Legislature(2015 - 2016)Nikiski Rec Center

06/16/2015 03:00 PM Senate RESOURCES


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Audio Topic
03:01:25 PM Start
03:04:20 PM Aklng Project Update with Steve Butt
04:03:12 PM Aklng Fiscal Team Update
05:40:34 PM State Gas Team Update
06:40:18 PM Aklng Impacts to the Kenai Peninsula Borough
06:56:39 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Joint Hearing with House Resources Committee
+ Update: Alaska LNG Project TELECONFERENCED
-- Testimony <Invitation Only> --
                    ALASKA STATE LEGISLATURE                                                                                  
                         JOINT MEETING                                                                                        
              SENATE RESOURCES STANDING COMMITTEE                                                                             
               HOUSE RESOURCES STANDING COMMITTEE                                                                             
                        NIKISKI, ALASKA                                                                                       
                         June 16, 2015                                                                                          
                           3:01 p.m.                                                                                            
                                                                                                                                
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
SENATE RESOURCES                                                                                                                
                                                                                                                                
 Senator Cathy Giessel, Chair                                                                                                   
 Senator John Coghill                                                                                                           
 Senator Peter Micciche                                                                                                         
 Senator Bill Stoltze                                                                                                           
 Senator Bill Wielechowski                                                                                                      
                                                                                                                                
HOUSE RESOURCES                                                                                                                 
                                                                                                                                
 Representative Benjamin Nageak, Co-Chair                                                                                       
 Representative David Talerico, Co-Chair                                                                                        
 Representative Bob Herron                                                                                                      
 Representative Kurt Olson                                                                                                      
 Representative Paul Seaton                                                                                                     
 Representative Andy Josephson                                                                                                  
 Representative Geran Tarr                                                                                                      
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
SENATE RESOURCES                                                                                                                
                                                                                                                                
 Senator Mia Costello, Vice Chair                                                                                               
 Senator Bert Stedman                                                                                                           
                                                                                                                                
HOUSE RESOURCES                                                                                                                 
                                                                                                                                
 Representative Mike Hawker, Vice Chair                                                                                         
 Representative Craig Johnson                                                                                                   
                                                                                                                                
OTHER LEGISLATORS PRESENT                                                                                                     
                                                                                                                                
Senator Anna Mackinnon                                                                                                          
Senator Lesil McGuire                                                                                                           
Representative Mike Chenault                                                                                                    
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
AKLNG Project Overview with Steve Butt                                                                                          
                                                                                                                                
     - HEARD                                                                                                                    
                                                                                                                                
AKLNG Fiscal Team Update                                                                                                        
                                                                                                                                
     - HEARD                                                                                                                    
                                                                                                                                
AKLNG Third Party Report of DNR and DOR Involvement                                                                             
                                                                                                                                
     - HEARD                                                                                                                    
                                                                                                                                
AKLNG Impact to the Kenai Peninsula Borough with Larry Persily                                                                  
                                                                                                                                
     - HEARD                                                                                                                    
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
No previous action to record                                                                                                    
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
STEVE BUTT, Project Manager                                                                                                     
AKLNG Project                                                                                                                   
POSITION STATEMENT: Provided AKLNG update.                                                                                    
                                                                                                                                
DAVID VAN TUYL, Regional Manager                                                                                                
BP Alaska                                                                                                                       
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Provided AKLNG fiscal update.                                                                            
                                                                                                                                
BILL MCMAHON, Senior Commercial Advisor                                                                                         
ExxonMobil                                                                                                                      
POSITION STATEMENT: Provided AKLNG fiscal update.                                                                             
                                                                                                                                
DARREN MEZNARICH, Project Integration Manager                                                                                   
AKLNG Project                                                                                                                   
ConocoPhillips                                                                                                                  
POSITION STATEMENT: Provided AKLNG fiscal update.                                                                             
                                                                                                                              
VINCENT LEE, Director                                                                                                           
Major Projects Development                                                                                                      
TransCanada, LLC                                                                                                                
POSITION STATEMENT:   Testified on  the AKLNG fiscal  update, but                                                             
due  to  technical  difficulties  it  was  not  clear  enough  to                                                               
summarize.                                                                                                                      
                                                                                                                                
DAN FAUSKE, President                                                                                                           
Alaska Gas Development Corporation (AGDC)                                                                                       
Anchorage, Alaska                                                                                                               
POSITION STATEMENT: Provided AKLNG fiscal update.                                                                             
                                                                                                                                
KEN VASSAR, Council                                                                                                             
Alaska Gasline Development Corporation (AGDC)                                                                                   
POSITION   STATEMENT:      Provided  AKLNG   fiscal   update   on                                                             
constitutional issues.                                                                                                          
                                                                                                                                
AUDIE SETTERS, General Manager                                                                                                  
State Gas Team                                                                                                                  
Department of Natural Resources (DNR)                                                                                           
POSITION  STATEMENT:  Provided  State   Gas  Team  AKLNG  Project                                                             
update.                                                                                                                       
                                                                                                                                
RANDALL HOFFBECK, Commissioner                                                                                                  
Department of Revenue (DOR)                                                                                                     
Anchorage, Alaska                                                                                                               
POSITION  STATEMENT:  Provided  State   Gas  Team  AKLNG  Project                                                             
update.                                                                                                                       
                                                                                                                                
DONA KEPPERS, Deputy Commissioner                                                                                               
Department of Revenue (DOR)                                                                                                     
Anchorage, Alaska                                                                                                               
POSITION  STATEMENT:  Provided  State   Gas  Team  AKLNG  Project                                                             
update.                                                                                                                       
                                                                                                                                
RANDALL HOFFBECK, Commissioner                                                                                                  
Department of Revenue (DOR)                                                                                                     
Juneau, Alaska                                                                                                                  
POSITION  STATEMENT:    Provided  State Gas  Team  AKLNG  Project                                                             
update.                                                                                                                       
                                                                                                                                
LARRY PERSILY, Oil and Gas Advisor                                                                                              
Kenai Peninsula Borough                                                                                                         
Soldotna, Alaska                                                                                                                
POSITION STATEMENT:  Provided AKLNG  Project update for the Kenai                                                             
Peninsula Borough.                                                                                                              
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
3:01:25 PM                                                                                                                    
CHAIR CATHY  GIESSEL called the  joint meeting of the  Senate and                                                             
House  Resources  Standing  Committees  to  order  at  3:00  p.m.                                                               
Present   at   the  call   to   order   were  Senators   Stoltze,                                                               
Wielechowski,    Coghill,    Micciche,   and    Chair    Giessel;                                                               
Representatives Herron, Josephson, Tarr, Olson, Seaton, and Co-                                                                 
Chairs Talerico and Nageak.                                                                                                     
                                                                                                                                
^AKLNG Project Update with Steve Butt                                                                                           
              AKLNG Project Update with Steve Butt                                                                          
                                                                                                                                
3:04:20 PM                                                                                                                    
CHAIR GIESSEL  announced that the  first part of  today's hearing                                                               
is  required as  part  of  SB 138,  which  established the  AKLNG                                                               
framework that passed in 2014.  It authorized the State of Alaska                                                               
to  enter into  the pre-front  end engineering  and design  (pre-                                                               
FEED)  stage  of  an  integrated gas  project.  She  invited  the                                                               
project manager, Steve Butt, to the table.                                                                                      
                                                                                                                                
STEVE BUTT, Project Manager, AKLNG  Project, related that a group                                                               
was  put together  under SB  138 to  formalize the  joint venture                                                               
agreement   that   includes   BP,   ConocoPhillips,   ExxonMobil,                                                               
TransCanada  and  the   Alaska  Gasline  Development  Corporation                                                               
(AGDC)  acting  as  the  state's agent  for  the  downstream  and                                                               
midstream segments (TransCanada is the  midstream and AGDC is the                                                               
downstream).                                                                                                                    
                                                                                                                                
3:07:11 PM                                                                                                                    
He said he was there on behalf of  the 135 people who work on the                                                               
project  and  he was  going  to  do his  very  best  to help  the                                                               
committee  understand what  they  accomplished in  the last  four                                                               
months.  He  said those  135  people  work with  several  hundred                                                               
contractors and different consortiums.                                                                                          
                                                                                                                                
MR. BUTT said  the AKLNG Project is an integrated  LNG project to                                                               
treat,  transport   and  liquefy   natural  gas  that   has  been                                                               
discovered on  the North  Slope, principally  in the  Prudhoe Bay                                                               
field and the Point Thomson  field that have somewhere between 32                                                               
and 35 tcf of  gas. It moves about 3.3 bcf a  day down to Nikiski                                                               
and that  leaves about 2.4  bcf gas  a day for  liquefaction. The                                                               
balance is  used for  fuel and  instate use.  The 2.4  bcf/day is                                                               
about  10 times  what  the  state uses  right  now, about  enough                                                               
energy to fuel an economy the  size of Germany. "It's an enormous                                                               
number." He said the scale of  the project is very large and will                                                               
cost  $45-$55 billion.  The  sheer complexity  and  scope of  the                                                               
project requires careful integration.                                                                                           
                                                                                                                                
MR. BUTT showed  pictures of the Point Thomson  drilling rig that                                                               
was finishing the third well for  the IPS. The modules will start                                                               
being brought in  for the compression facility over  the next few                                                               
weeks. The gas  treatment plant (GTP) is in final  design and the                                                               
same   optimization  work   is   being  done   on  building   the                                                               
liquefaction facility.                                                                                                          
                                                                                                                                
3:09:28 PM                                                                                                                    
The Safety,  Health and Environment  Report indicated  that there                                                               
was a  minor non-toxic  hydraulic fluid release  of one  cup that                                                               
was remediated.                                                                                                                 
                                                                                                                                
They spent  about $300  million, which  includes $200  million on                                                               
pre-FEED work  since 2014,  about $25-30  million per  month. The                                                               
work  was primarily  focused on  two  activities: one  addressing                                                               
regulatory  work with  the Federal  Energy Regulatory  Commission                                                               
(FERC) and the other doing basic design.                                                                                        
                                                                                                                                
3:10:51 PM                                                                                                                    
Since their  last talk,  one great milestone  issue came  up: the                                                               
Deputy Secretary of the Department  of Energy announced an export                                                               
authorization  for non-free  trade authorization  countries; that                                                               
means the  project can  ship LNG  to anywhere  in the  world. The                                                               
request was  for 20  million metric tons  annually for  a 30-year                                                               
period  with a  12-year start  to  initiation of  the permit  and                                                               
construction. He pointed out that  all numbers are unprecedented;                                                               
the   Department  of   Energy   has  never   granted  an   export                                                               
authorization of  that duration, of  that magnitude or  with more                                                               
than  seven years  for  construction. He  said  there was  strong                                                               
support from the DOE and the federal government.                                                                                
                                                                                                                                
3:12:52 PM                                                                                                                    
Another  big  milestone  is that  FERC  accepted  their  resource                                                               
report that  initiated the Environmental Impact  Statement (EIS).                                                               
This is  an arduous  process but  it is  required for  getting an                                                               
authorization for construction.                                                                                                 
                                                                                                                                
3:14:06 PM                                                                                                                    
Key Messages:                                                                                                                   
1. AKLNG is  an integrated LNG project: plant  plus pipeline that                                                               
provides gas to Alaskans and can  sell LNG anywhere in the world.                                                               
One  of the  most  important characteristics  of the  integration                                                               
design  is that  there  are four  parties  - ConocoPhillips,  BP,                                                               
ExxonMobil  and  the State  of  Alaska  - that  have  fundamental                                                               
claims  to  gas  on  the  North  Slope  and  rights  to  revenues                                                               
generated by  that resource; 98  percent of  the gas is  owned by                                                               
project   participants.  Aligning   the  four   parties  is   the                                                               
difference between  a project  that will work  and one  that will                                                               
struggle.                                                                                                                       
                                                                                                                                
2. The ARC of Success is:                                                                                                       
-Alignment: the  state is a  key participant with  voting rights,                                                               
and  rights  to  data.  Partners  can talk  to  each  other  with                                                               
transparency. The alignment factor is critical.                                                                                 
-Risk reduction: Pre-FEED identifies/mitigates risk.                                                                            
-Cost reduction: cost of supply defines competitiveness.                                                                        
                                                                                                                                
MR. BUTT said his last message  was that as the team goes through                                                               
all the work,  they are trying really hard to  match the pre-FEED                                                               
pace to all broader schedule  issues. The pre-FEED work will keep                                                               
the  project umbrella  deliverables  they all  agreed  to in  the                                                               
Joint Venture Agreement (JVA) on track.  But that is done as part                                                               
of a  broader whole.  Things like commercial  issues all  have to                                                               
come together so  that when they get to different  phase gates in                                                               
this project management structure they  come together at the same                                                               
time. Otherwise pieces won't be ready at the right time.                                                                        
                                                                                                                                
3:19:55 PM                                                                                                                    
The design  of the  gas treatment plant  (GTP) pad/camp  has been                                                               
completed. Access  to required  construction gravel  is confirmed                                                               
and  water resource  availability is  being evaluated.  A lot  of                                                               
geotechnical work is  being done at Nikiski and  with the Prudhoe                                                               
Bay operator on a whole host of issues.                                                                                         
                                                                                                                                
One  real   milestone  was   completing  the   winter  near-shore                                                               
excavation program.  They had  to find  out if  the west  dock at                                                               
Prudhoe  Bay needed  to  be deeper  to bring  in  modules in  the                                                               
winter. Traditionally  the work is  done in the summer,  but they                                                               
decided to use a traditional hydro-ax  to cut the ice and pick up                                                               
the coils  when they are  frozen. Doing  this in the  winter will                                                               
free up the summer months  for moving modules and logistics work.                                                               
This has been tested successfully.                                                                                              
                                                                                                                                
3:23:23 PM                                                                                                                    
Pipeline  work/design  is  continuing   to  go  really  well,  he                                                               
reported. The  route is  complete and aligns  with AGDC.  Work is                                                               
continuing on  key areas such  as Atigun Pass, Glitter  Gulch and                                                               
Nikiski.  The western  route across  Cook Inlet  was chosen.  The                                                               
hydraulic  work  has  been  done and  material  design  is  being                                                               
evaluated along  with weld procedures for  the different sections                                                               
of the pipeline.                                                                                                                
                                                                                                                                
3:26:54 PM                                                                                                                    
MR.  BUTT  explained  that  all parties  had  become  aligned  on                                                               
pipeline routing across  Cook Inlet. Since the focus  has been on                                                               
Nikiski as  the best site  for the LNG plant,  a lot of  work had                                                               
been done on how to cross  the Inlet and they believe the western                                                               
route  is   best.  It's  14   miles  shorter  and  has   a  lower                                                               
environmental impact; it  avoids the 25 miles  within the Susitna                                                               
Gunnery  range with  unexploded ordinance.  Second, the  mouth of                                                               
the Knik Arm is where all  the eight Chugach power cables are and                                                               
the lay  barge to put  in the pipe has  a 300 ft.  anchor spread.                                                               
So, it would have  to be able to move the  300 ft. spread without                                                               
hitting the power cables that  would compromise power to the City                                                               
of Anchorage. The  other big issue is that the  mouth of the Knik                                                               
Arm has a lot  of sediments coming in it from  glaciers and it is                                                               
one of the  most active seabeds in south Alaska.  It has moved 40                                                               
feet in six years.                                                                                                              
                                                                                                                                
3:33:17 PM                                                                                                                    
They  are  continuing  to  improve  marine  facility  design  and                                                               
operational capability  and actually did  the civil work  for the                                                               
gas-to-liquids (GTL)  plant location. It would  cost $3-4 billion                                                               
to  move 131  million cubic  yards  of rock  into Prince  William                                                               
Sound (PWS) locations,  but the extensive civil  work impacts are                                                               
unknown  and probably  can't be  permitted. He  said it  would be                                                               
easier to  put a GTL  in Seward because it  has a great  site for                                                               
shipping, but it is  not a good place to find  800 flat acres for                                                               
the GTL plant.                                                                                                                  
                                                                                                                                
In Cook Inlet,  the challenge was getting across  the Kenai River                                                               
and  moving gas  down  into  a premier  salmon  area. This  would                                                               
increase costs because  it makes the pipeline  much longer, would                                                               
increase the  environmental impact by crossing  important waters.                                                               
Staying in an  existing industrial area would  limit that impact.                                                               
Additionally, with the Valdez/Prince  William option there is the                                                               
difficulty in getting  the gas back to the  population centers in                                                               
Anchorage;  that  would  require  a very  long  spur  going  back                                                               
through Glennallen.                                                                                                             
                                                                                                                                
The  Seward pipeline  access  point would  be  very difficult  to                                                               
construct.  He repeated  that their  exercise focuses  around the                                                               
ability to  be successful by keeping  costs down and that  is why                                                               
they  are focusing  on Nikiski  as the  plant site  and have  had                                                               
nothing but excellent welcomes from community members.                                                                          
                                                                                                                                
3:37:58 PM                                                                                                                    
MR.  BUTT  related  that  every  year  field  work  is  done  for                                                               
regulatory data and this year  250 people spent about $50 million                                                               
on  it.  They are  primarily  cultural  heritage specialists  who                                                               
found five cultural area sites, about  75 percent of them are old                                                               
Alaskan settlements.                                                                                                            
                                                                                                                                
CHAIR GIESSEL recognized Speaker Chenault in attendance.                                                                        
                                                                                                                                
SENATOR  MICCICHE said  a lot  of people  did not  understand the                                                               
work behind the site choice.                                                                                                    
                                                                                                                                
MR.  BUTT replied  that  a lot  of  very proprietary  specialized                                                               
design  work went  behind it,  but he  would talk  about what  he                                                               
could. They had  been making sure all participants  are happy and                                                               
having some  "good conversations" with  the State Gas  Team about                                                               
constructability challenges.                                                                                                    
                                                                                                                                
3:39:35 PM                                                                                                                    
SENATOR  STOLTZE  had  a  question,   but  due  to  technological                                                               
difficulties it was indiscernible.                                                                                              
                                                                                                                                
MR.  BUTT said  as  part of  the  Environmental Impact  Statement                                                               
process, FERC wants  to know what the community  thinks about the                                                               
project in  terms of  different routings  and other  options. So,                                                               
last year  they had  a lot of  stakeholder engagement  holding 80                                                               
sessions; FERC had  also held their own  sessions. Everyone wants                                                               
confidence that the community supports the project.                                                                             
                                                                                                                                
He  had  four  sessions  in   late  May  with  about  700  people                                                               
representing about 300 Alaska  businesses, because local Alaskans                                                               
have knowledge  on how to  work in  Alaska which will  help drive                                                               
down costs. Those are "going really  well."  The U.S. Coast Guard                                                               
is very  supportive. He  related that the  White House  sees this                                                               
project favorably  because the limited  carbon footprint  is very                                                               
efficient with all the CO being put back in the ground.                                                                         
                         2                                                                                                      
                                                                                                                                
They  take  environmental  responsibility for  protecting  marine                                                               
mammals  and  habitat  whatever  route  is  taken.  That  is  why                                                               
extensive pre-FEED  work went into  coming up with a  really good                                                               
design  that works  for  all the  stakeholders.  It will  provide                                                               
"comfort" that the design really works  when they got to the FEED                                                               
stage decision.  "We really want to  get it right," he  said, and                                                               
"Working on the wrong line gets very expensive very fast."                                                                      
                                                                                                                                
He said  the labor and  logistics study assured  understanding of                                                               
how this huge project would get  built. The scale is enormous and                                                               
means 15,000 more jobs in Alaska.                                                                                               
                                                                                                                                
3:47:42 PM                                                                                                                    
They had  great dialogues  with the  different labor  unions, the                                                               
Department  of Labor  and the  Native corporations  on developing                                                               
the craft  labor skills  that are  needed, but  there is  so much                                                               
work that some of  it will have to be exported.  That is the only                                                               
way to keep the project economic.                                                                                               
                                                                                                                                
MR. BUTT  remarked how  hard it  is to drive  buses of  40 people                                                               
safely on  a highway  and that  3,500 people  will be  working on                                                               
site. How will they be moved  along with the 250 thousand tons of                                                               
steel that  will need to be  fabricated and get it  landed in the                                                               
right  way? All  ports in  Alaska are  being looked  at, multiple                                                               
ports for different materials.                                                                                                  
                                                                                                                                
3:48:36 PM                                                                                                                    
Lastly,  Mr.  Butt  covered  forward  plans.  The  Joint  Venture                                                               
Agreement (JVA) is a playbook telling  them how to build an AKLNG                                                               
Project. As  part of that,  everyone agreed  on what work  had to                                                               
get done  to make sure  that pre-FEED questions can  be answered;                                                               
that work  is on  track and  will be  complete and  available for                                                               
shareholder  review in  the  fourth quarter  of  2015. This  will                                                               
inform additional work.                                                                                                         
                                                                                                                                
MR. BUTT  said they must keep  their FERC and EIS  work on track;                                                               
the first draft of the resource  report is done. The second draft                                                               
is  expected in  early 2016.  They want  to keep  the engineering                                                               
deliverables and the FERC documents together.                                                                                   
                                                                                                                                
With  that said,  they need  to keep  working with  the state  to                                                               
understand some of  the open issues like some  of the transitions                                                               
that are being discussed, potential  changes in the state's Asian                                                               
relationship, how the  state wants to be involved  in the project                                                               
and how  that may impact  the resources available to  the project                                                               
and how it might impact the skills available to the project.                                                                    
                                                                                                                                
They can test how new risks  can be mitigated and understand very                                                               
clearly how  to the actual  offtake locations will be  built. The                                                               
AGDC has done  a lot of work on this  using everything outside of                                                               
the  main distribution  as part  of their  mandate. They  want to                                                               
know how that would work, so  the offtakes are in the right place                                                               
and the hydraulic model can be validated.                                                                                       
                                                                                                                                
He said  they want  to make  sure the  project design  elements -                                                               
pipeline  size,  route  and  plant   site  -  are  to  everyone's                                                               
satisfaction. They  don't want  to waste  resources by  having to                                                               
switch  routes. Alignment  among  the parties  is  needed on  the                                                               
fundamental design issues.   In addition, they want  to make sure                                                               
they  have  complete  support from  the  administration's  45-day                                                               
review team to their satisfaction.  They will be positioned for a                                                               
FEED decision when the open issues are resolved.                                                                                
                                                                                                                                
3:52:26 PM                                                                                                                  
As Mr. Butt mentioned earlier,  the project's pace and spend must                                                               
be matched to  all these other open issues so  that when the work                                                               
is ready to go  across the gate it's in the  right place. Does it                                                               
have viable  technical options, does it  have government support,                                                               
are  permits  and  land  uses   achievable;  is  there  potential                                                               
commercial  viability at  a level  that  all of  the parties  are                                                               
comfortable with?  The parties  and the  citizens of  Alaska will                                                               
have to decide, under SB 138,  if they want to continue investing                                                               
25  percent of  the money  required to  move to  the next  level;                                                               
that's $1 billion to $1.5 billion,.                                                                                             
                                                                                                                                
3:55:50 PM                                                                                                                    
CHAIR  GIESSEL asked  him to  talk about  employment of  Alaskans                                                               
right now in the project.                                                                                                       
                                                                                                                                
MR. BUTT  said about 200  people are  working on the  field work,                                                               
about  30-40 doing  the geo-technical  work; and  several hundred                                                               
people  are  providing  logistical support  (ASRC).  Hundreds  of                                                               
people are coming up to support that work.                                                                                      
                                                                                                                                
CHAIR GIESSEL said she knew the  State of Alaska was trying to do                                                               
its part to  have a prepared workforce. She thanked  Mr. Butt for                                                               
the presentation.                                                                                                               
                                                                                                                                
3:58:40 PM                                                                                                                    
At ease from 3:58 to 4:03 p.m.                                                                                                  
                                                                                                                                
^AKLNG Fiscal Team Update                                                                                                       
                                                                                                                              
                    AKLNG Fiscal Team Update                                                                                
                                                                                                                              
4:03:12 PM                                                                                                                  
CHAIR GIESSEL called the meeting  back to order and announced the                                                               
AKLNG fiscal team update as the next order of business.                                                                         
                                                                                                                                
4:04:35 PM                                                                                                                    
DAVID VAN  TUYL, Regional Manager, BP  Alaska, Anchorage, Alaska,                                                               
said he  had been working  for BP for  almost 31 years,  the last                                                               
half of that on the Alaska gas  project. He is now working on the                                                               
Joint Fiscal Team and Management  Committee of the AKLNG Project.                                                               
He  is  pleased  to  be  in  Nikiski,  the  site  of  the  future                                                               
liquefaction facility.  The success  of this project  is critical                                                               
to BP's  business here in Alaska,  he said, and also  critical to                                                               
the  future of  the  State of  Alaska, itself,  and  for so  many                                                               
Alaskans  who  will  benefit  directly   and  indirectly  from  a                                                               
successful project.                                                                                                             
                                                                                                                                
He said the  project recently took a very  important step forward                                                               
in receiving  export authorization  for non-trade  countries from                                                               
the  U.S. Department  of Energy.  It's  a big  deal. The  project                                                               
would not be a success  without that approval. The relative speed                                                               
with which  that approval was  obtained also shows  how important                                                               
the project is on the U.S.  federal level. That approval sends an                                                               
important message  to the  world that the  AKLNG Project  is real                                                               
and is coming; the project is building momentum.                                                                                
                                                                                                                                
MR. VAN TUYL said there is much  to be done, but they continue to                                                               
make progress. Since the early  days of the Walker Administration                                                               
all partners had worked productively  with his team and they will                                                               
continue doing  that. They remain  actively engaged on  a variety                                                               
of fronts to continue to  progress the project and the associated                                                               
commercial work members will hear about shortly.                                                                                
                                                                                                                                
He  concluded  that  last  year  they  started  on  this  journey                                                               
together;  project momentum  is continuing.  BP looks  forward to                                                               
continuing  this  journey  together  in  the  coming  months.  He                                                               
thanked them and turned the presentation over to Mr. McMahon.                                                                   
                                                                                                                                
4:07:44 PM                                                                                                                    
BILL MCMAHON, Senior Commercial  Advisor, ExxonMobil, said he had                                                               
been working for  ExxonMobil for more than 33 years.  The last 23                                                               
of those year  he had been focused on Alaska  gas development. He                                                               
said  Alaska   continues  to   be  a   very  important   part  of                                                               
ExxonMobil's  worldwide portfolio;  they had  been in  Alaska for                                                               
more  than 50  years  and  had invested  more  than $13  billion.                                                               
ExxonMobil  is  committed to  Alaska  and  continues to  actively                                                               
pursue  investment  opportunities  there. As  operator  at  Point                                                               
Thomson,  ExxonMobil   was  pleased   to  reach   the  settlement                                                               
agreement back in 2012 that  allowed that project to move forward                                                               
for development and  allowed the AKLNG Project.  Since that time,                                                               
they  had  been moving  quickly  to  get the  initial  production                                                               
system  running. It  is scheduled  to start  up either  late this                                                               
year  or early  next year,  well before  their commitment  in the                                                               
settlement.                                                                                                                     
                                                                                                                                
As the  largest working  partner at Prudhoe  Bay and  the largest                                                               
lease  holder of  discovered natural  in  Alaska, ExxonMobil  has                                                               
serious  commitments to  the AKLNG  Project. ExxonMobil  has been                                                               
involved  with  all past  gas  commercialization  efforts and  is                                                               
excited by the promise of  AKLNG and is working diligently toward                                                               
the next  major milestone. Today  he would review  their progress                                                               
and remaining key challenges.                                                                                                   
                                                                                                                                
4:10:26 PM                                                                                                                    
DARREN   MEZNARICH,  Project   Integration   Manager  of   AKLNG,                                                               
ConocoPhillips,  Anchorage, Alaska,  said  he had  been with  the                                                               
company  for 25  years. He  said ConocoPhillips  is working  hard                                                               
with the administration  and the other parties  on technical work                                                               
and the necessary commercial and  fiscal agreements and are ready                                                               
to move  to the next  phase. He said ConocoPhillips  testified in                                                               
February that the most  important commercial agreement throughout                                                               
is the gas supply agreement. It  is foundational for a project of                                                               
this scale and size. It's the  basis for determining the rate and                                                               
the volume of gas between Prudhoe  Bay and Point Thomson and what                                                               
happens if  volumes are not  supplied. This agreement is  key for                                                               
ConocoPhillips in  a special session.  It is crucial to  agree on                                                               
them now so the project  has a solid commercial foundation, which                                                               
the  legislature  can  consider  additional  fiscal  and  project                                                               
enabling legislation on. He is  encouraged by the state's support                                                               
of the  project and the governor's  accessibility and engagement.                                                               
The   governor's  team   brings  important   LNG  expertise   and                                                               
experience to the project.                                                                                                      
                                                                                                                                
VINCENT LEE,  Director, Major Projects  Development, TransCanada,                                                               
testified  but  due to  technical  difficulties  it wasn't  clear                                                               
enough to summarize.                                                                                                            
                                                                                                                                
4:14:20 PM                                                                                                                    
DAN  FAUSKE,   President,  Alaska  Gas   Development  Corporation                                                               
(AGDC), Anchorage,  Alaska, said  it continues  to be  a pleasure                                                               
working with state agencies on  AKLNG team. He said they continue                                                               
to do  work on the  Alaska Stand  Alone Project (ASAP),  but it's                                                               
all geotechnical  or environmental  work that benefits  the other                                                               
project.                                                                                                                        
                                                                                                                                
4:15:56 PM                                                                                                                    
SENATOR STOLTZE said he tries  to understand the dynamics between                                                               
the  two groups  and asked  if there  is a  schism between  their                                                               
philosophies.                                                                                                                   
                                                                                                                                
MR.  McMAHON  answered  that  he  would  show  slides  about  how                                                               
integrated they are.                                                                                                            
                                                                                                                                
4:16:59 PM                                                                                                                    
MR. McMAHON  went to  slide 2 that  introduced the  term "sponsor                                                               
group" that has all seven parties  that have an interest in AKLNG                                                               
Project:  the   Department  of   Natural  Resources   (DNR),  the                                                               
Department of Revenue  (DOR) from the governor's  office; AGDC as                                                               
the  state's representative  making the  investments in  the pre-                                                               
FEED stage  of the project,  TransCanada; and ExxonMobil,  BP and                                                               
ConocoPhillips  who  hold  the  rights for  the  natural  gas  in                                                               
Prudhoe Bay. All  are concerned with progressing  the project. In                                                               
addition  to what  Mr. Butt  talked  about, the  project team  is                                                               
interested in the ongoing commercial and fiscal work.                                                                           
                                                                                                                                
FERC  and  NEPA applicants  are  the  same  group of  folks;  the                                                               
administration is  not a formal  applicant but it has  very heavy                                                               
consultation  involvement, because  FERC  is  very interested  in                                                               
where  the State  of  Alaska stands  on  these applications.  The                                                               
critical issue  is the EIS  that will  allow the project  to turn                                                               
earth and start construction.                                                                                                   
                                                                                                                                
The  third box  on the  slide indicated  the five  joint interest                                                               
parties that signed the  agreement governing pre-FEED activities.                                                               
The DOE  export license work was  all done under the  name of the                                                               
AKLNG Project,  LLC. The  terms of that  agreement allow  for the                                                               
addition of parties. So they  anticipate that the state would put                                                               
a representative into  the LLC with some kind  of connection with                                                               
the state royalty in kind election.                                                                                             
                                                                                                                                
MR.  MCMAHON  said  slide  3  summarizes  the  7  parties  having                                                               
interest in pre-FEED, and  highlights activities and deliverables                                                               
with  a target  completion  by year  end. He  used  the chart  to                                                               
remind people of what is inside and outside the project.                                                                        
                                                                                                                                
4:24:27 PM                                                                                                                    
MR. McMAHON said  slide 3 showed everything Mr. Butt  said on one                                                               
page. It showed the seven parties  that have a vested interest in                                                               
moving  this project  forward  and good  progress  is being  made                                                               
towards  completing the  pre-FEED  deliverables. One  of the  key                                                               
things  was passing  the bill  that grants  right-of-ways through                                                               
state parks. Mr. Butt has  been targeting completion of this work                                                               
by year-end, so owner reviews can happen after that.                                                                            
                                                                                                                                
The circle  on slide 4  reminds folks of  what is in  the project                                                               
and  what is  outside the  project. Everything  in the  circle is                                                               
officially part of  AKLNG: the two transmission  lines to connect                                                               
two fields into  the gas treatment plant (GTP), the  GTP gets gas                                                               
to  a  quality so  that  it  can be  turned  into  a liquid,  the                                                               
pipeline that  goes across the  state and the LNG  plant, storage                                                               
and loading in Nikiski.                                                                                                         
                                                                                                                                
Prudhoe Bay and Point Thomson are  outside the box but central to                                                               
the  project, and  the  owners  of those  two  units are  working                                                               
closely  to get  natural  gas flowing.  Another  box outside  the                                                               
circle  represented  in-state  gas  supply, a  priority  for  the                                                               
project. So, they  will work with the administration  and AGDC to                                                               
find out where  those offtakes will be. The sponsors  have a wide                                                               
span of interests in activities  beyond just the project team in:                                                               
gas production, commercial,  fiscal, regulatory, external affairs                                                               
and government relations.  Work in each of those  areas will need                                                               
to be  completed in sync with  all the other paths.  The sponsors                                                               
don't discuss individual efforts to monetize the gas.                                                                           
                                                                                                                                
For  gas production  the main  thing to  update is  first in  the                                                               
Point  Thompson  Unit  (PTU)  area where  75-80  percent  of  the                                                               
initial production  system is going to  be able to be  reused for                                                               
gas expansion. More reservoir data  can be collected as the field                                                               
gets up  and running. As  that moves  forward, it will  provide a                                                               
good oil and gas expansion foundation.                                                                                          
                                                                                                                                
The Alaska Oil  and Gas Conservation Commission  (AOGCC) has been                                                               
having regular  interactions the  Point Thomson owners  about the                                                               
gas offtakes  and hope to  be in a  position next month  to begin                                                               
the formal  application for them.  At the same time,  the Prudhoe                                                               
Bay owners  are actively working  on getting ready for  gas sales                                                               
and have had  successful technical workshops with  AOGCC and will                                                               
be submitting a formal request soon.                                                                                            
                                                                                                                                
He  presented  a  gas production  visual  that  charted  upstream                                                               
working   interests,  producer   share  and   working  interests,                                                               
producer and  state shares  after royalty  and after  royalty and                                                               
production tax divided  up by PBU and PTU. The  ultimate split of                                                               
the two  different fields is  subject to  the gas supply  and the                                                               
regulatory  authorizations. He  explained  that if  the State  of                                                               
Alaska (SOA)  would take royalty  in kind it would  receive about                                                               
13  percent of  the natural  gas coming  out of  the project  and                                                               
producers/partners would  take less. Under the  SB 138 construct,                                                               
if the state takes RIK and tax  as gas (TAG) the state would then                                                               
control  around 25  percent of  the gas  and the  producer shares                                                               
would shrink.                                                                                                                   
                                                                                                                                
4:28:48 PM                                                                                                                    
SENATOR MICCICHE  asked how he  assumed 13 percent of  royalty in                                                               
kind and 25 percent with RIK and TAG.                                                                                           
                                                                                                                                
MR. McMAHON  explained that the  royalty percentages  are defined                                                               
in their  lease agreements  and the  increase for  tax as  gas is                                                               
based on  SB 138 that  set 13 percent  as the production  tax for                                                               
natural gas for this project.                                                                                                   
                                                                                                                                
4:29:45 PM                                                                                                                    
CHAIR GIESSEL  said they know  that as  a state there  are things                                                               
the   partners   are  waiting   for   like   the  RIK   and   TAG                                                               
determinations. But  he is working  on a gas  balancing agreement                                                               
now amongst  the parties and  asked if the  state is part  of the                                                               
discussion and how that is progressing.                                                                                         
                                                                                                                                
MR.  McMAHON answered  that they  are  progressing and  he has  a                                                               
chart coming up about it.                                                                                                       
                                                                                                                                
4:30:33 PM                                                                                                                    
REPRESENTATIVE  SEATON said  the Point  Thomson distribution  was                                                               
based on the amount of investment  each company has in that field                                                               
and  asked if  the state  has additional  investment through  any                                                               
creditor being  paid for  work on  the PTU and  if that  would be                                                               
reflected in royalty or the production tax.                                                                                     
                                                                                                                                
MR. McMAHON answered  that the participation at  Point Thomson is                                                               
governed by their lease agreements.  So, ExxonMobil pays about 62                                                               
percent of the costs, BP pays  about 32 percent of the costs, and                                                               
ConocoPhillips pays  about 5  percent of the  costs; there  is no                                                               
state  participation in  Point Thomson.  The state  participation                                                               
the chart talks about focuses on the AKLNG Project.                                                                             
                                                                                                                                
REPRESENTATIVE SEATON  asked if  tax credits  were taken  for the                                                               
development of  the Point  Thomson Unit if  the tax  credits were                                                               
considered as an investment by the state.                                                                                       
                                                                                                                                
4:33:49 PM                                                                                                                    
MR. MCMAHON  answered that Point  Thomson has  lease expenditures                                                               
that do qualify  for tax credits under SB 21,  but he didn't have                                                               
that information with him.                                                                                                      
                                                                                                                                
4:34:05 PM                                                                                                                    
He  said  once lease  modifications  under  SB 138  are  drafted,                                                               
applications will  be submitted to DNR.  They address royalty-in-                                                               
kind (RIK) and  royalty-in-value (RIV) switching and  limit it to                                                               
a particular  period in time. Right  now the State of  Alaska has                                                               
the  right  to   switch  back  and  forth,  but   that  would  be                                                               
inconsistent with this project having  stability over a period of                                                               
time. Also,  Point Thomson has  a sliding scale royalty  (SSR) as                                                               
well as net  profit sharing (NPS) leases. SB  138 envisioned that                                                               
it be  Point Thomson  owners unless  DNR can  come to  terms that                                                               
those variable  leases can be  converted into a  fixed percentage                                                               
to  increase  the  state's  gas share  of  participation  in  the                                                               
project.                                                                                                                        
                                                                                                                                
SENATOR COGHILL asked what timeframe he was talking about.                                                                      
                                                                                                                                
MR. MCMAHON's answer was indiscernible.                                                                                         
                                                                                                                                
MR.  MCMAHON  said  a  large   amount  of  work  was  going  into                                                               
developing  the  commercial  basins   for  the  venture  and  the                                                               
foundation agreements  need to  be sufficiently  completed before                                                               
fiscal action  can be taken  by the legislature over  moving into                                                               
FEED.                                                                                                                           
                                                                                                                                
The first  area they are working  on is the governor's  long term                                                               
venture  including how  the facilities  would  be expanded.  Just                                                               
like a  negotiated agreement governed their  pre-FEED activities,                                                               
they are  in the process  of negotiating an agreement  that would                                                               
govern FEED,  engineering, procurement  and construction  as well                                                               
as long term  operations. They are also  developing agreements on                                                               
how  gas  will   be  supplied  to  the   project,  of  particular                                                               
importance to the state because  under the construct if the state                                                               
takes RIK  and producers elect TAG,  then the state will  need to                                                               
know how they will lift that 25  percent of gas out of the fields                                                               
into  the  project. Also,  since  gas  will  be coming  from  two                                                               
different  fields, those  commercial agreements  will govern  how                                                               
those fields produce it.                                                                                                        
                                                                                                                                
A third area  of importance is to understand how  people can take                                                               
gas off the project to supply  to Alaskans as well as lifting the                                                               
LNG  from the  loading docks  onto ships.  They are  also working                                                               
mostly with the State Gas  Team on agreements around in-state gas                                                               
and other  agreements until they  get to the point  of justifying                                                               
legislative action on fiscals.                                                                                                  
                                                                                                                                
4:39:33 PM                                                                                                                    
A  Long  Term  Firm   Transportation  Services  Agreement  (FTSA)                                                               
between  the  state  and  TransCanada needs  to  be  worked  out.                                                               
Depending on  who the  parties are, some  of the  agreements will                                                               
require legislative review.                                                                                                     
                                                                                                                                
CHAIR  GIESSEL said  she felt  that  the timeline  for a  special                                                               
session  on these  issues was  getting tight,  around the  end of                                                               
October. There is  also a 90 day public notice  for their review.                                                               
She asked how he felt about that.                                                                                               
                                                                                                                                
MR.  McMAHON responded  from  ExxonMobil's  perspective they  are                                                               
making good progress.  The way you get to agreements  is to start                                                               
with terms. It is a daunting task, but they are making progress.                                                                
                                                                                                                                
MR. VAN  TUYL agreed that  it is  daunting, but BP  is encouraged                                                               
that separate independent teams  working are on different aspects                                                               
of the project.                                                                                                                 
                                                                                                                                
MR. MEZNARICH  said they had hoped  to be further along,  but the                                                               
work is challenging.                                                                                                            
                                                                                                                                
4:43:32 PM                                                                                                                    
MR.  LEE said  that TransCanada  was  not at  liberty to  discuss                                                               
details,  but could  say that  the administration  had informally                                                               
approached  TransCanada  about  taking  steps  to  terminate  its                                                               
relationship with the State of Alaska.                                                                                          
                                                                                                                                
CHAIR  GIESSEL said  she appreciated  his comments.  The governor                                                               
had indicated his  desire to go it alone on  the pipeline and the                                                               
legislative consultants  had outlined  what that cash  call would                                                               
entail.                                                                                                                         
                                                                                                                                
REPRESENTATIVE HERRON noted that earlier  Mr. Lee had stated that                                                               
a termination  notice had  not been  received by  TransCanada and                                                               
asked  if the  governor had  asked  for any  information about  a                                                               
termination process.                                                                                                            
                                                                                                                                
MR.  LEE's said  that this  question was  better directed  to the                                                               
administration,  but  that the  choice  was  entirely within  the                                                               
purview of the State of Alaska.                                                                                                 
                                                                                                                                
REPRESENTATIVE  HERRON asked  if  this  is a  good  time for  the                                                               
governor to negotiate this.                                                                                                     
                                                                                                                                
MR. LEE's answer was indiscernible.                                                                                             
                                                                                                                                
4:48:38 PM                                                                                                                    
CHAIR  GIESSEL  reminded  folks  that  termination  criteria  was                                                               
spelled out in Appendix  C on pages 8 and 9  of the memorandum of                                                               
understanding (MOU)  with a deadline  for entering into  the FTSA                                                               
of September  31, 2015. If the  state decides to go  it alone and                                                               
not  enter that  FTSA, it  would  owe TransCanada  the amount  of                                                               
investment  they have  made up  to  this point  plus 7.1  percent                                                               
interest, which  the governor's office  has estimated to  be $108                                                               
million.                                                                                                                        
                                                                                                                                
SENATOR STOLTZE  asked if the  legislature was supposed  to focus                                                               
on fiscal terms or legislation on the right-of-ways this year.                                                                  
                                                                                                                                
MR. McMAHON  answered that the  first issue would  be legislation                                                               
on flow-related  property tax  and payments  during construction;                                                               
next would  be a review  and ratification of any  fiscal contract                                                               
agreed to by the partners and  the state of Alaska; finally, many                                                               
of  the  commercial  agreements require  legislative  review  and                                                               
approval.                                                                                                                       
                                                                                                                                
4:51:18 PM                                                                                                                    
MR. FAUSKE said the gas  balancing agreement is also key, because                                                               
without it there is no project. O                                                                                               
-CHAIR JOSEPHSON                                                                                                                
4:52:19 PM                                                                                                                    
MR. MEZNARICH added that gas  supply and the fiscal terms, things                                                               
laid out in the Heads of Agreement (HOA) roadmap, are also key.                                                                 
                                                                                                                                
MR. VAN TUYL commented that  a royalty-in-kind election was under                                                               
the  purview  of the  administration.  That  underpins the  basic                                                               
structure of the  gasline and enables the  alignment everyone has                                                               
been talking about.                                                                                                             
                                                                                                                                
CHAIR GIESSEL  remarked that  the legislature  will not  have any                                                               
review of the RIK issue; it  will be under the DNR commissioner's                                                               
review.                                                                                                                         
                                                                                                                                
SENATOR  MICCICHE  asked if  he  thought  the administration  was                                                               
creating  obstacles  to  an   acceptable  timeline  or  improving                                                               
relationships.  Does the  administration  have  the potential  to                                                               
derail  this very  important project  or  will improvements  keep                                                               
everyone on schedule this year?                                                                                                 
                                                                                                                                
MR. VAN TUYL replied  that BP is using the roadmap  in SB 138 and                                                               
a  key thing  that underpins  that is  commercial alignment.  The                                                               
administration is absolutely interested  in this project and BP's                                                               
preference is  to continue  maturing the  relationships addressed                                                               
in SB 138.                                                                                                                      
                                                                                                                                
4:57:19 PM                                                                                                                    
MR.  MEZNARICH  recognized  that   the  administration  has  good                                                               
constructive  proposals and  brings  a sense  of  urgency to  the                                                               
project.                                                                                                                        
                                                                                                                                
4:57:56 PM                                                                                                                    
MR. McMAHON said  this is all about  putting together predictable                                                               
and durable fiscal  terms for a project that  is of unprecedented                                                               
scale. It is  important to LNG buyers, lenders  and investors and                                                               
the administration recognizes  this. They are in  a dialogue with                                                               
the  administration   about  the  mechanism  for   financing  and                                                               
property taxes.                                                                                                                 
                                                                                                                                
SENATOR  STOLTZE asked  if he  had looked  at the  possibility of                                                               
needing a constitutional amendment for the fiscal terms.                                                                        
                                                                                                                                
MR. VAN TUYL answered  that he is not an attorney  and that BP is                                                               
sufficiently  confident  about  fiscal stability  to  have  spent                                                               
hundreds of millions on the project.                                                                                            
                                                                                                                                
5:02:21 PM                                                                                                                    
MR.   FAUSKE  said   he   isn't  an   attorney   either,  but   a                                                               
constitutional   amendment  would   be  another   benchmark  that                                                               
requires a general election, which  moves the project out another                                                               
year. He  wasn't sure if it  would be required or  not. They must                                                               
keep in  mind to  not be  too cautious  because the  market could                                                               
just leave them "sitting in the wake."                                                                                          
                                                                                                                                
SENATOR  COGHILL's  asked what  was  different  about a  standard                                                               
royalty contract and  the election of the state in  a contract to                                                               
take its royalty in gas. Had the parties thought that through?                                                                  
                                                                                                                                
MR. McMAHON's  answer they  have thought  that through,  and that                                                               
the terms of the lease agreement,  and the added protection of SB
138,  there was  sufficient grounds  to contract  that. That  was                                                               
also why  limiting the ability of  the state of Alaska  to switch                                                               
between royalty-in-kind  (RIK) and royalty-in-value  (RIV) leases                                                               
is so important to the project.                                                                                                 
                                                                                                                                
SENATOR COGHILL asked if the  state had ever unilaterally gone in                                                               
and changed royalty agreements.                                                                                                 
                                                                                                                                
MR. McMAHON answered not to his knowledge.                                                                                      
                                                                                                                                
SENATOR COGHILL's next question was indiscernible.                                                                              
                                                                                                                                
CHAIR GIESSEL said  that was a good point and  invited Mr. Fauske                                                               
to answer the question on competition.                                                                                          
                                                                                                                                
MR. FAUSKE said he would let AGDC council answer that.                                                                          
                                                                                                                                
5:07:53 PM                                                                                                                    
KEN  VASSAR,  Council,  Alaska  Gasline  Development  Corporation                                                               
(AGDC),  explained that  the constitutional  question  is if  one                                                               
legislature can  bind subsequent legislatures in  terms of taxes.                                                               
Taxes are in a different  situation than royalties and he thought                                                               
a constitutional  amendment would  be needed. The  state receives                                                               
royalties, but that is not considered taxes.                                                                                    
                                                                                                                                
SENATOR  MACKINNON asked  how long  a  constitutional vote  would                                                               
delay the project.                                                                                                              
                                                                                                                                
5:10:15 PM                                                                                                                    
MR. McMAHON  answered that would  need to be talked  through with                                                               
the administration and  the first time a vote could  happen is in                                                               
the  next general  election in  2016.  A critical  path for  this                                                               
project is  continuing the  work with  FERC. As  long as  work on                                                               
that continues, the startup date won't be impacted.                                                                             
                                                                                                                                
MR. MEZNARICH  commented that the constitutional  issue would not                                                               
get in the way of the timeline.                                                                                                 
                                                                                                                                
5:15:52 PM                                                                                                                    
SENATOR COGHILL  said he  thought the original  plan was  for the                                                               
state to  take its gas to  market and asked how  that affects the                                                               
tax.                                                                                                                            
                                                                                                                                
MR. McMAHON  said that is  still the  plan (state taking  RIK and                                                               
producers paying their TAG). SB  138 contained the obligation for                                                               
each  producer to  make  a proposal  to the  State  of Alaska  to                                                               
either purchase or market its share of the state's gas.                                                                         
                                                                                                                                
5:17:34 PM                                                                                                                    
SENATOR COGHILL  asked if there  would still be  a constitutional                                                               
question if the state chose to  continue on with the HOA with gas                                                               
that is  marketed and get the  value for it when  whoever buys it                                                               
pays for it.                                                                                                                    
                                                                                                                                
MR. McMAHON said  the constitutional challenge is  that there are                                                               
other  taxes  out there  like  property  tax  and can  the  state                                                               
provide certainty on those.                                                                                                     
                                                                                                                                
SENATOR MICCICHE said that Alaskans  are averse to changing their                                                               
constitution, but have also been  unpredictable in changing their                                                               
tax regime. Have the companies  planned the two scenarios: one if                                                               
the constitutional vote fails, the other if it is successful?                                                                   
                                                                                                                                
MR.  McMAHON answered  that one  of  the challenges  of having  a                                                               
public vote on  a constitutional amendment is if  the people give                                                               
a solid answer. It's difficult to imagine them saying no.                                                                       
                                                                                                                                
MR. VAN TUYL  remarked that that was a  hypothetical question and                                                               
answer.  Offering  it in  the  abstract  might be  difficult  for                                                               
voters  to get  their mind  around. The  rest of  his answer  was                                                               
[indiscernible].                                                                                                                
                                                                                                                                
MR. FAUSKE  suggested not raising  taxes during the time  of loan                                                               
payback if the length of  payback is shortened, because you can't                                                               
guarantee  an   investor  a  timeframe  that   meets  with  their                                                               
investment parameters.                                                                                                          
                                                                                                                                
5:24:02 PM                                                                                                                    
SENATOR STOLTZE  remarked that the legislature  decoupled oil and                                                               
gas two years  earlier. Now there is talk  about fiscal certainty                                                               
on the topic of  gas taxes. But what would happen  if there was a                                                               
move to revisit oil taxes?                                                                                                      
                                                                                                                                
MR. McMAHON  said he  touched on  one of  the two  key parameters                                                               
that will have to be agreed  to in any fiscal contract. The first                                                               
is to think of is how long  the terms will be predictable and the                                                               
other is the breadth of  predictability (what taxes are cut). His                                                               
answer  to  either   one  is  that  it  depends   on  the  entire                                                               
[indiscernible]. Having protection on the  gas business by having                                                               
the oil business exposed would  have to be factored into whatever                                                               
the gas terms are.                                                                                                              
                                                                                                                                
5:26:16 PM                                                                                                                    
MR. McMAHON  continued with  his update. He  said the  DOE export                                                               
authorizations  have been  received  and good  progress has  been                                                               
made  on the  NEPA  pre-file.  Their strategy  is  to submit  two                                                               
drafts to the  FERC before doing the final  submission. The first                                                               
draft went in on February of  this year and the second draft will                                                               
go in  February 2016.  One of  the key  things that  will support                                                               
that is  public comment.  Last year they  hosted about  60 public                                                               
comment events and they have more  than 60 planned for this fall.                                                               
It is  critical to maintain  the FERC  docket so that  the export                                                               
license remains valid,  and it's critical to push  on through the                                                               
NEPA pre-file process  to get the EIS permit that  allows them to                                                               
turn dirt.                                                                                                                      
                                                                                                                                
Finally, the  External Affairs and  Government Relations  Team is                                                               
all about the public image  of this project, which cannot proceed                                                               
without  broad   public  support.  They  are   busy  facilitating                                                               
meaningful community engagement.                                                                                                
                                                                                                                                
5:29:13 PM                                                                                                                    
Given the  magnitude of the  legislative ratification  step, it's                                                               
essential  that participants  are aligned  and time  be taken  to                                                               
complete all the deliverables needed for a FEED decision.                                                                       
                                                                                                                                
MR. MCMAHON  said the remaining challenges  are: establishing the                                                               
role  of the  state  as  project participant  in  terms of  lease                                                               
modifications and  RIK election, timely completion  of fiscal and                                                               
key   commercial  contracts,   legislation  for   property  taxes                                                               
including  a flow-related  property tax  mechanism after  startup                                                               
and  impact  payments  during  construction  and  legislation  to                                                               
provide durable predictable fiscal terms.                                                                                       
                                                                                                                                
REPRESENTATIVE TARR  asked if he  could comment on a  letter from                                                               
the governor's  office saying they  identified a lack  of urgency                                                               
in resolving some of the issues listed.                                                                                         
                                                                                                                                
MR. VAN TUYL replied they  had signed a confidentiality agreement                                                               
with   seven  parties   that  requires   them  to   keep  certain                                                               
information confidential.                                                                                                       
                                                                                                                                
MR. MEZNARICH said a number  of different work streams are moving                                                               
forward  in parallel  and that  progress  is being  made on  each                                                               
front.                                                                                                                          
                                                                                                                                
5:35:50 PM                                                                                                                    
REPRESENTATIVE  JOSEPHSON went  back  to the  tax  issue and  the                                                               
proposed constitutional amendment. Some  people would ask why the                                                               
state  would  relinquish  this sovereign  authority,  but  others                                                               
could be  educated that this is  a different kind of  contract, a                                                               
long term supply contract.                                                                                                      
                                                                                                                                
MR.  McMAHON said  if the  constitutional  amendment approach  is                                                               
chosen, it would  be critical to have the  contracts effective by                                                               
a successful  vote of the  people. The  people would need  to see                                                               
progress before the vote.                                                                                                       
^State Gas Team Update                                                                                                          
                                                                                                                                
                     State Gas Team Update                                                                                  
                                                                                                                                
5:40:34 PM                                                                                                                    
CHAIR GIESSEL announced the State Gas Team update.                                                                              
                                                                                                                                
AUDIE  SETTERS, General  Manager, State  Gas Team,  Department of                                                               
Natural  Resources  (DNR),  provided  his  background  which  was                                                               
working  for Chevron,  mostly overseas.  His  experience was  all                                                               
along the value  chain. He was indirectly  involved in developing                                                               
Chevron's LNG business when it  merged with Texaco. They embarked                                                               
on a strategy  to build three big gas projects,  two in Australia                                                               
and one in Angola. It was a successful strategy.                                                                                
                                                                                                                                
MR. SETTERS  said he was  hired by the Parnell  Administration in                                                               
September to help  on the LNG marketing. The State's  Gas Team is                                                               
organized under the  Office of the Governor and  consists of: the                                                               
Department of  Revenue, Department of Natural  Resources, himself                                                               
as general manager, the Department of Law and the AGDC.                                                                         
                                                                                                                                
CHAIR  GIESSEL said  the chart  had only  his name  and no  other                                                               
names for the other headings.                                                                                                   
                                                                                                                                
5:48:02 PM                                                                                                                    
MR. SETTERS  said everyone  in the  organization is  still there,                                                               
but  they  are  going  through   a  transition  that  will  bring                                                               
organizations together into one team.                                                                                           
                                                                                                                                
CHAIR  GIESSEL asked  how many  people are  still there  and what                                                               
roles they have.                                                                                                                
                                                                                                                                
MR.  SETTERS  said  Marty  Rutherford is  still  there,  but  the                                                               
Governor  thought someone  with more  global experience  would be                                                               
better, and  Ms. Rutherford  is supportive of  that. He  said the                                                               
State  of Alaska's  stakeholders  are many;  there are  potential                                                               
lenders, the legislature and Alaskans.                                                                                          
                                                                                                                                
He  said  that coming  to  a  new  organization  he felt  it  was                                                               
important  to define  what success  looks like.  It's "One  Team"                                                               
that  has   clearly  defined   roles  and   responsibilities,  is                                                               
streamlined and  empowers negotiating teams with  clear authority                                                               
to negotiate the  suite of agreements that are  needed and obtain                                                               
stakeholder  agreement to  enter FEED  in 2016.  The organization                                                               
will encourage the training and  development of Alaskan residents                                                               
for jobs related  to the AKLNG Project. His role  in this project                                                               
is not  necessarily to fish  but to help  teach the state  how to                                                               
fish. He  made that  clear to the  Parnell Administration  and to                                                               
Governor Walker who supports him wholeheartedly.                                                                                
                                                                                                                                
5:52:41 PM                                                                                                                    
CHAIR GIESSEL said she wanted to  know who the people on the Team                                                               
are and  asked him how  much money was  being spent on  the State                                                               
Gas Team.                                                                                                                       
                                                                                                                                
MR. SETTERS agreed to get that information.                                                                                     
                                                                                                                                
5:54:15 PM                                                                                                                    
MR. SETTERS said the immediate priorities are:                                                                                  
-Align stakeholders;                                                                                                            
-Consolidate  and  integrate  the  various  project  stakeholders                                                               
involved in negotiations and the decision process;                                                                              
-Establish processes to ensure state  negotiating teams are armed                                                               
with a clear authority to negotiate;                                                                                            
-Negotiate  the  suite  of  agreements   required  to  support  a                                                               
legislative  special session  in  the fall  of  2015, which  will                                                               
enable a FEED decision in 2016;                                                                                                 
-Develop commercial  agreements and  economic analysis  that will                                                               
inform the  RIK vs.  RIV determination  by the  DNR commissioner;                                                               
(Marty  Rutherford's  team  is  helping  make  the  RIK  vs.  RIV                                                               
determination and  commercial agreements need to  be developed to                                                               
define how risks are mitigated under the RIK decision)                                                                          
-Build the LNG marketing organization  required to promote market                                                               
awareness around  AKLNG and  support its  marketing requirements.                                                               
Uniquely,  the state  has very  strong partners  who have  a long                                                               
history in  the state in the  LNG business and who  are loyal and                                                               
want to expand their relationship with the state.                                                                               
                                                                                                                                
5:56:17 PM                                                                                                                    
REPRESENTATIVE  HERRON  asked  what   his  biggest  surprise  and                                                               
biggest disappointment were after his first day on the job.                                                                     
                                                                                                                                
MR. SETTERS replied that his  biggest surprise was how strong the                                                               
brand was  and how  the market reacted  to AKLNG.  After meetings                                                               
last  year,  he  was  amazed  at  how  excited  the  market  was.                                                               
Initially, he was a little bit  frustrated by the progress of the                                                               
project.                                                                                                                        
                                                                                                                                
CHAIR GIESSEL said  he indicated a dilemma in  the choice between                                                               
RIK and  RIV and remarked that  the state won't need  a marketing                                                               
organization if it takes its royalty in kind.                                                                                   
                                                                                                                                
MR. SETTERS  replied that they  are planning for success.  SB 138                                                               
describes the  base case as  RIK, but they  need to build  a case                                                               
for RIK  and that means  understanding how this project  would be                                                               
received in  the market. One thing  the state doesn't want  to do                                                               
is waste  people's time if it  doesn't have anything to  sell. He                                                               
wants  to  be  able  to  provide the  legislature  some  kind  of                                                               
assessment on  how the market  perceives the project in  the fall                                                               
special session.                                                                                                                
                                                                                                                                
6:01:06 PM                                                                                                                    
CHAIR GIESSEL talked about her reading of the statute.                                                                          
                                                                                                                                
SENATOR MICCICHE's  asked how the  state was taking  advantage of                                                               
the joint venture structure of the project.                                                                                     
                                                                                                                                
MR. SETTERS  said there were  many opportunities for  Alaskans to                                                               
take  advantage  of marketing  the  gas,  whether it  was  equity                                                               
marketing or  joint venture marketing. There  is flexibility, but                                                               
a joint  venture marketing position  allows the state  to combine                                                               
the marketability of that gas.                                                                                                  
                                                                                                                                
SENATOR MICCICHE opined  that the state has an  obligation to the                                                               
people of the state to market its gas as best as possible.                                                                      
                                                                                                                                
SENATOR  WIELECHOWSKI's  question  and  Mr.  Setters'  follow-up:                                                               
[indiscernible].  Mr. Setters  mentioned that  the intent  of the                                                               
governor's letter was  well received by the  producers and helped                                                               
some of the alignment and the senses of urgency.                                                                                
                                                                                                                                
6:08:02 PM                                                                                                                    
SENATOR  STOLTZE  asked  the  role   of  the  Permanent  Fund  in                                                               
financing this project.                                                                                                         
                                                                                                                                
MR. SETTERS answered  that it is his second week  on the job, but                                                               
he  didn't  understand how  it  could  be used.  [Discussion  was                                                               
indiscernible.]                                                                                                                 
                                                                                                                                
6:10:18 PM                                                                                                                    
RANDALL  HOFFBECK,  Commissioner,  Department of  Revenue  (DOR),                                                               
Anchorage,  Alaska,  answered  the  Permanent  Fund  question  by                                                               
saying its use was being  determined. State savings would have to                                                               
be used  as part of  its investment. There have  been discussions                                                               
around whether this should be  a good investment for a percentage                                                               
of the Permanent Fund.                                                                                                          
                                                                                                                                
SENATOR STOLTZE  asked if  he was  envisioning going  through the                                                               
portfolio as a trustee's presentation  or through the legislative                                                               
process.                                                                                                                        
                                                                                                                                
MR. HOFFBECK answered  that it could occur  either way. Investing                                                               
early would probably be a legislative decision.                                                                                 
                                                                                                                                
SENATOR  STOLTZE  [indiscernible]   question  about  funding  the                                                               
project.                                                                                                                        
                                                                                                                                
MR.  SETTERS  said  TransCanada's   share  is  $108  million  for                                                               
reimbursable pre-FEED costs.  One thing is sure;  they don't want                                                               
to  impact the  quality of  the work  that is  coming out  of the                                                               
AKLNG Team.  They also want to  keep up a good  long-term working                                                               
relationship  with  TransCanada,  because   it  is  an  excellent                                                               
company.                                                                                                                        
                                                                                                                                
CHAIR  GIESSEL  said  the  $108 million  is  only  the  immediate                                                               
number, all the  consultants have indicated the  risks of ongoing                                                               
cash calls.                                                                                                                     
                                                                                                                                
MR. SETTERS answered that she was  right and the state would have                                                               
to  carry  its  25  percent working  interest  through  FEED  and                                                               
ultimately  through the  project. Terms  are associated  with it;                                                               
so, it's  not just spending more  money. It also leads  to higher                                                               
revenues.                                                                                                                       
                                                                                                                                
6:18:42 PM                                                                                                                    
DONA KEPPERS,  Deputy Commissioner, Department of  Revenue (DOR),                                                               
Anchorage, Alaska, said  she works with Audie Setters  as part of                                                               
the State Gas  Team; she is the bridge between  the gas team from                                                               
the  previous  administration  to  this one.  She  became  deputy                                                               
commissioner with  the administration  change. She  provided more                                                               
background, but it was indiscernible.                                                                                           
                                                                                                                                
6:20:51 PM                                                                                                                    
RANDALL  HOFFBECK,  Commissioner,  Department of  Revenue  (DOR),                                                               
said  he came  up with  a simplified  formula for  evaluating the                                                               
AKLNG  Project  that is  robust  and  predictable. [Some  of  his                                                               
testimony was indiscernible, but can be  found on slide 11 of his                                                               
presentation.] The property tax issue was discussed.                                                                            
                                                                                                                                
6:27:20 PM                                                                                                                    
SENATOR  STOLTZE  mentioned   the  constitutional  amendment  and                                                               
decoupling issues.                                                                                                              
                                                                                                                                
COMMISSIONER HOFFBECK  replied that  he was  not involved  in the                                                               
writing of that and couldn't comment.                                                                                           
                                                                                                                                
6:28:19 PM                                                                                                                    
MR. SETTERS  said he  has a  legal background  on this  issue and                                                               
what they are trying to do is  create an incentive to build a gas                                                               
project. [Discussion indiscernible.]                                                                                            
                                                                                                                                
SENATOR MACKINNON  asked if  they were  considering a  version of                                                               
the property tax agreement, maybe around November.                                                                              
                                                                                                                                
COMMISSIONER HOFFBECK answered yes.                                                                                             
                                                                                                                                
6:32:06 PM                                                                                                                    
SENATOR STOLTZE asked what Rigdon Boykin's role is.                                                                             
                                                                                                                                
MR.  SETTERS  answered that  he  is  responsible for  the  45-day                                                               
review,  making   sure  that   opportunities  for   progress  are                                                               
identified  and   creative  solutions  are  found.   He  is  also                                                               
identifying any issues that may  create a problem for the project                                                               
down the  road. The 45-days was  supposed to start at  the end of                                                               
the  regular session,  but it  was delayed  a little  bit and  is                                                               
about half way done. A full  report will be made available to the                                                               
legislature.                                                                                                                    
                                                                                                                                
SENATOR STOLTZE asked what Mr. Boykin's background is.                                                                          
                                                                                                                                
MR. SETTERS  replied that he  had a chance  to work with  him for                                                               
about a month  and found him to be  extremely creative individual                                                               
who  is  also  an  attorney.  He  has  had  20  years  of  direct                                                               
experience  with   projects  in   Alaska  and  in   putting  very                                                               
complicated deals together. He is  a very positive force in terms                                                               
of getting  people to think outside  the box and in  breaking the                                                               
logjams  in  the  negotiations.  He  was  involved  in  the  Port                                                               
Authority, for one thing.                                                                                                       
                                                                                                                                
6:34:38 PM                                                                                                                    
CHAIR  GIESSEL  asked  about  Radoslov  Shipkoff's  role  in  the                                                               
project.                                                                                                                        
                                                                                                                                
MR. SETTERS said he is  with Greengate, LLC, based in Washington,                                                               
D.C.,  whose specialty  is in  project financing.  Being able  to                                                               
look at the  project through the eyes of lenders  is very helpful                                                               
in   helping  understand   the  pitfalls.   Mr.  Shipkoff   would                                                               
facilitate timely review of the project.                                                                                        
                                                                                                                                
CHAIR GIESSEL  said it  sounds like this  is another  person from                                                               
out of state.                                                                                                                   
                                                                                                                                
MR. SETTERS  answered yes,  but Radoslov  has probably  looked at                                                               
every LNG  project in the  world. He brings  a fresh set  of eyes                                                               
and  an understanding  of what  it  takes to  get these  projects                                                               
going.                                                                                                                          
                                                                                                                                
CHAIR GIESSEL said  you can't argue with having  someone with the                                                               
state who has experience and expertise.                                                                                         
                                                                                                                                
REPRESENTATIVE SEATON said he wanted  to make sure that they look                                                               
at  Legislative Budget  and Audit  Committee's (LB&A)  consultant                                                               
Rick Harper's paper  that analyzed the HOA and all  of the fiscal                                                               
proposals  so  that those  questions  could  brought forward  and                                                               
answered in the analysis.                                                                                                       
                                                                                                                                
REPRESENTATIVE JOSEPHSON's  question and Mr. Setters'  answer was                                                               
indiscernible.                                                                                                                  
                                                                                                                                
6:38:07 PM                                                                                                                    
REPRESENTATIVE HERRON asked if he  is aware that Mr. Shipkoff had                                                               
worked at the old Port Authority.                                                                                               
                                                                                                                                
MR. SETTERS answered no.                                                                                                        
                                                                                                                                
REPRESENTATIVE HERRON asked  him to pass on this  question to the                                                               
governor  and asked  if it  is possible  that leadership  in both                                                               
houses,  the co-chairs  of the  Finance and  Resources Committees                                                               
could get  a preliminary  review of the  45-day report  before it                                                               
goes final.                                                                                                                     
                                                                                                                                
MR. SETTERS said he would pass that on.                                                                                         
                                                                                                                                
^AKLNG Impacts to the Kenai Peninsula Borough                                                                                   
     AKLNG Update on Impacts to the Kenai Peninsula Borough                                                                 
                                                                                                                                
6:40:18 PM                                                                                                                    
CHAIR  GIESSEL invited  Larry Persily  to give  an update  on the                                                               
impacts of the AKLNG Project to the Kenai Peninsula Borough.                                                                    
                                                                                                                                
6:40:26 PM                                                                                                                    
LARRY  PERSILY, Oil  and Gas  Advisor,  Kenai Peninsula  Borough,                                                               
said  he had  worked on  this  project for  15 years  as a  state                                                               
official,  as  a  federal  official,   and  now  as  a  municipal                                                               
official. he expected half the value  of this project would be in                                                               
the Kenai  Peninsula Borough  boundaries and  would consist  of a                                                               
liquefaction plant,  marine terminals,  storage tanks,  almost 30                                                               
miles of pipe on  the bottom of Cook Inlet and  more miles on the                                                               
west and east sides of Cook Inlet.                                                                                              
                                                                                                                                
Five main issues the Kenai Peninsula Borough is working on:                                                                     
1.  The  FERC EIS  process  is  the  appropriate avenue  for  the                                                               
borough  or other  municipalities to  address the  socio economic                                                               
issues. FERC  in issuing an  order for  an LNG plant  can include                                                               
mitigation measures.                                                                                                            
2. The potential relocation of  Kenai Spur Highway for safety and                                                               
security reasons  to go around  the pipe  site would be  the most                                                               
immediate change in the community                                                                                               
3. Fiscal uncertainty can be harmful  for a project like this and                                                               
they  are  trying  their  best   working  with  AKLNG  to  answer                                                               
questions and keeping the public them informed                                                                                  
4. Ensure receipt of fair value for borough land                                                                                
5. Work  with the  state and  municipalities to  achieve adequate                                                               
impact aid  during construction and  payment in lieu  of property                                                               
taxes after start-up.                                                                                                           
                                                                                                                                
6:43:50 PM                                                                                                                    
MR.  PERSILY  said  the  next  round of  draft  reports  for  the                                                               
Environmental Impact Statement  will fill in more  details on not                                                               
just the  baseline - how  much traffic is on  the road -  but how                                                               
much  traffic  will  be  on   the  road  during  and  after  this                                                               
construction  and some  possible mitigation  measures. This  is a                                                               
major   concern   particularly  in   the   Nikiski/Kenai/Soldotna                                                               
corridor where  it's very busy or  is only one road  and a couple                                                               
of  lanes sometimes.  The Kenai  airport  and emergency  services                                                               
will have to be expanded.                                                                                                       
                                                                                                                                
He  said the  project is  undertaking a  labor supply  and demand                                                               
study  and a  logistics study  -  what ports  and what  potential                                                               
points to  bring in materials  and workers. There is  a potential                                                               
site  for the  Kenai Spur  Highway relocation  as it  wouldn't be                                                               
good for the highway to go through a work zone.                                                                                 
                                                                                                                                
He said local  residents' concerns are what one  would expect for                                                               
a  project of  this size.  But people  want answers  to specifics                                                               
that just don't  exist yet, like where the work  camp will be and                                                               
work hours, how  many people will be there and  how will they get                                                               
from the  work camp  to the  job site.  More information  on that                                                               
will  come  later. Noise  and  traffic,  property values  -  some                                                               
people  are in  the area  and wished  they had  been bought  out;                                                               
others are happy with being there - are all issues.                                                                             
                                                                                                                                
MR. PERSILY said that increased  pressure on sport fishing in the                                                               
Kenai  is also  a big  concern. Employers  are worried  that wage                                                               
inflation will make it hard to hold onto workers.                                                                               
                                                                                                                                
The better job  the project does of  getting accurate information                                                               
out   there  and   the  better   job  municipalities   and  local                                                               
governments do  in the process  will help gain  public acceptance                                                               
and avoid or lessen surprises and conflicts later on.                                                                           
                                                                                                                                
MR. PERSILY  said they are reaching  out to AKLNG to  ensure that                                                               
whatever property is needed from  the borough is transferred in a                                                               
timely fashion so it doesn't delay the project.                                                                                 
                                                                                                                                
He  said   the  borough   is  also   looking  at   future  growth                                                               
opportunities after  the project is operating,  making sure there                                                               
are lands  available for housing  or economic opportunity  in the                                                               
area.                                                                                                                           
                                                                                                                                
MR. PERSILY explained  that there are two pieces  to the property                                                               
tax  issue:  the  impact  aid   during  construction  making  the                                                               
municipalities  whole and  then coming  up with  a formula  for a                                                               
payment in lieu  of property taxes (PILT)  during operation. They                                                               
have been  asked to come  up with  some estimates for  the impact                                                               
aid during construction -  from airport accommodations, highways,                                                               
police, fire,  emergency services, social  services - but  it's a                                                               
little  hard because  they don't  have all  the data  - how  many                                                               
workers and work  camps, non-resident, residents -  yet. But they                                                               
will come  up with something  that will  probably be on  the high                                                               
side, because it is not precise.                                                                                                
                                                                                                                                
He said  the borough understands  that impact aid is  intended to                                                               
make  the municipalities  whole; it  is  not a  profit center  or                                                               
windfall. The  big questions are not  only how much will  go into                                                               
the account  but how it will  come back out. A  grant process has                                                               
been  talked about  in  the  advisory group.  Who  will make  the                                                               
decisions?  What  if  the  DCCED makes  a  decision  the  borough                                                               
doesn't like?  Can it be  appealed? Will  the money be  spent and                                                               
then  be  reimbursed  or  can  it  be  requested  in  advance  of                                                               
spending?                                                                                                                       
                                                                                                                                
In terms of  payment in lieu of tax (PILT)  during operation, Mr.                                                               
Persily  said that  a volume-driven  formula  makes sense  rather                                                               
than battling  for 30 years as  happened on the Trans  Alaska oil                                                               
pipeline (TAPS). To  come up with the value of  a 40 foot section                                                               
of steel pipe coated with concrete  sitting at the bottom or Cook                                                               
Inlet you  would look for three  comps but where would  they come                                                               
from?  And a  formula would  give some  certainty to  the project                                                               
developers.  If .20  mils is  used for  the entire  project, that                                                               
would equate to  close to $1/per thousand cubic  feet. Looking at                                                               
economics,  that's a  pretty heavy  burden. The  LNG plant  alone                                                               
would more than  triple the total assessed value  in the borough.                                                               
Kind of  like during impact  aid, you look  at that and  say well                                                               
the borough  probably doesn't need  three times as much  money as                                                               
in the  past, but what  does it need and  what is fair?  What can                                                               
the  project  afford  in  a  competitive  environment?  Once  the                                                               
formula  is  set,  how  it  gets  shared  between  the  different                                                               
municipalities  - the  North  Slope  Borough, Fairbanks,  Denali,                                                               
Mat-Su,  Anchorage  and  Kenai   -  will  be  another  challenge,                                                               
although it won't be the companies' problem.                                                                                    
                                                                                                                                
How the six  municipalities debate the distribution  of PILT will                                                               
be another  issue. Will there be  one PILT for the  gas treatment                                                               
plant  that is  entirely in  the  North Slope  Borough, one  PILT                                                               
formula  for  the  LNG  plant  which is  entirely  in  the  Kenai                                                               
Borough, and a separate one for the pipeline that could be                                                                      
calculated by mileage?                                                                                                          
                                                                                                                                
CHAIR GIESSEL thanked Mr. Persily.                                                                                              
                                                                                                                                
6:56:39 PM                                                                                                                    
ADJOURNMENT                                                                                                                   
CHAIR GIESSEL adjourned the Senate Resources Committee meeting                                                                  
at 6:57 p.m.                                                                                                                    

Document Name Date/Time Subjects
Joint HRES SRES- AK LNG Project Update-Steve Butt-June-16-2015.pdf SRES 6/16/2015 3:00:00 PM
Joint HRES SRES Larry Persilly Presentation 06-16-2015.pdf SRES 6/16/2015 3:00:00 PM
AKLNG SRES HRES Joint Testimony 06-16-2015 Final.pdf SRES 6/16/2015 3:00:00 PM
Joint HRES SRES- Alaska LNG State Gas Team Project Update 06-16-15.pdf SRES 6/16/2015 3:00:00 PM
Joint HRES SRES- AK LNG State Gas Team Project Update
Joint HRESE SRES- DNR Third Party Letter Sec 77 SB 138 Report to the Legislature 06-16-15.pdf SRES 6/16/2015 3:00:00 PM
SB 138