Legislature(2013 - 2014)BARNES 124
01/27/2014 01:00 PM House RESOURCES
| Audio | Topic |
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| Start | |
| Overview(s): Alaska Lng Project - Heads of Agreement | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
ALASKA STATE LEGISLATURE
HOUSE RESOURCES STANDING COMMITTEE
January 27, 2014
1:04 p.m.
MEMBERS PRESENT
Representative Eric Feige, Co-Chair
Representative Dan Saddler, Co-Chair
Representative Peggy Wilson, Vice Chair
Representative Craig Johnson
Representative Kurt Olson
Representative Paul Seaton
Representative Scott Kawasaki
Representative Geran Tarr
MEMBERS ABSENT
Representative Mike Hawker
OTHER LEGISLATORS PRESENT
Representative Lora Reinbold
Representative Andy Josephson
Representative Shelly Hughes
COMMITTEE CALENDAR
OVERVIEW(S): ALASKA LNG PROJECT - HEADS OF AGREEMENT
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
ANGELA RODELL, Commissioner
Department of Revenue (DOR)
Anchorage, Alaska
POSITION STATEMENT: Assisted in providing the overview
regarding the Alaska Liquefied Natural Gas (LNG) Project, Heads
of Agreement.
JOE BALASH, Commissioner
Department of Natural Resources (DNR)
Anchorage, Alaska
POSITION STATEMENT: Assisted in providing the overview
regarding the Alaska Liquefied Natural Gas Project, Heads of
Agreement.
MICHAEL PAWLOWSKI, Deputy Commissioner
Office of the Commissioner
Department of Revenue
Anchorage, Alaska
POSITION STATEMENT: Assisted in providing the overview
regarding the Alaska Liquefied Natural Gas Project, Heads of
Agreement.
ACTION NARRATIVE
1:04:10 PM
CO-CHAIR ERIC FEIGE called the House Resources Standing
Committee meeting to order at 1:04 p.m. Representatives Tarr,
Johnson, Seaton, P. Wilson, Kawasaki, Saddler, and Feige were
present at the call to order. Representative Olson arrived as
the meeting was in progress. Also present were Representatives
Reinbold, Josephson, and Hughes.
^OVERVIEW(S): Alaska LNG Project - Heads of Agreement
OVERVIEW(S): Alaska LNG Project - Heads of Agreement
1:04:32 PM
CO-CHAIR FEIGE announced that the only order of business is an
overview of the Alaska Liquefied Natural Gas (LNG) Project,
Heads of Agreement.
1:05:21 PM
ANGELA RODELL, Commissioner, Department of Revenue, explained
that the Heads of Agreement is between the Department of Revenue
(DOR), the Department of Natural Resources (DNR), the Alaska
Gasline Development Corporation (AGDC), the three major
producers [ExxonMobil Alaska Production Inc. (EMAP),
ConocoPhillips Alaska, Inc. (ConocoPhillips), BP Exploration
(Alaska) Inc. (BP)], and [TransCanada Alaska Development Inc.
(TADI)]. It is an agreement that has not been previously seen
in Alaska. Commissioner Rodell advised that the agreement
creates a road map for the state, the producers, and the
pipeline company to commercialize North Slope gas as an all-
encompassing liquefied natural gas project. This will require
the state to review the investment, the opportunities for
investment, and how to bring the investment to fruition. The
project will provide jobs, revenue, and gas to Alaskans.
1:07:22 PM
JOE BALASH, Commissioner, Department of Natural Resources (DNR),
began his presentation by stating that Alaskans have been
dealing with pipeline issues in detail over the last few years.
The department's understanding of those projects had to do with
an overland project to a liquid market, which was a highly
regulated piece of infrastructure from the field to a very deep,
very liquid, and transparent marketplace. However, LNG projects
present different challenges and considerations, which include
differences in the market itself, contracts involved, regulatory
jurisdiction, and, in particular, the overlay that is
fundamentally very different than what the state has dealt with
over the last decade. A 2013 study was commissioned that
examined how the state, DNR in particular, could maximize the
value of royalty interests. The study found that engagement
with the contractors, the nature of the relationships, and the
drivers in this sort of project are unique. Findings in the
study contributed to the department's current thinking that
ultimately the way for the state to maximize its royalty value
is to assert ownership upfront in the components of the project.
In that method the state gains greater control over the manner
in which those components are financed. Commissioner Balash
expressed that regardless of whether the project is overland or
an LNG project, certain objectives and principles for Alaskans
remain true. He requested the committee keep in mind that when
it comes to getting gas to Alaskans, to refer to Article 6.3,
Regulatory Framework, Access and Expansion, which is where
reference is made to access for third parties and access for
identified Alaskans.
1:10:37 PM
COMMISSIONER BALASH informed the committee that Article 11
refers to jobs and business opportunities. Appendix A: Pro-
Expansion Principles is information important to a long-term
future as it maximizes the state's value and provides access to
third party explorers for expansions of the system. He
described the Heads of Agreement as a document that provides, in
broad terms, the principles needed to secure Alaska's future on
its own terms. He related the belief that within a phased
approach a certain set of steps could be taken, and authority
granted within the statutes. The department expects that the
agreements would be brought to the public for review and would
receive the legislature's approval in late 2015 or early 2016.
1:12:33 PM
MICHAEL PAWLOWSKI, Deputy Commissioner, Office of the
Commissioner, Department of Revenue, began by saying that the
intent of his presentation is an orientation of how to read the
Heads of Agreement, which he defined as a roadmap and a blue
print of how the Parties intend to move the project forward
through the initial and subsequent Pre-Front-End Engineering and
Design (Pre-FEED) stages. He directed attention to slide 2,
noting that the Heads of Agreement is not a contract, but rather
the first step to a legally binding set of agreements. An LNG
project is not the same as previous efforts the state made for
an overland pipeline. An LNG project is inherently more
complicated and will be filled with multiple different
contracts. The agreements will come in a phased approach and
the commitments of each of the parties will become more
definitive through each phase toward the commercialization of
the gas.
1:14:19 PM
MR. PAWLOWSKI noted that slide 3 was created from [Exhibit I-B)
of the Heads of Agreement. He said this exhibit provides the
concept of what is now called the Alaska LNG Project, a very
different project than had been previously contemplated. He
opined that Alaskans will be familiar with the concept of a gas
treatment plant (GTP) and a pipeline, which individually are
monstrous components. Approximately 250,000-300,000 tons of
steel will be necessary for construction of the gas treatment
plant. There will be a pipeline, a world class liquefaction
plant, storage and loading [facilities] and improvements at
Point Thomson and Prudhoe Bay. This creates a real opportunity
to commercialize gas by turning it into LNG and supplying the
global marketplace.
1:15:26 PM
MR. PAWLOWSKI, turning to slide 4, explained that the Heads of
Agreement is organized into 16 sections, beginning with a series
of recitals describing the common understanding between the
present parties and future events. Thirteen specific articles
cover the guidelines and principles for development of the
project. The appendix articulates the critical pro-expansion
principles that will govern the project, not just through the
Pre-FEED stage, but across the life of the project. The
process, he further explained, began with the governor calling
for the parties to align around an LNG project which then led to
a concept selection stage. He said today's presentation is a
guideline of how to move from the concept selection stage to a
more aggressive ramp up of Pre-FEED development.
1:16:37 PM
MR. PAWLOWSKI, moving to slides 5-6, emphasized the importance
within the documents of the terms "The Administration," "The
Parties or Party," "The Alaska LNG Project Parties," and
"Producer Parties," as they indicate a specific role for
specific people. He noted the importance of dividing up who is
being referenced as there are appropriate roles for the resource
agencies in the management of the state's gas and mineral
interests. At the same time there are places where the
Administration and the agencies do not need to be involved in
the long-term commercial development; there are subsidiary
corporations and partners that are involved in the day-to-day
business activities. State government should not move into
those operational agreements at the agency level although the
state needs to be a party to them so that the Administration can
manage and regulate them. The word "administration" in the
context of this agreement is the Department of Natural Resources
and Department of Revenue. The word "state" is used more
broadly and indicates other functions of state government, such
as support for infrastructure, regulatory and permitting work.
Separate to that, is the parties to the agreement which includes
the Administration, Alaska Gasline Development Corporation
(AGDC) or its subsidiary, TransCanada Alaska Development, Inc.,
(TADI), ExxonMobil Alaska Production, Inc., (EMAP),
ConocoPhillips Alaska, Inc., (ConocoPhillips), BP Exploration
(Alaska), Inc. (BP). The word "party" or "parties" in the
agreement is referring to that collective group.
1:19:18 PM
REPRESENTATIVE KAWASAKI, recalling the passage of the Alaska
Gasline Inducement Act (AGIA), questioned whether other parties
were included in the 2014 Heads of Agreement.
COMMISSIONER BALASH responded that the Heads of Agreement is the
next step forward. Regarding TransCanada and the partnership
the state has through the AGIA license, TransCanada has
fulfilled the requirements it had and there was no need to
pursue other parties. However, TransCanada's expertise lies
primarily in the treatment and transportation of gas through a
pipeline, not in the liquefaction component. He expected that
at some point going forward, a different set of partners for
that project component will be looked for.
1:21:19 PM
MR. PAWLOWSKI advised that getting more digital from the Parties
is in the agreement referenced to Alaska LNG Parties. This is
specifically the owners of the infrastructure and the capacity
within that infrastructure. Therefore, it includes the AGDC or
an AGDC subsidiary, which under this construct holds the state's
interests in the liquefaction plant; TADI, which has custody of
the state's interests in the mid-stream and treatment;
ExxonMobil; ConocoPhillips; and BP Exploration. The
Administration, as the resource owner, is not directly in the
Alaska LNG Parties group because state agencies do not have a
role in the infrastructure; that is a different separation.
There are specific agreements and work to be developed with the
Producer Parties upstream of the project. The agreement
references "Producer Parties" to reference specifically
ExxonMobil, ConocoPhillips, and BP Exploration as the interest
owners upstream at Prudhoe Bay and the Point Thomson field.
1:22:45 PM
MR. PAWLOWSKI directed attention to slide 7, which specifies the
key sections, "Recitals", of the agreement. The Recitals are
intended to provide a context to the reader, articulate roles
and goals, provide direction for the project, and recognize the
Alaska Stand Alone Pipeline (ASAP) project that is currently
being advanced by the AGDC. The governor saw that circumstances
had changed due to Lower 48 shale development and requested the
Parties come together under an LNG project. Although funding by
the state under the AGIA license has supported key activities,
the Administration and TransCanada believe it is appropriate to
transition from the AGIA license and focus on the Alaska LNG
Project. The Alaska Gasline Development Corporation (AGDC)
plays an important role in advancing the state's interests, and
during the State of the State message, the governor described it
as the "ace in the hole." The AGDC will provide material
benefit to the ASAP moving forward particularly on access and
need for in-state gas. Mr. Pawlowski put forth that the Alaska
LNG Parties wish to ramp up the Pre-FEED phase of the Alaska LNG
Project, which is estimated to cost more than $400 million over
the next 12-18 months. He pointed out that within the Heads of
Agreement a capitalized word is typically referring back to
something that is a specifically defined term.
1:25:17 PM
MR. PAWLOWSKI, responding to Representative Seaton, explained
that the Alaska Gasline Development Corporation is currently
working toward an open season by assessing in-state needs for
natural gas. The Heads of Agreement contemplates at least five
offtake points for the access of Alaskans to gas moving through
the project. It is believed that ADGC's work, in consultation
with the Alaska LNG Project, will let the Alaska LNG Project
know where the offtake points need to be and how much gas is
demanded. A lot of work will transfer over that supports access
to gas for Alaskans, whether it is the ASAP project or the
Alaska LNG Project that moves forward. In further response to
Representative Seaton, Mr. Pawlowski confirmed that access to
state gas means supplying information to the project where
Alaskans will get gas from, not a supply of gas to, the project.
1:26:30 PM
MR. PAWLOWSKI, returning to his presentation, moved to slide 8
and highlighted five key definitions in the agreement. The
"Enabling Legislation" concept, he explained, is necessary to
advance the project as the Heads of Agreement is not a binding
agreement, although the agreement does become effective once
enabling legislation is put into place. The "Memorandum of
Understanding" (MOU) is between TransCanada and the
Administration and is for a transition from the AGIA license to
a more Alaskan commercial relationship. "Pre-FEED" is pre-
front-end engineering and design work for the Alaska LNG Project
that will be sufficient to support filings to the Federal Energy
Regulatory Commission (FERC). "Royalty in Kind" (RIK) takes gas
in kind for the state's royalty share, instead of taking the
value in money. "Tax as Gas" (TAG) described in Article 8.1.1,
is production tax being conceived as being paid in a similar way
as RIK; it is coming as a molecule not as a residual value.
1:27:54 PM
MR. PAWLOWSKI, responding to Representative Saddler, verified
that "Tax as Gas" means exactly the same as "Tax in Kind" (TIK);
TAG is a convenient acronym, not a term of art.
1:28:17 PM
COMMISSIONER BALASH, responding to Representative Tarr regarding
the success rate of other jurisdictions, stated that within
other regimes around the world, tax and royalty systems are
employed in the traditional sense. During the department's
investigation it was discovered that typically the royalty rates
were considerably lower than in Alaska. The department was then
concerned that it may need to make an adjustment to its royalty
rates. Further investigation revealed that in jurisdictions
where sovereign governments participate, it is not unusual for
that government to invest directly and participate in the
project. In Alaska's case, utilization of the state's
production tax interest in the gas combined with the state's
royalty interest arrives at an overall equity interest. There
are many parallels to practices that have been employed around
the world.
1:30:13 PM
REPRESENTATIVE TARR surmised that the concept of owner equity
interests will make the state "winners with everybody else or
losers with everybody else." It would basically just increase
the extent in which Alaska is a winner under a better price
scenario and a loser under a low price scenario.
COMMISSIONER BALASH replied that there are risks and rewards
involved which will be discussed within the actual sales
contracts. To avoid downside risks in the marketing of gases,
various players in the project may decide to pursue different
forms of pricing. That will likely come in the form of limited
upside through employment of an "S Curve."
1:31:31 PM
COMMISSIONER BALASH, responding to Representative P. Wilson
regarding where in the process Alaska could decide to become a
part owner of the pipeline, advised that [the departments] are
currently requesting permission to participate in an agreement
for Pre-FEED, which is basically a cost sharing and asset
ownership agreement. The actual equity agreements regarding the
infrastructure itself will be those developed over the course of
the next 18 months within the Pre-FEED phase. Those agreements
address the parameters under which any one of the parties,
including Alaska or other investors, might bring in further
partnerships and partners.
1:33:08 PM
REPRESENTATIVE JOHNSON pointed out that a key recital not
mentioned earlier by Mr. Pawlowski is the state's participation
in the Alaska LNG Project. He urged that this important recital
not be brushed over.
MR. PAWLOWSKI replied that state participation is important and
has its own article, which will be reviewed later in the
presentation.
1:34:13 PM
MR. PAWLOWSKI continued his presentation, turning to slide 9 to
describe the principles and benefits of state participation to
the Alaska LNG Project and to Alaskans. One benefit is "gas to
Alaskans" which allows opportunities for a competitively priced
and reliable in-state gas supply. A second benefit is "jobs to
Alaskans" for construction of the infrastructure and from
exploration and development of additional reserves. Another
benefit is "revenues to the state" from the development of gas
interests as well as the returns from the investment in the
infrastructure. A fourth benefit is "opportunities for
additional gas development" from opening the North Slope basin.
The existence of gas infrastructure creates opportunities for
the development of additional gas reserves, and also an
environment for exploring for oil and finding gas.
1:36:03 PM
REPRESENTATIVE SEATON, referring to the Heads of Agreement,
asked who is looking out for the interests of the new explorers,
and would the new players pay a higher transmission cost than
the three major producers.
COMMISSIONER BALASH answered the construct is that each sponsor
Party will own its segment for each component of the project.
It will be a project within a project. Initially there will be
slack in the system and room to expand the pipe with compression
as opposed to looping. Appendix A specifies that any party can
expand any component of the project so long as the party is
prepared to do so at its sole risk. Other parties who do not
want to participate in the expansion are unaffected. It will be
demonstrated to the committee how this will work for a non-
sponsor's gas supply in the overall agreement and how there will
be a pathway for the non-sponsors to get gas to market.
1:38:11 PM
REPRESENTATIVE SEATON understood from previous discussions that
there would be built-in slack initially - unless the "three
major parties" decide to reserve that for themselves as an
expansion. Thus, any further expansion is no longer constrained
by the rolled-in rate provisions, and therefore the state is
back to the problem of not having an incentive for exploring for
gas. He requested information regarding how this will work.
COMMISSIONER BALASH replied there is a specific rolled-in rate
statute under AGIA and there is a limit. The question is at
what point do new entrants have to pay more of the cost, where
is that line drawn, and functionally how much gas gets into the
system before tripping over that line. There is a general sense
of the capacity of the pipeline, but the specific limitations of
the system are unknown until finalization of the Pre-FEED stage.
The general understanding is that at 42 inches the pipeline
throughput can be expanded considerably and have sufficient room
in the pipeline to add an additional train at the marine
terminal, and still have additional room for throughput for
increased instate demand. Which of the Parties undertakes an
expansion will be a function of who finds additional gas
reserves and is able to sell those reserves the quickest. The
difference between the Alaska LNG Project and past projects is
the nature of the contracts, the Sale and Purchase Agreements
(SPAs), required to move forward. A typical LNG buyer is in the
business of buying LNG because it is from a country that does
not have other energy resources. This buyer is very interested
in energy security and making sure that what it is buying is
actually there by being able to trace what it is buying to the
specific resource or reserves in the ground. It will be
difficult for any of the parties to expand the scope of the
project without having that gas and buyer lined up ahead of
time.
1:42:05 PM
REPRESENTATIVE TARR understood Commissioner Balash to be saying
that at the beginning of the agreement [the state] would have
certain commitments made in terms of its equity interests and
the other parties involved, but at the time where one of the new
explorers comes in, upstream through downstream, [the state]
would have the opportunity to recalibrate that relationship.
The potential exists, if [the state] is not interested in that
particular expansion effort, to essentially become a lessor and
to become a minority party as other parties decided to move
forward.
COMMISSIONER BALASH responded that that is possible, but when
thinking about expansion scenarios it will depend upon where the
gas is located. The state's interests depend upon the source of
the gas. If it is located on state land, the state will still
have royalty and production tax. If the gas is coming from
onshore non-state land, the state will have a production tax
interest but not necessarily a royalty interest. Federal
offshore gas has very little state interest associated with it.
1:43:47 PM
CO-CHAIR FEIGE stated this is a key provision. For example, if
another party discovers a new field after the pipeline is built
and wants to put gas into it, the state as an original party to
this agreement is not responsible for the cost associated with
that party putting gas into the pipeline which is already
constructed. The state is protected from having to make future
equity investments to improve the system, yet the state still
derives production tax and royalty from the new quantities of
gas that will fill the expansion space in the project.
COMMISSIONER BALASH answered that the committee will have the
opportunity to review different scenarios and how things play
out. He emphasized that Appendix A is regarding "any" party, it
is not any party with at least "X percent" equity. The relative
size of a party's interest does not dictate that party's ability
to expand. The state's share or its partner's share might be
important in the up-front wrangling over which party is the lead
on a given component in the project.
1:45:16 PM
MR. PAWLOWSKI resumed his presentation. Addressing slide 10, he
explained that Article 4 of the Heads of Agreement is subsequent
to passage of enabling legislation. Article 4 describes work to
be conducted during the Pre-FEED stage of the project. Ramp up
of Pre-FEED is expected to take 18-24 months. Pre-FEED will be
followed by a review of each Party and its management, and the
decision to proceed to the next step is up to each individual
party. Article 4 delineates what happens during the Pre-FEED
period, which includes the development of sufficient information
for evaluating the technical, cost, and schedule aspects of the
Alaska LNG Project and the development of key project services
agreement for the state's gas between the state and TransCanada
and AGDC or AGDC's subsidiary. They will work within the
infrastructure and work with the state to carry out its capacity
and interests in a transparent manner. Mr. Pawlowski stressed
that a critical portion of Article 4 is that the parties,
including the [producer parties], develop mutually agreed upon
gas offtake and balancing agreements. The Department of Natural
Resources will determine how the gas is produced going into the
system and when the title is transferred to the state so it has
gas to move through the system. This work must be accomplished
as there is more than one field - Prudhoe Bay and Point Thomson
- initially starting to supply gas. The state has an interest
in those, and DNR as the landowner is uniquely positioned to
work with the Parties. Mr. Pawlowski advised that Article 8.3.3
is a commitment from each of the producer parties, individually,
to initiate individual gas sales or shipping efforts during the
Pre-FEED stage. An LNG project is fundamentally driven by the
market. This article is a clear statement of intent by the
parties that as Pre-FEED is ramped up, the [producer parties]
and the state will each test the market to determine whether
Alaska gas can compete. The intent is also to determine whether
there is an opportunity to move this project to the next stage.
This is viewed as a fundamental difference in the efforts to
commercialize Alaska gas.
1:49:16 PM
MR. PAWLOWSKI turned to slide 11 depicting Attachment 3 of
Exhibit I-B in the Heads of Agreement, which highlights each
stage of the project. He explained that certain work happens
during the 12-18 months of the Pre-FEED phase, which will cost
hundreds of millions of dollars and includes the beginning of
individual LNG sales to test the market. The decision then
arises whether to move to Frond-End Engineering and Design
(FEED), which will be in the billions of dollars and is expected
to take 2-3 years. Following FEED, the project moves into the
final investment decisions stage, which is when the Engineering,
Procurement & Construction (EPC) contracts are executed. This
stage will take 5-6 years and will cost in the tens of billions
of dollars. Under the Heads of Agreement, the state will take a
substantial role and will work with multiple partners with
expertise in LNG through each gate of the project.
1:50:47 PM
MR. PAWLOWSKI introduced slide 12 regarding Article 5 for state
participation in the Alaska LNG Project. He said state
participation would yield significant benefits to the state,
including maximizing the value of the state's resources,
opportunity for delivery of gas to Alaskans, public transparency
of the state's approval process, opportunity for additional
state revenues, realization of access and pro-expansion
principles, improving the alignment of interests between the
state and producer parties, and reducing valuation and other
potential disputes between the state and producer parties. The
state will participate in the infrastructure by entering into
agreements with TransCanada and the AGDC subsidiary. The state
participation section sets the range for state interest and an
expectation that that interest will be somewhere between 20
percent and 25 percent. This approximate amount is regarding
the state gas share with the blend of royalty gas and production
tax gas.
1:52:55 PM
COMMISSIONER BALASH, responding to Representative Kawasaki about
what risks the state would be taking on, advised that the manner
in which the state participates is going to be important and the
risks faced will be different depending upon the phase of the
project. During the development phase there will be cash calls
on the participating parties. If the state is participating
directly and on its own it will have to be prepared to meet
those cash calls as project development costs are incurred. A
benefit of TransCanada being a partner in the midstream is that
TransCanada will be responsible for meeting the cash calls, not
the state. With regard to the execution of the project, one of
the risks is cost overrun and the state will be interested in
those costs staying on budget and on time. TransCanada's track
record for delivering projects in an artic environment is
unparalleled in terms of coming in on time and on budget, so
long as it receives regulatory approvals from the federal
government. Subsequent to the construction phase and beginning
operation, and depending upon how the state financed its share
of the project, and whether it relied on a service provider or
partner, the state will have certain substantial demands or
financing charges to meet every day. These charges will be in
the millions of dollars every day and how the state meets those
demands will be based upon revenue coming into the state. He
said the aforementioned go back to the Sale and Purchase
Agreement, which includes the terms for the sale of the LNG
itself. The state may have different interests or needs in the
structuring of those agreements than the other parties. The
state may want to have an "S" curve that protects it at the
downside. Exactly how those particular risks are evaluated and
what the state does to mitigate them is very important, he
emphasized. The state has an opportunity within the Heads of
Agreement to leverage the expertise of its partners to assist in
development of mitigation strategies, and to apply those
strategies to the state's needs in its own way. For more detail
on some of the risks, Commissioner Balash directed the committee
to the royalty study released in November [2013].
1:57:01 PM
REPRESENTATIVE TARR recalled that the royalty study recommended
an equity share in the 35 percent range as the most desirable of
the three ranges that were evaluated.
COMMISSIONER BALASH replied, "That is not correct." He advised
that scenarios as high as 35 percent were looked at to determine
what it did to the state and to other parties. This figure was
at the top end of the mutually beneficial aspect of state
participation. At 35 percent there were circumstances where
other sponsors would be as well off, but many circumstances
where they would not. If the body chooses a tax rate that puts
the state lower than 20 percent, he surmised that the state
probably would not be interested in moving forward. If it
results in higher than 25 percent, some of the other parties may
not choose to move forward.
COMMISSIONER RODELL added that the state also must balance it
with what the state can afford. The state's participation means
it is going to have to find a way to come up with the cash calls
in each of these stage gates as the project moves forward. In
terms of long-term revenue, 35 percent may be attractive but it
also requires the state putting up a considerable amount of
money today. There is a need to balance the state's operating
budgets and capital budgets along with whatever the state's
appropriate participation is in this project.
1:59:35 PM
REPRESENTATIVE SEATON inquired whether finding purchasers
willing to buy the state's gas on a long-term contract would
provide financing for the state's portion.
COMMISSIONER RODELL answered that such a scenario would
definitely create a mechanism the state could use to generate
and raise capital to finance the state's portion of the project.
REPRESENTATIVE SEATON surmised, then, that if the state had
financing from the purchasers of long-term sales, the constraint
on the upper range of 25 percent would somewhat go away as far
as coming up with cash calls.
COMMISSIONER RODELL replied that an important function of the
Pre-FEED stage is to set something this year to start the
conversations. Work will be performed over the next 18 months
by both ADGC and the producer parties to assess the marketing
capability. The state will determine what the demand is for the
state's gas both internally and externally. This information
will assist the administration and legislature in 2015 during
the discussions of what adjustments need to be made to all of
the agreements.
REPRESENTATIVE SEATON stated that he is trying to determine if,
in the Heads of Agreement, the state is restricting itself if it
finds sales for its portion of gas. Or, he asked, if the state
is only proceeding forward on sales for everyone together and in
that manner everyone receives a portion of the gas or if the
state is proceeding with the idea that importers willing to work
directly with the state puts the state in a different position
than necessarily equivalent among producers.
COMMISSIONER RODELL responded that a benchmark has been set in
recognizing what is known today and recognizing the need to come
back and continue with these discussions. [The administration]
is confident about the 20-25 percent range, meaning both in-
state and export demand, and it is intended to be an ongoing
conversation.
2:02:43 PM
MR. PAWLOWSKI, before continuing his presentation, informed
members that presentations by the state's and legislature's
experts will be provided regarding royalty, production tax, and
other government take issues. He specified it is important to
not lose sight of other "state take" terms which impact this
project and the project's economics. Royalty and production tax
are not the only factors in the fiscal system - property tax at
$45-$65 billion is a significant factor through the life of this
project. Mr. Pawlowski then turned to slide 13 of his
presentation regarding the regulatory framework, access, and
expansion under Article 6 of the Heads of Agreement. Article 6
recognizes that under Section 3 of the Natural Gas Act there is
an opportunity for a tailored regulatory framework that meets
the needs of Alaskans, provides commercial terms for access and
pro-expansion, and protects Alaskans when alternatives are
available in the regulatory framework. Ultimately regulations
depend upon development of the commercial agreements supporting
the pro-extension principles, and there is an opportunity to
protect the state by committing to advancing this project during
the Pre-FEED stage under Section 3 of the Natural Gas Act.
2:05:07 PM
MR. PAWLOWSKI, responding to Co-Chair Saddler about why Section
3 of the Natural Gas Act is so important, stated that the
regulatory agencies assert what the jurisdiction is to be, and
it is up to a regulatory agency at the federal level to make a
decision. He maintained that LNG plants are clearly the
regulatory responsibility of the Federal Energy Regulatory
Commission (FERC), under Section 3 of the Natural Gas Act. From
the state's perspective this created concern regarding royalty
and production tax evaluation. Royalty begins with the state's
value equation from the wellhead, after transportation costs are
deducted. Production tax uses the same mechanism through the
gross value at the point of production with a slightly different
treatment of deductible expenditures, and at that point the
state calculates a production tax. Both are sensitive to the
cost of moving through the tariffs. FERC, Section 3, for an LNG
terminal is clearly not economically regulated. It is a "black
box." From the state's perspective the best way to create an
alignment is by "going into the black box" in order to maximize
the state's royalty value, tax interests, and transparency
interests. [The administration] views an amicable agreement,
with parties working together to solve each other's problems, as
the best way to move this project forward. The alternative
would be jurisdictional disputes and litigation. The best plan
is working together, clearly stating the state's interests, and
moving forward together.
2:07:10 PM
MR. PAWLOWSKI, responding to Co-Chair Saddler about whether FERC
has indicated any objections to the aforementioned, stated that
discussions have not yet been engaged with FERC. A portion of
Article 6 describes the process to start the discussion through
the filing of a Petition for Declaratory Order, starting to seek
clarification on jurisdiction, and a commitment that all parties
will work together to solve each other's problems. An important
portion of the Heads of Agreement, Page 11, is recognition that
each party must be satisfied with the commercial terms and
regulatory framework prior to the execution of the FEED
agreement for the Alaska LNG Project. This is a place where the
word "party" is used to recognize that it is just investors in
the infrastructure. The investors of the infrastructure plus
the agencies all must be comfortable with the agreement.
2:08:13 PM
REPRESENTATIVE SADDLER asked whether there are provisions for
dispute resolution should all parties not agree to enter FEED.
MR. PAWLOWSKI replied that dispute issues are to be developed
during the Pre-FEED phase, such as how the commercial
relationships work, and what happens if and when. Currently the
Heads of Agreement is the alignment mechanism which states that
through Pre-FEED the parties will work together. This phase
gets more detailed and more complicated as it moves forward.
2:09:10 PM
MR. PAWLOWSKI turned to slide 14 of his presentation and urged
the members to note why the expansion principles are so
important to the state. Alaska has significant gas resources on
the North Slope - the currently known reserves are 35 trillion
cubic feet (TCF) and the U.S. Geological Survey (USGS) estimates
the technically recoverable conventional gas resources are more
than 240 TCF. There is a large difference between what a
reserve is and what a technically recoverable resource is, but
all indications from the geological perspective is that the
state has vibrant gas resources available to be explored and
developed. This project is the avenue for that development as
pro-expansion guarantees that Alaska land, beyond Prudhoe Bay
and Point Thomson, will continue to be explored for gas and that
that gas will get into the line and benefit Alaskans.
2:10:09 PM
MR. PAWLOWSKI called attention to Appendix A, Pro-Expansion
Principles, displayed on slide 15. He said these principles
provide high-level guidelines and principles covering the
expansion of any component of the Alaska LNG Project, during
both the Pre-FEED stage and development of commercial agreements
during that state. From the state's perspective the key is that
any party to the project has a right, but not the obligation, to
expand the component it is in. Referring to the highlighted
language of slide 15, he stated that expansions can proceed if
they meet the criteria in Section A.1.1. [The administration]
believes this will put the state on a strong footing to protect
the state's interests and move the project.
2:11:22 PM
MR. PAWLOWSKI, responding to Representative Olson, clarified
that the 240 trillion cubic feet of gas he previously mentioned
is for conventional gas resources only and does not include any
unconventional gas resources.
2:11:41 PM
MR. PAWLOWSKI moved to slide 16, stating that the Heads of
Agreement contemplates the enabling legislation that has been
introduced by the governor and that this committee will review.
Article 7 of the Heads of Agreement describes a two stage
process which includes the establishment of general take terms
and mechanisms to provide clarity and predictability for the
parties during the Pre-FEED stage. Article 7 defines who does
what and who is responsible for what because multiple contracts
between multiple parties will be necessary to move the project.
The timeline presented on slide 16 assumes a success case by
starting with the enactment of enabling legislation in April
2014. Then, throughout 2014 and 2015, the agencies, AGDC,
AGDC's subsidiary, TransCanada, and the producer parties, both
internally and externally, will work to put the project enabling
contracts back together. In 2015 this package of work will come
before the legislature and the public to consider whether it is
appropriate to move to the next stage and each party,
individually, will decide whether to advance to the next stage
of the project.
2:13:43 PM
MR. PAWLOWSKI then discussed Article 8 of the Heads of Agreement
(slide 17), which describes the royalty and tax terms. A key
provision is that AS 38.05.182 directs DNR to take royalties in-
kind on oil and gas. [The Alaska North Slope Royalty Study,
November 2013, undertaken by Black & Veatch Corporation on
behalf of the Department of Natural Resources, State of Alaska,]
recognized risks that the state would be exposed to by going in-
kind. A primary risk is that the state, in taking a step into
the global LNG market, is not as well equipped as the producer
parties that operate in the market on a day-in-day-out basis.
He said Article 8.3.3 is an example of what happens when parties
work together. The article [page 14 of the Heads of Agreement]
states that individual producer parties will "negotiate
separately with the State in good faith to enter into an
agreement with the State regarding the purchase or other
disposition of a portion of the LNG that is made from the
State's deliveries [RIK plus TAG] of natural gas to the Alaska
LNG Project ...." This means the producer parties will work
with the state to provide an opportunity and an option, not a
foregone conclusion, to market on behalf of the state a portion
of the LNG. [The administration] believes that is a major step
in the state's direction of dealing with the primary risks
identified in the royalty study.
2:15:45 PM
MR. PAWLOWSKI moved to slide 18, noting that Articles 9 and 10
address other project enabling terms, and additional support,
for the Alaska LNG Project. Property tax is one of the most
significant fiscal impacts of the project and in Alaska that tax
is shared between the state and local governments. The
administration came to the table with the intent to engage local
municipalities in a plan for property tax, both within and
outside of the project corridor. The Heads of Agreement commits
the state to a consultation process with local governments to
develop payments in lieu of taxes and impact payments during the
project, which must happen during the Pre-FEED stage. It also
recognizes that the project enabling contracts negotiated
between the parties must be of a sufficient duration to support
financing, to permit the realization of competitive economic
returns, and to support gas and LNG sales. Predictability of
the terms matters as much to the state as it does to any of the
parties and that work will be developed during the Pre-FEED
stage. There is general support for the development of the
necessary infrastructure and other local, state, and federal
permitting requirements, including the continuation of a healthy
long-term oil business to share the costs and development of the
upstream in Alaska.
2:17:28 PM
MR. PAWLOWSKI turned to slide 19, addressing the Alaska hire and
content within Article 11. He said Article 11 commits the
parties to some principles, including guidance to hire Alaska
residents; contract with Alaska businesses; participate with the
Department of Labor & Workforce Development in updating training
plans and provide training that prepares Alaskans for work on
the project; and negotiate in good faith project labor
agreements for the Alaska LNG Project. Based upon Exhibit I-B,
the estimated total project cost is $45-$65 billion with between
9,000 and 15,000 jobs during peak construction. The LNG project
will also provide about 1,000 jobs once in operation, including
long-term, community-supporting jobs in liquefaction.
2:18:53 PM
MR. PAWLOWSKI concluded his presentation by displaying a picture
of Point Thomson (slide 20) and stating that development of
those reserves, and the unlocking of the settlement, forms a
foundation to move this project forward. He quoted from the
October 1, 2012, letter in Exhibit I-B: "While North Slope gas
commercialization is challenging, working together, we can
maintain the momentum toward our shared vision for Alaska." He
added that the Heads of Agreement is an alignment around a
vision and a road map and is people working together to solve
problems for the unlocking of a resource that will be of benefit
to generations of Alaskans.
2:20:42 PM
CO-CHAIR FEIGE thanked the witnesses for their efforts including
the entities involved in preparing the Heads of Agreement. He
recognized that the state resolved differences with other
parties and that the other parties worked together amongst
themselves to resolve their differences. The agreement is a
huge step forward in advancing the notion of a gas pipeline to
move North Slope gas to market. The pipeline would have great
benefits for the state in revenue, jobs, building the economy,
and lowering Alaskan's energy expenses.
2:21:01 PM
CO-CHAIR SADDLER recognized that the Heads of Agreement answers
some questions but contains firm answers to very few of the hard
questions that the legislature and the public are going to ask.
He said his questions include what the state's specific
obligations are; what the legislature's specific obligations
are, step by step, moving forward; at what point can the
legislature amend the conditions; and will there be any
opportunity for the legislature to amend the Heads of Agreement
before approving the enabling legislation.
COMMISSIONER BALASH offered his belief that the question really
refers to the enabling legislation. When [the administration]
reviews that legislation with the committee, members will see
what [the administration] is asking for in the way of authority.
[The administration] will turn to that authority to put on paper
any additional details desired, which are details necessary
before making a multi-hundred-million-dollar decision. He said,
currently, [the administration] is requesting legislative
authority to proceed on a tens of millions-dollar decision to
get to that next step. Regarding particular points within the
Heads of Agreement that the legislature would like to change or
amend, he guessed that "it depends." [The administration] is
prepared to discuss how its decisions were made during an open
dialogue with the other parties. There may be some room to
maneuver on the part of everyone. However, he said, he would
describe this as a term sheet that was developed with the other
parties and it is now being brought to the legislature. If the
legislature decides to send [the administration] a counter,
"we'll see what happens," he said. There may be some things to
talk about, but it is hard to be specific without understanding
exactly what Co-Chair Saddler would like to see different.
CO-CHAIR SADDLER interjected that it was not his intention to
second guess [the administration] or begin making changes to the
Heads of Agreement. He understood that the department was able
to negotiate what it could agree with, and where there was not
yet agreement was left to another day.
2:24:14 PM
COMMISSIONER BALASH said Co-Chair Saddler's statement is fair,
and he explained that the enabling legislation itself is where
the legislature can engage. Two big decisions for the
legislature are whether the state should participate and, if
yes, then the issue becomes the state's percentage overall,
which is arrived at by establishing the production tax rate.
There are also questions regarding establishing a subsidiary for
AGDC. [The administration] had to make decisions based upon the
best advice it had as to what to include in the legislation on
introduction, but there is discretion in what was ultimately
decided upon and the legislature, as a separate branch, will
want to review that and possibly make different decisions.
MR. PAWLOWSKI added that when the enabling legislation is
discussed, there are other pieces where a dialogue with the
committees will be valuable. Those include what the role of the
legislature is during the developments of these agreements, how
is the information flowing, and how is the diligence happening.
The governor and the administration have no intention of
completely stepping away as the intention is to be much more
transparent to the public, presenting the deal up front, and
working together over the next couple of years. There will be
opportunities to discuss how the legislature and public will
have a role in watching the project evolve.
2:26:50 PM
REPRESENTATIVE KAWASAKI referred to Appendix A regarding pro-
expansion principles, and noted the legislature had always
discussed, under AGIA or another pipeline, that it was to be a
common carrier and to have expansions paid for. He requested an
explanation for the departure from this particular principle.
COMMISSIONER BALASH explained that the provisional framework for
AGIA was built around Section 7 of the Natural Gas Act, and
Section 7 contemplates contract carriage, not common carriage.
Article 6 of the Heads of Agreement sets out that each party
will pursue the operation of its section of the pipe as it deems
fit. Each of the producer parties will pursue proprietary
operation. The state, in partnership with TransCanada and ADGC,
will operate in a fashion more akin to open access; for example,
providing service to third parties and offering intermittent
service. Rather than one tariff that is charged to all the
parties, there will be four tariffs. Within each portion of the
project each party will set up its own financing. In the early
1970s, Governor Egan spelled out how it would be in the state's
interest to own one-eighth of the TransAlaska Pipeline Service
(TAPS) for a number of reasons, including the ability to see how
much the costs were and to be certain the state did not overpay
its tariffs, he explained. Unfortunately Governor Egan was a
vote or two short in getting that ownership position, but had he
been successful, the state would have had a much different past.
The state then went into decades of disputes and hostilities
over the rates Alaska was charged for its share of the
production. It was not because the project cost more or less;
it was the basis of the financing for those costs. A party
could have the same costs for a given pipeline or piece of
infrastructure, and if it finances with more debt or less, or it
has varying rates of return, it can affect the tariff
considerably. [The administration] wants to ensure that for the
portion of the project the state is paying for, the state will
be in a position to set up the financing. For example, if one
of the companies decides to go 100 percent equity and receive a
13 percent rate of return on that equity, it will not affect the
state and it will not affect the state's other interests. "In
some ways, it is a live and let live approach."
2:31:31 PM
CO-CHAIR SADDLER requested an explanation regarding TransCanada
and the term "hold the state's equity share".
COMMISSIONER BALASH replied that, in essence, TransCanada will
operate as the state's equity agent in the [gas] treatment plant
and the pipeline. The parties have agreed on a certain set of
commercial terms that begin with the recognition that this is
transportation that is set up for the state's gas. At the end
of the initial contract term the state has the ability call back
the state's equity position in the infrastructure. Before that,
the state has an opportunity to participate in the equity
directly, which is an option that the state enjoys up until the
point of FEED. As part of the due diligence effort, [the
administration] will explore and work with AGDC and others to
identify whether it makes sense for the state to call that
option and remain a participant in the midstream elements. He
said that during its next presentation before the committee [the
administration] will discuss the cash consequences of going 100
percent TransCanada, 0 percent TransCanada, or something in
between.
2:33:42 PM
CO-CHAIR SADDLER noted he is looking forward to understanding
how TransCanada will act as the state's agent. He then inquired
how long the initial contract period is.
COMMISSIONER BALASH answered that the Firm Transportation
Services Agreement (FTSA) in the term sheet is expected to be 25
years, subject to further adjustment as the state gains an
understanding of the marketing arrangements and the terms of the
Sale and Purchase Agreements (SPAs). The Precedent Agreement is
a two-year item, where the state has a development cost
agreement up-front that leads into the FTSA.
2:34:37 PM
REPRESENTATIVE TARR, regarding cash flow, asked at what point in
the project timeline is the break-even point expected to be
reached and the revenue earnings to begin.
MR. PAWLOWSKI specified that economic analysis discussions from
DNR's experts, the state's experts, and the legislature's
experts will be forthcoming. He cautioned that models are
models. The committee can look at the crossover points,
returns, and cash flows for the rate that [the administration]
understands today. However, the largest driver is managing the
capital costs of construction, which is part of the reason [the
administration] sees such a benefit in participating with
partners like BP, Conoco, and Exxon, and TransCanada that have
expertise at bringing projects in around the estimated capital
costs. Within any analysis there must be sensitivity to the
fact that it is a model and that it must be looked at in
multiple sensitivities, not just one distinct point in time.
2:36:20 PM
REPRESENTATIVE TARR brought attention to slide 18 and inquired
whether consultations with local governments, payments in lieu
of property tax, and impact payments is similar to what happens
now with impacted communities for North Slope oil development.
COMMISSIONER BALASH responded that it is not dissimilar, but not
quite the same. It is more in keeping with the agreement that
Red Dog Mine has with the Northwest Arctic Borough.
MR. PAWLOWSKI interjected that the impact payment concept has
much to do with levy of property tax during the construction
period, how it is calculated, and what the tax might be. The
municipal partners must be able to calculate how to slide cash
flows and tax rates from the construction period on into the
operation period. A lot of work must be performed on the
property tax side to ascertain that communities are sharing
benefits in a manner that supports community needs during
construction as well as providing benefits long term through
property taxes.
2:38:07 PM
REPRESENTATIVE SEATON noted that royalty and production tax
could be taken in kind, that each party may have a different
financing mechanism, and that each party would be operating
independently. He asked what the effect would be of taking the
production tax in kind under this type of arrangement. For
example, a party with 100 percent equity could shift all the
costs down the stream so that the wellhead value is much less
and most of the cost is shifted to transportation of LNG. He
further asked whether the purpose of that is so it does not
affect the tax rate and the only thing the state would be
missing out on, or that could be influenced, is the corporate
income tax.
MR. PAWLOWSKI replied there is a difference between gross value
and a percent of production. The difference becomes important
when reviewing the question about fuel gas the state is
responsible for. He assured Representative Seaton those details
would be discussed with the enabling legislation, but it does
provide real transparency over what the costs are that go into
the equation to determine the value in a manner that protects
the state.
REPRESENTATIVE SEATON requested that a simple flow chart be
prepared for the committee of how the state gets to [gross
value], how that influences cost shifting, and how it would not
influence the production tax, but what influence it would have
depending upon those decisions made by other parties.
2:40:32 PM
CO-CHAIR SADDLER recalled there were concerns in that same
general area in a previous iteration of a natural gas line deal;
the lack of openness and transparency causes that previous one
to not be successful. These were some of the pitfalls that
caused the previous [natural gas line deal] to not be
successful. He inquired about the specific ways the process
outlined in the Heads of Agreement addresses those concerns and
hopes to ameliorate them.
MR. PAWLOWSKI responded that Articles 5.5 and 5.6 on page 10 of
the Heads of Agreement puts forward how information flows during
the Pre-FEED stage and in the principle of information flow
after the Pre-FEED stage. He reminded the members that in this
construct the resource agencies are actually customers of [the
state's] agents. [The state's] agents are either the AGDC
subsidiary or TransCanada on the terms that are negotiated
between the state and TransCanada by those services agreements.
Article 5.5 covers the flow of information during the Pre-FEED
stage and at that point the administration works with ADGC and
the producer parties in a proprietary capacity to have access to
that information during the Pre-FEED stage. When the project
moves into operation, Article 5.6 describes the disclosure of
information, subject to relevant confidentiality and applicable
law, in sufficient detail to allow each Alaska LNG party to meet
its reasonable business needs, including obligations to
customers. An important point is what information needs to be
shared from TransCanada or AGDC back to the state to allow the
state clarity and comfort in the shipping. Those are negotiated
in the services agreements to carry and transport state gas or
provide liquefaction services. Articles 5.5 and 5.6 provide the
mechanisms during Pre-FEED and after Pre-FEED of how that
information flows back to the state and through the state to the
people and the legislature. Within the enabling legislation are
some additional pieces that [the administration] has set up for
engagement with the legislature, along with other public
information around the way the tax is treated.
2:43:23 PM
REPRESENTATIVE TARR queried whether [the administration] has any
comments on the forthcoming RCA reauthorization legislation.
During a previous conversation it was explained that there was
an agreement about who had responsibility over each component of
the project. She asked whether that was something the committee
should be thinking about when it considers that legislation.
She also noted it has been reported that FERC has an enormous
backlog.
COMMISSIONER BALASH replied that jurisdiction on this project
will be a function of federal law. The state's statutes
regarding regulation of pipelines and associated facilities
gives a wide berth to federal jurisdiction. In this case, there
is no disputing that FERC has jurisdiction over the liquefaction
and marine terminal. The federal statutes are unclear as to how
far that jurisdiction extends with regard to a pipeline that
feeds into a liquefaction terminal. He noted there is a fair
debate to be had between and among FERC attorneys. It was
realized that the state can put forward a theory as to what law
applies and why, but ultimately it is the commission that
decides. Should the commission assert jurisdiction over the
pipeline, Article 6 provides a method to develop a plan for how
the commercial terms will apply and how a tailored approach will
be employed for this project.
2:46:02 PM
COMMISSIONER BALASH, responding to Representative Kawasaki,
explained that there are multiple copies of the same signature
pages of the Heads of Agreement because they had to be signed by
a number of people in different parts of the country.
REPRESENTATIVE KAWASAKI observed that the date for termination
of the Heads of Agreement is December 31, 2015. He asked
whether there are provisions for a withdrawn partner or for a
scenario in which the legislature decides not to go this way.
COMMISSIONER BALASH answered that this administration will serve
through early December 2014, and in November the people will
decide [if it is longer]. This particular agreement is set to
expire December 31, 2015, because it will be known by then
whether the state will be proceeding to the FEED gate. If there
is not progress along the way, if the other needed contracts are
not developed, it is fair to let this agreement expire. The
administration and the legislature will then have a much more
difficult conversation regarding what to do about it.
2:48:31 PM
CO-CHAIR SADDLER, regarding the signatories on the back pages of
the Heads of Agreement, asked whether there any assumptions the
committee should know about the level of commitment by the
Alaska subsidiaries and by the parent corporations of BP,
ConocoPhillips, and ExxonMobil.
MR. PAWLOWSKI deferred to the parties signing the Heads of
Agreement, saying it would be more appropriate for them to speak
about their respective commitments.
CO-CHAIR SADDLER inquired at what point in the process laid out
by the Heads of Agreement the state would have a better idea of
what the expected rate of return would be as an equity
participant in the gasline and all the associated components.
He clarified he is not asking what the rate would be, but when
it be expected to know the rate of return.
MR. PAWLOWSKI responded that the rate of return would not be
known until the project is built and in operation. There will
be estimates with increasing clarity and predictability
throughout Pre-FEED, FEED, and during construction. He pointed
out that there were things with the Trans-Alaska Pipeline System
(TAPS) that changed the rate of return for many of the people
involved in that project.
2:50:12 PM
CO-CHAIR FEIGE queried whether it was fair to say that there
will be a clearer idea as the project moves closer to the FEED
process and as the SPAs are negotiated.
MR. PAWLOWSKI offered his belief that at the conclusion of Pre-
FEED there will be a much clearer idea of what to expect. It
must be clear enough for the state, as well as everyone, to be
able to take the next step to what will then be a multi-billion-
dollar commitment for each party.
Co-Chair Feige commented it does not make sense to proceed if no
one will buy the product.
2:50:48 PM
REPRESENTATIVE SEATON recalled that in the previous iteration of
the state participation and ownership, one of the biggest
problems became the state regulating itself. He requested a
spreadsheet of how the state is getting around that same problem
under this proposed LNG scenario so it can be seen where there
are problems.
REPRESENTATIVE JOHNSON commented that since he has not heard of
any of the presidents of these companies being fired, they must
have been acting at the behest of their board of directors. He
queried whether at any point there will be discussions about the
interaction between this and the current law of the land.
COMMISSIONER BALASH answered that he will specifically address
this question during a forthcoming committee meeting.
REPRESENTATIVE TARR surmised that the Tax as Gas will now be the
standard that [the administration] is rolling into the proposal
and is how all of it will be factored.
COMMISSIONER BALASH nodded yes.
2:54:10 PM
ADJOURNMENT
There being no further business before the committee, the House
Resources Standing Committee meeting was adjourned at 2:54 P.M.
| Document Name | Date/Time | Subjects |
|---|---|---|
| Full HOA.pdf |
HRES 1/27/2014 1:00:00 PM |
|
| HRES Revised Heads of Agmt. 1.27.14.pdf |
HRES 1/27/2014 1:00:00 PM |