Legislature(2017 - 2018)BARNES 124
04/14/2017 01:00 PM House RESOURCES
Note: the audio ![]()
and video ![]()
recordings are distinct records and are obtained from different sources. As such there may be key differences between the two. The audio recordings are captured by our records offices as the official record of the meeting and will have more accurate timestamps. Use the icons to switch between them.
| Audio | Topic |
|---|---|
| Start | |
| HB177 | |
| Presentation: Ak Gasline Development Corporation Status Update | |
| HB211 | |
| HB201 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| + | HB 201 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HB 217 | TELECONFERENCED | |
| += | HB 218 | TELECONFERENCED | |
| += | HB 177 | TELECONFERENCED | |
| += | HB 211 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
HOUSE RESOURCES STANDING COMMITTEE
April 14, 2017
1:02 p.m.
MEMBERS PRESENT
Representative Andy Josephson, Co-Chair
Representative Geran Tarr, Co-Chair
Representative Dean Westlake, Vice Chair
Representative Harriet Drummond
Representative Justin Parish
Representative Chris Birch
Representative DeLena Johnson
Representative George Rauscher
Representative David Talerico
MEMBERS ABSENT
Representative Mike Chenault (alternate)
Representative Chris Tuck (alternate)
COMMITTEE CALENDAR
HOUSE BILL NO. 177
"An Act relating to the response to, and control of, aquatic
invasive species; establishing the aquatic invasive species
response fund; and relating to the provision of information
about aquatic invasive species to users of the Alaska marine
highway system."
- MOVED CSHB 177(RES) OUT OF COMMITTEE
PRESENTATION: AK GASLINE DEVELOPMENT CORPORATION STATUS UPDATE
- HEARD
HOUSE BILL NO. 211
"An Act requiring a nonresident to be accompanied by a guide or
resident spouse or relative when hunting certain caribou; and
providing for an effective date."
- MOVED CSHB 211(RES) OUT OF COMMITTEE
HOUSE BILL NO. 201
"An Act relating to municipal regulation of trapping; and
providing for an effective date."
- HEARD AND HELD
HOUSE BILL NO. 217
"An Act relating to the Alaska Food, Drug, and Cosmetic Act;
relating to the sale of milk, milk products, raw milk, and raw
milk products; and providing for an effective date."
- BILL HEARING POSTPONED
HOUSE BILL NO. 218
"An Act relating to the state veterinarian and to animals and
animal products."
- BILL HEARING POSTPONED
PREVIOUS COMMITTEE ACTION
BILL: HB 177
SHORT TITLE: AQUATIC INVASIVE SPECIES
SPONSOR(s): REPRESENTATIVE(s) TARR
03/14/17 (H) READ THE FIRST TIME - REFERRALS
03/14/17 (H) RES, FIN
04/05/17 (H) RES AT 1:00 PM BARNES 124
04/05/17 (H) Scheduled but Not Heard
04/07/17 (H) RES AT 1:00 PM BARNES 124
04/07/17 (H) Heard & Held
04/07/17 (H) MINUTE(RES)
04/10/17 (H) RES AT 1:00 PM BARNES 124
04/10/17 (H) -- MEETING CANCELED --
04/12/17 (H) RES AT 1:00 PM BARNES 124
04/12/17 (H) Scheduled but Not Heard
04/13/17 (H) RES AT 5:00 PM BARNES 124
04/13/17 (H) -- Continued from 4/12/17 --
04/14/17 (H) RES AT 1:00 PM BARNES 124
BILL: HB 211
SHORT TITLE: NONRESIDENT HUNTING REQUIREMENTS: CARIBOU
SPONSOR(s): REPRESENTATIVE(s) WESTLAKE
04/05/17 (H) READ THE FIRST TIME - REFERRALS
04/05/17 (H) RES
04/12/17 (H) RES AT 1:00 PM BARNES 124
04/12/17 (H) Scheduled but Not Heard
04/13/17 (H) RES AT 5:00 PM BARNES 124
04/13/17 (H) -- Continued from 4/12/17 --
04/14/17 (H) RES AT 1:00 PM BARNES 124
BILL: HB 201
SHORT TITLE: MUNICIPAL REGULATION OF TRAPPING
SPONSOR(s): REPRESENTATIVE(s) JOSEPHSON
03/29/17 (H) READ THE FIRST TIME - REFERRALS
03/29/17 (H) CRA, RES
04/11/17 (H) CRA AT 8:00 AM BARNES 124
04/11/17 (H) Heard & Held
04/11/17 (H) MINUTE(CRA)
04/13/17 (H) CRA AT 8:00 AM BARNES 124
04/13/17 (H) Moved CSHB 201(CRA) Out of Committee
04/13/17 (H) MINUTE(CRA)
04/14/17 (H) RES AT 1:00 PM BARNES 124
WITNESS REGISTER
KEITH MEYER, President
Alaska Gasline Development Corporation
Department of Commerce, Community & Economic Development
Anchorage, Alaska
POSITION STATEMENT: Provided a PowerPoint presentation prepared
by the Alaska Gasline Development Corporation dated 4/14/17, and
answered questions.
LIEZA WILCOX, Vice President
Commercial and Economics
Alaska Gasline Development Corporation
Department of Commerce, Community & Economic Development
Anchorage, Alaska
POSITION STATEMENT: Participated in a PowerPoint presentation
prepared by the Alaska Gasline Development Corporation dated
4/14/17, and answered questions.
BERNARD CHASTAIN, Major; Deputy Director
Headquarters
Division of Alaska Wildlife Troopers
Department of Public Safety
Anchorage, Alaska
POSITION STATEMENT: Answered questions during the hearing of HB
211.
FORREST WOLFE, Staff
Representative Dean Westlake
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Speaking on behalf of Representative
Westlake, sponsor, answered questions during the hearing of HB
211.
THOR STACEY, Lobbyist
Alaska Professional Hunters Association
Anchorage, Alaska
POSITION STATEMENT: Answered questions during the hearing of HB
211.
MEGAN ROWE, Staff
Representative Andy Josephson
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Speaking on behalf of Representative
Josephson, sponsor, answered questions during the hearing of HB
201.
BERNARD CHASTAIN, Major; Deputy Director
Headquarters
Division of Alaska Wildlife Troopers
Department of Public Safety
Anchorage, Alaska
POSITION STATEMENT: Answered questions during the hearing of HB
201.
BRUCE DALE, Director
Division of Wildlife Conservation
Alaska Department of Fish & Game
Palmer, Alaska
POSITION STATEMENT: Answered a question during the hearing of
HB 201.
ACTION NARRATIVE
1:02:21 PM
CO-CHAIR GERAN TARR called the House Resources Standing
Committee meeting to order at 1:02 p.m. Representatives Tarr,
Parish, Talerico, Rauscher, Drummond, Johnson, and Josephson
were present at the call to order. Representatives Westlake and
Birch arrived as the meeting was in progress.
HB 177-AQUATIC INVASIVE SPECIES
1:03:29 PM
CO-CHAIR TARR announced that the first order of business would
be HOUSE BILL NO. 177, "An Act relating to the response to, and
control of, aquatic invasive species; establishing the aquatic
invasive species response fund; and relating to the provision of
information about aquatic invasive species to users of the
Alaska marine highway system."
CO-CHAIR TARR reminded the committee HB 177 was amended during
the hearing on 4/13/17 to add an additional prevention measure
to share information related to aquatic invasive species with
individuals who register boats with the Division of Motor
Vehicles, Department of Administration. She said [state
legislation would not have jurisdiction over owners who register
floatplanes as] floatplanes are registered with the Federal
Aviation Administration, U.S. Department of Transportation.
1:05:34 PM
CO-CHAIR JOSEPHSON moved to report HB 177, as amended, out of
committee with individual recommendations and the accompanying
fiscal notes. There being no objection, CSHB 177(RES) was
reported from the House Resources Standing Committee.
^PRESENTATION: AK GASLINE DEVELOPMENT CORPORATION STATUS UPDATE
PRESENTATION: AK GASLINE DEVELOPMENT CORPORATION STATUS UPDATE
1:06:20 PM
CO-CHAIR TARR announced that the next order of business would be
a presentation by the Alaska Gasline Development Corporation.
1:06:58 PM
KEITH MEYER, President, Alaska Gasline Development Corporation
(AGDC), began AGDC's update on the Alaska [liquefied natural
gas] Project (Alaska LNG), and informed the committee the
project's three main focus areas for 2017-2018 are: regulatory,
finance, and commercial. Also included in the presentation are
Alaska LNG milestones, marketing efforts, a commercial update,
and upcoming activities [slide 2]. Firstly, as an update on the
"regulatory side," he said [on 4/13/17] the AGDC board of
directors approved AGDC's filing of an application to obtain a
Natural Gas Act Section 3 permit from the Federal Energy
Regulatory Commission (FERC). In the past two years, AGDC's
work has been directed toward the FERC National Environmental
Policy Act of 1969 (NEPA) prefiling phase - during which an
applicant interfaces with agencies - and draft prefiling
documents were submitted to FERC. Questions from FERC on the
draft documents have been addressed, and the formal application
will be filed [4/17/17]. Mr. Meyer said filing the application
begins a formal process with FERC that will end with an
authorization to construct the facilities. He explained that
all FERC questions have been addressed: 2,000 questions have
been answered, and some will be answered after final
engineering. Further, state agencies participated in answering
FERC questions, as the state, - through AGDC - is now the
applicant. The Department of Natural Resources (DNR) will serve
as the point of contact between state and federal agencies as
relates to state- and NEPA-related questions. Furthermore, a
public awareness campaign will commence 4/20/17, beginning with
community meetings across the state in which FERC will
participate. [AGDC] is also interviewing engineering
procurement construction (EPC) contractors to assist with
technical regulatory questions and capital cost estimates.
Lastly, AGDC is finalizing negotiations on the site purchase
[slide 3].
1:12:10 PM
REPRESENTATIVE PARISH asked whether the land upon which the
pipeline would be built is currently owned by [ExxonMobil
Corporation, BP, and ConocoPhillips Alaska, Inc.]
MR. MEYER clarified the aforementioned land is the site of the
proposed LNG facility in Nikiski. In further response to
Representative Parish, he explained AGDC, as applicant, needs to
either own or control the land. In further response to
Representative Parish, he said AGDC seeks to acquire the land at
a cost of about $50 million, but that does not include all the
parcels of land that are needed.
REPRESENTATIVE PARISH questioned whether additional parcels
would be acquired from a municipality and private owners.
MR. MEYER said correct.
REPRESENTATIVE TALERICO asked when FERC would issue its permit.
MR. MEYER said the FERC process would take about 18 months, but
may take less time because of the new [federal] administration,
and because of the amount of work previously completed.
REPRESENTATIVE BIRCH inquired as to whether the land purchase is
unconditional, or is subject to the project advancing.
MR. MEYER cautioned that he could not breach confidentiality
agreements with the present owners; AGDC seeks an option to buy
that would not be exercised until after the FERC process
granting AGDC the authority to build on the land.
REPRESENTATIVE BIRCH hoped a project with some measure of
uncertainty would not be obligated to spend $50 million on
property.
MR. MEYER said, "That is the plan."
REPRESENTATIVE JOHNSON asked for the term of the FERC [permit].
MR. MEYER said typical FERC authorizations to build LNG
facilities allow five years to start construction, but it could
be longer or shorter.
REPRESENTATIVE PARISH asked if [ExxonMobil, BP, and Conoco-
Phillips] spent $50 million to acquire the land [for the LNG
facility in Nikiski].
MR. MEYER was unsure, however, "the concept is, if we would buy
it, we would buy it at cost."
MR. MEYER turned to updates on finance structure: AGDC has
performed preliminary modeling of the third-party finance
structure for the project; an investor prospectus is underway to
show that the project is competitive and will provide a
reasonable return on investment; a financial advisor selection
process is underway and AGDC will also engage an independent
registered municipal advisor as required by the [Dodd-Frank Wall
Street Reform and Consumer Protection Act of 2010], retained
through the Department of Revenue (DOR). He explained the
financial advisor would assist AGDC in structuring assumptions,
and introduce AGDC to the global financial community. A chart
illustrated investor cash flow for a $40 billion project with 25
percent - $10 billion - in equity. The timeline indicated $10
billion spent [beginning in 2017], a 20-year debt life, and
returns of over $1 billion per year up to about $2 billion spent
by the end of the contract life. At that point the debt is
paid, and if the tolls remain the same, cash flow to the
investors increases for the life of the North Slope resource
base. Mr. Meyer stressed the timeline shows the project would
garner billions of dollars in returns; furthermore, a long-life
asset, once debt is paid, with a cash flow greater than $5
billion per year, could be sold or monetized for an estimated
$50 billion [slide 4].
REPRESENTATIVE PARISH questioned how AGDC qualifies as a
municipality.
MR. MEYER answered AGDC qualifies as a municipality under
protections provided by the Dodd-Frank Act because it is owned
by the state, and thus is required to engage an independent
registered municipal advisor. He further explained if a
financial advisor provides advice to AGDC, and AGDC is without
protection from an independent registered municipal advisor, the
financial advisor might preclude itself from participating in
debt offerings and equity. As DOR already has an agreement with
an independent registered financial advisor, AGDC will modify
and participate in the existing DOR agreement.
1:22:45 PM
CO-CHAIR TARR asked if [AGDC's status as a municipality] is a
separate issue from the "letter ruling" the state will seek for
taxation purposes.
MR. MEYER said AGDC's status as a municipality grants some tax-
exempt status for income tax. To the extent that AGDC owns the
project, and for the portion owned by AGDC, there are tax
advantages that cannot be passed to a third party. However, for
the portion owned by AGDC, there will be no federal income taxes
to pay.
REPRESENTATIVE JOHNSON asked whether AGDC is subject to federal
open meetings laws.
MR. MEYER said all AGDC board meetings must be public when three
or more members gather.
MR. MEYER continued to commercial issues. [AGDC] seeks to raise
awareness about the project in the LNG community as few funds
have been spent on marketing outside of Alaska. In fact, media
reports during the transition period may have inferred the
project was failing, thus there is an effort to raise awareness
and to push for commercial commitments. Currently, AGDC is
following up on existing prospects in Asia and elsewhere. Also
as part of raising awareness of the project, AGDC seeks to
correct misperceptions surrounding the project's capital cost of
less than $45 billion, the potential for phased development, and
that the delivered price for LNG will be very competitive in the
global arena. Upcoming commercial activities will include China
and a broader Asia-Pacific commercial plan, a capacity
solicitation process to ask for commitments on the capacity of
the pipeline and LNG plant, and drafting of tolling agreements
associated with capacity commitments [slide 5]. Slide 6 was a
timeline beginning in the first quarter of 2017 (Q1 2017) and
continuing to the first quarter of 2019 (Q1 2019). In Q1 2017,
AGDC will engage an engineering contractor to support the
regulatory and financing processes and refine capital cost;
however, this is not a detailed engineering effort. On the
timeline at Q2 2017 was shown the FERC [Sec 3 application]
filing, and he advised receipt of the draft environmental impact
statement (EIS) will take about one year. After a comment
period, the final EIS, a brief appeal period, and the
authorizing order will be completed in Q1 2019. Also shown was
the timeline for commercial/financing indicating AGDC is now
engaging an independent registered municipal advisor, followed
by final investor documents, marketing to the global community,
and exploring debt financing and ratings, all leading to a final
investment decision (FID) in Q1 2019. The third-party equity
process would continue from Q3 2017 through [Q4 2018]. Mr.
Meyer said customer engagement began in late December [2016],
and will continue along with capacity solicitation during Q3
2017 and beyond. He stressed between now and 2018, AGDC will
engage with the LNG market and with capacity holders to finalize
contracts. By Q1 2019 the project will be ready for FID, after
which "some of big dollars then get spent, but the funding is
from outside sources as well." He noted AGDC is "doing a lot of
paperwork in [2017 and 2018] ...."
1:30:39 PM
MR. MEYER returned to the Alaska LNG Summit which was hosted
with strong local support from Prudhoe Bay to the Kenai
Peninsula. [AGDC] brought 23 international guests -
representing 14 companies - from Asia, to the conference, and he
described the events sponsored by the major producers, labor
organizations, government, and regional corporations, all
speaking in support of the project. Costs of the summit were
paid by sponsors and registration fees. In April, AGDC attended
the Gastech exhibition and conference in Tokyo, Japan. Upcoming
commercial outreach efforts include engaging potential Chinese
LNG buyers, preparing for the CWC [World LNG & Gas Series (CWC)]
conference in Beijing, China, preparing for the CWC conference
in Houston, Texas, and expanding commercial efforts in the Asia-
Pacific region [slide 7].
1:32:53 PM
MR. MEYER said the visit of Chinese President Xi Jinping and
fourteen of his cabinet members was an historic event. The
meeting in Alaska followed President Xi's visit with President
Trump, where he heard positive statements about the project from
the American president. Mr. Meyer pointed out China is a major
energy consumer and the third largest consumer of LNG in the
world. Slide 8 illustrated Chinese LNG demand and the reduction
in its supply as LNG contracts expire in 2016: China has growth
in demand and contracts expiring. He remarked:
President XI ... told me "We've got 100 years of LNG
demand." I told him we've got 100 years of LNG
supply. So, we're a beautiful fit together.
1:34:42 PM
REPRESENTATIVE BIRCH inquired as to the potential use of
icebreaker LNG tankers operating out of Arctic nations.
MR. MEYER related the Russian Yamal LNG project will be served
by ships with icebreaking capabilities built in China. The
ships are expensive and not as efficient as others, and the
facility located on the Yamal Peninsula cannot be accessed year
around. He acknowledged icebreaker LNG tankers are being talked
about, but an LNG plant in the Arctic would need to be built 30-
50 miles offshore due to water depth; adding the cost of the
facility and the cost of the ships, the total project costs
would increase by $10 billion. Mr. Meyer opined better use of
the money is building a pipeline to a facility in a known
location. Further, a gas pipeline can serve all the State of
Alaska, providing fuel to mining projects and Alaska
communities.
REPRESENTATIVE PARISH observed the proposed gas pipeline route
goes under Cook Inlet to Nikiski, and asked why that route is
preferred over the Trans-Alaska Pipeline System (TAPS) route.
MR. MEYER said Alaska has many good sites for an LNG plant
including Valdez, Port MacKenzie, and Nikiski. Nikiski was
selected for a number of reasons detailed in the FERC
application. He offered to provide the specific list [of
reasons].
REPRESENTATIVE PARISH understood FERC identified Valdez as the
preferred site, as reported in the media.
MR. MEYER said that is an incorrect statement.
REPRESENTATIVE PARISH read from a document not provided.
MR. MEYER explained there was a route to Valdez approved for a
previous project. However, for Alaska LNG, Nikiski is the
preferred site, and FERC did not say otherwise about this
project. Valdez would have been a fine site; in fact, there
could be a future LNG facility in Valdez supplied by an
interconnect to the proposed gas pipeline. He added Nikiski has
good water depth, good land, and accessibility.
1:41:15 PM
REPRESENTATIVE RAUSCHER also read from a report in the media
that FERC is now seeking more information about Valdez as an
option [document not provided.
MR. MEYER acknowledged there is an intervenor [exercising the
right of an individual to request rehearing of a FERC order] in
the FERC process who is requesting FERC to approve Valdez as the
preferred site. In further response to Representative Rauscher,
he explained AGDC will have to respond to the motion to
intervene and provide further details that support Nikiski as
the preferred site. He advised, "... the intervention ... is
maybe going to cost us, you know, a month or two - changing the
site would cost us years."
REPRESENTATIVE PARISH questioned whether Cook Inlet is a good
place to run a subaquatic gas pipeline.
MR. MEYER said it is "a perfectly good place" for an offshore
line.
REPRESENTATIVE PARISH recalled gas has been lost in Cook Inlet
recently due to breaks in subaquatic pipelines. He expressed
reservations about running another pipeline, and asked for the
expected lifespan of the proposed pipeline.
MR. MEYER stated a pipeline can last forever if it is
maintained. The proposed pipeline traversing Cook Inlet will be
constructed of thick steel and coated with concrete.
CO-CHAIR TARR suggested the committee refer to videos presented
at previous Alaska LNG updates where the aforementioned topics
have been discussed in great length. She requested AGDC provide
the committee FERC filing information on the location selection,
noting there have been steps by the Alaska congressional
delegation related to land acquisition in the Denali National
Park and Preserve area, and there are safety concerns about two
pipelines terminating in Valdez.
1:47:11 PM
LIEZA WILCOX, Vice President, Commercial and Economics, Alaska
Gasline Development Corporation, DCCED, directed attention to
slide 10, which was a graph of the anticipated production
profile of volumes of gas for the first 30 years of the project,
from 2024 to 2054. As illustrated on slide 10, discovered
resource on the North Slope located in the Prudhoe Bay Unit
(PBU), the Point Thomson Unit (PTU), and other fields totals 35
trillion cubic feet (Tcf), an amount sufficient to supply the
proposed Alaska LNG pipeline at close to 100 percent capacity
for at least 20 years. She said this is an advantage Alaska can
offer customers because the gas is in production and is a
resource ready to be exported. Also shown was a portion of the
over 200 Tcf estimated as a "yet-to-find" resource -
undiscovered and technically recoverable - estimated by analysis
of the resource base and seismic data. Ms. Wilcox acknowledged
currently, worldwide LNG supply appears to be oversupplied;
further, a large number of projects have been developed and
appear "to have overshot a bit for the, for the amount of demand
that's available." However, she said the market is expected to
catch up to demand because LNG remains a popular energy source,
especially in Asia. Slide 11 illustrated an LNG demand
projection by BP that showed a large rise in demand from Asia,
and a second LNG demand projection by Royal Dutch Shell that
showed the world LNG market balance. She pointed out the
existing gas capacity begins to drop around [2020] and [projects
in development range to over 300 metric tons per annum (MTPA)
and the demand forecast rises to 500 MTPA in 2030]. Proposed
projects in competition with Alaska LNG are located as follows:
U.S. Gulf Coast, supplied by inexpensive shale gas; Canada and
the Pacific Northwest, challenged by permitting, taxation, and
regulatory issues; Russian Arctic, facilitated by icebreaker LNG
tankers; East Africa; Australia, expansion projects challenged
by cost overruns due to "floating LNG." As far as price, she
said U.S. Gulf Coast supply "appears to be driving the market
price setting in, in the states."
1:53:13 PM
REPRESENTATIVE PARISH inquired as to the impact on the world gas
supply of the completion of projects such as those in East
Africa.
MS. WILCOX advised each project in its initial stage tends
toward producing 10-15 million tons per year, and Alaska LNG can
produce "up to 20, with the three trains"; however, after a
project is built there are expansion possibilities, and over 100
Tcf of resource have been discovered in East Africa. Total
impact would depend on when the gas gets to market and what the
market can absorb. Slide 12 illustrated long-term LNG contracts
and demand in Japan, Korea, Taiwan, and China. She pointed out
Japan, Korea, Taiwan, and China are strategically positioned for
LNG from Alaska, and in the mid-2020s there will be decline in
their current long-term contracts, which will present an
opportunity for LNG from Alaska that did not exist 15 years ago.
REPRESENTATIVE PARISH observed the information presented on
decline and supply is not indicative of actual reduced supply,
but of reduced contracted supply, thus if all [expiring]
contracts are renewed, there would be a "much less rosy
outlook."
MS. WILCOX agreed, noting the outlook presented on slide 11
indicated the supply capacity declines at a lower rate than do
contracts. Further, some contracts will be renewed, and others
will be filled by competitors. She said, "We're looking at it
as the, as the double opportunity to not just provide new
capacity to the market, but potentially replace some of the
current capacity."
1:57:07 PM
REPRESENTATIVE WESTLAKE, regarding the second bullet point
[found on slide 12: Existing contracts expire in the same
timeframe as a projected global shortfall in LNG supply.], asked
whether AGDC could address the concern about fierce competition
for the world gas market.
MS. WILCOX advised the way to address competition is with early
and consistent project momentum and contracting. [AGDC] seeks
to complete commercial contracting and paperwork prior to
spending the funds that are required to construct the project.
For example, for a project planning to sell a lot of its
[capacity] on [the spot market], there is a much higher risk.
MS. WILCOX directed attention to slide 13, illustrating the
project's capital structure. Alaska LNG is an approximately $40
billion project with a traditional U.S. gas pipeline capital
structure. The project would require approximately $10 billion
in equity - 25 percent of the total investment - that would
garner an estimated 8 percent return. After the project is
contracted, the remaining $30 billion for construction would be
raised from debt, modeled with a 5 percent interest rate,
leaving the Alaska LNG total cost of $40 billion with 5.75
percent cost of capital. She stressed lowering the cost of
capital under the finance structure is key to lowering total
cost for all parties and making the project more competitive.
Returning to investor economics, she restated investor cash flow
will be 25 percent with an 8 percent return. Investors will
have expenditures at the front end and will repay debt for 20
years, during which the cash flow will be lower. After 20
years, investors will earn an estimated 10 percent return,
assuming the project still has a supply of gas, and after 2045,
the return will increase significantly. During the 20-year
contract period, approximately 25 Tcf of gas will be produced,
and 10 percent of the potential yet-to-find resources will be
required to continue operations for an additional 25 years.
Also after 2045, the asset value of the project could be
recovered through sale [slide 14].
MS. WILCOX explained slide 15 depicts potential cash flow to the
state over the same timeline, should the state invest 25 percent
equity into the project. Again, there would be an 8 percent
return for the contracted period, and 10 percent over the life
of the project, however, the state may earn additional upstream
cash in the form of revenue in kind (RIK), tax as gas (TAG), and
payment in lieu of tax (PILT), which would increase the state
return to 13 percent during the initial period and 15 percent
over the life of the project. Alaskans would further benefit
from state ownership through a lower cost of energy, industrial
development, and jobs.
2:04:00 PM
REPRESENTATIVE PARISH asked whether AGDC is able to establish
PILT on federal land because it is considered a municipality.
MS. WILCOX explained PILT is under consideration by AGDC as a
substitute for property tax assessed along the pipeline route.
A portion would be paid to the affected communities, and a
portion to the state general fund (GF) and thereby benefit the
overall state economy.
MR. MEYER further explained AGDC would pay PILT to communities,
which is an expense to the project; from the state's
perspective, it is assumed PILT would total $500 million per
year to the state and communities.
CO-CHAIR TARR clarified Senate Bill 138 [passed in the 29th
Alaska State Legislature] created a municipal advisory group to
address this topic. She recalled in order to avoid litigation
that has been brought related to the amount of taxes paid to
municipalities for TAPS, Alaska LNG seeks to negotiate PILT so
that regular annual payments would accrue for better municipal
planning. With state ownership of Alaska LNG, PILT would go to
local municipal governments to compensate for the impact of
construction.
MS. WILCOX continued to the competitiveness of the project, and
provided a graph representing a forecast of a range of prices
for LNG delivered to Asia. The lowest price shown on the graph
was the current Henry Hub index price that is an almost
historical low plus $5 for Gulf Coast facilities and shipping.
She said few new projects can be built on the basis of the
current Henry Hub price, which is low because the LNG market is
currently oversupplied and overbuilt. Other forecasts are for
prices that are tied to oil, and the highest forecast was from
the U.S. Energy Information Administration (EIA), base Henry Hub
plus $5. Although the exact price of gas in 2025 is unknown,
the forecasts are "the perceptions that we're competing with -
at the moment - for what the market price is." Also shown was
Alaska LNG toll plus shipping costs. She said, "We perceive
these numbers to be within the range of reasonable, for gas that
is already being produced ... and being reinjected and the gas
that, that doesn't have, doesn't carry exploration risks. And,
therefore, the project can be competitive."
2:09:13 PM
MS. WILCOX informed the committee one of AGDC's primary focus
areas during the next two years will be to improve the project's
competitiveness by lowering infrastructure costs through
financing, and by the validation of current engineering
estimates. Slide 17 compared the cost estimates for a three-
train system and a two-train system: a two-train system could
be built for about 75 percent less cost including two-thirds of
the capacity of the gas treatment plant and two-thirds of the
capacity of the LNG, with the same pipeline. Also under review
are contingency and owners costs. Also on slide 17 were further
details on owners costs, which she said would be validated
and/or challenged by the EPC contractor.
REPRESENTATIVE DRUMMOND inquired as to what would cause AGDC to
expand the project from two trains to three trains.
MS. WILCOX answered, "It would be more demand, so, so if the
market is oversupplied, ... then you would try to start smaller
and expand, which is how most LNG projects are run." In further
response to Representative Drummond, she affirmed that expansion
could occur while the project was operational.
MS. WILCOX advised AGDC, in its role as the project developer,
will bring many parties together for the success of the project,
including potential investors, potential upstream and downstream
tollers, and project support to provide tools to [lower] the
cost of the project related to financing and construction terms
[slide 18]. She reviewed the following points [slide 19]:
• Alaska LNG is needed by the Asian market and by Alaska as a
cash flow opportunity in the future
• Alaska LNG is competitive
• Alaska LNG is achievable through its project finance
structure
MR. MEYER restated AGDC's upcoming activities [slide 20). Not
previously stated is AGDC's intent to continue to advance
potential U.S. government support from the new federal
administration.
2:14:19 PM
REPRESENTATIVE RAUSCHER returned attention to earlier discussion
related to [LNG facilities located in the Arctic] that cost $10
billion, and asked why an LNG facility has to be built offshore,
and for the source of the data.
MR. MEYER said he speculated the cost of the project would
increase by $10 billion if the LNG facility was built offshore.
He expressed his understanding that the beach along Prudhoe Bay
is shallow thus to reach a water depth sufficient for ships, the
facility would need to be 35-40 miles offshore. He related
artificial channels fill quickly with silt.
REPRESENTATIVE RAUSCHER suggested the gas could be piped to Nome
for shipping.
MR. MEYER said shipping from the West Coast is "challenged." He
opined the proposed project routing serves Alaska, the mining
industry, and Alaska communities.
REPRESENTATIVE WESTLAKE questioned whether the project plan
includes take-off points.
MR. MEYER said there would be at least five take-off points
because instate demand is a key reason to build the project.
[CO-CHAIR TARR passed the gavel to Co-Chair Josephson.]
2:17:27 PM
The committee took an at-ease from 2:18 p.m. to 2:24 p.m.
HB 211-NONRESIDENT HUNTING REQUIREMENTS: CARIBOU
2:24:23 PM
CO-CHAIR JOSEPHSON announced that the next order of business
would be HOUSE BILL NO. 211, "An Act requiring a nonresident to
be accompanied by a guide or resident spouse or relative when
hunting certain caribou; and providing for an effective date."
2:25:09 PM
REPRESENTATIVE WESTLAKE read from the Alaska State Constitution,
Article 8, section 2 as follows:
The legislature shall provide for the utilization,
development, and conservation of all natural resources
belonging to the state, including land and waters, for
the maximum benefit of its people.
RESPRESENTATIVE WESTLAKE said maximizing benefits for Alaskans
should not be limited to oil [resources]. He pointed out the
wealth from out-of-state hunters with a guide is not disruptive
to migration patterns. Furthermore, a transporter bringing in a
hunter from out-of-state, or not, suffers no repercussions if a
violation is committed by a client, but if a hunter is
accompanied by a big game guide, the guide has a vested interest
in ensuring Alaska laws are obeyed.
CO-CHAIR JOSEPHSON asked for clarification on why the Porcupine
Caribou Herd, [with a herd size of] 200,000, is included in the
provisions of the bill.
REPRESENTATIVE WESTLAKE explained the legislation applies to the
caribou that cross over from Canada.
CO-CHAIR JOSEPHSON recalled previous testimony [during the
hearing of HB 211 on 4/13/17] from Mr. Barrette that mandatory
guiding should not be used as a tool to limit nonresident
opportunity.
REPRESENTATIVE WESTLAKE agreed, and explained why the bill
requires mandatory guiding as follows:
It goes back to sustainable yield, exactly what the
Board of Game [Alaska Department of Fish & Game
(ADFG)] was created for. You have big game guides out
there [and] it behooves them to, to have
sustainability built into whatever they may be
hunting, so, unlike [Mr. Barrette], where he's saying
I'm using it to exclude people, I'm using it so their
children, the clients' children, and their children,
and so forth, will be able to hunt from these
magnificent herds that are traveling across America,
the last ones that we have out here. [The bill] is a
safeguard for sustaining these herds, rather than what
we have now, with transporters being able to take
someone in, and being disruptive to herd migrations -
the herd patterns. This, it just makes sense.
CO-CHAIR JOSEPHSON directed attention to the bill on [page 1,
lines 10-14, which read:
*Sec. 2. AS 16.05.407(b) is amended to read:
(d) A nonresident who violates (a) or (g) of this
section, or who fails to furnish an affidavit under
(b) of this section, is guilty of a misdemeanor and
upon conviction is punishable by imprisonment for not
more than one year, or by a fine of not more than
$5,000, or by both.
CO-CHAIR JOSEPHSON asked whether the foregoing section would be
consistent with the efforts of the Division of Wildlife
Troopers, Department of Public Safety (DPS), in proposed HB 129
and in Senate Bill 91 [passed in the first session of the 30th
Alaska State Legislature], which are to move provisions into AS
12.55 "in sort of a generic [class] A misdemeanor sort of way."
2:29:29 PM
BERNARD CHASTAIN, Major, Deputy Director, Headquarters, Division
of Alaska Wildlife Troopers, DPS, clarified the question is
related to the penalties associated with AS 16.05.407
subsections (b) and (d). He informed the committee [companion
bills SB 60 and HB 129] propose to align penalties within Alaska
Statues Title 16, and standardizes the penalties within as class
A misdemeanors. Currently, AS 16.05.407 is not included in the
provisions of proposed HB 129 or SB 60; however, amendments are
forthcoming which would align AS 16.05.407 penalties to a class
A misdemeanor, and thereby change the penalties proposed in HB
211.
CO-CHAIR JOSEPHSON said, "... but you're O.K. with this sort of
continuing with the status quo, in terms of its language,
pending any further reform of, through HB 129."
MAJOR CHASTAIN clarified the change in the language [in HB 211
on page 1, lines 10-14] simply adds "or (g)" and does not change
the penalties. Other [proposed] bills would change the
penalties.
REPRESENTATIVE TALERICO said he is struggling with the idea of
the bill because the state has established a regulatory agency
via the Board of Game (BOG), ADFG, to deal with proposals
[related to wildlife]. He questioned whether BOG has the
ability to enact the restriction directed by the bill, and
thereby keep the restriction "somewhat flexible"; the
legislature enacts statutes, which are not very flexible. He
asked whether the bill removes authority from a state agency
structured to provide [wildlife] management.
REPRESENTATIVE WESTLAKE responded the bill addresses user
conflict. The problem is: There are many conflicts between
those who pay transporters and those who use the resource for
subsistence, which seem to be "never-ending." In GMU 23, [the
sizes of] caribou herds have dropped. He read as follows [from
a document not identified]:
Leading up to game management unit 23's closure, all
[caribou] harvesting declined ... except nonguided
nonresident.
REPRESENTATIVER WESTLAKE concluded from the foregoing that the
subsistence harvest declined, the resident harvest declined, the
guided nonresident harvest declined, and the only increase was
to the nonresident unguided harvest; therefore, the only ones to
lose were the local folks.
2:34:03 PM
FORREST WOLFE, staff to Representative Dean Westlake, Alaska
State Legislature, in response to Representative Talerico, said
enactment of a guide requirement has to be in statute as BOG
does not have the authority to do so.
CO-CHAIR JOSEPHSON recalled the executive director of Resident
Hunters of Alaska, testifying in opposition to the bill, also
stated [the restriction] had to done legislatively.
REPRESENTATIVE BIRCH said, "... it sounds to me like the
unguided nonresident hunters are better hunters, is that right?"
REPRESENTATIVE WESTLAKE agreed, and explained, "You can be the
best hunter out there if you go over there [and] disrupt that
pattern that they're trying to go through when they're, when
they're migrating either north to south in this instance, or
else south to north ...." Speaking as a Native hunter, he said
Native hunters never bother the front herds. He related his
experience of watching caribou come over a mountain to a river
followed by a second group following the same track.
Representative Westlake stressed the importance of letting the
pilot herds travel the migratory path without disruption, and
said, "So, sometimes at the end of the day, we get less game,
but the caribou stay on that route ...."
REPRESENTATIVE BIRCH asked whether a hunt can be structured
around a time that does not disrupt the migration pattern.
REPRESENTATIVE WESTLAKE suggested a summer hunt would probably
work.
MR. WOLFE, in response to Representative Birch's previous
question, said guides are regulated as to the number of clients
they can take per season to the hunting grounds, and
transporters are not. He advised nonguided nonresidents may not
be better hunters, but there may be more of them.
2:37:16 PM
REPRESENTATIVE PARISH inquired as to the economic impact to the
region of a guided hunt as opposed to a nonguided hunt.
2:37:56 PM
THOR STACEY, Lobbyist, Alaska Professional Hunters Association,
disclosed he has a guide concession located in the northeastern
portion of the Arctic National Wildlife Refuge (ANWR), thus he
may have a personal financial interest in some aspects of the
bill. In response to Representative Parish, he said the Alaska
Professional Hunters Association (APHA) commissioned an economic
report in 2013, and a second report with a partner in 2017, to
review the economic impacts associated with visiting nonresident
hunters who are accompanied by hunting guides. Mr. Stacey was
unaware of a study that documents the transporter industry's
direct economic benefit, or per animal most recent economic
study that the average guided hunt in Alaska is worth
approximately $16,500, calculated from a total of $87.5 million
of total economic output, from approximately 3,300 nonresident
hunters accompanied by guides. Mr. Stacey assumed there is more
value-added benefit for a guided hunting trip, but he did not
have documentation on the value of a transported nonresident
guided hunt. Furthermore, in response to a question posed
[4/13/17], approximately 90 percent of active registered guides
in Alaska are Alaska residents.
2:40:32 PM
REPRESENTATIVE PARISH questioned how the number of active guides
in the region compares with the number of transporters.
MR. STACEY said hunting guides contract the services of
transporters, and a nonresident accompanied by a hunting guide
may also contract the services of a transporter, such as an air
taxi. He pointed out the central portion of the affected area
to the west is federal land, and except for Bureau of Land
Management (BLM), U.S. Department of the Interior (DOI) land,
there is a fixed number of hunting guide concessions permitted
on land managed by the National Park Service, DOI, and the U.S.
Fish and Wildlife Service, DOI. In addition, from the Kavik
River east - the area of the Central Arctic and Porcupine herds
- the land is similarly restricted. Because there is not a
restrictive program affecting transporters, there is an
unlimited number of transporters operating within any of these
lands. One area not reported in studies of reductions in
harvest and opportunity is the "transporter component." He
related the demand for hunting a caribou is good - worldwide -
and the demand for transported access to hunting areas is high;
thus an "uptick" in harvest represents a larger uptick in total
hunter effort, because not every hunter gets a caribou: an
uptick in harvest and a declining herd represents more hunters
in the field.
2:43:19 PM
REPRESENTATIVE PARISH inquired as to what sanctions APHA has in
place for guides who may disrupt a migrating caribou herd.
MR. STACEY said APHA is a nongovernmental entity with a code of
conduct and ethical guidelines to which members adhere. He said
he was unaware of any governmental or nongovernmental sanctions
against a guide who disrupts the migration of a caribou herd.
However, the perception of disruptions, founded or unfounded,
may have resulted in the closure of GMU 23 to all nonlocal
hunters. In further response to Representative Parish, he
opined the bill is not designed to cap [the number of visits
and] the decline of the herd, in fact, caribou herds could
experience many environmental and human causes for a serious
decline; the state BOG process is confined by the state
constitutional mandate for sustained harvest, with a subsistence
priority, and on federal land, state and federal subsistence
absolute amounts are set. However, APHA does not see the bill
as necessary for the conservation of the herd, but instead,
human-on-human conflict is the "discussion on the table."
REPRESENTATIVE PARISH referred to information from the Division
of Wildlife Conservation, ADFG, reporting that last year 82
percent of nonresident hunters were unguided, and 350
nonresident hunters per year hunt unguided. For the Teshekpuk
and Western Arctic herds, approximately 2,326, or 77 percent of
nonresidents, are unguided. He asked what percentage [of the
unguided nonresident hunters] could be "absorbed into guided
hunts."
MR. STACEY advised not all could be absorbed through guided
hunts because that would be beyond the capacity of hunting
guides. Furthermore, the number of guided hunts is also limited
by economics because guided hunts cost more. He assured the
committee that the current number of permitted hunting guides
could not accompany the same number of nonresident unguided
hunts that now occur.
REPRESENTATIVE PARISH questioned whether guides could double
their capacity next year.
2:48:17 PM
MR. STACEY expressed doubt that the guiding industry could
double its capacity within a year.
REPRESENTATIVE PARISH posited that if guides were able to double
their capacity, there would be a 50 percent decline in the
number of nonresidents hunting, unless they had [qualified]
relatives in the area.
CO-CHAIR JOSEPHSON clarified nonresidents could hunt if they
have relatives in the state with a second degree of kindred.
MR. STACEY remarked:
Currently, zero nonresidents hunters could actually
hunt in the unit 23 portion of the area discussed, so
any opening would represent a significant increase of
opportunity that would theoretically, obviously, come
with a caveat .... that Alaska residents, everyone in
this room, that doesn't live within the area, would
once again be allowed to hunt there. ... It's hard to
ascertain the downrange of facts, especially where
federal management and federal boards and other things
are involved, so ... it's a complex problem.
CO-CHAIR JOSEPHSON asked whether guides can combine hunting for
caribou and sheep in the same trip.
MR. STACEY said that is common practice.
2:51:20 PM
REPRESENTATIVE DRUMMOND moved to adopt [Amendment 1, identified
as 30-LS0700\J.2, Bullard, 4/12/17].
2:51:27 PM
CO-CHAIR TARR objected for discussion purposes.
REPRESENTATIVE WESTLAKE explained Amendment 1 would correct an
oversight that omitted the Teshekpuk Caribou Herd from the
caribou herds protected in the bill. As an aside, he noted the
local hunters have already scaled down their subsistence hunting
of this herd.
2:52:33 PM
CO-CHAIR TARR removed her objection. There being no further
objection, Amendment 1 was adopted.
2:53:08 PM
CO-CHAIR TARR moved to report HB 211, as amended, out of
committee with individual recommendations and the accompanying
fiscal notes. There being no objection, CSHB 211(RES) was
reported from the House Resources Standing Committee.
The committee took an at-ease from 2:53 p.m. to 2:56 p.m.
HB 201-MUNICIPAL REGULATION OF TRAPPING
2:56:16 PM
CO-CHAIR JOSEPHSON announced that the final order of business
would be HOUSE BILL NO. 201, "An Act relating to municipal
regulation of trapping; and providing for an effective date."
Before the committee was CSHB 201 (CRA).
2:56:45 PM
MEGAN ROWE, staff to Representative Andy Josephson, Alaska State
Legislature, sponsor, informed the committee the purpose of HB
201 is to allow municipalities to regulate trapping for the
specific purpose of preventing injury to persons or property,
including domestic animals. In the process of committee
deliberations on HB 40 - which proposed a state-wide ban on
trapping within two hundred feet of certain public areas -
public testimony and testimony from members of the House
Resources Standing Committee was heard that this is a local
issue better met by "more narrowly tailored ordinances at the
municipal level." Thus, the bill would specifically authorize
municipalities to enact ordinances, and "clear up any kind of
legal confusion over whether they are able to under state law."
REPRESENTATIVE BIRCH expressed his understanding that
communities such as the Matanuska-Susitna (Mat-Su) Borough and
the Municipality of Anchorage are establishing laws, and
questioned whether there was any confusion, or a need for more
legislation.
MS. ROWE explained the confusion stems from arguments that the
state has plenary control over the management of game, which is
a principle derived from the state constitution and in Title 29,
which specifies municipalities can only indirectly regulate
game. In fact, testimony before the House Community and
Regional Affairs Standing Committee (CRA) presented by the
Department of Law advised municipalities should not regulate
trapping. The bill would prevent the state from challenging
municipalities' regulations related to trapping. For example,
the Municipality of Skagway has disallowed trapping within its
boundaries; however, the Board of Game (BOG), Alaska Department
of Fish & Game, allows trapping there, which has created a
conflict between the municipality and BOG. She restated if a
municipality seeks to regulate trapping for the health and
safety of its residents, and to prevent damage to animals, the
bill would allow it to do so, without a challenge to its
regulations by the state. Ms. Rowe said about 15 municipalities
already have related regulations that require clarifying
legislation.
REPRESENTATIVE BIRCH restated his understanding that regulations
in the Matanuska-Susitna Borough and the Municipality of
Anchorage are serving their purpose.
MS. ROWE referred to documents included in the committee packet
[a memorandum addressed to the Matanuska-Susitna (Mat-Su)
Borough mayor and assembly members from the Mat-Su Borough
Attorney's Office, dated 12/17/13, and a document addressed to
Lynn Mitchell CPA, from the Law Office of Kneeland Taylor, dated
2/3/17] and said the documents outline two different sides of
the issue. She also directed attention to a document included
in the committee packet [addressed to the Alaska boards of
fisheries and game, ADFG, from the Office of the Attorney
General, File No. 166-486-82, dated 11/19/82] which stated
municipalities cannot regulate game and trapping directly, but
can do so with a merely incidental effect. She concluded the
question remains undefined. The bill would ensure that when
municipalities are regulating for the purposes of health and
safety, and protecting property, the regulations would be
constitutional under state law.
3:02:36 PM
CO-CHAIR JOSEPHSON clarified that eight or nine local
governments have attempted to regulate trapping, and the bill
limits authority to "within the borders that ... represent that
municipality, trapping could be regulated." He posited that a
pro-trapping stance may be: Banning trapping in a borough over
the size of some states is "unthinkable." However, in the case
of public safety and competing interests, there may be a local
desire to regulate trapping in some way.
REPRESENTATIVE PARISH opined the bill would prevent eventual
litigation between the state and municipalities in this regard.
MS. ROWE agreed, although she questioned whether the state would
have reason to challenge ordinances unless a greater conflict
occurs.
CO-CHAIR JOSEPHSON advised the bill is very flexible in that
local governments can exempt trappers as well. He recalled CRA
added subsection (d) to the bill [on page 2, lines 13-15,] which
read:
(d) A municipality may not enact an ordinance
under this section that eliminates reasonable
opportunities for subsistence trapping of game within
its boundaries.
REPRESENTATIVE TALERICO expressed his belief that the Division
of Wildlife Troopers, DPS, does not enforce municipal
regulations.
3:06:51 PM
BERNARD CHASTAIN, Major, Deputy Director, Headquarters, Division
of Alaska Wildlife Troopers, DPS, responded the Alaska Wildlife
Troopers do not enforce municipal or borough code, therefore
enforcement of any regulations created by municipalities under
the proposed bill would have to be done by police agencies,
borough code enforcement officers, or those given authority to
do so by the municipality or borough.
CO-CHAIR JOSEPHSON concluded an ordinance or regulation would be
enforced as strongly as determined by the funding and the desire
of the local government.
MAJOR CHASTAIN said, "That would be our interpretation of it,
because we do not enforce that regulation. It would be up to
the municipality or the borough to decide what level of
enforcement they want to put on that regulation."
CO-CHAIR JOSEPHSON asked for Major Chastain's opinion about
whether BOG tries to honor and comply with ordinances on this
topic.
MAJOR CHASTAIN advised there are regulations put in place by BOG
that specifically restrict trapping in certain trail areas in
response to proposals brought before BOG.
3:09:51 PM
BRUCE DALE, director, Division of Wildlife Conservation, ADFG,
added BOG looks at every local situation on a case-by-case
basis. [BOG] has "mimicked" or "mirrored" local ordinances, for
example, Anchorage had a certain restriction in place, and BOG
subsequently banned all trapping in the Municipality of
Anchorage. In other areas, BOG has created areas closed to
trapping in the absence of a local ordinance.
[HB 201 was held over.]
3:11:51 PM
ADJOURNMENT
There being no further business before the committee, the House
Resources Standing Committee meeting was adjourned at 3:12 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| AGDC House Resources Committee Presentation 4.14.17.pdf |
HRES 4/14/2017 1:00:00 PM |
AGDC |
| HB201 Supporting Document - Legal Memos re MatSu Trapping 2013.pdf |
HRES 4/14/2017 1:00:00 PM |
HB 201 |