Legislature(2007 - 2008)BUTROVICH 205
04/13/2007 05:30 PM Senate JUDICIARY
| Audio | Topic |
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| Start | |
| SB104 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 104 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
SENATE JUDICIARY STANDING COMMITTEE
April 13, 2007
5:35 p.m.
MEMBERS PRESENT
Senator Hollis French, Chair
Senator Bill Wielechowski
Senator Gene Therriault
MEMBERS ABSENT
Senator Charlie Huggins, Vice Chair
Senator Lesil McGuire
COMMITTEE CALENDAR
SENATE BILL NO. 104
"An Act relating to the Alaska Gas line Inducement Act;
establishing the Alaska Gas line Inducement Act matching
contribution fund; providing for an Alaska Gas line Inducement
Act coordinator; making conforming amendments; and providing for
an effective date."
HEARD AND HELD
PREVIOUS COMMITTEE ACTION
BILL: SB 104
SHORT TITLE: NATURAL GAS PIPELINE PROJECT
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR
03/05/07 (S) READ THE FIRST TIME - REFERRALS
03/05/07 (S) RES, JUD, FIN
03/14/07 (S) RES AT 3:30 PM BUTROVICH 205
03/14/07 (S) Heard & Held
03/14/07 (S) MINUTE(RES)
03/16/07 (S) RES AT 3:30 PM BUTROVICH 205
03/16/07 (S) Heard & Held
03/16/07 (S) MINUTE(RES)
03/19/07 (S) RES AT 3:30 PM BUTROVICH 205
03/19/07 (S) Heard & Held
03/19/07 (S) MINUTE(RES)
03/21/07 (S) RES AT 3:30 PM SENATE FINANCE 532
03/21/07 (S) Heard & Held
03/21/07 (S) MINUTE(RES)
03/21/07 (S) RES AT 5:30 PM SENATE FINANCE 532
03/21/07 (S) Heard & Held
03/21/07 (S) MINUTE(RES)
03/22/07 (S) RES AT 4:15 PM FAHRENKAMP 203
03/22/07 (S) Heard & Held
03/22/07 (S) MINUTE(RES)
03/23/07 (S) RES AT 1:30 PM BUTROVICH 205
03/23/07 (S) Heard & Held
03/23/07 (S) MINUTE(RES)
03/24/07 (S) RES AT 1:00 PM SENATE FINANCE 532
03/24/07 (S) Heard & Held
03/24/07 (S) MINUTE(RES)
03/24/07 (S) RES AT 3:00 PM SENATE FINANCE 532
03/24/07 (S) Heard & Held
03/24/07 (S) MINUTE(RES)
03/26/07 (S) RES AT 3:30 PM BUTROVICH 205
03/26/07 (S) Heard & Held
03/26/07 (S) MINUTE(RES)
03/27/07 (S) RES AT 3:00 PM BUTROVICH 205
03/27/07 (S) Heard & Held
03/27/07 (S) MINUTE(RES)
03/28/07 (S) RES AT 3:30 PM BUTROVICH 205
03/28/07 (S) Heard & Held
03/28/07 (S) MINUTE(RES)
03/29/07 (S) RES AT 5:00 PM BUTROVICH 205
03/29/07 (S) Heard & Held
03/29/07 (S) MINUTE(RES)
03/30/07 (S) RES AT 1:30 PM BUTROVICH 205
03/30/07 (S) Heard & Held
03/30/07 (S) MINUTE(RES)
03/31/07 (S) RES AT 12:00 AM BUTROVICH 205
03/31/07 (S) Heard & Held
03/31/07 (S) MINUTE(RES)
04/01/07 (S) RES AT 11:00 AM BUTROVICH 205
04/01/07 (S) Moved CSSB 104(RES) Out of Committee
04/01/07 (S) MINUTE(RES)
04/02/07 (S) RES RPT CS 6AM SAME TITLE
04/02/07 (S) AM: HUGGINS, GREEN, STEVENS, STEDMAN,
WIELECHOWSKI, WAGONER
04/02/07 (S) RES AT 3:30 PM BUTROVICH 205
04/02/07 (S) Moved Out of Committee 4/1/07
04/02/07 (S) MINUTE(RES)
04/04/07 (S) JUD AT 2:45 PM BELTZ 211
04/04/07 (S) Heard & Held
04/04/07 (S) MINUTE(JUD)
04/11/07 (S) JUD AT 1:30 PM BUTROVICH 205
04/11/07 (S) Heard & Held
04/11/07 (S) MINUTE(JUD)
04/11/07 (S) JUD AT 5:30 PM BUTROVICH 205
04/11/07 (S) Heard & Held
04/11/07 (S) MINUTE(JUD)
04/12/07 (S) JUD AT 3:30 PM BUTROVICH 205
04/12/07 (S) Public Testimony 5:30 pm to 7:00 pm
04/13/07 (S) JUD AT 1:30 PM BUTROVICH 205
04/13/07 (S) JUD AT 5:30 PM BUTROVICH 205
WITNESS REGISTER
William Walker, General Counsel and Project Manager
Alaska Gas line Port Authority
411 4th Avenue, Suite 200
Fairbanks AK 99701
POSITION STATEMENT:
Clark Bishop, Commissioner
Department of Labor
Anchorage, AK
POSITION STATEMENT:
ACTION NARRATIVE
CHAIR HOLLIS FRENCH called the Senate Judiciary Standing
Committee meeting to order at 5:35:02 PM. Present at the call to
order were Senator Wielechowski, Senator Therriault, and Chair
French.
SB 104-NATURAL GAS PIPELINE PROJECT
5:35:13 PM
CHAIR FRENCH announced the consideration of SB 104. He said that
the first item on the agenda for the evening is to hear from Mr.
Walker from the Port Authority. He would talk about antitrust
issues in general as well as his particular experience.
5:35:54 PM
WILLIAM M. WALKER, General Counsel and Project Manager, Alaska
Gas line Port Authority ("Port Authority") said he is happy to
discuss the Port Authority's experience on the antitrust issue,
but he would speak carefully since it's a legal matter.
CHAIR FRENCH reminded members that the Port Authority brief on
this topic appears under tab 12 of the AGIA binder. The
complaint was filed in U.S. district court against Exxon and BP.
He opined that it's an excellent recitation of the history of
the gas line including the problems that have been encountered
in trying to develop a gas line.
MR. WALKER explained that the Port Authority has been working
since 1999 to put together a viable, competitive and financeable
project. The last step that's needed is the acquisition of gas.
As part of that the Port Authority submitted an offer to
purchase gas in April 2005. Quite soon it became evident that
the offer wouldn't even be engaged. That left the Port Authority
with few choices, particularly in light of the fact that the
administration at that time wasn't very supportive. He relayed
that the Port Authority directed him to lay out the options
regarding antitrust action against the producers as a result of
the collective refusal to sell gas. After reviewing the data
with David Boies a determination was made that there was a very
good antitrust claim and so the action was filed in Fairbanks on
December 19, 2005. ExxonMobil and BP responded with a motion to
dismiss, which was successful on the standing issue.
5:39:00 p.m.
CHAIR FRENCH asked him to remind the public what that standing
issue means.
MR. WALKER explained that the standing issue said that in filing
the action the Port Authority was trying to bypass the Stranded
Gas Development Act (SGDA) process. Clearly that wasn't the
idea, he said. We did not and do not believe that it's necessary
to file an application with the SGDA to build a gas line. We
believe it was an option but it wasn't exclusive so we
respectfully disagreed with the judge on that issue, he said.
MR. WALKER said they filed a request for reconsideration. "We
were the only ones that applied twice. We applied once and were
told to withdraw then we were asked by the administration to
apply a second time and we did, so that's really what the
stumbling block for us was." He added that the judge
acknowledged the change in political climate and said it might
remove the standing issue if the legislature or the
administration gave its blessing.
MR. WALKER explained that at about the same time that the Port
Authority headed into the ninth circuit court with its appeal,
the former administration took back Pt. Thomson. He said that
the Palin administration has upheld that action and so with this
new day and the desire to focus on building a project rather
than on the ninth circuit, the board authorized him to dismiss
the appeal and he has done that.
5:41:34 PM
CHAIR FRENCH referenced page 5 of the complaint and read the
following by Lee Raymond, then CEO for ExxonMobil:
Then you have these competing pipeline proposals,
which is fine if that's what you to do. But the
reality is, nobody is going to build a pipeline
without the producers. You and I know how pipelines
get built. The pipeline goes to the bank. The guy at
the bank says, what are you going to put in your
pipeline? Gas. Do you own the gas. No, I don't own the
gas. Well, who does own the gas, and do you have a
commitment from them that they are going to put it
through the pipeline? Well, no, we don't have that.
Then [says the bank] I don't think I'm going to give
you much money to build a pipeline.
CHAIR FRENCH asked Mr. Walker if that's the essence of his
case.
MR. WALKER said Mr. Raymond made that particular statement at
about the time the Port Authority was trying to buy gas so that
statement was a significant deciding point. It was clear that
more of the same process wasn't going to be productive.
SENATOR WIELECHOWSKI noted that Exxon testified before the
resources committee saying that the only way a pipeline will be
built is if the producers build it. He asked if that's an
accurate assessment and if statements like that would be a
violation of the U.S. antitrust laws.
MR. WALKER stated that he firmly disagrees with the statement
that only the producers can build a pipeline. Worldwide the way
pipelines are built, financed, and owned is contrary to that
because it's unusual for producers to be in an ownership
position. With regard to the second question he said it takes a
number of considered efforts for a violation of antitrust laws.
Although the Port Authority wasn't successful in the standing
issue, it does stand behind the facts that were asserted there,
he said. "Beyond that…we have read the leases, we've looked at
the law as far as the obligations under the leases, and we
believe the reasonable expectation of profit is the threshold."
He said we don't believe the producers can be forced to build a
pipeline and that's probably not a good idea anyway, but there
is an obligation to market. We were looking at the duty to
market the gas available, particularly the Prudhoe Bay gas
that's being re-injected, he stated.
SENATOR WIELECHOWSKI asked if the producers could validly refuse
to participate in an open season on this project.
MR. WALKER said we believe that if an open season includes a
volume that's approved and available and if it's within the
limits of the current off-take on the North Slope, then there's
an obligation for the producers to participate. Their response
may be conditional, but the leases don't allow them to sit back
and wait for the timeframe that works best for them. "The
leases…need to be developed at such point that there's a
reasonable expectation of profit." Stating that that is a term
of art that has been addressed by the courts, he opined that one
thing that's been misunderstood for decades here in Alaska is
that we felt we had to compete with every project on the planet
and that we had to be the most profitable as well. But that
isn't the law and that isn't what the leases say; reasonable
expectation of profit is the threshold, he stated.
SENATOR WIELECHOWSKI asked if the court has given a definition
for what is a reasonable expectation of profit. Also, how does
the profitability of this project compare to others around the
world?
MR. WALKER explained that the courts in Alaska haven't addressed
a definition, but he'd be happy to ask their Texas special
counsel to give his perspective on that in writing. As far as
how this project compares to others, he said we believe we're
absolutely competitive. For instance, other places where gas is
at tidewater have a 22-27 day shipping time while this project
would have a 5-6 day shipping time. Also, the ambient
temperature here is 40 degrees rather than 90 degrees so
liquefaction is 30-40 percent more efficient here. Beyond that
he would point out that this project doesn't have to beat every
other LNG project. It simply needs to be competitive to make
sure the market wants the product.
SENATOR THERRIAULT noted that when the U.S. government went
through a process to pick a project from the over-the-top
option, the overland option down the Alcan Highway, and the
tidewater option, the Carter administration selected the
overland option. He asked if he knows the history that led to
that decision.
MR. WALKER explained that there was strong competition for all
three options and Alaska united and fought hard for the line to
come through the state. Although the commissioners spoke
favorably about that route because there would be no regulatory
unknowns and there would be no aboriginal claims and rights
issues from a different country, the ultimate decision was to
run the line through Canada. Part of that decision was that
there would be no producer ownership of the line. For financial
reasons those regulations were modified during the Reagan
administration and some producer ownership was allowed. That
financing issue might not be completely gone, he added.
MR. WALKER said he really can't say why the Canadian route was
selected because the federal government's testimony was very
favorable for an all Alaska line.
SENATOR WIELECHOWSKI said he doesn't understand the rationale at
that time to have no producer ownership in the line.
MR. WALKER said he believes the concern related to the amount of
control the producers already had on the market and that
increasing it might have a chilling affect on additional
exploration and development in Alaska. It was more a concern
about market and basin control, he stated.
SENATOR WIELECHOWSKI asked if he's referring to the ability to
impact tariffs.
MR. WALKER said it was the tariff and exploration. The idea was
to ensure the ability to have maximum exploration of gas in
Alaska.
5:56:10 PM
CHAIR FRENCH summarized that the Port Authority tried to buy gas
and couldn't so they brought a lawsuit against Exxon and BP on
Sherman antitrust action. The suit was dismissed for lack of
standing and the judge said:
The defendants would seemingly not be able to hold
these gas reserves forever without making reasonable
and good faith efforts to develop them.
CHAIR FRENCH commented that that was a bit of a legal nugget
that came your way during the process.
MR. WALKER agreed and said the Port Authority thought that
submitting an offer to purchase gas would begin a productive
process. When we brought participants from the marketplace as
part of the offer we expected it would be taken more seriously
than it was, he stated.
SENATOR WIELECHOWSKI asked if it would benefit the state to have
a declaratory judgment action now saying that they would be in
default if they don't show up for an open season.
MR. WALKER cautioned that from the market standpoint that might
start a more lengthy process than might be productive. That's a
decision you'll have to make, he said. Although there needs to
be some understanding of what constitutes a failed open season,
he is encouraged that the tenor of discussion is that this
committee wouldn't be comfortable with no response and a failed
open season.
5:58:22 PM
CHAIR FRENCH announced the next item on the agenda is project
labor agreements by Commissioner Click Bishop.
5:58:35 PM
COMMISSIONER DESIGNEE CLICK BISHOP, Department of Labor and
Workforce Development, delivered a PowerPoint presentation.
What is a Project Labor Agreement (PLA)?
· A PLA is a comprehensive collective bargaining agreement
that sets the terms and conditions of employment on a
project, for that project only.
· A PLA is a collective bargaining agreement that is
negotiated between the licensee, or its agent, and an
appropriate entity setting out the terms and conditions of
employment on the project, typically including wages and
benefits, and setting out other working conditions
including no-strike, no lockout provisions, dispute
resolution procedures, and the use of hiring facilities in
the state.
· Contractors come under that umbrella. All contractors,
union or nonunion who are interested in bidding on a
project must follow the terms and conditions set out in the
PLA.
6:01:02 PM
CHAIR FRENCH recognized Senator Joe Thomas in the audience.
CHAIR FRENCH noted that some interested parties have told him
that a PLA would keep nonunion workers from getting a pipeline
job. He asked if anything about a PLA would exclude a nonunion
worker from getting a job.
COMMISSIONER BISHOP said no.
SENATOR THERRIAULT asked him to elaborate on how a nonunion
worker would go about securing a job on a project that has a PLA
and how a nonunion shop would bid on a job that has a PLA.
COMMISSIONER BISHOP explained that today all union hiring halls
are open to nonunion workers to go in and register on any auto
work list for employment. Under a PLA the only thing that would
prohibit a nonunion entity from bidding a project is a desire
not to participate, he said.
SENATOR THERRIAULT asked if his workers would have to go sign up
at the union hall if his nonunion business submitted a bid on a
project, or would his business just have to agree to pay the
particular wage that's been negotiated. How does that work?
COMMISSIONER BISHOP said he can't speak for organized labor, but
historically they could "key man" their people in on the pre-
hire bargaining agreement with the union to assure that the shop
could bring in its workers.
SENATOR THERRIAULT asked if there's a mechanism for his existing
workforce to qualify so that he wouldn't have to dismiss them
and hire from the names that are highest on the list.
COMMISSIONER BISHOP said there is a mechanism but he can't speak
for each local union.
6:04:44 PM
COMMISSIONER BISHOP continued.
History of PLAs.
· Project Labor Agreements were first used in the 1930s and
currently they're used widely in the private and public
sectors.
PLA Precedents.
· Legal.
· U.S. Supreme Court (Boston Harbor) 1933.
· Alaska Supreme Court (Laborers Local 942 v.
Lampkin) 1998.
· PLA-based Public and Private Projects.
· Grand Coulee and Hoover dams.
· TAPS.
· San Francisco BART.
· Puget Sound Transit.
· Sutter and Sunrise Power Plants in California.
· Seattle Airport.
6:05:48 PM
Why Have a PLA?
· Stable workforce guaranteeing no strikes or lockouts.
· Meets project scheduling challenges.
· Eliminates need to negotiate numerous separate contracts.
· Assures consistent terms and conditions for all
contractors.
· It's a good vehicle for:
· Alaska hire.
· Apprenticeship opportunities.
· Preference for underutilized groups.
6:06:45 PM
CHAIR FRENCH commented that a lot of the public thinks that once
unions get involved there might be a strike and the pipeline
wouldn't get built. He asked how a PLA prevents that from
happening.
COMMISSIONER BISHOP said the two sides can bind one another by
agreeing in writing that there won't be a strike or lockout. To
his knowledge there hasn't been a walkout or strike on any North
Slope projects since the inception of TAPS.
CHAIR FRENCH referenced page 9, lines 16-18, of the current CS
dealing with applicant requirements. He read the following:
(16) commit to negotiate, before
construction, a project labor agreement, to ensure
expedited construction and labor stability for the
project by qualified residents of the state;
CHAIR FRENCH asked if he or members of the administration are
working on a more exact definition for project labor agreement
within the context of AGIA.
COMMISSIONER BISHOP said yes.
CHAIR FRENCH asked him to forward it to the committee as soon as
it's finalized.
SENATOR THERRIAULT posed another scenario. His business is a
union shop that pays its employees, which are all year-around, a
union negotiated wage. He asked how a PLA that came in might
impact that type of agreement if the wage negotiated with the
union is different than the wage that's negotiated with the
individual union shop. Which one prevails?
COMMISSIONER BISHOP said that would be subject to negotiation
between the licensee and the labor entity.
SENATOR THERRIAULT asked if local 302 could negotiate a wage for
hiring out of its hall that would carry the day for that
particular business.
COMMISSIONER BISHOP said they could.
SENATOR WIELECHOWSKI asked if it's fair to say that Davis Bacon
laws would apply on this project.
COMMISSIONER BISHOP agreed that that would likely be the
benchmark for starters for negotiation.
6:10:55 PM
CHAIR FRENCH recessed the committee until 10:00 a.m. tomorrow.
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