Legislature(2013 - 2014)SENATE FINANCE 532
04/08/2013 02:30 PM Senate FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB4 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 4 | TELECONFERENCED | |
| + | TELECONFERENCED |
CS FOR SPONSOR SUBSTITUTE FOR HOUSE BILL NO. 4(FIN)
"An Act relating to the Alaska Gasline Development
Corporation; establishing the Alaska Gasline
Development Corporation as an independent public
corporation of the state; establishing and relating to
the in-state natural gas pipeline fund; making certain
information provided to or by the Alaska Gasline
Development Corporation and its subsidiaries exempt
from inspection as a public record; relating to the
Joint In-State Gasline Development Team; relating to
the Alaska Housing Finance Corporation; relating to
judicial review of a right-of-way lease or an action
or decision related to the development or construction
of an oil or gas pipeline on state land; relating to
the lease of a right-of-way for a gas pipeline
transportation corridor, including a corridor for a
natural gas pipeline that is a contract carrier;
relating to the cost of natural resources, permits,
and leases provided to the Alaska Gasline Development
Corporation; relating to procurement by the Alaska
Gasline Development Corporation; relating to the
review by the Regulatory Commission of Alaska of
natural gas transportation contracts; relating to the
regulation by the Regulatory Commission of Alaska of
an in-state natural gas pipeline project developed by
the Alaska Gasline Development Corporation; relating
to the regulation by the Regulatory Commission of
Alaska of an in-state natural gas pipeline that
provides transportation by contract carriage;
repealing the statutes relating to the Alaska Natural
Gas Development Authority and making conforming
changes; exempting property of a project developed by
the Alaska Gasline Development Corporation from
property taxes before the commencement of commercial
operations; and providing for an effective date."
2:43:39 PM
Co-Chair Meyer requested that testimony be limited to two
minutes per testifier.
2:44:31 PM
HAROLD HEINZE, SELF, ANCHORAGE (via teleconference),
expressed support for HB 4. He discussed his work and
background with oil and gas issues. He testified that the
in-state gas issue was filled with levels of complexity and
that the decisions made surrounding the issue should be
based on business principals, rather than political
principals. He believed that that AGDC was operating with
incomplete legislative authority. He noted that the current
board of directors lacked any expertise or appreciation for
the issues involved in an in-state pipeline. He thought
that the greatest strength of HB 4 was that it would create
a public corporation in the state with the proper framework
to take on all of the different roles that were necessary
and provided a business-like, board of director's structure
to make important decisions.
2:49:23 PM
Senator Hoffman asked if the testifier could recommend
changes that would strengthen the bill to ensure that the
gas was delivered to all Alaskans. He noted Page 13 of the
legislation. He believed the language was excellent but did
not clearly state how delivering gas to rural areas would
be accomplished.
Mr. Heinze responded that the best way that the bill would
be meaningful to all Alaskans was to have a board of
directors that was committed to delivering gas to the
entire state. He stressed that working relationships would
have to be struck with the producers and several entities
throughout the state. He said that he read nothing in the
legislation that prohibited the board from working toward
getting gas to rural Alaska. He believed that the bill
embodied the spirit of success.
2:53:21 PM
CLAY WALKER, MAYOR, DENALI BOROUGH, DENALI BOROUGH (via
teleconference), spoke in support of HB 4. He shared that
during a March 2013 meeting the Denali Borough moved to
comment positively on passage of HB 4 and was considering a
supporting resolution. He opined the high cost of energy in
the Denali Borough and related that affordable, clean and
reliable energy should be brought to the region.
2:54:46 PM
MERRICK PIERCE, SELF, HARDING LAKE (via teleconference),
testified against HB 4. He reminded the committee that when
AGIA was passed, little attention had been paid to what was
happening with shale gas in the Lower 48. He thought that
if the legislature had understood the significance of the
shale oil, Alaskans would not have wasted several million
dollars and half a decade studying a fruitless project. He
felt that the parallel between the wasted effort under AGIA
and HB4 was striking. He believed that the Senate Resources
Committee had not done a thorough job vetting the bill and
that it opened the state to liability. He said that HB 4
opened the state up to treble damages under AS 43.90.440.
He stated that the cost of gas from the bulletline ensured
no export market, the only potential market left would be
an in-state market, but the finance charges for the project
were not supportable by Rail belt consumers. He furthered
that HB 4 funded a project that had the wrong route; HB 4
would not provide gas to Eielson Air Force Base or national
missile defense at Fort Greely, it ignored research that
had found that gas needed to be available along the
Richardson Highway where there was the greatest potential
mineral resource. He said that HB 4 overturned the border
initiative from 2002 that created Alaska Natural Gas
Development Authority (ANGDA) and that passing the bill
would send the message that 138,000 Alaskans were wrong. He
added that HB 4 ignored the AML resolution 20-12-01 that
supported that Alaska gasline and rejected the bulletline.
He concluded that the best choice would be to reject the
bill and fully funding short-term solutions like a small
pipeline from Big Lake to Fairbanks or LNG trucking.
2:58:09 PM
TERRY HINMAN, SELF, DENALI BOROUGH (via teleconference),
spoke in support of HB 4. He believed that waiting for the
large petroleum producers to decide on moving LNG to
market, while Alaskans suffered high energy costs, was not
an affordable option. He stated that HB 4 was the only plan
that was well conceived. He pointed out that an Alaska
stand-alone pipeline was the only plan that focused on
supplying energy to the residents of the state. He believed
that the resources of the state should meet the needs of
Alaska's residents before being exported to foreign
markets. He opined that the increased cost of doing
business in-state was being passed on to consumers. He
believed that the Alaska stand-alone pipeline could provide
the energy needs for the entire state for the next 100
years.
3:01:23 PM
DEANTHA CROCKETT, EXECUTIVE DIRECTOR, ALASKA MINERS
ASSOCIATION, ANCHORAGE (via teleconference), testified in
support of HB 4. She related that the mining industry was
struggling with energy issues at a substantial level. She
stated that it was difficult to explain to potential
partners why it was so costly to operate a mine in Alaska.
She stressed that companies looking to invest in-state look
at the cost of energy when reflecting on their cost/benefit
analysis. She shared that the industry used 100's of
megawatts to operate their mines, and that some of the
projects on the horizon had examined ways to bring natural
gas to where they are located. She believed that HB 4 would
benefit the mining industry as well as the state.
3:03:48 PM
BILL SHEFFIELD, FORMER GOVERNOR OF ALASKA, ANCHORAGE (via
teleconference), spoke in support of HB 4. He expressed
concern with future wellbeing of Alaskans and related that
the bill's passage was a big step towards delivering a
long-term, affordable source of energy to a large part of
Alaska's population. He thought the bill would lead to jobs
during construction and ongoing jobs in production and
delivery afterwards. He noted that the bill allowed the
possibility of the Ingram Plant on the Kenai Peninsula to
reopen providing 325 jobs. He offered that it could also
help the Foothills Refinery. He detailed the myriad of ways
the legislation would benefit the state. He noted that the
project was beyond conceptual and had completed the
environmental impact statement (EIS), Right-of-Way-
approvals for the entire line and engineers were working
relentlessly on the project. He believed that the gas
should be used by Alaskans separate from the oil revenues
that the state has depended on to provide services to the
public and the state's operating and capital budgets. He
stressed that Alaska was given the right to be a state
because of the resources available to insure independence.
He expressed appreciation to the committee for the work
done on the legislation.
3:08:29 PM
Co-Chair Meyer noted that Speaker Chenault was present in
the audience.
3:08:43 PM
CINDY ROBERTS, SELF, ANCHORAGE (via teleconference),
testified in opposition to HB 4. She stated that it was
important to get gas to present and future Alaskans. She
related that the line would not be an adequate size to
deliver cheaper gas to Alaskans. She stated that economics
of the proposed pipeline were compromised by the legal
limits imposed by AGIA. She asserted that the fiscally
conservative legislature was losing sight of the $5 million
already committed to AGIA. She stated that more than $300
million of the inducements had been invested by the state.
She opined that the results of the inducements had not been
reported to the public or the legislature. She related that
there were 2 open seasons for AGIA that had not been
disclosed. She said that the September 2012 open season
yielded approximately 200 percent interest by willing
purchasers and wondered why a third open season, on a
smaller line, would be a wise investment. She urged the
committee to read the 2011 Alaska Gas Port Authority
Report.
3:12:16 PM
RICK ROGERS, EXECUTIVE DIRECTOR, RESOURCE DEVELOPMENT
COUNCIL (RDC), ANCHORAGE (via teleconference), testified
that RDC supported HB 4. He further encouraged the
modification of the AGDC governing statutes. He shared that
RDC had examined the bill in the effort to make sure that
it did not promote one resource over another. He stated
that under HB 4 the open season would secure firm economic
commitments and would succeed or fail on its economic
merits. He believed HB 4 provided an appropriate balance by
providing public sector support in the early stages that
were sufficient to bring the project to an open season
where the economics would determine the projects fate. He
said that he remained hopeful that a larger diameter
pipeline to tidewater would be sanctioned making the
development of the stand-alone gas project as envisioned
unnecessary. He stressed that the RDC did not view HB 4,
and the stand-alone gas project as a threat to a larger
gasline; it was viewed as an alternative means of
delivering gas to Alaskans should a larger project not be
sanctioned. He said that should a larger line mover forward
HB 4 would be in a position of authority to help expand
inter-state gas transportation. He felt that the viability
of the project would be unknown until an open season was
held.
3:16:21 PM
BERT COTTLE, SELF, MAT-SU (via teleconference), spoke
against HB 4 in its current form. He related that the
current Trans-Alaska Pipeline System (TAPS) oil line should
be used as a model of a successful large volume line that
went to tidewater. He said that small in-state lines have
been discussed before with the conclusion that they do not
make economic sense. He furthered that a large volume line
must go to tidewater. He expressed concern for the improper
use of waste energy and that the project could harangue
future generations with debt.
3:18:50 PM
MANNY ESCOBIDO, SELF, MAT-SU (via teleconference),
testified in strong opposition to HB 4. He argued that the
process of writing the bill had been rushed. He stated that
in 2002 the state voted for a gasline to Valdez that had
yet to come to fruition. He believed that the project would
cost the state money with no economic return. He argued
that it would be more economically sound to build the line
on the existing corridor.
3:21:31 PM
JIM PLAQUET, SELF, FAIRBANKS (via teleconference),
testified in support of HB 4. He related that SB 23 would
be a short-term energy solution for Fairbanks, but that HB
4 would be the long-term affordable energy solution. He
stated that HB 4 would provide gas to Alaskans at the
lowest cost and without delay.
KARL GOHLKE, FRONTIER SUPPLY COMPANY, FAIRBANKS (via
teleconference), testified in support of HB 4. He opined
that the instate gas issue had been discussed over the last
60 years, without result. He stated that as a result of
losing Elmendorf Air Force Base, the population of North
Pole was dwindling. He stated that the state had committed
$500 million to Trans-Canada for its gas project and that
nothing had come of it. He hoped that the project would not
lose momentum.
3:25:51 PM
DAVE COBB, MAYOR, CITY OF VALDEZ, VALDEZ (via
teleconference), expressed the City of Valdez's strong
opposition to HB 4. He opined the short notice given to the
public regarding the opportunity to testify on the
legislation. He relayed that there were a number of people
in his community that had not been able to testify on HB 4
during the hearing in Senate Resources, and he requested
that the committee consider all the public testimony
offered from that meeting. He relayed that the city had
worked to provide the public with information on what they
believed to be a bad bill. He asserted that a gasline
project should serve to provide the most benefit to all
Alaskans, which HB 4 did not. He stated that the small
volume pipe proposed in HB 4 would raise the cost of energy
in South-Central Alaska and would do nothing to address
energy costs in rural Alaska.
3:28:38 PM
JOHN HOZEY, CITY MANAGER, CITY OF VALDEZ, VALDEZ (via
teleconference), spoke the City of Valdez's strong
opposition to HB 4. He stated that the bill had technical
flaws that would prove dangerous to the state. He
understood that people in support of HB 4, who preferred a
large volume gasline project, were working under one of the
following three assumptions: that both lines were
reasonably possible so the state should get going on this
one first, they they have given up hope that a large line
would ever happen and would chose an inadequate project
over nothing at all, they believe that the small line could
eventually morph into a large volume project that would
include all of the necessary components currently lacking
in the AGDC plan. He shared that he had personally met with
representatives from two of the three major North Slope
producers who had agreed that only one gasline would be
built in the next 20 years. He asserted that over the past
several years a great deal of work had been done, and
$100's of millions of dollars had been spent, to advance a
large volume gasline project through AGIA. He asserted that
in an open season held in fall of 2012 letters of interest
were received to purchase twice the amount of gas necessary
to make a commercially viable. He stated that in February
of 2013, all three of the major North Slope producers sent
a letter to Governor Parnell stating that they had reached
alignment on a large volume project. He believed that the
stars were aligned for the right gasline to move forward.
He noted that there were no provisions in the bill that
would ensure an objective review of all project concepts
and consequences before any new money was spent further
developing the proposed line. He suggested that any
testimony given that in any way referenced the value of, or
desire for, a large volume gasline to tidewater should be
considered testimony in opposition to HB 4. He urged the
committee to refer to the technical points in the Walker-
Richardson presentation.
Co-Chair Meyer noted that Mr. Walker would be given an
extended amount of time to testify before the committee at a
later date.
3:33:58 PM
LISA VONBARGEN, SELF, VALDEZ (via teleconference),
testified against HB 4. She argued that the passage of SB
21 would result in an estimated reduction in annual revenue
to the state of between $350 million and $1 billion. She
said that the declining throughput had resulted in a drop
in oil revenues from $6 billion to $4 billion per year. She
believed that it would take a significant increase in
throughput to bridge that gap. She explained that based on
oil production activities in the U.S. it was unrealistic to
believe that, despite the financial hit to the state, a
revision to Alaska's Clear and Equitable Share (ACES) would
bolster exploration and production and lead to increased
throughput that would make up the revenue shortfall. She
asserted that Alaska needed to be abreast of occurrences in
the Bakken oil fields. She explained that oil from the
Bakken was being shipped via rail in exponentially
increasing quantities to West Coast refineries. She
informed the committee that Bakken crude was sweeter than
ANS crude, easier and cheaper to refine, and cheaper to
transport. She concluded that the state of Alaska needed a
new revenue source and that a large volume line to
tidewater with an export component was the only answer.
3:36:59 PM
MIKE WELLS, SELF, VALDEZ (via teleconference), testified
against HB 4. He believed that the project as proposed
under HB 4 was the wrong plan for Alaska. He stated that a
small diameter line would not have the economy of scale to
provide energy as feasibly as a large volume pipeline to
tidewater. He stressed Alaska needed the jobs and industry
that would be the result of gas liquids development. He
shared that HB 4 protected the AGDC from judicial review
and the public oversight critical for protecting consumers.
He stated that the prospect of building two pipeline
projects was remote and that the state should focus on the
best project.
3:38:57 PM
MIKE WILLIAMS, SELF, VALDEZ (via teleconference), spoke
against HB 4. He reiterated the testimony that Alaska
should build a larger line in order to increase revenue. He
stated that adding propane as an export component would
require an increased size of the line. He believed that a
small line would not be able to get cheap gas to the
Interior of Alaska. He agreed that instate gas was
important but that HB 4 was not the right solution. He
asserted that cheap gas would never make it to coastal
communities using a small line. He opined that the project
would be exempt from the Open Meetings Act, RCA oversight;
ADGC would make their own rates and the board would be able
to dispose of assets with only 4 votes.
3:43:13 PM
LYNN CRYSTAL, SELF, VALDEZ (via teleconference), expressed
his opposition to HB 4. He thought that Alaska was a small
market and that large amounts of customers would be needed
to pay for the project offered in HB 4. He expressed
concern as to how the bulletline would be financed. He
offered that the Rail belt already received the lowest
energy costs in Alaska. He spoke of existing gas in Cook
Inlet and wondered whether developing the small line was a
waste of time and money.
3:45:49 PM
SHERI PEIRCE, SELF, VALDEZ (via teleconference), testified
against HB 4. She cited Article 4, section 42.08.400 of the
legislation, which spoke to public records and
investigations. She read from the bill:
(b) The commission may by regulation classify records
received from an in-state natural gas pipeline carrier
or in-state natural gas pipeline as privileged records
that are not open to the public for inspection.
(c) A record filed with the commission that is a
precedent agreement between an in-state natural gas
pipeline carrier and an unregulated entity is a
privileged record that is not open to the public for
inspection. For a record that relates to a precedent
agreement, or is or relates to a contract other than a
precedent agreement between an in-state natural gas
pipeline carrier and an unregulated entity, if an in-
state natural gas pipeline carrier identifies the
provisions of the record that contain information
that, if disclosed, could adversely affect the
competitive position of the shipper or could cause
commercial or competitive harm or damage if disclosed
and the commission agrees, the information shall be
treated by the commission as confidential.
(d) A person may make written objection to the public
disclosure of information contained in a record filed
under this chapter or of information obtained by the
commission or by the attorney general under this
chapter, stating the grounds for the objection. When
an objection is made, the commission shall order the
information withheld from public disclosure if the
information adversely affects the interest of the
person making written objection and disclosure is not
required in the interest of the public.
She expressed concern that the language in the bill served
to severely restrict the disclosure of records and
information regarding the project, and could serve to
prevent the disclosure of any personal financial interest
in the project by a legislator, state commissioner, state
employee or a member of the proposed regulatory commission.
3:49:19 PM
DAVE DENGEL, SELF, VALDEZ (via teleconference), spoke
against HB 4. He stated that the bill was a dangerous
diversion to draw attention and resources away from a
gasline that would truly serve all Alaskans. He warned that
HB 4 would not generate the revenue to finance the
construction of the bulletline, nor would it contribute to
future state general fund program requirements.
3:51:00 PM
JEREMY O'NEIL, SELF, VALDEZ (via teleconference), expressed
opposition to HB 4. He expressed concern that the bill
would not benefit all Alaskans. He stated that a low volume
pipeline was not the best choice for all Alaskans and
opined that it left nearly half the state still wanting for
energy solutions. He believed that a constitutional
argument could be made against the language "maximum
benefit of all the people."
3:54:45 PM
JIM SYKES, SELF, PALMER (via teleconference), testified
against HB 4. He discussed his work history on the issue
and stated that the low volume pipeline would not work. He
argued that the legislation would exempt the AGDC from
public records laws and the RCA, effectively removing the
checks and balances that the public, the governor and the
legislature have come to expect for a publicly funded
project. He stressed that HB 4 was not the pipeline answer
for Alaska.
3:57:47 PM
JERRY CLEWORTH, MAYOR, CITY OF FAIRBANKS, Fairbanks (via
teleconference), testified to the Fairbanks City Council's
support of HB 4. He thought that it would be unfortunate to
stop the progress of a gasline project, especially
considering the leg-work that had already been done. He
noted the resolutions from Kenai in support of the
legislation.
3:59:54 PM
LUKE HOPKINS, MAYOR, FAIRBANKS NORTH STAR BOROUGH,
FAIRBANKS (via teleconference), expressed concern with HB
4, but believed that an in-state gas-pipeline needed to be
built.
4:02:24 PM
AT EASE
4:03:05 PM
RECONVENED
Co-Chair Meyer CLOSED public testimony.
4:03:44 PM
BARBARA HUFF TUCKNESS, DIRECTOR OF GOVERNMENTAL AND
LEGISLATIVE AFFAIRS, TEAMSTERS LOCAL 959, expressed the
Teamsters Local 959's support of HB 4. She encouraged the
movement of the bill out of committee.
Co-Chair Meyer discussed housekeeping and future invited
testimony.
4:06:38 PM
Vice-Chair Fairclough requested that Rena Delbridge speak
to the bill.
4:07:00 PM
Vice-Chair Fairclough referred to the recent public
testimony given by Sheri Peirce, and hoped that Ms.
Delbridge could provide insight to the article that Ms.
Peirce had spoken to.
RENA DELBRIDGE, STAFF, REPRESENTATIVE MIKE HAWKER, replied
that the Ms. Peirce had referred to Page 51 of the bill,
the RCA section. She stated that the section had the effect
of declaring that records filed before the RCA were public
records. She added that the exception was the Precedent
Agreements, which were filed under seal as they would be
contractual negotiations that were underway until
conditions were solidified, at which time the precedents
would evolve into firm Transportation Agreements that would
automatically become public. She explained that there was a
provision that allowed the redaction of commercially
sensitive information, but that the RCA had to agree that
the information was commercially sensitive and should be
redacted.
4:09:20 PM
Vice-Chair Fairclough noted that there was testimony that
the bill reflected a lack of RCA oversight. She understood
that the latest version of the bill provided 3 months for
the RCA to review the recourse tariff rates.
Ms. Delbridge responded that the bill included multiple
levels of RCA scrutiny of different phases of a carrier's
application as it progressed through commercial contracts.
She listed a variety of reviews that the sponsors believed
to be a strong regulatory framework. She offered that the
framework did differ from the kind of regulatory framework
that was generally used for public utilities.
4:10:22 PM
Vice-Chair Fairclough noted a reference in testimony
suggesting an elimination clause in the bill, should the
state prove unsuccessful in moving forward. She mentioned
the 2004 Port Authority Report. She noted that people still
continue to believe that a large diameter pipe was viable,
including in an export market. She wondered about the
request of interest.
Ms. Delbridge responded that AGDC's project as proposed
could include an export component, but that it was not
required and would be up to the buyers and sellers that
wanted to have it shipped. She said that the contract
negotiations with other markets would be up to the buyers
and sellers.
4:12:44 PM
Vice-Chair Fairclough wanted to export, but commented that
the price of gas and oil were different in terms of the
return to Alaska. She said that with the AGIA umbrella it
would be impossible for the return numbers to be high.
Ms. Delbridge believed that some of estimates on the value
to the treasury of export pipeline gas were based on ACES.
She said that the assumption under ACES had always been
that that state would need to reset a gas tax should there
be any development.
4:14:14 PM
Senator Hoffman requested that because the bill would be a
long-serving document, a commitment should be given from
the board that they would continue to work to get gas to
all Alaskans, and that language to that affect should be
written into the legislation.
Ms. Delbridge responded that she would discuss the
additional language with the sponsor.
4:15:15 PM
Senator Meyer requested further discussion on RCA
oversight.
Ms. Delbridge believed that the RCA would need to be
officially invited for testimony.
4:16:49 PM
Co-Chair Meyer related the need to discuss the fiscal notes
at a future date.
Ms. Delbridge replied that both she and other support staff
could walk the committee through the fiscal notes.
Co-Chair Meyer requested any possible amendments be
presented to him for discussion before the next hearing of
the bill
4:18:04 PM
HB 4 was HEARD and HELD in committee for further
consideration.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 4 Support Letter Packet 1.pdf |
SFIN 4/8/2013 2:30:00 PM |
HB 4 |
| HB4 Opposition Letter Packet 1.pdf |
SFIN 4/8/2013 2:30:00 PM |
HB 4 |
| HB 4 Opposition Letter Wenger.msg |
SFIN 4/8/2013 2:30:00 PM |
HB 4 |
| HB 4 Support Letter Packet 2.pdf |
SFIN 4/8/2013 2:30:00 PM |
HB 4 |