Legislature(1999 - 2000)
03/21/2000 05:16 PM House O&G
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
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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