Legislature(2015 - 2016)BUTROVICH 205
11/02/2015 09:00 AM Senate FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| SB3001 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB3001 | TELECONFERENCED | |
SENATE FINANCE COMMITTEE
THIRD SPECIAL SESSION
November 2, 2015
9:51 a.m.
9:51:48 AM
CALL TO ORDER
Co-Chair MacKinnon called the Senate Finance Committee
meeting to order at 9:51 a.m.
MEMBERS PRESENT
Senator Anna MacKinnon, Co-Chair
Senator Pete Kelly, Co-Chair
Senator Peter Micciche, Vice-Chair
Senator Click Bishop
Senator Mike Dunleavy
Senator Lyman Hoffman
Senator Donny Olson
MEMBERS ABSENT
None
ALSO PRESENT
Laura Pierre, Staff, Senator Anna MacKinnon; Mark Myers,
Commissioner, Department of Natural Resources; Jerry
Burnett, Deputy Commissioner, Treasury Division, Department
of Revenue; Bruce Tangeman, Vice President, Administration
and Finance, Alaska Gasline Development Corporation; Pat
Pitney, Director, Office of Management and Budget, Office
of the Governor; Dave Blaisdell, Director, Administrative
Services Division, Department of Law; Craig Richards,
Attorney General, Department of Law; Representative Lora
Reinbold.
PRESENT VIA TELECONFERENCE
Bruce Tangeman, Vice President, Administration and Finance,
Alaska Gasline Development Corporation
SUMMARY
SB 3001 APPROP: LNG PROJECT & FUND/AGDC/SUPP.
CSSB 3001(FIN) was REPORTED out of committee with
a "do pass" recommendation.
SENATE BILL NO. 3001
"An Act making supplemental appropriations; making
appropriations to capitalize funds; making
appropriations to the general fund from the budget
reserve fund (art. IX, sec. 17, Constitution of the
State of Alaska) in accordance with sec. 12(c), ch. 1,
SSSLA 2015; and providing for an effective date."
9:52:45 AM
Co-Chair MacKinnon relayed that the committee would
consider a committee substitute (CS) that included a
proposal to buyout TransCanada from the AKLNG project.
Additionally, the CS supported a new work program and
budget for the state's partners through FY 16, and included
a supplemental appropriation request of slightly over $13
million. She detailed that $10 million would go to the
Department of Law (DOL) and $3 million would be divided
between the Department of Revenue (DOR) and the Department
of Natural Resources (DNR).
Co-Chair Kelly MOVED to ADOPT the CS for SB 3001, Work
Draft 29-GS3812\I (Wallace/Martin, 11/1/15).
Co-Chair MacKinnon OBJECTED for discussion.
9:54:05 AM
LAURA PIERRE, STAFF, SENATOR ANNA MACKINNON, discussed the
explanation of the changes for the work draft (copy on
file):
Section 1 (b) the company name for TransCanada was
revised to reflect the appropriate entity TransCanada
Alaska Midstream Partnership
Section 2 Page 1, line 13 - the Department of Natural
Resources was inserted following the word assist
Page 2, line 2 - the following language was inserted:
Money may be expended from the appropriation made in
this section only for work completed during the fiscal
year ending June 30, 2016
Section 3 The amount was revised from $2,126,000 to
$1,849,500
Ms. Pierre elaborated that the revision in Section 3 had
been at the request of the administration. She explained
that the administration had looked at the request further
and had decided it did not need as much money as originally
determined. She continued to address the changes in the CS:
Section 3 Page 2, line 9 - The company name for
TransCanada was revised to reflect the appropriate
entity TransCanada Alaska Midstream Partnership
Page 2, line 10 - the following language was inserted:
Money may be expended from the appropriation made in
this section only for work completed during the fiscal
year ending June 30, 2016
Section 4 The amount was revised from $1,381,000 to
$1,045,500
Page 2, line 18 - the following language was inserted:
Money may be expended from the appropriation made in
this section only for work completed during the fiscal
year ending June 30, 2016
Section 5 The company name for TransCanada was revised
to reflect the appropriate entity TransCanada Alaska
Midstream Partnership
Section 6 No changes
Section 7 No changes
Section 8 Sections 2-4 were added to the contingency
clause
State of Alaska was removed
The company names were revised to reflect the
appropriate entity: ExxonMobil Alaska LNG LLC,
ConocoPhillips Alaska LNG Company, and BP Alaska LNG
LLC
Ms. Pierre expounded that Section 8 related to contingency
language that had been revised to include Sections 2
through 4; the language had originally only applied to
Section 5(b). She explained that the agencies would not
receive the appropriation unless the work program and
budget were adopted.
9:57:22 AM
Vice-Chair Micciche asked about the reason for the decrease
in the figure for DOR in Section 4. Ms. Pierre explained
that the administration had looked at the request further
and had decided a lower amount was more appropriate.
Co-Chair MacKinnon WITHDREW her OBJECTION. There being NO
further OBJECTION, Work Draft 29-GS3812\I was ADOPTED.
Co-Chair MacKinnon asked representatives from DOR and DNR
to address the rationale for the decrease in the
appropriation requests [in Sections 3 and 4 of the CS].
MARK MYERS, COMMISSIONER, DEPARTMENT OF NATURAL RESOURCES,
explained that the reduction in the request from DNR
related to work being conducted by the Division of Oil and
Gas and the Commissioner's Office to support the issue. He
elaborated that Deputy Commissioner Marty Rutherford's
full-time job was not the gasline, but she had been
spending 50 percent of her time on the subject. He
explained that the department would reallocate funds within
the department to manage Ms. Rutherford's costs and
workload associated with the subject. Additionally, the
department had many staff working on the geological and
geophysical aspects (looking at the gas, watching the gas
supply, and negotiating the flattening of royalty rates,
etcetera). He believed there was enough support in the
division to move workloads around. The two commercial
analyst positions spent that were 70 and 80 percent time
gasline were not doing a significant amount of key work
with royalty reopeners, lease sale terms, and oil sales
that needed to be done within the upcoming six months;
therefore, the department was looking to backfill the
positions. The reductions had been to backfill the
commercial analyst positions (the vacant positions had
already existed) and to manage the workload with existing
staff for the other positions within the Commissioner's
Office and the geological and geophysical work.
Co-Chair MacKinnon asked if Commissioner Myers had reviewed
the CS and whether it was satisfactory to the department.
Commissioner Myers replied in the affirmative. He believed
she had done a great job considering the resource needs of
the department. He added that DNR was working as a team
with DOL and DOR. He relayed that many decisions were made
in consultation with DOR because its tax gas was going in.
He felt strong in the partnership and that the bill
included the adequate resources needed for the fiscal year
to work hard to get to successful negotiations.
10:00:50 AM
Co-Chair Kelly referred to talk about the gasline getting
thrown into the budget discussion. He reassured the public
that from the Senate's point of view it was necessary to
keep the two issues separate. So as the department brought
a supplemental appropriation before the Senate Finance
Committee it would not get significant push back, though
the committee did not like to play games with raising
supplemental requests one year and dropping them the next.
He stated that "nothing like that is going on" and believed
there was significant support from the committee to ensure
that the gasline was separate from some of the budget
problems.
Commissioner Myers relayed that DNR saw the gasline as a
critical effort. He stated it was a critical time to
negotiate the project; therefore, the department had asked
for resources to aid in a razor focus on getting through
the complex commercial negotiation stage of the gasline at
present. He elaborated that the resources meant the
department could bring professional teams to the table to
meet goals and to protect the state's interest. He was
comfortable that the department was adequately staffed.
Previously he had been pulling resources off of other areas
to focus on the gasline, which had been straining and
challenging; therefore, the increment would enable the
department's gas team to focus on the particular effort for
the upcoming six months.
Co-Chair Kelly agreed. He pointed out that despite the
increase to the budget the committee was not objecting to
the increment. He stated it was necessary to keep the
conversations about the budget and gasline separate. He
acknowledged that the state could only do the project it
could afford, but it could not pull the project down into a
"nickel and dime" budget fight. He clarified his
understanding that the increment was not small, but in
relation to the larger project he believed it was not
something to get too carried away with.
10:03:17 AM
JERRY BURNETT, DEPUTY COMMISSIONER, TREASURY DIVISION,
DEPARTMENT OF REVENUE, echoed the comments made by
Commissioner Myers. He explained that the department's
audit masters and commercial analysts that that had been
working on the project needed to get back to their core
work at the Tax Division. The department was able to
reprioritize the work of the deputy commissioner and others
in its economic research group in order to make the
reduction. He explained that the department wanted to
ensure that the Tax Division's core functions were taken
care of.
Co-Chair MacKinnon addressed that the legislature in
consultation with DOR had attempted to reduce the
department's budget in the past session. She stated that
the conversations had been done in consultation and she did
not believe DOR had been hit with anything unexpected. She
communicated that in the coming session the legislature
would be looking to DOR for leadership in understanding how
to ensure the state was investing Alaska's money. She
stated that the supplemental budget for DOR was more
difficult than it was for DNR. She remarked that it had not
been a surprise that the positions were not there.
Mr. Burnett shared that DOR had worked very closely with
Co-Chair MacKinnon in the past. He explained that there had
been an appropriation to DNR that was reduced, which
contained money that would have been allocated to DOR
through an RSA [Reimbursable Services Agreement]. He
elaborated that the DOR budget had been built on the
assumption that the funds would be received; therefore, it
had been a surprise when the funds had not materialized.
Additionally, the timing on the project had gone longer
than anticipated by the department.
Co-Chair MacKinnon understood. She explained that the
legislature was working to keep an eye on both the
opportunity for the AKLNG project and the reality of the
state's current fiscal situation.
Co-Chair MacKinnon noted that the attorney general and
others were on their way in from the airport. She remarked
that Deputy Commissioner Rutherford had joined the meeting.
She asked Bruce Tangeman [Vice President, Administration
and Finance, Alaska Gasline Development Corporation] to
speak to the CS and address any concerns the Alaska Gasline
Development Corporation (AGDC) may have.
10:07:41 AM
BRUCE TANGEMAN, VICE PRESIDENT, ADMINISTRATION AND FINANCE,
ALASKA GASLINE DEVELOPMENT CORPORATION (via
teleconference), communicated that the language in the CS
allowed AGDC to fully represent the state in completing
pre-FEED [Front End Engineering and Design] once the work
program and budget were approved.
Co-Chair MacKinnon noted that if Daniel Fauske, President,
Alaska Gasline Development Corporation made it to the
meeting the committee would ask him the same question. She
identified a representative from TransCanada in the
audience and gave them an opportunity to testify with any
feedback or concerns about the CS. She indicated the
representative shook their head in response. She was
confident the response meant that the CS accurately
described the LLC and the transfer the committee would
discuss. She asked Office of Management and Budget Director
Pat Pitney to address the committee. She explained that the
changes in the CS were technical to ensure the appropriate
entities were included in the document as well as in
response to some concerns from the House.
PAT PITNEY, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET,
OFFICE OF THE GOVERNOR, addressed the addition in Section 2
to assist DNR through consultation with Commissioner Myers.
She communicated that because of his role representing the
entire project, the commissioner viewed any work DOL
conducted on behalf of DOR and AGDC as "in assistance" of
the overall agreement that DNR was also responsible for.
She indicated that the administration could manage through
the change. She clarified that the contracts would support
DOR, DNR, and AGDC. She added that legal resources would
also be available to the Department of Transportation and
Public Facilities and Department of Labor and Workforce
Development if needed, which DNR believe stayed within the
confines of the language. Additionally, the administration
believed that with the letters in-hand from producers, the
contingency language could be worked with.
10:11:49 AM
Co-Chair MacKinnon concurred that the goal of placing DNR
specifically in Section 2 for DOL was the legislature's
attempt to protect the wellhead value and to ensure that
what the state was doing would protect wellhead value. She
understood that DNR may authorize law work for other areas
of state government. She relayed that from the perspective
of the House, the work should be done consistent with SB
138 [legislation passed in 2014 related to a gas pipeline,
AGDC, and oil and gas production tax], from and through
DNR. She asked if her statements were accurate.
Ms. Pitney replied in the affirmative.
Co-Chair MacKinnon asked DOL to address the committee. She
had hoped to hear from the attorney general, but understood
that he was in route [from the airport]. She asked if DOL
was comfortable with the CS.
DAVE BLAISDELL, DIRECTOR, ADMINISTRATIVE SERVICES DIVISION,
DEPARTMENT OF LAW, replied in the affirmative. He relayed
that the department had reviewed the CS and had spoken with
other executive branch agencies.
Co-Chair MacKinnon remarked that she would invite Mr.
Fauske and the attorney general to speak if they arrived
during the meeting.
Senator Dunleavy requested time to review the changes to
the legislation.
10:14:40 AM
AT EASE
10:23:05 AM
RECONVENED
Co-Chair MacKinnon invited the attorney general to address
the committee. She communicated that Mr. Blaisdell had
testified that DOL was comfortable with the CS. She
explained that the CS included some technical changes and
some modified language in response to interest from the
House. She asked if the attorney general had reviewed the
CS. She relayed the committee's interest in understanding
any potential concerns from the department.
CRAIG RICHARDS, ATTORNEY GENERAL, DEPARTMENT OF LAW,
replied that he had just received a copy of the CS. From
his perspective, there were no problematic issues. He
believed the only component DOL had been concerned about
was Section 2 that appropriated the money. He read from
Section 2: "...and to provide legal and regulatory support
for state participation in the Alaska liquefied natural gas
project..." He believed the phrase meant that the funds
could be used for state agency support other than DNR.
Co-Chair MacKinnon replied that Ms. Pitney had confirmed
that the funds could be used for state agency support
outside of DNR. She understood that under the structure of
SB 138 that DNR had the responsibility to protect the
wellhead and would absolutely need support from other state
agencies to do so. She added that the money would feed
through DNR so other state agencies would have access to
the money.
Attorney General Richards replied that he did not believe
there was any issue.
Senator Olson thought the CS was "polished" and considered
it a good piece of legislation. He believed the departments
had done an excellent job honing down the financial
requests to the bare minimum needed. He encouraged the
passage of the legislation.
10:26:51 AM
Vice-Chair Micciche thanked Co-Chair MacKinnon for her
efforts in polishing the bill. He believed the bill
clarified and assigned roles and responsibilities in a more
precise way. He noted that DNR was allowed to protect the
wellhead value under the legislation. He believed there
were still some outstanding issues to work on. For example,
AGDC would be working on third-party access and expansion
agreements. He opined that DOL's role required additional
evaluation. He appreciated TransCanada's agreement to leave
employees (secondees) in place for a smooth transition,
which he believed was extremely important. He remarked that
ultimately the change would increase the value to the
state, while eliminating any outstanding question about
liability under the Alaska Gasline Inducement Act (AGIA).
He thought the legislation had the potential to improve
internal alignment, which he believed the committee had
identified as "somewhat lacking." He observed that the
opportunity would only occur if it was taken seriously. He
believed a focused effort was in order.
Co-Chair MacKinnon replied that it was a team effort. She
recognized Representative Liz Vazquez, Representative Scott
Kawasaki, and Senator Gary Stevens in the audience. She
provided a summary of the CS. She explained that the CS was
a request from the administration to buyout the state's
partner TransCanada. She furthered that in the buyout the
administration had presented an upside equity position that
was possible with "a little bit additional risk and cash
call for the State of Alaska." She relayed that the state's
analysts saw the issue slightly more conservatively than
the state's analyst Black and Veatch, but it appeared that
there was upside for the state to put more money down. She
agreed with the assertion that there was better alignment
in the state's interest related to voting and it was
possible the state may see some decisions differently than
TransCanada. She relayed that the state was very interested
in third-party access and the ability to expand the
pipeline in the instance that additional resources were
located somewhere along the 800-mile pipeline transition
route.
Co-Chair MacKinnon continued that the bill also contained a
work plan with a slightly expanded scope that had been
agreed to by the state's partners. The administration had
addressed whether a 42-inch pipe versus a 48-inch pipe
would be more advantageous to Alaska in the expansion
conversation and in the activity around providing other
opportunities to find gas in Alaska for the pipeline. She
communicated that the plan was ready for a vote on December
4 [2015] by the state's partners; if the legislation
advanced, there would be four voting partners versus five.
She detailed that Joe Dubler, Vice President and Chief
Financial Officer, AGDC would cast an affirmative vote for
the project on behalf of the state. She relayed that were
two producers the governor had pointed to who were willing
to commit gas to the project (though not necessarily a gas
sales agreement). Additionally, the governor was in the
process of actively negotiating the terms of a withdrawal
agreement.
Co-Chair MacKinnon relayed that the bill contained a third
component in the form of a supplemental request from three
departments. The request had been reduced by the
administration and was slightly under $13 million. She
detailed that $10.1 million would go to DOL to help with
contracts the state would establish to protect its interest
moving forward with the pipeline. She continued that DOR
had testified that significant work was being done to
ensure audits were being completed in other areas of
government outside of the AKLNG project and that additional
funds through a supplemental appropriation were needed. She
agreed with DNR's assertion that the wellhead value should
be protected in DNR; the bill would place the marketing
engine under DNR's control. She encouraged members to
carefully consider that the state was in position it had
not been in before. There was the potential to move a work
program forward where the state would spend $1 to every $3
invested by the other parties. She communicated that the
committee had received emails and phone calls from
constituents concerned with Alaska taking an equity
ownership interest in a project at all. She relayed that
some of the individuals were supportive of buying
TransCanada out, while others were not. She concluded that
the discussion would continue on the Senate floor and in
the House.
Co-Chair MacKinnon acknowledged Representative Lora
Reinbold in the committee room. She thanked legislative
staff for their work during the special session.
10:35:54 AM
Co-Chair Kelly MOVED to report CSSB 3001(FIN) out of
Committee with individual recommendations. There being NO
OBJECTION, it was so ordered.
10:36:24 AM
AT EASE
10:39:25 AM
RECONVENED
Vice-Chair Micciche explained that normally fiscal notes
accompanied legislation; however, appropriations bills
generally did not have a fiscal note.
CSSB 3001(FIN) was REPORTED out of committee with a "do
pass" recommendation.
ADJOURNMENT
10:40:08 AM
The meeting was adjourned at 10:40 a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB 3001 CSSB Version I.PDF |
SFIN 11/2/2015 9:00:00 AM |
SB3001 |
| SB 3001 - CSSB 3001 Explanation of Changes P to I.pdf |
SFIN 11/2/2015 9:00:00 AM |
SB3001 |
| SB 3001 - CSSB 3001Sectional Analysis Version I.pdf |
SFIN 11/2/2015 9:00:00 AM |
SB3001 |