Legislature(2009 - 2010)BARNES 124

04/06/2009 01:00 PM House RESOURCES

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                    ALASKA STATE LEGISLATURE                                                                                  
               HOUSE RESOURCES STANDING COMMITTEE                                                                             
                         April 6, 2009                                                                                          
                           1:01 p.m.                                                                                            
MEMBERS PRESENT                                                                                                               
Representative Craig Johnson, Co-Chair                                                                                          
Representative Mark Neuman, Co-Chair                                                                                            
Representative Kurt Olson                                                                                                       
Representative Paul Seaton                                                                                                      
Representative Peggy Wilson                                                                                                     
Representative David Guttenberg                                                                                                 
Representative Scott Kawasaki                                                                                                   
Representative Chris Tuck                                                                                                       
MEMBERS ABSENT                                                                                                                
Representative Bryce Edgmon                                                                                                     
COMMITTEE CALENDAR                                                                                                            
HOUSE JOINT RESOLUTION NO. 26                                                                                                   
Urging  the  United  States  Congress  to  adequately  fund  land                                                               
surveys  in Alaska  in order  to issue  patents to  the State  of                                                               
Alaska and Alaska Native corporations.                                                                                          
     - MOVED HJR 26 OUT OF COMMITTEE                                                                                            
HOUSE BILL NO. 120                                                                                                              
"An  Act authorizing  the  negotiation for  the  lease, sale,  or                                                               
other  disposal of  state land  with a  contract carrier  that is                                                               
engaged  in  the  intrastate transportation  of  natural  gas  by                                                               
pipeline;  and   relating  to  regulation  of   certain  contract                                                               
     - HEARD AND HELD                                                                                                           
HOUSE CONCURRENT RESOLUTION NO. 12                                                                                              
Requesting that the governor and  the attorney general review and                                                               
reevaluate  the license  issued  to  TransCanada Alaska  Company,                                                               
LLC, and  Foothills Pipe Lines  Ltd., jointly as  licensee, under                                                               
the  Alaska  Gasline  Inducement  Act to  determine  whether  the                                                               
project  proposed  by  the licensee  sufficiently  maximizes  the                                                               
benefits to  the people  of the state  and merits  continuing the                                                               
license,  taking into  consideration  economic changes  affecting                                                               
project financing, the availability  of liquefied natural gas and                                                               
natural  gas from  nonconventional sources,  the state's  risk of                                                               
paying treble damages associated with  an in- state gas pipeline,                                                               
and  the  expected  budget  deficit;   and  requesting  that  the                                                               
governor  and the  attorney  general report  the  outcome of  the                                                               
review and reevaluation within six months.                                                                                      
     - BILL HEARING CANCELED                                                                                                    
PREVIOUS COMMITTEE ACTION                                                                                                     
BILL: HJR 26                                                                                                                  
SHORT TITLE: STATEHOOD/ANCSA LAND SURVEY FUNDING                                                                                
SPONSOR(s): REPRESENTATIVE(s) FAIRCLOUGH                                                                                        
03/18/09       (H)       READ THE FIRST TIME - REFERRALS                                                                        
03/18/09       (H)       RES                                                                                                    
04/06/09       (H)       RES AT 1:00 PM BARNES 124                                                                              
BILL: HB 120                                                                                                                  
SHORT TITLE: PIPELINE CONTRACT CARRIERS                                                                                         
SPONSOR(s): REPRESENTATIVE(s) RAMRAS                                                                                            
02/06/09       (H)       READ THE FIRST TIME - REFERRALS                                                                        
02/06/09       (H)       RES, FIN                                                                                               
04/06/09       (H)       RES AT 1:00 PM BARNES 124                                                                              
WITNESS REGISTER                                                                                                              
CRYSTAL KOENEMAN, Staff                                                                                                         
Representative Anna Fairclough                                                                                                  
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Presented HJR 26 on behalf of                                                                            
Representative Fairclough, sponsor.                                                                                             
REPRESENTATIVE JAY RAMRAS                                                                                                       
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Testified as the sponsor of HB 120.                                                                      
DONALD BULLOCK, Attorney                                                                                                        
Legislative Legal Counsel                                                                                                       
Legislative Legal and Research Services                                                                                         
Legislative Affairs Agency                                                                                                      
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  As the drafter of HB 120, answered                                                                       
questions and provided information.                                                                                             
ACTION NARRATIVE                                                                                                              
1:00:53 PM                                                                                                                    
CO-CHAIR  CRAIG  JOHNSON  called  the  House  Resources  Standing                                                             
Committee  meeting  to  order  at   1:01  p.m.    Representatives                                                               
Johnson, Olson, and Seaton were present at the call to order.                                                                   
CO-CHAIR JOHNSON recessed the meeting to a call of the co-chair.                                                                
CO-CHAIR   JOHNSON  reconvened   the  House   Resources  Standing                                                               
Committee at 1:02 p.m.   Representatives Johnson, Neuman, Seaton,                                                               
Olson, Wilson, and Tuck were present at the call to order.                                                                      
HJR 26-STATEHOOD/ANCSA LAND SURVEY FUNDING                                                                                    
1:03:04 PM                                                                                                                    
CO-CHAIR  JOHNSON  announced that  the  first  order of  business                                                               
would be HOUSE JOINT RESOLUTION  NO. 26, Urging the United States                                                               
Congress to  adequately fund land  surveys in Alaska in  order to                                                               
issue  patents  to   the  State  of  Alaska   and  Alaska  Native                                                               
CRYSTAL KOENEMAN,  Staff, Representative Anna  Fairclough, Alaska                                                               
State Legislature,  presented HJR 26 on  behalf of Representative                                                               
Fairclough, sponsor.  She explained  that HJR 26 urges the United                                                               
States  Congress to  adequately fund  land surveys  in Alaska  in                                                               
order to issue  patents to the State of Alaska  and Alaska Native                                                               
corporations.   Currently, the U.S. Congress  is not sufficiently                                                               
budgeting funds  to the U.S.  Bureau of Land Management  which is                                                               
preventing the timely  completion of land surveys  for lands that                                                               
were promised to Alaska Natives and the State of Alaska.                                                                        
1:04:08 PM                                                                                                                    
CO-CHAIR NEUMAN noted that the  R.S. 2477 issue is also important                                                               
to  the   state  and  that   he  has  talked   to  Representative                                                               
Fairclough's aide about adding this issue to HJR 26.                                                                            
CO-CHAIR  JOHNSON explained  that  R.S. 2477  is the  traditional                                                               
right-of-ways  to  which,  in  theory,   the  state  has  access.                                                               
However, there  has been difficulty  in proving  what traditional                                                               
is; thus, there has been an  ongoing battle between the state and                                                               
the federal government.   He agreed that it  would be appropriate                                                               
to include this issue in HJR 26.                                                                                                
CO-CHAIR JOHNSON closed public  testimony after ascertaining that                                                               
no one wished to testify, then opened committee discussion.                                                                     
1:05:37 PM                                                                                                                    
REPRESENTATIVE SEATON inquired  whether Co-Chair Johnson intended                                                               
to put forth a conceptual amendment [regarding R.S. 2477].                                                                      
CO-CHAIR JOHNSON answered  that he does not intend to  do so, but                                                               
that Co-Chair Neuman might like to.                                                                                             
CO-CHAIR NEUMAN stated  that he is confident the  sponsor and her                                                               
staff  will  do  all  they  can  to  include  R.S.  2477  as  the                                                               
resolution  moves   forward.     He  asked  for   Ms.  Koeneman's                                                               
suggestion in this regard.                                                                                                      
MS.  KOENEMAN  replied that  she  will  talk with  Representative                                                               
Fairclough  about adding  R.S.  2477 either  in  the House  Rules                                                               
Standing Committee or on the Senate side.                                                                                       
1:06:49 PM                                                                                                                    
REPRESENTATIVE SEATON pointed out  that if a conceptual amendment                                                               
is adopted by the committee now,  it will be incorporated, but if                                                               
this is not  done there would have  to be a hearing  in the House                                                               
Rules Standing Committee or an amendment  on the floor.  He asked                                                               
whether  it is  important enough  to  the co-chair  to have  this                                                               
incorporated now.                                                                                                               
CO-CHAIR  NEUMAN  responded  that  he  considers  this  to  be  a                                                               
suggestion to  the sponsor for  inclusion further down  the road;                                                               
therefore  he does  not intend  to offer  a conceptual  amendment                                                               
right now.   He  said he  is making the  sponsor aware  that R.S.                                                               
2477 is  a critical issue that  is very close to  the land survey                                                               
and patent issue.                                                                                                               
CO-CHAIR  NEUMAN moved  to report  HJR 26  out of  committee with                                                               
individual  recommendations  and  the  accompanying  zero  fiscal                                                               
note.   There being no  objection, HJR  26 was reported  from the                                                               
House Resources Standing Committee.                                                                                             
The meeting was recessed at 1:08 p.m. to a call of the chair.                                                                   
2:14:03 PM                                                                                                                    
CO-CHAIR JOHNSON  called the meeting  back to order at  2:14 p.m.                                                               
Representatives  Johnson,   Neuman,  Seaton,  Olson,   Tuck,  and                                                               
Kawasaki  were present  at the  call to  order.   Representatives                                                               
Wilson and Guttenberg arrived as the meeting was in progress.                                                                   
HB 120-PIPELINE CONTRACT CARRIERS                                                                                             
[Contains discussion of HB 163.]                                                                                                
2:14:19 PM                                                                                                                    
CO-CHAIR JOHNSON announced that the  next order of business would                                                               
be, HOUSE BILL  NO. 120, "An Act authorizing  the negotiation for                                                               
the lease, sale, or other disposal  of state land with a contract                                                               
carrier  that  is engaged  in  the  intrastate transportation  of                                                               
natural gas  by pipeline; and  relating to regulation  of certain                                                               
contract carriers."                                                                                                             
The committee took an at-ease from 2:14 p.m. to 2:15 p.m.                                                                       
CO-CHAIR NEUMAN moved to adopt  the proposed committee substitute                                                               
(CS) for  HB 120,  Version 26-LS0523\E,  Bullock, 4/3/09,  as the                                                               
work draft.                                                                                                                     
REPRESENTATIVE SEATON objected for discussion purposes.                                                                         
REPRESENTATIVE KAWASAKI objected.                                                                                               
2:15:22 PM                                                                                                                    
REPRESENTATIVE  JAY RAMRAS,  Alaska  State Legislature,  sponsor,                                                               
explained that  his intent  for today  is to  familiarize members                                                               
with the CS and then come back  to the committee again at a later                                                               
date.   He said HB  120 comes from  his work with  the governor's                                                               
designee  for  coordinating  an instate  gas  line,  Harry  Noah,                                                               
Executive  Director,  Alaska  Mental Health  Trust  Land  Office,                                                               
Office of the Commissioner, Department  of Natural Resources.  He                                                               
also  said  HB  120  is  very  complimentary  to  the  governor's                                                               
objective of pursuing an instate gas line.                                                                                      
2:16:49 PM                                                                                                                    
REPRESENTATIVE RAMRAS spoke from the following prepared sponsor                                                                 
statement [original punctuation provided with some formatting                                                                   
     House  Bill  120  sets  the  framework  to  define  the                                                                    
     project of  an intrastate  natural gas pipeline  and to                                                                    
     recognize  the  Governor's  authority  to  designate  a                                                                    
     project  manager,  a position  that  has  not yet  been                                                                    
     defined  in statute.  The bill  further authorizes  the                                                                    
     Alaska  Natural  Gas   Development  Authority  (ANGDA),                                                                    
     under the  direction of the Governor  and her appointed                                                                    
     project manager,  to apply for a  right-of-way lease of                                                                    
     state land and to assist  in the acquisition of federal                                                                    
     and state  permits and  authorizations required  by the                                                                    
     designated  project  that  are  necessary  to  build  a                                                                    
     House  Bill  120  also   recognizes  that  the  instate                                                                    
     natural  gas pipeline  will  originally  be a  contract                                                                    
     carrier,  this  is  necessary to  protect  the  capital                                                                    
     investments   of   those   companies   that   initially                                                                    
     delineate gas into the instate pipeline.                                                                                   
     As  House  Bill  120  is   written,  the  role  of  the                                                                    
     Regulatory  Commission of  Alaska (RCA)  is limited  to                                                                    
     authorizing a  person to own  or operate  an intrastate                                                                    
     natural gas  pipeline as a contract  carrier, issuing a                                                                    
     certificate  of public  convenience and  necessity, and                                                                    
     issuing a conditional certificate  to an applicant that                                                                    
     has not  yet obtained  financing or possession  of firm                                                                    
     transportation   commitments.   However,  it   is   the                                                                    
     sponsor's belief that  this portion of the  bill can be                                                                    
     amended at  a later  date when  the composition  of the                                                                    
     pipeline is more clearly understood and defined.                                                                           
     House  Bill 120  is  an enhancement  of the  Governor's                                                                    
     authority  and  a  solidification of  a  more  narrowly                                                                    
     defined role  for ANGDA  as set  forth by  the Governor                                                                    
     and her appointed project manager.                                                                                         
     The language  in HB 120  requires the  Governor through                                                                    
     her project  manager to  define the  project, including                                                                    
     the proposed route,  determine the economic feasibility                                                                    
     and  probability of  success of  the project,  identify                                                                    
     permits  and authorizations  required for  the project,                                                                    
     determine  whether there  are  likely  to be  necessary                                                                    
     commitments, identify  the person  or persons  who will                                                                    
     design, construct,  operate the project, and  develop a                                                                    
     project  plan  for  design   and  construction  of  the                                                                    
     pipeline, before designating the project.                                                                                  
     As this bill moves through  the committee process it is                                                                    
     anticipated that  enabling language  in the form  of an                                                                    
     appropriations  bill  will  be  added  by  the  Finance                                                                    
     Committee.   Additionally,   HB   120   maintains   the                                                                    
     flexibility to  add specific intent language  to assist                                                                    
     in  the furtherance  of defining  the project,  project                                                                    
     manager, and the specific milestones  to be met by June                                                                    
2:22:11 PM                                                                                                                    
CO-CHAIR  NEUMAN  asked  Representative  Ramras  to  outline  the                                                               
difference between common carriers and contract carriers.                                                                       
REPRESENTATIVE  RAMRAS specified  that the  Trans-Alaska Pipeline                                                               
System (TAPS)  is capable  of carrying 2  million barrels  of oil                                                               
per  day, but  is  presently carrying  600,000-700,000 barrels  a                                                               
day.   It is a  common carrier line, so  anyone can put  oil into                                                               
the pipeline by  paying the tariff.  The  Cook Inlet transmission                                                               
pipeline is also  a common carrier and  because of deliverability                                                               
issues there  is space for  companies to nominate their  gas into                                                               
that pipeline.                                                                                                                  
REPRESENTATIVE RAMRAS said  it is anticipated that  once a supply                                                               
is secured for a small diameter  pipeline from the North Slope to                                                               
Southcentral, any  number of large  producers could take  all the                                                               
capacity in that  pipeline.  The risk accrues to  the person that                                                               
first  delineates  a  field  to  bring gas  into  this  line,  he                                                               
explained,  and  this  person  should  have  the  opportunity  to                                                               
recapture  the capital  investment.    This is  because  it is  a                                                               
significant issue to find a  supplier that has available gas that                                                               
is  not  working  on  the   pipeline  under  the  Alaska  Gasline                                                               
Inducement  Act (AGIA).    He pointed  out that  this  is not  an                                                               
essential  part of  HB  120  as the  bill  is  largely about  the                                                               
function  of ANGDA  and the  role that  Harry Noah  plays as  the                                                               
governor's  appointed  project  manager.   The  issue  of  common                                                               
carrier line versus  contract carrier line can be  fleshed out as                                                               
the bill moves forward.                                                                                                         
2:24:41 PM                                                                                                                    
CO-CHAIR NEUMAN stated that there  is a significant difference as                                                               
well as significant issues, but he  is willing to listen and work                                                               
things out along the way.                                                                                                       
CO-CHAIR JOHNSON interpreted the bill  to read common or contract                                                               
carrier and that  the bill provides the flexibility  to not close                                                               
any doors  but maybe open  some.  It  will be  up to Mr.  Noah if                                                               
this comes to fruition.                                                                                                         
REPRESENTATIVE  SEATON  understood  that by  law  all  intrastate                                                               
transmission lines  are common carriers, although  there has been                                                               
some  circumvention of  this by  the issuance  of contracts.   He                                                               
inquired whether under  current law the RCA only  has the ability                                                               
for intrastate  lines to  be a  common carrier  and would  HB 120                                                               
expand  the  RCA's  jurisdiction.    In  other  words,  is  it  a                                                               
statutory change that needs to be made?                                                                                         
REPRESENTATIVE  RAMRAS said  he  believes that  that is  correct.                                                               
Presently  the  state only  addresses  common  carrier lines  and                                                               
neither  the state  nor the  RCA have  ever addressed  a contract                                                               
carrier  line because  it has  not been  relevant to  the state's                                                               
practices.   However, it is  anticipated that it may  be relevant                                                               
with an instate gas pipeline.                                                                                                   
REPRESENTATIVE SEATON  presumed that the common  carrier language                                                               
is from statute and not the constitution.                                                                                       
REPRESENTATIVE RAMRAS understood this to be the case.                                                                           
2:27:15 PM                                                                                                                    
REPRESENTATIVE OLSON  inquired whether  HB 120 addresses  the 500                                                               
million cubic feet (MMCF) per day problem in AGIA.                                                                              
REPRESENTATIVE RAMRAS  explained that the  500 MMCF per  day rule                                                               
is in  effect when  the state provides  resources for  an instate                                                               
gas pipeline, such  as assistance from the  Department of Natural                                                               
Resources (DNR)  and ANGDA.   He said he  has a problem  with the                                                               
administration's bill,  HB 163, because it  talks about expansion                                                               
and compression and would talk  in statute about breaking another                                                               
statute.   He  said he  does not  think this  should be  done and                                                               
therefore HB 120 conforms to AGIA.                                                                                              
2:28:26 PM                                                                                                                    
REPRESENTATIVE OLSON asked  whether the cart is  being put before                                                               
the horse if the AGIA trigger is not addressed.                                                                                 
REPRESENTATIVE RAMRAS stated  that he tried to draft  a bill that                                                               
is AGIA compliant because that is the  law of the land, so HB 120                                                               
is presently AGIA compliant.                                                                                                    
REPRESENTATIVE OLSON  maintained that  a 22-inch pipeline  is not                                                               
AGIA compliant because  it will have the capability  of more than                                                               
500 MMCF per day.                                                                                                               
REPRESENTATIVE  RAMRAS replied  that although  it would  have the                                                               
capacity to be  a 1.2 billion cubic feet (BCF)  per day line, the                                                               
language in HB  120 calls for an AGIA compliant  line of 500 MMCF                                                               
per day.  He said he does  not think having a capacity beyond 500                                                               
MMCF per day is  a violation of AGIA as long as  no more than 500                                                               
MMCF per day is transported.                                                                                                    
2:30:16 PM                                                                                                                    
REPRESENTATIVE OLSON requested Mr. Bullock to address the issue.                                                                
DONALD BULLOCK, Attorney,  Legislative Legal Counsel, Legislative                                                               
Legal and  Research Services,  Legislative Affairs  Agency, first                                                               
noted that he is the drafter assigned  to HB 120 and that he also                                                               
worked on AGIA.  He  said Representative Olson's question relates                                                               
to  AS   43.90.440,  "which  is  the   treble  reimbursement  for                                                               
qualified  expenditures  if  the  state  throws  certain  support                                                               
behind a  competing gas line."   Under Section 13 of  HB 120, the                                                               
governor's  office  would  be   responsible  for  identifying  an                                                               
intrastate pipeline  project and  the risk of  giving inducements                                                               
to  a  pipeline  that  may  be deemed  a  competing  natural  gas                                                               
pipeline  will be  a  consideration.   He  recounted that  during                                                               
consideration of  AGIA, there was  always a concern  regarding at                                                               
what point a  gasline would go over  500 MMCF per day  and it was                                                               
never really resolved.  Rather, it  is "more of a yellow light to                                                               
the state to  be very careful before giving  any inducements that                                                               
would result in a gas  pipeline becoming a competing gas pipeline                                                               
for the purposes of that penalty provision."                                                                                    
2:32:31 PM                                                                                                                    
REPRESENTATIVE GUTTENBERG,  in regard  to AGIA  compliance, noted                                                               
that the  wording in Section  5, page 8,  line 12, Version  E, is                                                               
changed from "gas  from the North Slope" to "gas  produced in the                                                               
state".  Is  there not a section in AGIA  that deals specifically                                                               
with North Slope gas, he asked.                                                                                                 
MR.  BULLOCK  responded that  AS  43.90.440  defines a  competing                                                               
natural   gas  pipeline   project  as   a  project   designed  to                                                               
accommodate throughput  of more  than 500 MMCF  per day  of North                                                               
Slope gas  to market.   The  inducements were  to do  two things:                                                               
ensure the economic viability of  the licensed project and ensure                                                               
that  there would  be enough  gas to  be put  into the  "over the                                                               
highway"  pipeline.   Representative Guttenberg  is correct  that                                                               
the  statute says  "North  Slope gas  to  market", he  continued;                                                               
thus, another  production area of  the state to market  would not                                                               
be   within  that   competing   natural   gas  pipeline   project                                                               
definition.   North Slope is  defined as  that part of  the state                                                               
that lies  north of 68  degrees north latitude, which  is defined                                                               
in AS 43.90.900 for AGIA purposes.                                                                                              
REPRESENTATIVE OLSON  inquired whether  the Gubik Field  is North                                                               
Slope gas.                                                                                                                      
MR. BULLOCK said he does not know without seeing a map.                                                                         
2:34:34 PM                                                                                                                    
CO-CHAIR  JOHNSON  asked whether  there  has  been discussion  to                                                               
define design versus  capacity or design versus  what is actually                                                               
being carried.                                                                                                                  
MR. BULLOCK  answered that he  is not aware of  any.  He  said he                                                               
thinks that when  AGIA was put together the  administration did a                                                               
study  and  estimated  the  instate gas  needs  from  an  instate                                                               
pipeline  and that  estimate was  somewhere below  500 MMCF  [per                                                               
day].  That figure was not based  on what was anticipated to be a                                                               
pipeline,  but was  to allow  room  for an  instate gasline  that                                                               
would have  a certain  capacity to  meet the  anticipated demand.                                                               
So, it was  more market driven than a determination  of what kind                                                               
of expansion was anticipated once the gasline was built.                                                                        
2:36:15 PM                                                                                                                    
REPRESENTATIVE  SEATON  understood  that RCA  can  only  regulate                                                               
instate lines  as common carriers.   He inquired whether  this is                                                               
provided by statute or constitution.                                                                                            
MR. BULLOCK  noted that  HB 120  makes changes  to AS  38.35, the                                                               
"Alaska Pipeline  Act" [Right-of-Way Leasing Act].   This statute                                                               
requires that  there be common  carriers in current law  and that                                                               
RCA  regulate pipelines  as common  carriers.   A common  carrier                                                               
pipeline must  be open to all  people who wish to  transport gas,                                                               
so there is the risk that  a certain capacity would be diminished                                                               
to  make room  for a  new  player.   He said  the common  carrier                                                               
aspect is  a policy decision and  he believes part of  the policy                                                               
was to  encourage the  development of all  of Alaska's  gas under                                                               
its leases.   A contract pipeline, he continued, is  akin to five                                                               
people  buying  a  warehouse  and under  contract  each  gets  20                                                               
percent of  the warehouse regardless  of whether or not  they use                                                               
it.  No one can come in and  require the others to cut back their                                                               
20 percent.   A contract carrier assures  those people committing                                                               
to a pipeline  that they will have  a place to put  their gas and                                                               
this   is  something   they  can   consider  when   making  their                                                               
2:38:50 PM                                                                                                                    
REPRESENTATIVE  SEATON  said  he  wants to  make  sure  that  the                                                               
statute  is  not  implementing  a  constitutional  provision  for                                                               
common carrier.                                                                                                                 
MR.  BULLOCK replied,  "The changes  in the  bill are  statutory,                                                               
where it  says common carriers  we are doing  that."  He  said he                                                               
thinks that  if there  is a  constitutional basis  it would  be a                                                               
weak  basis and  might  be  related to  the  full development  of                                                               
Alaska's  resources and  whether  there might  be  some gas  that                                                               
would  not be  able to  be transported.   On  the other  hand, he                                                               
continued, since the  pipe has a fixed capacity only  so much gas                                                               
can go  through it, which kind  of meters the amount  of gas that                                                               
would be transported.                                                                                                           
2:40:13 PM                                                                                                                    
CO-CHAIR  JOHNSON asked  whether the  equal protection  clause of                                                               
the constitution might come into play here.                                                                                     
MR. BULLOCK responded that there  is little Alaska law experience                                                               
in contract  carriers and he has  not found much law  in contract                                                               
carriers  in  general.   However,  he  said  he  has not  seen  a                                                               
difference  between  a  contract  carrier  and  any  other  joint                                                               
business  enterprise.    It  is  just  like  that  warehouse,  he                                                               
explained,  where there  is an  industrial facility,  a pipeline,                                                               
that  is going  to be  transporting gas  and it  is owned  by one                                                               
person  who contracts  with a  certain number  of people  for the                                                               
2:41:10 PM                                                                                                                    
REPRESENTATIVE   GUTTENBERG,  in   reference   to  the   previous                                                               
discussion  about the  Gubik Field  located in  the foothills  of                                                               
Prudhoe Bay, noted  that Section 7 on page 9,  lines 1-7, Version                                                               
E,  defines the  "project" as  extending  from Prudhoe  Bay.   He                                                               
inquired whether  this wording would  require a project  to begin                                                               
in  Prudhoe Bay  or could  someone come  in with  a project  that                                                               
starts 100 miles south of Prudhoe Bay.                                                                                          
MR. BULLOCK answered no, Section  7 amends the Alaska Natural Gas                                                               
Development Authority [AS 41.41.990(3)]  and "project" is defined                                                               
in the  context of that  authority to mean the  un-underlined and                                                               
the un-bold  language [on  page 9, lines  1-7].   [The underlined                                                               
bold  type]  on page  9,  lines  7-8, specifically  excludes  the                                                               
governor's project  that is recommended  under AS  44.19.037 from                                                               
meaning a project that ANGDA would otherwise be dealing with.                                                                   
REPRESENTATIVE GUTTENBERG said he is  not sure he is reading this                                                               
the same way.                                                                                                                   
2:42:47 PM                                                                                                                    
CO-CHAIR  JOHNSON  asked  whether  this means  that  the  project                                                               
designated by the governor will not be under ANGDA.                                                                             
MR.   BULLOCK    explained   that   HB   120    changes   ANGDA's                                                               
responsibilities  by  adding  a new  responsibility.    Initially                                                               
ANGDA had statutory responsibility for  an ANGDA project which is                                                               
North Slope  to market,  and ANGDA  would take  the lead  on this                                                               
project.   However, HB  120 gives ANGDA  a new  responsibility to                                                               
assist  in the  development  of this  project  designated by  the                                                               
governor.   Since the governor's  project is from  any production                                                               
place in  the state  to market,  it is  not necessarily  the same                                                               
thing  as  the  ANGDA  project.    Under  HB  120,  the  governor                                                               
designates this project, which is  why that definition is changed                                                               
to not  mean an ANGDA project.   Thus, when ANGDA  assists in the                                                               
governor's project,  it is assisting the  governor's project, not                                                               
working  on  ANGDA's  project.    The  definition  in  Section  7                                                               
generally refers  to a  project that is  ANGDA's own  project, so                                                               
the definition  excludes the governor's project  from definitions                                                               
in ANGDA statutes.                                                                                                              
2:45:04 PM                                                                                                                    
CO-CHAIR  JOHNSON   inquired  whether   HB  120  would   add  the                                                               
governor's project  to ANGDA's original  statutory responsibility                                                               
or  replace ANGDA's  current responsibility  with the  governor's                                                               
MR. BULLOCK  understood that HB  120 does not displace  the ANGDA                                                               
statutes that  were enacted by  initiative; ANGDA  could continue                                                               
to  look for  a North-Slope-gas-south  project.   The bill  gives                                                               
ANGDA additional  responsibilities to  assist in  the development                                                               
of the governor's designated project.                                                                                           
2:45:59 PM                                                                                                                    
REPRESENTATIVE  SEATON  surmised   that  ANGDA  currently  cannot                                                               
participate in a  project that is from the Copper  River Basin or                                                               
other field  in the state  to market, but  that HB 120  would now                                                               
allow ANGDA  to participate  if it  is the  governor's identified                                                               
MR. BULLOCK responded  correct.  He drew attention  to Section 5,                                                               
page 8,  which he said  amends AS 41.41.010(a) with  new language                                                               
that adds  to ANGDA's responsibilities.   Thus, ANGDA  would have                                                               
its ongoing responsibility as well  as the new authority added by                                                               
Section  5.   He  said  this  goes  back to  what  Representative                                                               
Guttenberg  was  talking  about  in   Section  7,  which  is  the                                                               
definition  of  "project"  and  how  the  governor's  project  is                                                               
treated differently than what is  expected to be the project from                                                               
ANGDA under current law.                                                                                                        
2:47:58 PM                                                                                                                    
REPRESENTATIVE SEATON surmised that the  change made by Section 5                                                               
on page  8, Version E, would  allow ANGDA to be  involved in more                                                               
than one  pipeline.  He  asked whether  adding the word  "and" on                                                               
page  8,  line 17,  is  a  significant  change or  a  grammatical                                                               
MR. BULLOCK  answered that it  is just a language  correction and                                                               
not a substantive change.  He  added that there is no substantive                                                               
change until line 20.                                                                                                           
2:49:19 PM                                                                                                                    
REPRESENTATIVE SEATON  presumed that  under the  current language                                                               
of HB 120,  ANGDA could participate in a North  Slope pipeline as                                                               
well as another pipeline.                                                                                                       
MR.  BULLOCK replied  that  there  will be  a  certain amount  of                                                               
common sense  in deciding the number  of pipelines - the  size of                                                               
the market  and the  availability of  the gas.   At some  point a                                                               
project will be  identified that will take the  gas available and                                                               
deliver it  to the market  available.  The economics  will filter                                                               
out  whether there  is room  for one  or two  pipelines.   So, he                                                               
continued,  the  authority  is  there,  but  it  is  an  economic                                                               
judgment as to which project to pursue.                                                                                         
2:50:22 PM                                                                                                                    
REPRESENTATIVE  SEATON gathered  that this  would allow  ANGDA to                                                               
participate  in  a contract  carry  transmission  line from  Cook                                                               
Inlet gas wells to the distribution grid.                                                                                       
MR. BULLOCK responded  that this picks up on  the governor's bill                                                               
[HB   163]   that   was   intended  to   change   some   of   the                                                               
responsibilities of  ANGDA from just  a North Slope focus  to gas                                                               
generally produced in the state.                                                                                                
2:51:29 PM                                                                                                                    
REPRESENTATIVE  WILSON assumed  that HB  120 basically  gives the                                                               
governor the  authority to  do what she  deems necessary  to make                                                               
that  happen.   She  drew  attention  to  page 12,  lines  23-28,                                                               
Version E.                                                                                                                      
MR. BULLOCK said AS 44.19 has  to do with responsibilities of the                                                               
governor  and the  governor would  basically evaluate  a proposed                                                               
project  and make  all the  determinations that  are included  in                                                               
Section 13 of  this bill.  If  it looks like a  project is viable                                                               
and  should go  forward, the  governor would  then designate  the                                                               
project and  at that point ANGDA  would come in to  assist in the                                                               
development of the governor's project.                                                                                          
2:52:49 PM                                                                                                                    
REPRESENTATIVE WILSON presumed that  the governor can do whatever                                                               
she finds necessary to determine  the likelihood and success of a                                                               
project and that  once she makes that decision all  she has to do                                                               
is  provide written  notice  to  the chair  of  ANGDA's board  of                                                               
directors  and  then the  authority  goes  ahead.   She  inquired                                                               
whether the legislature is involved in this in any way.                                                                         
MR. BULLOCK explained that in  AGIA the state was providing money                                                               
to assist in  the development of the project.   However, under HB
120  the state  would not  put out  any money  and would  instead                                                               
offer to  have ANGDA  apply for the  right-of-ways and  help with                                                               
the  other permits,  but  the project  would  be somebody  else's                                                               
commercial  project.   He  said  he  expects that  appropriations                                                               
would  be  made   to  ANGDA  for  its  assistance   role  and  an                                                               
appropriation might be required to  the governor's office to make                                                               
the  determinations that  are  in  Section 13.    Other than  the                                                               
benefits  of ANGDA's  assistance, there  is not  a money  benefit                                                               
that goes to the person that is developing the pipeline.                                                                        
2:54:25 PM                                                                                                                    
REPRESENTATIVE GUTTENBERG  directed attention  to page  10, lines                                                               
14-16, Version  E, which state:   "may authorize a person  to own                                                               
or  operate an  intrastate  natural gas  pipeline  as a  contract                                                               
carrier, notwithstanding any  other provision of law."   He asked                                                               
whether there  is anything  in this  provision that  would either                                                               
prohibit or allow the state to be the owner.                                                                                    
MR. BULLOCK answered that these  are responsibilities of the RCA.                                                               
The  RCA has  traditionally regulated  common carriers,  and this                                                               
section gives the RCA the authority  to authorize a person to own                                                               
and operate  an intrastate  pipeline as a  contract carrier.   It                                                               
does not say anything about who  the owner is, just that there is                                                               
a new type of pipeline that RCA will take a look at.                                                                            
2:55:53 PM                                                                                                                    
REPRESENTATIVE  GUTTENBERG  noted  that   Section  10,  page  10,                                                               
Version E,  states, "The  commission may  issue a  certificate of                                                               
public convenience  ... is  in the best  interest of  the state."                                                               
He  inquired whether  "best  interest of  the  state" is  defined                                                               
MR. BULLOCK said  no, it is a general concept  that is used often                                                               
in the  statutes for what Alaska  will get out of  it and whether                                                               
it is a  good thing.  Part of the  consideration in getting that,                                                               
particularly in an  identifiable project like this,  would be the                                                               
consideration of whether there is a  better way to do it and what                                                               
the state's goals are and will this accomplish those.                                                                           
2:56:44 PM                                                                                                                    
REPRESENTATIVE GUTTENBERG directed attention  to Section 11, page                                                               
10,  Version  E, which  allows  the  RCA  to give  a  conditional                                                               
certificate even if  the applicant has not  obtained financing or                                                               
firm  commitments  for transportation.    He  asked whether  this                                                               
changes the RCA's  authority or the range of reasons  why the RCA                                                               
would give a certificate.                                                                                                       
MR.  BULLOCK deferred  to the  governor's administration,  saying                                                               
that this  provision is from the  governor's "right-of-way" bill.                                                               
He allowed  that he does  not completely understand how  it would                                                               
work, but  that it  is similar  to some  of the  discussions that                                                               
were had under AGIA where  DNR would issue two conditional right-                                                               
of-way  permits for  competing lines  and  then whoever  actually                                                               
built the line  would be the one to get  the actual right-of-way.                                                               
He said he thinks this is something similar to that.                                                                            
CO-CHAIR JOHNSON  interjected that he expects  the administration                                                               
to weigh in on this at some point.                                                                                              
2:58:18 PM                                                                                                                    
CO-CHAIR  JOHNSON, referenced  page 10,  lines 14-16,  Version E,                                                               
which  state,  "may authorize  a  person".    He noted  that  the                                                               
classic  definition  of a  person  is  basically anything  but  a                                                               
government  body and  inquired whether  this provision  precludes                                                               
the state from taking any ownership of such a line.                                                                             
MR. BULLOCK  replied that this  does not say anything  about what                                                               
person may come  before the RCA.   It just says that  if a person                                                               
comes  before  the RCA,  whoever  it  is,  the RCA  can  consider                                                               
authorizing that person  to operate as a contract  carrier.  This                                                               
is  merely  within   the  duties;  it  does   not  have  anything                                                               
substantive  to do  with  the power  of the  state  to develop  a                                                               
CO-CHAIR JOHNSON  asked whether  Mr. Bullock is  comfortable that                                                               
the term  "person" does not  exclude the state from  going before                                                               
the RCA.                                                                                                                        
MR. BULLOCK said he would not  go that far without looking at the                                                               
statutes  and looking  at  the general  definition  of person  in                                                               
Title 1.                                                                                                                        
CO-CHAIR JOHNSON remarked that therein  lays his question and the                                                               
committee will address it at a later date.                                                                                      
2:59:36 PM                                                                                                                    
REPRESENTATIVE  WILSON  assumed that  the  language  on page  10,                                                               
lines 27-31, Version E, is in reference to a failed open season.                                                                
MR. BULLOCK  believed this to  be correct.   If it is  found that                                                               
the pipeline  is a good  idea but more time  is needed to  see if                                                               
things will fall  into place and they subsequently  do, then page                                                               
11, lines  7-9, Version E, state  that if the conditions  are met                                                               
the project can go  ahead.  It is a way to  keep a project afloat                                                               
that the RCA thinks is a good idea.                                                                                             
3:00:51 PM                                                                                                                    
CO-CHAIR  NEUMAN, in  reference to  page 8,  line 20,  Version E,                                                               
inquired what the governor's project is under AS 44.19.037.                                                                     
MR. BULLOCK  replied, "Section  13 of the  bill introduces  a new                                                               
section  into the  powers  of the  governor  that authorizes  the                                                               
governor to designate a project to go forward."                                                                                 
CO-CHAIR NEUMAN  asked what project  Mr. Bullock  was referencing                                                               
when he earlier talked about the governor's project.                                                                            
MR. BULLOCK responded that the project  he is referring to is the                                                               
project that  would be designated  by the governor  under Section                                                               
13 of the  bill which is a  new section, AS 44.19.037.   It means                                                               
the project that the governor has identified to go forward.                                                                     
3:02:25 PM                                                                                                                    
CO-CHAIR  NEUMAN  referenced  page   4,  Section  4,  Version  E,                                                               
regarding noncompetitive  leases of  lands.  He  inquired whether                                                               
the state can generally enter  into noncompetitive lease sales or                                                               
is this done through best interest findings.                                                                                    
MR.  BULLOCK explained  that  AS  38.35 is  the  chapter that  is                                                               
amended starting  on page 4,  line 18, Version E,  and continuing                                                               
for the  next few sections.   He said this chapter  is the Right-                                                               
of-Way Leasing  Act which was  enacted in 1973 to  facilitate the                                                               
development of the  Trans-Alaska Pipeline.  The  act was designed                                                               
to  help the  pipeline going  forward by  allowing noncompetitive                                                               
leases with  certain carriers that  met the requirements  in that                                                               
section.  It is applicable to  the pipelines that are defined and                                                               
described in Section 4 of the bill.                                                                                             
3:03:56 PM                                                                                                                    
CO-CHAIR  NEUMAN  asked  whether  a contract  carrier  line  with                                                               
possible  exclusive right-of-way  issues  would be  a fully  open                                                               
accessible pipeline.                                                                                                            
MR.  BULLOCK said  he is  not sure  about openly  accessible, but                                                               
that  is  the issue  between  a  contract  carrier and  a  common                                                               
CO-CHAIR  NEUMAN noted  that openly  accessible was  a term  used                                                               
quite a  bit last year.   He asked  whether a pipeline  with five                                                               
owners would have open access to another company that finds gas.                                                                
MR. BULLOCK stated that he  thinks two different things are being                                                               
talked about here.  The  "pipeline right-of-way act" [1973 Right-                                                               
of-Way Leasing  Act] gives a  pipeline a  lease or a  contract to                                                               
run across  state land.   The lease may  be wide enough  to allow                                                               
another line to go through or for other purposes, such as non-                                                                  
oil and  gas purposes.   It depends on  how the lease  is written                                                               
and DNR  could provide more information  in this regard.   As for                                                               
the  pipe itself,  the issue  is contract  carrier versus  common                                                               
carrier.  The common carrier would  be open to new production and                                                               
existing  owners  would have  to  have  their capacity  cut  back                                                               
unless  there   was  expansion  through  compression   or  adding                                                               
additional or larger pipe.                                                                                                      
3:06:18 PM                                                                                                                    
CO-CHAIR NEUMAN,  in reference to  page 10, lines  23-24, Version                                                               
E,  which state  "in the  best interest  of the  state", inquired                                                               
whether  there  are any  best  interest  findings in  statute  or                                                               
established in some way in the past.                                                                                            
MR. BULLOCK  pointed out  that AGIA had  a significant  number of                                                               
commitments that were  required of an applicant  for the license.                                                               
He said  the legislature can  put in  the factors that  it thinks                                                               
would determine what the best interests of the state are.                                                                       
CO-CHAIR  NEUMAN  asked whether  that  would  be decided  by  the                                                               
commission rather than the legislature under this proposal.                                                                     
MR. BULLOCK  said it is  a separation of  the branch issue.   For                                                               
example, the  legislature can authorize  the commissioner  of DNR                                                               
to do something and set the  bounds of that, but the commissioner                                                               
has discretion  as a member  of the executive branch  to actually                                                               
carry out the law that is enacted.                                                                                              
3:07:54 PM                                                                                                                    
REPRESENTATIVE  SEATON  asked  whether  anything  in  Section  1,                                                               
Version E, prevents a "railroad-style"  giveaway of state land to                                                               
a contract  carrier that is  unrelated to the right-of-way.   For                                                               
example, could the  state transfer 200,000 acres of  land or some                                                               
other state asset  that could then act as a  funding mechanism to                                                               
pay for the project?                                                                                                            
MR. BULLOCK  suggested that  members read  the March  2008 Alaska                                                               
Supreme Court case regarding University  of Alaska lands in order                                                               
to  understand this.   The  case talks  about what  is considered                                                               
state lands and  the laws that are applicable to  state lands, as                                                               
well  as  the  limitations  of  the  Statehood  Act  as  to  what                                                               
interests  in lands  the  state  could give  up.    He said  that                                                               
generally  the approach  is by  leasing or  by providing  for the                                                               
disposal  of  land  under  the  Alaska  National  Interest  Lands                                                               
Conservation Act (ANILCA).  There  are significant limitations on                                                               
what the state  can do as far as transferring  land ownership and                                                               
there are also dedicated fund issues if it is done wrong.                                                                       
REPRESENTATIVE SEATON  withdrew his objection to  the adoption of                                                               
Version E as the working document.                                                                                              
[Representative Kawasaki's objection was treated as withdrawn.]                                                                 
CO-CHAIR JOHNSON,  after ascertaining  that there was  no further                                                               
objection, announced that  Version E of HB 120 is  adopted as the                                                               
working document before the committee.                                                                                          
3:10:24 PM                                                                                                                    
There being no  further business before the  committee, the House                                                               
Resources Standing Committee meeting was adjourned at 3:10 p.m.                                                                 

Document Name Date/Time Subjects
CSHB 120 26-LS0523 E.pdf HRES 4/6/2009 1:00:00 PM
HB 120