Legislature(2003 - 2004)

05/13/2003 04:06 PM House L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                    ALASKA STATE LEGISLATURE                                                                                  
          HOUSE LABOR AND COMMERCE STANDING COMMITTEE                                                                         
                          May 13, 2003                                                                                          
                           4:06 p.m.                                                                                            
                                                                                                                              
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Tom Anderson, Chair                                                                                              
Representative Bob Lynn, Vice Chair                                                                                             
Representative Nancy Dahlstrom                                                                                                  
Representative Carl Gatto                                                                                                       
Representative Norman Rokeberg                                                                                                  
Representative Harry Crawford                                                                                                   
Representative David Guttenberg                                                                                                 
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
All members present                                                                                                             
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
HOUSE BILL NO. 277                                                                                                              
"An Act  relating to the  powers of the Regulatory  Commission of                                                               
Alaska in  regard to intrastate pipeline  transportation services                                                               
and pipeline facilities, to the rate  of interest for funds to be                                                               
paid by pipeline shippers or carriers  at the end of a suspension                                                               
of  tariff   filing,  and  to  the   prospective  application  of                                                               
increased  standards on  regulated  pipeline utilities;  allowing                                                               
the  commission  to  accept  rates   set  in  conformity  with  a                                                               
settlement agreement between  the state and one  or more pipeline                                                               
carriers and  to enforce the  terms of a settlement  agreement in                                                               
regard  to  intrastate  rates; and  providing  for  an  effective                                                               
date."                                                                                                                          
                                                                                                                                
     - HEARD AND HELD                                                                                                           
                                                                                                                                
PREVIOUS ACTION                                                                                                               
                                                                                                                                
BILL: HB 277                                                                                                                  
SHORT TITLE:PIPELINE UTILITIES REGULATION                                                                                       
SPONSOR(S): REPRESENTATIVE(S)DAHLSTROM                                                                                          
                                                                                                                                
Jrn-Date   Jrn-Page                     Action                                                                                  
04/17/03     1026       (H)        READ THE FIRST TIME -                                                                        
                                   REFERRALS                                                                                    
04/17/03     1026       (H)        O&G, L&C                                                                                     
04/22/03                (H)        O&G AT 3:15 PM CAPITOL 124                                                                   
04/22/03                (H)        -- Meeting Canceled --                                                                       
04/23/03     1081       (H)        COSPONSOR(S): KOHRING                                                                        
04/24/03     1108       (H)        RES REFERRAL ADDED AFTER O&G                                                                 
04/24/03                (H)        O&G AT 3:15 PM CAPITOL 124                                                                   
04/24/03                (H)        Heard & Held                                                                                 
04/24/03                (H)        MINUTE(O&G)                                                                                  
04/29/03                (H)        O&G AT 3:15 PM CAPITOL 124                                                                   
04/29/03                (H)        Scheduled But Not Heard                                                                      
05/01/03                (H)        O&G AT 3:15 PM CAPITOL 124                                                                   
05/01/03                (H)        Moved CSHB 277(O&G) Out of                                                                   
                                   Committee                                                                                    
05/01/03                (H)        MINUTE(O&G)                                                                                  
05/02/03                (H)        L&C AT 3:15 PM CAPITOL 17                                                                    
05/02/03                (H)        Scheduled But Not Heard                                                                      
05/02/03                (H)        RES AT 1:00 PM CAPITOL 124                                                                   
05/02/03                (H)        <Pending Referral> -- Meeting                                                                
                                   Canceled --                                                                                  
05/05/03     1316       (H)        O&G RPT CS(O&G) NT 1DP 6NR                                                                   
05/05/03     1316       (H)        DP: KOHRING; NR: HOLM,                                                                       
                                   ROKEBERG, FATE,                                                                              
05/05/03     1316       (H)        KERTTULA, CRAWFORD, MCGUIRE                                                                  
05/05/03     1317       (H)        FNS: FORTHCOMING                                                                             
05/06/03     1372       (H)        FN1: ZERO(REV) RECEIVED                                                                      
05/06/03     1372       (H)        FN2: ZERO(DNR) RECEIVED                                                                      
05/07/03                (H)        RES AT 8:00 AM CAPITOL 124                                                                   
05/07/03                (H)        Bill Postponed 1:30 PM --                                                                    
05/07/03                (H)        RES AT 1:30 PM CAPITOL 124                                                                   
05/07/03                (H)        Heard & Held                                                                                 
                                   -- Recessed to Friday 8 AM --                                                                
05/07/03                (H)        MINUTE(RES)                                                                                  
05/09/03                (H)        L&C AT 3:15 PM CAPITOL 17                                                                    
05/09/03                (H)        Scheduled But Not Heard                                                                      
05/09/03                (H)        RES AT 8:00 AM CAPITOL 124                                                                   
05/09/03                (H)        Heard & Held                                                                                 
                                   -- Recessed to 1:00 pm --                                                                    
                                   MINUTE(RES)                                                                                  
05/12/03                (H)        L&C AT 3:15 PM CAPITOL 17                                                                    
05/12/03                (H)        Scheduled But Not Heard                                                                      
05/12/03                (H)        RES AT 1:00 PM CAPITOL 124                                                                   
05/12/03                (H)        Moved CSHB 277(RES) Out of                                                                   
                                   Committee                                                                                    
                                   MINUTE(RES)                                                                                  
05/13/03     1589       (H)        RES RPT CS(RES) NT 3DP 1DNP                                                                  
                                   2NR                                                                                          
05/13/03     1589       (H)        DP: LYNN, HEINZE, FATE;                                                                      
05/13/03     1589       (H)        DNP: GUTTENBERG; NR: MASEK,                                                                  
                                   WOLF                                                                                         
05/13/03     1590       (H)        FN1: ZERO(REV)                                                                               
05/13/03     1590       (H)        FN2: ZERO(DNR)                                                                               
05/13/03     1590       (H)        REFERRED TO LABOR & COMMERCE                                                                 
05/13/03     1617       (H)        CORRECTED CS(RES) NT RECEIVED                                                                
05/13/03                (H)        L&C AT 3:30 PM CAPITOL 17                                                                    
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
DAVE HARBOUR, Chairman                                                                                                          
Regulatory Commission of Alaska (RCA)                                                                                           
Department of Community and Economic Development (DCED)                                                                         
Anchorage, Alaska                                                                                                               
POSITION  STATEMENT:    Related  concerns about  areas  in  which                                                               
CSHB 277(RES)  provides obscurity  rather than  clarity; answered                                                               
questions.                                                                                                                      
                                                                                                                                
JANICE GREGG LEVY, Assistant Attorney General                                                                                   
Oil, Gas & Mining Section                                                                                                       
Civil Division (Juneau)                                                                                                         
Department of Law                                                                                                               
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:   Testified in  support of CSHB  277(RES) and                                                               
provided a sectional analysis; answered questions.                                                                              
                                                                                                                                
RANDAL G. BUCKENDORF, Counsel                                                                                                   
Anchorage Legal Department                                                                                                      
ConocoPhillips Alaska, Inc.                                                                                                     
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Testified in support of CSHB 277(RES).                                                                     
                                                                                                                                
MARK HANLEY, Public Affairs Manager, Alaska                                                                                     
Anadarko Petroleum Corporation                                                                                                  
Anchorage, Alaska                                                                                                               
POSITION  STATEMENT:     Pointed  out  that   the  committee  was                                                               
addressing an erroneous version of CSHB 277(RES).                                                                               
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
TAPE 03-52, SIDE A                                                                                                            
Number 0001                                                                                                                     
                                                                                                                                
CHAIR TOM ANDERSON  called the House Labor  and Commerce Standing                                                             
Committee  meeting  to  order  at   4:06  p.m.    Representatives                                                               
Anderson, Lynn, Dahlstrom, and Gatto  were present at the call to                                                               
order;  Representative Crawford  arrived immediately  thereafter.                                                               
Representatives Rokeberg  and Guttenberg  arrived as  the meeting                                                               
was in progress.                                                                                                                
                                                                                                                                
HB 277-PIPELINE UTILITIES REGULATION                                                                                          
                                                                                                                                
CHAIR ANDERSON announced that the  committee would consider HOUSE                                                               
BILL NO.  277, "An Act relating  to the powers of  the Regulatory                                                               
Commission   of  Alaska   in   regard   to  intrastate   pipeline                                                               
transportation services  and pipeline facilities, to  the rate of                                                               
interest for  funds to be  paid by pipeline shippers  or carriers                                                               
at  the  end  of  a  suspension of  tariff  filing,  and  to  the                                                               
prospective  application  of  increased  standards  on  regulated                                                               
pipeline utilities;  allowing the commission to  accept rates set                                                               
in conformity with  a settlement agreement between  the state and                                                               
one  or more  pipeline carriers  and to  enforce the  terms of  a                                                               
settlement  agreement   in  regard   to  intrastate   rates;  and                                                               
providing for an effective date."                                                                                               
                                                                                                                                
[Before  the  committee  was  CSHB  277(RES).    The  version  in                                                               
packets,  labeled  23-LS0980\I,  was  in error.    The  corrected                                                               
version,  labeled  23-LS0980\Q,  was provided  to  the  committee                                                               
after this meeting.]                                                                                                            
                                                                                                                                
Number 0069                                                                                                                     
                                                                                                                                
REPRESENTATIVE DAHLSTROM, sponsor, told  members HB 277 clarifies                                                               
that jurisdiction  of the Regulatory  Commission of  Alaska (RCA)                                                               
over rates is  limited to intrastate tariffs.   It eliminates the                                                               
RCA's jurisdiction  over state right-of-way leases  and clarifies                                                               
its  authority  over   dismantlement,  removal,  and  restoration                                                               
(DR&R).  It adds a new  section that ensures the RCA's support of                                                               
rate methodologies  agreed to in  settlement agreements  with the                                                               
state.   And  it  changes the  applicable  interest rate  charged                                                               
under  RCA  orders so  that  it  conforms  to the  interest  rate                                                               
applied in  similar matters.  Representative  Dahlstrom concluded                                                               
by adding, "My  intent for filing this legislation  is that there                                                               
are issues that need  to be worked out.  And  I think we're doing                                                               
a  good job  of bringing  all the  parties to  the table  ... and                                                               
working  towards  a  solution."     She  suggested  hearing  from                                                               
witnesses.                                                                                                                      
                                                                                                                                
CHAIR ANDERSON called upon Dave Harbour.                                                                                        
                                                                                                                                
Number 0211                                                                                                                     
                                                                                                                                
DAVE HARBOUR,  Chairman, Regulatory  Commission of  Alaska (RCA),                                                               
Department   of  Community   and  Economic   Development  (DCED),                                                               
specified that his comments would  address CSHB 277(RES) and that                                                               
the version he  had - since he was  testifying via teleconference                                                               
-  was  faxed  to  him  prior to  the  House  Resources  Standing                                                               
Committee  meeting the  previous day.   He  also noted  that he'd                                                               
provided formal written testimony.                                                                                              
                                                                                                                                
CHAIR ANDERSON  offered his belief  that version  23-LS0980\I was                                                               
what had moved out of the House Resources Standing Committee.                                                                   
                                                                                                                                
REPRESENTATIVE DAHLSTROM  requested that  Jan Levy  testify first                                                               
and present a sectional analysis.                                                                                               
                                                                                                                                
MR.  HARBOUR  concurred,  but  pointed out  that  the  RCA  finds                                                               
serious fault  with the  position of  [Ms. Levy]  as well  as the                                                               
advocates of  the bill, in  spite of  the best intentions  of its                                                               
author.                                                                                                                         
                                                                                                                                
Number 0470                                                                                                                     
                                                                                                                                
JANICE GREGG LEVY, Assistant Attorney  General; Oil, Gas & Mining                                                               
Section; Civil  Division (Juneau); Department of  Law, noted that                                                               
she would address legal questions  about the bill and offered the                                                               
administration's support for CSHB 277(RES).  She said:                                                                          
                                                                                                                                
     In our view,  the bill has a number  of attributes that                                                                    
     will  clarify areas  where  there  have been  questions                                                                    
     raised  regarding  the  jurisdiction of  the  RCA.  ...                                                                    
     Section   1   would   amend  the   authority   of   the                                                                    
     commissioner  of  natural  resources ...  by  adding  a                                                                    
     section that  makes clear that the  commissioner is the                                                                    
     lead  in investigating  the performance  of obligations                                                                    
     under  the   terms  of  the   leases  issued   by  that                                                                    
     department.   We believe  this is  already the  law and                                                                    
     that  DNR  [Department  of Natural  Resources]  is  the                                                                    
     obvious  agency  to be  enforcing  the  leases that  it                                                                    
     enters into,  with the assistance of  the Department of                                                                    
     Law.  But this would make it explicit.                                                                                     
                                                                                                                                
     And the reason  this was brought up is  because, as you                                                                    
     may know,  a little  later, in Section  2 of  the bill,                                                                    
     we're deleting  language under which it  currently says                                                                    
     that  the  commission,  the RCA,  may  investigate  the                                                                    
     performance  of obligations  under and  compliance with                                                                    
     terms  of  leases   issued  by  the  state.     So  the                                                                    
     administration  believes  that  the  proper  agency  to                                                                    
     enforce  its  state  leases -  these  are  real  estate                                                                    
     leases,  mind  you  -  is  the  Department  of  Natural                                                                    
     Resources  and   not  the  RCA,  and   that  the  RCA's                                                                    
     functions  are more  tailored to  overseeing the  rates                                                                    
     and   the  transportation   service  provided   by  the                                                                    
     pipeline carriers.                                                                                                         
                                                                                                                                
Number 0626                                                                                                                     
                                                                                                                                
REPRESENTATIVE  GUTTENBERG remarked  that it  seems this  changes                                                               
the authority  and relationship among the  commissioner, the RCA,                                                               
and the  regulated community.   He asked  Ms. Levy to  expound on                                                               
that and added, "The RCA's rulings  - which I don't have in front                                                               
of me, and  I think some of  this ... is meant to  address that -                                                               
said  one thing,  and now  ...  are you  giving the  commissioner                                                               
authority over  things that  the RCA  has claimed  authority over                                                               
before?"                                                                                                                        
                                                                                                                                
MS. LEVY replied:                                                                                                               
                                                                                                                                
     The administration doesn't  believe that we're changing                                                                    
     that scheme,  but I will recognize  absolutely that the                                                                    
     ...  commissioners  of the  RCA  may  have a  different                                                                    
     view.   And where this  is coming up,  specifically, is                                                                    
     with  this phrase,  "performance  of obligations  under                                                                    
     and  compliance  with terms  of  leases  issued by  the                                                                    
     state".                                                                                                                    
                                                                                                                                
     The ... leases issued by  the state, of course, are ...                                                                    
     leases for  the use of the  state land.  That's  not so                                                                    
     much the area  where we believe the  legislature in the                                                                    
     past has sought  regulation. ... The way  that we would                                                                    
     enforce our  leases would not  be by going to  the RCA,                                                                    
     but by going to  the court if we need to.   If we think                                                                    
     that a  company ... that  we allow  to use our  land is                                                                    
     breaching  the contract,  we would  ... initially  work                                                                    
     with them  and then, if  need be,  go to court  to have                                                                    
     that enforced.   We wouldn't  typically go to  the RCA.                                                                    
     And also, if  you would note, this has only  to do with                                                                    
     terms of leases issued by the state.                                                                                       
                                                                                                                                
     And  there's  been  quite  a  bit  of  discussion  that                                                                    
     somehow this  bill would leave  a regulatory  void, and                                                                    
     that there would  be no oversight of  the leases issued                                                                    
     by  private  landowners,   Native  landowners,  federal                                                                    
     landowners.   And, of course,  we think ...  the owners                                                                    
     of  the  land are  the  proper  ones to  enforce  their                                                                    
     rights -  if they  lease their  lands to  parties, they                                                                    
     should enforce  those rights - and  that the commission                                                                    
     has  the expertise  and wisdom  to  regulate the  rates                                                                    
     charged  for transporting  the resource,  but not  what                                                                    
     the  terms are  of the  use of  the land  on which  the                                                                    
     pipeline is built.                                                                                                         
                                                                                                                                
Number 0779                                                                                                                     
                                                                                                                                
REPRESENTATIVE GUTTENBERG offered his understanding that this                                                                   
relates to the whole DR&R issue.  He asked, "Isn't the DR&R ...                                                                 
under the leases and that whole concept?"                                                                                       
                                                                                                                                
MS. LEVY replied:                                                                                                               
                                                                                                                                
     That's correct.  ... I'm not  aware of any time  in the                                                                    
     past that the APUC  [Alaska Public Utilities Commission                                                                    
     - precursor  to the  RCA] or the  Regulatory Commission                                                                    
     of  Alaska has,  in fact,  overseen  DR&R.   This is  a                                                                    
     relatively  new  phenomenon coming  up  now.   And  the                                                                    
     reason I think you're hearing  about it is, in a recent                                                                    
     order  - and  not  Order 151  that  you've heard  about                                                                    
     that's  been  appealed  to superior  court,  but  in  a                                                                    
     recent order -  the regulatory agency said  that it had                                                                    
     authority  over the  performance of  DR&R.    And  this                                                                    
     came as a surprise to most parties, I think. ...                                                                           
                                                                                                                                
     The  administration  is fully  in  support  of the  RCA                                                                    
     overseeing  the collection  of money  from shippers  to                                                                    
     perform  those obligations.   We  want them  to perform                                                                    
     that function.   So  when a carrier  says, "We  want to                                                                    
     ... make additional charges to  the shippers so that we                                                                    
     can collect  money in  advance to  perform this  at the                                                                    
     end  of the  life  of the  pipeline,"  we think  that's                                                                    
     absolutely  appropriate.   If there  are refunds  to be                                                                    
     made at the  end of the life of the  pipeline, we think                                                                    
     that  is   absolutely  appropriate   for  the   RCA  to                                                                    
     determine how much the cost has been.                                                                                      
                                                                                                                                
     But the  evidence of whether  or not  those contractual                                                                    
     obligations have  been met should be  determined by the                                                                    
     landowner that  required it in  the first place.   This                                                                    
     ...  appears  to   be  a  new  area   of  oversight  in                                                                    
     regulation   that  we've   never   seen  evidenced   or                                                                    
     exercised by this agency or its predecessor agencies.                                                                      
                                                                                                                                
Number 0907                                                                                                                     
                                                                                                                                
MS. LEVY turned attention to Section 3 and said:                                                                                
                                                                                                                                
     This is the same issue  that we think is an appropriate                                                                    
     clarification,   that   with   respect   to   ...   the                                                                    
     performance of DR&R - that  means the physically taking                                                                    
     down the pipe or cleaning  it or whatever is required -                                                                    
     ...  will be  overseen  by those  parties  that have  a                                                                    
     contractual obligation  to either do it  or ... receive                                                                    
     the benefit of  that contract.  But if you  can see, at                                                                    
     the  end,  "except  amounts included  in  the  pipeline                                                                    
     carrier's  intrastate rates",  the  RCA  ought to  have                                                                    
     continued  jurisdiction  over   whether  or  not  those                                                                    
     amounts should  be continued  to be  collected -  is it                                                                    
     too much, is it too little.                                                                                                
                                                                                                                                
Number 0962                                                                                                                     
                                                                                                                                
MS. LEVY addressed Section 4 as follows:                                                                                        
                                                                                                                                
     The primary change here that  we see is down ... around                                                                    
     page  4, lines  27,  28, 29,  that  the commission,  in                                                                    
     setting its intrastate rates, may  not base those rates                                                                    
     on  the   revenues  that   have  been   collected  from                                                                    
     interstate shippers. ...  We have ... one  pipe and two                                                                    
     types of service  on the pipe.  If the  oil is destined                                                                    
     for  an  interstate market,  ...  the  shippers pay  an                                                                    
     interstate  tariff  that  is  filed  with  the  Federal                                                                    
     Energy Regulatory Commission [FERC].                                                                                       
                                                                                                                                
     And on  the intrastate side,  it's filed with  the RCA.                                                                    
     Even  though it's  flowing through  the  same pipe,  it                                                                    
     enters at  Pump Station  [No.] 1 and  in some  cases is                                                                    
     used within  Alaska, [and in  some cases]  ... Outside.                                                                    
     But  the   FERC,  who  regulates   interstate  tariffs,                                                                    
     doesn't  make  its  decision  ... as  to  what  can  be                                                                    
     collected  based  on  what's   been  collected  on  the                                                                    
     intrastate side.   And it  shouldn't operate  the other                                                                    
     way around either. ...                                                                                                     
                                                                                                                                
     It has  been brought  to my  attention that  some folks                                                                    
     think  that  because  the TAPS  [Trans-Alaska  Pipeline                                                                    
     System] settlement agreement  ... does allow intrastate                                                                    
     rates to  be considered on  the interstate side  to set                                                                    
     tariffs, that that means  the FERC considers intrastate                                                                    
     revenues.  But that's  not the  case,  ... because  the                                                                    
     FERC  doesn't set  rates on  TAPS, since  it's approved                                                                    
     the  settlement  agreement.    So  the  FERC  does  not                                                                    
     consider intrastate  revenues.   We think this  is what                                                                    
     the   law  is   today,   and  it's   meant   to  be   a                                                                    
     clarification.   And it's meant  to be  consistent with                                                                    
     the FERC methodology as well.                                                                                              
                                                                                                                                
Number 1070                                                                                                                     
                                                                                                                                
MS.  LEVY turned  attention to  Section 5,  noting that  it would                                                               
delete the  words ["discontinue use  of all  or any portion  of a                                                               
pipeline  or abandon"  and replace  it  with "reduce  capacity"].                                                               
She explained:                                                                                                                  
                                                                                                                                
     My  understanding of  the purpose  of this  is to  make                                                                    
     clear  that the  owners  of a  pipeline  in this  state                                                                    
     should be  free to make changes  in hardware, equipment                                                                    
     - the capital  expenditures - without going  to the RCA                                                                    
     for permission so long as  they aren't reducing ... the                                                                    
     transportation  service.    If  they  are,  if  they're                                                                    
     permanently reducing  capacity, or if they're  having a                                                                    
     reduction  in transportation  services,  as you'll  see                                                                    
     highlighted here,  then they  need to  go ...  and seek                                                                    
     permission.   So we think  that's appropriate,  and not                                                                    
     removing   regulation   that   is   necessary.      The                                                                    
     administration is  in support of regulation  where it's                                                                    
     useful and helpful to the  public, but not where it ...                                                                    
     may impede efficient use of the resource.                                                                                  
                                                                                                                                
Number 1132                                                                                                                     
                                                                                                                                
MS. LEVY addressed Section 6 as follows:                                                                                        
                                                                                                                                
     Section 6  is an  interest rate  provision.   Under the                                                                    
     current statute, if there  are overcollections that are                                                                    
     ordered at  some time to  be refunded, they're  paid at                                                                    
     the statutory rate set out  in [AS] 45.45.010, which is                                                                    
     10.5  percent.   This change  would be  five percentage                                                                    
     points   above  the   12th  Federal   Reserve  District                                                                    
     discount rate.   This is  a modification, if  you will,                                                                    
     of  the  interest rate  that  the  legislature set  for                                                                    
     other judgments  and ... payments of  money in Title 9,                                                                    
     but  it's adjusted  to five  percentages points  above,                                                                    
     instead of three percentage points above.                                                                                  
                                                                                                                                
     Under this  bill, this provision changing  the interest                                                                    
     rate would  not apply to  any pending cases.   It would                                                                    
     only apply to a case  filed after the effective date of                                                                    
     this  bill.   So  any  pending  case,  if a  refund  is                                                                    
     ordered,  would  continue  to   be  paid  at  the  10.5                                                                    
     percent.                                                                                                                   
                                                                                                                                
Number 1192                                                                                                                     
                                                                                                                                
MS. LEVY turned attention to Section 7 and said:                                                                                
                                                                                                                                
     Section  7,  again,  is something  we  believe  is  the                                                                    
     existing law, but it's a  clarification.  It arose as a                                                                    
     result of litigation  - things that have  been argued -                                                                    
     but  I believe  I've  understood Chair  Harbour to  say                                                                    
     that   the   commission   believes  this   section   is                                                                    
     consistent  with their  understanding of  existing law.                                                                    
     So, any orders that are  issued by the commission would                                                                    
     not affect any rates that  have been charged before the                                                                    
     protest  that initiated  the dispute.    This would  be                                                                    
     consistent with ... their business as well.                                                                                
                                                                                                                                
MS. LEVY discussed Section 8 as follows:                                                                                        
                                                                                                                                
     The  change  you'll  see  on  page  7,  again,  [is]  a                                                                    
     codification  of existing  practice  that the  attorney                                                                    
     general  is  the  one  who  brings  a  pipeline  tariff                                                                    
     challenge if  we are challenging  one of  the carrier's                                                                    
     rates.  We do that now  before the FERC, and it's clear                                                                    
     in statute that  the attorney general is  the entity to                                                                    
     do that.  It's less clear  with respect to the RCA, but                                                                    
     it's been  the practice ever since  we've had pipelines                                                                    
     in the  state, and  this would  clarify that,  and that                                                                    
     the attorney  general would  consult with  the affected                                                                    
     agencies.                                                                                                                  
                                                                                                                                
Number 1264                                                                                                                     
                                                                                                                                
MS. LEVY turned attention to [Section 9] and said:                                                                              
                                                                                                                                
     It's a large applicability section.   Most of the bill,                                                                    
     Sections  1-4  and 7  and  8,  would apply  to  matters                                                                    
     pending before the RCA.  And  I know that this has been                                                                    
     a concern  to a number  of people who have  stated that                                                                    
     they don't want to change  the rules midstream.  And in                                                                    
     looking  through  the bill,  we  looked  for ...  where                                                                    
     there would  be a change here.   A lot of  this is just                                                                    
     codifying  what  we  think   is  existing  practice  or                                                                    
     policy.   And for those, if  you were to say  this bill                                                                    
     did not apply to them,  well, then, you'd actually have                                                                    
     the  reverse effect:   you  would be  leaving in  place                                                                    
     language  that perhaps  is not  the policy  intended by                                                                    
     this legislation.                                                                                                          
                                                                                                                                
     So  we think  this is  the right  way to  go, with  the                                                                    
     exception of  interest, which could affect  an existing                                                                    
     case, and  so it  seems right, in  the administration's                                                                    
     view, to just apply  that going forward.  Additionally,                                                                    
     there's  been  discussion that  ...  this  has been  an                                                                    
     effort to change  an order that was issued  by the RCA,                                                                    
     Order  151,  and my  understanding  is  that's not  the                                                                    
     case.   [Subsection]  (c) ...  on the  last page  would                                                                    
     clarify  that. ...  The changes  here do  not apply  to                                                                    
     anything on  appeal to  the courts.   And it  would not                                                                    
     apply to  something on  appeal to  the courts  that was                                                                    
     subsequently  remanded.   So it  is not  an attempt  to                                                                    
     undo what the RCA did in Order 151.                                                                                        
                                                                                                                                
Number 1364                                                                                                                     
                                                                                                                                
MS. LEVY, in reply to Representative Guttenberg as to why                                                                       
Section 9 doesn't affect Order 151, said:                                                                                       
                                                                                                                                
     That  order  is on  appeal  now;  ... it's  before  the                                                                    
     superior court.   And then  we thought, well,  it could                                                                    
     get remanded for some reason,  or some part of it could                                                                    
     be remanded.  And ... so  we went to say it won't apply                                                                    
     to a matter that's in an  order that's on appeal and is                                                                    
     remanded.  So that's our way of getting around it.                                                                         
                                                                                                                                
     Now,  there are  other issues  that still  exist before                                                                    
     the RCA  now that,  except for  the interest  rate, the                                                                    
     rest  of  this bill  would  apply  to  them.   And  the                                                                    
     administration thinks  it's both fair and  good policy.                                                                    
     You don't want a situation  where you have one pipeline                                                                    
     subject to  one set of  rules for complaints  that were                                                                    
     filed a  year ago,  and that  same pipeline  subject to                                                                    
     another set of rules by  somebody who files a complaint                                                                    
     next year. ... DR&R either is  a function of the RCA or                                                                    
     it isn't.   It  can't exist two  different ways  on the                                                                    
     same pipeline for two different litigants.                                                                                 
                                                                                                                                
REPRESENTATIVE GUTTENBERG asked whether any part of Order 151                                                                   
hasn't been appealed or remanded.                                                                                               
                                                                                                                                
MS. LEVY replied:                                                                                                               
                                                                                                                                
     Nothing has been  remanded.  All of Order  151 has been                                                                    
     appealed.   There are pieces  of the docket  from which                                                                    
     [Order] 151  arose that  remain before  the commission,                                                                    
     but  those have  not been  resolved.   They are  not on                                                                    
     appeal.   There's  not  an order  yet  with respect  to                                                                    
     those,  and they  involve  DR&R.   So  they involve  an                                                                    
     issue  that's being  addressed within  the body  of the                                                                    
     bill.                                                                                                                      
                                                                                                                                
REPRESENTATIVE GUTTENBERG  requested confirmation that  this bill                                                               
would  address   all  of  those  issues   that  aren't  appealed,                                                               
basically the DR&R.                                                                                                             
                                                                                                                                
MS. LEVY said that is correct.                                                                                                  
                                                                                                                                
Number 1478                                                                                                                     
                                                                                                                                
REPRESENTATIVE GATTO  asked whether it  is a departure  from past                                                               
practice to have  [decisions about] the land  being separate from                                                               
rates and services.                                                                                                             
                                                                                                                                
MS. LEVY  replied, "No.   That's  always been the  case."   As to                                                               
what  triggered  this,  she said  there  was  litigation  brought                                                               
before the RCA and explained:                                                                                                   
                                                                                                                                
     It cited  to this statutory authority  to oversee state                                                                    
     leases  as a  basis  for having  jurisdiction over  ...                                                                    
     both intrastate  and interstate DR&R collections.   And                                                                    
     I think  that's what brought this  to folks' attention.                                                                    
     But the  leases have  always been  entered into  by the                                                                    
     state.   The  state  owns the  land.   If  it issues  a                                                                    
     right-of-way lease, it does so  pursuant to the statute                                                                    
     and through  a long string  of requirements set  by the                                                                    
     legislature.                                                                                                               
                                                                                                                                
     And so this would be new  to have the RCA overseeing or                                                                    
     interpreting  the state's  leases.   And  I'm not  sure                                                                    
     what would  happen if the  RCA had a different  view of                                                                    
     what our  contractual requirements  were than  what the                                                                    
     state  thought  of its  own  contract.   And  so  we're                                                                    
     concerned about  that as a  policy matter -  who should                                                                    
     be interpreting ... the state's contracts.                                                                                 
                                                                                                                                
Number 1558                                                                                                                     
                                                                                                                                
REPRESENTATIVE GUTTENBERG  referred to Section 4  and the concept                                                               
that  the commission  may not  base intrastate  rates on  revenue                                                               
collected  on interstate  transportation.   He asked,  "Does this                                                               
mean that they  can't use any of the information  they know about                                                               
those  rates,  ...  any  part  of  their  understanding  of  what                                                               
happens, whether its overpayment,  underpayment, or just any part                                                               
of  the rate  structure ...  on interstate,  ... that  they can't                                                               
gather information and understand what  happens and even use that                                                               
in consideration?"                                                                                                              
                                                                                                                                
MS. LEVY answered no.  She explained:                                                                                           
                                                                                                                                
     This  language  is  a  clarification  of  the  previous                                                                    
     version  of  the  bill,  which   used  the  words  "the                                                                    
     commission may  not consider" -  I think is the  way it                                                                    
     was  written.   And  in the  last  committee there  was                                                                    
     concern expressed  about the  use of  that word,  and I                                                                    
     think  that's why  the committee  changed  this so  ...                                                                    
     they can consider it, they  gather any information they                                                                    
     want, [and] they can look at anything.                                                                                     
                                                                                                                                
     But  under  this,  the  commission  may  not  base  the                                                                    
     intrastate  rates  on  what's  been  collected  on  the                                                                    
     interstate side.  ... You  have to kind  of view  it in                                                                    
     your mind as though [there  are] two pipes:  there's an                                                                    
     interstate pipe  and an intrastate  pipe.   And there's                                                                    
     one big cost in operating that regulated entity.                                                                           
                                                                                                                                
     If the FERC  ... does not allow the  interstate side to                                                                    
     collect  a  sufficient  amount -  maybe  they  have  90                                                                    
     percent of the  throughput and they only  allow them to                                                                    
     collect  80 percent  - in  our view  that doesn't  mean                                                                    
     that the  extra 10 percent  should be picked up  by the                                                                    
     intrastate  shippers. ...  That wouldn't  be the  right                                                                    
     approach.                                                                                                                  
                                                                                                                                
     The right  approach is,  if 10 percent  of it  is being                                                                    
     shipped on the intrastate side,  they pay 10 percent of                                                                    
     the cost.   If the  FERC didn't allow them  enough, the                                                                    
     carriers  go back  to the  FERC and  plead their  case.                                                                    
     And  the same  would be  true if  they allowed  them to                                                                    
     collect  too much,  from the  RCA's view,  on the  FERC                                                                    
     side; that  doesn't mean the  shippers get to  ship for                                                                    
     ...  free on  the intrastate  side. ...  You go  to the                                                                    
     agency  that regulates  that  portion  of the  service.                                                                    
     And ... I think that's the only way to keep it clear.                                                                      
                                                                                                                                
     But certainly, under this  language, nobody's trying to                                                                    
     hide information. ...  I have a lot of  respect for the                                                                    
     RCA.   They're entitled  to any information  they think                                                                    
     they may  need to get  a full picture of  the operation                                                                    
     of the pipeline.                                                                                                           
                                                                                                                                
Number 1684                                                                                                                     
                                                                                                                                
CHAIR ANDERSON noted  that several members had heard  the bill in                                                               
previous committees.                                                                                                            
                                                                                                                                
REPRESENTATIVE GUTTENBERG  pointed out, however, that  the latest                                                               
version  moved  out of  the  House  Resources Standing  Committee                                                               
without  testimony or  questioning,  despite significant  changes                                                               
such  as that  the commission  may  not "base"  as compared  with                                                               
"consider".                                                                                                                     
                                                                                                                                
CHAIR ANDERSON  said he  hadn't realized that.   He  again called                                                               
upon Mr. Harbour, chair of the RCA, to testify.                                                                                 
                                                                                                                                
Number 1744                                                                                                                     
                                                                                                                                
MR. HARBOUR told members:                                                                                                       
                                                                                                                                
     I  guess I'll  start by  saying that  we are  sometimes                                                                    
     categorized  as  being  on  a  side  -  and  ...  we're                                                                    
     actually  the  only entity  advising  you  that has  no                                                                    
     financial stake  in the  outcome of  this debate.   The                                                                    
     state itself  is a party  to various open  dockets that                                                                    
     are related  to the  legislation that's  been proposed,                                                                    
     and  we respect  the  state's advocacy,  for under  the                                                                    
     agreements  that  it has  with  the  TAPS owners,  it's                                                                    
     obligated to defend the agreement.                                                                                         
                                                                                                                                
     We  are not  obligated  to defend  the  agreement.   By                                                                    
     statute  and by  terms of  the pipeline  Act that  your                                                                    
     predecessors established, we are  obligated to look out                                                                    
     after  the  public  interest, as  well  as  assure  the                                                                    
     proper relationship of rates ...  to all of the parties                                                                    
     involved.  And that leads us to this particular bill.                                                                      
                                                                                                                                
Number 1789                                                                                                                     
                                                                                                                                
MR.  HARBOUR  told members  Section  1,  rather than  clarifying,                                                               
obscures almost  everything except the interest-rate  issue.  For                                                               
example,  paragraph   (9),  which  discusses  the   role  of  the                                                               
commissioner of  natural resources,  only appears to  clarify the                                                               
commissioner's role.  He explained:                                                                                             
                                                                                                                                
     The  ...  commissioner  of   natural  resources  has  a                                                                    
     responsibility over state lands  and state leases - and                                                                    
     properly so  - and  for the  proper execution  of those                                                                    
     leases.   And  the  assistant attorney  general and  we                                                                    
     agree  on  that  point.    What's  obscured  is  what's                                                                    
     missing, that  is, what entity  then goes on  to assure                                                                    
     that  those  operating   the  pipeline  have  collected                                                                    
     sufficient fees  for the dismantlement of  the project,                                                                    
     and properly apply those, and  that those are available                                                                    
     and ...,  further [adding] to  this web  of complexity,                                                                    
     that proper rates are charged the intrastate shippers.                                                                     
                                                                                                                                
Number 1869                                                                                                                     
                                                                                                                                
MR.  HARBOUR  addressed  Section  2, saying  that  apparently  an                                                               
attempt  to correct  a fairly  glaring  error only  added to  the                                                               
obscurity  in   relation  to  later  portions   of  the  proposed                                                               
amendments.  He explained:                                                                                                      
                                                                                                                                
     After the words ... "carriers  in the state", they took                                                                    
     out the section  "but only to the  extent applicable to                                                                    
     services", in essence pipeline  services; so that would                                                                    
     have  removed  from   your  regulatory  commission  the                                                                    
     ability  to look  over any  facilities, only  services,                                                                    
     and  it would  have seriously  diluted [it].   However,                                                                    
     the  dilution  is still  in  effect  by virtue  of  the                                                                    
     obscurities  that  I'll  lead  you to  as  we  go  down                                                                    
     further.  ...  The bill  before  you  reads now  "shall                                                                    
     regulate  pipelines   and  pipeline  carriers   in  the                                                                    
     state",  period, which  is the  way  the law  currently                                                                    
     reads.  The  last version or the last  two versions had                                                                    
     that  extra  phrase put  in  that  was removed  in  the                                                                    
     [House Resources Standing Committee] ... yesterday.                                                                        
                                                                                                                                
Number 1930                                                                                                                     
                                                                                                                                
MR. HARBOUR referred  to the elimination in  Section 2, paragraph                                                               
(2), of  the following:   ", AND  THE PERFORMANCE  OF OBLIGATIONS                                                               
UNDER  AND COMPLIANCE  WITH THE  TERMS  OF LEASES  ISSUED BY  THE                                                               
STATE".  He told members:                                                                                                       
                                                                                                                                
     [That]  goes  back to  the  statement  that I  made  on                                                                    
     Section 1  with respect to the  responsibilities of the                                                                    
     commissioner  of the  Department of  Natural Resources.                                                                    
     Certainly,   he,  more   than   any   other,  has   the                                                                    
     jurisdiction  and responsibility  over terms  of leases                                                                    
     and how  those leases are  observed, and how  DR&R, for                                                                    
     example,  under  leases  would be  accomplished  -  the                                                                    
     physical  dismantlement ...  and  so  forth.   However,                                                                    
     again,  this specifically  removes  ... the  commission                                                                    
     from the  ability and  the jurisdiction  to be  able to                                                                    
     look over  the law  to the  larger rate  and collection                                                                    
     issues, and even refund issues.                                                                                            
                                                                                                                                
Number 1978                                                                                                                     
                                                                                                                                
MR. HARBOUR referred to Section 2, subparagraph (8), on page 3,                                                                 
line 31.  He said:                                                                                                              
                                                                                                                                
     Note  that  the  word  "abandonment"  [which  is  being                                                                    
     deleted]  ...  seems  like  a  small  word.    And  the                                                                    
     assistant  attorney  general  might want  to  speak  to                                                                    
     that,  but omitting  "abandonment" as  a responsibility                                                                    
     of  the commission  under this  section  ... puts  huge                                                                    
     obscurity   into  the   whole  process,   for  if   the                                                                    
     commission  ... does  not have  abandonment within  its                                                                    
     portfolio,  then how  may  it -  as it  can  now do  on                                                                    
     behalf  of the  people of  the  state of  Alaska -  ...                                                                    
     certify ...  that DR&R has  been done, that is,  to get                                                                    
     statements  from the  Department  of Natural  Resources                                                                    
     and   the  Bureau   of  Land   Management  and   Native                                                                    
     landowners  and private  landowners  and  then, at  the                                                                    
     request  of  a  pipeline  that   wants  to  go  out  of                                                                    
     business, certify it's done what  it's supposed to have                                                                    
     been ... done - the  fees have been properly collected,                                                                    
     properly   refunded  in   some   cases,   and  then   a                                                                    
     certificate for abandonment  is given.  So  who will do                                                                    
     that if this bill passes?  That's another obscurity.                                                                       
                                                                                                                                
Number 2065                                                                                                                     
                                                                                                                                
MR. HARBOUR noted that the language proposed in Section 3 reads:                                                                
                                                                                                                                
          (c)  Notwithstanding any other provision of this                                                                      
     chapter,  the  commission  does not  have  jurisdiction                                                                    
     over   a  pipeline   carrier   with   respect  to   the                                                                    
     dismantlement, removal, and restoration  of any part of                                                                    
     a pipeline  facility, or over  any amount  collected or                                                                    
     held   by    a   pipeline   carrier    for   performing                                                                    
     dismantlement, removal, and  restoration except amounts                                                                    
     included in a pipeline carrier's intrastate rates.                                                                         
                                                                                                                                
MR. HARBOUR remarked:                                                                                                           
                                                                                                                                
     These  are current  items ...  for the  commission, and                                                                    
     the  specific intent  is to  (indisc.)  of such  items.                                                                    
     And then  it goes on  to say "except  amounts collected                                                                    
     in a pipeline carrier's intrastate  rates".  And I have                                                                    
     to tell you,  ... when I paint this  little picture for                                                                    
     you,  you'll  clearly   understand  the  obscurity  I'm                                                                    
     trying  to  define  for  you.    How  can  you  set  an                                                                    
     intrastate rate,  ... one of whose  components is DR&R,                                                                    
     without knowing the  total picture?  And  this seeks to                                                                    
     make that obscure.                                                                                                         
                                                                                                                                
     All of  these items ...  that I'm defining  as obscure,                                                                    
     I'm also  going to  suggest to  you represent  items of                                                                    
     uncertainty and future litigation  which will have cost                                                                    
     impact indeterminate on  the regulatory commission, but                                                                    
     certainly  represent  uncertainty ...  and  significant                                                                    
     potential litigation  because of the huge,  huge stakes                                                                    
     involved.                                                                                                                  
                                                                                                                                
Number 2131                                                                                                                     
                                                                                                                                
MR. HARBOUR turned attention to Section  4 and said, "This is one                                                               
that's  so confusing  that I've  had several  lawyers within  the                                                               
agency disagreeing  on what  the meaning that  the author  has in                                                               
mind is."  He read from Section 4, which stated in part:                                                                        
                                                                                                                                
     The requirements of this  chapter pertaining to permits                                                                    
     and  certificates of  public convenience  and necessity                                                                    
     do  not  apply  to   the  construction  of  a  pipeline                                                                    
     facility  exclusively subject  to federal  jurisdiction                                                                    
     or  to the  interstate  portion of  the  business of  a                                                                    
     pipeline or  pipeline carrier [EXCLUSIVELY]  subject to                                                                    
     federal jurisdiction ....                                                                                                  
                                                                                                                                
MR. HARBOUR noted that certificates of public convenience and                                                                   
necessity are something the RCA does on behalf of the people of                                                                 
Alaska when there is a pipeline in the state.  He said:                                                                         
                                                                                                                                
     This   removes   that   jurisdiction   for   interstate                                                                    
     pipelines  and  a  pipeline ...  proposed  to  be  only                                                                    
     interstate, or  for an interstate pipeline  ... that is                                                                    
     subject to federal jurisdiction  that has an intrastate                                                                    
     component,  ...  and   that  includes  rates,  tariffs,                                                                    
     charges, classifications, rules.   We've concluded here                                                                    
     that   this  provides   rich,   rich  opportunity   for                                                                    
     employing  lawyers  ...  for years,  especially,  then,                                                                    
     when you go down a little further.                                                                                         
                                                                                                                                
MR. HARBOUR read from the next sentence of Section 4, which                                                                     
stated:                                                                                                                         
                                                                                                                                
     However, the  requirements of this chapter  for permits                                                                    
     and  certificates of  public convenience  and necessity                                                                    
     do  apply  to  [ALL]  the  intrastate  portion  of  the                                                                    
     business of  a pipeline or pipeline  carrier subject to                                                                    
     federal  jurisdiction to  the  extent  the pipeline  or                                                                
     pipeline carrier  is engaged  [WHENEVER IT  ENGAGES] in                                                                
     intrastate   commerce,    including   rates,   tariffs,                                                                
     charges,  classification,  rules,  regulations,  terms,                                                                
     and  conditions  pertaining  solely to  the  intrastate                                                                
     portion of the business.                                                                                               
                                                                                                                                
MR. HARBOUR remarked, "This seems to give back, but it's                                                                        
debatable if it gives back."  He continued:                                                                                     
                                                                                                                                
     Then, the  next sentence that [Ms.  Levy] was referring                                                                    
     to, "The  commission may  not base"  - we  do interpret                                                                    
     basing differently than  the assistant attorney general                                                                    
     does,  and   believe  that  that  also   will  lead  to                                                                    
     significant legal  conflict. ... A couple  of sentences                                                                    
     down,  "However, nothing  in  this  section limits  the                                                                
     power of the commission to consider ...."                                                                              
                                                                                                                                
     OK, just  above, we cannot "base"  ... intrastate rates                                                                    
     on revenue collected  in interstate transportation, but                                                                    
     ...  thank   goodness  that  we  can   "consider"  both                                                                    
     interstate and  intrastate revenue.   Again,  that word                                                                    
     ... is  different than the  word "rates" above,  and it                                                                    
     was changed from the word "cost" a couple of days ago.                                                                     
                                                                                                                                
Number 2263                                                                                                                     
                                                                                                                                
MR. HARBOUR asked that someone provide a clear meaning for                                                                      
Section 4, suggesting it will provide a great deal of                                                                           
difficulty.  He explained:                                                                                                      
                                                                                                                                
     The framers  of the pipeline  Act 30 years ago  ... set                                                                    
     out to make sure that  the State of Alaska's regulatory                                                                    
     jurisdiction reached out, covered  any "no man's land,"                                                                    
     until  it touched  federal jurisdiction.   And  what is                                                                    
     done  at  the  end  of  Section 4,  at  the  very  last                                                                    
     sentence,  is to  remove that  fundamental underpinning                                                                    
     of the  Alaska Pipeline Act  ... by removing  the words                                                                    
     "set out in this chapter  except to the extent they are                                                                    
     preempted by federal law".   [Then-Senator] Groh wanted                                                                    
     to make  sure that the  State of Alaska had  control of                                                                    
     these  facilities except  to  the  extent preempted  by                                                                    
     federal  law.     And  that   is  very   carefully  and                                                                    
     surgically removed from the Act.                                                                                           
                                                                                                                                
Number 2305                                                                                                                     
                                                                                                                                
MR.  HARBOUR  referred  to  Section   5  and  asked  why  "reduce                                                           
capacity"  is being  added and  the following  is being  removed:                                                           
"DISCONTINUE  USE  OF  ALL  OR  ANY  PORTION  OF  A  PIPELINE  OR                                                               
ABANDON".  He told members:                                                                                                     
                                                                                                                                
     If you  read the Alaska  Pipeline Act tonight  at home,                                                                    
     ...  it will  take about  20 minutes  and it  will read                                                                    
     clearly,  as the  framers intended.   And  then if  you                                                                    
     read these  changes, you'll  be scratching  your heads,                                                                    
     as  the professionals  are. ...  This  section is  very                                                                    
     deceptive.   It  looks  as though  it's  saying that  a                                                                    
     pipeline carrier may not  abandon or permanently reduce                                                                    
     capacity, but you  have to look carefully  at the words                                                                    
     and  how  the lawyers  will  interpret  those words  in                                                                    
     future actions.                                                                                                            
                                                                                                                                
MR. HARBOUR  said he  respects all  the regulated  companies that                                                               
come before  the RCA,  but is obligated  to give  the legislature                                                               
straight advice  and counsel as  well, for legislators  to accept                                                               
or not.  As an example, he  posed a situation in which a pipeline                                                               
has a  certain amount of  capacity that was partly  made possible                                                               
through a certain number of either  pump stations, in terms of an                                                               
oil  pipeline,  or  compressor  stations,   in  terms  of  a  gas                                                               
pipeline.   The life of the  pipeline is more than  halfway over,                                                               
throughput  has  peaked,  and  the owner  believes  it  would  be                                                               
cheaper  to  remove  one  or more  compressor  stations  or  pump                                                               
stations.    The  owner  can argue  that  it  hasn't  permanently                                                               
reduced  the capacity.    However, when  a  new explorer  obtains                                                               
reserves and then requests capacity,  the answer will be no, that                                                               
the  number of  pump  stations or  compressor  stations has  been                                                               
reduced and there is [no room for the explorer's product].                                                                      
                                                                                                                                
TAPE 03-52, SIDE B                                                                                                            
                                                                                                                                
MR. HARBOUR said it is obviously  in the interest of the State of                                                               
Alaska to  [be able to  hear issues relating to  capacity], which                                                               
is why  former legislators wrote the  Act as they did.   However,                                                               
[this bill] makes  it arguable that such a  potential shipper can                                                               
appeal to the commission for  capacity.  The commission currently                                                               
has the  ability to hear a  record and issue orders  that provide                                                               
the capacity on a reasonable basis  at reasonable rates.  "If the                                                               
legislature mindfully  wants to  lose that capability  by cutting                                                               
off the arm of the commission to perform that kind of decision                                                                  
making, then that is one of the obscurities that the decision                                                                   
presents to you today," he cautioned.                                                                                           
                                                                                                                                
Number 2360                                                                                                                     
                                                                                                                                
MR. HARBOUR addressed Section 6, calling attention to the last                                                                  
part of it.  He said:                                                                                                           
                                                                                                                                
     The  interest-rate  matter  is   one  that  is  in  the                                                                    
     pipeline  Act  now.    It is  clearly  defined.    It's                                                                    
     defined   otherwise  for   court  judgments   in  other                                                                    
     portions of  our statutes.   If the  legislature wishes                                                                    
     to  clarify that  particular  number,  then that's  not                                                                    
     something that the commission could find fault with.                                                                       
                                                                                                                                
Number 2335                                                                                                                     
                                                                                                                                
MR. HARBOUR turned attention to Section 7 and told members:                                                                     
                                                                                                                                
     The  author  of  this  ...   maybe  had  a  very  clear                                                                    
     understanding  of the  processes in  the added  section                                                                    
     and maybe ... had not  a very good understanding of our                                                                    
     processes.   But we  have the  ability to  do temporary                                                                    
     rates and  interim and refundable rates  ... before the                                                                    
     commission.  And  in order to do what  the author wants                                                                    
     this to do,  after the word "affect",  the word "final"                                                                    
     should  be  inserted so  that  it  reads "affect  final                                                                    
     rates", because  we do not  go back and  do retroactive                                                                    
     ratemaking.                                                                                                                
                                                                                                                                
     We do  make rates interim and  refundable or temporary,                                                                    
     based  upon  the  case  before   us  and  the  evidence                                                                    
     presented, or the  lack of final resolution  ... of the                                                                    
     case. ... And  the parties know that at the  end of the                                                                    
     decision  process, those  will  be made  final and  ...                                                                    
     that either refunds or other  collections will be made,                                                                    
     depending  on  the final  order.    So that  correction                                                                    
     should be made if this thing goes any further.                                                                             
                                                                                                                                
MR. HARBOUR, in response to  Representative Gatto, specified that                                                               
he was talking  about the rates on line 13  previously and in the                                                               
last few  minutes was talking about  "final rates" on line  26 in                                                               
Section 7.  In further response he said:                                                                                        
                                                                                                                                
     If the author wished to  be accurate, the author should                                                                    
     add the word "final"  after "affect" and before "rates"                                                                    
     so  it   reads  "not   affect  final   rates",  because                                                                    
     otherwise  it  would  apply  to  all  rates,  including                                                                    
     interim,  refundable,  temporary  ratemaking  that  the                                                                    
     commission does.                                                                                                           
                                                                                                                                
CHAIR  ANDERSON noted  that  Mr. Harbour  must  have a  different                                                               
document, because on his own copy it was on page 6, line 28.                                                                    
                                                                                                                                
Number 2231                                                                                                                     
                                                                                                                                
MR. HARBOUR turned attention to Section 8 and said:                                                                             
                                                                                                                                
     I don't  think the intent  is problematic.  I  do think                                                                    
     that the legislature should consider  the fact that, as                                                                    
     ... in some current cases,  the attorney general may be                                                                    
     representing the state as a  party to issues before the                                                                    
     commission,  ...  in  which case  the  legislature  has                                                                    
     defined  ex  parte   communications  and  the  attorney                                                                    
     general  should not  be consulting  under your  current                                                                    
     statutes  with  this   commission  on  pipeline  tariff                                                                    
     matters and open dockets on  which the attorney general                                                                    
     is representing a party.                                                                                                   
                                                                                                                                
Number 2201                                                                                                                     
                                                                                                                                
MR. HARBOUR addressed  Section 9 and retroactivity.   He referred                                                               
to page  7, line  30, which  says Sections 1-5  and 7-8  apply to                                                               
matters pending before the RCA on  or after the effective date of                                                               
the Act.   He  also referred  to testimony by  the state  and the                                                               
bill's advocates that  there is no intent to be  retroactive.  He                                                               
estimated that  if the bill  passes in  the near future,  it will                                                               
apply  to approximately  30 open  dockets that  are pending.   He                                                               
added  that these  are "big  issues that  are the  target of  the                                                               
obscurity that I have described to you."                                                                                        
                                                                                                                                
Number 2079                                                                                                                     
                                                                                                                                
REPRESENTATIVE CRAWFORD  asked why [Section 9  says] Sections 1-5                                                               
and 7-8 apply  to matters pending before the RCA  on or after the                                                               
effective  date, whereas  subsection (b)  says Section  6 applies                                                               
only to  matters filed before the  RCA on or after  the effective                                                               
date of this Act.                                                                                                               
                                                                                                                                
MR. HARBOUR  suggested that Ms.  Levy's reply would refer  to the                                                               
interest-rate section, which  he said is the least  cloudy of all                                                               
the issues he'd presented.                                                                                                      
                                                                                                                                
MS. LEVY responded:                                                                                                             
                                                                                                                                
     The applicability  section [Section  9], ...  I believe                                                                    
     that Chairman  Harbour is  reading the  bill correctly.                                                                    
     I think  this is  what the previous  committee intended                                                                    
     to  pass out.    If you  take it,  looking  at line  3,                                                                    
     Section  6  is  the  interest section.    So,  for  any                                                                    
     pending  matter,  the  30  cases  or  so  that  he  has                                                                    
     referenced, if  in fact as  a result of the  outcome of                                                                    
     those  cases  there  is  ...   a  refund  ordered,  the                                                                    
     interest rate  will be the  interest rate  that applies                                                                    
     today,  not the  one that's  being put  into effect  by                                                                    
     this bill.                                                                                                                 
                                                                                                                                
     The   reason    that   the    administration   supports                                                                    
     [subsection] (a)  to the  effect that  the rest  of the                                                                    
     sections will apply to pending  matters is - as I tried                                                                    
     to say before,  and perhaps I didn't do  it too clearly                                                                    
     - ... many of these  charges are what we believe either                                                                    
     are in  the law  or ought  to be in  the law,  and it's                                                                    
     appropriate and good policy for them to apply.                                                                             
                                                                                                                                
     It's appropriate  and good policy that  DNR oversee its                                                                    
     own leases.   We do  not believe that anything  in this                                                                    
     bill is going to impede the  ability of the RCA to look                                                                    
     at rates collected for DR&R.   We don't think that it's                                                                    
     their role,  necessarily, to  ensure that  enough money                                                                    
     has been  collected because, in  our view,  whether the                                                                    
     pipeline  carriers collect  enough money  or not,  they                                                                    
     have to  do what's required  by the contract.   If they                                                                    
     fail to come to the  commission and ask for that money,                                                                    
     they may  not get it  from the shippers.   And, indeed,                                                                    
     that's  what  happened in  Cook  Inlet  pipeline.   The                                                                    
     first 13  years of  its life,  it operated  without any                                                                    
     DR&R being  collected.   It is still  going to  have to                                                                    
     perform DR&R,  even though  it didn't  -- I  don't know                                                                    
     why  it  didn't, but  it  didn't  ask  for that  to  be                                                                    
     collected in  its rates,  and the  APUC didn't  come in                                                                    
     and tap them  on the shoulder and say,  "Excuse me, you                                                                    
     forgot to ask  for a DR&R collection".   But they still                                                                    
     have to do the job.                                                                                                        
                                                                                                                                
Number 1930                                                                                                                     
                                                                                                                                
CHAIR ANDERSON asked Ms. Levy to respond to Mr. Harbour's                                                                       
comment about the 30 open dockets that will be affected.                                                                        
                                                                                                                                
MS. LEVY replied:                                                                                                               
                                                                                                                                
     Well,  as I  said, if  you walk  through the  different                                                                    
     sections of the  bill - ... if you're of  the view that                                                                    
     each  of  these  provisions  is good  policy,  and  the                                                                    
     administration is  of that  view -  then we  think it's                                                                    
     appropriate that they  apply now.  And  if there aren't                                                                    
     really any rights being trampled  on here, in the sense                                                                    
     that we think this points  everyone to the right result                                                                    
     in any event - that,  for example, there isn't anything                                                                    
     pending before  the RCA ...  that discusses  whether or                                                                    
     not DNR  has authority over its  leases, really; that's                                                                    
     not an  issue in someone's  case -  if you were  to say                                                                    
     that  this doesn't  apply, it's  not applicable,  ... I                                                                    
     don't know how  you interpret that if you  pass the law                                                                    
     today.                                                                                                                     
                                                                                                                                
     It has  to either apply  now and  in the future  ... or                                                                    
     not.   It doesn't really apply  to the case.   The ones                                                                    
     that do,  ... in all  fairness, ... it's the  DR&R. ...                                                                    
     That goes to the heart of  the issue:  ... should there                                                                    
     be authority right now over  DR&R.  And we believe that                                                                    
     over DR&R rates,  yes, there should be.   And this bill                                                                    
     doesn't remove  it.   And so to  the extent  that those                                                                    
     pending  cases involve  how much  can be  collected for                                                                    
     DR&R  -   has  it  been  overcollected,   has  it  been                                                                    
     undercollected  -   we  believe   that  the   RCA  will                                                                    
     absolutely  still  have  the authority  to  make  those                                                                    
     determinations.                                                                                                            
                                                                                                                                
REPRESENTATIVE CRAWFORD asked to hear  from both [Mr. Harbour and                                                               
Ms.  Levy].   Observing  that it  seems  jurisdictions are  being                                                               
changed,  he  inquired  whether   the  likelihood  of  litigation                                                               
related to issues like DR&R is addressed in the fiscal notes.                                                                   
                                                                                                                                
CHAIR ANDERSON announced that he would hold that question.                                                                      
                                                                                                                                
Number 1790                                                                                                                     
                                                                                                                                
REPRESENTATIVE GUTTENBERG pointed out that there was no House                                                                   
Finance Committee referral for the bill.  He expressed concern                                                                  
about the indeterminate fiscal impact to the state and the zero-                                                                
impact [fiscal] notes.  He asked Mr. Harbour to expand on that.                                                                 
                                                                                                                                
MR. HARBOUR replied:                                                                                                            
                                                                                                                                
     I'm in a challenging  position, surrounded by companies                                                                    
     and lawyers  that I respect,  and ... the  governor has                                                                    
     appointed me  and you  [the legislature]  confirmed ...                                                                    
     that  appointment.   And I'm  in a  position of  having                                                                    
     submitted a fiscal note  to the administration, through                                                                    
     channels, that  ... says what  I testified to,  that we                                                                    
     believe there  is a  fiscal impact on  the agency  as a                                                                    
     result ... of litigation.  And  so all I can do is give                                                                    
     that to you [verbally] as  my testimony.  As to whether                                                                    
     the administration  or the [DCED]  - to which  [the RCA                                                                    
     is] administratively  attached -  wishes to  issue that                                                                    
     fiscal note or one that's  revised, then one would have                                                                    
     to respect their ability to do so.                                                                                         
                                                                                                                                
MR. HARBOUR concluded with the following on the DR&R issue:                                                                     
                                                                                                                                
     I  know   that  the  state  has   testified  that  each                                                                    
     landowner  has the  ability  through  contract to  make                                                                    
     sure that DR&R  is done ... as a result  of that lease.                                                                    
     And I  just want to  give you  one example.   Let's say                                                                    
     you  have some  privately  owned territory.   And  only                                                                    
     about   half   of   the   pipeline   is   under   state                                                                    
     jurisdiction, and of the  federal jurisdiction, the BLM                                                                    
     doesn't assure  the collection of  DR&R funds,  and the                                                                    
     FERC  doesn't  assure  the collection  of  DR&R  funds.                                                                    
     Only the  RCA is  the common  stream that  runs through                                                                    
     all of those to assure it's all done properly.                                                                             
                                                                                                                                
     And in the  event that the pipeline  owners, anxious to                                                                    
     close the pipeline  and leave the state,  were to, say,                                                                    
     pay off  private landowners  -   say, ...  "Here's some                                                                    
     millions of  dollars so that  we don't have  to perform                                                                    
     the DR&R obligation" -  it  may be that they'd still be                                                                    
     in trouble  with environmental agencies or  others, but                                                                    
     there wouldn't  be a  regulatory commission  to certify                                                                    
     abandonment  and  that  all  the  work  had  been  done                                                                    
     consistently  throughout the  length  of the  pipeline.                                                                    
     So our objective is not to  overreach - to get into DNR                                                                    
     or BLM  or anybody else's  business or contracts  - but                                                                    
     to assure on behalf of you  and the people of the state                                                                    
     that any DR&R done is seamless and appropriate.                                                                            
                                                                                                                                
Number 1647                                                                                                                     
                                                                                                                                
REPRESENTATIVE CRAWFORD asked Mr. Harbour to fax his proposed                                                                   
fiscal note or related information.                                                                                             
                                                                                                                                
MR. HARBOUR replied:                                                                                                            
                                                                                                                                
     Sir, I have a problem doing  that.  I have submitted it                                                                    
     to the administration through channels,  and it has not                                                                    
     been   approved  by   my  administrative   agency,  the                                                                    
     Department  of  Community and  [Economic  Development].                                                                    
     And, therefore,  I think it would  be inappropriate for                                                                    
     me to submit my own draft.                                                                                                 
                                                                                                                                
Number 1594                                                                                                                     
                                                                                                                                
RANDAL  G.  BUCKENDORF,   Counsel,  Anchorage  Legal  Department,                                                               
ConocoPhillips Alaska,  Inc. ("ConocoPhillips"), began  by noting                                                               
that  he does  his  company's environmental  and pipelines  legal                                                               
work.  He told members:                                                                                                         
                                                                                                                                
     As  you know,  49 days  ago, on  March 26,  I presented                                                                    
     testimony  to the  subcommittee  outlining why  certain                                                                    
     changes needed to  be made to the  Alaska Pipeline Act.                                                                    
     The subcommittee recognized changes  needed to be made,                                                                    
     and  Representative  Dahlstrom  took  the  concepts  we                                                                    
     presented, crafted HB 277, and  has assisted since that                                                                    
     time   in  getting   the   parties  together,   forcing                                                                    
     discussions,  and  getting  amendments in  the  current                                                                    
     committee  substitute drafted  to  address the  various                                                                    
     concerns  that  have  been presented.    ConocoPhillips                                                                    
     supported  changes before  you then  and supports  this                                                                    
     bill before you today.                                                                                                     
                                                                                                                                
MR. BUCKENDORF addressed what he characterized as myths and                                                                     
misperceptions with regard to the bill.  He said:                                                                               
                                                                                                                                
     HB 277 does  not overturn the recent RCA  order on TAPS                                                                    
     rates, Order No.  151.  I stated that that  was not the                                                                    
     intent to  you 49 days ago.   It was not  the intent of                                                                    
     the  initial  bill,   and  certain  clarifications  and                                                                    
     actual deletions from that bill  have been made to make                                                                    
     sure  that  is   not  the  case.    HB   277  does  not                                                                    
     legislatively   approve   the  1985   TAPS   settlement                                                                    
     agreement.   I think this  bill makes that  very clear.                                                                    
     HB  277   does  not  remove  RCA's   jurisdiction  over                                                                    
     establishing  intrastate   [pipeline]  tariffs.     Ms.                                                                    
     Levy's testimony made that very clear.                                                                                     
                                                                                                                                
Number 1491                                                                                                                     
                                                                                                                                
MR. BUCKENDORF continued:                                                                                                       
                                                                                                                                
     HB 277 does  not foreclose the state's  right to ensure                                                                    
     the  proper  development of  its  resources.   It  just                                                                    
     allocates jurisdictional  authority as  between several                                                                    
     agencies in a proper manner.   HB 277 does not create a                                                                    
     jurisdictional gap  that will allow the  pipeline owner                                                                    
     to treat an affiliate  shipper any differently than any                                                                    
     other shipper of oil.                                                                                                      
                                                                                                                                
     Rather,  the  bill  is  about  clarity  and  certainty.                                                                    
     HB 277 is  about creating an atmosphere  for the future                                                                    
     where  companies big  and small  alike are  clear about                                                                    
     the  rules  when  they   explore,  develop,  and  build                                                                    
     pipelines to develop those resources.                                                                                      
                                                                                                                                
MR. BUCKENDORF noted that the sectional analysis he'd intended                                                                  
to address is very similar to that presented by the                                                                             
administration through Ms. Levy.                                                                                                
                                                                                                                                
Number 1443                                                                                                                     
                                                                                                                                
MR. BUCKENDORF offered the belief that Sections 1, 2, and 3                                                                     
address jurisdictional overlap and discontinuity that currently                                                                 
exist between the RCA and DNR.  He said:                                                                                        
                                                                                                                                
     Various   amendments   through   [the   House   Special                                                                    
     Committee  on  Oil  and Gas  and  the  House  Resources                                                                    
     Standing Committee]  have provided clarity  around what                                                                    
     certain of  those changes were  intended to do,  and we                                                                    
     believe the current draft should  be supported in doing                                                                    
     that.                                                                                                                      
                                                                                                                                
     Pipeline    leases    are    essentially    contractual                                                                    
     arrangements  between  every  pipeline  owner,  whether                                                                    
     it's  for an  Alpine pipeline  owner and  it's a  lease                                                                    
     between ... ConocoPhillips and  Anadarko, or the trans-                                                                    
     Alaska  pipeline.   All of  those leases  have recently                                                                    
     been  extended  for  an   additional  30  years;  we're                                                                    
     signatories  to them,  and  the  Department of  Natural                                                                    
     Resources has signed them on  behalf of the state.  Any                                                                    
     implication that  the RCA can attempt  to insert itself                                                                    
     into  those leases  just as  if they  were a  signatory                                                                    
     party, when clearly they are  not, is unacceptable both                                                                    
     from a contractual and a regulatory point of view.                                                                         
                                                                                                                                
     A myth that you will hear  is that the bill will remove                                                                    
     RCA authority to oversee  money collected on intrastate                                                                    
     rates for DR&R.  That  is incorrect.  Another myth that                                                                    
     you will  hear is that it  is an essential duty  of the                                                                    
     RCA to  make sure  enough money  has been  collected to                                                                    
     ensure DR&R is performed.   I agree completely with Ms.                                                                    
     Levy.  That is  not the case.  We are  bound by law and                                                                    
     contract  to  perform  DR&R   on  state,  federal,  and                                                                    
     private  lands,  whether  or not  the  money  has  been                                                                    
     collected.   I do our  legal [work] for the  Cook Inlet                                                                    
     pipeline  that Ms.  Levy ...  referenced.   It was  not                                                                    
     collected.   It  was  not allowed  to  be collected  in                                                                    
     arrears.   And yet,  still, we're responsible  for that                                                                    
     payment.                                                                                                                   
                                                                                                                                
Number 1322                                                                                                                     
                                                                                                                                
MR. BUCKENDORF turned attention to Sections 8 and 9, noting that                                                                
they've generated a lot of questions.  He said:                                                                                 
                                                                                                                                
     Section   8  is   a  new   section   proposed  by   the                                                                    
     administration  to  further  clarify the  role  of  the                                                                    
     [attorney general].   We also agree  that that codifies                                                                    
     current practice.   I can  speak from experience:   the                                                                    
     attorney general's  office has challenged  every single                                                                    
     pipeline  tariff  ever  filed  in  the  state.    I  am                                                                    
     positive they will  continue to do so.   This clarifies                                                                    
     ... their role in doing that.                                                                                              
                                                                                                                                
     And  finally, as  to applicability  [in Section  9] and                                                                    
     certain of  the questions surrounding Sections  1-5 and                                                                    
     7-8 of  the Act, it  is ... essential that  those apply                                                                    
     and  that there  not be  two bodies  of law  applicable                                                                    
     surrounding jurisdiction.   Although we had recommended                                                                    
     [it and] we do believe it  is still a decision that the                                                                    
     legislature ...  could make to retroactively  apply the                                                                    
     interest rate, the administration  is not supportive of                                                                    
     that now,  and we're  not advocating  for that  at this                                                                    
     time.     But   ...  jurisdictional   clarification  is                                                                    
     essential to apply  at all points in time,  and that is                                                                    
     how  the   current  practice  has  been   whenever  the                                                                    
     legislature    makes     changes    regarding    simple                                                                    
     jurisdiction.                                                                                                              
                                                                                                                                
MR. BUCKENDORF closed by submitting his written testimony.                                                                      
                                                                                                                                
CHAIR ANDERSON called on Mr. Hanley, noting that he is a former                                                                 
state Representative.                                                                                                           
                                                                                                                                
Number 1260                                                                                                                     
                                                                                                                                
MARK HANLEY,  Public Affairs Manager, Alaska;  Anadarko Petroleum                                                               
Corporation  ("Anadarko"),  pointed  out   that  the  version  of                                                               
CSHB 277(RES)  being  addressed  by the  committee,  Version  23-                                                               
LS0980\I,  although it  had  been read  across  the House  floor,                                                               
wasn't what moved out of  the House Resources Standing Committee.                                                               
He expressed concern about some unspecified provisions.                                                                         
                                                                                                                                
REPRESENTATIVE  DAHLSTROM responded,  "This is  a work  draft and                                                               
Mr.  Hanley  is correct  -  there  are  a few  errors,  technical                                                               
errors, that  were made  ... from the  version that  was accepted                                                               
and voted on  in [the House Resources Standing  Committee]."  She                                                               
indicated her staff could address the differences.                                                                              
                                                                                                                                
CHAIR ANDERSON asked when Representative  Dahlstrom had found out                                                               
about this.  [There was no audible response.]                                                                                   
                                                                                                                                
REPRESENTATIVE ROKEBERG inquired as to the problem areas.                                                                       
                                                                                                                                
The committee took an at-ease from 5:20 p.m. to 5:24 p.m.                                                                       
                                                                                                                                
Number 1174                                                                                                                     
                                                                                                                                
CHAIR ANDERSON  explained that there had  been inadvertent errors                                                               
in transferring  CSHB 277(RES) from the  House Resources Standing                                                               
Committee.   He suggested those  errors probably  wouldn't change                                                               
much of the testimony of Ms.  Levy or Mr. Harbour, in particular,                                                               
but  suggested it  would  be prudent  to  have public  testimony,                                                               
including  from   Mr.  Hanley,  after  the   proper  version  was                                                               
obtained.  [HB 277 was held over.]                                                                                              
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being no  further business before the  committee, the House                                                               
Labor and  Commerce Standing Committee  meeting was  adjourned at                                                               
5:25 p.m.                                                                                                                       

Document Name Date/Time Subjects