Legislature(2009 - 2010)BUTROVICH 205
03/22/2010 03:30 PM Senate RESOURCES
| Audio | Topic |
|---|---|
| Start | |
| SB228 | |
| SB287 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 287 | TELECONFERENCED | |
| += | SB 294 | TELECONFERENCED | |
| *+ | SR 10 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| = | SB 228 | ||
SB 287-IN-STATE GAS PIPELINE
4:16:28 PM
CO-CHAIR MCGUIRE announced SB 287 to be up for consideration.
MIKE PAWLOWSKI, aide to Senator McGuire, sponsor of SB 287, said
that the committee substitute (CS) 26-LS1467\E was before them.
He explained there were some minor changes to bill and some
fairly substantive ones, as well. The first change was to
section 1 - the purpose and findings section. Changes were made
to the language in some cases to dial back some of the findings
to more reasonable levels and some were taken out to address how
the bill and process envisioned in the bill would move forward
with the changed effective date. In particular, he said he was
referring to the transfer language from the administration to
the ARRC. The original bill had a transfer of authority. With
the movement to an effective date of July 1, the bill is now
more of an authorization rather than a transfer. It acknowledges
that the work under the administration is continuing and will be
transferred to the ARRC as it becomes authorized to conduct and
move an instate gas pipeline forward.
4:18:35 PM
The changes in section 2 (page3, lines 19-20) were added to
recognize that there may be other sources of gas. On page 4,
line 1, the compatible but not competitive projects language
added the AGIA project in AS 43.90. In section 4 the primary
change was on page 4, lines 4-5, where (b)(1) establishes a
subsidiary corporation for the ARRC. Also in section 4, lines 6-
7, the word "acquisition" was used twice and this was a clerical
cleanup that "authorization" seemed to be the more appropriate
word.
The final substantive change was to page 4, lines 20-31, and
page 5, lines 1-13 in the previous version where language
covered the right-of-way issue. They worked with the Department
of Law (DOL) on new language that is on page 4, lines 21 - page
5, line 6, that changes the way the right-of-way gets granted.
Originally the land, itself, was transferred to the ARRC; the
concept is the actual land transfer was unnecessary and created
some cumbersome management issues in the event the project
wasn't built. Sticking with a more traditional right-of-way
transfer made more sense for the project.
MR. PAWLOWSKI said section 5 had relatively minor changes up to
the final ones on page 6, lines 16-17. SB 287 envisions a
process for cancelling the project and it seemed appropriate
given that there are other efforts going on that language needed
to be included that other circumstances could warrant the
termination of this project.
4:21:42 PM
Finally, on page 6, lines 18-19, he said the manner in which the
legislature would express terminating the project was designed
as a concurrent resolution. In the original version the
requirement was for the legislature to express that the project
should be terminated. The question was how it would express
that. He also mentioned a drafting error on page 6, line 20,
where the words "immediately under" were supposed to be deleted.
Legislative Legal apologized for the error. It would say this
act takes effect July 1, 2010.
CO-CHAIR WIELECHOWSKI moved conceptual Amendment 1 on page 6,
line 20, to delete "immediately under". There were no objections
and it was so ordered.
4:23:16 PM
SENATOR FRENCH asked for an explanation of the new fiscal note.
MR. PAWLOWSKI said the ARRC could address that.
4:24:09 PM
SENATOR STEDMAN suggested focusing more on page 3, lines 29-31,
that deals with compatible but not competitive projects. He
thought that ANGDA was already set up to do that sort of thing
and that the legislature should have a policy discussion about
alleviating ANGDA of its duties and heading down another
direction. Otherwise the state would continue having a fractured
approach to the solution of getting gas.
CO-CHAIR MCGUIRE said that was a great point and she said that
his committee could look at it more broadly. She explained that
this weekend they broke out all the pieces that needed to be
considered; one of the pieces was an evaluation of the financing
and which entities are in place to bond and which entities may
or may not wish to bond.
4:26:21 PM
MR. PAWLOWSKI said one of the concepts in talking to the
administration and working through the issue internally is the
separation between a pipeline and a shipper. In that ANGDA was
working on aggregating demand through the Natural Gas Co-op, the
idea was separating them out as part of a commercial working
group that might purchase gas or might be a shipper of gas and
the effort around the pipe. If they are co-mingled too much,
that might raise issues with RCA about preferential treatment of
shippers.
CO-CHAIR MCGUIRE said it is their goal and it is a position of
distinction between Speaker Chenault and her that the ARRC
should be the one looking at the building part. This shouldn't
be competitive, but rather be compatible, with the efforts that
ANGDA is currently undertaking and would undertake in the
expansion of the HB 44 to look at gas supply and other things.
She said she was amenable to clearer language.
4:27:54 PM
SENATOR HUGGINS said ANGDA had done a lot of work on propanes,
infrastructure and distribution items, which is hugely
important. In a larger sense, he anticipated that this bill and
HB 44 would go through a metamorphosis and amalgamation.
SENATOR STEDMAN said not really; the issue is that he agreed
with the direction, but they should close some doors behind them
instead of coming up with more options. Ignoring ANGDA is
politically easier to do, but that doesn't get them to a
solution any easier.
CO-CHAIR MCGUIRE said that is the point of making the ARRC the
exclusive agency for housing the work that has been done so far
as well as continuing acquisition of rights-of-way and data. Do
they want to eliminate any reference to ANGDA, page 3, lines 29-
31? She said this was her early attempt to send a friendly olive
branch to other body, to let them know they thought perhaps
there was a role for ANGDA but in a different place - not as
builder or assessor of planning, permits and coordination of
building, but perhaps on the supply side.
SENATOR HUGGINS said he assumed the ARRC would organize the
players.
CO-CHAIR MCGUIRE said she thought Senator Stedman was right.
4:33:16 PM
RALPH SAMUELS, Fairbanks resident, said he thought the instate
line would get gas to Alaskans first and provide the economic
growth for jobs. The Parks Highway, the last big piece of
infrastructure to be built in Alaska, would have never been
built if they had charged a toll. If it gets built everybody can
tap off of it; things can develop from there. This is a piece of
infrastructure that is appropriate for the state to build.
He stated that shale gas has changed the world fundamentally
now. More than anything else Alaskans need to invest in
themselves and move forward with the bullet line. It's the one
thing we can have complete control over. You don't need export
licenses, AGIA, Denali, or the Canadians. A small leap of faith
is needed that private sector investors would jump in with some
of the mining and the LNG plant - but he was willing to take
that leap of faith.
4:36:12 PM
JOHN BINKLEY, Chairman, Alaska Railroad Board (ARRC), said the
success of the Railroad has not been dependent on one person or
one boards of the years. They all help in making it successful.
But the real success has been in the brilliance of the
legislative body when they enacted the statutes that set the
framework for the ARRC 25 years ago. It took an entity that has
a very public purpose in serving the economic development
aspects of Alaska, but doing it in a manner that is based on the
principals of the private sector. When the ARRC looks at
projects, it looks at the benefit to the public, but in a manner
that is dependent on serving their customers and producing a
profit to their bottom line.
The Railroad has a very unique bonding authority under the IRS
code that allows a public entity to partner with a private
entity to sell tax free bonds for a project. It was specifically
written into federal law that the ARRC retain that ability while
it was taken away from other entities. It gives an edge to
projects by reducing the capital costs.
He explained that the third aspect of the Railroad is in the
structure of its board of directors. It is made up of seven
members: two are commissioners of the Alaska Department of
Transportation and Public Facilities (DOTPF) and the Alaska
Department of Commerce, Community and Economic Development
(DCCED). The other members are one from labor, three
representing each of the judiciary districts the Railroad runs
through from Seward to North Pole and Eielson, the fourth is a
private sector person at large. This is an entity that is well
suited for the task outlined for the Alaska Railroad. The board
has not discussed this as a policy matter, but he has had
discussions with individual board members. They will meet on
Thursday to discuss this specifically along with bringing on a
new president and CEO.
4:45:02 PM
SENATOR FRENCH asked his view of the ARRC's relationship with
ANGDA.
MR. BINKLEY said his opinion is that ANGDA has played an
important role on this project to this point. They have done a
tremendous job alone on moving propane ahead that will share the
benefits of this resource beyond just the gas line grid from
Prudhoe Bay to Homer to other areas of the state. It's critical
that that happen; ANGDA has a critical role to play in that as
well as other areas.
SENATOR STEDMAN said some people are concerned that we are not
moving forward and there are too many captains on too many
ships. He asked him to explain the Railroad's unique bonding
authority.
MR. BINKLEY said it is similar to the building of the Valdez
tank farm during the construction of the TransAlaska Pipeline
(TAPS) when the City of Valdez did wrap-around bonds. The
recourse of the bond went back to the owners of the TAPS project
and the terminal facility in Valdez. It allowed Valdez to use
the tax free bonds to provide a lower rate of interest for the
project funding.
CO-CHAIR WIELECHOWSKI asked how confident he was that the IRS
would allow issuance of these bonds.
MR. BINKLEY answered that you could not be 100 percent sure of
that, but it is clear in statute. Their analysis shows that it
is viable and it is codified in IRS law.
CO-CHAIR WIELECHOWSKI said the voters voted to enact ANGDA years
ago to design and construct a pipeline that would bring North
Slope gas to market. Which one is the best agency, ANGDA or
ARRC?
4:50:37 PM
MR. BINKLEY replied that it is ultimately a policy call for the
legislature, but the ARRC is well-suited for large projects. He
wasn't so sure about ANGDA, although it has had a very important
role in bringing projects to the point that they are. He didn't
know their competencies in terms of actually constructing
facilities or engaging in large scale projects.
SENATOR WAGONER said 63 percent of the people voted for ANGDA to
do what they are talking about; the problem is every time they
turn around, the legislature picks another approach to a
pipeline. Two years ago Enstar came to his office and said they
wanted to build the pipeline, and all they wanted was for the
state to help them in the permitting process. Now this thing has
morphed back into the state building the pipeline. He understood
the bonding capacity of the Railroad, but maybe everybody should
make up their mind once and for all that AGIA is the state's
chosen entity. Every time they get a head of steam going, the
legislature jerks the money out from under them and they don't
have enough money to do their job and they give it to somebody
else. They should back ANGDA and maybe bring the ARRC in for its
bonding capacity and get the people who know about gas pipelines
in charge of the project.
Another point Senator Wagoner made is that everybody talks about
fast-tracking this pipeline, but if one molecule is destined to
go out of state, this pipeline has to go through exactly the
same process as the big line. He wanted a timeline on this
project, open season, FERC, the whole works.
4:55:16 PM
CO-CHAIR MCGUIRE responded that the Railroad isn't being asked
to build the gas pipeline. They are trying to find a place to
house the good work that Harry Noah started and Mr. Swenson has
continued towards an instate pipeline should AGIA fail. She said
the intensity started for her when AGIA passed. Many thought
giving the governor tools to get a gasline was the right thing
to do. Many were shocked when it came back with a single bidder.
Some people felt that it was a sole source contract.
The real concern started from a group in the Instate Gas Caucus
about the 500 mcf/d limit and realizing that was a "sweet spot"
that people didn't want to give up. That is when the $10 million
amendment was put in to instate efforts as well - because that
is important. Harry Noah was appointed and his team did great
work. The Railroad is the only quasi-public entity that is
building things in the state. She liked the fact that it's a
private corporation bringing buyers and sellers together.
SENATOR HUGGINS said the governor had signed on with her concept
of the Railroad. He also pointed out that not only does the
Railroad have good people it will have a lot to gain from
transporting construction materials and fuel.
5:01:08 PM
SENATOR WAGONER said there was more than one applicant in the
AGIA process. As a matter of fact, many were disappointed that
one other did not show up and make an application.
CO-CHAIR WIELECHOWSKI said he thought the legislature had to
come to a conclusion in this issue this session. He had heard
that another organization that was looking at building an
instate pipeline has said they are no longer interested because
of uncertainty about whether or not the state is going to be
involved.
MR. BINKLEY concurred with his comments.
5:03:34 PM
PAUL METZ, Director, Mineral Industry Research Laboratory,
University of Alaska, Fairbanks, Alaska, said his previous
presentation on SB 228 incorporated his comments with respect to
the instate gas line. He said he would be happy to answer
questions.
SENATOR FRENCH moved Amendment 2, labeled E.1.
26-LS1467\E.1
Chenoweth
AMENDMENT 2
OFFERED IN THE SENATE
TO: CSSB 287(RES), Draft Version "E"
Page 4, line 13, following "work;":
Delete "and"
Page 4, line 17, following "gas":
Insert "; and
(6) commit to negotiate, before
construction of the natural gas pipeline project
begins, a project labor agreement to the maximum
extent permitted by law; if the corporation determines
that the natural gas pipeline project is to be
constructed by a private pipeline construction company
or companies, the corporation shall incorporate the
requirements of this paragraph into its construction
contract agreement as a binding commitment applicable
to the corporation's contractors; in this paragraph,
"project labor agreement" means a comprehensive
collective bargaining agreement between the
corporation or, if construction is to be undertaken by
one or more private pipeline construction companies,
the corporation's contractor or contractors and the
appropriate labor representatives to ensure expedited
construction with labor stability for the natural gas
pipeline project by qualified residents of the state"
CO-CHAIR MCGUIRE objected for discussion purposes. She said the
issue of project labor agreements (PLA) is very important. They
have meetings today with people who have strong views about it,
and she hoped this debate could continue upstairs in the Finance
Committee.
5:05:47 PM
TIM SHARP, Business Manager, Alaska District Council of
Laborers, supported Amendment 2 that requires a project labor
agreement. It would make sure Alaskans get the jobs on the
proposed bullet line. Most projects of this size in Alaska have
had project labor agreements; it's not new ground. Most state
leadership has recognized the need for project labor agreements
on projects. These agreements will make certain that Alaskans
are trained and hired for the jobs first and laid off last.
He said that Commissioner Click Bishop, Department of Labor and
Workforce Development (DOLWD), prepared a report on Alaska hire
that indicated without project labor agreements things are
continually getting worse in the oil fields and not better. It
also means that real apprenticeship programs with track records
of creating jobs and careers for Alaskans will be put strongly
into play. PLAs also contractually insure Alaskan Native
participation in the project.
MR. SHARP said they strongly support energy and gas development
in the state, but at the end of the day, while the project is
being built a PLA means the money will stay in Alaska because
Alaskan participation is enforceable.
5:08:35 PM
MIKE LITTLEFIELD, Teamsters Local 959, supported Mr. Sharp's
comments about project labor agreements. He said "We want to see
Alaskans working on an Alaskan project."
5:09:06 PM
VINCE BALTRAMI, President, Alaska AFL-CIO, supported Amendment
2. He agreed with Mr. Sharp's comments saying there are tons of
documentation that show PLAs are good business decisions, they
determine predictability and planning construction, scheduling,
labor needs and safety programs. Both AGIA and ANGDA have PLA
requirements. The Building Trades Council has negotiated and
worked under dozens of PLAs over the years; one of the recent
big ones was a ground-based missile defense project in Shemya
and Delta Junction. The management of those prime contractors,
LaFleur and Bechtel, raved about how well the PLA worked on a
real large project. It put over 1000 people to work, over 90
percent Alaska hire, 12 percent Alaska Native hire, and 17
percent minority hire - all the while training hundreds of
apprentices who are now working as journeymen in their chosen
fields, and without a hitch that job has been done on time and
under budget.
MR. BALTRAMI said one thing they do know us that the workers on
this project will be heavy and highway type construction
workers, and 85 percent of those workers in the state of Alaska
are represented by unions; 85 percent of the federally
registered apprentices are actually in union apprenticeship
programs. He said while there are tons of arguments in favor of
PLAs there are usually only a couple against and a lot of them
go back 30 years to a time when complaints were made about
people coming up from outside of the state. But this generation
of labor leaders has made a significant effort to make sure
Alaskans will go to work first on these projects whether they
currently belong to a union or not. Barriers to membership have
been knocked down and it's real easy to get non-union people
that are interested in going to work on a project like this
signed up, tested and ready to go, so they are ready to have all
the rights that a resident union would have before anybody would
be able to go out on a job from the Lower 48. This is one of the
common myths that is used quite a bit to bad mouth what is seen
across the country these days as good public policy. He
encouraged them to look at a website called Plaswork.org that
has recent studies from Michigan State University and the
University of Tennessee where experts in the field have debunked
a lot of the myths surrounding PLAs.
SENATOR WAGONER said one of his worries with project labor
agreements is out of state call ups versus instate hires, and he
asked what they can do to assure the workers in the State of
Alaska if they have a PLA that they would be called up first.
5:14:21 PM
MR. BALTRAMI answered that is one of the things labor leaders
have worked on over the years. All the unions have certain
referral procedures for when people go to work and in what
order. He remembered that out-of-state workers used to be able
to come up here and go to work if they met all the other
requirements. But now referral procedures have changed to make
sure that qualified Alaskan residents go to work before others
from outside the state. A PLA is the only way to legally enforce
any kind of a local hire.
Another thing Mr. Sharp mentioned was that the trend they have
seen in the commissioner's report on resident hire definitely
left something to be desired. It shows that this year more
people are working in the oil fields than a year ago, but less
Alaskans are working there. The logical conclusion is that too
many people are coming and taking jobs. A PLA is the only legal
means they have of assuring Alaskans get hired.
SENATOR WAGONER said he didn't answer his question. How can they
assure that hiring Alaskans does actually take place?
MR. BALTRAMI answered that the project labor agreements language
typically contains referral language that is in place in the
local unions. He hadn't seen the amendment, but he would support
language stating that the union referral procedures must take
local hire into consideration.
5:17:53 PM
CO-CHAIR MCGUIRE said one of the common push backs on project
labor agreements is that they will put more out of staters to
work than Alaskans.
5:19:07 PM
MEREK PIERCE, board member, Alaska Gasline Port Authority
(AGPA), said the one aspect of this bill that he finds slightly
encouraging in the 66th year of pipeline discussions (the first
gasline study was completed in 1954) is the rendition of the
basic facts summarized in the legislative findings and purposes
in section 1 of SB 287. Alaska does urgently need a diversified
revenue stream and Alaskans need affordable energy. The problem
with this bill is the extraordinary disconnect between the
findings and the stated purpose. If they are going to make the
case that we have a problem - an urgent need for both new
revenue and affordable natural gas for Alaskans, why turn the
gas pipeline over to a Railroad that soon will not have even a
CEO? Why wouldn't the primary responsibility be invested in
ANGDA, an organization with public support, with both the
institutional knowledge and expertise, and the strong desire to
see the all-Alaska gasline and spur line to Southcentral be
built? Additionally, ANGDA is partnered with AGPA that also has
a voter mandate and partners who are very interested in Alaskan
LNG both for the West Coast of the United State as well as world
markets.
The second problem with this bill relates to the first; if we
urgently desire a gasline and expect to move forward with a real
project after the failed open season and the scuttling of AGIA,
why waste time and effort studying a gasline down the Parks
Highway that doesn't provide the lowest cost gas for Alaskan's,
doesn't have EIS, doesn't have a right-of-way, it doesn't even
deliver gas to the military bases, mines and small communities
that need gas? The all-Alaska gasline as designed by YPC has a
final environmental impact statement, an established right-of-
way, economy of scale, delivers gas to military bases and a host
of communities along its route that do not now have affordable
energy.
CO-CHAIR MCGUIRE thanked him for his comments and focused
attention back to Amendment 2.
5:21:27 PM
SENATOR FRENCH said that they heard that the last major project
in Alaska had 90 percent Alaskan hire.
CO-CHAIR MCGUIRE said she supported project labor agreements;
they work in general, but some folks are uncomfortable.
A roll call vote was taken: Senators French and Wielechowski
voted yea; Senators Huggins, Wagoner and McGuire voted nay; so
the amendment failed.
5:24:22 PM
SENATOR WAGONER moved conceptual Amendment 3 that for this
project, only, puts the Railroad under the Executive Budget Act
- just like ANGDA, AIDEA or anybody else. It's important that if
the Railroad is going to be the focal point on building a
pipeline and coordinating all these different agencies that they
should be under the Act. That means they will be responsible to
the legislature for the budgeting.
MR. BINKLEY responded that this goes to the heart of the
brilliance of the legislation establishing the Railroad. This is
what distinguishes the Railroad from any other state agency, and
in his opinion, it is what has been at the heart of the success
of the Alaska Railroad for the last 25 years. Any entity looks
to its funding source for its direction; the Alaska Railroad
looks to its customers and to profitability, not to a political
body. This is the heart of the difference between the Alaska
Railroad and the Department of Transportation and Public
Facilities (DOTPF).
He said this would take away one of the most compelling reasons
for why the gas pipeline should be housed within the ARRC.
Exempting them from the Executive Budget Act means that they
respond to their customers instead of a political body. That is
why they have been less political than other entity over time
and have been successful in not relying on any state subsidy for
moving the ARRC forward. It would be damaging for the Railroad's
ability to respond to changes in the market and to business
decisions that have made it successful over the years.
SENATOR WAGONER read the language from ANGDA: The revenue earned
by operations of the Authority must be identified as a source of
the operating budget of the Authority in the state's operating
budget under AS 37.07. It's not as complicated as some think;
but it at least gives some legislative control. This bill takes
the governor and the legislature out of the picture, and he
didn't want to go there with this project.
CO-CHAIR MCGUIRE pointed out that this bill requires them to
make regular findings and milestone achievement reports to the
legislature and the governor.
CO-CHAIR WIELECHOWSKI said he appreciated the amendment, but he
would oppose it, because he thought part of the problem was too
much legislative intervention.
SENATOR WAGONER agreed that it had been micro managed to death
already, but his point is that a report is not oversight. They
are talking about turning a big project over to the Railroad
that doesn't even have a CEO right now.
CO-CHAIR MCGUIRE said she would oppose it also because of the
reasons Mr. Binkley articulated. But she didn't expect any less
of a new CEO than the excellent ones they had had.
SENATOR HUGGINS added that he will oppose the amendment, but
would remain open minded. The legislature needs to be
consistent. In his experience there are two organizations, the
Railroad is one, that when they present they are organized,
they're convincing, their numbers add up, and you go away saying
"that is one efficient organization." He has great confidence
in the Railroad and its structure.
SENATOR WAGONER asked if the Railroad thought about purchasing
the Flint Hills refinery.
MR. BINKLEY answered no.
SENATOR WAGONER asked if it had been discussed at the board
level.
MR. BINKELY answered that during the previous administration the
governor said something about having the Railroad involved in
some solution to making certain that the refinery remained in
place and producing fuel for both the Interior and Southcentral,
but there were never any negotiations.
SENATOR HUGGINS added that he was involved in that era and some
administration people were advocating for it, buy General Gamble
had resisted it.
CO-CHAIR MCGUIRE asked for a roll call vote. Senators Wagoner
voted yea; Senators Huggins, French, Wielechowski and McGuire
voted nay; so Amendment 2 failed.
5:36:38 PM
SENATOR HUGGINS moved to report CSSB 287(RES) from committee as
amended with individual recommendations and attached fiscal
note(s).
SENATOR WAGONER objected. A roll call vote was taken: Senators
Huggins, French, Wielechowski and McGuire voted yea;
Senator Wagoner voted nay; so CSSB 284(RES) as amended moved
from committee.
5:39:52 PM
CO-CHAIR MCGUIRE adjourned the meeting at 5:39.
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