Legislature(1999 - 2000)
02/02/1999 10:08 AM House O&G
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
HOUSE SPECIAL COMMITTEE ON OIL & GAS
February 2, 1999
10:08 a.m.
COMMITTEE CALENDAR
ORGANIZATIONAL MEETING
TAPE(S)
99-1, SIDE(S) A & B
CALL TO ORDER
Representative Jim Whitaker, Chairman, convened the House Special
Committee on Oil & Gas meeting at 10:08 a.m.
PRESENT
Committee members present at the call to order were Representatives
Whitaker, Dyson, Ogan, Harris, Kemplen, Brice and Smalley.
Representatives Porter and Phillips were excused.
SUMMARY OF INFORMATION
CHAIRMAN WHITAKER introduced staff, Shannon Grynkewich, and stated
that the committee will be meeting on Tuesdays and Thursdays at
10:00 a.m., unless otherwise noted. Committee packets will be
delivered to offices by noon the preceding day of a meeting. A
quorum of five is necessary to take action. The general order of
business pertaining to bills will be as follows: testimony by the
sponsor, testimony by the Administration, testimony from the public
and committee discussion.
CHAIRMAN WHITAKER further noted that he expects a busy session
relating to oil and gas issues. He cited the following meetings:
February 4, 1999 - ARCO Alaska, Incorporated
February 11, 1999 - BP Exploration (Alaska) Incorporated
February 16, 1999 - Exxon Company, U.S.A.
February 23, 1999 - a sponsor group for a liquefied
natural gas (LNG) pipeline
CHAIRMAN WHITAKER further stated that his approach for this
committee is to be goal oriented. The committee will function as
a catalyst for the continued and expanded utilization of Alaska's
vast oil and gas resources. Alaska's oil industry is experiencing
a new depression because of extraordinarily depressed oil prices,
a situation that the committee can do little to affect. Alaska's
fledgling gas industry, on the other hand, provides an opportunity
to serve as a catalyst for expansion of this vital industry.
Alaska currently accounts for 1 percent of world gas production all
of which is produced from Cook Inlet by Phillips Petroleum and
exported to Japan. Alaska's North Slope contains over 100 trillion
cubic feet of natural gas, some used to utilize oil recovery, none
of which has been sent to market, however. It is a huge commodity
resource, therefore, it is important to determine if it can be
taken to market feasibly. The committee will take the following
path:
1. Determine the current status of LNG;
2. Determine the current status of gas-to-liquid (GTL)
processing;
3. Develop an understanding of the comparison between
LNG and GTL and their markets;
4. Determine relative value to the state of LNG and
GTL;
5. Provide an endorsement for a course of action, based
on the relative value (LNG, GTL, or a combination
of both);
6. Determine the effects of the merger between Exxon
and Mobile on the state, north slope gas to market,
and competition for additional oil production.
CHAIRMAN WHITAKER further noted that the committee will not be
antagonistic towards the oil and gas industry, the backbone of
Alaska's economy. The committee will do all that it can to assist
them in their endeavor to flourish their industries. Nonetheless,
it is the committee's duty to protect the state's interest when
there are divergences.
Number 258
REPRESENTATIVE SMALLEY suggested scheduling a discussion from the
state and industry in regards to the pipeline leak on the Kenai
Peninsula. Chairman Whitaker so noted his suggestion.
Number 268
REPRESENTATIVE DYSON replied the leak on the Kenai Peninsula was a
corrosion problem. He suggested an update on corrosion detection,
especially from Alyeska in regards to the pipeline and terminal.
Chairman Whitaker so noted his suggestion.
Number 304
REPRESENTATIVE HARRIS stated that he hopes the committee does
everything that it can to enhance and develop the oil and gas
industry. He is interested in seeing a gas pipeline/GTL project;
it not only would effect his district but the entire state.
Number 328
REPRESENTATIVE OGAN stated the committee has a big job ahead of it
knowing that there is a storm ahead. In nautical terms, the state
needs to batten down the hatches and plan a strategy to get around
the storm.
Number 355
REPRESENTATIVE KEMPLEN agreed that there is a need for planning.
He would like to see the committee explore and examine the industry
to enhance the industry's engine.
Number 380
CHAIRMAN WHITAKER announced that the committee is bipartisan. A
good idea is a good idea; it doesn't depend on which side of the
isle it comes from. Chairman Whitaker called on former
Representative Mark Hodgins to explain the committee's actions
during the last legislature.
Number 395
FORMER REPRESENTATIVE HODGINS explained the main focus of the House
Special Committee on Oil & Gas the last legislature was to
facilitate the progress of a gas pipeline project. The stranded
gas bill sent the message that Alaska is willing and wanting to
work with customers to build a gas pipeline.
FORMER REPRESENTATIVE HODGINS further noted the other issues the
committee covered. They were as follows: the makeup of the North
Slope ownership in regards to a gas pipeline; Point Thomson in
regards to a gas pipeline; other technologies pertaining to GTL;
the impact of a gas pipeline on communities; spurs of a gas
pipeline into Southcentral; the gasification of the communities
along a gas pipeline corridor(s); the Kiroshima (ph) spill in Dutch
Harbor in regards to 470 funds and the Alaska Chadux Corporation;
and low-sulphur diesel in regards to air quality.
Number 559
REPRESENTATIVE OGAN asked former Representative Hodgins to explain
470 funds and the Alaska Chadux Corporation.
FORMER REPRESENTATIVE HODGINS replied the 470 funds is a nickel-
per-barrel tax on all oil from the North Slope to Valdez up to a
$50 million threshold. Agencies were using the proceeds for
operations, however, so it never got to the $50 million level.
Therefore, the nickel was split - 3 cents goes to the fund and 2
cents goes to the Department of Environmental Conservation (DEC)
for spill response equipment and supplies. Alaska Chadux is a
spill response team around the state. It was able to respond
quickly in Dutch Harbor because it was better prepared than any
other group. Alaska Chadux, however, was not on the response list
for the DEC indicating that the state is not ready for a spill.
Number 612
REPRESENTATIVE OGAN noted further that the Kiroshima (ph), one of
many ships that don't have a contingency spill plan, was not a
member of the Alaska Chadux organization.
Number 626
CHAIRMAN WHITAKER asked former Representative Hodgins whether the
low-sulphur-diesel exemption is from the Environmental Protection
Agency. Former Representative Hodgins replied yes. Chairman
Whitaker asked him whether ancillary costs have been identified
inherent to not having an exemption. Former Representative Hodgins
replied MAPCO Alaska Petroleum Incorporated, Northstar and Tesoro
testified that they could supply low-sulphur diesel sufficient
enough for the road system in Alaska, but not the entire state.
The conversion costs would be prohibitive for all refineries in the
state because there is not that much of a market causing a high
price.
Number 681
CHAIRMAN WHITAKER asked former Representative Hodgins whether the
exemption is area or statewide. Former Representative Hodgins
replied it is statewide. He further stated that an area exemption
has been discussed for rural Alaska.
Number 689
CHAIRMAN WHITAKER asked former Representative Hodgins to comment on
the exemption time periods. Former Representative Hodgins replied
the current exemption will go away in June or July of this year and
urged the committee to address the issue with the Department of
Environmental Conservation.
Number 702
REPRESENTATIVE HARRIS noted the largest spill response service
group works out of Valdez.
TAPE 99-1, SIDE B
Number 000
REPRESENTATIVE HARRIS continued. He suggested looking at relieving
the legal responsibilities of these organizations so that they can
respond to cruise ship spills, for example.
CHAIRMAN WHITAKER stated it is important to know the direct lines
of responsibilities in regards to a cruise ship spill.
REPRESENTATIVE BRICE suggested inviting the Department of
Environmental Conservation and the Coast Guard for an overview of
responsibilities and spill scenarios. Chairman Whitaker noted his
suggestion.
REPRESENTATIVE DYSON noted that a response to a spill is
exceptionally important and since the state deals with foreign
bottoms it would be wise to require a vessel to inform the state
what it is prepared to do in the event of a spill. Chairman
Whitaker noted his comments.
COMMITTEE ACTION
The committee took no action.
ADJOURNMENT
The meeting adjourned at 10:58 a.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 130 Seward Street, Suite 211, Juneau,
Alaska 99801-1182, (907) 465-2214, and after adjournment of the
second session of the Twenty-first Alaska State Legislature, in the
Legislative Reference Library.
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