Legislature(2009 - 2010)BARNES 124

03/01/2010 01:00 PM House RESOURCES

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01:11:30 PM Start
01:11:41 PM HB369
03:00:52 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Heard & Held
Scheduled But Not Heard
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                    ALASKA STATE LEGISLATURE                                                                                  
               HOUSE RESOURCES STANDING COMMITTEE                                                                             
                         March 1, 2010                                                                                          
                           1:11 p.m.                                                                                            
MEMBERS PRESENT                                                                                                               
Representative Craig Johnson, Co-Chair                                                                                          
Representative Mark Neuman, Co-Chair                                                                                            
Representative Bryce Edgmon                                                                                                     
Representative Kurt Olson                                                                                                       
Representative Paul Seaton                                                                                                      
Representative Peggy Wilson                                                                                                     
Representative David Guttenberg                                                                                                 
Representative Scott Kawasaki                                                                                                   
Representative Chris Tuck                                                                                                       
MEMBERS ABSENT                                                                                                                
All members present                                                                                                             
COMMITTEE CALENDAR                                                                                                            
HOUSE BILL NO. 369                                                                                                              
"An Act relating to an  in-state natural gas pipeline, the office                                                               
of in-state  gasline project manager, the  Joint In-State Gasline                                                               
Development Team,  and the  In-State Gasline  Steering Committee;                                                               
and providing for an effective date."                                                                                           
     - HEARD & HELD                                                                                                             
SENATE JOINT RESOLUTION NO. 22                                                                                                  
Opposing litigation  that seeks to eliminate  the Kenai, Kasilof,                                                               
and Chitina  sockeye salmon personal  use dip net  fisheries; and                                                               
requesting  the   governor  to  re-examine   the  disproportional                                                               
influence  of the  commercial fisheries  industries on  fisheries                                                               
management in the state.                                                                                                        
     - SCHEDULED BUT NOT HEARD                                                                                                  
PREVIOUS COMMITTEE ACTION                                                                                                     
BILL: HB 369                                                                                                                  
SHORT TITLE: IN-STATE PIPELINE/ MANAGER/TEAM                                                                                    
SPONSOR(s): REPRESENTATIVE(s) CHENAULT                                                                                          
02/23/10       (H)       READ THE FIRST TIME - REFERRALS                                                                        
02/23/10       (H)       RES, FIN                                                                                               
02/26/10       (H)       RES AT 1:00 PM BARNES 124                                                                              
02/26/10       (H)       Heard & Held                                                                                           
02/26/10       (H)       MINUTE(RES)                                                                                            
03/01/10       (H)       RES AT 1:00 PM BARNES 124                                                                              
WITNESS REGISTER                                                                                                              
REPRESENTATIVE MIKE CHENAULT                                                                                                    
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Answered questions as sponsor of HB 369.                                                                 
TOM WRIGHT, Staff                                                                                                               
Representative Mike Chenault                                                                                                    
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Answered questions regarding HB 369 on                                                                   
behalf of Representative Chenault, sponsor.                                                                                     
HAROLD HEINZE, Chief Executive Officer                                                                                          
Alaska Natural Gas Development Authority (ANGDA)                                                                                
Department of Revenue                                                                                                           
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Supported HB 308.                                                                                        
SCOTT HAMANN                                                                                                                    
Kenai, Alaska                                                                                                                   
POSITION STATEMENT:  Supported HB 369.                                                                                        
ROBERT SWENSON, Project Manager                                                                                                 
In-State Gas Project                                                                                                            
Alaska Mental Health Trust Land Office                                                                                          
Department of Natural Resources                                                                                                 
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  During the hearing on HB 369, answered                                                                   
ACTION NARRATIVE                                                                                                              
1:11:30 PM                                                                                                                    
CO-CHAIR  CRAIG  JOHNSON  called  the  House  Resources  Standing                                                             
Committee meeting to  order at 1:11 p.m.  Present  at the call to                                                               
order  were Representatives  Edgmon, Guttenberg,  Kawasaki, Tuck,                                                               
Seaton,  Neuman,  and Johnson.    Representatives  P. Wilson  and                                                               
Olson arrived as the meeting was in progress.                                                                                   
             HB 369-IN-STATE PIPELINE/ MANAGER/TEAM                                                                         
1:11:41 PM                                                                                                                    
CO-CHAIR JOHNSON  announced that  the only  order of  business is                                                               
HOUSE BILL NO.  369, "An Act relating to an  in-state natural gas                                                               
pipeline,  the office  of in-state  gasline project  manager, the                                                               
Joint  In-State  Gasline  Development   Team,  and  the  In-State                                                               
Gasline  Steering  Committee;  and  providing  for  an  effective                                                               
1:12:36 PM                                                                                                                    
CO-CHAIR  NEUMAN   moved  to  adopt  Amendment   8,  labeled  26-                                                               
LS1527\R.4,   Cook,   3/1/10,   written  as   follows   [original                                                               
punctuation provided]:                                                                                                          
      Page 4, line 13, following the second occurrence of                                                                       
         Insert ", except for requests from the Alaska                                                                          
     Gasline Inducement Act coordinator (AS 43.90.250),"                                                                        
CO-CHAIR JOHNSON  objected for discussion purposes.   In response                                                               
to  Representative  Guttenberg,  he clarified  the  committee  is                                                               
still working on the original version of HB 369.                                                                                
REPRESENTATIVE   MIKE   CHENAULT,   Alaska   State   Legislature,                                                               
explained that Amendment 8 is  in response to concerns previously                                                               
expressed  by   Representative  Seaton  regarding   priority  and                                                               
crossing the  legal line with  the Alaska Gasline  Inducement Act                                                               
(AGIA) process.   He  related that the  drafter was  unsure there                                                               
was a problem, but she drafted  an amendment that would take care                                                               
of the problem either way.                                                                                                      
REPRESENTATIVE SEATON said he appreciates the amendment.                                                                        
1:14:34 PM                                                                                                                    
CO-CHAIR  JOHNSON  inquired  whether the  drafter  believes  this                                                               
would place a  request by the AGIA coordinator above  that of the                                                               
in-state gasline project manager, as opposed to equal footing.                                                                  
REPRESENTATIVE CHENAULT deferred to Mr. Tom Wright.                                                                             
TOM  WRIGHT, Staff,  Representative Mike  Chenault, Alaska  State                                                               
Legislature, related that the problem  the drafter, Ms. Tam Cook,                                                               
had was that  when she researched the AGIA statutes  there was no                                                               
request for language that gave  [the AGIA coordinator] a priority                                                               
over  other requests.   Therefore,  from  his conversation,  this                                                               
would be on an equal footing with the AGIA coordinator.                                                                         
CO-CHAIR JOHNSON stated his concern  that it be equal footing and                                                               
not subservient to requests from the AGIA coordinator.                                                                          
1:15:38 PM                                                                                                                    
CO-CHAIR NEUMAN asked  Mr. Wright to talk  about the relationship                                                               
between  the  AGIA coordinator  and  the  Joint In-state  Gasline                                                               
Development Team.                                                                                                               
MR. WRIGHT  responded that  the coordinator for  AGIA is  a whole                                                               
separate  entity from  the  in-state  gasline [project  manager];                                                               
they are  two different  people and two  different projects.   In                                                               
further response,  he explained that  any request from  the Joint                                                               
In-state Gasline  Development Team would go  through the in-state                                                               
gasline [project manager] and not through the AGIA coordinator.                                                                 
CO-CHAIR JOHNSON removed  his objection.  There  being no further                                                               
objection, Amendment 8 was adopted.                                                                                             
1:17:32 PM                                                                                                                    
CO-CHAIR NEUMAN pointed  out the new fiscal notes for  HB 369 and                                                               
presumed they would be explained after public testimony.                                                                        
REPRESENTATIVE CHENAULT,  in response  to Co-Chair  Johnson, said                                                               
the fiscal notes are $350-$380 million.                                                                                         
CO-CHAIR JOHNSON commented  that this is a  substantial amount of                                                               
money; however, he believes this is  money that would be spent on                                                               
any in-state gas pipeline regardless  of who does it.  Therefore,                                                               
the fiscal note  is not unique to HB 369,  but unique to building                                                               
a pipeline.                                                                                                                     
REPRESENTATIVE CHENAULT responded correct.                                                                                      
CO-CHAIR NEUMAN requested that the  people presenting this fiscal                                                               
note be ready to describe how they came up with the numbers.                                                                    
CO-CHAIR  JOHNSON said  one of  the things  this legislation  has                                                               
done  is to  spur people  to provide  these numbers  because they                                                               
were not forthcoming prior to HB  369 being presented.  He opened                                                               
public testimony.                                                                                                               
1:19:41 PM                                                                                                                    
HAROLD  HEINZE,  Chief  Executive  Officer,  Alaska  Natural  Gas                                                               
Development  Authority  (ANGDA),  Department  of  Revenue,  first                                                               
qualified that while  he is speaking in support of  HB 369 as the                                                               
chief  executive officer  of ANGDA,  he  has not  yet polled  his                                                               
board on  this legislation.  However,  a number of the  things he                                                               
will comment on  have been discussed with the  ANGDA board within                                                               
the past  year.   He said  ANGDA is pleased  to be  considered as                                                               
part  of  the   team  and  believes  it  can   be  a  significant                                                               
contributor to that  team.  His organization is happy  to work in                                                               
this   cooperative  and   collaborative   environment  of   state                                                               
entities,  and  believes  there  will  be a  lot  of  synergy  in                                                               
combining  the public  corporations  and  state agencies  towards                                                               
achieving the expedited action desired.   In the past year, ANGDA                                                               
has  been very  frustrated over  the decisions  on gasline  route                                                               
selection and is  therefore very anxious to  participate in route                                                               
selection  and alignment  design for  an in-state  gas system  as                                                               
directed under HB 369.                                                                                                          
1:21:38 PM                                                                                                                    
MR.  HEINZE offered  his belief  that HB  369 clearly  allows the                                                               
ANGDA board  to pursue  other lawful  activities as  provided for                                                               
under AS  41.41 and that there  is no contradiction of  the ANGDA                                                               
statute that  was approved  as Proposition  3 in  1992.   He said                                                               
ANGDA strongly  endorses the much-needed public  forum that would                                                               
be  provided by  the steering  committee concept.   Accomplishing                                                               
the tasks  assigned to  the team will  require work  efforts well                                                               
beyond  the   existing  state  employee   capability.     Use  of                                                               
individual  expert  contractors  and  contractor  companies  will                                                               
require funding and ANGDA is  anxious to avoid having an unfunded                                                               
mandate for action.                                                                                                             
1:22:39 PM                                                                                                                    
REPRESENTATIVE  SEATON inquired  whether  a fiscal  note will  be                                                               
forthcoming from Mr. Heinze.                                                                                                    
CO-CHAIR JOHNSON  responded he is  unsure whether ANGDA  would be                                                               
in a  position to  submit a  fiscal note because  it is  a quasi-                                                               
government agency.                                                                                                              
MR.  HEINZE replied  that ANGDA  is a  public corporation  of the                                                               
state and  is a  body of  state government  that administratively                                                               
reports  to the  Department  of  Revenue.   He  said  he has  not                                                               
submitted a  fiscal note at this  point because he does  not know                                                               
how the  development team  is going to  estimate the  work effort                                                               
involved.   It  will take  money to  do this,  and the  work that                                                               
ANGDA could do as  part of the total team effort  would be in the                                                               
range of  $1 million.   He  estimates that  the total  work would                                                               
probably measure in the range of $5-$10 million.                                                                                
1:24:30 PM                                                                                                                    
MR. WRIGHT related  that the sponsor asked  the administration to                                                               
encompass agencies  like the  Alaska Railroad  and ANGDA  when it                                                               
prepared   the   fiscal   note,  although   the   Department   of                                                               
Transportation  &  Public  Facilities submitted  its  own  fiscal                                                               
note.   The  sponsor  does  not want  duplication  of effort  and                                                               
staff,  so the  administration  was charged  to  provide what  it                                                               
envisions based upon the provisions of HB 369.                                                                                  
CO-CHAIR  JOHNSON  stated  that  Mr. Bob  Swenson,  In-state  Gas                                                               
Project Manager, probably put together the fiscal note.                                                                         
1:25:55 PM                                                                                                                    
REPRESENTATIVE SEATON asked whether  there is money available for                                                               
ANGDA's participation on the team,  or whether some other funding                                                               
mechanism is needed.                                                                                                            
MR. HEINZE answered that the  legislature's past funding of ANGDA                                                               
has allowed it to complete work  for a route, a right-of-way, and                                                               
an  environmental impact  statement for  a 460-mile  right-of-way                                                               
extending from  Beluga through Palmer through  Glennallen through                                                               
Delta Junction  to the Golden Valley  Electric Association (GVEA)                                                               
plant in Fairbanks.   He presumes this work would  become part of                                                               
the body of work that is looked  at through HB 369, as this would                                                               
put the gasline  halfway to the North Slope and  would be of some                                                               
significance.     Resources   have   been   made  available   and                                                               
commitments made  to contractors that exhaust  ANGDA's funding at                                                               
this point.   More funding would be needed if  additional work is                                                               
defined for ANGDA as part of this team effort.                                                                                  
REPRESENTATIVE SEATON  said he is  raising this issue  because it                                                               
would be  difficult if  one member of  the development  team does                                                               
not have funding.                                                                                                               
1:28:21 PM                                                                                                                    
CO-CHAIR NEUMAN  inquired whether there would  be consequences to                                                               
an entity  in the second open  season if it does  not participate                                                               
in the first open season.                                                                                                       
MR. HEINZE responded  that the group ANGDA has focused  on is the                                                               
electric   utilities,  ranging   from   Golden  Valley   Electric                                                               
Association in  Fairbanks, Copper Valley Electric  Association in                                                               
Glennallen, and at least five  of the major electric utilities in                                                               
the Cook  Inlet area.  He  said ANGDA believes it  very important                                                               
that some  major portion of the  in-state gas users put  at least                                                               
some marker down  to assure that people understand  gas is wanted                                                               
from a big  project delivered into Alaska.  If  that is not done,                                                               
he thinks  substantial commercial advantage  is lost in  terms of                                                               
shipment as well  as substantial loss of leverage  in the Federal                                                               
Energy Regulatory  Commission (FERC)  process.  The  in-state gas                                                               
use will  always be a  very minor  percentage of the  big project                                                               
and the state does not want  to be that last few percent; rather,                                                               
it will want  to be a few percent that  speaks towards the middle                                                               
of the  pack.  While  he will not  tell members that  they cannot                                                               
delay  and  wait, ANGDA  believes  there  are fairly  substantive                                                               
advantages  that  ultimately  reflect  in the  consumer  bill  in                                                               
participating in the initial open season.                                                                                       
1:30:16 PM                                                                                                                    
CO-CHAIR NEUMAN asked whether ANGDA  has looked at other proposed                                                               
projects that could  happen in the state that  would create jobs,                                                               
such as the Donlin Creek Gold Mine.                                                                                             
MR.  HEINZE  replied  he  was  specifically  talking  about  that                                                               
portion of the market that ANGDA  has been trying to work with to                                                               
put together a natural gas  supply cooperative that would provide                                                               
the  ability   to  bid  the  substantial   financial  commitments                                                               
required in  the big  project.  ENSTAR  is easily  equivalent, if                                                               
not bigger  than, the  electric utilities;  however, he  does not                                                               
know what ENSTAR's  intentions are for participating  in the open                                                               
season.   He said ANGDA  has attempted  to work with  any parties                                                               
that have an  interest in shipping gas within  an in-state system                                                               
either to  the Cook Inlet area  for industrial uses or  to Valdez                                                               
for liquefied natural gas (LNG)  export.  All of those activities                                                               
are  extremely important  in making  the in-state  system viable.                                                               
He believes  it is important to  put at least some  marker on the                                                               
table  for  in-state  delivery  even if  some  entities  are  not                                                               
involved in this initial go-round.                                                                                              
1:32:17 PM                                                                                                                    
CO-CHAIR NEUMAN inquired whether  ANGDA has looked at alternative                                                               
routes, such  as a Parks  Highway route and  a spur line  over to                                                               
Donlin Creek Gold Mine.                                                                                                         
MR.  HEINZE answered  yes; ANGDA  has looked  at the  route issue                                                               
several times over.   All kinds of parameters come  into play, of                                                               
which the most fundamental is consumer  cost.  What would be paid                                                               
on  monthly utility  bills is  reflected best  by looking  at the                                                               
tariff, the  cost of service  for gas  delivered on a  unit basis                                                               
into consuming  areas.   In all  cases, the  work ANGDA  has done                                                               
strongly favors  going through Glennallen because  it would allow                                                               
the  option of  going to  Valdez.   He said  ANGDA believes  that                                                               
eliminating  the Valdez  option at  this point  is a  mistake and                                                               
that  it  should be  given  every  chance  to  see if  there  are                                                               
interested shippers.                                                                                                            
1:33:31 PM                                                                                                                    
CO-CHAIR NEUMAN agreed that drawing an  X through Valdez is a bad                                                               
idea, as is  drawing an X down the Parks  Highway.  He reiterated                                                               
his question  about whether ANGDA  has done any work  to identify                                                               
projects down  the Parks Highway so  energy can be taken  over to                                                               
Donlin Creek Gold Mine.                                                                                                         
MR. HEINZE  responded that last April  the legislature authorized                                                               
Mr.  Harry Noah  to exclusively  undertake certain  work.   While                                                               
ANGDA provided some input to that  work, it was not a participant                                                               
in any  of the discussions  or considerations that Mr.  Noah used                                                               
to formulate  his decision to  work in  more detail on  the Parks                                                               
Highway.   No attempt was made  by ANGDA to duplicate  Mr. Noah's                                                               
work and  ANGDA presumes  that at  a proper  time that  work will                                                               
become publically available.                                                                                                    
1:34:45 PM                                                                                                                    
CO-CHAIR NEUMAN  understood Mr. Heinze's  answer to be  no, ANGDA                                                               
has not  done recent work  on a Park's  Highway route.   He asked                                                               
how much money is currently in ANGDA's budget.                                                                                  
MR.  HEINZE, recalling  from memory,  said ANGDA  had about  $4.2                                                               
million in appropriated  money at the start of  this fiscal year.                                                               
At this  point ANGDA  has spent  $1.7 million  of that  money and                                                               
committed  about $2.6  million.   As  of today,  ANGDA has  about                                                               
$300,000 that remains uncommitted for the rest of the year.                                                                     
1:36:02 PM                                                                                                                    
REPRESENTATIVE KAWASAKI  reviewed some of the  purposes for which                                                               
ANGDA was established  in 2002:  acquisition  and conditioning of                                                               
North Slope  natural gas, design  and construction of  a pipeline                                                               
system, operations and maintenance,  and acquisition of a natural                                                               
gas market  share sufficient to  ensure long term  feasibility of                                                               
the  pipeline system  project.   He inquired  why ANGDA  does not                                                               
just do that and why this bill is necessary for that process.                                                                   
MR. HEINZE replied he believes ANGDA  has done that over its six-                                                               
year  history.   The  first  couple  of  years were  spent  fully                                                               
understanding an  LNG project to  Valdez, which  was specifically                                                               
referenced  in  Proposition   3  in  the  2002   election.    The                                                               
proposition also provided  for a spur line from  that pipeline to                                                               
the  Cook Inlet  area.    Over the  next  couple  of years  ANGDA                                                               
progressed that pipeline and  obtained a conditional right-of-way                                                               
from the  state for a  Glennallen to  Palmer pipeline.   When the                                                               
Alaska  Gasline Port  Authority  began pursuing  the LNG  project                                                               
ANGDA stepped back  and concentrated on the spur line.   When the                                                               
AGIA  process arose,  ANGDA  analyzed what  was  in the  consumer                                                               
interest and determined that the best  use of ANGDA's time was to                                                               
focus on  utilizing as  much of  the big  project as  possible to                                                               
deliver gas in-state with a  connector, lateral, or spur line off                                                               
the  big line.    It  is hoped  this  will  culminate in  ANGDA's                                                               
participation in the open season this summer.                                                                                   
1:38:26 PM                                                                                                                    
REPRESENTATIVE  KAWASAKI  noted  that  HB 369  proposes  to  have                                                               
several dozen  members on an In-state  Gasline Steering Committee                                                               
and  to have  ANGDA be  a member  of the  Joint In-state  Gasline                                                               
Development Team.   He questioned why this would be  the best way                                                               
to streamline a pipeline so that it can be done more quickly.                                                                   
MR. HEINZE  answered that ANGDA  believes the  steering committee                                                               
concept provides for advice and  consultation and also allows for                                                               
public vetting  and public involvement.   One of  ANGDA's biggest                                                               
concerns over  the last  nine months is  that very  little public                                                               
information has  been put forward.   In regard to  composition of                                                               
the  development team,  ANGDA has  many of  the capabilities  and                                                               
interests in doing some of  the duties described there.  However,                                                               
to  move  expeditiously,  the combination  of  working  with  the                                                               
Department of Transportation & Public  Facilities (DOT&PF) to use                                                               
the highway  rights-of-way, bridges, and facilities  is extremely                                                               
powerful.   One  of the  biggest problems  Alaska faces  with any                                                               
development activity is the state's  interaction with the federal                                                               
authorities.  Use of the  highway rights-of-way for a few hundred                                                               
miles  of pipeline  almost immediately  goes a  long way  towards                                                               
advancing the  project, so ANGDA  sees the strengthening  of that                                                               
relationship with DOT&PF as good.                                                                                               
1:41:06 PM                                                                                                                    
REPRESENTATIVE KAWASAKI observed that  under existing statute the                                                               
DOT&PF  commissioner  has  the   authority  to  work  with  other                                                               
agencies to complete  a gasline.  Given this, he  asked why ANGDA                                                               
has  not worked  with DOT&PF  before.   He said  he is  trying to                                                               
determine why  HB 369 is  needed because  it seems like  the bill                                                               
would just add another layer to the bureaucracy.                                                                                
MR.  HEINZE responded  that in  the past  ANGDA has  identified a                                                               
number of places  where use of the highway  right-of-way would be                                                               
attractive,  and in  particular ANGDA  has attempted  interaction                                                               
with DOT&PF in the area from  Glennallen to Palmer and in some of                                                               
the areas between Delta Junction  and Glennallen.  However, ANGDA                                                               
has  been  unable  to  progress   DOT&PF  very  far  because  the                                                               
department is  stretched thin and  its priorities  are different.                                                               
Thus,  HB 369  would  strengthen that  relationship  and make  it                                                               
clear to all parties that the  desired result is a more expedited                                                               
preparation for  an in-state pipeline  and that all  agencies can                                                               
and should  be fully committed  to this  as one of  their highest                                                               
1:43:00 PM                                                                                                                    
REPRESENTATIVE  KAWASAKI  said  he  has questions  in  regard  to                                                               
interpretation  of the  duties of  the development  team and  how                                                               
they might conflict  with ANGDA's authority under Title  41.  For                                                               
example,  the Joint  In-state Gasline  Development Team  would be                                                               
directed to find  the most economical route,  and Co-Chair Neuman                                                               
has asked about  bringing gas to the Donlin Creek  Gold Mine.  He                                                               
inquired what  would happen if  Mr. Heinze, as director  of ANGDA                                                               
and following ANGDA's  established rules under Title  41, were to                                                               
conflict with the  duties of the development team  as proposed by                                                               
HB 369.                                                                                                                         
MR. HEINZE  replied he reads  the language in AS  38.34.040(b) as                                                               
directing the team  to focus on a specific project  - an in-state                                                               
natural  gas  pipeline   that  runs  from  the   North  Slope  to                                                               
tidewater.  He said ANGDA  is fully prepared to fully participate                                                               
and has information regarding a  Valdez LNG connection and a spur                                                               
line  to Cook  Inlet  that  needs to  be  considered  as part  of                                                               
whatever decisions  are made.   Because  those decisions  will be                                                               
publically  vetted,  he  does  not believe  there  would  be  any                                                               
conflict  with ANGDA's  purpose.   Additionally, nothing  in that                                                               
language goes against ANGDA's board looking  at a spur line off a                                                               
big project  running from  the North  Slope.   Propane is  one of                                                               
numerous  other projects  that  ANGDA has  been  working on,  and                                                               
there is nothing in HB 369 that contradicts that either.                                                                        
1:45:31 PM                                                                                                                    
REPRESENTATIVE  KAWASAKI offered  his appreciation  for the  work                                                               
Mr.  Heinze has  done  on in-state  gas.   He  added  that it  is                                                               
incumbent upon everyone to provide  information to the public and                                                               
he hopes HB  369 will increase that information.   However, while                                                               
an in-state gasline  is everyone's priority, he is  unsure HB 369                                                               
is the right way to get there.                                                                                                  
MR. HEINZE agreed  it is very important to talk  to folks, to let                                                               
them know what  is being done, and to put  up with hard questions                                                               
for which there might not be an answer.                                                                                         
1:46:44 PM                                                                                                                    
REPRESENTATIVE  KAWASAKI  noted that  there  is  worry about  how                                                               
political  an in-state  gasline becomes.   He  asked whether  yet                                                               
more politics  would be  added to  Mr. Heinze's  job if  ANGDA is                                                               
brought into the development team.                                                                                              
MR. HEINZE answered  the statute is clear that he  himself has no                                                               
power.  The statutory authority lies  with the ANGDA board and he                                                               
works for  them at their direction.   The board meets  monthly or                                                               
every six weeks and these meetings  are very public and allow the                                                               
public  to  speak.   Funding  through  legislative  appropriation                                                               
certainly involves  political elements,  but both he  and ANGDA's                                                               
board members are  always willing to listen to  the direction and                                                               
suggestions of  the legislature and  the governor, and  have done                                                               
so over all these years.                                                                                                        
1:48:33 PM                                                                                                                    
REPRESENTATIVE GUTTENBERG surmised  that from ANGDA's perspective                                                               
an  in-state gasline  would need  to  include gas  export or  the                                                               
moving of gas down to the Lower 48.                                                                                             
MR. HEINZE  responded ANGDA's view  has been that an  LNG project                                                               
or an LNG  export component from Valdez would  provide the volume                                                               
and  investor  strength  that  is  important  for  advancing  the                                                               
project in  a way that  leads to the  lowest consumer cost.   The                                                               
open  season   process  being  undertaken  by   "TransCanada  and                                                               
ExxonMobil"  will  provide  some  indication  about  interest  in                                                               
Valdez.  If  there is no interest, discussion will  become a moot                                                               
point and  a lot of people's  hopes will be dashed.   However, if                                                               
there is interest, it would be  unfortunate to have had the state                                                               
turn its  back on that opportunity.   Over the last  year ANGDA's                                                               
focus   has   been   on  preparations   for   the   open   season                                                               
participation.  It  was ANGDA's impression that  Mr. Noah's work,                                                               
funded  by the  legislature,  was to  look at  a  North Slope  to                                                               
tidewater  pipeline, so  ANGDA avoided  duplicating that  effort.                                                               
He said he has requested Mr.  Swenson, the person taking over for                                                               
Mr. Noah,  to provide ANGDA  with information about  the elements                                                               
of that work that  would be useful to ANGDA's work.   He does not                                                               
see anything  wrong with Alaska  having the strength of  a couple                                                               
different efforts.   This bill  visualizes that ANGDA  would work                                                               
as part of the team and ANGDA is prepared to do that.                                                                           
1:51:24 PM                                                                                                                    
REPRESENTATIVE GUTTENBERG  inquired what  Mr. Heinze sees  as the                                                               
levels of in-state demand and export.                                                                                           
MR.  HEINZE replied  that Railbelt  electric utilities  currently                                                               
use  a little  over  100  million cubic  feet  per  day for  home                                                               
heating.   A  big pipeline  through the  Fairbanks area  combined                                                               
with Golden  Valley Electric Association  and the  refinery would                                                               
use about 50  million cubic feet per day.   The historic high for                                                               
industrial use  in Cook  Inlet was about  250 million  cubic feet                                                               
per  day; right  now it  is about  half that  at 125-150  million                                                               
cubic feet  per day  for the  Kenai LNG  plant.   A gas-to-liquid                                                               
industrial  customer  would  likely use  about  0.5-0.75  billion                                                               
cubic feet  per day,  and LNG  export could  easily be  1 billion                                                               
cubic feet per day.                                                                                                             
1:52:49 PM                                                                                                                    
REPRESENTATIVE GUTTENBERG asked  what particular activities ANGDA                                                               
would work on, assuming an in-state gasline is happening.                                                                       
MR. HEINZE answered that ANGDA has  put a lot of energy into, and                                                               
would  continue looking  into, a  propane wholesale  point and  a                                                               
propane distribution system.  Also,  ANGDA would work with people                                                               
to advance lateral  lines at a number of spots,  such as the mine                                                               
mentioned  earlier or  the Nenana  Basin.   This  work would  not                                                               
include actually doing the projects,  but helping to finance them                                                               
or  apply other  leverage.   He offered  his observation  that if                                                               
there is a spur line off  Delta Junction, ANGDA has advanced that                                                               
project pretty far  along and would see that as  a pre-build into                                                               
a  big pipeline  as ANGDA  thinks there  are advantages  to that.                                                               
Should the open season be  unsuccessful, ANGDA would then look at                                                               
what projects to  do and would probably focus on  Valdez LNG as a                                                               
project.  When  looking at participation in the  open season, the                                                               
key is that  there is basically unlimited volume  for an in-state                                                               
gas  system.     He  recalled   that  during  the   AGIA  process                                                               
TransCanada clearly  stipulated that  if the  state ships  gas to                                                               
Delta Junction the  state would be a customer,  not a competitor.                                                               
In that  case the state would  not be limited to  the 0.5 billion                                                               
cubic feet per day  that would apply if the state  were to go all                                                               
the way to the North Slope with a separate project.                                                                             
1:55:38 PM                                                                                                                    
REPRESENTATIVE  GUTTENBERG  requested  Mr.  Heinze  to  elaborate                                                               
further on  taking gas to Delta  Junction for ANGDA to  then take                                                               
to tidewater.                                                                                                                   
MR. HEINZE related that the AGIA  language placing a limit of 0.5                                                               
billion cubic  feet per  day was  designed to  assure TransCanada                                                               
that the state  would not become a competitor to  the very effort                                                               
the state  and TransCanada are jointly  working on.  At  the time                                                               
of the  hearings to grant the  license there was a  great deal of                                                               
concern that  an LNG project could  be lost if it  was limited by                                                               
that  provision; therefore,  TransCanada agreed  to also  solicit                                                               
commitments to Valdez  as well as to the border  and is holding a                                                               
separate and simultaneous open season  for Valdez.  At that time,                                                               
there   was  a   clear   understanding   with  TransCanada   that                                                               
nominations in  TransCanada's big  pipeline to Delta  Junction in                                                               
excess of 0.5 billion cubic feet  per day were not a violation of                                                               
the  AGIA non-compete  provision  because the  state  would be  a                                                               
customer and not a competitive project.                                                                                         
1:57:45 PM                                                                                                                    
CO-CHAIR JOHNSON disagreed with Mr. Heinze's interpretation.                                                                    
MR.  HEINZE clarified  that ANGDA  is  not proposing  to build  a                                                               
project in  competition with TransCanada;  ANGDA is  proposing to                                                               
participate  in TransCanada's  open season  and take  off gas  at                                                               
Delta Junction.   In further response, he said  the spur pipeline                                                               
from the Delta  Junction takeoff probably would be  built by some                                                               
other company.                                                                                                                  
CO-CHAIR JOHNSON said he will get a legal opinion on that.                                                                      
1:58:36 PM                                                                                                                    
MR. HEINZE, in  response to Representative P.  Wilson, said ANGDA                                                               
was established  by Proposition 3  in the 2002 election,  and was                                                               
given its  wings in the summer  or fall of 2003  by then-Governor                                                               
Frank Murkowski.  In further  response, and speaking from memory,                                                               
he recalled  that since  its inception  and until  year-end 2010,                                                               
ANGDA has  been appropriated a total  of about $13 million.   The                                                               
vast majority of  that was in capital project  money for specific                                                               
work that  has resulted in  the assets of  conditional rights-of-                                                               
way, permits, preliminary  engineering designs, and so  forth.  A                                                               
relatively  minor   amount  of  the   money  has  been   for  the                                                               
traditional operating budget for staff of about $300,000 a year.                                                                
2:00:23 PM                                                                                                                    
REPRESENTATIVE  P.  WILSON  surmised that  the  right-of-way  and                                                               
everything ANGDA has worked on is from Delta Junction south.                                                                    
MR.  HEINZE responded  that in  its Beluga-to-Fairbanks  project,                                                               
ANGDA has  been working on right-of-way,  wetlands determination,                                                               
and environmental  impact associated with a  project running from                                                               
Beluga  on the  west  side of  Cook Inlet  to  Palmer, Palmer  to                                                               
Glennallen,  Glennallen   to  Delta  Junction,  and   then  Delta                                                               
Junction to Fairbanks.   That could provide,  if appropriate, gas                                                               
to Fairbanks if there was a long delay in a pipeline.                                                                           
2:01:34 PM                                                                                                                    
MR. HEINZE,  in response to another  question from Representative                                                               
P. Wilson,  stated ANGDA has  in hand a  conditional right-of-way                                                               
from the  State of  Alaska that runs  from Glennallen  to Palmer.                                                               
Currently,  ANGDA is  in  the  process of  working  on state  and                                                               
federal   rights-of-way  from   Beluga  to   Fairbanks,  and   an                                                               
environmental impact  statement (EIS)  from Beluga  to Fairbanks.                                                               
Additionally, ANGDA has completed  the wetlands determination and                                                               
filed  with the  U.S. Army  Corps of  Engineers for  the wetlands                                                               
permit, which is  the major permit for a pipeline  from Beluga to                                                               
Fairbanks.  The  draft EIS should be issued by  mid-2010 and then                                                               
it will  take another six months  for that to be  perfected.  All                                                               
the  right-of-way and  permit conditions  should be  perfected by                                                               
year end.   In further response, he explained  that ANGDA applied                                                               
for  these permits  a long  time  ago and  is in  the process  of                                                               
working through all the steps and  documents that need to be done                                                               
and expects to have these permits by the end of 2010.                                                                           
2:03:20 PM                                                                                                                    
REPRESENTATIVE OLSON  understood Alaska's  North Slope gas  to be                                                               
at roughly $2 per thousand cubic feet (Mcf) at the wellhead.                                                                    
MR. HEINZE replied  it has moved around, and at  this time he has                                                               
no basis to argue that it is not $2 per Mcf.                                                                                    
REPRESENTATIVE OLSON  related that Qatar,  which has at  least as                                                               
much gas  as Alaska, is  receiving 15  cents at the  wellhead and                                                               
the Gorgon Project  [off Australia] is at 40-50 cents.   He asked                                                               
how much gas, including gas for LNG,  would have to be sold at $2                                                               
per Mcf to make  it competitive with the rest of  the gas that is                                                               
on the world market.                                                                                                            
MR. HEINZE  explained that the  pricing of  gas in the  Far East,                                                               
Japan in  particular, is based  on an equivalency with  oil price                                                               
and has  nothing to  do with  cost structures  in Qatar  or other                                                               
places.  However, it has everything  to do with the delivered oil                                                               
price in those locales.   Generally, the Japanese market is about                                                               
90 percent  of the British  Thermal Unit (BTU) equivalent  of oil                                                               
price, which  leaves a big margin  between $2, $3, or  even $4 on                                                               
the North Slope and the delivered price in Tokyo.                                                                               
REPRESENTATIVE OLSON  inquired whether  new contracts  coming out                                                               
of Japan have  been dropping significantly due to  the high price                                                               
of  oil and  the low  price of  gas and  the glut  of gas  on the                                                               
MR.  HEINZE  answered that  ANGDA's  work  suggests the  cost  to                                                               
deliver  Alaska's gas  is  competitive in  terms  of the  pricing                                                               
structures across the Pacific.                                                                                                  
2:05:15 PM                                                                                                                    
CO-CHAIR JOHNSON posed a scenario  in which China wants to export                                                               
0.5  billion cubic  feet of  Alaska gas.   He  asked whether  Mr.                                                               
Heinze would consider that a viable open season offer.                                                                          
MR. HEINZE  responded that,  in the past,  some explorers  on the                                                               
North Slope  have taken  some interest  in the  in-state process.                                                               
In  particular, one  or two  of them  were involved  in the  AGIA                                                               
process up  to the last week  and had done  a lot of work  on the                                                               
Valdez connection.   Based on  conversations he has had,  and the                                                               
general interest  he has seen  for trade  and the ability  of the                                                               
Chinese  to invest  in Alaska,  he thinks  there is  a reasonable                                                               
chance of the Chinese showing  up with 0.5-1.0 billion cubic feet                                                               
per day of  interest in Valdez; if  they do, he thinks  that is a                                                               
substantial anchor  for any  in-state gas  system, whether  it is                                                               
built  off the  big  pipeline  or as  a  separate  pipeline.   He                                                               
reminded members  that Sinopec  submitted a  bid during  the AGIA                                                               
process that would  have provided for 4.0 billion  cubic feet per                                                               
delivered to Valdez.  That may have  been a bit much at the time,                                                               
he allowed, but Sinopec is  one of the largest corporate entities                                                               
in the world.                                                                                                                   
2:07:42 PM                                                                                                                    
CO-CHAIR   JOHNSON  remarked   that   he   received  calls   from                                                               
Washington, DC, in opposition to the aforementioned gas export.                                                                 
MR.  HEINZE  said  he  hopes  the state  is  careful  as  to  how                                                               
Washington,  DC,  is allowed  to  make  policy  for Alaska.    He                                                               
reminded members  that the open  season process is open  to folks                                                               
from Chicago as  well as to people across the  Pacific Ocean.  In                                                               
further response,  he explained that export  licenses are granted                                                               
by  the  U.S. Department  of  Energy.    There is  currently  one                                                               
license for  LNG export in  the U.S. and  that is located  at the                                                               
Kenai LNG plant.  The  general requirement is that export volumes                                                               
must be  in excess  of local  needs, and  right now  Alaska would                                                               
probably  use  no more  than  5-10  percent  of the  North  Slope                                                               
reserve,  which leaves  a  fair  amount of  room  for an  excess.                                                               
Additionally, the  open season process  is a  federally monitored                                                               
and regulated  open process for  all parties to come  forward and                                                               
provide a financial  basis for the building of the  pipeline.  It                                                               
will be very  interesting to see who shows up  and what the level                                                               
of commitment is for all these different aspects, he added.                                                                     
2:09:09 PM                                                                                                                    
CO-CHAIR JOHNSON  inquired what would  happen to the  open season                                                               
for  a  spur  line  from   Delta  Junction  should  the  electric                                                               
utilities and  ENSTAR not bid  and the  pipeline under HB  369 is                                                               
built first and they bid their  gas there.  He presumed that open                                                               
seasons could not  be offered in both places  and would therefore                                                               
be mutually exclusive.                                                                                                          
MR.  HEINZE  clarified  that  ANGDA  is  working  only  with  the                                                               
electric utilities  in regard to [TransCanada's]  open season and                                                               
the commitments  involved.   As a gas  company, ENSTAR  must make                                                               
its  own  decisions  as  to  whether to  participate.    All  the                                                               
electric  utilities, either  in aggregate  or individually,  have                                                               
some need for  gas.  The volumes needed in  Alaska are very small                                                               
compared to the total volumes involved  in the pipeline - tens of                                                               
millions of cubic feet per day  versus billions of cubic feet per                                                               
day.   There must be  participation in  the process to  enjoy the                                                               
benefits of  the process  and the benefit  is fixing  tariffs and                                                               
other conditions of  delivery.  The actual  commitments here will                                                               
be  conditioned and  those conditions  will put  a time  limit on                                                               
which  time  that  commitment  is  open;  if  a  project  is  not                                                               
developed,  then those  commitments are  not binding  and do  not                                                               
carry  forward.     For  example,   if  Golden   Valley  Electric                                                               
Association nominated 15 million cubic  feet per day for delivery                                                               
to Fairbanks and  then no pipeline is built to  Fairbanks after a                                                               
period of review, GVEA would  be released from that commitment of                                                               
its credit towards that gas.                                                                                                    
2:12:03 PM                                                                                                                    
CO-CHAIR  JOHNSON posed  a scenario  of an  Anchorage utility,  a                                                               
stand-alone  pipeline from  the North  Slope down  the Richardson                                                               
Highway  to Anchorage,  and an  offtake from  a pipeline  through                                                               
Delta  Junction.    He  surmised  that if  the  utility  bid  the                                                               
Richardson Highway  route, it would  not have the ability  to bid                                                               
the other pipeline because it would not need the capacity.                                                                      
MR. HEINZE  cautioned solace not  be taken that AGIA  provides an                                                               
offtake  because one  of the  two possible  big pipelines  is not                                                               
under AGIA  and therefore not  bound by  the AGIA rules.   Alaska                                                               
must deal  with the realities of  FERC, not AGIA as  far as these                                                               
commitments.   TransCanada  and  "ExxonMobil"  have clearly  said                                                               
there can  be commitments  tendered to both  a pipeline  going to                                                               
Valdez, in ANGDA's  case that would be an  offtake in Glennallen,                                                               
or to a  pipeline to the border, in which  case the offtake would                                                               
be in Delta  Junction.  At the  same time, ANGDA is  also free to                                                               
make  a  commitment into  the  "Denali  pipeline" if  those  open                                                               
seasons  overlap; each  commitment would  be contingent  upon the                                                               
non-acceptance of the others.                                                                                                   
2:13:53 PM                                                                                                                    
CO-CHAIR JOHNSON said  he is not talking about either  of the big                                                               
lines; rather, he is talking  about a small pipeline from Prudhoe                                                               
Bay down the  Richardson Highway to Anchorage.   He surmised that                                                               
bidding gas  into that pipeline  by Chugach  Electric Association                                                               
would  preclude   the  association,  financially,   from  bidding                                                               
another pipeline  because the association could  theoretically be                                                               
on the hook for double the capacity.                                                                                            
MR. HEINZE  replied if the  open seasons associated with  each of                                                               
those pipelines  overlapped, then the  bid in each case  would be                                                               
contingent on non-acceptance  of the bid in the other  case.  So,                                                               
yes, the utility can play in all the games at the same time.                                                                    
2:14:40 PM                                                                                                                    
CO-CHAIR  JOHNSON   inquired  what  happens  if   both  bids  are                                                               
MR.  HEINZE answered  that the  utility  would have  a choice  of                                                               
which one to proceed on.                                                                                                        
CO-CHAIR JOHNSON disagreed  the utility would have a  choice.  In                                                               
his  opinion, the  utility would  be on  the hook  for twice  the                                                               
volume  that  it wants  because  it  would  be brought  from  two                                                               
MR.  HEINZE reiterated  the commitments  made are  contingent and                                                               
argued that there  would be lots of legal help  from the attorney                                                               
general's office to prevent becoming trapped.                                                                                   
CO-CHAIR JOHNSON  said he will  be anxious to hear  whether other                                                               
users share Mr. Heinze's view.                                                                                                  
2:15:39 PM                                                                                                                    
REPRESENTATIVE  TUCK stated  that oftentimes  the legislature  is                                                               
perceived  as moving  too  slowly  and it  is  important to  move                                                               
forward without any steps backward.   A team effort would provide                                                               
more public  vetting, strengthening of relationships,  and better                                                               
commitments from  the different agencies.   He asked  whether Mr.                                                               
Heinze believes  this will  speed up the  timeline for  getting a                                                               
gasline and  whether this  is the needed  component for  making a                                                               
gasline  happen.   For example,  when ANGDA  was established  the                                                               
expectation was full production by 2007, and now it is 2011.                                                                    
MR.  HEINZE  related that  he  has  been  asked  in the  past  by                                                               
legislators  as to  what it  would take  to assure  the timeliest                                                               
construction of  an in-state gas  system.  His response  has been                                                               
that at  the top of his  list is unfettered and  full cooperative                                                               
access to the  state highway right-of-way and  full commitment of                                                               
the Department of Transportation  & Public Facilities (DOT&PF) to                                                               
working on  an in-state gas  pipeline; HB  369 makes it  clear to                                                               
both ANGDA and DOT&PF that that is the desired result.                                                                          
2:18:03 PM                                                                                                                    
REPRESENTATIVE  TUCK  understood Mr.  Heinze  to  be saying  that                                                               
ANGDA is  currently receiving neither unfettered  cooperation nor                                                               
full commitment and therefore HB 369 is necessary.                                                                              
MR.  HEINZE responded  that, from  ANGDA's knowledge,  it is  not                                                               
making  much  progress in  that  regard.    He  is aware  of  the                                                               
separate  process  under Mr.  Noah,  and  now Mr.  Swenson,  that                                                               
involves the  Department of  Transportation &  Public Facilities,                                                               
but he does not know what that progress  has been.  He said he is                                                               
trying to  convey that he  considers the involvement of  DOT&PF a                                                               
good and key  element in timely advancing of  an in-state gasline                                                               
because DOT&PF  already holds significant right-of-way  that does                                                               
not require the state to deal with all the federal issues.                                                                      
2:19:25 PM                                                                                                                    
REPRESENTATIVE  TUCK acknowledged  that ANGDA  had an  aggressive                                                               
schedule put  before it with  trying to meet production  by 2007.                                                               
He inquired how many meetings would  need to take place to have a                                                               
project ready by 2011.                                                                                                          
MR.  HEINZE  provided  the following  anecdote  in  this  regard:                                                               
after passage of  Proposition 3 it took nine  months before ANGDA                                                               
was set  up and  another six  to nine months  to get  funded; one                                                               
year  was allocated  for  ANGDA  to complete  its  chore, but  it                                                               
actually took eighteen  months; at that point,  ANGDA's ideas ran                                                               
against  what  then-Governor  Murkowski wanted  and  ANGDA  found                                                               
itself in  a backwater where  it stayed for quite  awhile working                                                               
on the spur line.  Anyone working  on a project that takes two to                                                               
four years to advance will  occasionally have to regroup and look                                                               
at where  progress can be  made, he  related, and ANGDA  has done                                                               
that.    Right now,  ANGDA  has  an  effort underway  that  would                                                               
significantly cut the  frontend of any project, and  that is what                                                               
HB  369 is  emphasizing.   The emphasis  is not  on building  the                                                               
pipeline but  on getting the  frontend of the project  reduced to                                                               
the point  where a competent  pipeline company could  move fairly                                                               
rapidly towards construction.                                                                                                   
2:21:53 PM                                                                                                                    
REPRESENTATIVE TUCK  said he thinks Mr.  Heinze's expertise would                                                               
be heavily relied  upon in this process.  He  asked Mr. Heinze to                                                               
state how  much funding  ANGDA would need  to participate  in the                                                               
team process that would be provided by HB 369.                                                                                  
MR. HEINZE  replied that he has  not made a detailed  estimate of                                                               
the level  of work that ANGDA  would be involved in  and how much                                                               
it would cost.  Presuming there  is already a fair amount of work                                                               
already done or  already underway, some of which he  may not know                                                               
about at  this point, but  making some  allowance that all  of it                                                               
has to  be pulled together,  he estimates ANGDA would  need about                                                               
$500,000 for  individual contractors  who bring  very specialized                                                               
expertise to the  issue and probably $500,000  for contractors to                                                               
do analysis and design.  While  this would be minimal, he expects                                                               
that the others would have a lot more effort in this process.                                                                   
2:24:13 PM                                                                                                                    
REPRESENTATIVE  TUCK  understood  that  the  U.S.  Department  of                                                               
Energy is the  only one that can  sign off on any  type of export                                                               
licenses in  the U.S. and  that Alaska's  need would only  be for                                                               
five to  ten percent of  the gas produced.   As far  as exporting                                                               
the  excess,  he  inquired  whether the  granting  of  an  export                                                               
license would be dependent upon the  needs of the other 48 states                                                               
in addition to Alaska's.                                                                                                        
MR. HEINZE  answered he is  unable to  project how this  would be                                                               
handled by  the U.S.  Department of Energy.   However,  if during                                                               
the open season process the  commitments indicate that there is a                                                               
desire and a  need for that gas  in the Lower 48,  then he thinks                                                               
the U.S. Department of Energy  would give that very heavy weight.                                                               
On the  other hand, if  not much  interest is expressed,  then he                                                               
thinks it  would become a  much more open  question as to  how to                                                               
deal with the other national needs.                                                                                             
CO-CHAIR JOHNSON  offered to  ask that  question directly  to the                                                               
U.S. Department  of Energy when  he attends this  year's national                                                               
energy conference.                                                                                                              
2:26:08 PM                                                                                                                    
REPRESENTATIVE  KAWASAKI  understood  that when  the  proposition                                                               
vote  on  ANGDA first  occurred,  quite  a  bit of  the  language                                                               
discussed the state's conflicts  with North Slope producers, such                                                               
as  the state  maybe  having to  take back  the  gas because  the                                                               
leaseholders were  not doing their  due diligence.   The language                                                               
pushed  for  an  all-Alaska  gasline and  state  ownership  of  a                                                               
pipeline and the related facilities.   He requested Mr. Heinze to                                                               
speak to  that, given  his testimony that  the pipeline  might be                                                               
privately held, which would conflict with ANGDA's mission.                                                                      
MR. HEINZE responded  that ANGDA's business strategy  has been to                                                               
focus  on the  frontend  of  the process;  ANGDA  has never  seen                                                               
itself as  the pipeline  builder.  Rather,  ANGDA sees  itself as                                                               
somebody  who can  do  the  route selection  issue,  work on  the                                                               
rights-of-way, do  the environmental  impact statements,  get the                                                               
permits,  and  get  the  pipeline   build-ready.    The  business                                                               
strategy has  included contacting medium-size  pipeline companies                                                               
in the Lower  48 and Canada.   It has been ANGDA's  intent to use                                                               
some sort  of public-private partnership  mechanism to  work with                                                               
such  a  company  where  that   company  ultimately  becomes  the                                                               
builder-owner  of   the  pipeline,  but  under   terms  that  are                                                               
favorable  to  the consumer  interest  and  the recovery  of  the                                                               
public investment that has been  made in obtaining the rights-of-                                                               
way,  environmental impact  statements, and  the permits.   Thus,                                                               
ANGDA's  exit strategy  is to  find  a good  pipeline company  to                                                               
partner with  and that  company would be  the execution  phase of                                                               
building this pipeline.                                                                                                         
2:29:27 PM                                                                                                                    
REPRESENTATIVE  KAWASAKI read  from the  proposition establishing                                                               
the  all-Alaska   natural  gas  development  authority   for  the                                                               
purposes of  developing, constructing, managing, and  operating a                                                               
gas  pipeline   from  the  North   Slope  and  a  spur   line  to                                                               
Southcentral  Alaska.   He said  he is  unclear where  it changed                                                               
into something where  ANGDA maybe does the bonding  and a private                                                               
company ends up  holding the pipeline itself.  In  regard to page                                                               
2  of HB  369  [lines  17-22], he  asked  what  happens if  ANGDA                                                               
decides on a  project and the Joint  In-state Gasline Development                                                               
Team project manager  determines that project is not  in the best                                                               
MR. HEINZE replied that as he  remembers it, the language on page                                                               
2 of HB 369  relates to an agency adding a  condition.  Also, the                                                               
state  process would  have a  high level  of public  review.   In                                                               
obtaining  the   conditional  right-of-way  from   Glennallen  to                                                               
Palmer, ANGDA went  through an 18-month review  period of holding                                                               
hearings up and down the  entire proposed route, so public review                                                               
is a very  comfortable part of the process for  ANGDA and it does                                                               
not see a  potential for conflict there.  Regarding  the words of                                                               
the proposition calling  for ANGDA to construct,  Mr. Heinze said                                                               
the  words of  the  statute are  very clear  that  the board  was                                                               
granted  very   broad  authorities,  including  the   ability  to                                                               
construct the  pipeline, if  that was desired.   In  its business                                                               
plan, ANGDA  has always formulated that  there was a risk  in the                                                               
state  becoming  the executor  of  a  $1-$2 billion  construction                                                               
project, and  that that  phase of the  project was  most properly                                                               
handled by a private sector partner.                                                                                            
2:33:15 PM                                                                                                                    
CO-CHAIR NEUMAN  offered his belief  that ANGDA received  a legal                                                               
opinion that stated  ANGDA's authority.  He  requested Mr. Heinze                                                               
to provide a copy of this legal opinion to the committee.                                                                       
MR.  HEINZE  answered that  in  early  2009 some  questions  were                                                               
raised  as to  whether some  projects being  undertaken by  ANGDA                                                               
were within its authority.   The attorney general's review of the                                                               
five specific  contracts that were questioned,  indicated that as                                                               
long as the projects had some  relationship to North Slope gas at                                                               
some point  in time, the ANGDA  statute was broad enough  that it                                                               
allowed  those  specific contracts  to  go  forward.   Basically,                                                               
ANGDA's mission is  to work with North Slope gas  in-state to the                                                               
benefit of  consumers, and that  is what  ANGDA has tried  to do.                                                               
In further  response to Co-Chairs  Neuman and Johnson,  he agreed                                                               
to provide a copy of the legal opinion.                                                                                         
2:34:52 PM                                                                                                                    
REPRESENTATIVE  SEATON inquired  whether the  scope of  work that                                                               
ANGDA  has going  for the  $13 million  from Beluga  to Fairbanks                                                               
includes  the  cost  associated   with  contractual  services  to                                                               
perform  the detailed  pipeline  engineering, facilities  design,                                                               
field  work, and  permitting to  get the  project ready  to begin                                                               
construction.   In response  to Co-Chair  Johnson, Representative                                                               
Seaton clarified  that he  is reading  from page 1  of 4  [of the                                                               
fiscal analysis  accompanying the 1-page fiscal  note prepared by                                                               
Linda Perez,  Director, Division of Administrative  Services, and                                                               
approved  by   Bob  Swenson,  Project  Manager,   Office  of  the                                                               
Governor, dated 3/1/10].                                                                                                        
MR. HEINZE  responded he does not  have the fiscal note  in front                                                               
of him, but he understands the  thrust of the question.  From his                                                               
perspective,  generally all  of the  aforementioned are  elements                                                               
ANGDA  has worked  on,  with the  exception  of detailed  design.                                                               
Generally,  to  lead  to  project sanction,  one  needs  to  have                                                               
obtained the major  environmental clearances, permits, rights-of-                                                               
way, some level  of design, project schedule,  and cost estimate,                                                               
and solid arrangements with customers  wanting to ship gas in the                                                               
pipeline.   While  ANGDA did  not get  all of  that done  for $13                                                               
million, he expects  that it would not be too  much more money to                                                               
get to  the point where  a decision could  be made on  whether to                                                               
proceed with the  project.  Once at the point  of moving into the                                                               
very  detailed  aspects  of design,  construction,  and  material                                                               
ordering,  the  cost  is  measured in  hundreds  of  millions  of                                                               
dollars rather than tens of millions.                                                                                           
CO-CHAIR JOHNSON  said it  sounds like $13  million can  be taken                                                               
off this fiscal note because the work has already been done.                                                                    
2:37:52 PM                                                                                                                    
REPRESENTATIVE OLSON  inquired whether HB 369  would provide more                                                               
chance of  getting gas  to Fairbanks several  years ahead  of any                                                               
other projects  the state  is currently  looking at  for strictly                                                               
in-state use.                                                                                                                   
MR. HEINZE  replied he  thinks being able  to concentrate  on the                                                               
use of state right-of-way would  significantly expedite the North                                                               
Slope to Fairbanks pipelining because  this relates to the use of                                                               
bridges,   yard   facilities,   gravel  pits,   and   so   forth.                                                               
Additionally, he  thinks the introduction of  the Alaska Railroad                                                               
represents an interesting  element and there may  be some aspects                                                               
of a more  Fairbanks-centric view of how to do  this project with                                                               
the Alaska Railroad involved.                                                                                                   
2:39:23 PM                                                                                                                    
REPRESENTATIVE OLSON  surmised it  could be as  much as  three to                                                               
four years sooner  as opposed to a big pipeline  or anything else                                                               
that is currently on the table.                                                                                                 
MR.  HEINZE answered  that  he does  not think  there  can be  an                                                               
improvement of  three to  four years  for the  plans that  he has                                                               
seen presented as the result of a stand-alone pipeline.                                                                         
2:39:59 PM                                                                                                                    
REPRESENTATIVE  TUCK inquired  whether  ANGDA  currently has  the                                                               
authority that  is outlined  on page  4, lines  8-11, of  HB 369,                                                               
which read as follows [original punctuation provided]:                                                                          
     ...  the Joint  In-state Gasline  Development Team  may                                                                    
     have  access   to  information   of  a   state  entity,                                                                    
     including confidential information,  that may relate to                                                                    
     the in-state  natural gas pipeline  or prove  useful in                                                                    
     planning,  design, construction,  or  operation of  the                                                                    
MR. HEINZE, in  regard to subsections (a) and (b)  [page 4, lines                                                               
7-16],  explained that  when ANGDA  has requests  for information                                                               
that  it knows  exists elsewhere,  ANGDA does  not undertake  it.                                                               
For  example,  ANGDA   knows  that  public  money   was  used  by                                                               
TransCanada to  gather field information  in some areas  that are                                                               
of interest to ANGDA and ANGDA  has therefore chosen not to spend                                                               
any public money to duplicate that  effort and will wait until it                                                               
can see or use that information.   As far as confidentiality, any                                                               
private  sector  information  given  to ANGDA  is  by  definition                                                               
confidential under  the ANGDA  statute and  will not  be released                                                               
unless specifically authorized by the private sector company.                                                                   
2:41:48 PM                                                                                                                    
REPRESENTATIVE  TUCK   asked  whether   ANGDA  already   has  the                                                               
aforementioned authority and, if not,  is this the authority that                                                               
ANGDA is seeking.                                                                                                               
MR. HEINZE  answered that  he is a  bystander to  this paragraph,                                                               
but it  strikes him as reasonable.   He said ANGDA  has generally                                                               
been  able to  obtain public  information by  simply asking,  and                                                               
ANGDA  has no  ability  to demand  information  from the  private                                                               
sector and  is not privy  to private sector information  given to                                                               
other state agencies under a confidential heading.                                                                              
2:42:34 PM                                                                                                                    
REPRESENTATIVE GUTTENBERG posed a  scenario in which ANGDA enters                                                               
into a contractual relationship with  a private sector entity and                                                               
that entity  gives ANGDA confidential  information.   He inquired                                                               
how that  entity would feel  if it  understood that ANGDA  had to                                                               
share  its confidential  information with  someone else  that has                                                               
already agreed to keep it  confidential.  Would that be spreading                                                               
it too  far out, he inquired  further, or is that  a common thing                                                               
in the industry.                                                                                                                
MR. HEINZE responded  that that is not uncommon  in the industry,                                                               
provided  the people  involved are  bound by  confidentiality and                                                               
are getting the information out of need and not curiosity.                                                                      
2:43:27 PM                                                                                                                    
CO-CHAIR JOHNSON moved public testimony to the next witness.                                                                    
SCOTT HAMANN supported HB 369  and cautioned against talking this                                                               
issue to death.  He said the point  of the bill is to empower the                                                               
development team so  it can get the  job done.  He  has shown the                                                               
bill  to people  he knows  and they  have expressed  hope that  a                                                               
gasline can be  built in-state for Alaskans on  the state's terms                                                               
and not  the oil companies'  terms.   This pipeline is  just like                                                               
infrastructure and he thinks the  State of Alaska should build it                                                               
and quit talking about it.                                                                                                      
2:45:27 PM                                                                                                                    
REPRESENTATIVE TUCK asked whether  Mr. Hamann thinks forming this                                                               
development  team  would  make  things  go  quicker  rather  than                                                               
further talking it to death.                                                                                                    
MR. HAMANN  replied yes  because a timeline  for getting  the job                                                               
done would  be in statute.   The people who would  be involved in                                                               
the development team  are motivated to get this done  and want to                                                               
get it done; therefore, he thinks it  is the right way to go.  In                                                               
further response,  he confirmed that  he sees a team  approach as                                                               
being better than an individual  agency approach, especially with                                                               
the power  that would be  given to  the [project manager]  to get                                                               
things  done.   He thinks  Alaskans  are acutely  aware that  the                                                               
longer this  drags on, the more  money it will cost,  and that it                                                               
is time to get it done.                                                                                                         
REPRESENTATIVE OLSON thanked Mr.  Hamann for listening to today's                                                               
hearing as well as the hearing on 2/26/10.                                                                                      
2:47:22 PM                                                                                                                    
REPRESENTATIVE KAWASAKI commented that  just because something is                                                               
written  on paper  does not  mean it  will happen  that way.   In                                                               
regard  to the  provision to  take any  action necessary  for the                                                               
construction  to begin  during  the provided  dates, he  inquired                                                               
whether  Mr.  Hamann   would  support  putting  out   a  bond  or                                                               
instituting sales or  income tax to build the  gasline should the                                                               
state not have the money.                                                                                                       
MR. HAMANN responded,  "Absolutely."  While he  believes in small                                                               
government, he  thinks this  is such an  important issue  for the                                                               
state that  people need to  trust that the development  team will                                                               
do  what is  best  for Alaska.    He  thinks there  is  a lot  of                                                               
opportunity for oversight and the  proposed development team will                                                               
be a good one.                                                                                                                  
CO-CHAIR JOHNSON left public testimony open.                                                                                    
2:49:49 PM                                                                                                                    
CO-CHAIR  JOHNSON  requested  Mr.  Swenson to  walk  through  the                                                               
fiscal  note for  HB  369.   He  asked  whether  the $13  million                                                               
already spent by  ANGDA is included in the fiscal  note and could                                                               
therefore be dropped off.                                                                                                       
ROBERT  SWENSON, Project  Manager, In-State  Gas Project,  Alaska                                                               
Mental   Health  Trust   Land  Office,   Department  of   Natural                                                               
Resources,  began his  discussion  with the  fiscal note  labeled                                                               
page 1  of 1  [prepared by  Linda Perez,  signed by  Mr. Swenson,                                                               
dated 3/1/10].  He explained  that personal services expenditures                                                               
are related  to additional personnel  necessary to  implement the                                                               
timeline  associated  with  HB  369,  and  includes  the  project                                                               
manager, engineering manager,  commercial manager, and permitting                                                               
and right-of-way  manager, as  well as  a legislative  and public                                                               
outreach   officer,  financial   budget  analyst,   and  schedule                                                               
MR. SWENSON,  in response  to Co-Chair  Johnson, stated  that the                                                               
paper  entitled, "Stand  Alone Gas  Pipeline Project  Alternative                                                               
Schedule" is a  timeline associated with a  mid-range estimate of                                                               
the process -  the engineering process and  permitting process to                                                               
the point of  construction ready - for reference to  what he will                                                               
talk about for the contractual portion of this fiscal note.                                                                     
2:53:30 PM                                                                                                                    
MR. SWENSON returned to page 1 of  1 of the fiscal note.  He said                                                               
the travel would be $116,000 for  the first two years, $58,000 in                                                               
fiscal year 2012,  and $36,000 in fiscal year 2013.   This travel                                                               
is  associated with  both the  development team  and the  scoping                                                               
group identified in the bill.                                                                                                   
CO-CHAIR  NEUMAN asked  for  clarification  about which  pipeline                                                               
route is being talked about.                                                                                                    
MR. SWENSON replied  that this fiscal note is  specifically for a                                                               
stand-alone pipeline  from the  North Slope  to tidewater  in the                                                               
Cook Inlet.   In response  to further questions, he  explained it                                                               
is a 24-inch  pipeline that is in the process  of cost estimation                                                               
associated  with  cost  of  transport.   A  number  of  different                                                               
scenarios  are  being looked  at  for  a route  essentially  from                                                               
Prudhoe Bay, with an alternate route  to the Gubik area, and from                                                               
there  to  the tidewater.    The  series of  different  scenarios                                                               
include  facilities on  the  North Slope  as  well as  compressor                                                               
stations along  the route  depending upon  the throughput  of the                                                               
pipeline.   The throughputs  being looked at  are:   250 million,                                                               
500  million, 750  million, and  1  billion cubic  feet per  day.                                                               
Also  ongoing  are  three major  permits  for  the  environmental                                                               
impact statement:   the U.S. Army Corps 404  permit, state right-                                                               
of-way, and federal right-of-way.                                                                                               
2:56:48 PM                                                                                                                    
MR.  SWENSON moved  to  page 1  of 4  of  the backup  information                                                               
attached to  the aforementioned fiscal  note.  He said  the first                                                               
two  paragraphs   help  in  understanding   the  basis   for  the                                                               
indeterminate portion  of the  fiscal note  regarding contractual                                                               
expenditures.  To  have a pipeline construction ready  by July 1,                                                               
2011, as directed  by HB 369, would require  increased amounts of                                                               
engineering, facilities  design, field work, and  permitting, and                                                               
this would be more than $350  million.  However, the exact amount                                                               
of  funding  needed  cannot  be  determined  without  significant                                                               
amount of  additional engineering and  estimation work.   Work is                                                               
currently  progressing  on  a  Class  4  Cost  of  Transportation                                                               
estimate  that  will  be  finalized  by  July  1,  2010.    These                                                               
estimates do not include the  detail cost estimates to enable the                                                               
ordering  of  pipe  or  to work  on  facilities  associated  with                                                               
construction of  such a pipeline.   In addition,  included costs,                                                               
such as  pipe and commitment  to facilities construction  and the                                                               
initial camp development, are also  not included, and these costs                                                               
would likely be greater than $500 million.                                                                                      
2:58:32 PM                                                                                                                    
MR. SWENSON,  in response to  Co-Chair Johnson, explained  that a                                                               
Class 4  cost estimate  means the  estimate is  plus or  minus 30                                                               
percent of what  the final cost estimation would be.   It is used                                                               
as a general  design and scoping mechanism.  A  key aspect of the                                                               
original appropriations for this project  is to create this Class                                                               
4 Cost  of Transportation estimate  for inclusion with  the three                                                               
major permits; this is to be  used to attract a pipeline company,                                                               
as well as a producer and a consumer  on each end of the pipe, to                                                               
move  the next  step in  building of  the pipeline.   It  is very                                                               
similar  to the  AGIA  and "Denali"  processes  that are  ongoing                                                               
right now.                                                                                                                      
2:59:38 PM                                                                                                                    
REPRESENTATIVE SEATON  inquired whether Class  4 is what  is done                                                               
to have an open season.                                                                                                         
MR.  SWENSON answered  no; Class  4  is the  initial scoping,  or                                                               
essentially the  same work that  was done to  attract TransCanada                                                               
into the AGIA process.                                                                                                          
REPRESENTATIVE SEATON asked at what  point this process would get                                                               
to an open season.                                                                                                              
CO-CHAIR JOHNSON pointed out that the committee is out of time                                                                  
and requested Representative Seaton to bring up this question at                                                                
the next hearing.                                                                                                               
[HB 369 was held over.]                                                                                                         
3:00:52 PM                                                                                                                    
There being no further business before the committee, the House                                                                 
Resources Standing Committee meeting was adjourned at 3:01 p.m.                                                                 

Document Name Date/Time Subjects
HB369-OOG-EO-03-01-10.pdf HRES 3/1/2010 1:00:00 PM
HB 369
HB369-DOT-SDES-2-26-10 .pdf HRES 3/1/2010 1:00:00 PM
HB 369
HB369-OOG-EO-03-01-10 fiscal note attachments.pdf HRES 3/1/2010 1:00:00 PM
HB 369
HB369 - OOG-EO-03-01-10 fiscal analysis.pdf HRES 3/1/2010 1:00:00 PM
HB 369