Legislature(2007 - 2008)SENATE FINANCE 532
03/24/2007 03:00 PM Senate RESOURCES
| Audio | Topic |
|---|---|
| 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 RESOURCES STANDING COMMITTEE
March 24, 2007
2:50 p.m.
MEMBERS PRESENT
Senator Charlie Huggins, Chair
Senator Lyda Green
Senator Lesil McGuire
Senator Bill Wielechowski
Senator Thomas Wagoner
MEMBERS ABSENT
Senator Bert Stedman, Vice Chair
Senator Gary Stevens
OTHER LEGISLATORS PRESENT
Representative Ralph Samuels
Representative Vic Kohring
COMMITTEE CALENDAR
SENATE BILL NO. 104
"An Act relating to the Alaska Gasline Inducement Act;
establishing the Alaska Gasline Inducement Act matching
contribution fund; providing for an Alaska Gasline 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) Presentation: Industry Representatives
03/24/07 (S) RES AT 1:00 PM SENATE FINANCE 532
03/24/07 (S) RES AT 3:00 PM SENATE FINANCE 532
WITNESS REGISTER
WENDY KING, Director
State Negotiations
ConocoPhillips Alaska, Inc.
Anchorage AK 99510
POSITION STATEMENT: Commented on SB 104.
ACTION NARRATIVE
CHAIR CHARLIE HUGGINS called the Senate Resources Standing
Committee meeting to order at 2:50:17 PM. Present at the call to
order were Senators Wagoner, McGuire, Green, Wielechowski and
Huggins. Representatives Kohring and Samuels joined the
committee.
SB 104-NATURAL GAS PIPELINE PROJECT
CHAIR HUGGINS announced SB 104 to be up for consideration and
that the committee would first receive comments from Wendy King.
[The following is a verbatim transcript of Ms. King's comments]
2:51:04 PM
WENDY KING, Director of State Negotiations, ConocoPhillips
Alaska, Inc.: I work for ConocoPhillips in Anchorage and I have
been working on the ANS gas development project for four and a
half years. I'm pleased to be here today to testify on SB 104 or
the proposed AGIA bill. And I'd highlight - I think there are
some handouts or some presentation materials and rather than
work off the screen, we're going to work off the handout. I'll
try to do my best to try to follow you through, even though
there's not slide numbers on here. I'll do my best to draw your
attention to the different points in the slides.
Before I discuss the bill and we'll turn to that first slide
labeled "Investing in Alaska Today" I want to reintroduce to the
committee ConocoPhillips and what our business in Alaska looks
like. ConocoPhillips is the state's largest oil and gas
producer. We have had 1,200 uninterrupted LNG shipments since
1969 from the Kenai LNG plant. We are the state's largest
acreage holder on the ANS and we have drilled over 60
exploration wells since 1999. We have drilled 16 wells in NPRA
where we're the operator.
ConocoPhillips - I get to learn these little facts about my
company all the time - but one of them was that ConocoPhillips'
heritage company, Phillips, was the first oil company to
establish an office in Alaska.
Just to move on to some general comments, I wanted to emphasize
that timing on this project is important. I would agree with the
administration that the timing is an important issue. Our
company is committed to developing the ANS gas resources and
ConocoPhillips is willing to consider creative solutions. We are
eager to find a framework by which both parts of the project,
both the midstream and the resource parts of the project, can be
advanced. And I want to step back for a second and define that.
The midstream sides of the project - and I'm going to use that
term quite a bit - for me it involves what we call the gas
transmission lines, the gas treatment plant, the big pipe that
would go to Alberta and then what the different alternatives
might be from Alberta to markets in the Lower 48. So, all
components of that I would call the midstream portions of the
project.
2:53:07 PM
Upstream are the resource portions of the project or the assets
that would be asked to be making shipping commitments to the
project - so assets like the working interest owners in Prudhoe
Bay or NPRA or other exploration. So, it's more from the
perspective of a resource owner - a working-interest owner.
That's the terminology I'll use.
2:53:26 PM
The next slide in your packet is what makes the Alaska project
different. And what you've got here is a graph of the North
American gas pipeline projects that have happened since 1997
that are greater than $100 million. And I think from a visual
perspective, the first thing eyes always go to when we look at
this graph is that the cost of the Alaska gas pipeline project
is just off the scale. I mean this has got the $20 billion 2001
estimate on it. But you can see, here's the Rockies Express
Project, a pipeline project that is in construction right now.
Its estimated cost for a 1,300 mile pipeline is $4 billion. The
Alliance project which was completed in December of 2000, is a
1.3 bcf/day pipeline cost around $3.6 billion and it's an 1,800
mile pipeline. Mac Delta, I'm sure most of you have read, the
MacKenzie Delta project - the cost increases that are just
incurred on the MacKenzie Delta project - I believe the public
estimate that was just made on that is $14 billion including the
upstream development - that's U.S. dollars and that's a 1.2
bcf/day project. So just a flag - you know the Alaska gas
pipeline project being a 3,600 mile pipeline with a cost
estimate greater than $20 billion is just not comparative of
these. It's much bigger. The scale is significantly larger.
And I would also highlight that comparing - you know, you can't
just take and say it's a $30 billion project or a $20 billion
project, whatever the number ends up being - and say that's 10
times $2 billion projects.
2:54:47 PM
The scale is just different. You can't just multiply it out. The
next point I would like to make was on...
SENATOR WIELECHOWSKI: Since the cost is so much for this - how
many miles did you say it was?
MS. KING: It's 3,600 miles from Alaska's North Slope to Chicago,
which would be one of the markets in the Lower 48.
SENATOR WIELECHOWSKI: Since that is - 3,600 miles - doesn't it
make sense to start maybe thinking a little bit more about
building a simply 800-mile line down to Valdez and shipping it
by LNG?
MS. KING: Senator Wielechowski, through the Chair, actually that
is a question that ConocoPhillips, being the current operator
and have had an existing LNG operation in Alaska for decades,
it's a question we consistently look at. And we still believe
that the cost - you'd still have to build a 800-mile pipeline -
you'd still have to have the gasification, tankers, move it to a
market and get it to it - a disadvantaged market in the context
of you can only access the coast and have to bring it in. We
still believe the total costs are better going with a pipeline
project through Canada to the Lower 48. So, we've looked at it;
we continually look at it; we think we bring a unique
perspective on that. We have proprietary technology on LNG and
we still believe the cost is better to go with a pipeline
project to markets in the Lower 48 through Canada.
2:56:46 PM
The next slide, if you turn to - and this is - you know,
predicting natural gas prices - it's a risky business. And this
graph is actually to just highlight a quick critical point here.
What you've got on here is the forward curve that was published
on December 9, 2005. That's the black line on this graph. And
what's underneath it is what the actual gas prices were over the
course of that year. So for me, I find this quite a staggering
graph in that it kind of grounds me that we can't even predict
natural gas prices within a one-year timeframe. Can you imagine
trying to do that for a 30 or 40 year timeframe? And that's one
of the key risks that the resource owners bear in this project -
is that the volatility and the uncertainty on natural gas
prices.
I'd also like to highlight that ConocoPhillips wants to work
with the Alaska legislature and Governor Palin on a framework
that will advance a project. We agree a public transparent
process is needed and we also believe a balanced deal is needed
to stand the test of time. The project is just too big to have a
winner/loser mentality. We've got to find a balanced deal to go
forward.
We believe ConocoPhillips can bring a lot of value to this
project. We have financial strength; we have Arctic experience;
we have Alaska experience; we operate in Alaska. We have project
management skills and we have mega-project skills and we have
key learnings from other pipeline projects that we're involved
in. We also believe we bring a unique perspective to this in
that we are an existing producer, but we are also an explorer.
We have a track record of trying to advance the Alaska gas
pipeline project and we have spent millions of dollars trying to
do that.
My primary focus today is to convey that we want to work in a
constructive way with you to move forward, but more work is
needed. The first time ConocoPhillips saw the proposed bill was
on March 2, which was the first day it was released to the
public. We have had our teams reviewing the bill and are eager
to find a framework that will allow development of ANS gas
resources to advance. We need to be able to work through some
critical issues with the Alaska legislature and Governor Palin.
We are not locked into the old proposal, but we need to find a
framework that addresses the critical resource issues that are
needed to support long-term shipping commitments for this
project.
One aspect of the proposed bill that we have noted in particular
is the distinction between the midstream and the resource terms.
The risk/reward balance is very different between the regulated
return portions of the project, particularly when they're backed
by strong firm transportation agreements. Just to remind people,
firm transportation agreements are those agreements where a
shipper would be asked to pay a pipeline what is called a demand
charge, day in/day out. And for a project of this magnitude, it
could be 20 - 25 years that people are asked to sign that
shipping commitment for. And I'd point out as well - you pay for
that charge regardless if you ship gas or not.
The split between the midstream and that resource we think will
help to illustrate the differences on risk and reward within the
project. That being said, the project will only be successful if
both the midstream and the resource risks are addressed.
2:59:49 PM
Based on our initial review of the bill, ConocoPhillips has four
key question areas that we would like to discuss with you. We
have some suggestions on some of these, but we still don't have
solutions for all of these. The four key areas are first -
exclusivity or what we would call creating roadblocks to
alternative projects; the second one is the resource terms,
themselves; the third one, we'll buck it, is called the
midstream bid requirements; and the fourth one is the expansion
terms. And I'll go into more detail now on these four areas.
3:00:23 PM
Exclusivity or roadblocks to competing projects - I'd first like
to flag a key question - Why would the state want to block
alternative projects instead of letting the free market work
most efficiently? And I want to draw your attention to section
440 in the bill.
CHAIR HUGGINS: I'm sorry, Wendy, would you say which section
again?
MS. KING: Yes, Chairman Huggins, section 43.90.440. This
particular section reads:
Except as otherwise provided in this chapter, the
state grants the licensee assurances that the licensee
has exclusive enjoyment of the inducements provided
under this chapter.
CHAIR HUGGINS: Okay, hold on just a second. Okay - page 18, line
22 - we're now prepared.
MS. KING: Sorry chairman Huggins. I was reading from line 22 and
I'll read that again.
Except as otherwise provided in this chapter, the
state grants the licensee assurances that the licensee
has exclusive inducements - 'Excuse me, I can't read
today - Oh, jeez, it's been a long week - I apologize
- starting over again.'
Except as otherwise provided in this chapter, the
state grants the licensee assurances that the licensee
has exclusive enjoyment of the inducements provided
under this chapter. If the state extends to another
person preferential royalty, tax, or monetary
treatment for the purpose of facilitating the
construction of a competing natural gas pipeline
project in the state, and if the licensee is in
compliance with the requirements of the license and
with the requirements of state and federal statutes
and regulations relevant to the project, the licensee
is entitled to payment from the state of an amount
equal to three times the total of reasonable costs
that the licensee has incurred in developing the
licensee's project as of that date that the state
first extended preferential treatment to another
person.
Then I'd like to draw your attention to sections 340 in the bill
and I'll try to find the pages here for you.
3:02:43 PM
Actually sections [43.90.]330 and 340, I'm particularly looking
at what the inducements are on pages 16 and 17 in the bill. The
midstream inducements include streamline coordination for the
project. Why wouldn't the state offer the benefits of streamline
coordination to any project? That is how the federal process is
set up.
The inducements and particularly in section 340(b), line 7,
indicate that the inducements - you can not put burdens - and I
recognize that is a word I am using, but you can read your own
words there - on a permit by any state agency would only apply
to the licensed project. Does that then mean that the state
would be willing to put burdens on a competing or alternative
project through the permitting process? The way the bill is
currently conceived, it would from a practical perspective make
it incredibly difficult to permit an alternative project with
the state for potentially as long as ten years. It is not clear
what that the state could ever provide streamline permitting to
any other project without creating litigation exposure to the
original licensee.
The exclusive inducements also include the benefits of a state-
funded training program for Alaskans. Why would the state be
willing to train Alaskans for only one project - the licensed
project? Shouldn't qualified Alaskans have the opportunity to be
trained and work on any project that is being advanced by mixing
streamline permitting, the office of the state coordinator -
AGIA coordinator, training for Alaskans and creating obstacles
to work with resource owners except with regard to the licensed
project with exclusive inducements of AGIA, it becomes difficult
to see...
CHAIR HUGGINS: Wendy, could you please give us a page and which
line you're on.
MS. KING: Oh, I'm skipped ahead in the bill, but I'm back on 440
and I'm kind of closing in this section here.
CHAIR HUGGINS: Yes, when you do that if you would just give us a
page and line number, it would help us.
MS. KING: I apologize, Chairman Huggins.
Section 440 again - and I'm going to draw in here...
SENATOR WAGONER: Page?
MS. KING: Page 18, line 22 through 31 again. I'm back to the
reference to the exclusive inducements and also the treble
damages clause.
The exclusive inducements - they include the benefits of
streamline permitting - that's listed in the bill, the office of
the AGIA coordinator - the state coordinator, training for
Alaskans, and creating obstacles to work with resource owners
except with regard to the licensed project. It becomes difficult
to see how an alternative project could be advanced anytime over
the next ten years unless the licensee agrees that the project
is uneconomic or if there was an arbitrator's award saying that
it was uneconomic, that that was not challenged by the licensee.
3:05:51 PM
I want to emphasize, ConocoPhillips is a supporter of
streamlined permitting. We worked very hard on the federal
legislation that was passed with the Alaska Natural Gas Pipeline
Act. If the state is going to pass similar provisions, we
believe they should be available to any project that is being
advanced.
We request that these sections be amended to make it clear that
other projects can advance. So that is particularly the focus in
those sections of 440 on page 18 and I'll go back on pages 16
and 17 to the inducements associated with the Alaska Gas line
Inducement Act coordinator. So that's our first area of...
3:06:31 PM
SENATOR McGUIRE: Wendy, on that point. So you know the theory
behind these inducements if you will and the exclusivity of them
is to get the project going. To incentivize people who have been
similarly situated over the last three decades, two decades,
depending on how you argue it and yet nothing seems to be moving
forward. So would your argument be that these incentives aren't
needed? Or I guess what I'm trying to - and I don't disagree by
the way. I'm very concerned about the treble damages associated
with that section because I think that a lot of those
inducements are things we'd like to offer to anybody that's
willing to develop resource development projects in Alaska.
But I guess my question is, do you think these inducements are
needed in the exclusivity and if not, what is the alternative?
MS. KING: I do believe there are value in these inducements. I
believe that streamline permitting - I believe that the state
helping with the training program - Labor is clearly going to be
a challenge for these projects so I do believe that there are
value in these inducements. My concern stems, again, the
exclusive nature of the inducements. So I do believe - and I
understand your concern of wanting to motivate a gas pipeline
project going forward.
And I believe ConocoPhillips' record since 2000 clearly
demonstrates our commitment to try to move this project forward.
We are doing what we can to do that, but we see that these
inducements should be out there for any project and if the state
takes the chance of tying up those inducements, which would be
normal - Let's just say permitting a project is a normal
sovereign power the state would have. If you give - grant those
exclusively, we could see ourselves - if you've chosen the wrong
winner for some reason - the state's chosen the wrong winner,
being delayed for a decade with those inducements being tied up
to that licensee.
So that's where our concern stems. I do believe there's value in
some of these inducements - particularly those around streamline
permitting and those around getting Alaskans ready for the jobs.
We would prefer to see those apply to any project that is being
advanced. And let the market choose which project goes forward.
3:08:49 PM
MS. KING: The next area that I wanted to talk about is the
resource package. And once again I want to draw our attention to
what do I mean when I say "the resource." The resource, once
again, is getting the owners, the leaseholders, explorers,
whoever else that might want to show up for an open season -
those that would be asked to make the shipping commitments to
the project. And the issues that they face, they're unique in
being asked to make that shipping commitment.
As we stated last month in Senate Resources, the resource risks
have always posed the greatest obstacle to a gas pipeline. The
predominant resource risk that we want to continue to focus on
with the state is in obtaining clarity on the state taxes and
royalties that are needed in order to secure long-term shipping
commitments. Addressing these issues remains a critical
component to make this pipeline a reality.
ConocoPhillips appreciates the recognition of the importance of
resource issues for a proposed gas line project. Sections 300 -
320 in the bill.
CHAIR HUGGINS: Give us your page number and line.
MS. KING: I'm looking them up right now. Page 14, Chairman
Huggins, page 14 is the qualifications for resource inducement.
310 is the royalty inducements.
CHAIR HUGGINS: Line 7
MS. KING: Actually, in moving all the way through pages 14 -16
is the whole package of resource inducements that are in the
bill.
Those sections, 300, 310 and 320 - so pages 14-16 - would not be
in the bill if the administration had not recognized that
changes were needed on the resource side. We also appreciate the
administration identified that fiscal stability is a critical
resource issue by proposing the ten year stability provision.
3:11:19 PM
A troubling aspect of the resource inducement package is the tie
to the exclusivity of the licensed project and the treble
damages clause. So I'm going back again now to section 440 in
the bill. Is the state not willing to provide term inducements
to any potential project that is being advanced and to any party
that underpins the pipeline construction with a firm
transportation commitment? What if the chosen winner makes some
promises that can't be delivered on? What happens if the
licensed project stumbles? Is the state willing to give up their
right to change tax terms and royalty terms, which is a
contractual arrangement, outside of the licensed project without
creating litigation exposure with the licensee? What if the
state picks the licensee but we know that the licensee can not
deliver on what they say? We will not have the right to get
upstream stability and provisions for any other open season on a
different project for up to ten years or expose the state once
again to damages.
We do not want to see the project tied up in exclusive
arrangements or exposed to the larger damages in order to have a
backup plan.
More to the specific side of the resource provisions, we remain
concerned that the provisions in the bill need more work. The
present bill promises to make some changes in the royalty
contracts, but rather than negotiate changes to the contract,
the bill would require the resource owners to accept being
subject to as yet unwritten regulations and the regulations are
subject to change every two years.
3:12:19 PM
The bill promises a degree of protection against potential
changes to the gas production tax, which is a start. However, it
does not identify the protected production tax rate, and the
period of relative stability is insufficient for a project of
this magnitude. In addition, there is no protection against
increases in other taxes that may be aimed at circumventing the
protection. To give an example of that: If you had gas
production tax stability, state corporate income tax could be
increased to offset what you…basically the terms that you had
there. So that balance of looking at the entire tax structure is
something we think is important. We need to develop a complete
resource package, and it's going to require creativity, open
dialogue, and consensus. We believe that developing a resource-
inducement package is important. In fact, [it is] the most
important aspect that will advance a project to a successful
open season--but more work is needed.
3:13:31 PM
The next area that I want to move to is midstream requirements.
My first question is: Why would the state be so proscriptive in
the midstream requirements? The current version of the bill has
a long list of requirements that a party must demonstrate to the
administration's satisfaction before their bid would be reviewed
by the public and the legislature. Any bid that did not meet all
of the bid requirements would be rejected out of hand, even if
it brought the best all-around solutions to the challenges
facing this project. For example, a bid that met every one of
the requirements, but said, "I cannot meet three fixed-date
requirements, because we felt that that might not be consistent
with the best project management tools and skills that are out
there," the bid would be rejected as a non-conforming bid. For
approximately a year, ConocoPhillips has indicated that we have
alternatives on different work commitments if the right resource
framework was in place, but the proscriptive nature of the
requirements would not even allow us to bring that creativity to
the table; it would be rejected as non-conforming bid. Another
example of this is what if a company decided they did not want
the state capital contribution prior to the open season? For our
project, we have estimated it could cost $400 to $500 million to
get to the open season. The bid requirements would require us to
take $200 to $250 million of state contributions to be a
qualifying bid. Should we be required to take that money from
the state as part of the bid?
3:15:08 PM
SENATOR WAGONER: You keep saying 'our requirements'. You talking
producers as a whole, or you talking just ConocoPhillips?
MS. KING: First and foremost, I am always speaking on behalf of
ConocoPhillips; I'm not speaking on behalf of a producer group
or big oil. I am here representing ConocoPhillips. Now with
respect to the second part of that-the midstream requirements
I'm talking here are the ones that are actually laid out in the
proposed AGIA bill. I'll probably get the number wrong, but
there's a number of requirements that are in there that you need
to meet to be considered a conforming bid. And that long list of
requirements is the one that I'm speaking to now, Senator
Wagoner.
One of the few times that a pipeline really has risk in this
project is prior to that open season. I guess there's a question
in my mind, if you're not confident enough that you can have a
successful open season, and you require an inducement from the
state to get through those relatively small costs-we're talking
$500 million out of a project that could be in the magnitude of
$30 billion-you have to question what role you can play in the
project. What about the objectives of the customers, the
shippers? How do you balance the fact that many of these
requirements flow through directly to the shippers? What stops a
pipeline company from promising all of these terms, knowing that
they can pass them on to the shippers and have the benefits of
the exclusive inducements for over a decade? What happens with
an empty promise? How does the state deal with someone saying
they can deliver a particular size pipeline and then eight years
later saying: I can't, I didn't get the firm shipping
commitments, they were inadequate, financing wasn't available,
or FERC wouldn't approve the project? The current bid process
encourages bidders to bid high and then beg forgiveness rather
than to bid realistically. We suggest changing the current list
of bid requirements to bid variables that would be consistent
with the administration's goal of fair and transparent process,
but would allow companies like ConocoPhillips, who have a lot of
experience in these types of deals, to use our creativity. We
understand the state has some must-haves. Isn't it an easier way
to say to the industry, we have these demands: Alaska-hire,
options for gas for Alaskans, rock-solid work commitments, and
others? Please bring us, industry, the most creative solutions
you can to meet those demands. The final area that I wanted to
move to is the mandating expansions and rolled in rates.
3:17:56 PM
Why would the state want to mandate enhancements for late
shippers that could threaten the viability of the basin-opening
project and impair state revenues? ConocoPhillips is the state's
largest explorer, and I draw your attention to this slide here.
And I think we can bring a different perspective to this issue.
From this slide you can see that ConocoPhillips has a strong
land position. The color in orange is lands that we hold that
are ConocoPhillips operated. The ones in yellow are
ConocoPhillips non-operated. We drill a number of exploration
wells in Alaska every year, and we continue to explore in a
region that we know is gas-prone: the NPRA. ConocoPhillips is
concerned that the initial shippers, who will be asked to sign
up for billions and billions of dollars in firm shipping
commitments that will make the pipeline project feasible, are
being asked to take on more risk under the proposed bill than
under existing statutes and regulations. Why would a party sign
up as an initial shipper if I could wait, secure in the
knowledge that an expansion could be mandated and its tariff
mitigated through rolled in rate subsidies? At some point you
have to ask: Are all these promises for explorers actually
driving the behaviors you want?
For over four years, I have heard companies saying they need
more time prior to an open season so they can drill. We have
been actively trying, since 2001, to advance a gas pipeline
project and get the government frameworks in place. These
issues-or explorer issues-have been debated with the federal
legislation-the Alaska Natural Gas Pipeline Act-and have been
debated in front of FERC with orders 2005 and 2005a. And both
times a balance was struck, and there's still no drilling. Why
should I drill now when the state continues to push to provide
guaranteed subsidized rates for those that defer drilling?
ConocoPhillips continues to spend millions of dollars every year
to advance a gas pipeline. We believe the single largest
variable that will motivate new exploration on the slope is a
gas pipeline and a successful open season. With costs going up
the way they are, we are letting a million dollar issue drive
the billion dollar issues. Let's keep our eye on first things
first. Let's compare the risks - the next graph here - that [an]
initial shipper faces versus a later shipper. And I recognize
this is a subjective, qualitative-type analysis, and we might
have debates about whether there should be one and a half X's
here or two X's here. It's more intended to be just an
indication.
3:20:22 PM
I'd flag initial shippers-just going down here through the list-
the initial shippers are going to be asked to sign up for
shipping commitments, potentially a decade before gas is
delivered to the market and with huge levels of uncertainty in
the resulting toll they may have to pay. The cost environment
for those upstream developments that the resources are facing,
and the expenditures that you could be facing, and trying to
advance those upstream developments in parallel to the largest
pipeline project in North America. Let me just highlight this
issue again. We're going to be trying to get our assets ready on
the upstream side-trying to get Prudhoe Bay ready for gas
productions; trying to develop other fields, and for us that can
involve things with NPRA in parallel to the largest private
construction project in the world.
Our upstream developments will be competing with the pipeline
project for the very goods and services that we're going to need
to have the gas ready, and that is a risk that an initial
shipper is going to face in having your gas ready for the day
the pipeline's ready. We do acknowledge that gas reserves and
deliverability-that's a risk that any shipper faces, whether
you're an early shipper or a late shipper. The increased state
take over a period of FT is also there for initial shippers
versus late shippers, but the initial shippers are going to be
asked to sign up for shipping commitments that could last for
decades. A late shipper may not have to sign up for that
duration of a shipping commitment.
3:22:02 PM
The increased tariffs from rolled in rates on expansions--that's
something that the initial shippers will face, and to a degree,
a later shipper might face to, and I'm going to give an example
of that later on here. The project delays that usually account
to more costs; usually projects being delayed, you're spending
more money and it translates to more costs. So, yes, that is
something a pipeline entity carries a risk while they're in the
construction phase, but when the costs are finished, they will
be able to pass them through, in its whole, to the initial
shippers and to the late shippers. And then the pipeline also
has a risk around obtaining those shipping commitments from
credit-worthy parties. Once again, will the market support that
this is the best project to do? I want to just flag: the risks
are very great for the initial shippers, and we think we have to
be careful that we don't set up an environment where you're in a
place where everybody would say: I'd rather be a late shipper.
We have to get the project out of the starting gate. The fact
remains [that] the magnitude of these initial shipping
commitments are huge, at a toll of $3.50 for a 20-year shipping
commitment, that initial shipping commitment can be in excess of
$26 billion for a 1 bcf/day commitment. Now multiply that number
times 4 to get to a 4 bcf/day pipeline; it's about $100 billion
worth of shipping commitments that will sit behind this project
when it has an open season. That value is several times the
value of many of the companies that might apply under this
process. I ask myself, who has the financial strength to sit
behind those types of numbers if natural gas prices plummet for
a period of time, or if a field has deliverability problems? I
also want to emphasize that I'm surprised that access is being
raised as a question. I'm actually not aware that access has
been a problem for anyone to date on the North Slope. Anadarko
is our partner, and Alpine has access to facilities to produce
their oil in NPRA. They have access to TAPS. We know their spare
capacity in TAPS, and we have demonstrated a willingness to work
facilities access with parties like Pioneer.
3:23:48 PM
With respect to the Alaskan Natural Gas Pipeline, the US
Congress already created an unprecedented provision with
mandated expansion provisions to ensure access to this pipeline.
She emphasized that there's no similar provision on any other
pipeline in the Lower 48 than the mandated expansion that was
passed in section 105 of the Alaska Natural Gas Pipeline Act. If
a shipper is willing to sign up for firm shipping commitments,
which translates to pay for the expansion, and can demonstrate
that that expansion won't require others to subsidize it, the
FERC can order an expansion of the Alaska Natural Gas Pipeline.
In addition, there's absolutely no issue with a party making a
firm shipping commitment on the gas pipeline project, even if
you haven't found gas. You just need to be prepared to pay the
toll. Isn't the real issue here not access, but the cost of that
access? I understand why the state wants to create enhancements
for exploration.
3:25:03 PM
As an explorer I'm happy about that. We want to see new gas
volumes, we want co-venturers to explore with Unalaska's North
Slope, and I think I've communicated this before, but it's
pretty risky drilling exploration wells at one hundred percent
dollars; we like to have partners to explore and help spread our
risks. We are the state's largest explorer and we can see both
sides of the equation on many of these issues regarding
expansions and rolled-in rates. ConocoPhillips does not oppose
the application of rolled-in rates, for some expansions.
3:25:39 PM
We do have some concerns with mandating that application, that
application, for all potential expansions. We are not opposing
the language in FERC order 2005 and in 2005 A, that grants the
presumption of rolled-in rates. I'm going to read from that
order 2005:
3:26:00 PM
In conclusion, to provide guidance to potential
shippers in advance of the initial open season that is
subject of this rule, the commission intends to
harmonize both objectives: rate predictability for the
initial shippers, and reductions of barriers to future
exploration and production in designing rates for
future expansions of any Alaska natural gas
transportation project. It is consistent with our
guiding principle that competition favors all of the
commission's customers as well as with the objectives
of the act to adopt rolled-in treatment up to the
point that would cause there to be a subsidy of
expansion shippers by initial shippers if any subsidy
were to be found.
That's on page 44 and 18 CFR part 157 order number 2005, which
was February 9, 2005. Let me illustrate a few concerns with the
approach we have with mandating rolled-in rates for all
expansions and mandating expansions that may be commercially
unreasonable. Some of the exploration volumes could be from
federal or private lands and some may even be from lands that
the state can't tax. I'm drawing your attention to this graph
here that was in your pack. This is here just to kind of
illustrate - we tend to focus a lot of our attention right here,
on this little circle in blue here, where the existing
infrastructure is. But in reality, these exploration volumes
we're talking about are likely going to be in the Chukchi [Sea],
the Beaufort [Sea], NPRA, ANWR [Arctic National Wildlife
Reserve], and the foothills, so we tend to focus in on a small
area and the exploration volumes are going to be out in these
different regions.
If you skip then to the next slide that I've got in the pack,
these are from public ally available sources from different -
the United States Geological Survey assessments, and I've put
the dates down as to when the different assessments were made,
but I'd like to draw your attention to the three biggest numbers
on here: the 83, the potential, the largest potential areas; 83
tcf in NPRA, 72 tcf in the Beaufort, 210 tcf in the Chukchi -
and I've worked on these, these are technically I think
recoverable-type numbers. But those three biggest numbers are in
areas where the state has no royalty, or no, or some of these,
not even production tax. Let me explain an example of where I
think, from the state's perspective, you might question whether
or not mandating rolled-in rates would work.
Prudhoe Bay has a toll, for example, of four bucks. There's an
expansion that comes along that says the toll would go up to
four-sixty, a fifteen percent increase. The state would receive
less royalty in production taxes, less permanent fund
contributions from Prudhoe Bay by the fact that the toll was
going up. Now many people have argued saying, there could be
state-wide inducements or benefits from that other [indisc.]
exploration coming in here. But what if that exploration volume
is from a field in the Beaufort where the state has no royalty
or no production taxes from it. So you would be in a place where
you're receiving less royalty and less production taxes from
Prudhoe Bay, but no new revenue coming in from that field,
coming from the Beaufort. And I do acknowledge there's gonna be
some socio-economic benefits of having developments going on in
the Beaufort, but you will not be getting a revenue stream
directly from those developments. Another example of mandated
rolled-in rates which could be problematic is an NPRA example.
3:29:16 PM
What if we are successful in NPRA after initial open season and
we think we've got a good expansion; 800 million a day, cubic
feet a day, kind of expansion? And I'm actually just grabbing
numbers for illustrative purposes, I'm not actually calculating.
The toll, once again, let's just say the toll was four bucks. If
that toll, due to this 800 million-a-day expansion, through the
application of rolled-in rates, was a good expansion, you might
see the toll go down for everybody to $3.80. That explorer that
was making the development decision to produce or develop that
field said the toll is $3.80. It looks like I should go ahead
with this development. Five years later, there's another
expansion where the toll would go up to five bucks because it's
an expansion from the Beaufort. You made your investment
decision thinking that you had a $3.80 toll, and all of a sudden
now you're facing a five dollar toll. That's the type of
uncertainty that even as an explorer or a late-shipper, you
might be exposed to by mandating rolled-in rates.
Another example would be, for example, if there is some short-
haul service to Fairbanks, and short-haul means that you just
said I want to take capacity out on open season just to ship my
gas from the North Slope to Fairbanks, and let's just assume
that that toll was fifty cents. If there was an expansion, they
could be exposed to the toll going up from fifty cents to fifty-
seven point five cents and all of a sudden, consumers in
Fairbanks are saying, why am I having to pay more to transport
the gas when there's an expansion coming in from somewhere else
that's not delivering any more volumes here? So there's both, on
the customer end, as well as on the shipper end, scenarios where
mandating rolled-in rates may not be in the best interest of all
the parties involved. All we are suggesting is let the FERC be
the adjudicator on this issue.
3:31:08 PM
ConocoPhillips might very well be the company in there arguing
for the application of rolled in rates, and the state might want
to be on the opposite side, or vice versa. Our perspective is,
we just don't know what the expansions might look like, what
they might come from.
FERC has rebuttable presumption of rolled-in rates that's not
being challenged. What we'd say is just let the FERC adjudicate
those issues and all of us have the flexibility then to argue
our case for whether we think the subsidy's been made at that
point in time in the future. I'd also highlight that there are
many tools in the state's toolbox to deal with the issue of
enhancing exploration and motivating expansions, including
things like royalty reductions and tax credits. The state could
put a capital contribution in on an expansion at some point in
the future; there's many tools in the state's toolbox to incent
that exploration. What is inappropriate, though, is to require
the initial shippers, the ones who have already taken
exploration risks to find the existing known resource, you'll be
taking on the multi-billion dollar risk that will make this
pipeline possible, to subsidize those that have not yet taken
those risks. We can't let unknown gas prospects that could take
a decade to explore, appraise, and develop, drive the timing and
development of the approximately 35 tcf of known resources, and
the largest private construction project in North America. I'll
conclude my remarks today by summarizing what I think are the
key issues.
3:32:28 PM
ConocoPhillips is ready to solve issues with the Alaska
Legislature and the governor. We want to actively work with you
to achieve a framework that promotes the development of the ANS
gas resources and addresses the legitimate interests of all
parties.
The key to advancing the gas pipeline is really to address the
resource issues and providing adequate security to companies so
that they can make the long-term shipping commitments, is the
critical issue that will result in a project. We urge you to not
lose sight of this fundamental issue. The project is so
difficult that we have to be on the same team and we have to
recognize that compromise, like in all major decisions in life,
is necessary for all parties. We have to have focus on doing
what it takes to get this project moving forward. We can't lose
sight - the costs are going up on the project. The recent
announcement on the MacKenzie Delta project - the costs
increasing confirms this, and should make us all step back and
pause for a second.
We need to remember the real prize: the tens of billions of
dollars in new tax and royalty revenues, the countless jobs, the
new economy that will be created with a new gas exploration and
development industry for decades to come. To achieve this prize
the risk must be realistically addressed and risk and rewards
must be balanced. We've had thirty years of an oil economy; we
need to look forward to a new gas economy. We need to find a
creative way to make it happen. No company will work harder than
ConocoPhillips to make this project a reality. I'd be happy to
try to answer any of your questions.
[End of Ms. King's verbatim transcript]
3:34:03 PM
SENATOR WAGONER asked for a copy of Ms. King's testimony.
MS. KING responded that she didn't have a copy of her testimony,
but she offered to have individual conversation with anyone on
the committee on the points she made.
3:35:03 PM
SENATOR WAGONER said while he realized that ConocoPhillips is
the explorer, and the other two major aren't, "The two biggest
supplies of gas have already been explored for and we already
know where they're at." He had a problem with her statement
about exploration risk because "there's not a lot risk in some
cases."
3:37:43 PM
MS. KING responded by illustrating a risk that she saw. She
worked in the United Kingdom for a while in the Southern Gas
Basin that had a known resource that was producing very well.
One particularly cold winter, a very unexpected event happened
in the reservoir and they were unable to produce gas from that
field for an entire winter. She emphasized that those types of
things happen. When someone takes on a huge shipping commitment
risk from an asset the size of Prudhoe Bay, if something went
wrong that is a huge risk.
I would not just assume because the resource is found
that we have all the answers and there's not going to
be risk associated with production and deliverability
- even from the known resource. The other point I
can't articulate on other companies' exploration
strategies, but what I do believe is that the federal
government is going to be paying very close attention.
The FERC will be paying very close attention to insure
that access is provided to those that have all volumes
in the state. And as an explorer - and I've had people
say 'You're an explorer producer, but you want to take
an ownership position in the pipe, so it's all money
going from one to the other.' Well, I would argue or
at least point out to people that when we say we want
to align our ownership interest in the pipe with our
shipping commitment, that's based on the initial
volumes.
If we have exploration volumes, we very well might not
be aligned on those issues. And so, once again, we
could find ourselves in a different situation as an
explorer. We still believe the best alternative is to
be able to lay out the facts at the time the expansion
is being advanced - Was a party willing to sign up for
shipping commitments? Is it going to result in a
subsidy? And let the FERC see the facts at that time
and be the adjudicator.
And we know that if we're the ones that believe that a
subsidy is happening, the FERC is starting with a
rebuttable presumption of rolled-in rates. So, you've
got a little bit of a hurdle to get over to show that
there is a subsidy. But we believe that that is the
best venue to be able to deal with the specific facts
at that point in time.
3:38:54 PM
And then I'd, once again, go back to the point of you
as a state have many vehicles at that point in the
future to enhance that exploration. If a discovery is
made and it's struggling economically, there are many
tools in your toolbox that you can use with specific
facts, then, knowing where that field is coming from.
Knowing what its impact will be on the pipeline
project as a whole, you can weigh the balance of that
say what inducement is appropriate at that point in
time in the future - to get that exploration volume
into the markets in the Lower 48.
3:39:43 PM
CHAIR HUGGINS said he thought an important component was her
ability to communicate directly to the people who designed AGIA.
He asked if she had that opportunity.
MS. KING replied that she met with the administration two times
in January and had a couple of informal meetings after that, but
she has not had a lot of formal dialogue to date. She hastened
to add that she felt that Commissioner Irwin and Commissioner
Galvin were anxious to talk.
3:41:03 PM
CHAIR HUGGINS said he thought it important to communicate with
the ones who wrote the bill.
MS. KING agreed saying the issues are complex and it's critical
to have the talks.
3:42:25 PM
CHAIR HUGGINS asked her to say a few more words about the open
season.
MS. KING said:
The critical milestone that I see for this project is
that open season. That's when a pipeline entity comes
forward and says, 'Here's the services that we think
we can provide; here's the cost we think we can
provide them at.' And at that point in time, each
potential customer is going to go back - each
potential shipper is going to go back - and say, 'With
what I know now - and there's still some questions
that need to be addressed as potential shippers - I'd
flag as a working interest owner in Prudhoe Bay, we
are still working with the Alaska Oil and Gas
Conservation Commission to find out what is the
appropriate off-take rate for gas out of Prudhoe Bay.
I've had a lot of people ask questions about Prudhoe
Bay - is a complex - it's an excellent field. But it's
a complex field in that that gas has been working hard
for decades to produce more and more oil out of that
field. When you start taking that gas off, there will
be impacts in the reservoir doing that. That's one
issue that the working interest owners in Prudhoe Bay
will need to work through with the AOGCC to be ready
for that open season. That's just one of the many
issues that will need to be ready for that open
season. But when that open season happens, that's when
the customers are going to have to say, 'Look, I've
weighed the risks. This is what I think the market is
going to be doing. These are what I think I can
deliver from my assets. This is what I think the
eventual costs will be on the project and how they'll
get translated back to me.'
And that will be a signal of - when a customer is
willing to say 'I'm willing to sign up for a 20 - 25
year shipping commitment, that the markets are
supporting, that this project is ready to go forward.'
It still doesn't mean that the project is guaranteed,
because there still could be opportunities where the
costs increase dramatically after you get going, but
it indicates the market is ready to try to move the
project forward. And so it is a critical milestone.
3:44:31 PM
REPRESENTATIVE SAMUELS said he was going to ask her two
questions that he asked Mr. Massey as well. He asked regardless
of who the licensee is, if the bill passed and ConocoPhillips
wanted to come to an open season and ship 1 bcf/day and the
partners chose not to, or just BP came or however it worked out,
is that possible to do under the operating unit agreement or "do
you all have to swim together?"
MS. KING replied that question is actually a complex question
that will have to be handled on a case by case basis depending
on the circumstances at the time. She explained:
We do have long-term agreements with out fellow
working interest owners and we have to - like I
mentioned there are some real complex issues here.
There's the impacts on oil. If one party starts to
take gas off, it's going to have an impact.
And so - another one is impurities. We all have
discussed that Prudhoe Bay has 12 percent co2. What
happens if one party wants to start putting more co2
back into the ground? So, it's a complex question and
I know there have been frustrations about can't you
provide a clear answer on this. But I would highlight
it is just going to have to be a case by case
situation. We will have to assess what the other
producer wants to do, what we need to do. We're going
to have to assess what the governing agreements
actually say and we're going to have to assess what
the governing agreements actually say and we're going
to have to assess whether or not the impact on the
working interest owners and the arrangements - what
would be necessary to accommodate what each parties'
reasonable concerns are. So, it's not a clear answer
and it would require a lot of review on a case by case
basis.
3:46:24 PM
REPRESENTATIVE SAMUELS said one of the frustrations the drafters
of AGIA had with exclusivity is without it, no one would play
because you [the producers] had the gas and an automatic leg up
on everybody.
He asked if she had any other thoughts on work commitments so
that something actually happens to move the project forward
"without having to pick the winner before the race starts."
3:48:09 PM
MS. KING said that ConocoPhillips believes more can be done from
its perspective on work commitments. However, hard dates make
them nervous, not because they don't want to go forward with the
project, but because this is the largest private construction
project in the North America and "having a cost blow out on the
other end because you were driven by a date."
She emphasized the critical issue is to have the frameworks in
place that address the resource issues. She added that's why she
thought moving the midstream bid requirements to bid variables
would allow ConocoPhillips the flexibility to go back and bring
some sharp minds together to look for creative solutions.
3:49:35 PM
SENATOR WIELECHOWSKI asked if the Prudhoe Bay operating
agreement has a provision that says if one producer takes a
certain amount of gas, then all the others have to also.
MS. KING replied that she hadn't read the Prudhoe Bay operating
agreement, but that does not mean such a provision does not
exist. She flagged again that those issues are considered on a
case by case basis.
3:50:56 PM
SENATOR WAGONER asked if ConocoPhillips would participate in an
open season if AGIA were modified.
MS. KING answered that she wouldn't say what would happen at
some point in the future, but emphasized that the four key areas
she mentioned earlier need to be worked on to try to get a gas
pipeline project moving forward under AGIA. That is their first
priority right now.
SENATOR WAGONER asked if the actual cost of the project will not
be known until it is completed no matter who offers the first
open season.
MS. KING answered yes, but she added that ConocoPhillips has
experts and they have learned that good front-end engineering
design can save billions of dollars on the backside.
That's an important aspect of skills that I think we
as a company can bring to the table in the
construction of one of the largest private
construction projects in North America - is bringing
those types of skills to say, 'We need to take this
pause here because if we spend a little bit more money
right now, if we spend $10 million right now studying
this issue, it could save us billions of dollars
later.' Those important aspects are something we think
we can bring to the table as a participator in a
pipeline project going forward.
3:53:24 PM
SENATOR WAGONER asked the status of ConocoPhillips' facility
sharing agreements with Pioneer.
MS. KING replied she didn't know the answer, but she knew they
were working on it.
SENATOR WAGONER asked her to follow up on that.
3:54:23 PM
REPRESENTATIVE SAMUELS recapped that Ms. King said it could cost
ConocoPhillips $400 million to get to an open season, but the
administration testified it would cost $50 million to $200
million. That would work out to $25 million to $100 million for
the state's matching 50 percent. He asked why there is that much
of a discrepancy in getting to an open season estimate and how
fast ConocoPhillips could get to an open season "if you are
queen for a day."
MS. KING replied with a few points. First, that ConocoPhillips'
estimate in 2001/2002 was that it would take approximately $400
million to $500 million to complete an open season in its
success case timeline. In May, they indicated approximately 18
months before an open season would be started. FERC requires 90
days to approve the open season plans and 90 more days to hold
it. The proposed AGIA does not have requirements before an open
season and she thought that meant an open season could be held
after spending just $10 million and then be in the state
matching section after that. She elaborated:
It has no clear threshold that one open season has to
be like another open season and that different people
might do different pieces of work prior to an open
season. Our schedule was we wanted to have four
seasons of environmental field data that we need to
get. We wanted to be doing that in parallel to the
commercial work of getting an open season. So, when
the open season was completed, we would be ready to
submit our applications to the FERC and to the NEB.
So, we had some parallel activities.
But it is not to say that all project sponsors would
necessarily hold an open season at the same timeframe.
So, that could be why you're seeing some of the
discrepancy in the numbers. But I will reiterate, it
was the $400 million to $500 million - was the work
that we had done previously to complete an open season
and roughly two years from when you start - on a
success case schedule.
3:57:37 PM
REPRESENTATIVE SAMUELS recapped that Ms. King had just said
ConocoPhillips could do a cheaper open season, but if it had
already spent the $400 million, how much more money would it
spend to get the certificate. He wanted a total figure.
MS. KING replied that ConocoPhillips' 2001 figures would be
going up. It would take some strong engineering and regulatory
work to do an updated cost estimate for this project. It cost
$125 million the first time; it's not a simple undertaking to
update it. In 2001 they thought it would take another $500
million to get a FERC certificate - about $1 billion total. Then
the construction decision would be made and that's when you
start to spend the $19 plus billion associated with the pre-
construction and the construction phase.
3:58:59 PM
REPRESENTATIVE SAMUELS asked if someone could do an open season
for less than $50 million, would they just have less information
for the shippers. Would you trust the tariff a little bit less
or what?
MS. KING replied that one wouldn't trust the estimate. That
would be a key question if someone held an open season very
soon. Other than the six-month FERC requirement, it's more how
one thinks is the best way to manage the project. She didn't see
anything in the bill that would foreclose someone holding an
open season sooner than ConocoPhillips' timeframe. "It's just
that we felt that was the best way to manage the project."
4:00:15 PM
REPRESENTATIVE SAMUELS asked using a relatively large project -
the Rocky Mountains Express as an example - did they spend half
their money getting to open season and the other half to get the
certificate.
MS. KING replied that she didn't have those figures, but some of
her colleagues pointed out to her that the breadth percentage
they were thinking was consistent with some of the other major
pipeline projects. She offered to follow up on that a little
more.
4:00:55 PM
CHAIR HUGGINS went to page 11, lines 14 - 25, on exclusivity. He
recapped what someone said to him - that the state is now
managing failure. The AGIA sets a timeline of five years and if
gas was $7.50 that would cost the state about $12 billion to $13
billion. He asked her for ConocoPhillips' take on that
provision.
MS. KING replied:
This section of [43.90] 210 (b) and (c) - my read on
it is pretty clear. If you've had a successful open
season, and you've got your FERC certificate and
you've credit support, you have to commit - let me
just flag in (a) first. You have to accept the FERC
application, which FERC has the right to put
conditions on a certificate. So, this would be
requiring somebody to accept that FERC certificate in
(a). (b) then says once you've accepted that FERC
certificate, that you have one year to go forward to
project sanction and if you don't have credit support,
you still have the exclusive inducements in this
chapter for another 5 years - or another 4 years - I
guess - depending on whether you're counting the one
year. You still have the exclusive inducements under
this chapter all the way through that time even if you
haven't had credit support.
Now, one question that we are still evaluating is
normally, I believe, and I apologize, I did not have
time to listen to the FERC's testimony this week, but
my understanding is that normally FERC would say you
have 1 - 2 years after you receive a certificate by
which you need to go forward with construction. And
it's predominantly because the environmental data that
you've based your environmental analysis on, your
environmental impacts, will start to get stale - if
you sit on a certificate for too long. So, I don't
actually know how the FERC answered those questions if
they were asked in the other hearing. But what I would
flag is that it seems unusual to provide such an
extended period of time after a FERC certificate if
the market is in support of it.
So, you've gone through a period where potentially you
could have had 4 or 5 years just to get to the FERC
certificate and then another 4 or 5 years on top of
that and so that's where I came up to the estimate of
10 years that you could have the exclusive rights
under section [43.90.]440.
4:04:52 PM
CHAIR HUGGINS responded that's what he thought. He was concerned
about the state's exposure to having to help a company that was
going bankrupt - or whatever - and if it was going to continue
for the next five years it would look to the state of Alaska
specifically. He asked if she disagreed with that.
MS. KING agreed that the state has some exposure to parties
coming back to it questioning about how to go forward. "And you
will have invested a substantial amount of time and money at
that point and I understand the analysis of delays."
CHAIR HUGGINS mentioned he commonly hears "We [the State of
Alaska] would be leveraged to an extreme degree if we wanted to
continue on with that licensee" and asked if she was familiar
with it.
MS. KING replied that she had heard the term "leveraged" a
couple of times.
CHAIR HUGGINS thanked her very much for her remarks and
adjourned the meeting at 4:06:32 PM.
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