Legislature(2015 - 2016)BUTROVICH 205
11/01/2015 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 1, 2015
9:07 a.m.
9:07:15 AM
CALL TO ORDER
Co-Chair MacKinnon called the Senate Finance Committee
meeting to order at 9:07 a.m.
MEMBERS PRESENT
Senator Anna MacKinnon, Co-Chair
Senator Pete Kelly, Co-Chair
Senator Click Bishop
Senator Mike Dunleavy
Senator Lyman Hoffman
Senator Donny Olson
MEMBERS ABSENT
Senator Peter Micciche, Vice-Chair
ALSO PRESENT
Mark Myers, Commissioner, Department of Natural Resources;
Pat Pitney, Director, Office of Management and Budget,
Office of the Governor; Senator Mia Costello; Senator Cathy
Giessel; Senator Kevin Meyer; Senator Gary Stevens;
Representative Dave Talerico.
PRESENT VIA TELECONFERENCE
Joe Dubler, Vice President and Chief Financial Officer,
Alaska Gasline Development Corporation.
SUMMARY
SB 3001 APPROP: LNG PROJECT & FUND/AGDC/SUPP.
SB 3001 was HEARD and HELD in committee for
further consideration.
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."
9:08:33 AM
Co-Chair MacKinnon discussed that SB 3001 was an
appropriation bill from the administration asking the
legislature to approve a buyout of TransCanada, a current
partner in Alaska's Liquefied Natural Gas (AKLNG) project.
Additionally, the bill would approve a work program that
would expand the project scope and associated dollars. The
bill included a $13 million-plus supplemental appropriation
to the Department of Law ($10 million) and to the
Departments of Revenue and Natural Resources ($3 million).
She relayed that Joe Dubler, Vice President and Chief
Financial Officer, Alaska Gasline Development Corporation
(AGDC) was available for questions via teleconference. She
shared that Daniel Fauske [President, Alaska Gasline
Development Corporation] would be available to speak
directly with committee members prior to a vote on the
Senate floor. She discussed the agenda for the following
day and relayed that a new committee substitute (CS) would
be introduced. She detailed that the CS would be technical
and would ensure the appropriate partners and dollar
amounts were listed. She planned to follow up with
Legislative Legal Services and Craig Richards, Attorney
General, Department of Law to ensure that the timeline
would be initiated as planned.
Co-Chair MacKinnon communicated that the following
presentation would outline a timeline for the transaction.
She detailed that there were many different agreements in
place and a multitude of signators that needed to come
online. She believed the state needed to modify its
president agreement. The presentation would include points
that could create a challenge or obstacle for the state to
meet as far as delaying the state's ability to obtain the
assets currently held by TransCanada. She furthered that
Alaska would have the opportunity through AGDC,
specifically Mr. Dubler, to vote on behalf of the state for
the continuation of the project.
9:11:59 AM
MARK MYERS, COMMISSIONER, DEPARTMENT OF NATURAL RESOURCES
(DNR), provided a PowerPoint presentation titled
"TransCanada Termination Timeline of Events" dated October
2015 (copy on file). He began on slide 8 titled "Modified
Termination Timeline Schematic." He detailed that the slide
provided a termination timeline. The goal was to make a
smooth transition. He equated the transition to a change of
command on a military base where there was an understanding
of a clear passing of authority and responsibility (the
current scenario also included funding and assets). He
communicated that modification to terms in the Precedent
Agreement was needed. He elaborated that the agreement did
not address the time of the work plan and budget with the
time of the termination. There was a termination date of
December 31 [2015], but it could be moved up if all parties
agreed. He expounded that the timeline schematic on slide 8
proposed moving the termination date up. The goal was to
transition the assets to AGDC in a timeframe that would
enable the agency to vote on the work plan and budget on
December 4 [2015]. He communicated that the dollar amount
the state anticipated would be paid out under the Precedent
Agreement had been fully audited before the state had
written the check. Under the proposal addressed in the
presentation, TransCanada would be given time to provide
its best cost estimate; the state would additionally have
rights past the payout to audit TransCanada and "true up"
at the end of that time period. He relayed that the changes
would enable a smooth transfer to AGDC to vote on December
4, payment to TransCanada, and for the state to do the
proper audits.
9:13:47 AM
Co-Chair MacKinnon asked if DNR had reviewed the number and
TransCanada had agreed to the specific number allocated in
the CS for SB 3001.
PAT PITNEY, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET,
OFFICE OF THE GOVERNOR, replied that the administration
felt relatively confident in the number, but would like the
language to read "estimated to be" because the amount could
change slightly on the margins. She explained that the
original bill had included the whole $144 [million],
reasoning that there was enough flexibility between the two
numbers [CSSB 3001 included fund capitalization of
approximately $68 million] that would enable the pay to
TransCanada if the cost was slightly higher.
Co-Chair MacKinnon asked if there had been a request to
change the language in the CS to "estimated." Ms. Pitney
replied in the negative.
Co-Chair MacKinnon requested that the administration notify
the Senate Finance Committee as soon as possible if it had
any concerns about the CS. She noted that the committee had
asked all legislators to review the CS. She added that the
goal was to address as many concerns as possible up front
in order to avoid going to a conference committee.
Commissioner Myers relayed that there was another pertinent
factor. He stated that the numbers worked to the
termination date of December 31 [2015] in the Precedent
Agreement. Under the proposal, the termination date would
be earlier and TransCanada would owe money to the state on
that date. He shared his intent to address the issues
during the presentation. He noted that the money owed by
TransCanada would be a lesser amount than it would have
been under the original December 31 deadline.
Co-Chair MacKinnon requested any proposed changes from the
administration or departments by 4:00 p.m. She reiterated
that the committee would address a new CS the following
day.
9:16:35 AM
Commissioner Myers addressed slide 2 titled "Overview":
This presentation will:
· Summarize how the TransCanada (TC) termination would
work under the Precedent Agreement (PA) -which would
not allow the termination to occur prior to December
4, 2015
· Summarize how the State and TC will amend the
termination process under the PA to allow the
termination to occur prior to December 4, 2015
o Upon termination, TC will transfer interest in
TransCanada Alaska Midstream Limited Partnership
(TAMLP) to State/Alaska Gasline Development
Corporation (AGDC), so that AGDC can vote on 2016
Work Program & Budget (WP&B) by December 4, 2015
9:17:29 AM
Commissioner Myers discussed slides 3 and 4 titled
"Sequence of Events and Timing of Termination under PA as
Currently Drafted":
1. Appropriation approved and Governor executes the
appropriation bill
2. State provides notice of termination to TransCanada
(TC)
3. Within 30 days of notice of termination TC must
deliver to State a final report of the Termination
Amount (development costs, plus interest)
4. Within 30 days of receiving the final report from
TC, State must either pay the Termination Amount or
provide notice of objection to the Termination
Amount and present an alternate amount
5. If the parties fail to agree on the amount within 5
business days of the State's objection, then
Alternative Dispute Resolution (ADR) will apply and
State must pay the Termination Amount in full within
5 business days of notice of intent to commence ADR
(disputed amounts paid into escrow pending dispute
resolution)
6. 6.State pays TC Termination Amount and TC transfers
TAMLP interests to State/AGDC
Commissioner Myers elaborated that the official notice of
termination to TransCanada would come from the DNR
commissioner. He added that the termination amount would be
TransCanada's absolute best estimate; the state could
either pay or object to the amount within 30 days. He
explained that if the state objected to the specified
amount, it would present an alternative. A dispute
resolution mechanism was also included in the event of any
disagreements. He explained that if an agreement failed,
the proposed transfer of assets by December 4 would not
take place (the process had a 60-day minimum) and AGDC
would not have the ability to vote on the work plan and
budget at that time.
9:18:39 AM
Commissioner Myers explained that the dates included in the
timeline were all made on an assumption of the date
appropriation; if it was earlier, the dates could move up
by a week or more. The timeframe was designed to achieve
the work in time even if the bill did not pass until the
last day of the current special session; the dates outlined
in the structure were relative.
Commissioner Myers addressed slide 5, "Modified Termination
Timeline, Assuming Appropriation is Approved."
· Currently, State and TC are drafting a Purchase and
Sale Agreement (PSA) for the State's acquisition of
TAMLP [Finalize by November 13]
· State and AGDC are taking steps and drafting
documents designating AGDC as the State's designee
under the PA (e.g., legal instrument(s) to convey
TAMLP to AGDC) [Finalize by November 13]
· TC submits initial Termination Amount report, which
State reviews [November 4]
· State and AKLNG Parties work together to address the
continuation of TC pipeline secondees in AKLNG
through the pre-FEED phase
· Appropriation approved and Governor Walker executes
the appropriation bill [November 21-23]
Commissioner Myers expounded that the goal was to have the
legal agreement negotiated between state institutions by
November 13 [2015]. Co-Chair MacKinnon asked for
verification that it was going to a subsidiary of AGDC.
Commissioner Myers deferred the question to AGDC.
Co-Chair MacKinnon stated that the committee had been told
by the Attorney General Richards and Mr. Dubler that a
subsidiary had been created inside of AGDC. She detailed
that one subsidiary was an aggregator that would look at
instate gas and the ability to enter into some gas sales
agreements to help bring energy to parts of Alaska and to
possibly sell to another market. A second subsidiary had
been created to receive assets from TransCanada. She asked
for verification that her understanding was accurate.
JOE DUBLER, VICE PRESIDENT AND CHIEF FINANCIAL OFFICER,
ALASKA GASLINE DEVELOPMENT CORPORATION (via
teleconference), affirmed that AGDC had created a
subsidiary. He clarified that the subsidiary would hold all
the assets of the AKLNG project for the parent company
AGDC.
9:21:48 AM
Co-Chair MacKinnon asked for verification that legal
counsel had advised the state that the subsidiary was the
best way to secure the product and to maintain flexibility
inside of AGDC. Mr. Dubler replied in the affirmative.
Commissioner Myers continued to discuss slide 5. He relayed
that TransCanada would submit its initial report amount,
which the state would review. The state and AKLNG partners
would work together for the continuation of TransCanada
pipeline secondees in AKLNG through the pre-FEED [Front End
Engineering and Design] phase. He communicated that
TransCanada was fully committed to getting the secondees in
through May (there were 15 people active in the project).
He stated that the action would be between the project
(Steve Butt's organization [ExxonMobil executive]). The
state would pay 25 percent of the cost of the secondees
under the structure; the oil company partners would pay the
remaining 75 percent of the costs. TransCanada had relayed
that Mr. Butt was very positive on the transfer and wanted
to ensure that it took place. He stated that it would be an
internal project decision, but TransCanada was completely
willing. He believed the company had agreed on the cost
structure. He noted that the issue was an important piece
of the equation for project continuity. The next step was
the approval of the appropriation by the legislature and
signature by the governor, which could occur on November
23, 2015. He clarified that the dates would move up if the
appropriation was approved earlier.
Co-Chair MacKinnon wondered if the appropriate signators
would be accessible and in-state when needed. She asked if
the document could be signed electronically if someone was
traveling. Commissioner Myers responded that he could not
yet make the commitment because the firm dates were not
currently known. He believed the parties would be willing
to figure it out to obtain signatures either directly or
through an authorization of delegation.
9:24:38 AM
Co-Chair MacKinnon hoped the administration would ensure
that the required signatories were available when needed.
She thanked the administration and departments for their
presence at the meeting.
Commissioner Myers discussed slide 6 titled "Modified
Termination Timeline." The state would provide a notice of
termination to TransCanada and immediately following the
governor's signature the Purchase and Sales Agreement would
be executed. TransCanada would then submit an updated
termination amount for closing purposes by November 24. He
expounded that by December 1 the interests would be
transferred and the Precedent Agreement and Equity Option
Agreement would be terminated. At that point AGDC would be
in the position to approve the work plan and budget on
December 4.
Co-Chair MacKinnon asked what and who would be doing
specific tasks during the week of November 24 to December
1.
Mr. Myers deferred the question to the Department of Law
(DOL). He did not know about all of the elements involved
with the closing. The amounts would have been agreed upon
prior to that time and the legal documents would be in
place. He did not know what due diligence took place during
that time.
Co-Chair MacKinnon had anticipated that the information
would have been in the current presentation to the
committee. She was happy to hear from DOL during the
meeting or to receive the information in writing. She
wanted to ensure that the state was prepared for the
transition. She asked DOL to follow up with the
information.
Commissioner Myers noted that TransCanada was in support of
the specified time period.
9:27:57 AM
Commissioner Myers addressed slide 7, "Modified Termination
Timeline." TransCanada would prepare a final termination
amount report within 45 days of the closing. He relayed
that the date of termination would be firm and the amount
would be calculated for that specific date. One of the
issues the termination timeline had faced was related to
the fact that the date could flex; TransCanada wanted the
ability to do a last calculation of actual costs for the
period. He believed the specified 45 days would allow
TransCanada to get all of its cost data together. He added
that the earlier the date was known, the better. He
communicated that the state had 60 days after closing to
perform the audit; the time was needed to conduct due
diligence. He anticipated that the auditors would travel to
Calgary in Alberta, Canada to conduct the audit from
TransCanada's office. He noted that the nature of the audit
was outlined in the Precedent Agreement. The state and
TransCanada would agree on any termination amount
adjustment (if any) and adjustment payments would be made.
He communicated that the anticipated completion of the
audit process and true-up payment should be no later than
March 2016.
Co-Chair MacKinnon asked if the legislature would receive
an update on the audit in the form of a presentation or
report. Commissioner Myers believed so, but had not been
party to discussions about the issue and did not know
whether there were confidentiality concerns around the data
or data transfer components. He was certain there would be
a report, but did not know how detailed it would be.
Commissioner Myers concluded with slide 8 titled "Modified
Termination Timeline Schematic." He reiterated that an
earlier termination date would move the process up (items
on the chart would shift to the left). The top priority was
for the transfer of assets to occur prior to December 4 in
order for AGDC to vote for the work plan and budget.
9:30:39 AM
AT EASE
9:31:11 AM
RECONVENED
Co-Chair MacKinnon asked what the process would be to
deliver the assets to TransCanada and receive the
information if DOL, DNR, and AGDC fully executed the plan.
Ms. Pitney answered that one piece related to the funding
to TransCanada and the second related to the transfer of
assets. The process for providing the funding to
TransCanada was to establish an RSA [registration services
agreement]; the RSA would be ready shortly after the bill
passed albeit without the exact amount (the exact amount
would be included when determined). The RSA would allow
AGDC to transfer the funds back to the state under DNR.
She continued that simultaneously the state would set up a
wire-transfer capability with TransCanada; therefore, as
soon as the amount was determined and the RSA was signed
the transfer could take place. The maximum timeframe would
be a couple of days. The transfer of assets would become
part of the legal agreement between ADGC and DNR; it did
not require anything more from a financial standpoint other
than noting the placement of the assets.
Co-Chair MacKinnon asked if the state had done transfers to
and from TransCanada in the past. She asked if the state
had the routing numbers. She wondered if the state would
conduct a test run to ensure the money would land
appropriately. Ms. Pitney replied that transfers may have
been done through AGDC. She did not know that there had
been transfers from the state. She affirmed that a test
would be conducted prior to the actual transfer of assets.
Co-Chair MacKinnon wanted to ensure the accuracy of the
routing numbers to be certain the transfer would be
successful.
9:34:26 AM
Commissioner Myers stated that there were assets
transferred from TransCanada to the state as well. He
detailed that the data was stored in common; the data was
commonly owned by the party participants for the particular
piece. TransCanada's ownership of the piece would be
transferred to the state, but the data was already in
repositories with the project. He stated that cores were
stored in a common location for all parties. He furthered
that the assets would give AGDC the information on how to
access the data sets in common; it would then have full
access to the gas treatment plant and pipeline data sets.
Senator Olson asked if the modifications to the Precedent
Agreement timeline and process had been recommended by the
consultant. Commissioner Myers believed a draft version had
been negotiated by Rigdon Boykin [South Carolina-based
attorney serving as the state's lead negotiator on the
AKLNG project]. He believed Mr. Boykin had been looking at
the idea of an early termination, but it had not been one
supported or fully vetted by DNR. He stated that there had
been some discussion of other values (the information was
confidential); however, he essentially had too many
concerns about the modified document and issues it brought
forward. He stated that the document before the committee
was a much cleaner transfer document.
9:36:26 AM
Co-Chair MacKinnon made a joking remark about daylight
savings time.
Senator Olson asked if the modification put undue strain on
the funding that put the state at a disadvantaged position.
Commissioner Myers replied that he could not discuss it due
to the sensitivity of the confidential information. He
stated that the changes had not been executed and
materially had not caused any stress. He believed the
option he had presented to the committee during the current
meeting offered a successful path forward that protected
the interests of all involved parties. He was very
satisfied with the outcome that was moving forward and was
not interested in looking back at past pieces. He
acknowledged the difficulty of negotiations and believed
"we're in a good place now."
Senator Olson believed optimism was a positive attribute.
Co-Chair MacKinnon asked Mr. Dubler if he had any closing
comments related to the transaction and timeline presented
to the committee during the meeting. Mr. Dubler had no
further comments.
Commissioner Myers thanked the committee for the
opportunity to explain the changes. He asked committee
members to provide the department with any additional
questions they may have. He would follow up on questions
asked during the meeting.
Co-Chair MacKinnon relayed that public testimony on SB 3001
was closed; however, it would be held for the House version
of the bill the following week. She addressed the schedule
for the following day.
ADJOURNMENT
9:39:16 AM
The meeting was adjourned at 9:39 a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB 3001 110115 TC Termination Timeline of Events 10-30-15.pdf |
SFIN 11/1/2015 9:00:00 AM |
SB3001 |
| SB 3001 11 01 15 Senate Finance Question - Answer.pdf |
SFIN 11/1/2015 9:00:00 AM |
SB3001 |
| SB 3001 110115 Use and Availability of 48 (1).pdf |
SFIN 11/1/2015 9:00:00 AM |
SB3001 |