02/26/2018 03:15 PM House LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| HB340 | |
| HB342 | |
| HB343 | |
| HB147 | |
| HB261 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 340 | TELECONFERENCED | |
| += | HB 342 | TELECONFERENCED | |
| += | HB 343 | TELECONFERENCED | |
| *+ | HB 147 | TELECONFERENCED | |
| *+ | HB 261 | TELECONFERENCED | |
| + | TELECONFERENCED |
ALASKA STATE LEGISLATURE
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
February 26, 2018
3:18 p.m.
MEMBERS PRESENT
Representative Sam Kito, Chair
Representative Adam Wool, Vice Chair
Representative Andy Josephson
Representative Louise Stutes
Representative Chris Birch
Representative Gary Knopp
Representative Colleen Sullivan-Leonard
MEMBERS ABSENT
Representative Mike Chenault (alternate)
Representative Bryce Edgmon (alternate)
COMMITTEE CALENDAR
HOUSE BILL NO. 340
"An Act repealing the Alaska BIDCO Assistance program and
repealing requirements for an annual examination of a BIDCO by
the Department of Commerce, Community, and Economic
Development."
- MOVED HB 340 OUT OF COMMITTEE
HOUSE BILL NO. 342
"An Act amending and repealing registration filing provisions of
the Uniform Land Sales Practices Act; relating to the
jurisdiction of the office of administrative hearings; and
providing for an effective date."
- MOVED HB 342 OUT OF COMMITTEE
HOUSE BILL NO. 343
"An Act relating to examination of premium finance companies."
- MOVED HB 343 OUT OF COMMITTEE
SPONSOR SUBSTITUTE FOR HOUSE BILL NO. 147
"An Act relating to the Board of Public Accountancy; relating to
the licensure of public accountants; and relating to the
practice of public accounting."
- HEARD & HELD
HOUSE BILL NO. 261
"An Act relating to the financing and issuance of bonds for a
liquefied natural gas production system and natural gas
distribution system; and providing for an effective date."
- HEARD & HELD
PREVIOUS COMMITTEE ACTION
BILL: HB 340
SHORT TITLE: REPEAL BIDCO ASSISTANCE PROGRAM
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR
02/09/18 (H) READ THE FIRST TIME - REFERRALS
02/09/18 (H) L&C
02/23/18 (H) L&C AT 3:15 PM BARNES 124
02/23/18 (H) Heard & Held
02/23/18 (H) MINUTE(L&C)
02/26/18 (H) L&C AT 3:15 PM BARNES 124
BILL: HB 342
SHORT TITLE: LAND SALES PRACTICES
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR
02/09/18 (H) READ THE FIRST TIME - REFERRALS
02/09/18 (H) L&C
02/23/18 (H) L&C AT 3:15 PM BARNES 124
02/23/18 (H) Heard & Held
02/23/18 (H) MINUTE(L&C)
02/26/18 (H) L&C AT 3:15 PM BARNES 124
BILL: HB 343
SHORT TITLE: PREMIUM FINANCE COMPANIES : EXAM REQS
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR
02/09/18 (H) READ THE FIRST TIME - REFERRALS
02/09/18 (H) L&C
02/23/18 (H) L&C AT 3:15 PM BARNES 124
02/23/18 (H) Heard & Held
02/23/18 (H) MINUTE(L&C)
02/26/18 (H) L&C AT 3:15 PM BARNES 124
BILL: HB 147
SHORT TITLE: PUBLIC ACCOUNTING
SPONSOR(s): THOMPSON
03/01/17 (H) READ THE FIRST TIME - REFERRALS
03/01/17 (H) L&C
02/02/18 (H) SPONSOR SUBSTITUTE INTRODUCED
02/02/18 (H) READ THE FIRST TIME - REFERRALS
02/02/18 (H) L&C
02/26/18 (H) L&C AT 3:15 PM BARNES 124
BILL: HB 261
SHORT TITLE: EXTEND BOND AUTH FOR INTERIOR ENERGY PROJ
SPONSOR(s): THOMPSON
01/08/18 (H) PREFILE RELEASED 1/8/18
01/16/18 (H) READ THE FIRST TIME - REFERRALS
01/16/18 (H) L&C, FIN
02/26/18 (H) L&C AT 3:15 PM BARNES 124
WITNESS REGISTER
MIKE NAVARRE, Commissioner Designee
Department of Commerce, Community & Economic Development (DCCED)
Juneau, Alaska
POSITION STATEMENT: Introduced HB 340 on behalf of the House
Rules Committee by request of the governor.
PATRICE WALSH, Chief Examiner
Division of Banking and Securities
Department of Commerce, Community & Economic Development (DCCED)
Anchorage, Alaska
POSITION STATEMENT: Answered questions in the hearing on HB
340.
MIKE NAVARRE, Commissioner Designee
Department of Commerce, Community & Economic Development (DCCED)
Juneau, Alaska
POSITION STATEMENT: Introduced HB 342 on behalf of the House
Rules Committee by request of the governor.
MIKE NAVARRE, Commissioner Designee
Department of Commerce, Community & Economic Development (DCCED)
Juneau, Alaska
POSITION STATEMENT: Introduced HB 343 on behalf of the House
Rules Committee by request of the governor.
PATRICE WALSH, Chief Examiner
Division of Banking and Securities
Department of Commerce, Community & Economic Development (DCCED)
Anchorage, Alaska
POSITION STATEMENT: Answered questions in the hearing on HB
343.
REPRESENTATIVE STEVE THOMPSON
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented HB 147 as prime sponsor.
KAREN BREWER-TARVER
Certified Public Accountant
Member, Alaska Board of Public Accountancy
Juneau, Alaska
POSITION STATEMENT: Answered questions in the hearing on HB
147.
JEFF JOHNSON
Member, Alaska Board of Public Accountancy
Fairbanks, Alaska
POSITION STATEMENT: Answered questions in the hearing on HB
147.
DONOVAN RULIEN
Alaska State Board of Accountancy
Anchorage, Alaska
POSITION STATEMENT: Testified in support of HB 147.
REPRESENTATIVE STEVE THOMPSON
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Introduced HB 261 as prime sponsor.
GENE THERRIAULT
Alaska Industrial Development and Export Authority (AIDEA),
Juneau, Alaska
POSITION STATEMENT: Testified in the hearing on HB 261.
JOMO STEWART, Managing Director
Interior Gas Utility
Fairbanks, Alaska
POSITION STATEMENT: Testified in the hearing on HB 261.
ELIZABETH WARLICK
Greater Fairbanks Chamber of Commerce
Fairbanks, Alaska
POSITION STATEMENT: Testified in support of HB 261.
JIM DODSON
Fairbanks Economic Development Corporation
Fairbanks, Alaska
POSITION STATEMENT: Testified in support of HB 261.
DAVID PRUHS
Fairbanks, Alaska
POSITION STATEMENT: Testified in support of HB 261.
ACTION NARRATIVE
3:17:52 PM
CHAIR SAM KITO called the House Labor and Commerce Standing
Committee meeting to order at 3:17 p.m. Representative Sullivan-
Leonard, Wool, Stutes, Knopp, Birch, Josephson and Kito were
present at the call.
HB 340-REPEAL BIDCO ASSISTANCE PROGRAM
3:18:56 PM
CHAIR KITO announced that the first order of business would be
HOUSE BILL NO. 340, "An Act repealing the Alaska BIDCO
Assistance program and repealing requirements for an annual
examination of a BIDCO by the Department of Commerce, Community,
and Economic Development."
3:19:20 PM
MIKE NAVARRE, Commissioner Designee, Department of Commerce,
Community & Economic Development (DCCED), introduced HB 340 on
behalf of the House Rules Committee by request of the governor.
He stated the proposed bill was an efficiency bill, repealing a
number of statutes for a program that has never been funded. He
said there is only one BIDCO in Alaska, and the proposed bill
would bring the need for examinations from every 18 months to
"as needed."
3:20:04 PM
REPRESENTATIVE SULLIVAN-LEONARD said she was confused regarding
how the BIDCO process works. She said she initially though the
proposed bill would be repealing the program altogether. She
asked whether it was the assistance program that would be
repealed.
COMMISSIONER DESIGNEE NAVARRE answered in the affirmative. He
said BIDCOs would still exist, but the assistance program had
never been funded.
REPRESENTATIVE SULLIVAN-LEONARD spoke to the loans for BIDCOs
and some of the jobs data that the program created.
COMMISSIONER DESIGNEE NAVARRE asked to which documents
Representative Sullivan-Leonard referred.
3:22:03 PM
PATRICE WALSH, Chief Examiner, Division of Banking and
Securities, Department of Commerce, Community & Economic
Development (DCCED), answered questions in the hearing on HB
340. She said she did not have the data Representative
Sullivan-Leonard was looking at, so could not answer the
question.
3:22:51 PM
REPRESENTATIVE SULLIVAN-LEONARD said she would follow up with
Ms. Walsh at a later date.
COMMISSIONER DESIGNEE NAVARRE suggested the question was better
directed at Alaska Growth Capital, which facilitates those
loans.
3:23:42 PM
REPRESENTATIVE WOOL asked for clarification about the different
uses of the term "BIDCO".
COMMISSIONER DESIGNEE NAVARRE answered the only BIDCO in Alaska
is the Alaska Growth Capital.
REPRESENTATIVE WOOL asked whether repealing the BIDCO program
was the goal of the proposed bill. He asked whether the
corporation formed by the BIDCO program would stay intact, but
the program would go away.
COMMISSIONER DESIGNEE NAVARRE said the regulatory board would
remain, but the audit process would be carried out when problems
were identified or when the entity is up for renewal.
3:25:50 PM
REPRESENTATIVE KNOPP said he understood the program isn't
functioning. He asked about the intent of the BIDCOs.
COMMISSIONER DESIGNEE NAVARRE deferred to Ms. Walsh.
REPRESENTATIVE KNOPP asked whether the state still supports the
one BIDCO in the state.
3:27:18 PM
CHAIR KITO explained that BIDCOs were a federal construct and
Alaska adopted a state construct. He said he thought federal
funding coming in can come in through the Small Business
Administration and some entities are eligible to be conduits for
the federal money coming in. He said the proposed bill would
remove the state capitalization as well as the state regulatory
requirement for an audit, which would relieve some of the burden
on the BIDCO and on the department while allowing the BIDCO to
benefit from federal programs.
REPRESENTATIVE KNOPP asked whether the program acts as conduit
for federal money.
CHAIR KITO said he thought it was benefiting Alaska by providing
loans from the SBA.
3:28:47 PM
MS. WALSH said that all that had been stated was correct.
3:29:01 PM
REPRESENTATIVE KNOPP asked whether the state would be retaining
oversight authority.
COMMISSIONER DESIGNEE NAVARRE answered there are two parts [to
the proposal]. He said the first part is licensing, which the
department would continue to oversee, and the second part is
funding of the BIDCO loan program which would be repealed. He
explained BIDCOs are able to facilitate loans to Alaska
businesses with federal dollars.
3:30:27 PM
REPRESENTATIVE KNOPP asked whether the state was still receiving
federal funds for BIDCOs.
COMMISSIONER DESIGNEE NAVARRE answered that the one BIDCO can
still access federal funds for loans.
3:30:59 PM
CHAIR KITO stated public testimony on HB 340 was still open
[from the previous bill hearing]. Upon ascertaining that no one
was available to testify, he closed public testimony.
3:31:21 PM
REPRESENTATIVE BIRCH reiterated that his son is employed at the
one BIDCO in the state.
REPRESENTATIVE WOOL asked whether the one BIDCO that is funded
is an investment company.
COMMISSIONER DESIGNEE NAVARRE answered in the affirmative. He
added the company assists businesses to access loan programs.
REPRESENTATIVE WOOL moved to report HB 340 out of committee with
individual recommendations and the accompanying fiscal notes.
There being no objection, it was so ordered.
3:32:35 PM
The committee took an at-ease from 3:32 p.m. to 3:35 p.m.
HB 342-LAND SALES PRACTICES
3:35:08 PM
CHAIR KITO announced that the next order of business would be
HOUSE BILL NO. 342, "An Act amending and repealing registration
filing provisions of the Uniform Land Sales Practices Act;
relating to the jurisdiction of the office of administrative
hearings; and providing for an effective date."
3:36:14 PM
MIKE NAVARRE, Commissioner Designee, Department of Commerce,
Community & Economic Development (DCCED), introduced HB 342 on
behalf of the House Rules Committee by request of the governor.
He said the [Uniform Land Sales Practices] Act was obsolete and
unused and the proposed bill would clean up the statute by
repealing it.
CHAIR KITO stated public testimony on HB 342 was still open
[from the previous bill hearing]. Upon ascertaining that no one
was available to testify, he closed public testimony.
3:37:39 PM
REPRESENTATIVE WOOL moved to report HB 342 out of committee with
individual recommendations and the accompanying fiscal notes.
There being no objection, it was so ordered.
3:37:59 PM
The committee took an at-ease from 3:37 p.m. to 3:40 p.m.
HB 343-PREMIUM FINANCE COMPANIES : EXAM REQS
3:40:39 PM
CHAIR KITO announced that the next order of business would be
HOUSE BILL NO. 343, "An Act relating to examination of premium
finance companies."
3:40:48 PM
MIKE NAVARRE, Commissioner Designee, Department of Commerce,
Community & Economic Development (DCCED), introduced HB 343 on
behalf of the House Rules Committee by request of the governor.
He explained that HB 343 would exempt premium finance companies
from the 18-month examination requirement.
3:42:01 PM
CHAIR KITO commented that he would cautiously support the
proposed bill. He said he would encourage the department to
ensure there would be at least some kind of verification that
there are no issues going into the future.
3:42:44 PM
REPRESENTATIVE SULLIVAN-LEONARD asked why the proposal was to do
away with an examination as opposed to changing it up to a two-
year or three-year period.
COMMISSIONER DESIGNEE NAVARRE said that no issues had been
identified and it was thought renewal examinations would be
sufficient.
3:44:28 PM
PATRICE WALSH, Chief Examiner, Division of Banking and
Securities, Department of Commerce, Community & Economic
Development (DCCED), answered questions in the hearing on HB
343. She confirmed that there are two [review] opportunities
with the licensed group. She stated the groups submit
information for review on December 31 by way of renewal and
March 15 when they submit an annual report. She reiterated the
aim was to best use the division's resources.
3:45:43 PM
REPRESENTATIVE JOSEPHSON asked whether the recommendation came
from the companies or from department staff.
COMMISSIONER DESIGNEE NAVARRE answered that he thought it came
from staff as a way to better utilize their resources.
MS. WALSH confirmed it came from staff.
3:46:26 PM
CHAIR KITO closed public testimony on HB 343.
3:46:36 PM
REPRESENTATIVE WOOL moved to report HB 343 out of committee with
individual recommendations and the accompanying fiscal notes.
There being no objection, it was so ordered.
3:46:49 PM
The committee took an at-ease from 3:46 p.m. to 3:49 p.m.
3:46:58 PM
HB 147-PUBLIC ACCOUNTING
3:49:38 PM
CHAIR KITO announced that the next order of business would be
HOUSE BILL NO. 147, "An Act relating to the Board of Public
Accountancy; relating to the licensure of public accountants;
and relating to the practice of public accounting."
3:49:44 PM
REPRESENTATIVE STEVE THOMPSON, Alaska State Legislature,
presented HB 147 as prime sponsor. He paraphrased the sponsor
statement [included in committee packet] which reads as follows
[original punctuation provided]:
SSHB 147 is a bill that updates the statutes in Title
8 (Business and Professions), Chapter 4 (Accountants).
The National Association of State Boards of
Accountancy (NASBA) and the American Institute of
Certified Public Accountants (AICPA) provided the
Alaska Board of Public Accountancy under the
Department of Commerce, Community, and Economic
Development with a summary of areas where the Alaska
statutes and regulations for public accountancy differ
from the Uniform Accountancy Act or AICPA's Code of
Professional Conduct.
The proposed statute changes will align the Alaska
statutes and regulations for public accountancy with
these national organizations.
Many of the changes in the bill are housekeeping
items. Some changes expand existing language to
provide more information or clarity, while other
changes remove unnecessary language or condense it.
REPRESENTATIVE THOMPSON mentioned that his wife is a certified
public accountant (CPA) and chair of the Alaska CPA Legislative
Committee. He underlined that neither he nor any member of the
CPA community would benefit financially from the proposed bill.
3:52:11 PM
KAREN BREWER-TARVER, Certified Public Accountant, Member, Alaska
Board of Public Accountancy, answered questions in the hearing
on HB 147. She said the board had worked with the Alaska
Society of CPAs to make the changes. She added that none of the
proposed changes are controversial
3:53:11 PM
REPRESENTATIVE SULLIVAN-LEONARD asked for more information
regarding the removal of language from statute.
MS. BREWER-TARVER answered she thought Representative Sullivan-
Leonard was referring to Section 3 of the proposed bill. She
explained there are currently two ways to become licensed in the
state as a CPA. She said a licensee could either pass an exam
or present a license from another state. She added that
currently in Alaska there is a requirement for four years of
public accounting work. It was determined that this is more
than what is asked for from those taking the CPA exam, and the
change would reduce it to two years.
3:54:54 PM
REPRESENTATIVE JOSEPHSON asked Ms. Brewer-Tarver to explain what
is going on with the test functions described in Section 5.
MS. BREWER-TARVER said Section 5 is the confidential
communications section. She said Section 6 was being added to
include wording in the Uniform Accountancy Act outlining which
regulatory agencies to which to submit work papers.
3:56:32 PM
REPRESENTATIVE BIRCH asked whether a CPA designation is required
for a large commercial enterprise for accounting procedures.
MS. BREWER-TARVER answered the only reason a CPA license is
needed is for test functions.
3:57:57 PM
CHAIR KITO opened public testimony on HB 147.
JEFF JOHNSON, Member, Public Accountancy Board, stated that he
is employed by RJG CPA in Fairbanks, Alaska. He said that the
fiscal note reflects the savings on postage due to the use of
email.
REPRESENTATIVE JOSEPHSON asked for the full title of the firm.
MR. JOHNSON answered that it was the initials of the names of
the members of the firm.
3:59:43 PM
DONOVAN RULIEN, Alaska State Board of Accountancy, testified in
support of HB 147. He explained the aim of the proposed bill is
to clean up the language in the statute to bring it up to date.
4:00:30 PM
CHAIR KITO said he would be leaving public testimony open on HB
147.
CHAIR KITO held over HB 147.
HB 261-EXTEND BOND AUTH FOR INTERIOR ENERGY PROJ
4:00:52 PM
CHAIR KITO announced that the next order of business would be
HOUSE BILL NO. 261, "An Act relating to the financing and
issuance of bonds for a liquefied natural gas production system
and natural gas distribution system; and providing for an
effective date."
4:01:25 PM
REPRESENTATIVE STEVE THOMPSON, Alaska State Legislature,
introduced HB 261 as prime sponsor. He said HB 261 would extend
the allowable time for the Alaska Industrial Development and
Energy Authority (AIDEA) to issue bonds for the Interior Energy
Project (IEP) to June 30, 2023. He added the Interior suffers
the most volatile energy costs out of any town on the rail belt.
He said when the price of heating oil is high, many residents
augment their fuel with wood, but due to the climate and
geography of the area, woodburning at low temperatures
contributes to problematic air quality issues for the Interior.
He went on to say that Fairbanks, Alaska, and North Pole,
Alaska, are part of the PM125 non-attainment area which leads to
restrictions on wood sellers and non-compliant wood stoves. He
spoke to Senate Bill 23 in 2013, creating the IEP to bring
affordable gas to people in the Interior. He stated the goal
of the IEP is to bring natural gas to the Interior at the lowest
cost and as quickly as possible. He said the initiative
includes the liquefaction, regasification, storage and
distribution of natural gas. He explained due to limited
liquification and storage infrastructure, the distribution
network never exceeded 70 miles of pipeline. He added that many
of the customers are commercial in nature. This structure made
it challenging to create an expanded network for residents. He
underlined that for a community that supports two major military
installations and many large commercial entities, the volatility
of energy prices has presented a significant economic
impediment.
REPRESENTATIVE THOMPSON said the original funding package for
the IEP included $57.5 million in a capital grant which has been
spent or obligated; $125 million in SETS loans of which $52.8
million has been expended and $45.5 million has been obligated;
$150 million in AIDEA bonding authority - the subject of the
proposed bill - none of which has been used to date. He
underlined the authorization is set to expire on June 30 [2018].
He emphasized that the bonding authority can only be used for
the IEP due to amendments to the financing package created in
the passage of House Bill 105. It can be used to finance
investment-grade utility infrastructure due to covenants
included in the agreements between AIDEA and IGU.
REPRESENTATIVE THOMPSON stated the project has not been without
bumps in the road as is to be expected with any project of this
scale. He listed the accomplishments of the project. In 2014-
2015 the project created build-out covering nearly all of
Fairbanks; adopted a qualified plan of development; and a gas
supply agreement with Hilcorp and an agreement to consolidate
FNG and IGU into a single gas utility through the sale of
Pentex's assets to IGU. He said in the current month
construction was under way to build the 5.2-million-gallon
storage facility that will support customer growth in the new
consolidated system. He said the first transmission is expected
in the late fall or winter 2019. He stated that extending the
sunset for AIDEA bonding will help the community realize the
vision of clean and affordable natural gas in the Fairbanks,
Alaska, area.
4:08:55 PM
REPRESENTATIVE JOSEPHSON asked Representative Thompson to repeat
the three parts that made up Senate Bill 23.
REPRESENTATIVE THOMPSON answered there were $57.5 million in
capital grants; $125 million in sustainable energy transmission
supply (SETS) loans, of which $52.8 million has been expended
and $45.5 million has been obligated.
REPRESENTATIVE JOSEPHSON asked whether there was work done but
still no gas.
REPRESENTATIVE THOMPSON answered in the affirmative. He said
Fairbanks, Alaska only has a small amount of storage and that a
lot of the customers are commercial.
REPRESENTATIVE JOSEPHSON asked about the status of the
transportation of the gas.
REPRESENTATIVE THOMPSON answered that originally there was a
plan to bring gas from the North Slope and now the aim was to
truck gas from Port Mackenzie. He added the rail system has not
been solidified as an alternative.
4:11:24 PM
REPRESENTATIVE STUTES asked about the "bumps in the road."
REPRESENTATIVE THOMPSON answered there had been a purchase of
land on the North Slope as well as the examination of the
possibility of using the railroad.
CHAIR KITO asked about the impact of the price of natural gas on
the project.
REPRESENTATIVE THOMPSON answered that when the project began,
the cost of heating fuel was over $30 per BTU. He said he
thought the breakeven point at the time was about $2 per gallon
to match the cost of fuel oil.
CHAIR KITO said it seemed the changes in oil prices are more
impactful than the price of gas.
4:13:32 PM
GENE THERRIAULT, Alaska Industrial Development and Export
Authority (AIDEA), Juneau, Alaska, testified in the hearing on
HB 261. He explained that when the IEP was first envisioned,
the target was to deliver gas to residential customers at the
fuel oil equivalent cost of $2. He added the components are the
source of the gas, liquefaction, transportation, storage as a
cryogenic fluid, and distribution to customers. He said the
choke point is the lack of liquified natural gas (LNG) storage
in the community.
MR. THERRIAULT said in midsummer when demand falls off, there is
nowhere to store the LNG. He said once the large storage tank
is in place, more customers can be served. He said the rail
transportation has been examined and larger storage containers
have been acquired. He remarked access to the bonding will be
critical when storage is brought online, and more customers will
be served out of the storage.
4:18:05 PM
REPRESENTATIVE JOSEPHSON asked about the current capacity in
Southcentral Alaska to liquify natural gas.
MR. THERRIAULT answered that there is a plant in the Mat-Su area
with approximately one BSF per year and has been in operation
for almost 20 years.
REPRESENTATIVE JOSEPHSON surmised SETS money was not needed for
the plant.
MR. THERRIAULT answered it was previously a private sector
partner and subsequently AIDEA purchased the Pentax assets in
2015.
REPRESENTATIVE JOSEPHSON asked whether there were major changes
in SB 125 compared to HB 261.
MR. THERRIAULT answered that the two bills are identical.
4:19:37 PM
REPRESENTATIVE BIRCH asked what the price would be per British
Thermal Unit (BTU).
MR. THERRIAULT answered the price was $21.81 equivalent to $2.77
fuel oil. He added that currently natural gas is below fuel
oil.
REPRESENTATIVE BIRCH asked if the price is per million BTUs.
MR. THERRIAULT answered it is per thousand cubic feet (MCF).
REPRESENTATIVE BIRCH asked about the break out of the price.
MR. THERRIAULT spoke to House Bill 105, passed in 2015, in which
restrictions were removed when the economics of sourcing gas on
the North Slope didn't work. He said the source of gas from
Hilcorp was higher than expected at $7.72. He stated that
starting in 2020 or 2019 when storage will be available, it
appears that trucking price is $2.53. He said the calculation
had not counted on the railroad. He added that once they are
able to hook up more customers and spread the fixed costs, the
price is expected to come down in the third year when
residential customers come onboard at $15.48 or $15.11 and
therefore close to the $2 fuel oil equivalent.
4:24:15 PM
REPRESENTATIVE KNOPP asked about using the railroad.
MR. THERRIAULT answered the Alaska Railroad trial runs were the
first shipments via rail of LNG in North America. He said the
containers were shipped over from Japan. He explained the
logistics of rail were complex since the site is not near the
railroad and the crews did not have time in the day to complete
the operation. The suggestion was to send railcars to
Anchorage, Alaska, and ship the following day.
4:26:23 PM
REPRESENTATIVE JOSEPHSON asked about the plan to ship LNG to the
North Star Borough.
MR. THERRIAULT described the service territory. He said AIDEA
took the step to purchase the territory in order to expand the
utility. He said the utility could be consolidated to push the
gas out over a wide service area. He said that in 2015 some
SETS money was used to add pipe to North Pole. He explained the
plan was to use the existing tanks to push distribution to a
larger area.
4:28:49 PM
REPRESENTATIVE WOOL asked how much of the bond authority has
been used.
MR. THERRIAULT answered that none of it has been bonded but the
expectation is that storage and plant size will use up the SETS
funds.
REPRESENTATIVE WOOL asked whether the money would be used to
purchase Pentex from AIDEA in the future.
MR. THERRIAULT answered that "it is part of the deal." He
explained the Pentex purchase by AIDEA was done with the
revolving load fun.
4:30:23 PM
CHAIR KITO asked whether the state would be repaid for the
grants.
MR. THERRIAULT answered the state will not be paid back on the
grant dollars. He said the SETS funds have a low interest rate
and the bonds will be issued and the new municipal utility will
be the enterprise that pays the bonds back. He said the state
will not incur any of the debt.
CHAIR KITO asked whether the companies need to come back to the
state for more funding.
MR. THERRIAULT said there was no plan to ask for more funds.
CHAIR KITO remarked that AIDEA has anticipated in its business
plan a certain level of gas prices. He shared his concern that
if flat or lower gas prices are anticipated, high oil prices
will drive people towards gas, but historically high oil prices
means high gas prices. He asked how that factors into the
calculation on the economic viability of the project.
MR. THERRIAULT responded that as the price of oil went down, the
project was challenged. Over a series of years, about 75
percent of people that have access to the pipe would become
customers. As the price of oil came down, that was lowered to
50 percent of people converting over time. The IGU ran numbers
based on 35 percent. It was thought that even at that very low
price, the project would be able to pay its bills. He said the
price of oil and fuel has come back up to above the price of
gas. He added the AIDEA board announced a 3 percent increase
in customers.
CHAIR KITO remarked that historically gas prices increase with
oil prices. He suggested that gas price prediction is risky.
MR. THERRIAULT said the price from Hilcorp is locked in flat for
3 years. He said beyond that it is escalated by 2 percent per
year.
4:37:51 PM
REPRESENTATIVE JOSEPHSON asked whether people can be compelled
to make the transfer by federal ruling.
MR. THERRIAULT answered the local government has air quality
rules. Fairbanks North Star Borough is working with the
Department of Environmental Conservation (DEC). He added there
is pressure from the Environment Protection Agency (EPA) and
eventually the local government may have to implement those
tools. He said they had not chosen to do so, but ultimately the
Clean Air Act will add pressure.
4:39:29 PM
REPRESENTATIVE WOOL asked whether currently gas is being
delivered to Fairbanks through FNG at approximately $20.
MR. THERRIAULT confirmed that current price is $20.81.
REPRESENTATIVE WOOL asked about the Pentex plant capacity.
MR. THERRIAULT answered capacity is about a billion cubic feet
(BCF) per year.
REPRESENTATIVE WOOL suggested it is basically producing a
million MCF per year and that would have to increase.
MR. THERRIAULT said that once the storage was in place, the next
issue would be increasing capacity.
4:41:25 PM
JOMO STEWART, Managing Director, Interior Gas Utility, testified
in the hearing on HB 261. He made a correction on whether the
project will come back for more funding. He stated IGU would be
coming back for funds for storage facilities that would be in
place by 2019.
CHAIR KITO asked whether there is an estimate of how much
additional capital IGU will be asking for from the legislature.
MR. STEWART answered the amount was written in statute as a
reimbursement of maximum $15 million. He said the large
facility would qualify for the full reimbursement. He added a
small satellite LNG facility in North Pole would cost in the $5
million to $7 million-dollar range.
CHAIR KITO asked for confirmation that the amount is identified
in statute but not appropriated and would be a capital request.
MR. STEWART answered in the affirmative.
4:44:54 PM
REPRESENTATIVE WOOL asked for confirmation that the current
storage facility that FNG is using will stay in operation in
conjunction with the new facility on South Cushman.
MR. STEWART answered that a large storage tank will go in and
the two larger ones will be moved out to North Pole.
4:46:17 PM
CHAIR KITO opened public testimony on HB 261.
4:46:25 PM
ELIZABETH WARLICK, Greater Fairbanks Chamber of Commerce,
testified in support of HB 261. She said the Chamber supports
the new storage facility and the expansion in North Pole.
4:48:15 PM
JIM DODSON, Fairbanks Economic Development Corporation,
testified in support of HB 261. He stated the need to bring
affordable clean energy to the Interior.
4:49:15 PM
DAVID PRUHS testified in support of HB 261. He stated the city
of Fairbanks, Alaska has approximately 9,000 structures that
rely on oil. He said the structural life of a buried fuel tank
is 40 to 50 years. He estimated 50-60 percent of Fairbanks,
Alaska, properties have fuel tanks passed their structural life.
He added that real estate operators are ordering the structural
integrity tests. He said Fairbanks, Alaska, also has a water
table that is 12 feet below grade. He stated a new system is
being put in to place to ensure new systems are convertible to
natural gas. He said the city already has the system in place
economically and needs to get there structurally.
4:52:18 PM
REPRESENTATIVE WOOL asked for clarification about the fuel bill
to which Mr. Pruhs referred.
MR. PRUHS answered he was referring to his diesel bill which is
$2.94. He stated he had a gas line close to his house with no
gas in it. He reiterated the need for the proposed legislation.
4:53:09 PM
CHAIR KITO announced he would leave public testimony open on HB
261.
[HB 261 was held over.]
4:53:48 PM
ADJOURNMENT
There being no further business before the committee, the House
Labor and Commerce Standing Committee meeting was adjourned at
4:53 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SSHB 147 Summary of Changes ver A to ver J 2.13.18.pdf |
HL&C 2/26/2018 3:15:00 PM |
HB 147 |
| SSHB 147 Sponsor Statement ver J 2.5.18.pdf |
HL&C 2/26/2018 3:15:00 PM |
HB 147 |
| SSHB 147 version J.pdf |
HL&C 2/26/2018 3:15:00 PM |
HB 147 |
| HB 147 version A.pdf |
HL&C 2/26/2018 3:15:00 PM |
HB 147 |
| HB 147 Letters of Support 2.13.18.pdf |
HL&C 2/26/2018 3:15:00 PM |
HB 147 |
| HB147 Fiscal Note DCCED-CBPL 2.22.18.pdf |
HL&C 2/26/2018 3:15:00 PM |
HB 147 |
| SSHB 147 Sectional Analysis ver J 2.13.18.pdf |
HL&C 2/26/2018 3:15:00 PM |
HB 147 |
| HB261 Supporting Documents - FNSB Resolution 2.12.18.pdf |
HL&C 2/26/2018 3:15:00 PM |
HB 261 |
| HB261 ver A 1.24.18.PDF |
HL&C 2/26/2018 3:15:00 PM |
HB 261 |
| HB261 Sponsor Statement 1.24.18.pdf |
HL&C 2/26/2018 3:15:00 PM |
HB 261 |
| HB261 Fiscal Note DCCED-AIDEA 2.23.18.pdf |
HL&C 2/26/2018 3:15:00 PM |
HB 261 |
| HB261 Letters of Support 2.24.18.pdf |
HL&C 2/26/2018 3:15:00 PM |
HB 261 |
| HB261 Supporting Document - LNG Storage Construction 2.26.18.pdf |
HL&C 2/26/2018 3:15:00 PM |
HB 261 |