HB 119-GAS PIPELINE FAIRBANKS SPUR  1:49:23 PM CO-CHAIR BURKE announced that the next order of business would be HOUSE BILL NO. 119, "An Act relating to an in-state natural gas pipeline developed by the Alaska Gasline Development Corporation; and providing for an effective date." 1:46:34 PM CO-CHAIR DIBERT moved to adopt the draft committee substitute for House Bill 119, work order number 34-LS0613\G as a working document. CO-CHAIR BURKE objected for the purpose of discussion. 1:50:03 PM BERNARD AOTO, Staff, Representative Will Stapp, Alaska State Legislature, explained that the committee substitute removed the spur line language under subsection 5 of the Alaska Gasline Development Corporation (AGDC) charter. He pointed out that work order number 34-LS0613\G was drafted to clarify the language of a previous CS and remedy a miscommunication. 1:51:36 PM CO-CHAIR BURKE removed her objection. She announced that the committee substitute for HB 119 was before the committee. 1:51:54 PM REPRESENTATIVE WILL STAPP, Alaska State Legislature, explained that HB 119 seeks to eliminate a long-standing problem for residents in the interior. The conversation had moved forward regarding the development of a gas line project as proposed with AGDC and majority owner Glenfarne. The current proposed route of the pipeline would bypass Fairbanks, the second largest town in Alaska. The bill sought a mechanism to remedy that disservice. He referenced the sale of 75 percent ownership in the line by AGDC which created difficulties in terms of the bill. Part of a fiscal note received from Mr. Richards stated, in part, that Glenfarne acquired the majority of interest in 8 Star, LLC, Alaska, which was the privately held subsidiary of AGDC. That made Glenfarne the majority owner. The fiscal note stated, "AGDC does not have the right to change the scope of the Alaska LNG project." He also noted that Mr. Richards referenced the agreement with Glenfarne, but he was not aware that any member had the opportunity to read what was actually in that agreement. It seemed that no member had the opportunity to read what was in the agreement prior to it being finalized. Representative Stapp then explained that two sections of HB 119 were relatively simple, adding language that would codify in statute that an all-Alaska line, if advanced, must include a direct spur to the city of Fairbanks and the North Star borough. The second section that was added specified that proceeds of the sales of the gas line would be for the purpose of bringing gas to all Alaskans. He explained that the concept was to create a fund to ensure that Alaskans share the proceeds of monetizing the North Slope gas 1:55:12 PM MR. AOTO explained that Representative Stapp covered everything in the sectional analysis except section 3 which created an immediate effective date. 1:55:56 PM FRANK RICHARDS, President, Alaska Gas Line Development Corp, responded to a question from Representative Coulombe regarding the permitting for a Fairbanks spur line. He referenced language imbedded in paragraph 4 regarding the Alaska stand- alone pipeline project, which was the in-state line for North Slope gas to be used in Alaska. That was the outcome of a feasibility study in 2012 when the legislature appropriated funds for the design of the in-state project which was a 36-inch diameter main line with a spur into Fairbanks that was a 12-inch line. That project went through engineering and design, and it went through the permitting process, but not all the permits were obtained. The right of way was provided to AGDC for that pipeline project, and AGDC still retains those designs leading into Fairbanks. He explained that the difference between the two projects is that one of them did not include the spur line. 1:58:33 PM REPRESENTATIVE STAPP addressed a series of questions from Representative Coulombe regarding the spur line. He explained that the diameter of the pipeline probably doesn't matter that much and quoted the saying, "It doesn't matter if the cat is black or white so long as it catches the mice." He said people needed to know that if the export project were to go into final investment decision, they would break ground on a main line but would skip the second largest town in Alaska. He referenced Mr. Richards statement that not all permits had been obtained. He described several factors influencing the permitting of projects as well as time frames regarding the main line and an off-take line for the purpose of developing a spur line. 2:00:16 PM REPRESENTATIVE STAPP responded to a question from representative Saddler regarding the amendment by explaining two problems. First, because of the agreement with Glenfarme, AGDC no longer had the right to make changes to the scope of the development project. Second, there would be potential risk to the project because they are permitted under two different sections of permitting, i.e. Federal Energy Regulatory Commission (FERC) and the Army Corps of Engineers. 2:01:28 PM MR. RICHARDS responded to Representative Saddler's request for clarification regarding why language had been changed between the previous version and the current version. He explained that a fiscal note had been created based on the previous version included in the Alaska LNG project. He said Representative Stapp was correct in saying that AGDC's agreement with Glenfarne regarding the Alaska LNG project as permitted through the FERC process did not include a lateral into Fairbanks. From the perspective of AGDC, opening up the spur line permitting would add significant potential environmental and regulatory risk to the project proceeding forward, so they waived that issue due to timing, costs, and permitting. In addition, it had been decided to move the mainline off-take line because the new proposal included uplands which were less environmentally sensitive. 2:04:21 PM REPRESENTATIVE STAPP responded to a question from Representative Saddler regarding the system of natural gas line plumbing in the city of Fairbanks as well as the North Star borough. He explained that technically both pass through the North Star borough and described who in the area would be getting direct gas. 2:05:59 PM REPRESENTATIVE STAPP, in response to a question from Representative Elam, described some of the history, referencing the former project's design which would have passed 30 miles from Fairbanks. Since that time, Fairbanks developed what was called the Interior Gas Utility for the purpose of trucking liquified gas from the North Slope liquification plant. Trucks would transport LNG from the slope to Fairbanks. He explained that the issues include costs, tariff rates, and the mechanics of de-liquifying the gas and compared that to the costs of tariffs and amortizing of the gas line. He pointed out the potential irony of being halfway from the source of gas compared to Anchorage but possibly paying double the costs for gas. 2:09:50 PM FRANK RICHARDS addressed a request from Representative Mears to verify that the tariffs for Fairbanks would be in addition to tariffs for the entire pipeline and how that tariff is structured so that Fairbanks is not in addition to but is rather a part of the tariff structure. He reminded the committee that AGDC has a signed Memorandum of Understanding (MOU) with an Alaskan pipeline company that wants to take on the ownership, permitting, design, and construction of the spur line into Fairbanks. The cost analysis for the buildout was based on numbers from 2014, and since that time, the demand in Fairbanks has gotten smaller, so the construction costs need to be considered as well as an optimal design. He said that the full responsibility for determining tariff rates will go through the Regulatory Commission of Alaska which is looking out for the well being of Alaska. He compared the Fairbanks situation to South Central when Enstar brings on new lines. 2:12:11 PM REPRESENTATIVE STAPP agreed with Representative Mears that the spur needs to be included in an overall tariff, but this bill is probably not the place for that discussion. 2:12:58 PM FRANK RICHARDS responded to a series of questions from Representative Stapp. He explained that the MOU he referred to was with AGDC and was part of the Alaska stand-alone pipeline project, but was not part of the agreement transfer to Glenfarne. Regarding whether there was an MOU under the existing mainline project, he explained that there was an interconnection or an offtake point near the Chatanika River. That would be the point where a spur line would start for delivery of gas to Fairbanks. In response to further questions requesting clarification about what that interconnection would actually be, he described it as a valve and a depressurization unit. This would enable off-taking gas to another entity who would then have the construction, operation, and maintenance responsibilities for a spur line into Fairbanks. 2:15:08 PM REPRESENTATIVE STAPP agreed with Representative Coulombe's observation that that South Central would be charged tariffs by Enstar which would represent the costs of carrying gas from A to B and that there would be a tariff for gas to Fairbanks. He acknowledged the potential for the capital costs plus the tariff to operate the pipeline both landing on Fairbanks, which would lead to higher tariffs for Fairbanks. He pointed out that the state had invested heavily in a gas export line that would not benefit a vast majority of people despite running within 30 miles of a large population center. If the costs were to be amortized, the cost to the Fairbanks residents would be substantially higher. 2:18:14 PM REPRESENTATIVE STAPP addressed several questions from Representative Rauscher, explaining that the Interior Alaska Gas Utility (IGU) had been building gas infrastructure in Fairbanks with the expectation of a gas line to the town. Regarding the comment that the amortization would be "extravagant," he suggested it would be less so than "the billions of dollars dumped into Cook Inlet to subsidize producers for production." He commented that adding customers would result in lower rates because of economy of scale wherein a cheaper source of fuel would attract more customers. Ideally a gas line would enable customers to spend less money on heat. 2:21:02 PM MR. AOTO responded to Representative Rauscher's question regarding a study on this issue. He explained that the Wood Mackenzie study [November 2024] assumed Fairbanks would consume 11 billion cubic feet (Bcf) if the gas pipeline was built compared to the UGI consumption rate estimate of 1.5 Bcf. That study assumes an overhaul to enable usage by the larger customers such as the University of Alaska Fairbanks, Fort Wainwright, and the Eielson Air Force Base. He explained that the study did not necessarily account for the time and expense of putting in the power plants that would be able to receive that natural gas. 2:21:56 PM REPRESENTATIVE STAPP responded to Representative Saddler's question regarding the fiscal note for HB 119, explaining that the numbers were based on ADGC operating the pipeline, and the numbers would change under a different scenario. 2:24:13 PM MR. AOTO clarified the result of the new committee substitute regarding gas line connections throughout the state of Alaska. 2:24:45 PM FRANK RICHARDS responded to a question from Co-Chair Burke concerning which permits had not been received. Mr. Richards said AGDC had strategically focused on acquiring major permits that derisk the project, but that there was an Army Corps of Engineers wetlands permit the project had not fully received. 2:26:08 PM FRANK RICHARDS responded to a question from Co-Chair Burke concerning which permits had not been received. [Due to poor sound quality, portions of the audio are indiscernible.] 2:28:27 PM There being no further discussion HB 119 was held over.   2:28:47 PM The committee took an at-ease from 2:28 p.m. to 2:30 p.m.