Legislature(2023 - 2024)BARNES 124
03/15/2024 01:00 PM House RESOURCES
Note: the audio ![]()
and video ![]()
recordings are distinct records and are obtained from different sources. As such there may be key differences between the two. The audio recordings are captured by our records offices as the official record of the meeting and will have more accurate timestamps. Use the icons to switch between them.
| Audio | Topic |
|---|---|
| Start | |
| Presentation(s): Southcentral Gas Supply | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| += | HB 359 | TELECONFERENCED | |
| += | HB 387 | TELECONFERENCED | |
| + | TELECONFERENCED |
ALASKA STATE LEGISLATURE
HOUSE RESOURCES STANDING COMMITTEE
March 15, 2024
1:03 p.m.
MEMBERS PRESENT
Representative Tom McKay, Chair
Representative Thomas Baker
Representative Kevin McCabe
Representative Dan Saddler
Representative Stanley Wright
Representative Donna Mears
Representative Maxine Dibert
MEMBERS ABSENT
Representative George Rauscher, Vice Chair
Representative Jennie Armstrong
COMMITTEE CALENDAR
PRESENTATION(S): SOUTHCENTRAL GAS SUPPLY
- HEARD
HOUSE BILL NO. 359
"An Act relating to the permanent fund dividend and a one-time
permanent fund dividend payment and land voucher; and providing
for an effective date."
- BILL HEARING CANCELED
HOUSE BILL NO. 387
"An Act relating to a tax credit for certain oil and gas
equipment in the Cook Inlet sedimentary basin; and providing for
an effective date."
- BILL HEARING CANCELED
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
BRAD KEITHLEY, Managing Director
Alaskans for Sustainable Budgets
Anchorage, Alaska
POSITION STATEMENT: Gave the presentation, titled "Southcentral
Gas Supply."
ACTION NARRATIVE
1:03:25 PM
CHAIR TOM MCKAY called the House Resources Standing Committee
meeting to order at 1:03 p.m. Representatives Dibert, Wright,
McCabe, Mears, Baker, Saddler, and McKay were present at the
call to order.
^PRESENTATION(S): Southcentral Gas Supply
PRESENTATION(S): Southcentral Gas Supply
1:04:21 PM
CHAIR MCKAY announced that the only order of business would be
the Southcentral Gas Supply presentation.
1:06:02 PM
BRAD KEITHLEY, Managing Director, Alaskans for Sustainable
Budgets, began the Southcentral Gas Supply presentation via
PowerPoint [hard copy included in the committee packet]. He
began on slide 2, which highlighted his professional background
and experiences that qualified him to be speaking on the topic
at hand. He moved to slide 3, which explained his perspective
on market economics and natural gas development in Alaska.
1:11:35 PM
MR. KEITHLEY continued to slide 4, which displayed a graph that
emphasized the current market demands of oil and gas supply in
Alaska. He moved to slide 5, which put forth that subsidies
awarded by the Alaska State Legislature aren't necessary to
lower the cost of natural gas to Alaskans.
1:19:00 PM
REPRESENTATIVE MCCABE asked how the Alaska State Legislature
could mitigate any impacts of a decision it makes regarding the
subsidizing of natural gas production and distribution.
1:19:23 PM
MR. KEITHLEY answered that currently, the permanent fund is
likely to pay for a natural gas subsidy and said that it is
likely to affect lower and middle class families.
1:21:10 PM
CHAIR MCKAY asserted that the committee should be open to all
ideas regarding a solution for natural gas subsidies.
1:21:37 PM
REPRESENTATIVE MCCABE asked why the cost of gas in the Cook
Inlet Gas Region is much lower than the current market rate.
1:22:05 PM
MR. KEITHLEY answered that the ENSTAR Natural Gas Company
(ENSTAR) and the Chugach Electric Association (CEA) are
artificially keeping the price of gas low.
1:23:30 PM
REPRESENTATIVE MCCABE opined that there should be more
competition between utilities in the Cook Inlet Gas Region.
1:24:54 PM
MR. KEITHLEY replied that there needs to be a price motivator to
drive any change in a localized gas market.
1:25:56 PM
REPRESENTATIVE SADDLER asked if Alaska is meeting its
constitutional obligations to fully develop its natural
resources if it is currently limiting itself through market
tactics.
1:27:10 PM
MR. KEITHLEY said that the Regulatory Commission of Alaska (RCA)
should be included in the discussion regarding the limitation of
utilities' ability to set their own prices.
1:29:11 PM
CHAIR MCKAY added that his office is working to leverage the
cost of developing "stranded" gas explorations.
1:30:53 PM
MR. KEITHLEY said that the current market price is being
achieved by tax incentives, which he compared to a direct
subsidy of the natural gas industry.
CHAIR MCKAY responded that any tax incentive or direct subsidy
will always save consumers millions of dollars in increased
rates.
MR. KEITHLEY retorted that a subsidy would only "save the
Southcentral consumers."
CHAIR MCKAY asserted that everyone would benefit from a natural
gas subsidy or tax incentive.
MR. KEITHLEY remarked that any tax incentive or subsidy would
come out of the permanent fund subsequently lowering the annual
permanent fund dividend (PFD).
CHAIR MCKAY argued that the lower cost of energy would save
Alaskans more money overall than a lower PFD would.
MR. KEITHLEY explained that a tax incentive or subsidy funded by
the permanent fund would affect lower income Alaskans the most.
1:35:22 PM
CHAIR MCKAY stressed that renewable energy is heavily subsidized
in Alaska and explained that any subsidy would lower the overall
cost of energy for Alaskans.
MR. KEITHLEY said that removing a subsidy on gas would reset the
market price of natural gas in the Cook Inlet Gas Region to a
price that is consistent with global market patterns.
CHAIR MCKAY pointed out that there are no taxes and royalties
received by liquified natural gas (LNG) importation.
1:40:07 PM
MR. KEITHLEY explained that a lower market price would be
directly influenced by a natural gas subsidy.
CHAIR MCKAY said that utilities companies wouldn't permit an
increase in the price of natural gas.
1:41:46 PM
MR. KEITHLEY compared the current market price of natural gas in
Alaska to the natural gas market of the Lower 48 States in the
1970s.
1:43:43 PM
REPRESENTATIVE MEARS commented that the incremental increase of
natural gas prices in the Cook Inlet Gas Region should prompt a
look at the use of renewable energy sources as an alternative.
1:45:09 PM
MR. KEITHLEY refocused the discussion back to slide 4 and said
that the continuous subsidy of natural gas in the Cook Inlet Gas
Region would harm the consumer.
1:46:57 PM
MR. KEITHLEY resumed the presentation on slide 6, which
displayed two graphs that compared the lowest overall cost
possible without utilizing subsidies. He continued to slide 7,
which highlighted the first graph displayed on slide 6 and
emphasized the price of $9 per million cubic feet (Mcf) of
natural gas. He moved to slide 8, which highlighted the second
graph displayed on slide 6 and emphasized the declining price of
natural gas in the Cook Inlet Gas Region.
1:52:42 PM
REPRESENTATIVE SADDLER questioned the price figures on slide 7.
1:53:28 PM
MR. KEITHLEY cited line 2 and explained that the state is not
going to earn a return on that investment but rather will
subsidize it by way of it being state-owned.
1:54:27 PM
MR. KEITHLEY resumed the presentation on slide 9, which
displayed a graphic that highlighted the total cost of
developing and distributing natural gas in the Cook Inlet Gas
Region.
1:55:55 PM
CHAIR MCKAY offered an anecdote relating to the fluctuation of
the price of oil and gas during his time working in the oil and
gas industry.
MR. KEITHLEY commented that Alaska will have to incur a serious
amount of cost when it is developing new projects in Alaska.
2:00:45 PM
REPRESENTATIVE MCCABE added that the constitutional budget
reserve (CBR) and the permanent fund are the lowest they have
ever been because the Alaska State Legislature has capped their
growth. He asked if "clean coal" from Healy, Alaska, was
included in the presentation's cost of energy calculations.
MR. KEITHLEY responded to Representative McCabe that coal was
mentioned on slide 7.
2:02:34 PM
REPRESENTATIVE MEARS added that Alaska is "very well set up" for
the use of natural gas in homes and said that it would be a
transitional process regardless of the source of energy used.
2:03:13 PM
MR. KEITHLEY resumed the presentation on slide 10, which
displayed a spreadsheet of the most cost-effective,
nonsubsidized options for energy in Alaska. He backtracked to
slide 8 to highlight various nonsubsidized alternatives to an
in-state gas pipeline.
2:06:21 PM
CHAIR MCKAY shared his excitement about the idea that imported
LNG could also help further development of LNG in Alaska and
cautioned that the Kenai Peninsula's natural gas industry could
suffer from an Interior LNG pipeline.
2:07:39 PM
MR. KEITHLEY explained a category of gas mentioned in the
Natural Gas Policy Act of 1978 referred to as "high cost gas"
that was viewed as a necessary additional supply in the case of
a supply deficit. He said that the "high cost gas" category of
the Natural Gas Policy Act of 1978 went out of business very
quickly because of low demand for it.
2:10:24 PM
REPRESENTATIVE SADDLER referenced the assertions on slide 12
regarding natural gas policy and said that he was unsure about
certain aspects of the slide.
2:11:38 PM
CHAIR MCKAY commented that the situation surrounding the
permanent fund is clearly understood in the House Resources
Standing Committee.
2:11:57 PM
MR. KEITHLEY clarified that a lower PFD would harm lower class
Alaska families.
2:14:06 PM
REPRESENTATIVE MCCABE claimed that Governor Walker cut the PFD
and opined that the CBR was traditionally used for subsidies and
tax incentives.
2:15:06 PM
MR. KEITHLEY resumed the presentation on slide 13, which touched
on the topic of royalty relief in Alaska's natural gas industry.
2:16:46 PM
CHAIR MCKAY commented that it would take the Cook Inlet Gas
Region six more years before it was ready to intake any imported
LNG.
2:17:02 PM
MR. KEITHLEY returned to slide 8 to emphasize the need for
royalty relief in certain regions of Alaska.
CHAIR MCKAY said that a decline in a gas well's production
creates a need for more subsidies as time goes on.
2:19:28 PM
REPRESENTATIVE MCCABE asked Mr. Keithly if he was aware of how
the words "shall" or "must" would affect the development of gas
in Alaska.
MR. KEITHLEY said he was unsure of the answer.
2:20:58 PM
REPRESENTATIVE MEARS added her understanding that a royalty rate
cannot be raised but could be reduced.
2:21:24 PM
CHAIR MCKAY affirmed Representative Mear's understanding of
royalty rate changes and said that he was unsure of whether or
not the commissioner of the Department of Natural Resources
(DNR) would be willing to do so.
2:22:14 PM
MR. KEITHLEY responded to Representative Mears' understanding
that any change in royalty rate would have to be targeted.
2:23:15 PM
CHAIR MCKAY highlighted specific changes in royalty rates around
Alaska as examples of the practice to which Representative Mears
was referring.
2:24:02 PM
REPRESENTATIVE SADDLER shared his philosophy on natural gas
development in Alaska.
MR. KEITHLEY replied that the need is to understand both the
beneficiary of a subsidy and the cost bearer of said subsidy.
2:25:42 PM
MR. KEITHLEY continued the presentation on slide 14, which gave
a summary of the previous slides, and he gave concluding remarks
regarding the supply, cost, and demand of natural gas in the
Cook Inlet Gas Region.
2:26:55 PM
CHAIR MCKAY and Representative Saddler both thanked Mr. Keithly
for his presentation.
2:28:41 PM
CHAIR MCKAY gave a few closing remarks regarding the regulation
and supply of natural gas in the Cook Inlet Gas Region and
delivered committee announcements.
2:30:25 PM
ADJOURNMENT
There being no further business before the committee, the House
Resources Standing Committee meeting was adjourned at 2:30 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| Presentation - Southcentral Gas Supply.pdf |
HRES 3/15/2024 1:00:00 PM |