Legislature(1997 - 1998)
03/26/1998 10:05 AM House O&G
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE SPECIAL COMMITTEE ON OIL AND GAS
March 26, 1998
10:05 a.m.
MEMBERS PRESENT
Representative Mark Hodgins, Chairman
Representative Scott Ogan
Representative Norman Rokeberg
Representative Joe Ryan
Representative Con Bunde
Representative Tom Brice
Representative J. Allen Kemplen
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
HOUSE BILL NO. 393
"An Act relating to contracts with the state establishing payments
in lieu of other taxes by a qualified sponsor or qualified sponsor
group for projects to develop stranded gas resources in the state;
providing for the inclusion in such contracts of terms making
certain adjustments regarding royalty value and the timing and
notice of the state's right to take royalty in kind or in value
from such projects; relating to the effect of such contracts on
municipal taxation; and providing for an effective date."
- MOVED CSHB 393(O&G) OUT OF COMMITTEE
(* First public hearing)
PREVIOUS ACTION
BILL: HB 393
SHORT TITLE: DEVELOP STRANDED GAS RESOURCES
SPONSOR(S): RULES BY REQUEST OF THE GOVERNOR
Jrn-Date Jrn-Page Action
02/11/98 2280 (H) READ THE FIRST TIME - REFERRAL(S)
02/11/98 2281 (H) OIL & GAS, FINANCE
02/11/98 2281 (H) 2 FISCAL NOTES (DNR, REV)
02/11/98 2281 (H) GOVERNOR'S TRANSMITTAL LETTER
02/19/98 (H) O&G AT 11:00 AM CAPITOL 124
02/19/98 (H) MINUTE(O&G)
02/24/98 (H) O&G AT 10:00 AM CAPITOL 124
02/24/98 (H) MINUTE(O&G)
02/26/98 (H) O&G AT 10:00 AM CAPITOL 124
02/26/98 (H) MINUTE(O&G)
03/03/98 (H) O&G AT 10:00 AM CAPITOL 124
03/05/98 (H) MINUTE(O&G)
03/09/98 2578 (H) RES REFERRAL ADDED
03/10/98 (H) O&G AT 10:00 AM CAPITOL 124
03/10/98 (H) MINUTE(O&G)
03/12/98 (H) O&G AT 10:00 AM CAPITOL 124
03/12/98 (H) MINUTE(O&G)
03/19/98 (H) O&G AT 10:00 AM CAPITOL 124
03/19/98 (H) MINUTE(O&G)
03/24/98 (H) O&G AT 10:00 AM CAPITOL 124
03/24/98 (H) MINUTE(O&G)
03/24/98 (H) O&G AT 5:00 PM CAPITOL 124
03/24/98 (H) MINUTE(O&G)
03/26/98 (H) O&G AT 10:00 AM CAPITOL 124
WITNESS REGISTER
MR. PAT CARTER, Legislative Assistant
to Representative Hodgins
Alaska State Legislature
Capitol Building, Room 110
Juneau, Alaska 99801
Telephone: (907) 465-2283
POSITION STATEMENT: Testified on CSHB 393(O&G).
ACTION NARRATIVE
TAPE 98-28, SIDE A
Number 0001
CHAIRMAN MARK HODGINS called the House Special Committee on Oil and
Gas meeting to order at 10:05 a.m. Members present at the call to
order were Representatives Hodgins, Ogan, Rokeberg and Brice.
Representatives Kemplen, Ryan and Bunde arrived at 10:06 a.m.
HB 393 - DEVELOP STRANDED GAS RESOURCES
Number 0035
CHAIRMAN HODGINS announced the committee would hear HB 393,"An Act
relating to contracts with the state establishing payments in lieu
of other taxes by a qualified sponsor or qualified sponsor group
for projects to develop stranded gas resources in the state;
providing for the inclusion in such contracts of terms making
certain adjustments regarding royalty value and the timing and
notice of the state's right to take royalty in kind or in value
from such projects; relating to the effect of such contracts on
municipal taxation; and providing for an effective date." He
stated that he hoped to move the bill out today. He stated that
the committee is working on CSHB 393(O&G), 0-GH2006\B. He stated
that the committee has dealt with Amendments 1-13 and now has
Amendments 14-17 before the committee. He stated that there is an
additional amendment to replace the gas-to-liquids (GTL) language
but in order to consider that amendment, there needs to be a motion
to rescind the committee's actions at the previous meeting.
Number 0064
REPRESENTATIVE CON BUNDE made a motion to rescind Amendment 3 0-
GH2006\B.8, which read:
Page 2, lines 8-11:
Delete all material.
Renumber the following paragraphs accordingly.
Page 2, lines 23-28:
Delete all material.
Insert "tankers;"
Number 0093
REPRESENTATIVE JOE RYAN stated that it would not bother him at all
if the committee rescinded all his amendments and went back to the
version of the bill that was amended by the committee and
Representative Rokeberg. He stated that he did not plan on
offering his other amendments.
Number 0100
CHAIRMAN HODGINS stated that there is already a motion on the
table.
Number 0120
CHAIRMAN HODGINS called for a brief at ease at 10:15 a.m.
Number 0120
CHAIRMAN HODGINS called the meeting back to order at 10:18 a.m. He
asked if there was an objection to the motion.
REPRESENTATIVE ALAN KEMPLEN objected for purposes of discussion.
He asked why the committee felt it is necessary to rescind
Amendment 3.
Number 0155
REPRESENTATIVE ROKEBERG responded that the reason for rescinding
Amendment 3 is to talk about the merits of the amendment.
REPRESENTATIVE BUNDE stated that there is no requirement in the
legislative process for anyone to explain why they choose to vote
one way or another on any item.
Number 0165
REPRESENTATIVE KEMPLEN removed his objection.
Number 0172
CHAIRMAN HODGINS asked if there were any further objections. He
stated that Amendment 3 is now back in front of the committee.
REPRESENTATIVE ROKEBERG made a motion to amend Amendment 3 to read:
Page 2, lines 8-11:
Delete all material.
Renumber the following paragraphs accordingly.
Number 0185
REPRESENTATIVE SCOTT OGAN objected. He stated that at the last
meeting there was some discussion to include GTL technology. He
suggested that the idea of the bill is to provide an incentive and
to defer various taxes to help a liquefied natural gas (LNG)
pipeline project be economical. GTL technology would not require
building a new pipeline or new infrastructure. He stated that he
is supportive of getting whatever technology is needed to get the
gas developed, however he believed that it is a separate issue. He
stated that when the state has a viable GTL project, then they
could come before the legislature. He stated that the bill is
about building LNG facilities and the impact of taxes. He stated
that he objects to the GTL language being added back into the bill.
Number 0242
REPRESENTATIVE ROKEBERG stated that he agrees with everything that
Representative Ogan has said, however, he felt that it would be
premature to remove what is only intent language from the
legislation without further debate by the entire House and Senate
on the issue. He stated that it is up to the industry to make
their case before this legislature. He stated that it would not be
prudent for this legislature to do something that would send a
negative signal to the industry that the state of Alaska is or
isn't interested in the GTL technology, when in the long run this
technology may be very important to Alaska. He explained that the
requirement in the legislation for legislative review, the review
of whatever administration is in place and the contract that
results from this legislation, is going to have extraordinary
public scrutiny. He stated that he believed that the whole tax and
incentive regime for an LNG project is going to be entirely
different for a GTL project. However, he felt it would be
premature to send a negative message to the industry and that is
why he has brought Amendment 3 up.
Number 0280
REPRESENTATIVE BUNDE stated that he has a broader view of the bill.
It is an attempt to develop the gas field on the North Slope and
one way is through the pipeline and the other way is through GTL
technology. He stated that if he were to follow the reasoning of
waiting for technology to be further developed, then he could argue
that there be not any incentives for the pipeline until there are
definite markets available. He stated that this is a preparatory
bill and he would like to be able to market gas in all forms. He
stated that he has yet to see that it is economically viable to
build a pipeline, even with the bill. He asserted that the
legislature needs to do all they can to extend the life of the
existing pipeline and a GTL option for the use of stranded gas
would extend the lifeline of the existing pipeline. Therefore, he
stated he supports Amendment 3.
Number 0306
REPRESENTATIVE KEMPLEN stated that there are distinct differences
which relate to the process. He stated that by allowing the
language to remain in the bill it is giving permission to the
administration to negotiate a contract with the private sector for
GTL technology and when the contract is negotiated it will come to
the legislature for approval. He stated that there is a contract
now with Mapco and there has been concerns raised by various
members of the state to the structure of that contract. He stated
that it is a yes or no issue for the approval. He stated that
there will be economic development and jobs due to the expansion of
the Mapco refinery, so it is important for it to proceed but that
is not to say that the contract is perfect. He explained that for
the legislature to not have input into the development of a
contract, that is using a public resource, is not prudent. It is
important for a legislature to be able to have a say and be able to
adjust the contracts if the merit is proven. He stated that if
this language was to remain in the bill, it would say to the
industry that they could negotiate everything they want to. The
GTL technology is continually being updated to be economically
viable. He questioned if it would need fiscal regime adjustments.
He stated that the purpose of the bill is to provide a mechanism
for the construction of the LNG pipeline. He stated that it would
be prudent for the legislature to keep its options open in terms of
the GTL technology and if adjustments are needed in the fiscal
regime, then at that point, the players should come before the
legislature and make their case for it.
Number 0405
CHAIRMAN HODGINS stated that the idea behind the bill to get the 4
trillion cubic feet of gas to market and receive revenue from the
sale of those resources. He stated that various technologies and
ways need to be weighed. It is enabling legislation to produce a
contract. He stated that there are a lot of hoops that the GTL
technology needs to jump through in order for it to be considered.
He asserted that there has been testimony that the GTL technology
has not been viable at this time but there is the possibility that
it could and it should not be excluded. He stated that the
original language regarding the GTL technology had already been
toned down and Amendment 3 is not giving license to the
administration to start pumping GTLs through the pipeline.
Number 0447
REPRESENTATIVE OGAN stated that he is going to vote to get the
language out of the bill because he wanted to send the message that
the legislature is interested in having a LNG pipeline built and
did not want to send a mixed signal or give a reason to delay the
building of a gas pipeline.
Number 0455
CHAIRMAN HODGINS stated that this bill is not a pipeline bill, it
is a bill to establish payments in lieu of other taxes by a
qualified sponsor group for projects to develop stranded gas
resources in the state.
Number 0465
CHAIRMAN HODGINS called for a roll call vote on the amendment to
Amendment 3. A roll call vote was taken. Representatives Brice,
Bunde, Rokeberg and Hodgins voted in favor of the motion.
Representatives Kemplen and Ogan voted against the motion. The
amendment to Amendment 3 passed.
REPRESENTATIVE ROKEBERG made a motion to adopt Amendment 3 as
amended.
Number 0505
CHAIRMAN HODGINS asked if there was an objection. Hearing none,
Amendment 3, as amended, is adopted.
Number 0509
CHAIRMAN HODGINS stated that the sponsor of the additional
amendments removed those amendments. He stated that he would like
to have the committee move CSHB 393(O&G) 0-GH2006\L.
Number 0515
REPRESENTATIVE BRICE asked if the version L incorporated the
amendment. He believe that proper motion would be to move CSHB
393(O&G) 0-GH2006\B, as amended.
Number 0523
REPRESENTATIVE ROKEBERG made a motion to move CSHB 393(O&G) version
B, 0-GH2006, as amended, with individual recommendations and
attached fiscal note.
Number 0530
CHAIRMAN HODGINS asked if there was an objection. Hearing none,
CSHB 393(O&G) version B, 0-GH2006, as amended was moved out of the
House Special Committee on Oil and Gas.
Number 0540
MR. PAT CARTER, Legislative Assistant to Representative Hodgins,
stated that by moving CSHB 393(O&G) version B, 0-GH2006, as
amended, it will not be able to be heard in the House Resources
Standing Committee this afternoon, because there will not be a
final version done. He stated that CSHB 393(O&G), version L,
reflects all the amendments up to the conclusion of the meeting on
March 24, 1998. He recommended that Amendment 3 be attached to
CSHB 393(O&G) version L.
Number 0547
REPRESENTATIVE ROKEBERG made a motion to rescind the motion to move
CSHB 393(O&G) version B, 0-GH2006, as amended.
CHAIRMAN HODGINS asked if there was an objection. Hearing none,
CSHB 393(O&G) version B, 0-GH2006, as amended was rescinded.
Number 0560
REPRESENTATIVE ROKEBERG made a motion to move CSHB 393(O&G) version
L, 0-GH2006, before the committee.
CHAIRMAN HODGINS asked if there was an objection. Hearing none,
CSHB 393(O&G) version L, 0-GH2006 was so moved.
Number 0566
REPRESENTATIVE ROKEBERG made a motion to adopt Amendment 1 before
the committee, which read:
Page 2, line 19, following "tankers":
Insert "although experimental research is being conducted
other alternative technologies such as gas to liquids, this
technology is not yet commercially viable; if this research
results in a commercially viable technology, and after
economic analysis by the state of the application of this
technology, it is shown that local or state tax or regulatory
changes are necessary to commercialize an Alaska project using
this technology, then this technology may be considered in
regard to this legislation."
Number 0572
CHAIRMAN HODGINS asked if there was an objection. Hearing none,
Amendment 1 was adopted.
Number 0576
REPRESENTATIVE ROKEBERG made at motion to move CSHB 393(O&G)
version L, 0-GH2006, as amended, with individual recommendations
and the attached fiscal note.
CHAIRMAN HODGINS asked if there was an objection. Hearing none,
CSHB 393(O&G) version L, 0-GH2006, as amended, moved out of the
House Special Oil and Gas Committee.
Number 0580
CHAIRMAN HODGINS stated that he hoped to create a lot of jobs for
Alaskans and bring a lot of revenue into the state's coffers.
ADJOURNMENT
Number 0585
CHAIRMAN HODGINS adjourned the House Special Committee on Oil and
Gas meeting at 10:40 a.m.
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