Legislature(1999 - 2000)

03/21/2000 05:16 PM House O&G

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
             HOUSE SPECIAL COMMITTEE ON OIL AND GAS                                                                             
                         March 21, 2000                                                                                         
                            5:16 p.m.                                                                                           
                                                                                                                                
                                                                                                                                
COMMITTEE CALENDAR                                                                                                              
                                                                                                                                
PRESENTATION BY ALASKA INTRASTATE GAS COMPANY                                                                                   
                                                                                                                                
TAPE                                                                                                                            
                                                                                                                                
00-19, SIDES A AND B                                                                                                            
                                                                                                                                
CALL TO ORDER                                                                                                                   
                                                                                                                                
Representative Jim Whitaker, Chairman,  convened the House Special                                                              
Committee on Oil and Gas meeting at 5:16 p.m.                                                                                   
                                                                                                                                
PRESENT                                                                                                                         
                                                                                                                                
Members present  were Representatives  Whitaker, Porter,  Kemplen,                                                              
Brice and Smalley.  Representative  Green joined the meeting while                                                              
it was in progress.                                                                                                             
                                                                                                                                
SUMMARY OF INFORMATION                                                                                                          
                                                                                                                                
CHAIRMAN  WHITAKER introduced  Frank Avezac,  Paul Rusanowski  and                                                              
John Henry Dale of the Alaska Intrastate Gas Company.                                                                           
                                                                                                                                
FRANK AVEZAC  briefly described the  company's Southeast  and Gulf                                                              
of Alaska (SEAGA) project.                                                                                                      
                                                                                                                                
PAUL RUSANOWSKI began the presentation  by stating that except for                                                              
in the Anchorage Bowl and South Central  Alaska, there has been no                                                              
development or use  of natural gas with the exception  of some use                                                              
on the North Slope.   The SEAGA project has been  in the works for                                                              
about nine  years; through it,  the Alaska Intrastate  Gas Company                                                              
hopes to bring  gas to communities that have not  yet been served.                                                              
The intent is to provide gas as propane  and liquefied natural gas                                                              
(LNG).  In liquid  form, the gas can be transported  and stored in                                                              
communities, then re-gasified for use there.                                                                                    
                                                                                                                                
MR. RUSANOWSKI  discussed  the Alaska Intrastate  Gas Company,  an                                                              
Alaskan corporation  formed in 1992  that filed an  application to                                                              
operate as  a gas utility in  1995; that application  was approved                                                              
on  December 31,  1998,  and on  June 30,  1999,  the company  was                                                              
issued certificates of public convenience  for 17 communities.  As                                                              
a utility operating  in those 17 communities, the  company will be                                                              
involved in  the marketing  and related  support services  and the                                                              
long  term maintenance  and operation  of  local gas  distribution                                                              
systems.    The  company  also  intends  to  contract  for  marine                                                              
transport   of  those   gas  supplies  to   the  17   communities.                                                              
Initially,  they  would be  bringing  gas  to Prince  Rupert  from                                                              
Alberta and British  Columbia as propane, then  transporting it by                                                              
rail.  They are  focusing first on using a mixture  of propane and                                                              
air  that   mimics  natural   gas.    They   will  us   a  similar                                                              
configuration  to other  communities  that use  propane for  "peak                                                              
shaving".                                                                                                                       
                                                                                                                                
REPRESENTATIVE   GREEN   asked  whether   they   would  be   using                                                              
"mercaptains" to reduce smell.                                                                                                  
                                                                                                                                
MR. RUSANOWSKI  said yes.   He continued,  stating that  while the                                                              
SEAGA project  will begin  with gas  from Canada,  it may  also be                                                              
possible to obtain gas from Alaska.   The communities to be served                                                              
initially  include 4 on  the Gulf  of Alaska  and 13 in  Southeast                                                              
Alaska.   The  project anticipates  a  market load  of 26  billion                                                              
cubic  feet (BCF)  annually,  averaged over  the  first 10  years.                                                              
Residential loads are very important,  with industrial, mining and                                                              
electrical following.   The  project anticipates providing  around                                                              
100  megawatts  of  electrical  load   as  electric  power  plants                                                              
currently powered by oil retrofit to use gas.                                                                                   
                                                                                                                                
MR. RUSANOWSKI  said plans  call for using  barges of  the typical                                                              
size, 300  feet long  by 63 feet  wide, with a  draft of  11 feet.                                                              
They would  be moved by "push  tugs" on inland waters.  There also                                                              
are existing hydro-train barges that  can carry 6 to 24 rail cars,                                                              
allowing LNG to be transported with the existing infrastructure.                                                                
                                                                                                                                
MR. RUSANOWSKI  said phase  1 of  the project  would bring  gas to                                                              
Juneau, Ketchikan  and Sitka, which together account  for about 64                                                              
percent of the projected load.  The  annual load in the first five                                                              
years is expected  to be 4.6 BCF  for residential use and  3.5 BCF                                                              
for  industrial  use.   Phases  2  and  3  will take  gas  to  the                                                              
remaining communities.   Phase 1 is scheduled to  begin service in                                                              
the fall of  2001.  Phases 2 and  3 will be staggered  over a six-                                                              
year period, beginning service no sooner than 2003.                                                                             
                                                                                                                                
MR. RUSANOWSKI said  the LNG component is based  upon peak shaving                                                              
LNG plants supporting 10-36 million  gallons per year, with a feed                                                              
stock rate  of 10  million standard  cubic feet per  day.   If the                                                              
demand  exceeds three  BCF  per year,  the  company will  consider                                                              
building its own  LNG facility, and using both LNG  and propane as                                                              
feed  stocks.    To a  question  by  Representative  Smalley,  Mr.                                                              
Rusanowski  stated  that  the  cost  of  an  LNG  plant  would  be                                                              
somewhere  in   the  $20-50  million   range.    In   response  to                                                              
Representative Porter,  Mr. Rusanowski said the plan  is to locate                                                              
it in Prince  Rupert, but that notion could change  in the future.                                                              
If, in fact,  there were a  gas pipeline project [in  Alaska], the                                                              
company wouldn't have  to build an LNG facility at  all, but could                                                              
just purchase it from the pipeline.                                                                                             
                                                                                                                                
MR. RUSANOWSKI said  the cost of the propane air  system for phase                                                              
1 is  estimated at  $34 million for  the pipe  in the street,  $11                                                              
million  for  the propane  air  and  dock  systems, and  about  $8                                                              
million   for  miscellaneous   startup  costs.     The  cost   for                                                              
residential service will be $7.25  per thousand cubic feet of gas,                                                              
plus a $7.95  utility fee.   There will be discounted  service for                                                              
industrial and  electrical service  customers.  After  providing a                                                              
comparison  to  prices  of heating  oil,  electrical  service  and                                                              
residential  gas  service  by  state,  Mr.  Rusanowski  closed  by                                                              
stating that  they are competitive  with fuel oil in  rural Alaska                                                              
communities, and economically viable  to a distance of 1,000 miles                                                              
(transportation),  and can serve communities  with as few  as 400-                                                              
500 residents.                                                                                                                  
                                                                                                                                
MR.  RUSANOWSKI,  in answer  to  questions by  Chairman  Whitaker,                                                              
stated that  the project is moving  ahead incrementally.   He said                                                              
they  will  be looking  at  many  different methods  of  long-term                                                              
financing and  may come back to  the legislature to help  out some                                                              
time in  the future.   He added that  some of the  communities may                                                              
need some assistance with building LNG facilities.                                                                              
                                                                                                                                
CHAIRMAN  WHITAKER asked  whether  they would  obtaining gas  from                                                              
Prince Rupert or from Cook Inlet.                                                                                               
                                                                                                                                
MR. RUSANOWSKI  said  that they will  depend on  gas from  Canada,                                                              
that they initially pursued gas contracts  in the state, but there                                                              
were  problems  with getting  contractual  commitments  that  they                                                              
could provide to  the Regulatory Commission of Alaska  (RCA).  The                                                              
RCA requested the  opportunity to oversee their  supply contracts,                                                              
even though they  are from Canada, to be certain  the price is not                                                              
inflated at any step along the way.                                                                                             
                                                                                                                                
MR.  RUSANOWSKI,  in  response to  a  question  by  Representative                                                              
Smalley, described  the cost structure  to connect a house  to gas                                                              
service.   If the  house is  within 75  feet of  the service,  the                                                              
hookup is free.   If it is  beyond that distance, there  will be a                                                              
prorated cost.  He also went on to  discuss the need to build up a                                                              
reserve  of  gas supply  to  help  meet  increased demand  in  the                                                              
winter.  In response  to a question by Representative  Porter, Mr.                                                              
Rusanowski stated that the economics  of a gas-based economy would                                                              
be beneficial  to the communities for  a long time in  relation to                                                              
solving environmental  problems and reducing their  costs of doing                                                              
business.    The price  of  service  will  be averaged  among  the                                                              
communities rather than differing  from one community to the next.                                                              
                                                                                                                                
COMMITTEE ACTION                                                                                                                
                                                                                                                                
The committee took no action.                                                                                                   
                                                                                                                                
ADJOURNMENT                                                                                                                     
                                                                                                                                
CHAIRMAN WHITAKER adjourned the meeting at approximately 6 p.m.                                                                 
                                                                                                                                
NOTE:   The meeting  was recorded and  handwritten log  notes were                                                              
taken.   A copy of the  tape(s) and log  notes may be  obtained by                                                              
contacting the House Records Office  at 129 6th Street, Suite 229,                                                              
Juneau, Alaska  99801-2197, (907)  465-2214, and after adjournment                                                              
of  the   second  session   of  the   Twenty-first  Alaska   State                                                              
Legislature  this information  may be obtained  by contacting  the                                                              
Legislative Reference Library at  129 6th Street, Suite 102, (907)                                                              
465-3808.                                                                                                                       
                                                                                                                                
                                                                                                                                

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