Legislature(2009 - 2010)BELTZ 211
02/27/2009 11:00 AM ENERGY
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|HCR2|| HCR3|| HCR4|| HCR5|
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
11:26:03 AM HCR 2-IN-STATE GAS PIPELINE HCR 3-IN-STATE GAS PIPELINE HCR 4-IN-STATE GAS PIPELINE HCR 5-IN-STATE GAS PIPELINE CHAIR MCGUIRE announced the consideration of four House Concurrent Resolutions: HCR 2(RES) am, HCR 3 am, HCR 4 am, and HCR 5 am. MARGARET DOWLING, Staff to Representative Jay Ramras, Alaska State Legislature, said the resolutions remind Representative Ramras of how one eats an elephant: one bite at a time. Each resolution attempts to help get a bullet line with affordable natural gas to hungry Alaskan markets one bite at a time. HCR 2 encourages the administration to promote a bullet line; to identify entities in Gubik or elsewhere on the North Slope that may have sufficient quantities of natural gas to support the line; and to negotiate a commitment with that entity for natural gas production on commercially reasonable terms that would support the economic viability of a gasline. HCR 3 addresses the demand end of the gasline equation by encouraging the administration to expedite the reopening of the Agrium plant in Kenai. The plant closed in 2007 because it lacked an adequate supply of gas. It employed up to 250 people and manufactured fertilizer and ammonia for local use and for export. So HCR 3 also supports the farms of Alaska, which cover over 25,000 acres in five boroughs. There are more than 300 farmers in the Mat-Su borough and 130 in Fairbanks. Since the Agrium plant closed, farmers have experienced a 400 percent increase in the cost of fertilizer, and farming jobs may decline by 150 positions. 11:29:08 AM MS. DOWLING said HCR 4 asks the governor to advocate for an increase in the amount of gas that may be exported under U.S. Department of Energy licenses to 60 bcf per year. Current licenses are set to expire in 2011, and the Kenai LNG export facility could be forced to close unless additional supplies of gas are found in the Cook Inlet. HCR 5 gives the administration a timeline for these projects. It basically tells it to lend a hand, use the resources it has, and then get out of the way. It requests that the governor facilitate the process for a private entity to make a final commitment before November 1, 2010. In summary, these resolutions urge the administration to take the lead for instate gas. Alaskans need a cheap, clean, and reliable source of fuel, and a bullet line will do that. The governor has the resources to make that happen, and these resolutions will just encourage her to do so. 11:31:02 AM SENATOR WIELECHOWSKI said HCR 2 talks about 180 billion cubic feet per year, and he asked what that is per day. There is a provision in AGIA that "we" can't go over 500 mcf per day. MS. DOWLING said nothing in these resolutions will conflict with AGIA. The intent is that any pipeline would fit within the limitations of AGIA. 11:31:50 AM SENATOR WIELECHOWSKI said page 2, lines 13-18, of HCR 2 talks about exporting natural gas overseas. If there are 60 bcf for the Railbelt and 60 bcf for industrial use, will it be sufficient to supply gas for Alaskans? He doesn't want to support shipping gas overseas if Alaskans aren't taken care of. MS. DOWLING said Representative Ramras knows about that concern. These resolutions don't have the force of law. It is a way to encourage consistent demand so the pipeline can be viable. There will be many opportunities to weigh in on these licenses. An amendment to HCR 2 puts Alaskans first. 11:33:07 AM SENATOR WIELECHOWSKI said the issue of the time availability for Gubik gas came up in a Senate Resources hearing several weeks ago. Enstar said it needs gas by 2015, and Gubik won't be on line until 2016, at the earliest. The big gasline will be available in 2018. Everyone wants to get gas as quickly as possible to Alaska consumers, but what about this disconnect? MS. DOWLING said there is an expectation of other sources of natural gas, and all should be explored. The resolution mentions Gubik and the North Slope, but it isn't meant to be exclusive. CHAIR MCGUIRE said page 2 of HCR 2 refers to promoting the development of the Gubik area and other North Slope areas. MS. DOWLING said it is not exclusive to any one producer or entity. It is to be as broad as possible in finding gas. 11:34:56 AM CHAIR MCGUIRE said Senator Wielechowski has a good point. It was disappointing to hear of those dates in a prior committee. Natural resource exploration timeframes can move, but it may happen sooner. These are good resolutions. SENATOR STEDMAN said HCR 2 is "the 500 a day." "Close enough." CHAIR MCGUIRE said she has to be mindful of that 500 million mcf limit in AGIA, but a lot of things can happen. We don't know that a pipeline will come to fruition under AGIA. "I would hope that we continue to be innovative in getting natural gas to Alaskans, and it may well be that we find a project that is larger than that for the pure economics of it." 11:36:43 AM SENATOR WIELECHOWSKI noted that HCR 5 talks about government getting out of the way. That may be the best course of action, but what role will ANGDA have as a governmental organization that is working on the exact same thing? MS. DOWLING said she will ask Representative Ramras. 11:37:42 AM LISA PARKER, Manager, Government Relations, Agrium, Kenai, said the resolutions are important for providing economic stability to Alaska and to get gas to consumers -- residential and industrial. After 40 years of operation, Agrium shut down its facility in 2007 due to a lack of natural gas supply in Cook Inlet. Agrium put over $350 million per year into the Alaska economy at its peak. Agrium supports a bullet line and has had discussions with state agencies about it. If the line is constructed in the next 5 to 7 years, Agrium could put a $1 billion industrial facility back into operation on the Kenai Peninsula. It would provide a stable tax base and jobs. It would help the agricultural industry and the Department of Transportation and Public Facilities for airports that use urea. 11:39:52 AM SENATOR WIELECHOWSKI thanked her for her advocacy. Everyone wants to get Agrium back. What price per mcf makes it feasible for Agrium to reopen? MS. PARKER said she will provide that. SENATOR WIELECHOWSKI said in the past Agrium was paying $3 per mcf and that was stretching Agrium's finances. The costs that he has heard are Henry hub, which can fluctuate from $4 to $12 per mcf. Is the bullet line the best way to get the cheapest gas for Southcentral and at a price that Agrium can do business? MS. PARKER said Agrium was paying "Henry hub plus" in the latter years of operation. The devil will be in the details of the bullet line and what the price will be. 11:41:46 AM CHAIR MCGUIRE said it was hard for the lawmakers who really tried to keep Agrium open. Her heart goes out to the 250 employees. It is a loss. CURTIS THAYER, Director, Government Relations and Public Affairs, Enstar, said he supports all four resolutions. They provide a foundation for the project to move forward. The industrial anchor in HCR 3 or the LNG plant in HCR 4 cannot be overemphasized for providing a reasonable tariff for the consumers along the Railbelt. Enstar thanks Representative Ramras and other. About 18 months ago ACES set a tax rate that helped spur development in Gubik, the Nenana Basin, and the Yukon Flats. This will be a long process but he hopes to be successful in the next five to seven years. 11:43:38 AM TOM LAKOSH, Anchorage, asked the committee to recall SB 31 because his testimony was blocked by the moderator. He was denied his constitutional right to petition his government. He would also like to voice concerns about the bullet line as a $4 billion boondoggle for the following reasons. Gas producers will not commit to long-term gas for the bullet line because the tariffs will be too high. They will be able to make more money on the main gasline that will follow in a year or two. More than half of the gasline will become obsolete a year or two after construction because the mainline will deliver it more cheaply. The overly optimistic projections of the bullet line tariffs depend on an explosion of use in Southcentral. The proposed carbon tax, energy conservation measures, and renewable power projects will greatly reduce gas use. The cost per unit of gas will triple. The increased costs will cause lower gas use, further increasing the per unit cost. He made the same argument to the Bonneville Power Administration when it was building the whoops power plants [Washington Public Power Supply System] that were shut down because the cost of electricity became too expensive and the plants were no longer needed. MR. LAKOSH said any near-term shortage of gas in Southcentral can be quickly remedied by the cancelation of the export license for Cook Inlet gas that will lower gas rates, and if we still need additional gas in the long-term, we could then build a shorter spur off of the main line in Fairbanks for less than $2 billion. The excuse that production must be maintained to prevent degradation of the production is a flimsy excuse for maintaining export where the Agrium plant can provide for interruptible consumption of gas to maintain production rates. The specific production needs of each field would be required to definitively ascertain if degradation would occur from slower gas production rates. In those fields where degradation would not occur from slower production, gas can be stored for exceptional winter needs. Some exhausted gas fields on the Kenai are being proposed for this very purpose. On-land storage in tanks in compressed or liquid form is also being proposed to serve high-use periods, and production can be maintained from degrading gas fields by supplying those storage facilities. If it is determined that continuous production from gas fields must be maintained for gas conservation, the production of fertilizer and employment at the Agrium plant is of substantially greater value to Alaskans and should be deemed a more beneficial use of Alaska natural gas. It is a clear constitutional justification for cancelation of the export license. 11:47:25 AM CHAIR MCGUIRE asked for his testimony in writing. She said he can testify on SB 31 in the Senate Resources Committee. MR. LAKOSH said cancellation of the export license for the LNG plant in Nikiski will force the oil companies to look for more gas in Cook Inlet and the spur line won't be needed at all when new gas fields are developed. For the price of the pipeline, one gigawatt of renewable energy could be built at $3,000 per kilowatt and still have $1 billion left over for transmission of those alternative energy sources. He urged the committee not to spur the state to spend a thin dime on this boondoggle. 11:49:13 AM CHAIR MCGUIRE said when she was in the resources committee a few years ago, she offered an instate tax credit for the Nenana Basin, and there was discussion on whether it would incentivize natural gas exploration. It is good to hear Enstar personnel talk about it. She hopes to see more development. She hopes SB 31 will offer such benefits. Tax incentives really do help. SENATOR WIELECHOWSKI moved to report HCR 2 from committee with individual recommendations and attached fiscal note(s). There being no objection, HCR 2(RES) am moved from committee. SENATOR WIELECHOWSKI moved to report HCR 3 from committee with individual recommendations and attached fiscal note(s). There being no objection, HCR 3 am moved from committee. SENATOR WIELECHOWSKI moved to report HCR 4 from committee with individual recommendations and attached fiscal note(s). There being no objection, HCR 4 am moved from committee. SENATOR WIELECHOWSKI moved to report HCR 5 from committee with individual recommendations and attached fiscal note(s). There being no objection, HCR 5 am moved from committee.