Legislature(2007 - 2008)BUTROVICH 205

02/04/2008 03:30 PM Senate RESOURCES


Download Mp3. <- Right click and save file as

Audio Topic
03:39:22 PM Start
03:40:41 PM Little Susitna Construction & Prime Subcontractor: Sinopec Dominic Lee, Tammie Smith, Wayne Lewis
05:18:52 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Presentation: TELECONFERENCED
Little Susitna Construction & Prime
Subcontractor: SINOPEC
-- Testimony <Invitation Only> --
+ Bills Previously Heard/Scheduled, if TELECONFERENCED
Necessary
                      ALASKA STATE LEGISLATURE                                                                                
                 SENATE RESOURCES STANDING COMMITTEE                                                                          
                          February 4, 2008                                                                                      
                              3:39 p.m.                                                                                         
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Senator Charlie Huggins, Chair                                                                                                  
Senator Bert Stedman, Vice Chair                                                                                                
Senator Lyda Green                                                                                                              
Senator Gary Stevens                                                                                                            
Senator Bill Wielechowski                                                                                                       
Senator Thomas Wagoner                                                                                                          
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Senator Lesil McGuire                                                                                                           
                                                                                                                                
OTHER LEGISLATORS PRESENT                                                                                                     
                                                                                                                                
Senator Joe Thomas                                                                                                              
Representative Kurt Olson                                                                                                       
Representative Jay Ramras                                                                                                       
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
Presentation   by    Little   Susitna   Construction    &   Prime                                                               
Subcontractor:  Sinopec - Dominic Lee, Tammie Smith, Wayne Lewis                                                                
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
No previous action to record                                                                                                    
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
DOMINIC S.F. LEE, P.E., President                                                                                               
Little Susitna Construction Company (LSCC)                                                                                      
Anchorage, AK                                                                                                                   
POSITION STATEMENT:  Gave presentation on behalf of LSCC and                                                                  
answered questions.                                                                                                             
                                                                                                                                
TAMMIE SMITH, General Manager                                                                                                   
Little Susitna Construction Company                                                                                             
Anchorage, AK                                                                                                                   
POSITION STATEMENT:  Gave overview of gas pipeline proposal with                                                              
subcontractor Sinopec ZPEB.                                                                                                     
                                                                                                                                
WAYNE LEWIS, Vice President                                                                                                     
Yukon Pacific Corporation                                                                                                       
POSITION STATEMENT: Commented on Sinopec gas pipeline proposal.                                                               
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
CHAIR  CHARLIE  HUGGINS  called  the  Senate  Resources  Standing                                                             
Committee meeting  to order at 3:39:22  PM.  Present at  the call                                                             
to  order were  Senators Green,  Stevens, Stedman,  Wielechowski,                                                               
Wagoner, and Chair  Huggins.  Senator McGuire was  excused.  Also                                                               
in attendance  were Senator Joe  Thomas and  Representatives Kurt                                                               
Olson and Jay Ramras.                                                                                                           
                                                                                                                                
   ^Little Susitna Construction & Prime Subcontractor:  Sinopec                                                             
              Dominic Lee, Tammie Smith, Wayne Lewis                                                                        
                                                                                                                                
3:40:41 PM                                                                                                                    
CHAIR  HUGGINS  announced  the  presentation  by  Little  Susitna                                                               
Construction Company (LSCC) and  its prime subcontractor, Sinopec                                                               
ZPEB of China.                                                                                                                  
                                                                                                                                
DOMINIC S.F.  LEE, P.E.,  President, Little  Susitna Construction                                                               
Company, introduced  Tammie Smith of  LSCC and Wayne  Lewis, Vice                                                               
President, Yukon Pacific Corp., noting  he'd only met Mr. Lewis a                                                               
month ago.                                                                                                                      
                                                                                                                                
CHAIR  HUGGINS drew  attention  to  a completeness  determination                                                               
dated  January 4  from the  governor to  Mr. Lee with  respect to                                                               
LSCC's  application  under  the  Alaska  Gasline  Inducement  Act                                                               
(AGIA).    He remarked  on  the  apparent  merit and  quality  of                                                               
preparation.  He thanked LSCC for submitting an application.                                                                    
                                                                                                                                
3:42:26 PM                                                                                                                    
TAMMIE  SMITH,  General   Manager,  Little  Susitna  Construction                                                               
Company, began  a slide  overview of  LSCC's "Alaskans  First Gas                                                               
Pipeline"  proposal  submitted   November 30  with  subcontractor                                                               
Sinopec ZPEB;  a hard copy  was provided.   She told  members the                                                               
proposal was for  an 800-mile, 48-inch gas  pipeline from Prudhoe                                                               
Bay  to  Valdez along  the  Trans-Alaska  Pipeline System  (TAPS)                                                               
corridor.  Designed to deliver 4.5  to 5 billion cubic feet a day                                                               
(Bcfd),  expandable to  7 Bcfd,  it would  terminate at  Anderson                                                               
Bay, two miles beyond the  current Alyeska oil pipeline terminal;                                                               
there  would be  a liquefied  natural  gas (LNG)  facility and  a                                                               
natural gas liquids (NGL) plant and  LNG storage plant there.  It                                                               
might be possible to do the NGL plant elsewhere in the state.                                                                   
                                                                                                                                
MS. SMITH said  a marine terminal would be built  at Anderson Bay                                                               
for  docking and  loading of  LNG tankers.   Sinopec  proposed to                                                               
provide 20 LNG  tankers to transport LNG from Valdez  to China, a                                                               
$7 billion  value that isn't  part of the  proposed cost.   A 24-                                                               
inch  spur line  from  Glennallen  to Beluga  would  be built  to                                                               
supply  Southcentral  Alaska  with   gas  for  home  heating  and                                                               
electrical generation; most likely,  it would be subcontracted to                                                               
the Alaska  Natural Gas Development  Authority (ANGDA)  to design                                                               
and build,  since ANGDA  already has so  much of  the preliminary                                                               
engineering and environmental studies completed.                                                                                
                                                                                                                                
MR.  LEE, in  response to  Chair  Huggins, noted  that after  the                                                               
proposal was submitted he had  talked with ANGDA's Harold Heinze,                                                               
who'd  mentioned working  as  a team,  possibly  with the  Alaska                                                               
Gasline Port Authority ("Port Authority") or others in Alaska.                                                                  
                                                                                                                                
3:45:32 PM                                                                                                                    
MS.  SMITH noted  a  minimum  of five  delivery  points would  be                                                               
provided  at  locations  such as  Fairbanks,  North  Pole,  Delta                                                               
Junction,  Glennallen,  and  Valdez;   those  could  be  changed,                                                               
depending  on  supply and  demand.    Propane  and LNG  would  be                                                               
shipped from Valdez  to over 100 Alaskan  communities for heating                                                               
and  electricity  generation.    This  all-Alaska  project  would                                                               
provide  20,000 construction  jobs over  3-4 years  to build  the                                                               
pipeline, and  approximately 5,000 good-paying permanent  jobs to                                                               
operate  and maintain  the infrastructure  for 30-50  years.   It                                                               
also would  create good permanent  jobs in support  of associated                                                               
industries and facilities related  to the petrochemical industry,                                                               
transportation, and distribution.                                                                                               
                                                                                                                                
MS. SMITH showed  a slide depicting the pipeline  route, with red                                                               
dots showing places  to which the propane would be  shipped.  She                                                               
noted the project team would consist  of LSCC with the support of                                                               
its Chinese  subcontractor, Sinopec,  along with  up to  20 other                                                               
U.S. and Alaskan  companies that would be  involved in completing                                                               
this project because of its size.                                                                                               
                                                                                                                                
3:46:55 PM                                                                                                                    
MS. SMITH provided  background, noting LSCC is  a 28-year Alaskan                                                               
firm  providing  architectural,  engineering,  construction,  and                                                               
construction  management  throughout   Alaska  and  ten  Lower 48                                                               
states.  It  is headed by Dominic  Shi Fong Lee, P.E.,  who has a                                                               
bachelor of science and master's  of science degree in electrical                                                               
engineering  as  well as  a  master's  degree in  mechanical  and                                                               
aerospace  engineering, all  from the  University of  Missouri at                                                               
Columbia; he  also has  three years of  graduate study  in arctic                                                               
and  civil  engineering at  the  University  of Alaska  Anchorage                                                               
(UAA).    A  professional mechanical  engineer  and  professional                                                               
electrical engineer  since 1974,  Mr. Lee  holds these  dual P.E.                                                               
licenses in Alaska and 10 other states.                                                                                         
                                                                                                                                
MS. SMITH  said LSCC got its  start in Alaska by  designing North                                                               
Slope projects  for ARCO's Kuparuk  oil field for over  10 years.                                                               
There is an  awareness of the harsh conditions and  what it takes                                                               
to operate.   Since  1980, LSCC  has been  providing construction                                                               
and  construction  management  services  for  projects  all  over                                                               
Alaska for  clients such as the  U.S. Coast Guard, Army  Corps of                                                               
Engineers,  Air  Force,  Army,  General  Services  Administration                                                               
(GSA),  and  U.S.  Postal  Service;   the  Alaska  Department  of                                                               
Transportation  and Public  Facilities; and  the City  of Barrow,                                                               
City of  Valdez, City  of Bethel,  Fairbanks North  Star Borough,                                                               
Matanuska-Susitna Borough,  Municipality of Anchorage,  and other                                                               
local governments and school districts.                                                                                         
                                                                                                                                
3:48:31 PM                                                                                                                    
MS. SMITH turned  to Sinopec, saying it's the  second largest oil                                                               
and gas company  in China, comparable in  size to ConocoPhillips,                                                               
with 2006 revenues  of $155 billion and profits  of $9.2 billion.                                                               
Traded on  the New York Stock  Exchange (NYSE), it has  more than                                                               
500,000 employees in China and overseas.                                                                                        
                                                                                                                                
MS.  SMITH said  Sinopec  doesn't  want to  own  or operate  this                                                               
pipeline.  Rather,  it wants to purchase LNG from  Alaska for the                                                               
following reasons:   1) Alaskan gas  will be a stable  and secure                                                               
energy  source, 2) it  is prudent  to  have a  diverse supply  of                                                               
energy, 3)  the Chinese are  eager to purchase  Alaskan resources                                                               
outside  what  they  currently  do  in  the  lumber  and  fishing                                                               
industries, and 4) there  is a desire to purchase  LNG to balance                                                               
trade with the U.S.                                                                                                             
                                                                                                                                
MS.  SMITH noted  three Sinopec  divisions would  be involved  in                                                               
this project.   The first, Sinopec ZYEC, is the  design branch of                                                               
Sinopec  Engineering Company,  with  400  licensed engineers  and                                                               
technicians  that   design  oil   and  gas   pipelines,  pressure                                                               
pipelines,    oil-gas    gathering   facilities,    long-distance                                                               
pipelines, and LNG  plants.  It has designed all  Sinopec oil and                                                               
gas  projects  since  1980,  including   a  2,200  kilometer  gas                                                               
pipeline from Sichuan to Shanghai.                                                                                              
                                                                                                                                
MS. SMITH said the second  division, Sinopec ZPEB, is responsible                                                               
for construction  and operation of  Sinopec's oil and  gas fields                                                               
in China  and builds and  operates gas pipelines,  oil pipelines,                                                               
and LNG facilities.   For this project, it would  serve as LSCC's                                                               
general contractor  for the pipeline  and LNG facilities,  and it                                                               
would coordinate the purchase of steel and equipment.                                                                           
                                                                                                                                
MS.  SMITH said  the third  division, Sinopec  International, has                                                               
authority  to approve  or  disapprove  any Sinopec  international                                                               
activities.   It is  the entity  that provided  authorization for                                                               
the teaming  agreement with  LSCC, and it  will assist  LSCC with                                                               
financing for  this project.   Ms. Smith turned  the presentation                                                               
over to Mr. Lee.                                                                                                                
                                                                                                                                
3:51:27 PM                                                                                                                    
MR.  LEE noted  he'd mostly  written the  proposal himself,  with                                                               
help  from   staff  and  a  petroleum   engineer.    Highlighting                                                               
globalization, he  said an Irish  friend sent an e-mail  about an                                                               
English  princess with  an Egyptian  boyfriend who  crashed in  a                                                               
French tunnel while driving a German  car with a Dutch engine; it                                                               
was driven by a Belgian drunk  on Scotch whiskey who was followed                                                               
by Italian paparazzi on a  Japanese motorcycle and was treated by                                                               
an American doctor.   People may read this using  a computer that                                                               
has  Taiwanese   chips  and  a   Korean  monitor,   assembled  by                                                               
Bangladesh workers  in Singapore, handled  by an Indian  hired by                                                               
an Indonesian, unloaded by Sicilian  longshoremen, and trucked by                                                               
a Mexican.  That's globalization.                                                                                               
                                                                                                                                
3:54:00 PM                                                                                                                    
CHAIR HUGGINS welcomed Representative  Kurt Olson and Senator Joe                                                               
Thomas.                                                                                                                         
                                                                                                                                
MR. LEE showed  slides on why LSCC's project is  best for Alaska,                                                               
Alaskans, and the U.S.  The first had the following points:                                                                     
                                                                                                                                
     1.   The  "Alaskans  First Gas  Pipeline" proposal  has                                                                    
     brought  to the  table what  no other  entity has  been                                                                    
     able to  produce for the  past 30 years:   a commitment                                                                    
     to purchase  North Slope  gas in  sufficient quantities                                                                    
     to enable  a project to  be built that  is economically                                                                    
     viable.                                                                                                                    
                                                                                                                                
     Sinopec's commitment:                                                                                                      
     - 4 Bcf of natural gas per day or                                                                                        
     - 30 million tons of LNG per year                                                                                          
        - A $500 to $800 billion trade surplus to U.S. in the                                                                   
     next 30 years                                                                                                              
                                                                                                                                
MR. LEE  mentioned a  $200 billion deficit  every year  to China.                                                               
He'd studied  three routes from  Prudhoe Bay: to Chicago,  to the                                                               
Beluga field, and  to Valdez.  He recalled that  the governor had                                                               
spoken  for an  all-Alaska pipeline  during her  campaign.   He'd                                                               
compared the three routes.  The  one to Chicago is 3,600 miles to                                                               
bring the  gas to the  Lower 48.  It  would require more  than 70                                                               
compressor stations, each using a  lot of energy; the price would                                                               
be the Chicago or Henry Hub price, about $7 or $8 maximum.                                                                      
                                                                                                                                
MR. LEE said  the second route studied, to the  Beluga oil field,                                                               
peels off  from Fairbanks, going through  state, federal, Native,                                                               
private, and  borough land.   The required  environmental studies                                                               
and permitting  would take a  long time,  and it would  require a                                                               
lot of  gravel for  the foundation  and so  on.   Furthermore, it                                                               
isn't  suitable for  150,000-ton  tankers  because of  wintertime                                                               
ice, and it isn't that deep.                                                                                                    
                                                                                                                                
3:57:55 PM                                                                                                                    
MR.  LEE  explained  the  chosen  route, to  Valdez.    The  TAPS                                                               
corridor already exists, two miles  wide.  A natural gas pipeline                                                               
should  be able  to  be put  alongside.   The  permits are  there                                                               
because they've  been done three times  already for environmental                                                               
impact  statements.   The land  is mostly  rock and  would resist                                                               
earthquakes.  There is a deepwater  port, ice-free all year.  And                                                               
there is a  possibility of sharing security,  maintenance, and so                                                               
forth, which would  lower the tariff rates.  Thus  he'd chosen an                                                               
all-Alaska route to Valdez for economic and other reasons.                                                                      
                                                                                                                                
CHAIR  HUGGINS asked  about compressor  stations if  the southern                                                               
route is used through Canada.                                                                                                   
                                                                                                                                
MR. LEE  said it takes about  32 to Calgary, as  confirmed by the                                                               
winning proposal.  It takes 71 to Chicago.                                                                                      
                                                                                                                                
CHAIR HUGGINS asked how much gas is consumed by those stations.                                                                 
                                                                                                                                
MR.  LEE indicated  a  solar-turbine  compressor manufacturer,  a                                                               
unit of  United Technology, estimated  11.5 million cubic  feet a                                                               
day per station  to run the compressors and chiller.   To Chicago                                                               
it's about 20 percent of the  gas; to Calgary, about 8.3 percent.                                                               
His calculations  were close to  those numbers from  the factory.                                                               
Some compressors are  more efficient than others,  within about a                                                               
5 percent range.                                                                                                                
                                                                                                                                
MR.  LEE said  the 19.5  percent to  Chicago that  he'd estimated                                                               
would be subsidized  by the State of Alaska to  push the gas from                                                               
Prudhoe Bay,  $1.1 billion a year at  an $8 price.   If the price                                                               
rose to $16 in the future, it  would be $2.2 billion.  Over a 30-                                                               
year lifetime, it would be  $33 billion to $66 billion subsidized                                                               
by the state to move the gas to the Lower 48.                                                                                   
                                                                                                                                
4:02:41 PM                                                                                                                    
MR. LEE, in  response to Senator Wagoner, said  the 71 compressor                                                               
stations are  for 4.5 Bcfd.   To  his understanding, that  is the                                                               
same number of stations in TransCanada's proposal.                                                                              
                                                                                                                                
SENATOR  WAGONER  said  he  hadn't  read  that  in  TransCanada's                                                               
proposal last week.                                                                                                             
                                                                                                                                
MR. LEE  cited 60,000 horsepower  per station and  then mentioned                                                               
"55 or 60" horsepower per station.                                                                                              
                                                                                                                                
4:03:38 PM                                                                                                                    
MR.  LEE showed  slides depicting  the teaming  agreement between                                                               
LSCC  and  ZPEB  International,  signed by  him  and  the  acting                                                               
general manager  of ZPEB International,  dated October  24, 2007.                                                               
He  said it  was approved  by the  board of  directors and  had a                                                               
government approval "chop" or seal  - highly important in China -                                                               
on a  binding document.  He  mentioned an oil field  he'd gone to                                                               
500 miles southwest of Beijing  where 400,000 people work for one                                                               
company,  Sinopec.   He  said this  shows  the genuine  contract,                                                               
arrived at  after five  days of  talking; the  original signature                                                               
was submitted with the proposal.                                                                                                
                                                                                                                                
MR. LEE, in response to Chair  Huggins, said that paper means the                                                               
division has  400 engineers right away  to work on it.   Half the                                                               
work would  be done  in Alaska,  but they  have the  expertise to                                                               
design the necessary facilities.                                                                                                
                                                                                                                                
4:07:11 PM                                                                                                                    
CHAIR HUGGINS asked about Sinopec's experience with LNG.                                                                        
                                                                                                                                
MR. LEE replied  Sinopec designed all the LNG work  for China and                                                               
now is working on LNG for  the Middle East, with offices in Saudi                                                               
Arabia,  Dubai,  Qatar,  and  so  on.   In  response  to  Senator                                                               
Wielechowski,  he  explained that  LNG  tankers  hold 150,000  to                                                               
185,000 cubic meters.                                                                                                           
                                                                                                                                
SENATOR WIELECHOWSKI  asked how many  days' supply that  would be                                                               
from a 4.5 Bcfd line.                                                                                                           
                                                                                                                                
MR. LEE  said when the  gas becomes liquid,  it goes by  the ton.                                                               
This project would require 30  tankers running between Valdez and                                                               
China  year-round,  with eight  day's  traveling  time, two  days                                                               
loading, and  two days unloading,  to deliver 30 million  tons of                                                               
LNG to China.                                                                                                                   
                                                                                                                                
4:08:58 PM                                                                                                                    
MR.  LEWIS  remarked on  all  the  conversions necessary  to  get                                                               
natural gas from its vapor state to a delivered liquid in Asia.                                                                 
                                                                                                                                
MR. LEE,  in further  response as  to the  number of  tankers for                                                               
4.5 Bcfd, said  he knows the  conversion, but in a  metric system                                                               
using liters, not gallons.                                                                                                      
                                                                                                                                
4:09:52 PM                                                                                                                    
MR. LEE  continued with the  slides, showing a letter  of intent,                                                               
estimating it's worth $500 billion  to $800 billion, depending on                                                               
the  future LNG  price.   It  says Sinopec  agrees  to buy  about                                                               
4 Bcfd of  LNG, about  30 million  tons a year,  for the  next 30                                                               
years.   Price isn't  locked in.   The  current selling  price in                                                               
Asia will  be paid.   For example,  they just bought  100 million                                                               
tons of  crude oil from  Iraq last  week on a  long-term contract                                                               
that  uses  the  previous  four   days'  average  price  for  any                                                               
particular day's price.  It will  be a good current market price,                                                               
he emphasized.                                                                                                                  
                                                                                                                                
SENATOR WIELECHOWSKI asked  how the price in  China compares with                                                               
Henry Hub  in the U.S.,  where it's about  $7 or $8  per thousand                                                               
cubic feet (Mcf).                                                                                                               
                                                                                                                                
MR.  LEE replied  he  thinks it's  about  $10 to  $12  now.   But                                                               
according  to  a  U.S. Energy  Information  Administration  (EIA)                                                               
projection, by  the time the  project is finished it  may average                                                               
$20 over  the 30  years.  That  translates to  some $800 billion.                                                               
He indicated  at the end  of the  proposal there is  a comparison                                                               
spreadsheet.                                                                                                                    
                                                                                                                                
4:12:53 PM                                                                                                                    
MR. LEE  showed another slide on  why LSCC's project is  best for                                                               
Alaska, Alaskans, and the U.S., with the following points:                                                                      
                                                                                                                                
     2.  "Alaskans First Gas Pipeline" will have easier                                                                         
     access to X70 steel required for pipeline.                                                                                 
                                                                                                                                
     - Subcontractor and project financier, Sinopec, will                                                                       
        coordinate steel purchases.                                                                                             
     - China's Bo On Steel is one of two companies in the                                                                       
        world able to provide 2.2 million tons of X70 steel.                                                                    
     - Shorter 800 mile route from Prudhoe Bay to Valdez                                                                        
        will be a favorable factor in procuring steel as                                                                        
        compared to a Canadian route to Chicago ....                                                                            
                                                                                                                                
MR.  LEE opined  that  only  China can  do  the pipeline  swiftly                                                               
because it has the steel.   Since steel deregulation, the U.S. is                                                               
losing  its   steel  industry  because  it   cannot  compete;  he                                                               
mentioned a steel mill in St. Louis  and a small one in Utah that                                                               
use  scrap metal  to make  steel on  a small  scale.   Building a                                                               
pipeline from  Prudhoe Bay to  Valdez would require 800  miles of                                                               
4-foot pipe weighing  almost 1,000 pounds a foot.   At 5,280 feet                                                               
a  mile, times  800  miles,  this is  about  200 million tons  of                                                               
steel.   Whereas TAPS  used pipe  5/8ths of  an inch  thick, this                                                               
would use pipe 1 inch thick, nearly double.                                                                                     
                                                                                                                                
4:14:46 PM                                                                                                                    
Representative Jay Ramras arrived.                                                                                              
                                                                                                                                
MR. LEE said China now makes  about 60 percent of the steel, with                                                               
the  other 40  percent made  by Poland,  India, Japan,  and South                                                               
Korea.  Sinopec  is a Chinese company  whose majority stockholder                                                               
is the  government, at 76  percent.  Bo  On Steel is  100 percent                                                               
owned by the Chinese government, as  is another company there.  A                                                               
quota will  be provided, acknowledging this  urgent allocation of                                                               
the  steel.   He mentioned  ensuring that  the delivery  time and                                                               
quality meet specifications, suggesting  one advantage over other                                                               
companies is having the manufacturer on their side.                                                                             
                                                                                                                                
CHAIR HUGGINS recalled  Mr. Lee had once said  this would require                                                               
Bo On Steel and potentially Nippon's production.                                                                                
                                                                                                                                
MR. LEE  said Nippon  can make  some of the  steel, but  not all.                                                               
Some  might be  bought from  Nippon  to make  up the  difference.                                                               
China is  an industrialized country and  is using a lot  of steel                                                               
now, for  the upcoming Olympics, for  example.  "We are  lucky to                                                               
get steel from them," he added.                                                                                                 
                                                                                                                                
4:17:09 PM                                                                                                                    
CHAIR HUGGINS  asked whether "X70"  is an  international standard                                                               
for steel.                                                                                                                      
                                                                                                                                
MR. LEE affirmed  that, saying it means the steel  has a strength                                                               
of 65,000-70,000 pounds before it  buckles.  The pressure for the                                                               
gas pipeline will  be only 2,500 pounds.  He  indicated there was                                                               
a Canadian suggestion  to use X100 steel, but he  said the demand                                                               
doesn't exist and  so isn't made.  While X100  steel is extremely                                                               
strong, people  would laugh  if 1,700  miles were  ordered today,                                                               
saying  they couldn't  even obtain  100  feet; it  is that  rare.                                                               
Normal  pipe is  X60  to X70,  which is  used  for gas  pipelines                                                               
worldwide and can  stand up to 7 Bcfd already.   He indicated the                                                               
X70 was recommended  by Sinopec's steel engineer as  a good steel                                                               
that they use all over the world.                                                                                               
                                                                                                                                
SENATOR WAGONER asked about the  pounds per square inch (psi) for                                                               
a 48-inch pipeline transporting 7 Bcfd.                                                                                         
                                                                                                                                
MR.  LEE answered  2,500.   He said  to get  to Chicago  requires                                                               
10 million tons  of steel  because it is  3,600 miles,  4.5 times                                                               
longer than LSCC's proposed pipeline.   He surmised someone might                                                               
have to wait 20 years to get that much steel.                                                                                   
                                                                                                                                
4:20:13 PM                                                                                                                    
MR. LEE  showed the third  slide on  why LSCC's proposal  is best                                                               
for Alaska, Alaskans, and the U.S., with the following points:                                                                  
                                                                                                                                
     3.  The "Alaskans First Gas Pipeline" calls on the                                                                         
     buyer to provide the shipping.                                                                                             
                                                                                                                                
     - This cost is absorbed by purchaser, Sinopec                                                                              
     - Non-Jones Act ships will transport LNG to China and                                                                      
        other Pacific Basin countries                                                                                           
     - Jones Act ships will transport LNG to Alaskan                                                                            
        Coastal cities                                                                                                          
                                                                                                                                
MR. LEE elaborated, saying the  buyer would provide the shipping,                                                               
bringing a  boat to Valdez  to pick it  up.  The  pipeline itself                                                               
wouldn't be burdened by  the cost of the boat.   A large LNG boat                                                               
costs about  $300 million, and  they take  a long time  to build,                                                               
sometimes requiring a  wait of four or five years.   Shipping LNG                                                               
around  Alaska, to  Kodiak,  for example,  requires  a Jones  Act                                                               
boat; the hull and  engine must be built in the  U.S. and then it                                                               
goes to China  or Korea to add refrigeration.   Those are smaller                                                               
boats,  perhaps 75,000  cubic meters,  half the  size, but  still                                                               
cost $250 million each because American labor costs more.                                                                       
                                                                                                                                
MR. LEE said  every city and village in Alaska  should have cheap                                                               
gas to heat  homes and generate electricity.  There  is no reason                                                               
Alaska,  as  an energy-producing  state,  should  have such  high                                                               
heating costs.  He has traveled  in Alaska for 28 years, visiting                                                               
over 100 villages, where people may  pay half or a third of their                                                               
incomes  to heat  their  homes.   In Iran  and  Iraq, people  pay                                                               
30 cents a gallon for gas.                                                                                                      
                                                                                                                                
MR. LEE  suggested that the  State of  Alaska would have  so much                                                               
money  from  his project  that  it  could subsidize  such  costs,                                                               
ensuring Alaskans  pay $50 a month  for heating and the  same for                                                               
electricity, saving  some families $5,000  a year.  He  pays $400                                                               
or $500  a month  in Anchorage;  in 1977, he  paid $100  for both                                                               
electricity and gas.   He asked:  Since Alaska  owns the gas, why                                                               
shouldn't  it benefit  Alaskans, rather  than other  people?   He                                                               
said LSCC's plan does this.                                                                                                     
                                                                                                                                
4:24:18 PM                                                                                                                    
MR. LEE showed another slide on  why LSCC's project is best, with                                                               
these points:                                                                                                                   
                                                                                                                                
           4.  The "Alaskans First Gas Pipeline" keeps the                                                                      
         project within Alaska to create the following value                                                                    
     added benefits for Alaskans:                                                                                               
                                                                                                                                
     - A Spur Line to Anchorage/Mat-Su area                                                                                     
     - Propane distribution for rural Alaska;                                                                                   
     - Permanent jobs for Alaskans for 20 to 50 years;                                                                          
     - Potential new jobs with natural gas byproducts;                                                                          
       - Availability of natural gasoline as cheap substitute                                                                   
        fuel;                                                                                                                   
        - Opportunity for Alaskans to invest in the pipeline                                                                    
        service company as a publicly traded corporation                                                                        
                                                                                                                                
MR. LEE  explained that  the plan includes  190 miles  of 2-foot-                                                               
diameter X70 gas  pipeline to the Beluga field to  give energy to                                                               
ENSTAR  so it  can  feed Southcentral  Alaska, including  Palmer,                                                               
Wasilla, Anchorage, Eagle  River, and the Kenai  and Homer areas.                                                               
This  would take  care  of  perhaps half  of  the state's  energy                                                               
needs.   The  rest of  the gas  would feed  Chugach Electric  and                                                               
Municipal Light & Power (ML&P)  to provide cheap electricity.  He                                                               
noted  Harold Heinze,  when asked  about  subcontracting on  this                                                               
project because he'd done so much  work already, had said he'd be                                                               
happy to help Mr. Lee out.                                                                                                      
                                                                                                                                
4:25:15 PM                                                                                                                    
MR. LEE  discussed distribution to  rural Alaska.   This 4.5 Bcfd                                                               
of  natural gas  comes with  a  lot of  liquid.   A  big part  is                                                               
propane, which is portable.  The  plan is to separate the propane                                                               
in Valdez;  put it  into 5,000 and  10,000 gallon  propane tanks;                                                               
transport it  by barge  or boat  to Seward; take  it by  train to                                                               
Nenana,  south of  Fairbanks; and  then barge  it down  the Yukon                                                               
River to  all communities  along the  river like  Tanana, Galena,                                                               
and so on.                                                                                                                      
                                                                                                                                
MR. LEE  said the propane  would go to distribution  centers from                                                               
which bottles can be trucked  to every family's home, where 1,000                                                               
gallon tanks can  be filled for a  year's supply.  A  tank at the                                                               
electrical power plant  would be filled as well.   Converting the                                                               
burner for  the power plant from  diesel is simple, he  said, and                                                               
every community would benefit.                                                                                                  
                                                                                                                                
MR.  LEE  noted that  for  towns  not on  the  river,  it can  be                                                               
transported.   Propane  is  cheap.   It's also  one  of the  most                                                               
versatile fuels.   It can be gotten to folks  for around a dollar                                                               
a  gallon.   For  bigger  towns  like Ketchikan,  Sitka,  Juneau,                                                               
Seward,  Kodiak,  Dillingham,  Bethel, Nome,  and  Kotzebue,  his                                                               
proposal  suggests that  the  state do  a  program whereby  those                                                               
places  have an  LNG receiving  station and  storage facility  in                                                               
order to evaporate  the liquid LNG and distribute  it through gas                                                               
pipes, as done in Fairbanks now.   But it would be $1 a gallon or                                                               
less.   People  could heat  homes  for $100,  and electric  bills                                                               
would be $50.  This would benefit every Alaskan family, he said.                                                                
                                                                                                                                
4:31:57 PM                                                                                                                    
MR.  LEE turned  to jobs  for Alaskans,  saying the  plan creates                                                               
jobs in a variety of areas  during construction.  It also creates                                                               
permanent jobs for 20 to 50  years, when people will be needed to                                                               
maintain facilities,  run the 10-14 compression  stations in this                                                               
line, do  deliveries, and  so on.   The  plant that  converts the                                                               
4.5 Bcfd of gas to  LNG will be the biggest in  the U.S.  Another                                                               
plant will separate liquids, which  can be shipped to places like                                                               
Fairbanks,  Kenai, or  Wasilla  to  make petrochemical  products,                                                               
rather than  having it go  to Canada.   Thus Alaskans  could have                                                               
more job opportunities and monetary benefits.                                                                                   
                                                                                                                                
MR. LEE highlighted pentane, explaining  it is a natural gasoline                                                               
that can  be used in a  car.  Like it  or not, it comes  with the                                                               
gas,  up to  10-20 million  tons a  year.   The plan  proposes to                                                               
distribute it at  cost to Alaskan gas stations where  it could be                                                               
sold  for 30 cents  a  gallon.   While  not  enough for  Alaska's                                                               
entire use, this  resource belongs to Alaskans  who could benefit                                                               
from it.                                                                                                                        
                                                                                                                                
MR.  LEE addressed  the  opportunity to  invest  in the  pipeline                                                               
service as  a publicly  traded corporation.   He  reiterated that                                                               
Sinopec  isn't interested  in owning  or  operating the  company.                                                               
Thus  a new  legal entity  would be  created, Alaskans  First Gas                                                               
Pipeline  Service Company.   Modeled  after the  Alyeska Pipeline                                                               
Service Company  ("Alyeska"), it would service  the gas pipeline,                                                               
LNG plant, marine  terminal, and liquids plant.  But  it would be                                                               
publicly  traded,   unlike  Alyeska,   which  is  owned   by  oil                                                               
companies.    Any Alaskan  could  buy  stock,  as could  any  oil                                                               
company  or the  State of  Alaska.   The profit  would provide  a                                                               
dividend  to stockholders.   This  would give  an opportunity  to                                                               
invest in something that benefits Alaska.                                                                                       
                                                                                                                                
4:37:37 PM                                                                                                                    
MR. LEE  showed the next slide  on why the project  is best, with                                                               
the following points:                                                                                                           
                                                                                                                                
     5.     The  "Alaskans  First  Gas   Pipeline"  makes  a                                                                    
     commitment  to work  with  Alaska's  unions to  provide                                                                    
     skilled and  non-skilled labor for the  construction of                                                                    
     the pipeline.                                                                                                              
                                                                                                                                
     -  Plans will  be developed  to provide  incentives and                                                                    
        assistance to train Alaskans to work on the pipeline                                                                    
        construction project.                                                                                                   
                                                                                                                                
MR.  LEE  elaborated, saying  LSCC  has  committed to  using  100                                                               
percent  union labor,  whether skilled  or  unskilled.   Alaskans                                                               
will have first  preference and will make excellent  money.  This                                                               
job will  last three to  four years,  building a gas  pipeline, a                                                               
world-class LNG  plant, and a petrochemical  industry for Alaska.                                                               
Besides construction  jobs, there will  be a need  for engineers,                                                               
surveyors,  scientists  for   environmental  studies,  and  folks                                                               
involved in shipping, supplies, and so on.                                                                                      
                                                                                                                                
MR.  LEE said  this is  the biggest  construction project  in the                                                               
U.S.,  perhaps  the  world.    Whereas  China's  Three-Gorge  Dam                                                               
project cost $25 billion,  this will be $32 billion.   Noting his                                                               
four children  grew up  in Alaska's school  system, he  said they                                                               
now have advanced  degrees but couldn't find good  jobs in Alaska                                                               
and thus  live elsewhere.   He emphasized providing good  jobs so                                                               
Alaska's  young people  will stay,  either blue-collar  jobs that                                                               
pay Davis-Bacon wages or professional jobs.                                                                                     
                                                                                                                                
4:43:03 PM                                                                                                                    
MR. LEE  showed the next slide  on why the project  is best, with                                                               
the following points:                                                                                                           
                                                                                                                                
     6.  The "Alaskans First  Gas Pipeline" proposal met the                                                                    
     AGIA requirements  for financing with no  less than 70%                                                                    
     debt.   Sinopec will  help to  provide the  30% capital                                                                    
     financing required by AGIA.                                                                                                
                                                                                                                                
He  referred  to  the  teaming agreement  and  letter  of  intent                                                               
discussed  earlier,  saying China  agreed  to  help with  capital                                                               
financing  that  isn't  guaranteed  by  the  federal  government,                                                               
70 percent.  "They  will have no problem raising  money for you,"                                                               
he added,  saying the  new pipeline company  would take  over the                                                               
loan and  (indisc.) the debt  to the  tariff and the  profit they                                                               
make.  In the meantime, there is no need to go to Wall Street to                                                                
raise money; it's already there.                                                                                                
                                                                                                                                
4:44:13 PM                                                                                                                    
MR. LEE showed the next two slides on why the project is best,                                                                  
with the following points:                                                                                                      
                                                                                                                                
     7.  The "Alaskans First Gas Pipeline" is the best deal                                                                     
     for the U.S. because it will help solve our critical                                                                       
     trade imbalance with China.                                                                                                
                                                                                                                                
      - Selling 4 Bcf of natural gas a day to China will reduce                                                                 
        the U.S. trade imbalance with China by nearly $500                                                                      
        billion to $800 billion over 30 years based on today's                                                                  
        dollars at sales of $10 to $12 per mmbtu.                                                                               
     - Actual trade numbers will exceed $500 billion when rates                                                                 
        exceed the current $10 per mmbtu.                                                                                       
     - China has the same trade status in Japan.                                                                                
       - For over 35 years Alaska has been exporting Liquefied                                                                  
        Natural Gas  (LNG)  from Kenai  to  the  two largest  LNG                                                               
        importers on the planet - Tokyo  Electric Power and Tokyo                                                               
        Gas of Japan.   Between these two importers,  they have a                                                               
        combined customer base of 30 million customers.                                                                         
     - Presidential authorization for export of North Slope gas                                                                 
        is currently in place.                                                                                                  
                                                                                                                                
MR.  LEE  pointed out  how  much  this  country  buys from  China  and                                                          
outsources  to  there.   Noting  he  is  a  33-year U.S.  citizen,  he                                                          
expressed concern  that every  year there  is a  $200 billion deficit;                                                          
already  $1.4  trillion is  owed.    This  cannot continue,  he  said.                                                          
Eventually, there  will be nothing  to sell.   There is  little trade.                                                          
The LSCC project  wouldn't just benefit Alaska; it  would also benefit                                                          
the  U.S.   He expressed  concern about  the declining  value of  U.S.                                                          
currency, noting whereas  it used to be worth more  than Canada's, now                                                          
it is even.  He cited other examples.                                                                                           
                                                                                                                                
MR. LEE  said he wants  to see  America strong, which  requires trade.                                                          
Trade is a two-way street.  There  must be something to sell.  He said                                                          
his  plan  is good  for  the  U.S. because  it  would  bring in  about                                                          
$30 billion a  year for  30 years,  $800-900 billion, a  big sum.   He                                                          
suggested there is  no benefit to shipping it to  the Lower 48 because                                                          
of the cost compared with shipping it to China.                                                                                 
                                                                                                                                
4:48:59 PM                                                                                                                    
MR. LEE said shipping natural gas to the Far East has been done                                                                 
in the past 40 year from Kenai to Japan, so exporting LNG in                                                                    
this respect isn't new.                                                                                                         
                                                                                                                                
SENATOR WAGONER asked whether this  is based on the assumption of                                                               
Yukon  Pacific Corporation  (YPC) holding  an export  permit from                                                               
the U.S. Department of Energy (USDOE).                                                                                          
                                                                                                                                
MR. LEE  replied he'd  just learned from  them that  they already                                                               
have an  export license from the  USDOE.  His company  would have                                                               
to get that agency to submit a revision.                                                                                        
                                                                                                                                
4:50:48 PM                                                                                                                    
MR. LEWIS  added that the current  export license is held  by YPC                                                               
through  its parent  company,  CSX.   It  speaks  in  terms of  a                                                               
million  metric tons  a  year  for an  aggregate  of 350  million                                                               
metric  tons authorized  for export,  with an  annual average  of                                                               
14 million tons.   That's a 2 Bcfd project, in  essence.  There's                                                               
no ceiling.  It calls for  an average.  Theoretically, more could                                                               
be  exported  in a  given  year,  but  overall  it works  out  to                                                               
14 million metric tons a year.                                                                                                  
                                                                                                                                
SENATOR  WAGONER  asked how  valid  that  license  is.   He  said                                                               
ConocoPhillips just went  through a process to  extend its export                                                               
license, hopefully for up to  two years; even with concurrence of                                                               
the  administration, that  extension still  hasn't occurred.   He                                                               
asked how  long this  export license is  supposedly good  for, as                                                               
well  as what  it would  take to  get USDOE  to provide  a letter                                                               
saying that export license is still valid and is renewable.                                                                     
                                                                                                                                
MR. LEWIS said he'd have to  do some research; he'd hoped to call                                                               
on  Jeff  Lowenfels, who'd  been  involved  in  that to  an  even                                                               
greater  degree.    Mr.  Lewis   said  he  wasn't  aware  of  any                                                               
expiration date on that export license, but he would check.                                                                     
                                                                                                                                
4:52:47 PM                                                                                                                    
MR. LEE showed the final slides  on why the LSCC project is best,                                                               
with the following points:                                                                                                      
                                                                                                                                
          8.  The "Alaskans First Gas Pipeline" will not be                                                                     
     controlled by China.                                                                                                       
                                                                                                                                
     - The pipeline will be an ALASKAN owned company.                                                                           
         - Chinese workers will not be imported to build the                                                                    
        pipeline, but will be used in the design phase only                                                                     
        for 5.5% of the work.                                                                                                   
        - China will not own or control any of the gas fields                                                                   
        in Alaska.                                                                                                              
       - China only seeks to have a reliable source of energy                                                                   
        for its exploding economy.                                                                                              
     - China is willing to sign agreements to buy LNG from                                                                      
        Alaska for years to come.                                                                                               
     - Alaskan LNG will help make China's coal-heavy energy                                                                     
        industry greener, a benefit for all the world.                                                                          
                                                                                                                                
MR. LEE  spoke to the concern  that "the Chinese are  coming, the                                                               
Chinese are coming."  He said  they're not coming.  There will be                                                               
no Chinese skilled or unskilled labor allowed on this job.                                                                      
                                                                                                                                
4:54:23 PM                                                                                                                    
MR.  LEE  showed  a  slide  of the  people  signing  the  teaming                                                               
agreement with Sinopec.   He then showed a  spreadsheet of income                                                               
comparisons for  LSCC's project without  PPT, Alaska's  tax known                                                               
as both  the petroleum production  tax and the  petroleum profits                                                               
tax.   At a $12 price,  for example, annual revenue  would be $18                                                               
billion; the U.S.  government would get $3.76  billion; the state                                                               
would  get $3 billion,  the North  Slope producers  would get  $6                                                               
billion;  and  the  pipeline  operator,  LSCC,  would  get  $0.59                                                               
billion.                                                                                                                        
                                                                                                                                
MR.  LEE  discussed the  lower  part  of the  spreadsheet,  which                                                               
compares  LSCC's   project  versus  TransCanada's  in   terms  of                                                               
lifetime pipeline income, with a 25  percent PPT tax.  He said if                                                               
one goes by the real costs,  using federal EIA figures of $20 per                                                               
Mcf, revenue  would be almost $30  billion a year, with  the U.S.                                                               
government    getting   $7.3    billion,   the    state   getting                                                               
$10.47 billion, the  North Slope producers getting  $6.8 billion,                                                               
and LSCC  getting $0.59 billion  as the  operator.  In  30 years,                                                               
the total revenue  would be $896 billion, with the  U.S. share at                                                               
$290 billion,  the state share  at $314 billion, the  North Slope                                                               
producers at $204 billion, and LSCC at $17.7 billion.                                                                           
                                                                                                                                
MR. LEE referred  to TransCanada's proposal at page  2.10-10.  He                                                               
noted the  U.S. share would  be $52 billion  with a PPT  tax, far                                                               
less; that  would be over  25 years,  to his understanding.   The                                                               
State   of  Alaska   would  get   $131  billion,   compared  with                                                               
$314 billion under the LSCC plan for 30 years.                                                                                  
                                                                                                                                
4:57:59 PM                                                                                                                    
SENATOR WIELECHOWSKI  asked whether Mr.  Lee had talked  with the                                                               
North Slope producers to see if they'd sell gas to LSCC.                                                                        
                                                                                                                                
MR.  LEE explained  that he  was so  confident about  passing the                                                               
first cut  in the AGIA process,  he'd asked to go  to Beijing and                                                               
meet  with  Sinopec as  well  as  the China  representatives  for                                                               
ConocoPhillips, ExxonMobil,  and BP.   Sinopec had said  it could                                                               
set up a meeting.  ConocoPhillips  is doing a 50-50 joint venture                                                               
with China  Oil in a field  where they get about  300,000 gallons                                                               
of oil  a day; there  are other  joint ventures too.   ExxonMobil                                                               
has  a $5 billion  refinery  and  petrochemical project,  teaming                                                               
with Sinopec.  And noting BP  bought out ARCO, he mentioned ARCO-                                                               
China joint  ventures in the Yellow  Sea and South China  Sea oil                                                               
fields;  he said  they  are working  there.   They  talk to  each                                                               
other,  as  BP talks  to  ExxonMobil  in  Alaska.   However,  his                                                               
project hadn't  made the  short list and  so he'd  requested that                                                               
all meetings be canceled.                                                                                                       
                                                                                                                                
MR. LEE added  that the oil companies make lots  of money but are                                                               
good to  Alaska.  Their  businesses provide  80 to 90  percent of                                                               
the state budget.   They sponsor symphonies and  charities.  They                                                               
hire lots of  Alaskans.  They've done their part,  as far as he's                                                               
concerned.  Mr.  Lee said his company worked for  ARCO ten years,                                                               
helping to develop the Kuparuk  oil field.  He characterized them                                                               
as nice people, cautious and honest and paying him on time.                                                                     
                                                                                                                                
MR. LEE suggested  everyone can work together.  Sinopec  is a big                                                               
company and has joint ventures in  other countries.  It isn't the                                                               
enemy.  Natural  gas is everywhere.  China is  buying gas and oil                                                               
from  all over  the world  because it  needs the  energy to  make                                                               
things and  ship them to  America.  He  highlighted globalization                                                               
and figuring out how to make money so it benefits everyone.                                                                     
                                                                                                                                
5:03:59 PM                                                                                                                    
MR.  LEE said  he would  work with  any of  the other  interested                                                               
companies, inviting them to bid to  do work on LSCC's project and                                                               
saying  it's an  open  process.   He would  hire  a big  American                                                               
management firm during construction, a  company like CH2M Hill or                                                               
Bechtel to  run the project  so everything is done  correctly, on                                                               
time, and  within the budget.   He emphasized that  Sinopec would                                                               
provide the funding and wants the  gas.  He surmised with Sinopec                                                               
they'd be able to work out any disagreement among parties.                                                                      
                                                                                                                                
MR. LEE,  in response  to Chair Huggins,  said his  proposal asks                                                               
for a federal guarantee.  He  referred to the AGIA guidelines and                                                               
mentioned the  open season.  He  said he'd recently been  told if                                                               
gas is transported  from Prudhoe Bay to Valdez, there  is no need                                                               
for an  open season or  the Federal Energy  Regulatory Commission                                                               
(FERC).   If his proposal  is selected, he'd  buy the gas  at the                                                               
wellhead; he has a customer to buy it.                                                                                          
                                                                                                                                
MR.  LEE  referred to  the  spreadsheet,  which shows  that  over                                                               
30 years the producers would receive  $204 billion.  He said that                                                               
is without having to invest any  money in his project or take any                                                               
risk.  For stockholders' benefit,  the producers should take this                                                               
deal.  He added, "We are the one taking all the risk."                                                                          
                                                                                                                                
5:07:35 PM                                                                                                                    
SENATOR  WIELECHOWSKI said  another organization  had claimed  it                                                               
was pressured not to apply under  AGIA.  He asked whether Mr. Lee                                                               
had experienced anything like that.                                                                                             
                                                                                                                                
MR.  LEE replied  no.   He'd only  had three  weeks to  write the                                                               
proposal, and he hadn't contacted anyone.                                                                                       
                                                                                                                                
5:08:44 PM                                                                                                                    
MR.  LEWIS  added  that  although he  hadn't  been  involved,  it                                                               
strikes  him  that  the  AGIA  application  requirements  weren't                                                               
written  for an  LNG project.   It  presupposes things  like open                                                               
seasons.   Saying  he  didn't mean  it in  a  pejorative way,  he                                                               
characterized  it as  a  tortured fit  and  remarked of  Mr. Lee,                                                               
"I don't know how he got it in as well as he did."                                                                              
                                                                                                                                
MR. LEWIS  said he's  been around  LNG for 15  years.   One great                                                               
benefit of  an LNG project is  that it isn't a  commodity market.                                                               
He suggested  thinking of an  LNG project as a  regional shopping                                                               
center where the strength of a  company like Sinopec as an anchor                                                               
tenant is something that never  has been available before, for an                                                               
LNG  project or  any other.   Sinopec  brings so  much heft  to a                                                               
project that  it doesn't require any  federal or state help.   It                                                               
is a stand-alone deal.                                                                                                          
                                                                                                                                
MR.  LEWIS  said he  knew  why  Mr.  Lee  had submitted  an  AGIA                                                               
proposal,  although they  hadn't  known each  other.   Mr.  Lewis                                                               
noted he and his partner,  Jeff Lowenfels, are volunteering their                                                               
time  because they  see the  synergies between  15 years  of work                                                               
already in place  by YPC and what is in  front of legislators, "a                                                               
greatest hits version of that work."                                                                                            
                                                                                                                                
MR.  LEWIS alluded  to  YPC's  handouts about  its  permits.   He                                                               
emphasized  that this  work dramatically  diminishes the  risk in                                                               
the project and the  time to build it.  Calling  it a royal flush                                                               
of   permits,  authorizations,   export  licenses,   right-of-way                                                               
agreements,   and  so   on,  he   surmised  there   has  been   a                                                               
misunderstanding.                                                                                                               
                                                                                                                                
MR.  LEWIS said  while there  has  been no  marriage yet  between                                                               
LSCC's  proposal and  the  holders  of these  permits,  it is  so                                                               
logical; the  permits have no  value without a project,  but they                                                               
have tremendous  value, to all the  players, with a project.   He                                                               
offered to bring Jeff Lowenfels  into the discussion by phone and                                                               
said  they're  always  available  to  expand  on  what  has  been                                                               
provided here.   Mr. Lewis said this portfolio of  permits and so                                                               
on streamlines  the project  in a  way that  is unmatched  in any                                                               
other way.   The anchor tenant  exists, as well as  the design; a                                                               
lot of engineering  work is already in place in  support of these                                                               
permits and authorizations.                                                                                                     
                                                                                                                                
5:12:20 PM                                                                                                                    
CHAIR HUGGINS referred to a  message to the committee from former                                                               
Governor Hickel that he interpreted as  follows:  There is a need                                                               
to look  at potentially restarting  the process, and  he supports                                                               
AGIA  but it  may need  to  be amended.   He  asked Mr. Lewis  to                                                               
suggest potential amendments, after  giving it some thought, that                                                               
might be appropriate  with respect to LNG.  He  added that former                                                               
Governor Hickel  got the State of  Alaska to buy into  a baseline                                                               
comparison between the  Canadian course of action  and LNG, which                                                               
some  folks  had  been  pushing for  unsuccessfully.    He  asked                                                               
whether   anything  besides   the  open   season  came   to  mind                                                               
immediately with regard to how AGIA isn't crafted for LNG.                                                                      
                                                                                                                                
MR. LEWIS said that's the one  that comes to mind, although there                                                               
likely  are others.   The  AGIA  process seems  to contemplate  a                                                               
standard pipeline  transmission system  that charges a  tariff to                                                               
shippers.   He added, "Whatever  you buy at the  wellhead, you're                                                               
your own shipper."   Mr. Lewis said thinking in  terms of tariffs                                                               
and so on doesn't work, because at  the end of the pipeline is an                                                               
LNG plant, not a market.                                                                                                        
                                                                                                                                
CHAIR HUGGINS thanked  Mr. Lewis for pointing that out.   He told                                                               
Mr. Lee he'd brought a lot to the table and it wasn't over yet.                                                                 
                                                                                                                                
5:14:57 PM                                                                                                                    
MR.  LEWIS  remarked  that  this  project  is  one  of  the  most                                                               
astonishing  things he  has ever  heard of.   An  entrepreneurial                                                               
citizen has brought in a serious  overture that deserves a lot of                                                               
attention because of the weight of this buyer.                                                                                  
                                                                                                                                
CHAIR  HUGGINS said  it  clearly is  out  of the  box  as far  as                                                               
planning.  He asked whether Mr. Lee had any closing comments.                                                                   
                                                                                                                                
MR. LEE noted  LSCC had submitted a letter to  the Governor Palin                                                               
and  the commissioners,  asking for  reconsideration of  the AGIA                                                               
application.  He  pointed out that nothing could be  added to the                                                               
application  with  respect  to   the  commitment.    But  page 12                                                               
mentions  giving the  state extra  commitments,  which LSCC  did,                                                               
giving them the buyer and  financing.  He surmised his additional                                                               
commitment  had been  confused with  the original  commitment and                                                               
thus the application was denied because of a misunderstanding.                                                                  
                                                                                                                                
MR. LEE  offered to  provide a copy  of LSCC's  letter, submitted                                                               
last Friday.   He opined  that if  the Department of  Law reviews                                                               
it,  it will  find  merit.   He closed  by  giving some  personal                                                               
history in  Alaska and  emphasizing his  desire for  children who                                                               
grow up in Alaska to be able to remain.                                                                                         
                                                                                                                                
CHAIR HUGGINS thanked participants and closed the hearing.                                                                      
                                                                                                                                
There being  no further  business to  come before  the committee,                                                               
Chair Huggins  adjourned the Senate Resources  Standing Committee                                                               
meeting at 5:18:52 PM.                                                                                                        

Document Name Date/Time Subjects