those  proposals would  come                                                               
down the Glenn Highway.                                                                                                         
                                                                                                                                
CO-CHAIR JOHNSON responded that they  will get to Southcentral in                                                               
roughly the same area  - one is up by Palmer and  the other is up                                                               
by Sutton.                                                                                                                      
                                                                                                                                
REPRESENTATIVE  OLSON said  the other  route  is about  80 or  90                                                               
miles longer.                                                                                                                   
                                                                                                                                
CO-CHAIR JOHNSON added, "You don't have  to go all the way to the                                                               
same  point, there  [are] ...  other  entry points  into the  ...                                                               
supplies."                                                                                                                      
                                                                                                                                
REPRESENTATIVE GUTTENBERG  recognized that economic  forces would                                                               
figure this out,  but said he wants to ensure  that everything is                                                               
taken care of.                                                                                                                  
                                                                                                                                
1:41:05 PM                                                                                                                    
                                                                                                                                
TOM  LAKOSH  testified  that  he   vehemently  opposes  all  four                                                               
resolutions [HCR  2, HCR  3, HCR  4, and  HCR 5].   He  urged the                                                               
committee  to  instead  pass  a bill  or  resolution  that  would                                                               
qualify Agrium for in-state need  in accordance with the terms of                                                               
the  export  lease.    This would  give  Southcentral  Alaska  40                                                               
percent more gas  and the ability to carry itself  over.  Then in                                                               
10  years, if  Southcentral still  needed gas  a line  would only                                                               
need  to  be  built  from  Fairbanks  to  Anchorage  because  the                                                               
TransCanada or  Denali line would  go to Fairbanks by  that time.                                                               
The northern  350 miles of  the bullet line will  become obsolete                                                               
within  three to  six years  of  completion because  it would  be                                                               
cheaper in tariffs  to buy the gas from the  mainline rather than                                                               
the bullet line, he maintained.                                                                                                 
                                                                                                                                
MR.  LAKOSH   said  the  bullet   line  is  premature   prior  to                                                               
consideration  of   the  Railbelt  energy  plan   that  is  being                                                               
developed by  the Alaska  Energy Authority (AEA).   The  state is                                                               
weatherizing,  conserving, and  switching to  renewables, so  the                                                               
need for natural gas and this  bullet line will shrink, not grow.                                                               
Cancellation of the export license  would provide a quick way for                                                               
getting gas to  Agrium and would cause "Marathon  and Chevron" to                                                               
look for  gas to keep their  gas line going.   The export license                                                               
does  not  encourage  exploration,  he argued,  but  closing  the                                                               
export license  and the export  plant would do so  by encouraging                                                               
exploration and production in Cook Inlet.                                                                                       
                                                                                                                                
1:45:02 PM                                                                                                                    
                                                                                                                                
MR. LAKOSH said  the state will also lose money  from North Slope                                                               
gas that would otherwise have gone  to full production tax had it                                                               
been shipped  down the  main line.   He said  he is  cognizant of                                                               
Fairbanks's problems,  but that these  can be addressed by:   the                                                               
wood pellet plant  that is currently being built,  the Healy coal                                                               
project that is  coming back on line, a return  to service of the                                                               
Eielson Air  Force Base waste-to-power plant,  and development of                                                               
geothermal, biomass, and  coal gasification.  For  the $4 billion                                                               
cost  of  the bullet  line,  ENSTAR  could  instead invest  in  a                                                               
gigawatt  of  renewable energy  sources  at  $3,000 per  kilowatt                                                               
installed  and  use  the  remaining   $1  billion  to  build  the                                                               
transmission line.   It is insane  to pay for the  pipeline, then                                                               
pay for the  additional gas generators on top of  the $4 billion,                                                               
and then pay for  the gas on top of that, Mr.  Lakosh opined.  He                                                               
urged the  committee to take  testimony from AEA on  the Railbelt                                                               
plan before going ahead with these resolutions.                                                                                 
                                                                                                                                
1:49:22 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GUTTENBERG  inquired   whether  anyone  from  the                                                               
administration  will be  responding to  what the  resolutions are                                                               
asking.                                                                                                                         
                                                                                                                                
CO-CHAIR JOHNSON said  no one from the  administration is present                                                               
at today's hearing, but the administration did receive notice.                                                                  
                                                                                                                                
CO-CHAIR JOHNSON closed public testimony on HCR 2.                                                                              
                                                                                                                                
1:50:37 PM                                                                                                                    
                                                                                                                                
CO-CHAIR NEUMAN  asked what  the price  of gas  will be  when the                                                               
bullet line is complete as compared to now.                                                                                     
                                                                                                                                
CURTIS  THAYER, Director,  Corporate &  External Affairs,  ENSTAR                                                               
Natural Gas  Company, answered that  all of ENSTAR's  current gas                                                               
contracts  are  based  on  various  indices.    ENSTAR's  largest                                                               
contract is indexed on a trailing  average of Henry Hub prices, a                                                               
market indicator that is trading at  the $5 range today.  He said                                                               
ENSTAR feels  the tariff must be  around $2.50 to make  this line                                                               
economically  viable,  understanding  there  would  be  distance-                                                               
sensitive rates.   For example,  Fairbanks would pay less  of the                                                               
tariff because  the pipeline distance  to that city is  less than                                                               
to Southcentral.   At  today's rate  of $5.05  plus the  $2.50, a                                                               
customer  could be  paying $7.55/Mcf.    Currently, customers  in                                                               
Cook Inlet pay  $10.46/Mcf and Fairbanks pays over  $23/Mcf.  So,                                                               
depending on the market, it  would be basically market price with                                                               
the tariff.   "We can't predict out what 2015  is, but the common                                                               
denominator  in the  Lower 48  in determining  gas prices  is the                                                               
Henry Hub or New York Mercantile exchange rate," he said.                                                                       
                                                                                                                                
1:52:24 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  NEUMAN  understood the  cost  of  delivery, or  tariff,                                                               
would be  about $2.50 and that  this number is derived  by taking                                                               
the  cost of  building  the  pipeline divided  by  the number  of                                                               
customers.                                                                                                                      
                                                                                                                                
MR. THAYER  explained that $2.50  is what ENSTAR feels  is needed                                                               
to be economically  viable.  In its  assumptions, ENSTAR assumed:                                                               
Fairbanks  would be  using more  natural  gas than  it is  today,                                                               
Flint  Hills  Resources, LP,  and  the  military bases  would  be                                                               
customers,   and   there   would  be   Southcentral   residential                                                               
customers.  He related that  ENSTAR currently serves over half of                                                               
the  state's overall  population  in just  home  heating.   Power                                                               
generation  produced from  Cook  Inlet by  the utility  companies                                                               
serves about  two-thirds of the  state's needs from  Fairbanks to                                                               
Homer  and Seward.   An  industrial anchor  is necessary  to make                                                               
this line viable, he said, and that  would be an Agrium or an LNG                                                               
plant, both  of which  Southcentral currently  has but  which are                                                               
not currently being utilized to their full potential.                                                                           
                                                                                                                                
1:53:39 PM                                                                                                                    
                                                                                                                                
CO-CHAIR NEUMAN remarked  that it is inspiring to  hear the costs                                                               
could actually be lowered.                                                                                                      
                                                                                                                                
MR. THAYER  replied he is  saying that  that is the  price today.                                                               
He explained that ENSTAR's gas  supply contracts must be approved                                                               
by the  Regulatory Commission of Alaska  (RCA).  An Agrium  or an                                                               
LNG plant or  "a Flint Hills" would  negotiate independently with                                                               
the  producer for  the  cost of  the  gas and  that  does not  go                                                               
through  the  RCA,  only  the   utilities  go  through  the  RCA.                                                               
However, the tariff would be about the same for everybody.                                                                      
                                                                                                                                
CO-CHAIR NEUMAN commented that the  480 Mmcf currently being used                                                               
in  the  Cook  Inlet  area  is   all  the  more  reason  for  the                                                               
administration  to find  opportunities, whether  it is  increased                                                               
LNG, Agrium, or added-value processing of Alaska's natural gas.                                                                 
                                                                                                                                
1:54:42 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   WILSON,  in   relation  to   the  aforementioned                                                               
customer price of  [$7.55], inquired what the  lowest and highest                                                               
prices have  been over  the last  five years  and whether  any of                                                               
those prices have been either too low or too high.                                                                              
                                                                                                                                
MR. THAYER  clarified that the  tariff is  the cost to  build the                                                               
line, which ENSTAR anticipates to  be $2.50, and the actual price                                                               
will  be  market conditions.    Using  the  Henry Hub  index,  he                                                               
continued, prices have  spiked as high as $15  and declined below                                                               
$4  during the  past seven  years.   When  a large  gas line  was                                                               
considered in  2001, the price of  gas in the Lower  48 was below                                                               
$4/Mcf  and was  one of  the reasons  for scrapping  the project.                                                               
For the past  three years the price has been  hovering in the $5-                                                               
$7 range.   However, it  would be what  the market prices  are in                                                               
2015.   Right now, Cook  Inlet has the  lowest delivered-to-your-                                                               
home gas price in the country.                                                                                                  
                                                                                                                                
1:56:35 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE WILSON  understood the  future price  could either                                                               
be lower than  today or higher than current  prices in Fairbanks,                                                               
depending upon the market price at that time.                                                                                   
                                                                                                                                
MR.  THAYER answered,  "Correct,  the market  price  is what  you                                                               
would buy it for or negotiate for  at the time."  An ENSTAR study                                                               
conducted  last   year  showed  that  if   Southcentral  Alaska's                                                               
consumers switched to  fuel oil, the next lowest  price, the cost                                                               
of just the commodity itself would  be "a $500 million hit to the                                                               
local economy."   So, in eight years a bullet  line would pay for                                                               
itself just  for Southcentral  cost.   Although switching  is not                                                               
really  an alternative  in the  Cook Inlet  area, ENSTAR  figures                                                               
that natural  gas piped from the  North Slope can lower  the cost                                                               
in Fairbanks by more than half.                                                                                                 
                                                                                                                                
1:57:44 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  WILSON  asked  what  the  figures  would  be  for                                                               
electricity.                                                                                                                    
                                                                                                                                
MR. THAYER  said he  does not  know, but  utilities are  paying a                                                               
market  price for  natural  gas  to generate  90  percent of  the                                                               
Railbelt's  electrical power.   Given  the conversion  of gas  to                                                               
electricity that  would then be used  to heat a home,  he said he                                                               
believes the  cost would be  about $350  as compared to  $154 for                                                               
natural gas.                                                                                                                    
                                                                                                                                
1:58:28 PM                                                                                                                    
                                                                                                                                
MR. THAYER,  in response to  Representative Guttenberg,  said the                                                               
Department of  Revenue tracks  Henry Hub  prices and  last summer                                                               
the department made a 10-year prediction.                                                                                       
                                                                                                                                
REPRESENTATIVE GUTTENBERG inquired  whether HCR 2, HCR  3, HCR 4,                                                               
or HCR 5 would help ENSTAR  in regard to providing certainty that                                                               
the state supports the bullet line project.                                                                                     
                                                                                                                                
MR.  THAYER replied  they clearly  do as  far as  a sense  of the                                                               
legislature.   He  said the  governor plans  to introduce  a bill                                                               
that would  provide clarity  on regulation  and how  the pipeline                                                               
would be  treated.  There needs  to be some clarity  because last                                                               
year  ENSTAR spent  $5 million  on  this project  and expects  to                                                               
spend up to $60 million by next year.                                                                                           
                                                                                                                                
2:00:47 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  KAWASAKI,  in reference  to  the  issue of  small                                                               
diameter pipelines  having high tariff  rates due to  low volume,                                                               
asked how ENSTAR will be able to  use the Henry Hub index and get                                                               
a low enough rate for consumers in Anchorage or Fairbanks.                                                                      
                                                                                                                                
MR. THAYER  responded that the Henry  Hub is just a  common index                                                               
that is used.  He said ENSTAR  does not know whether that will be                                                               
the negotiating  point for gas  contracts because it has  not yet                                                               
come to any  type of commercial terms with a  producer.  ENSTAR's                                                               
base  case is  a  20-inch pipeline,  but it  could  be a  24-inch                                                               
pipeline.  ENSTAR  anticipates that the pipeline  would serve all                                                               
of Southcentral, Fairbanks, and the  Railbelt for many years.  It                                                               
is correct that the more gas  that can be put through a pipeline,                                                               
the lower the tariff.  If the  gas supply is there, and there are                                                               
users at the  other end, compression can be used  to increase the                                                               
volume.   The reason the pipeline  is 500 Mmcf/day is  to make it                                                               
AGIA compliant.                                                                                                                 
                                                                                                                                
2:02:23 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE KAWASAKI  expressed his concern that  the language                                                               
in HCR  2 on page 2,  lines 17-25, could result  in ENSTAR coming                                                               
back to  the legislature for  concessions should the  bullet line                                                               
be uncommercial                                                                                                                 
                                                                                                                                
MR. THAYER answered  that ENSTAR is not asking  for any financial                                                               
concessions from the state; it is a private enterprise project.                                                                 
                                                                                                                                
REPRESENTATIVE  KAWASAKI submitted  that at  some point  in time,                                                               
ENSTAR and the producers will have  to come back to the state for                                                               
tax terms.                                                                                                                      
                                                                                                                                
MR. THAYER replied that under  Alaska's Clear and Equitable Share                                                               
(ACES) the  statewide tax rate is  5 percent.  This  tax rate has                                                               
spurred  new  exploration,  he  maintained, and  is  one  of  the                                                               
reasons  for the  exploration  that is  now  occurring in  Gubik,                                                               
Doyon, and  possibly the Yukon  Flats.  He said  ENSTAR's concern                                                               
is  with  government regulation  and  permitting,  and ENSTAR  is                                                               
hoping the  state will  establish a framework  that makes  this a                                                               
priority so the regulatory and  permitting issues can be resolved                                                               
in a very timely fashion.                                                                                                       
                                                                                                                                
2:04:15 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TUCK asked  for Mr. Thayer's opinion  in regard to                                                               
Mr. Lakosh's  testimony about stopping  the export of  Cook Inlet                                                               
gas.                                                                                                                            
                                                                                                                                
MR.  THAYER responded  that  if the  LNG plant  had  not been  in                                                               
operation and diverting gas to  Anchorage and Southcentral Alaska                                                               
during this winter's most recent  cold snap, there would probably                                                               
have been  a loss  of part  of the system  as well  as electrical                                                               
generation.  The  LNG plant is vital not only  to anchor a bullet                                                               
line, but  to stay in  production, he  explained.  The  LNG plant                                                               
flows and  uses gas 24  hours a  day, 7 days  a week, 365  days a                                                               
year.  But a utility like ENSTAR  swings as much as 10 times from                                                               
one day to  another, such as when the weather  goes from 20 below                                                               
one week  to 50 degrees  above the  next.  An  electrical company                                                               
has a  similar ratio, but not  as great.  Because  the Cook Inlet                                                               
fields are so old  they could fill up with sand  and water and be                                                               
lost if  they are  not drawn  on constantly.   So, the  LNG plant                                                               
plays a very important part  in helping with ENSTAR's swing ratio                                                               
and ENSTAR  believes that shutting  down the plant will  hurt the                                                               
supplies and reserves in Cook Inlet.                                                                                            
                                                                                                                                
2:06:14 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   TUCK   inquired   whether  ENSTAR   would   have                                                               
sufficient gas to  meet the retail, commercial,  and Agrium needs                                                               
from the Cook Inlet region if there was no export contract.                                                                     
                                                                                                                                
MR. THAYER  reiterated that  with utilities there  needs to  be a                                                               
base load  24 hours a day  7 days a  week in order to  swing when                                                               
extra gas  is needed.   Twenty  years ago in  Cook Inlet  the gas                                                               
just free-flowed  into the system, he  said, but that is  not the                                                               
case today  so shutting down  the plant  would hurt that.   There                                                               
are  three  companies looking  for  gas  today -  "Marathon"  and                                                               
"Conoco" for the plant and the  utilities.  If the market were to                                                               
shrink from say, 200 Bcf to 50  or 60 Bcf just for the utilities,                                                               
there would  not be  as much investment  and exploration  for new                                                               
gas in Cook Inlet, which is a concern of ENSTAR.                                                                                
                                                                                                                                
2:07:25 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  TUCK asked  whether ENSTAR  has any  concern that                                                               
exports  could take  priority and  cause  a shortage  of gas  for                                                               
Alaskans.                                                                                                                       
                                                                                                                                
MR. THAYER answered,  "No, because the priority would  be for the                                                               
utilities; the industrial customers  could be interrupted through                                                               
commercial arrangements  so the  gas is  diverted to  local needs                                                               
along  the Railbelt."    The  industrial load  is  needed on  the                                                               
bullet  line to  keep  that  tariff as  low  as  possible.   "The                                                               
residential  and  commercial  needs   alone  cannot  support  the                                                               
building of  a $4 billion  pipeline, but with an  industrial load                                                               
it does," he said.                                                                                                              
                                                                                                                                
2:08:39 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TUCK expressed his  concern that export could take                                                               
control of the volume necessary for  the line.  He urged that the                                                               
gas be  prioritized first for  Alaska's needs and that  export be                                                               
done as  needed to maximize  the line.   He inquired  whether Mr.                                                               
Thayer believes HCR 2 would protect ENSTAR in this regard.                                                                      
                                                                                                                                
MR. THAYER  replied, "We  do, and Conoco  and Marathon  have been                                                               
great partners."   Whenever Southcentral Alaska  needed diversion                                                               
from the LNG  plant they did it, even without  a contract in this                                                               
regard.  He  said he believes this type of  commercial term could                                                               
be written into the contract for gas delivery into Southcentral.                                                                
                                                                                                                                
2:09:40 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  OLSON pointed  out that  the LNG  export facility                                                               
has  been around  for approximately  40  years and  terms in  the                                                               
plant's export  license require that  demands by  local utilities                                                               
take precedence  over shipments to  Japan.  Up until  about three                                                               
years  ago, "Conoco"  and "Marathon"  never missed  or shorted  a                                                               
delivery to Japan.  But in the  past six to eight months, he said                                                               
he believes  several loads to  Japan were shorted to  provide gas                                                               
to ENSTAR.                                                                                                                      
                                                                                                                                
MR. THAYER answered, "Correct."                                                                                                 
                                                                                                                                
REPRESENTATIVE OLSON added that this  is the only facility in the                                                               
U.S.  with an  exemption  to  the Jones  Act  which prevents  the                                                               
export of gas overseas.                                                                                                         
                                                                                                                                
2:11:21 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE WILSON  moved to  adopt Conceptual Amendment  1 as                                                               
follows:                                                                                                                        
                                                                                                                                
     Page 2, line 18, after "for":                                                                                              
          Delete "all"                                                                                                          
                                                                                                                                
     Page 2, line 18, after "taking":                                                                                           
          Delete "all"                                                                                                          
                                                                                                                                
     Page 2, line 18, before "necessary":                                                                                       
          Delete "action"                                                                                                       
          Insert "actions"                                                                                                      
                                                                                                                                
Thus, Page 2, line 18, would read:                                                                                              
                                                                                                                                
     provide energy security for Alaskans by taking actions                                                                     
     necessary to promote the                                                                                                   
                                                                                                                                
CO-CHAIR JOHNSON objected for discussion purposes.                                                                              
                                                                                                                                
2:12:30 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE WILSON  said she feels the  amendment is important                                                               
because  this  action  will  not  affect  "all"  Alaskans.    For                                                               
example, the bullet  line will not affect  residents of Southeast                                                               
Alaska.   In addition,  taking "all"  action is  too encompassing                                                               
and could result in someone coming back in this regard.                                                                         
                                                                                                                                
CO-CHAIR  NEUMAN  disagreed.   He  said  he  thinks it  does  add                                                               
security for all Alaskans because  eventually the state's various                                                               
power  grids  will  be  working together  so  this  will  benefit                                                               
everyone.                                                                                                                       
                                                                                                                                
REPRESENTATIVE WILSON  agreed that everything will  eventually be                                                               
connected.    However, this  particular  resolution  does not  do                                                               
that, therefore it does not take care of all Alaskans.                                                                          
                                                                                                                                
2:15:44 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  RAMRAS  said  the  governor  has  demonstrated  a                                                               
growing contempt for the legislative  branch and whether the word                                                               
"all" is  included will not  matter significantly insofar  as the                                                               
power of  the resolution.  He  said he would be  open to deleting                                                               
"all"  before  the word  Alaskans  in  an  effort to  respond  to                                                               
Representative Wilson,  and to keeping "all  action necessary" in                                                               
response to Co-Chair Neuman.                                                                                                    
                                                                                                                                
CO-CHAIR NEUMAN said  he thinks "taking all  action necessary" is                                                               
a critical part of HCR 2.   He offered an amendment to Conceptual                                                               
Amendment 1 that  would retain deletion of the  first "all", keep                                                               
the second "all", and retain adding  an "s" to the word "action".                                                               
Therefore, Conceptual Amendment 1, as amended, would read:                                                                      
                                                                                                                                
       provide energy security for Alaskans by taking all                                                                       
     actions necessary to promote the                                                                                           
                                                                                                                                
CO-CHAIR JOHNSON objected for discussion purposes.                                                                              
                                                                                                                                
2:18:01 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GUTTENBERG  supported   the  original  Conceptual                                                               
Amendment 1.   If the governor  was to listen to  the legislature                                                               
at some point, she could take this to the extreme, he cautioned.                                                                
                                                                                                                                
REPRESENTATIVE TUCK  supported the original  Conceptual Amendment                                                               
1.  Some of the actions need to be discretionary, he said.                                                                      
                                                                                                                                
CO-CHAIR  JOHNSON  removed  his  objection to  the  amendment  of                                                               
Conceptual Amendment 1.                                                                                                         
                                                                                                                                
REPRESENTATIVE  TUCK  objected  to the  amendment  to  Conceptual                                                               
Amendment 1.                                                                                                                    
                                                                                                                                
A roll call  vote was taken.  Representatives  Olson, Neuman, and                                                               
Johnson voted in  favor of the amendment  to Conceptual Amendment                                                               
1.  Representatives Guttenberg,  Kawasaki, Tuck, and Wilson voted                                                               
against it.   Therefore, the amendment to  Conceptual Amendment 1                                                               
failed by a vote of 3-4.                                                                                                        
                                                                                                                                
The committee took an at-ease from 2:22 p.m. to 2:23 p.m.                                                                       
                                                                                                                                
2:23:43 PM                                                                                                                    
                                                                                                                                
A  roll   call  vote  was   taken  on  Conceptual   Amendment  1.                                                               
Representatives Guttenberg,  Kawasaki, Tuck, and Wilson  voted in                                                               
favor of Conceptual Amendment 1.   Representatives Olson, Neuman,                                                               
and Johnson voted against it.   Therefore, Conceptual Amendment 1                                                               
passed by a vote of 4-3.                                                                                                        
                                                                                                                                
2:24:49 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TUCK moved Conceptual Amendment 2 as follows:                                                                    
                                                                                                                                
     Page 2, line 18, after "Alaskans":                                                                                         
          Insert "first"                                                                                                        
                                                                                                                                
     Page 2, line 24, after "support":                                                                                          
          Insert "the energy needs of Alaskans and"                                                                             
                                                                                                                                
Therefore,  page 2,  line 18,  and page  2, line  24, would  read                                                               
respectively:                                                                                                                   
                                                                                                                                
      provide energy security for Alaskans first by taking                                                                      
     actions necessary to promote the                                                                                           
                                                                                                                                
         for a commitment of natural gas production on                                                                          
      commercially reasonable terms to support the energy                                                                       
     needs of Alaskans and the                                                                                                  
                                                                                                                                
CO-CHAIR JOHNSON  objected for purposes  of discussion  and asked                                                               
whether Representative  Ramras, as  the sponsor, had any concerns                                                               
with Conceptual Amendment 2.                                                                                                    
                                                                                                                                
2:26:20 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE RAMRAS replied that this  is just a resolution and                                                               
he would be more fearful of wordsmithing if it were a statute.                                                                  
                                                                                                                                
CO-CHAIR JOHNSON agreed with Representative Ramras.                                                                             
                                                                                                                                
CO-CHAIR NEUMAN  said he is  concerned with  wordsmithing because                                                               
the language was carefully thought out the way it is written.                                                                   
                                                                                                                                
CO-CHAIR JOHNSON  withdrew his objection to  Conceptual Amendment                                                               
2.                                                                                                                              
                                                                                                                                
There being no further objection, Conceptual Amendment 2 passed.                                                                
                                                                                                                                
2:28:25 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  NEUMAN  moved to  report  HCR  2,  as amended,  out  of                                                               
committee  with any  individual recommendations  and accompanying                                                               
fiscal  notes.    There  being no  objection,  CSHCR  2(RES)  was                                                               
reported out of  the House Resources Standing Committee.   [HCR 2                                                               
was re-heard later in the meeting.]                                                                                             
                                                                                                                                
HCR  3-IN-STATE GAS PIPELINE                                                                                                  
                                                                                                                                
[Testimony was heard regarding HCR 2, HCR 3, HCR 4, and HCR 5.]                                                                 
                                                                                                                                
2:28:49 PM                                                                                                                    
                                                                                                                                
CO-CHAIR JOHNSON announced that the  next order of business would                                                               
be HOUSE CONCURRENT RESOLUTION NO.  3, Requesting the governor to                                                               
provide  energy   security  for   all  Alaskans  by   taking  and                                                               
encouraging all  action that would  support a natural  gas bullet                                                               
pipeline  from  the  North  Slope   to  the  Cook  Inlet  region,                                                               
including  initiating any  necessary negotiations  to reopen  the                                                               
Agrium plant in Kenai.                                                                                                          
                                                                                                                                
REPRESENTATIVE JAY  RAMRAS, Alaska State Legislature,  sponsor of                                                               
HCR 3, drew attention to page  1, lines 12-15, and noted that the                                                               
AGIA  gas line  from the  North Slope,  or a  similar alternative                                                               
project, would not  deliver gas until after 2016, "if  ever".  He                                                               
stated  his concern  over  whether  there will  ever  be a  large                                                               
diameter pipe  given the  market changes  since passage  of AGIA.                                                               
Restarting Agrium  is essential to  the economic viability  of an                                                               
in-state gas pipeline, he opined.                                                                                               
                                                                                                                                
2:30:04 PM                                                                                                                    
                                                                                                                                
LISA  PARKER, Manager,  U.S. Government  Relations, Agrium  Inc.,                                                               
offered Agrium Inc.'s support of HCR 2,  HCR 3, HCR 4, and HCR 5.                                                               
She  said  the  resolutions  are important  to  provide  economic                                                               
stability to Alaska as well as  to provide jobs for Alaskans.  In                                                               
September 2007,  after nearly  40 years  of operation  in Alaska,                                                               
Agrium  had to  shut down  its Kenai  facility due  to a  lack of                                                               
natural gas  in Cook Inlet.   At its peak this  facility put over                                                               
$350 million annually  into the Alaskan economy,  the majority of                                                               
which  was  spent in  Southcentral  Alaska.   Agrium  supports  a                                                               
bullet  line  and is  engaged  in  discussions with  the  various                                                               
organizations and companies interested  in pursuing the line, she                                                               
said.   A bullet  line, along with  the various  negotiated terms                                                               
and conditions,  would put a  billion dollar  industrial facility                                                               
back  into operation  in Alaska.   Bringing  back the  fertilizer                                                               
plant would restore  250 jobs, provide economic  stability to the                                                               
state, and provide jobs and  income to the various businesses and                                                               
support industries that have been  impacted by Agrium's shutdown.                                                               
The  re-started  facility  would support  and  supply  fertilizer                                                               
product to  Alaska's agricultural industry, the  state of Alaska,                                                               
and the international airports in Anchorage and Fairbanks.                                                                      
                                                                                                                                
MS. PARKER, in  response to Representative Olson,  stated that at                                                               
its  peak   Agrium  employed   approximately  330   people,  plus                                                               
contractors.   In further response  to Representative  Olson, she                                                               
explained that Agrium  cut back to 250 employees  in mid-2004 and                                                               
then scaled  back again  to 150 employees  in early  2006 because                                                               
only 50 percent of the plant was in operation.                                                                                  
                                                                                                                                
2:33:10 PM                                                                                                                    
                                                                                                                                
CO-CHAIR JOHNSON closed public testimony on  HCR 3.  In an effort                                                               
to be fair, he pointed out  that HCR 3 contains the same language                                                               
as HCR 2.                                                                                                                       
                                                                                                                                
CO-CHAIR  NEUMAN moved  to report  HCR  3 out  of committee  with                                                               
individual recommendations and any accompanying fiscal notes.                                                                   
                                                                                                                                
2:34:08 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   GUTTENBERG  objected.     He   moved  Conceptual                                                               
Amendment 1 as follows:                                                                                                         
                                                                                                                                
     Page 2, line 31, after "for":                                                                                              
          Delete "all"                                                                                                          
                                                                                                                                
     Page 2, line 31, after "encouraging":                                                                                      
          Delete "all"                                                                                                          
                                                                                                                                
     Page 2, line 31, before "necessary":                                                                                       
          Delete "action"                                                                                                       
          Insert "actions"                                                                                                      
                                                                                                                                
Therefore, page 2, line 31, of HCR 3 would read as follows:                                                                     
                                                                                                                                
       provide energy security for Alaskans by taking and                                                                       
     encouraging actions necessary to                                                                                           
                                                                                                                                
CO-CHAIR NEUMAN objected to Conceptual Amendment 1.                                                                             
                                                                                                                                
REPRESENTATIVE GUTTENBERG argued that  this is the same amendment                                                               
with the same intent as  was offered by Representative Wilson for                                                               
HCR 2 and passed.   If it was valid for HCR 2,  it should also be                                                               
valid for HCR 3, HCR 4, and HCR 5.                                                                                              
                                                                                                                                
CO-CHAIR JOHNSON  agreed it would  be valid to those  members who                                                               
had supported that amendment.                                                                                                   
                                                                                                                                
2:35:35 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  RAMRAS,  speaking  in  regard  to  Representative                                                               
Wilson's  original   concern,  pointed  out  that   the  cost  of                                                               
fertilizer  in Alaska  will be  going up  400 percent  which will                                                               
affect all Alaskans  unless they do not eat produce  grown in the                                                               
state, do not  have a lawn, or  do not like flowers.   He said he                                                               
likes HCR 3 as it is and that it is just a resolution.                                                                          
                                                                                                                                
CO-CHAIR NEUMAN maintained his objection.                                                                                       
                                                                                                                                
REPRESENTATIVE  GUTTENBERG  said  the  rest  of  line  31  [which                                                               
continues onto  page 3] refers  to a bullet  line and goes  on to                                                               
expand upon Agrium, but it  has the same relationship between all                                                               
Alaskans and  a bullet line.   If  the resolution was  only about                                                               
Agrium, then the wording would be different.                                                                                    
                                                                                                                                
CO-CHAIR JOHNSON commented that the point is taken.                                                                             
                                                                                                                                
CO-CHAIR NEUMAN maintained his objection.                                                                                       
                                                                                                                                
2:38:01 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  KAWASAKI pointed  out that  the title  on page  1                                                               
includes the same  language being amended on page 2.   He offered                                                               
a friendly amendment  that would add the  following to Conceptual                                                               
Amendment 1:                                                                                                                    
                                                                                                                                
     Page 1, line 1, after "for":                                                                                               
          Delete "all"                                                                                                          
                                                                                                                                
     Page 1, line 2, after "encouraging":                                                                                       
          Delete "all"                                                                                                          
                                                                                                                                
CO-CHAIR JOHNSON  pointed out  that in  terms of  consistency the                                                               
title of HCR 2 was not amended.                                                                                                 
                                                                                                                                
CO-CHAIR  NEUMAN   objected  to   the  amendment   to  Conceptual                                                               
Amendment 1.                                                                                                                    
                                                                                                                                
A roll call vote was  taken.  Representatives Kawasaki, Tuck, and                                                               
Guttenberg  voted  in  favor  of   the  amendment  to  Conceptual                                                               
Amendment 1.  Representatives Wilson,  Olson, Neuman, and Johnson                                                               
voted  against  it.    Therefore,  the  amendment  to  Conceptual                                                               
Amendment 1 failed by a vote of 3-4.                                                                                            
                                                                                                                                
2:40:01 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  NEUMAN  maintained  his objection  to  Conceptual                                                               
Amendment 1.                                                                                                                    
                                                                                                                                
REPRESENTATIVE  TUCK  supported HCR  3  as  a  whole as  well  as                                                               
Conceptual Amendment 1.  The  amendment is about supplying energy                                                               
security to Alaskans, not providing food supply, he said.                                                                       
                                                                                                                                
A roll  call vote was  taken.  Representatives  Tuck, Guttenberg,                                                               
and  Kawasaki   voted  in  favor   of  Conceptual   Amendment  1.                                                               
Representatives Wilson, Olson, Neuman,  and Johnson voted against                                                               
it.  Therefore, Conceptual Amendment 1 failed by a vote of 3-4.                                                                 
                                                                                                                                
CO-CHAIR  NEUMAN again  moved to  report HCR  3 out  of committee                                                               
with  individual  recommendations  and  any  accompanying  fiscal                                                               
notes.  There  being no objection, HCR 3 was  reported out of the                                                               
House Resources Standing Committee.                                                                                             
                                                                                                                                
HCR  4-IN-STATE GAS PIPELINE                                                                                                  
                                                                                                                                
2:46:00 PM                                                                                                                    
                                                                                                                                
CO-CHAIR JOHNSON announced that the  next order of business would                                                               
be HOUSE CONCURRENT RESOLUTION NO.  4, Requesting the governor to                                                               
provide energy  security for Alaskans  by taking  and encouraging                                                               
all  action  to  support  development of  a  natural  gas  bullet                                                               
pipeline from the North Slope  to the Cook Inlet region including                                                               
advocating an increase  in the amount of natural gas  that may be                                                               
exported under authority granted  by the United States Department                                                               
of Energy.                                                                                                                      
                                                                                                                                
REPRESENTATIVE JAY  RAMRAS, Alaska State Legislature,  sponsor of                                                               
HCR 4,  said the resolution asks  the governor of Alaska  to open                                                               
up a  dialogue with the U.S.  Department of Energy to  expand the                                                               
state's  export  license  in  order to  increase  the  volume  of                                                               
natural gas  travelling down  an in-state bullet  line.   In 1996                                                               
the maximum amount of gas moved  by the "Conoco LNG plant" was 75                                                               
Bcf [per  year] and  the volume  of export  was 230  Mmcf/day, he                                                               
related.   The current  authorized amount is  50 Bcf/year  at 137                                                               
Mmcf/day.  Due to deliverability  and depletion of the Cook Inlet                                                               
gas field,  the LNG plant is  running at less than  full capacity                                                               
because some  gas is  being diverted  to heat  Southcentral homes                                                               
and businesses,  and this  is the  reason for  trying to  open up                                                               
another field for  an in-state bullet line.   He reminded members                                                               
that 500  Mmcf/day of  gas is  180 Bcf/year,  so the  bullet line                                                               
would provide  60 Bcf/year for  light commercial  and residential                                                               
use along  the Railbelt, 60 Bcf  for the Agrium facility,  and up                                                               
to  60 Bcf/year  for export,  notwithstanding concrete  plants in                                                               
the Matanuska-Susitna  Valley or gas-to-liquid  opportunities for                                                               
synthetic fuel for the U.S.  Air Force or the International Tower                                                               
Hill gold  mining prospects near  Livengood.  It is  important to                                                               
open  up this  dialogue years  in advance  to create  an adequate                                                               
amount of demand,  he maintained, because there is  not that much                                                               
present use of gas inside the state.                                                                                            
                                                                                                                                
2:48:41 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GUTTENBERG  asked  whether there  have  been  any                                                               
exploratory  discussions  with  the  U.S.  Department  of  Energy                                                               
regarding expansion of the export license.                                                                                      
                                                                                                                                
REPRESENTATIVE RAMRAS  replied that he  has met three  times with                                                               
commissioners of the Federal  Energy Regulatory Commission (FERC)                                                               
and that  the FERC  chairman was  present at  all three  of those                                                               
meetings.     He  said   it  is   important  to   recognize  that                                                               
nonconventional  sources  of  natural   gas,  mainly  shale,  are                                                               
displacing  conventional gas  supplies.   Moreover,  by the  year                                                               
2010, new LNG  import terminals in the U.S. will  have opened and                                                               
expanded capacity  from 6 Bcf/day  to 20 Bcf/day.   Presently, he                                                               
continued, there is  such a glut of natural gas  in the U.S. that                                                               
one newly opened  terminal has only received one  shipment of LNG                                                               
since it opened about a year ago.   It is important to initiate a                                                               
dialog  with the  U.S.  Department of  Energy  five years  before                                                               
there is  a bullet  line and  eighteen months  before there  is a                                                               
final  investment   decision  from  the  private   sector  entity                                                               
interested in  opening this bullet line  in order to get  a sense                                                               
of whether expanding  the demand is viable.  If  the tariff is $6                                                               
when the pipeline  is one-third full, $4 at  two-thirds full, and                                                               
$2 when  it is completely full,  then it is in  the best interest                                                               
of all  Railbelt users  to have  the bullet  line filled  with as                                                               
much volume  as possible.   Representative Ramras  understood the                                                               
working  number  for  the  tariff  for  a  full  pipeline  to  be                                                               
$2.50/Mcf.  Fairbanks Natural Gas  estimates it would cost $4/Mcf                                                               
for  them to  haul gas  from the  North Slope,  he related,  so a                                                               
$2.50 tariff is an attractive number.                                                                                           
                                                                                                                                
2:52:05 PM                                                                                                                    
                                                                                                                                
CO-CHAIR JOHNSON opened public testimony on HCR 4.                                                                              
                                                                                                                                
TOM  LAKOSH testified  that being  able to  fill the  pipeline is                                                               
critical to maintaining the in-state  line's projected low tariff                                                               
cost.   Switching  to  renewables  will reduce  the  load on  the                                                               
pipeline,  so it  may become  wholly  uneconomic, he  maintained.                                                               
The  Agrium  plant  could  fulfill  the  role  of  an  industrial                                                               
customer, he argued, and the  committee should choose between 350                                                               
employees  running the  Agrium  plant or  the  smaller number  of                                                               
employees that  would be  needed to run  an LNG  export terminal.                                                               
This  can be  addressed immediately  without spending  $4 billion                                                               
and waiting  four years  for a  pipeline to be  built.   He urged                                                               
members  to  adjust  the  resolution  to  get  the  gas  in-state                                                               
immediately and not wait for  either the pipeline or its incurred                                                               
costs.                                                                                                                          
                                                                                                                                
CO-CHAIR JOHNSON closed public testimony on HCR 4.                                                                              
                                                                                                                                
CO-CHAIR NEUMAN moved  to report HCR 4 out of  committee with any                                                               
individual  recommendations  or  attached fiscal  notes.    There                                                               
being no objection,  HCR 4 was reported from  the House Resources                                                               
Standing Committee.                                                                                                             
                                                                                                                                

Document Name Date/Time Subjects
HCR 2 Resolution.pdf HRES 2/4/2009 1:00:00 PM
HCR 3 Resolution.pdf HRES 2/4/2009 1:00:00 PM
HCR 4 Resolution.pdf HRES 2/4/2009 1:00:00 PM
HCR 5 Resolution.pdf HRES 2/4/2009 1:00:00 PM
Sponsor Stmt HCR 2.pdf HRES 2/4/2009 1:00:00 PM
Sponsor Stmt HCR 3.pdf HRES 2/4/2009 1:00:00 PM
Sponsor Stmt HCR 4.pdf HRES 2/4/2009 1:00:00 PM
Sponsor Stmt HCR 5.pdf HRES 2/4/2009 1:00:00 PM