Legislature(2009 - 2010)BUTROVICH 205
04/02/2009 11:30 AM Senate ENERGY
| Audio | Topic |
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| Start | |
| SB135 | |
| SB162 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 135 | TELECONFERENCED | |
| *+ | SB 162 | TELECONFERENCED | |
| + | TELECONFERENCED |
ALASKA STATE LEGISLATURE
SENATE SPECIAL COMMITTEE ON ENERGY
April 2, 2009
11:42 a.m.
MEMBERS PRESENT
Senator Lesil McGuire, Chair
Senator Albert Kookesh
Senator Bill Wielechowski
MEMBERS ABSENT
Senator Lyman Hoffman
Senator Bert Stedman
OTHER LEGISLATORS PRESENT
Senator Joe Thomas
Senator Joe Paskvan
COMMITTEE CALENDAR
SENATE BILL NO. 135
"An Act clarifying the purpose of the Alaska Natural Gas
Development Authority; and relating to definitions of certain
terms in AS 41.41."
HEARD AND HELD
SENATE BILL NO. 162
"An Act relating to a heating fuel energy relief program; and
providing for an effective date."
HEARD AND HELD
PREVIOUS COMMITTEE ACTION
BILL: SB 135
SHORT TITLE: ALASKA NATURAL GAS DEVELOPMENT AUTHORITY
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR
03/02/09 (S) READ THE FIRST TIME - REFERRALS
03/02/09 (S) ENE, RES, FIN
03/19/09 (S) ENE AT 11:00 AM BUTROVICH 205
03/19/09 (S) Scheduled But Not Heard
03/26/09 (S) ENE AT 11:00 AM BUTROVICH 205
03/26/09 (S) Scheduled But Not Heard
04/02/09 (S) ENE AT 11:30 AM BUTROVICH 205
BILL: SB 162
SHORT TITLE: HEATING FUEL ENERGY RELIEF
SPONSOR(s): PASKVAN
03/25/09 (S) READ THE FIRST TIME - REFERRALS
03/25/09 (S) ENE, RES, FIN
04/02/09 (S) ENE AT 11:30 AM BUTROVICH 205
WITNESS REGISTER
JOE BALASH, Special Assistant on Energy and Gas Issues
Governor Palin
State Capital
Juneau, AK
POSITION STATEMENT: Presented SB 135.
HAROLD HEINZE, Executive Director
Alaska Natural Gas Development Authority (ANGDA)
POSITION STATEMENT: supported SB 135.
PAUL FUHS, representing himself
Juneau, AK
POSITION STATEMENT: Supported SB 135.
MR. OSTNESS, representing himself
Cordova, AK
POSITION STATEMENT: Technical difficulties - indiscernible
testimony.
BILL WARREN, representing himself
Nikiski, AK
POSITION STATEMENT: Supported SB 135.
SENATOR PASKVAN
State Capital Bldg.
Juneau, AK
POSITION STATEMENT: Sponsor of SB 162.
SCOTT RUBY, Manager
Division of Operations
Department of Commerce, Community and Economic Development
POSTIION STATEMENT: Said he was available to answer questions
on SB 162.
ACTION NARRATIVE
11:42:43 AM
CHAIR LESIL MCGUIRE called the Senate Special Committee on
Energy meeting to order at 11:42 a.m. Present at the call to
order were Senators Wielechowski, Kookesh and McGuire.
SB 135-ALASKA NATURAL GAS DEVELOPMENT AUTHORITY
11:43:34 AM
CHAIR MCGUIRE announced SB 135 to be up for consideration.
JOE BALASH, Special Assistant to Governor Palin on Energy and
Gas Issues, said SB 135 is one of three elements in the
Governor's three-part plan to initiate progress and work on an
in-state gas delivery system, specifically looking at what has
been traditionally referred to as a "bullet line." This bill
fits in with the other two elements and addresses what is the
most logical vehicle for pursuing development of natural gas in
Alaska through the Alaska Natural Gas Development Authority
(ANGDA).
ANGDA was created by voter initiative in 2002 and has some very
specific assignments to carry out as conceived by its drafters.
That work was fulfilled; and now ANGDA has begun looking at
other options for bringing gas to market to Alaskans engaging in
a number of different projects and efforts on sort of a forward
looking basis, but in a manner not entirely consistent with the
statutory direction provided in AS 41.
MR. BALASH said the bill is fairly straight-forward and makes
sure that ANGDA can look at gas supply options other than the
North Slope and can look at delivery options other than just to
Southcentral or to tidewater to market. He said this is
consistent with the Governor's vision that Alaska's natural gas
resources be made available to and usable by each and every
Alaskan wherever it makes sense.
11:46:09 AM
He returned to two questions that Senator Wielechowski had asked
at the last hearing on one of the other companion bills. He had
asked whether or not the administration had asked for a change
in leadership at ANGDA. He committed to going back and asking
the questions and while he knew of the conversations, he wasn't
a party to them. The discussion in those conversations did touch
on the leadership of the Authority, the corporation and its
employees. Options were discussed, but there was no pressure on
the chair to make a particular change.
SENATOR WIELECHOWSKI said he appreciated the answers, and asked
who was a party to the conversations.
MR. BALASH replied those occurred a few weeks ago between the
Governor, her chief of staff, and Scott Hayward, the chair.
SENATOR WIELECHOWSKI asked if anyone asked for or suggested
resignations from ANGDA.
MR. BALASH replied that it wasn't described in that manner. Some
discussions were had on how to make some transitions. They
talked about the future of ANGDA, the work that it could be
doing, the direction the Governor wanted to go, looking at the
options available for instate gas, and organizational changes.
SENATOR WIELECHOWSKI said since this is an ANGDA bill and they
will be talking about where it is going to go, he wanted to ask
what the administration's concerns with it are.
MR. BALASH responded that fits in with Senator Wielechowski's
other question at the last meeting. The question was whether or
not any contracts for ANGDA had been denied by the
administration, and the answer is yes, one that was to pursue
the initial feasibility of a pipeline going into western Alaska.
The reason it was denied is that the appropriation authority
cited in the contract document cited an appropriation in last
year's capital budget, but there was no mention of delivery to
western Alaska in the discussion there. It was all about just
Cook Inlet and Prince William Sound destinations. The concern
was that there wasn't the proper appropriation in place to fund
that kind of work. That is what invited the question of what
other things ANGDA has been doing. The legislature broadened the
scope of the Authority to include not just Prince William Sound,
but also Cook Inlet, as a potential destination and sight of an
LNG facility.
11:51:19 AM
ANGDA has been investigating delivery of propane to other parts
of the state, namely coastal areas and locations along the river
system. Propane could be a better alternative, and a more
efficient alternative in many villages. While that work is
commendable, it is not explicitly clear that it is something the
statute authorizes.
SENATOR WIELECHOWSKI asked if this bill addresses the
administration's concern with the direction of ANGDA and
clarifies where they think it needs to be.
MR. BALASH replied this language provides the kind of
flexibility ANGDA needs to have to reach the Governor's vision
for an in-state natural gas pipeline to Southcentral. However,
that is a limited and limiting role that the administration
would like to expand. They want to see what the options and
opportunities are to deliver gas to other parts of the state.
SENATOR WIELECHOWSKI asked if the Governor thinks ANGDA needs
leadership changes.
MR. BALASH responded that they have gone through some difficult
experiences over the last year in terms of trying to get
cooperative efforts between parties. It's possible a new face is
needed.
SENATOR WIELECHOWSKI said he understands that the board of
directors of ANGDA is the final arbiter of who leads ANGDA, and
the Governor gets to appoint those people. Is that accurate?
MR. BALASH said that is correct. The corporation is lead by a
seven-member board of directors and the Governor appointments
them. Those appointments are not subject to legislative
confirmation, because it's not a quasi-judicial entity.
CHAIR MCGUIRE said there has been a lot of discussion about what
people were voting for when they voted for ANGDA, but the ballot
language said that the Authority would be created for the
purpose of developing, constructing and managing and operating a
gas pipeline from the North Slope of Alaska and a spur line to
Southcentral Alaska natural gas distribution grid. Her question
is more philosophical. Some people say they envisioned a quasi-
governmental entity that would live on into existence and "have
all these other tentacles to it," and some say "really what the
people were doing is they were voting because they wanted to see
a natural gas pipeline and they have wanted one for many years -
and the frustration that they had could be exercised at the
ballot." So, what does this governor think the people were
saying in this vote and how is that not consistent with an
expansion of ANGDA?
11:58:24 AM
MR. BALASH replied that the Governor voted for the initiative
and believes in the vision. He hasn't talked with her about what
the voters were thinking. When you look at the voter returns,
everyone in every district voted for that initiative.
11:59:39 AM
CHAIR MCGUIRE asked if voters today would vote for a ballot
proposition that reflects the language contained in SB 135.
MR. BALASH said he couldn't speculate as a member of the
administration, but as someone who has been around politics for
12 years, he would expect it to pass by a significant margin.
Voters don't get to chose to amend language; they just get a
"yes" or a "no" option at the ballot box.
CHAIR MCGUIRE remarked that this Authority was created by a vote
of the people and here the legislature sits expanding it - more
dollars, more positions, and more bureaucracy - all of the
things that come with agencies. It's always important to
remember the reason behind its original creation. Where in the
next decade does he see ANGDA fitting in, in terms of the need
for a gas pipeline and affordable energy to Alaska including
rural Alaska and Southeast Alaska?
MR. BALASH answered that the best way to identify where it fits
in is by going back to its title - the Natural Gas Development
Authority with emphasis on "development." He envisioned that it
would continue in the development sphere - the early dollars for
identifying, estimating the cost of, and planning the work that
would then be picked up by a private entity to take on as an
investment that makes sense.
12:03:50 PM
In terms of a bureaucracy, he wouldn't characterize the
administration's vision of ANGDA as being some new a super
agency whatsoever. But with regard to the opportunities for
natural gas development in the state use of the natural gas at
the most efficient and economic level, the administration
continues to maintain that the best way to make gas available to
Alaskans is through a large-diameter pipeline that helps secure
both delivery of gas at the most efficient way possible, but
also would help stabilize and secure the state's fiscal future.
The challenges they face in the cost and availability of energy
all around Alaska are significant to say the least. The
challenges presented in each nook and cranny are different and
have to be solved in different ways. And so coming back around
the identification of the AHFC and the other pieces of state
government, it is clear that they need to work on identifying a
single point of contact, and right now AHFC and AEA programs in
the Department of Commerce and Economic Development (DCCED) and
the Department of Health and Social Services all have something
to do with energy. So, they have sought to revitalize the Alaska
Energy Authority by appointing Mr. Haagenson last year as the
executive director. For years the AIDEA and AEA executive
director were one and the same.
CHAIR MCGUIRE said she is envisioning an energy organizational
chart later in the interim because she thinks it would be good
to see how all the state and federal organizations and efforts
fit together.
12:07:55 PM
SENATOR THOMAS said that seeing how departments are coordinating
would be useful for all the departments of government "because
there's a lot of duplication." He said the bill appears to be an
expansion of what takes place and markets, but he sees it as a
good thing, because it is more practical. It actually focuses
things a little more on what they are attempting to do with the
creation of ANGDA. He thought they were headed in the right
direction.
SENATOR WIELECHOWSKI said his statement that the administration
still believes that our best prospect for in-state gas is
through a large-diameter pipe.
MR. BALASH answered that is correct.
12:12:10 PM
CHAIR WIELECHOWSKI asked then, why are they hiring Harry Noah
and saying that they want to build the bullet line, not a large-
diameter line.
MR. BALASH replied that the nature of the work that Mr. Noah is
doing is not with a predetermined outcome. They know there is
some need for gas delivery from outside of Cook Inlet into the
Southcentral market and it could be a time period before a
large-diameter pipeline is operating. There are uncertainties
about when that pipeline will happen and if there is a need to
fill the gap in the meantime, they need to know what the options
are. The lead time for a small-diameter pipeline, a bullet
pipeline, is significant. People have been talking about the
magnitude of everything in Alaska and have been talking about a
1,700-mile, 48-inch pipeline for so long that the idea of an
800-mile pipeline that is 20-24 inches seems small, but in fact,
it's world class. It would be one of the largest developments in
the world. So the lead time involved in identifying that
particular kind of project is significant enough that if they
don't start working on it now, it may be too late to consider
that as an option in 2011 or 2012 when the state will know what
its choices really are. It is maintaining the state's options
without having a predetermined outcome in mind.
12:12:59 PM
SENATOR WIELECHOWSKI said he has based a lot of his decisions on
this issue on statements that were made by the administration
and TransCanada, and all the statements he has heard are that
the large-scale line is scheduled to be completed in 2018. Today
is the first day he is hearing the administration say there are
uncertainties about when the large-scale line will happen. Do
you have new information that the large-scale line will not be
ready in 2018?
MR. BALASH answered when the two commissioners of the DNR and
DOR reviewed the AGIA application submitted by TransCanada last
year, the proposed schedule for completion and first gas in 2018
was determined to be achievable, yet aggressive. They prepared a
cost/schedule curves that weighted the probabilities of various
things happening on the critical path, and he didn't recall
whether the 50 percent case occurred in 2020 or 2021, but he
knows it was not 2018. The administration still thinks that is
achievable and possible if everything goes right, but if, for
example, FERC certification or any of the NPA and NEB
certifications are delayed - regulatory and logistical things
could slow the project. One of the major concerns their
technical team had was in the ability to deliver the components
of the GTP on a sealift vessel due to the constraints in the
seasonal opportunity for delivery up to Prudhoe Bay. If you
don't make the barge, you don't lose a day for a day, you lose
six or nine months. So there are logistical challenges on top of
the regulatory challenges. So, it's not that they have new
information; they just have recognized that you set a schedule,
you work it, but the exact date that gas is delivered is
"uncertain."
If Southcentral Alaska is going to have all the gas that it
needs until 2016, that presents a certain set of challenges. If
it has all the gas it needs until 2022, it's a different
question fundamentally. A lot of the work that Mr. Noah has
identified as being necessary over the next year is to identify
what Cook Inlet already has in its known fields. That is work
the Division of Oil and Gas is working on. They are also working
on assessments of what it would cost to explore for, find, and
develop new fields in Cook Inlet - and what that cost ultimately
would be and what sort of schedule might be possible.
12:16:42 PM
The needs of Southcentral have to be identified before a supply
of gas can be found that would go through a pipeline that leads
to Southcentral, which is a constrained market, not a liquid
market. Southcentral has a smaller market that gets tied up
contractually for periods of time, and so the opportunity to
place gas is a bit of a challenge. Nevertheless, they think that
the reserves in Southcentral are able to produce for some time;
they just need to understand at what rate they can produce and
how that meets up with daily demand, particularly the winter
peaks.
SENATOR KOOKESH said he would appreciate it if they could spend
their time on the bill and the changes that are in it.
12:19:43 PM
HAROLD HEINZE, Executive Director, Alaska Natural Gas
Development Authority (ANGDA), supported SB 135. He wanted to
amplify a few things that Mr. Balash touched on. Number one
ANGDA didn't come into existence until 2003, and one of the
first things they did was draw a diagram that illustrated the
benefits to Alaskans. ANGDA was formed out of frustration over
two things; the fact that nothing was happening on the pipeline,
and two, even if something did happen on the pipeline, most of
the people in the state felt it would not necessarily benefit
them. So they drew a chart that identified what they saw as the
potential benefits that an ANGDA as a public corporation of the
state could deliver to the citizens. That chart hasn't been
changed. It's not a simple chart; it's a big pipeline system
with gas to electric power, barging LPG fuel on the Yukon and
local gas distribution to Fairbanks, and a spur line from
Glennallen into Cook Inlet and maybe petrochemicals. The reason
those are on the chart is they thought that NS gas was not a
simple issue of going from point A to point B for instate use.
It was a system; and the ballot measure language describes the
design and construction of "the pipeline system". It didn't say
"of the pipeline."
MR. HEINZE said they constantly ask themselves where the best
opportunities are for ANGDA to contribute to the benefit of the
people and where can they offer solutions for the biggest gas
issues. They have found that one of their roles is to keep
options open.
MR. HEINZE said when you go to bankers in New York, you have to
have clarity. This bill provides clarity. The board's Authority
is clear in statute. Article 8 of the Constitution specifies the
legislature as the body that makes policy on that resource
development. In that case, he welcomed legislative interaction
through this bill. He urged them to keep all the options
available that provide benefits to Alaskans.
12:26:15 PM
SENATOR WIELECHOWSKI asked if he sees this changing his ability
to work with Enstar on developing a bullet line.
MR. HEINZE replied that ANGDA would release the final version of
a report on public/private partnerships next Wednesday. Last
July they were challenged to see if they could work in a
public/private partnership. It turns out that there probably
isn't a strong basis for either of them to do that. Enstar
should be allowed to move forward with whatever it wants to do.
The challenge for ANGDA is to develop financing ideas to help
them achieve a public benefit in the long run.
12:29:15 PM
PAUL FUHS, representing himself, supported SB 135. He is one of
the original drafters of the initiative and it was an oversight
to not include the other regions. They didn't intend to exclude
anyone. He said the Red Dog and Donlin Creek mines' biggest
issue is getting fuel, and the idea is that they could be anchor
tenants for natural gas. Steven Haagenson considered this and
said his main mission is really electricity, but based on Enstar
numbers he figured that the gas tariff would be about $10 per
thousand cubic feet. Right now they are paying about $30 mcf for
oil. When he helped write the initiative he wanted ANGDA to have
the power to make something happen, but to also protect the
consumer. But if ANGDA participates in something and provides
tax exempt financing and savings to a developer, they are going
to demand that be passed on to the consumer. "It's only right
that that be done if they are going to step in." If the company
they are working with wants to put all that money in their
pocket rather than give it to the consumer, then there is no
basis for a public/private partnership."
SENATOR KOOKESH asked if he has heard from anyone else about
supporting it.
MR. FUHS replied he thought everyone would support it.
12:33:47 PM
MR. OSTNESS, representing himself, Cordova, [technical
difficulties - indiscernible testimony.].
12:35:48 PM
BILL WARREN, representing himself, Nikiski, supported SB 135. He
wants a pipeline and since voting for the ANGDA initiative he
thinks "we've got mired down in a lot of politics," although he
thinks that ANGDA has done a "sterling job." Renewables will
compliment a gas line, but those will take a while to phase in.
He also strongly supported state oversight of in-state natural
gas.
CHAIR MCGUIRE said SB 135 would be held for further
consideration.
SB 162-HEATING FUEL ENERGY RELIEF
12:41:32 PM
CHAIR MCGUIRE announced SB 162 to be up for consideration.
12:42:48 PM
SENATOR PASKVAN, sponsor of SB 162, said this is a short term
solution for a very serious issue in Interior Alaska, although
this bill would apply to rural Alaska and to some extent
Southeast and Southcentral Alaska. He explained that
approximately 80 percent of rural Alaska and Interior Alaska use
heating oil as their primary source of heat. He knows this
legislation needs more work and he asked for their assistance.
SENATOR PASKVAN said Alaskans who rely on heating oil to keep
warm during the winter need a specific short-term solution in
addition to the many other promising long-term solutions that
are being considered. SB 162 is a short-term solution; it would
require the State of Alaska to offset heating costs over
$2.50/gallon when the price of a barrel of crude rises to the
point where the state is enjoying a budget surplus. The state
would pay the balance directly to the home heating distributors.
SENATOR PASKVAN said having a short-term solution in place,
would free people to come up with a long-term solution, which
will restore optimism about our economic future, protect
families and businesses and allow them to concentrate on
renewable and sustainable energy solutions for all of Alaska.
He said that SB 162 is easily administered. The dealers of
heating oil as part of their current reporting requirements
already report to the State of Alaska in a monthly form a
breakdown of the quantities of the various petroleum products
that they sell and that does include the heating oil
classification.
12:45:32 PM
He said the quantities of heating oil are verifiable and
objectively determinable. SB 162 does not create a bureaucracy
of paperwork or a massive government employment program to
operate. And rather than distributing checks or debit cards to
tens of thousands of individuals, the state would make a payment
directly oil distributors.
SB 162 requires the consumer price of heating oil to increase
each of the next three years to reinforce the need of Alaskans
to conserve and to switch to alternative energies or to find the
long-term solutions. His oil distributors won't go to a home
unless they were delivering at least 100 gallons; if the
consumer didn't have $450, there would be no delivery. People
were forced to go to the gas station with a five gallon gas can
to get diesel to try to make it through a minus-50 degree night.
Many Fairbanks people were on the verge of freezing in the dark
because of the $4.50/gallon price. And when winter ended, the
distributors' accounts receivable levels were at unsustainably
high amounts. If prices had not gone down, they would have not
been able to enter this last winter by providing any credit to
the consumers, because they couldn't afford losing their
business. He said the average 1,400 square ft. home cost about
$5,000/year to heat as compared to about $1,200 if the person
was on natural gas. It's also important to understand that in
Interior Alaska the per capita income is 20 percent below the
national average. The entire Interior Alaska could not afford to
stay in the situation for another year.
SCOTT RUBY, Manager, Division of Operations, Department of
Commerce, Community and Economic Development, said he was
available to answer questions on SB 162.
CHAIR MCGUIRE said she liked the approach in this bill rather
than money being sent out as happened last year, and said she
would work with him during the Interim on refining the language.
SB 162 was held in committee.
12:51:40 PM
Finding no further business to come before the committee, Chair
McGuire adjourned the meeting at 12:51 p.m.
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