Legislature(2005 - 2006)HOUSE FINANCE 519

08/04/2006 10:00 AM House FINANCE

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10:19:04 AM Start
10:19:40 AM HB3006
11:33:11 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Heard & Held
-- Testimony <Invitation Only> --
+ Bills Previously Heard/Scheduled TELECONFERENCED
                   HOUSE FINANCE COMMITTEE                                                                                      
                       August 4, 2006                                                                                           
                         10:19 A.M.                                                                                             
CALL TO ORDER                                                                                                                 
Co-Chair Meyer called the House Finance Committee meeting to                                                                    
order at 10:19:04 AM.                                                                                                         
MEMBERS PRESENT                                                                                                               
Representative Mike Chenault, Co-Chair                                                                                          
Representative Kevin Meyer, Co-Chair                                                                                            
Representative Bill Stoltze, Vice-Chair                                                                                         
Representative Richard Foster                                                                                                   
Representative Beth Kerttula                                                                                                    
Representative Mike Hawker                                                                                                      
Representative Jim Holm                                                                                                         
Representative Reggie Joule                                                                                                     
Representative Mike Kelly                                                                                                       
Representative Carl Moses                                                                                                       
MEMBERS ABSENT                                                                                                                
Representative Bruce Weyhrauch                                                                                                  
ALSO PRESENT                                                                                                                  
Representative Berta Gardner; Kevin Jardell, Assistant                                                                          
Commissioner, Department of Administration; Mike Menge,                                                                         
Commissioner, Department of Natural Resources                                                                                   
PRESENT VIA TELECONFERENCE                                                                                                    
Ron   Miller,    Executive    Director,   Alaska    Industrial                                                                  
Development and Export Authority (AIDEA), ANCHORAGE                                                                             
HB 3006   An Act making an appropriation to study the                                                                           
          feasibility of a spur line from a gas pipeline in                                                                     
          this state; and providing for an effective date.                                                                      
          HB 3006 was HEARD & HELD in Committee.                                                                                
10:19:40 AM                                                                                                                   
HOUSE BILL NO. 3006                                                                                                           
     An Act making an appropriation to study the feasibility                                                                    
     of a spur line from a gas pipeline in this state; and                                                                      
     providing for an effective date.                                                                                           
10:20:16 AM                                                                                                                   
KEVIN   JARDELL,   ASSISTANT   COMMISSIONER,   DEPARTMENT   OF                                                                  
ADMINISTRATION,  addressed  the Administration's  concern  and                                                                  
the  need to  expand the  call for  legislation.   (Copies  on                                                                  
10:22:04 AM                                                                                                                   
Mr. Jardell  explained that the  Governor vetoed the  Railbelt                                                                  
Energy  distribution due  to concerns  regarding planning  for                                                                  
electrical  needs in the  Railbelt.   He noted that  amendment                                                                  
#1, 24G-2,  8/3/06, was  chosen as the  vehicle to request  an                                                                  
appropriation rather  than introduce a separate  appropriation                                                                  
REPRESENTATIVE  JOULE  pointed  out  that,  in  rural  Alaska,                                                                  
there has  been a  huge increase  in the cost  of energy.   He                                                                  
asked if there  had been consideration given to  expanding the                                                                  
call to look at alternative energy for rural Alaska.                                                                            
Mr. Jardell commented  that high cost of energy  is an Alaskan                                                                  
issue,  not  just  a  rural  issue.    He  stated  that  other                                                                  
projects  had been considered;  the Railbelt  Energy Fund  has                                                                  
been  considered  for  a  number   of  years.    The  Governor                                                                  
believed  that  there was  not  enough  effort among  all  the                                                                  
Railbelt  utilities  to  meet  the  electrical  needs  of  the                                                                  
Railbelt.   That  is the  reason  for the  appropriation  from                                                                  
that fund.                                                                                                                      
Mr.  Jardell  continued,  noting   that  there  has  been  and                                                                  
currently  is planning in  place to  address all rural  energy                                                                  
10:26:42 AM                                                                                                                   
Representative  Joule encouraged the Committee  to pass a bill                                                                  
out  of the  Special Session  toward Power  Cost  Equalization                                                                  
(PCE)  and  encouraged  further  exploration   of  alternative                                                                  
10:28:05 AM                                                                                                                   
Co-Chair  Meyer   clarified  that  HB  3006  was   before  the                                                                  
Committee  with  an  amendment  to  include   Railbelt  Energy                                                                  
10:28:51 AM                                                                                                                   
MIKE  MENGE, COMMISSIONER,  DEPARTMENT  OF NATURAL  RESOURCES,                                                                  
addressed   the   gas  pipeline,   spur   line   study.     He                                                                  
acknowledged  that it  is an  issue affecting  all of  Alaska.                                                                  
He outlined  the various concerns  that could be  addressed by                                                                  
the proposed appropriation.   He noted that the  Department of                                                                  
Energy has  been working on spur  line issues for a  number of                                                                  
years.   He proposed using the  funding to coordinate  efforts                                                                  
under  a single  management tool  enabling  the Department  of                                                                  
Natural Resources  (DNR), Department of Revenue  (DOR) and the                                                                  
Legislature  to access information  the on  issue. He  went on                                                                  
to say  that the most  visible effort  regarding energy  needs                                                                  
is  the  work  of  Harold  Heinz,  Chief   Executive  Officer,                                                                  
Natural  Gas  Development  Authority  (ANGDA)  and ANGDA.    A                                                                  
portion of the  $4 million dollar appropriation  would be used                                                                  
to advance  the efforts  of the Authority  for the  Glennellen                                                                  
to Palmer spur  line.  He emphasized that no funding  would be                                                                  
used  for  duplicative  efforts.  Currently,  a work  plan  is                                                                  
being developed to identify the next steps.                                                                                     
10:34:01 AM                                                                                                                   
Commissioner Menge  noted that the Department  of Energy (DOE)                                                                  
has completed a  feasibility study for a Fairbanks  to Wasilla                                                                  
spur line.   Both spur  lines are designed  to serve  the same                                                                  
market and the  state is not in a position to  decide which is                                                                  
most feasible and  cost effective.  Part of the  appropriation                                                                  
would be used  to create a new  contract to pick up  where DOE                                                                  
left off.  The final efforts of  DOE would be to put  together                                                                  
a work  plan as  how to best  advance the  evaluation of  that                                                                  
Commissioner Menge  recommended that the issuing  and awarding                                                                  
of  the  contract  come  out  of  the  Department  of  Natural                                                                  
Resources pipeline  office. He  observed that the  engineering                                                                  
group works  primarily  out of contract  and also  coordinates                                                                  
with state and federal agencies.                                                                                                
10:36:37 AM                                                                                                                   
Commissioner  Menge further identified  the challenges  of the                                                                  
Delta  Junction  - GlennAllen  extension.  He  explained  that                                                                  
this would  be needed  if the line  from Glennallen to  Palmer                                                                  
were chosen.  He added that there  are issues that need  to be                                                                  
addressed   regarding  the  compatibility   of  the   hot  oil                                                                  
pipeline  and the natural  gas pipeline.  He requested  that a                                                                  
small sum be set  aside to initiate a formal process  with the                                                                  
Bureau  of  Land  Management  (BLM)  to  determine  procedure,                                                                  
practices and process.                                                                                                          
He recommended  that the work would be useful  in construction                                                                  
of the pipeline from Prudhoe down to Delta.                                                                                     
10:38:29 AM                                                                                                                   
Commissioner  Menge outlined specific  concerns regarding  the                                                                  
feasibility  study of an offtake  at the Yukon crossing  and a                                                                  
method for conveying energy up and down the Yukon River:                                                                        
    · First the technology and costs associated with a                                                                          
    · Secondly it would take the work that ANGDA had done                                                                       
      and add  it to a new  contract, specifically  looking at                                                                  
      the feasibility  of the Ketchikan  ship yard  to provide                                                                  
      pressure   vessels:   CNG,  LNG.   The  decisions   made                                                                  
      regarding  that  will  prompt   further  discussion  and                                                                  
      decision  making  as each  has a  different  engineering                                                                  
      and economic profile; and                                                                                                 
    · Funding for feasibility of the Yukon River Offtake.                                                                       
10:39:55 AM                                                                                                                   
Commissioner  Menge   discussed  the  advantages   of  getting                                                                  
energy to  Cook Inlet,  Bristol Bay  and Prince William  Sound                                                                  
with the spur line.   He acknowledged differences  due to this                                                                  
line  being sea-born.    He further  noted  advantages to  the                                                                  
fishing  industry of  providing low  cost ice  as well as  the                                                                  
economic advantages for value added product.                                                                                    
10:41:18 AM                                                                                                                   
Commissioner Menge  explained that the infrastructure  for the                                                                  
Palmer  & Wasilla  Line  is insufficient  for  current  needs.                                                                  
Some of the  funds requested would  be used to put  together a                                                                  
technical  team  to address  the  engineering  challenges.  He                                                                  
emphasized   the   importance   of   establishing   both   the                                                                  
infrastructure and regulatory component.                                                                                        
10:43:26 AM                                                                                                                   
Commissioner  Menge went on  to say that  funds would  be used                                                                  
for an  evaluation of  a storage area  to store large  volumes                                                                  
of gas.                                                                                                                         
10:45:35 AM                                                                                                                   
Representative  Holm asked if consideration had  been given to                                                                  
transferring  energy  via  electrical   lines.    Commissioner                                                                  
Menge  responded that  gas  by wire  is an  emerging  concept.                                                                  
Phase  1  of  the  project  is  practical  applications.    He                                                                  
asserted  that  a portion  of  that  could be  transported  by                                                                  
10:48:29 AM                                                                                                                   
Representative  Stoltze questioned  why the appropriation  was                                                                  
not  going to  the  Alaska Natural  Gas  Pipeline  Development                                                                  
Authority (ANGDA),  noting that this organization  already has                                                                  
public confidence.   Commissioner  Menge agreed that  the work                                                                  
of  ANGDA regarding  the  Glenallen to  Palmer  infrastructure                                                                  
should  be  supported.   The  Department  of  Energy  did  not                                                                  
choose to pursue the Fairbanks to Wasilla portion.                                                                              
10:50:56 AM                                                                                                                   
Co-Chair  Chenault asked what  the impact  would be on  ANGDA,                                                                  
and the employees  at the Department of Natural  Resources. He                                                                  
also   asked  for   clarification  regarding   the   Ketchikan                                                                  
shipyard.   He noted that there  are other areas of  the state                                                                  
that  could  build   pressure  vessels.    Co-Chair   Chenault                                                                  
referenced  gas storage  and the  areas chosen  to do that  as                                                                  
well as the infrastructure needed.                                                                                              
10:54:59 AM                                                                                                                   
Commissioner   Menge  explained   that  the  purpose   of  the                                                                  
appropriation  is to  explore  these and  other  issues.   The                                                                  
details of  how to implement  the gas  line would be  the next                                                                  
phase after understanding what all the variables are.                                                                           
10:56:50 AM                                                                                                                   
Representative  Hawker expressed  concern  with the timing  of                                                                  
the  request.    He  felt  it  was  important   dialogue,  but                                                                  
emphasized that  it might have been better to  deal with it on                                                                  
the front  end of  the issue.  He asked  what the  anticipated                                                                  
time  frame for  spending the  money would  be.   Commissioner                                                                  
Menge proposed  providing  a specific summary  of progress  to                                                                  
the legislature  in the early spring of 2007.   He agreed with                                                                  
Representative  Hawker's  concerns  and explained  that  there                                                                  
had never  been a unified  approach  to accomplish this  task.                                                                  
The  appropriation  is  an  attempt  to  unify  resources  and                                                                  
11:00:00 AM                                                                                                                   
Representative  Hawker   agreed  that  there  needs  to  be  a                                                                  
unified   coordination   of  the   diverse   interests.     He                                                                  
questioned  if  it  were  possible   to  establish  a  uniform                                                                  
coordinator  in  the  State  of  Alaska   within  the  current                                                                  
operating budget.                                                                                                               
11:02:52 AM                                                                                                                   
Commissioner   Menge  stated  that   the  funding   authorized                                                                  
already had  specific functions.   The  Pipeline Office  is an                                                                  
organization  to answer questions  of the legislature[L1].  He                                                                  
recommended   that  the   coordination   be  handled   through                                                                  
contract  rather than by  adding another  state employee.   He                                                                  
reiterated  his   commitment  to  itemize  expenses   for  the                                                                  
legislature and to not have duplicative expenditures.                                                                           
11:05:21 AM                                                                                                                   
Representative  Hawker suggested using discretionary  funds of                                                                  
the Office  of  the Governor,  the Department  of Revenue  and                                                                  
the Department of Natural Resources.                                                                                            
Commissioner  Menge stated  that they will  be using  existing                                                                  
employees and existing resources.                                                                                               
11:06:56 AM                                                                                                                   
REPRESENTATIVE  KELLY  referenced   ANGDA;  he  asked  if  the                                                                  
reason  that  ANGDA  was not  doing  the  work  was due  to  a                                                                  
conflict  regarding the  Wasilla portion.  Commissioner  Menge                                                                  
could  not specifically  answer  the question.   He  explained                                                                  
that ANGDA has  chosen a course of action that  is more spread                                                                  
11:09:32 AM                                                                                                                   
Representative  Kelly stated that it was not uncommon  to have                                                                  
a  consultant   that  could   suggest  different  courses   of                                                                  
actions.  He worried  about excluding ANGDA and  the political                                                                  
component  involved.   Commissioner Menge  maintained that  he                                                                  
did not want  to create any disharmony  in the system  or do a                                                                  
disservice  to the Legislature[L2] regarding the funding.   He                                                                  
felt  it important  for all  entities to  pursue current  work                                                                  
and move towards drawing all the information together.                                                                          
11:12:08 AM                                                                                                                   
Representative  Kelly requested  a hearing  from Harold  Heinz                                                                  
and the Alaska Natural Gas Pipeline Development Authority.                                                                      
Co  Chair  Meyer  agreed  and   noted  that  it  was  not  his                                                                  
intention  to take  any  action on  the request  before  other                                                                  
parties are heard from.                                                                                                         
Commissioner  Menge reported that  he has spent time  with Mr.                                                                  
Heinz  discussing  the  same  information   presented  to  the                                                                  
Committee[L3].  He noted that Mr. Heinz is supportive.                                                                          
Representative  Stoltze  reiterated that  [L4]ANGDA process is                                                                  
working  and  would  like  to see  their  work  sustained  and                                                                  
11:14:48 AM                                                                                                                   
Co-Chair  Meyer noted  that  the Governor'[L5]s original  call                                                                  
was  supplemented  to  include  the  appropriation   from  the                                                                  
Railbelt  Energy  Fund.   The Administration's   intent is  to                                                                  
amend HB 3006 to incorporate the Railbelt Energy Fund.                                                                          
11:15:40 AM                                                                                                                   
Representative  Hawker questioned whether the  amendment needs                                                                  
to be moved or if it can just be discussed.                                                                                     
Co-Chair Meyer said that the discussion could take place.                                                                       
11:17:30 AM                                                                                                                   
RON   MILLER,    EXECUTIVE    DIRECTOR,   ALASKA    INDUSTRIAL                                                                  
DEVELOPMENT  AND  EXPORT  AUTHORITY   (AIDEA),  addressed  the                                                                  
questions  raised regarding  energy issues.   He related  that                                                                  
the  Alaska Energy  Authority  has been  working to  implement                                                                  
the  rural  energy  plan  to  fully  fund  the  Department  of                                                                  
Community  and  Economic Development  Program.    It has  been                                                                  
active in  the alternative energy  fields. He related  that an                                                                  
alternative  energy report  would  be distributed  soon.   Mr.                                                                  
Miller  reported  on the  use  of  in-state  gas, as  well  as                                                                  
monitoring efforts.                                                                                                             
Mr. Miller  reported that  the intent of  the amendment  is to                                                                  
appropriate  money  from  the  Railbelt  Energy  Fund  to  the                                                                  
Alaska Energy Authority.                                                                                                        
Co-Chair Meyer  asked for clarification.   Mr. Miller  replied                                                                  
that the purpose  is to bring more efficiency  to and increase                                                                  
reliability of  power generation in the rail belt  through the                                                                  
list  of  grants.   He  explained  that  the grants  had  come                                                                  
before  the  legislature  and  passed,[L6] but had  then  been                                                                  
vetoed  by the Governor  due to  a lack of  confidence  in the                                                                  
cooperation on the Railbelt utilities.                                                                                          
Mr. Miller  further  noted that  the A[L7]dministration worked                                                                  
with some of the  Railbelt utilities in crafting  the language                                                                  
in  Section   4.   He  added   that  some   of  the   Railbelt                                                                  
utilities[L8] are working together  and that  if this bill  is                                                                  
to pass with amendments  AEA is committed to meeting  with the                                                                  
Railbelt utilities to move forward with plans.                                                                                  
11:23:25 AM                                                                                                                   
Representative   Stoltze  asked  for  information   about  the                                                                  
written  advice to  the Governor  regarding his  vetoes.   Mr.                                                                  
Miller  replied that  there is  no written  analysis from  the                                                                  
Department.     He  explained,[L9] he had  been asked  by  the                                                                  
Office of  Management and  Budget (OMB)  what the grants  were                                                                  
for  and provided  details to  them.   He  offered to  provide                                                                  
that documentation  to the Committee.  Representative  Stoltze                                                                  
asked about the  Juneau OMB advisors and questioned  the veto.                                                                  
Mr.  Miller  responded  that  the  only  role he  had  in  the                                                                  
process  was to  gather  information  from the  utilities  and                                                                  
provide  that   to  the  Governor's   office.   Representative                                                                  
Stoltze said  that explains some  of the lack of logic  in the                                                                  
11:25:38 AM                                                                                                                   
Representative  Hawker was reluctant to pursue  the issue.  He                                                                  
expressed  frustration  with  the  bill  and  felt  it  was  a                                                                  
distraction  from the oil  and gas tax  bill.  He related  the                                                                  
history  of   the  issue  emphasizing   the  passage   of  the                                                                  
appropriation  and  then   the  veto  by  the  Governor.    He                                                                  
questioned the purpose of the bill.                                                                                             
Co-Chair Meyer  said the intent of the meeting  was to discuss                                                                  
this information.                                                                                                               
11:28:20 AM                                                                                                                   
Co-Chair Chenault  asked if the  $12 million to ANGDA  for the                                                                  
Healy  coal project  was  in the  original  proposal that  was                                                                  
vetoed.     Mr.  Miller   affirmed.     [L10]Co-Chair Chenault                                                                  
considered  the  veto  an end  to  the project.    He  further                                                                  
questioned how  the project would be  financed if it [L11]moves                                                                 
forward.  Mr. Miller  replied  that  they are  moving  forward                                                                  
with  money   from   AIDEA.    Co-Chair   Chenault   expressed                                                                  
frustration  regarding the communication  with the  Governor's                                                                  
office  regarding Healy.   He felt  a disservice  was done  to                                                                  
his  area.    He maintained  that  this  issue  is  not  being                                                                  
offered at a good time.                                                                                                         
Representative  Stoltze  stated that  he made  the motion  for                                                                  
the veto  override and  feels strongly about  the matter.   He                                                                  
implied  that  it  is  a  political   matter.    He  expressed                                                                  
frustration and lack of confidence in the issue.                                                                                
11:33:11 AM                                                                                                                   
Representative  Kelly  said the  Governor  was  right when  he                                                                  
vetoed the bill  and suggested that he "should  have left well                                                                  
enough  alone".  He  observed that  the plan  did not  include                                                                  
the three major  generators in the Railbelt and  asserted that                                                                  
it was fatally  flawed.  He maintained that changes  needed to                                                                  
be made  to the distribution  of funds.  Representative  Kelly                                                                  
echoed Representative  Hawker's comments  that it was  not the                                                                  
right time to deal with the matter.                                                                                             
Co-Chair Meyer  noted that the  discussion was good.   He said                                                                  
he would hold onto the bill.                                                                                                    
The meeting was adjourned at 11:35 AM.                                                                                          

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