04/02/2001 10:17 AM House O&G
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ALASKA STATE LEGISLATURE
HOUSE SPECIAL COMMITTEE ON OIL AND GAS
April 2, 2001
10:17 a.m.
MEMBERS PRESENT
Representative Scott Ogan, Chair
Representative Hugh Fate, Vice Chair
Representative Fred Dyson
Representative Mike Chenault
Representative Gretchen Guess
MEMBERS ABSENT
Representative Vic Kohring
Representative Reggie Joule
COMMITTEE CALENDAR
HOUSE BILL NO. 9
"An Act amending the standards applicable to determining whether
a proposed new investment constitutes a qualified project for
purposes of the Alaska Stranded Gas Development Act; and
providing for an effective date."
- HEARD AND HELD
HOUSE BILL NO. 83
"An Act relating to natural gas pipelines, providing a statutory
definition for the portion of the constitutional statement of
policy on resource development as applicable to the development
and transportation of the state's natural gas reserves, amending
Acts relating to construction of natural gas pipelines to
require conformance to the requirements of the statutory
definition, and amending the standards applicable to determining
whether a proposed new investment constitutes a qualified
project for purposes of the Alaska Stranded Gas Development Act;
and providing for an effective date."
- HEARD AND HELD
HOUSE BILL NO. 38
"An Act amending the application deadline, and the standards
applicable to determining whether a proposed new investment
constitutes a qualified project, for purposes of the Alaska
Stranded Gas Development Act; and providing for an effective
date."
- SCHEDULED BUT NOT HEARD
PREVIOUS ACTION
BILL: HB 9
SHORT TITLE:STRANDED GAS DEVELOPMENT PROJECT
SPONSOR(S): REPRESENTATIVE(S)GREEN
Jrn-Date Jrn-Page Action
01/08/01 0026 (H) PREFILE RELEASED 12/29/00
01/08/01 0026 (H) READ THE FIRST TIME -
REFERRALS
01/08/01 0026 (H) O&G, RES
01/08/01 0026 (H) REFERRED TO O&G
01/30/01 (H) O&G AT 10:00 AM CAPITOL 124
01/30/01 (H) Heard & Held
01/30/01 (H) MINUTE(O&G)
01/30/01 (H) MINUTE(O&G)
02/01/01 (H) O&G AT 10:00 AM CAPITOL 124
02/01/01 (H) Scheduled But Not Heard
02/13/01 (H) O&G AT 10:00 AM CAPITOL 124
02/13/01 (H) Heard & Held
02/13/01 (H) MINUTE(O&G)
02/13/01 (H) MINUTE(O&G)
03/30/01 (H) O&G AT 8:00 AM CAPITOL 124
03/30/01 (H) Meeting postponed
04/02/01 (H) O&G AT 10:00 AM CAPITOL 124
BILL: HB 83
SHORT TITLE:NATURAL GAS RESOURCES DEVELOPMENT
SPONSOR(S): OIL & GAS
Jrn-Date Jrn-Page Action
01/19/01 0130 (H) READ THE FIRST TIME -
REFERRALS
01/19/01 0130 (H) O&G, RES
01/19/01 0130 (H) REFERRED TO O&G
01/30/01 (H) O&G AT 10:00 AM CAPITOL 124
01/30/01 (H) Heard & Held
01/30/01 (H) MINUTE(O&G)
02/01/01 (H) O&G AT 10:00 AM CAPITOL 124
02/01/01 (H) Heard & Held
02/01/01 (H) MINUTE(O&G)
03/28/01 (H) O&G AT 3:00 PM CAPITOL 124
03/28/01 (H) Heard & Held
MINUTE(O&G)
03/30/01 (H) O&G AT 8:00 AM CAPITOL 124
03/30/01 (H) Meeting postponed
04/02/01 (H) O&G AT 10:00 AM CAPITOL 124
WITNESS REGISTER
SENATOR JOHN TORGERSON
Alaska State Legislature
Capitol Building, Room 427
Juneau, Alaska 99801
POSITION STATEMENT: Reviewed HB 83 in comparison to SB 164.
MICHAEL HURLEY, Government Relations
North American Natural Gas Pipeline Group
601 West 5th Avenue
Anchorage, Alaska 99501
POSITION STATEMENT: Testified as to NANGPG's view.
ACTION NARRATIVE
TAPE 01-24, SIDE A
Number 0001
CHAIR SCOTT OGAN called the House Special Committee on Oil and
Gas meeting to order at 10:17 a.m. Representatives Ogan, Dyson,
Chenault, and Fate were present at the call to order.
Representative Guess arrived as the meeting was in progress.
HB 9 - STRANDED GAS DEVELOPMENT PROJECT
CHAIR OGAN announced that the first order of business would be
HOUSE BILL NO. 9, "An Act amending the standards applicable to
determining whether a proposed new investment constitutes a
qualified project for purposes of the Alaska Stranded Gas
Development Act; and providing for an effective date."
Number 0065
CHAIR OGAN turned to a memorandum drafted by Jack Chenoweth,
Assistant Revisor, Legislative Counsel, Legislative Legal and
Research Division, Legislative Affairs Agency, [which addresses]
a discussion regarding the legislature's powers under the
Stranded Gas Development Act. The short answer [embodied in Mr.
Chenoweth's memorandum] is that the legislature cannot negotiate
the terms, but would have the final decision to authorize
execution or withhold authorization to execute the agreement.
This conflicts with testimony from the commissioner of the
Department of Revenue who indicated that the legislature would
have the ability to negotiate.
[HB 9 was held over.]
HB 83 - NATURAL GAS RESOURCES DEVELOPMENT
[Contains references to SB 164.]
Number 0270
CHAIR OGAN announced that the next order of business would be
HOUSE BILL NO. 83, "An Act relating to natural gas pipelines,
providing a statutory definition for the portion of the
constitutional statement of policy on resource development as
applicable to the development and transportation of the state's
natural gas reserves, amending Acts relating to construction of
natural gas pipelines to require conformance to the requirements
of the statutory definition, and amending the standards
applicable to determining whether a proposed new investment
constitutes a qualified project for purposes of the Alaska
Stranded Gas Development Act; and providing for an effective
date."
CHAIR OGAN noted that HB 83 has "morphed" into a companion bill
to [SB 164].
Number 0270
REPRESENTATIVE FATE moved to adopt CSHB 83, Version 22-LS0322\L,
Chenoweth, 3/28/01, as the working document before the
committee. There being no objection, Version L was before the
committee.
Number 0306
SENATOR JOHN TORGERSON, Alaska State Legislature, testified as
sponsor of SB 164 [the companion to HB 83]. Senator Torgerson
explained that upon review of the bill [HB 83], he saw that it
contained two sections [not included in SB 164] one of which
included local hire provisions, which he felt fit into the
context of the bill. The other section, which he doesn't
believe fits with the intent of the bill, is located on page 3,
subparagraph (b). Although he believes that the [state] may end
up requesting that the line have excess capacity, he believes
that the state would have to pay for it.
SENATOR TORGERSON, in response to Chair Ogan, explained that [SB
164] amends the declaration of legislative policy that is found
in statute dealing with the right-of-way leasing provisions. It
merely adds four or five other components to the legislative
policy declaration. He pointed out that Alaska's constitution
"directs the legislature to provide for the utilization, the
development, the conservation of all our natural resources for
the maximum benefit of its people." This language wasn't in
statute in that particular location before. Senator Torgerson
pointed out that the language being discussed is on page 1
though page 2.
SENATOR TORGERSON turned to the top of page 2, lines 3-12, which
addresses in-state uses. On page 2, [subparagraph] (B) is a
conforming amendment so that sub-subparagraph (i), which is the
language addressing the maximum benefit for short-term
construction and operation, can be included. [Sub-subparagraph]
(ii) is also a conforming amendment. Senator Torgerson
explained that subparagraph (C) makes the statement that the
line must add long-term property value to the tax base for local
state governments. [Paragraph] (2) ensures "that the design,
location, and construction of a pipeline" enhance the
opportunities listed on page 3, [subparagraph's] (A) and (B).
He reiterated that page 3, subparagraph (B) doesn't fit.
Senator Torgerson continued with page 3, subsection (b), which
is the "real meat and potatoes."
Number 0760
CHAIR OGAN asked if this is similar to the policy the
legislature set out with Northstar.
SENATOR TORGERSON pointed out that in the past the legislature
has made legislative policy and then made a legislative best
interest findings, which was done with Northstar. Although
Northstar was challenged, its constitutionality was upheld.
There was a similar situation with the Kachemak Bay prohibition
against leasing oil and gas [strictly in Kachemak Bay]. Both
cases determined that the legislature does have the authority to
set policy and direct the commissioner to follow the policy set
by the legislature.
CHAIR OGAN surmised then that the legislature isn't treading new
ground because there have been legislative findings in the past.
He asked if Senator Torgerson felt that [HB 83] is the same
model as in Northstar and Kachemak Bay.
SENATOR TORGERSON replied yes. However, he noted that although
this hasn't been done in relation to pipelines, legislative
policy and findings have been done in other cases relating to
natural resources.
CHAIR OGAN related his understanding that [HB 83] doesn't
preclude them from building a northern route, it merely would
have to be built after the southern route.
SENATOR TORGERSON agreed with Chair Ogan's understanding.
Number 0917
CHAIR OGAN said that he believes that another bill will come
over from the Senate. He noted that the labor language was
borrowed from the Northstar agreement. He said he would take
out the capacity language, which he felt was more appropriate
for the hub discussion that this committee intends to work on
over the interim.
SENATOR TORGERSON agreed with Chair Ogan that the capacity
language belongs in the southern route or hub discussion.
Senator Torgerson noted that there is another piece of
legislation that will ask the Department of Revenue to perform a
study on owner equity on all or part of the line as well as
address other questions.
CHAIR OGAN announced that pending referral of SB 158 to the
House Special Committee on Oil and Gas, it will be noticed for
next week and expedited as quickly as possible. After
determining there were no questions for Senator Torgerson or
Larry Persily, Department of Revenue, he asked if it would be a
fair assumption that both options will be reviewed by the [North
American Natural Gas Pipeline Group].
Number 1180
MICHAEL HURLEY, Government Relations, North American Natural Gas
Pipeline Group (NANGPG), answered that that the group believes
that it is prudent business to continue to review the routes.
Under the Federal Energy Regulatory Commission (FERC)
application standards for a certificate of public convenience
and necessity there are requirements that alternatives be
reviewed. He remarked that a discussion probably needs to occur
with FERC in order to determine what alternatives need to be
reviewed. The alternatives that had been identified were the
northern route. However, there is legislation that makes that
route problematic.
CHAIR OGAN posed a situation in which the southern route is
built. In such a case, would it be cost effective to run a
pipeline from MacKenzie to Point Thompson or wherever the
infrastructure is and pipe the gas east or west.
MR. HURLEY said that he expected that should NANGPG build the
southern route, the MacKenzie producers would build their own
route south up the MacKenzie Valley. He noted that there is a
consortium of MacKenzie Valley producers who are reviewing such,
almost independent of what NANGPG does. In further response to
Chair Ogan, Mr. Hurley related his belief that the MacKenzie
producers includes Exxon, through its Imperial subsidiary in
Canada, Gulf Canada, and several of the pipeline companies in
Canada have been or may be involved at this point. However, Mr.
Hurley wasn't sure who was doing the work now. He recalled that
one of the original sponsors had been Shell.
CHAIR OGAN inquired as to whether Exxon is the major holder of
the gas.
MR. HURLEY answered that he wasn't sure, although he knew that
Exxon held a significant position.
CHAIR OGAN expressed interest in obtaining a breakdown in regard
to who owns what percentage of gas.
MR. HURLEY noted that he has seen a report from the Canadian
government that he could provide to the chair.
Number 1389
REPRESENTATIVE GUESS pointed out that currently it's against
federal law to go north. If HB 83 passes, then it will be
against state law to provide leases on the northern route.
Therefore, she inquired as to whether FERC could charge that
[NANGPG] has looked at the north even though it is illegal and
thus [NANGPG] will have to look north in order to obtain a
certificate for the south. Also, she inquired as to whether
FERC, as a regulatory commission, would force the study of a
route that is against federal law and state law, if HB 83
passes.
MR. HURLEY answered, "We're not sure. We haven't had that
discussion with them." He echoed his earlier testimony that
[NANGPG] isn't sure what alternative FERC would want to see if
it didn't want to see [the northern route].
REPRESENTATIVE GUESS reiterated that [the northern route] would
be against federal law.
MR. HURLEY said, "Given that you would be making it potentially
illegal under state law, FERC has, to the best of my knowledge,
not determined that its against federal law to go north."
REPRESENTATIVE GUESS said, "So, we did that in the presidential
decision in the Natural Gas [Act]."
MR. MURPHY remarked that this is one of the areas that NANGPG
needs to work on this year. There have been several different
legal opinions that say several different things. This is an
area in which NANGPG is unclear in regard to the true federal
requirements.
Number 1510
REPRESENTATIVE GUESS remarked that this seems to be a fairly
important question to ask because FERC's role should be
understood. If FERC says that the northern route is against the
presidential decision and the Natural Gas Act and state, then it
may shift NANGPG's focus to what is in the best interest of the
company. Since two members have been appointed, has NANGPG
decided to move forward and ask the aforementioned question?
MR. HURLEY answered that the federal government will be heavily
involved in all of these discussions. Furthermore, NANGPG will
speak with the federal government and FERC in regard to their
view of how this is to work.
REPRESENTATIVE GUESS asked whether the process to approach FERC
in order to understand their role in choosing a representative
has been started.
MR. HURLEY replied that there have been discussions with the
federal agencies, including FERC. As one would imagine, there
is a bit of a "turf battle" in regard to who will be the lead
agency in the federal government. He noted that this process
will obviously be revised.
Number 1649
CHAIR OGAN inquired as to what Mr. Hurley thought about the
provisions in CSHB 83 regarding labor. He also inquired as to
whether any of the companies Mr. Hurley represents will have
problems with that.
MR. HURLEY responded, "In our view of how this project is going
to roll out, we're going to be hiring not only every qualified
Alaskan, but every qualified North American to try and get this
thing built." In further response to Chair Ogan, Mr. Hurley
expressed his hope that Alaskans would be hired first.
CHAIR OGAN urged Mr. Hurley to convey the desire to hire
Alaskans first if this project moves forward.
MR. HURLEY noted that discussions within NANGPG have begun with
entities involved in training and jobs programs. Mr. Hurley
said that [NANGPG] understands the need and the desire of the
legislature and the people of Alaska to have as much local labor
as possible.
Number 1815
CHAIR OGAN asked if there have been discussions with the
University of Alaska regarding meeting the needs of future
employees.
MR. HURLEY related his understanding that the university is part
of the "APEC" (ph) group. He noted that [NANGPG] has a meeting
with them shortly.
CHAIR OGAN related his belief that the University of Alaska
should be the premier oil and gas university in the nation and
should turn out not only the disciplines in oil and gas but also
the trade people. "The University of Alaska should be dedicated
to oil and gas research," he charged.
CHAIR OGAN asked if anyone else would like to testify. There
was no one else to testify. [HB 83 was held over.]
ADJOURNMENT
There being no further business before the committee, the House
Special Committee on Oil and Gas meeting was adjourned at 10:44
a.m.
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