Legislature(2013 - 2014)BELTZ 105 (TSBldg)
02/18/2014 01:30 PM LABOR & COMMERCE
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* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
SB 140-AIDEA: ARCTIC DEVELOPMENT PROGRAM/FUND 2:32:48 PM CO-CHAIR DUNLEAVY reconvened the meeting and announced the consideration of SB 140."An Act creating the Arctic infrastructure development program and fund in the Alaska Industrial Development and Export Authority." This was the first hearing. 2:33:04 PM SENATOR MCGUIRE, sponsor of SB 140, introduced the legislation speaking to the following sponsor statement: Globally, all eyes are on the Arctic. The World Economic Forum has recently identified Arctic Infrastructure development as one of the top Four (4) challenges facing the regions. Alaska's future is in the Arctic, and in order for Alaskans to capitalize on the incredible opportunities and overcome the significant challenges that this region presents, we must begin to build infrastructure now. Aside from a few areas in Norway and the Russian Federation the Arctic as a whole remains vastly underserved by transportation, ports, communication, emergency response, defense and other critical infrastructure. For further development to occur, which Alaskans deserve, both public and private interests must come together to boost the investment in the Arctic. For these reasons I have introduced Senate Bill 140, Arctic Infrastructure Development Fund ("AIDF"). SB 140 expands AIDEA's tool bag by extending the same authority for loans, loan guarantees, bonds and bond guarantees that it currently utilizes in the energy sector via the SETS fund (AS 44.88.650- 690) in order to develop Infrastructure in the Arctic. AIDEA used SETS to facilitate the financing of the Interior Energy Project. This tool helps to create the public- private partnerships that are needed to encourage large investment in capital intensive infrastructure. Senate Bill 140 extends AIDEA's existing power to finance, or facilitate the financing of projects to the realm of Arctic Infrastructure by granting the Authority the ability to: 1. Insure project obligations and guarantee loans or bonds for projects. 2. Defer principle payments and capitalize interest. 3. Offer financing terms of up to 30 years. 4. Enter into lease agreements, sales-lease-back agreements, build-operate-transfer agreements and other agreements to finance Arctic infrastructure projects. These powers already provide flexible terms that can reduce the ultimate cost of energy (via the SETS program) to consumers, and if it can work in the energy realm, it can work for infrastructure. However, SB 140 also requires legislative approval for investments that are more than one-third of a project's capital costs or if a loan guarantee exceeds $20 Million. By subjecting certain investments to legislative approval, SB 140 maintains an appropriate level of due diligence for projects. By making financing available we can empower communities and attract a global pool of investment that is an alternative to the traditional grant model that too often underfunds projects and leads to delays. Relying on credit also ensures that sponsors have some skin in the game and a stake in the project's success. Most importantly, we expand the arena of where Alaskan assets are working in order to grow our own economy. Currently, many of Alaska's savings accounts are invested in stocks and bonds that drive economic activity outside of Alaska. SB 140 suggests instead that some of those savings be invested here in Alaska through AIDEA, not as blank checks for development, but as investments for our future in Arctic Infrastructure. For the purposes of this Act, I propose that this program and fund focus infrastructure development in the geographical definition of the Arctic as laid out in Arctic Research and Policy Act (amended 1990). That definition includes the area of the State of Alaska north of the Arctic Circle, north and west of the boundary formed by the Porcupine, Yukon, and Kuskokwim Rivers, all contiguous seas, including the Arctic Ocean, and the Beaufort, Bering, and Chukchi Seas, and the Aleutian chain. With AIDF I am proposing that the State expand AIDEA's existing authority to finance, or facilitate the financing of, Arctic Infrastructure. 2:43:30 PM SENATOR STEDMAN agreed with the bill sponsor that Alaska has to get aggressive in developing infrastructure in the Arctic because the federal government is lagging. JESSE LOGAN, Staff, Senator Lesil McGuire, stated that after the bill was introduced the sponsor worked with AIDEA, the Arctic Policy Commission, and other stakeholders to identify ways to strengthen the bill and help the development of Arctic infrastructure. He noted the packets contain a sectional of the suggested changes. SENATOR STEDMAN asked if the process will be to introduce potential changes and return with a committee substitute. MR. LOGAN said yes. CHAIR DUNLEAVY asked Mr. Davis if he had anything to add. MARK DAVIS, Deputy Director, Alaska Industrial Development and Export Authority, (AIDEA), agreed with Mr. Logan that AIDEA is working with the sponsor's office on a possible committee substitute. 2:45:30 PM STEPHEN TRIMBLE, President, Trimble Strategies, LLC and public member of the Alaska Arctic Policy Commission, stated support for SB 140, which would create an Arctic infrastructure program and fund within AIDEA. He described the Arctic as the future of Alaska and emphasized the importance of investing in infrastructure now in order to have a meaningful place in this new global frontier. Industry has responded to the call for public investment and now is the time to further public/private investment within Alaska. Enabling AIDEA with the powers provided by SB 140 is an investment in the future of Alaska. 2:47:11 PM STEPHEN KLINE, Managing Principle, First Infrastructure Inc., a consulting firm based in New Jersey, said he is testifying as a professional in the financial field. He reported that he advises AIDEA on a number of matters, the regulations and procedures relating to the SETS fund in particular. He related that he is a strong proponent of guarantee structures to stretch relatively scarce public sector dollars for the benefit of what are deemed to be worthwhile projects. Utilizing such a structure in support of Arctic infrastructure projects would be a wise use of the state's scarce public resources, he said. 2:49:24 PM CHRIS HLADICK, Manager, City of Unalaska, Unalaska, Alaska, reported that he served on both the Northern Waters Task Force and the Arctic Policy Commission and is testifying in support of SB 140. He said that Unalaska is seeing explosive needs to accommodate the anticipated arrival of the oil companies. Infrastructure needs have been identified that will require public/private partnership and SB 140 provides another tool. He acknowledged that a lot of places need additional infrastructure, and pointed out that all the infrastructure development in places like Kotzebue, Nome or Port Clarence will have to pass through Unalaska/Dutch Harbor. CO-CHAIR DUNLEAVY commented that he was impressed when he visited Unalaska. SENATOR MICCICHE asked if the changes in Section 8 would include the ability for LNG storage and infrastructure needs. MR. HLADICK said he didn't know. SENATOR MICCICHE asked to hear from the sponsor after public testimony so she could answer the question. 2:52:10 PM RON LONG, Assistant City Manager, City of Seward, stated that if the state is to succeed in the development of the Arctic, whether it's in fisheries, resource development, tourism, or response and monitoring capacity for foreign flagged vessels transiting the Bering Straits, it is critical to have a deep water port or ports to support the effort. SB 140 helps advance those goals. AIDEA's track record with Red Dog transportation infrastructure and Alaska Ship and Dry Dock speaks well of their ability to help move these projects forward. He expressed hope that as the bill moves forward it would be amended to include provisions that will build on existing capacity within the state to support the staging and logistics necessary to make a number of port developments successful. He noted that when he attended an Institute of the North presentation in Seattle on Arctic opportunities and challenges, a representative from a Washington state port declared that Bellingham would be the gateway to the Arctic. He warned that just as other nations are moving into the Arctic with active plans and resource commitments while the U.S. is trying to form an action plan, other states are looking for opportunities that should remain in Alaska. SENATOR MICCICHE expressed appreciation for the recent tour of Seward's breakwater expansion. He observed that there are communities that are ready to support the Arctic, although all need a bit of infrastructure boost to ensure the safety of the services. 2:55:33 PM CHAIR DUNLEAVY asked Senator Micciche to restate his question for the sponsor. SENATOR MICCICHE expressed interest in helping with an amendment to ensure that the bill will consider energy infrastructure and projects in western and northwest Alaska. SENATOR MCGUIRE said that has already been addressed both in SB 140 and the changes to SETS in SB 99. She described where these changes are found. Section 11, paragraphs (18) and (19) of SB 140 change the way "Arctic" and "Arctic infrastructure development" is defined so that all of Alaska can benefit from the new fund. On page 3, lines 1-4, of SB 99 it states that liquefaction, regasification storage, and natural gas are included in the definition of "qualified energy development." 2:59:14 PM CO-CHAIR DUNLEAVY announced he would hold SB 140 in committee for further consideration. Public testimony would be opened at the next hearing.