HB 119-GAS PIPELINE FAIRBANKS SPUR    4:22:11 PM CHAIR CARRICK announced that the final 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." 4:22:35 PM REPRESENTATIVE WILL STAPP, Alaska State Legislature, As prime sponsor, presented HB 119. He said the proposed bill is relatively simple on the surface, but it is not a simple concept. He said that as many committee members knew, the Alaska Gasline Development Corporation's (AGDC's) project has been the source of "lots of news," especially at a federal level. He opined that members from Interior Alaska have always felt that if any gasline infrastructure were developed, the project - if funded with state money - should not skip interior communities in the project's vicinity. He pointed to a map [copy available in committee file] that highlights the Alaska liquified natural gas (LNG) projects area of operation and relative location to Interior communities. He said that the pipeline would run through most major communities in Alaska; however, it bypasses Fairbanks and is positioned to the east of the community. He remarked that every time he has spoken with Frank Richards with AGDC and asked whether Fairbanks would get gas, the answer has almost always been that there would not be a gasline built in the state in the event it skips Fairbanks. He said that he has not had any definitive assurances that a project would not, in fact, skip the Fairbanks North Star Borough REPRESENTATIVE STAPP said that the purpose of HB 119 is assurance to the 100,000 people that a project would not skip the Fairbanks North Star Borough. He noted that a spur line would connect Alaska LNG with Fairbanks. He noted there had not been any meaningful progression in terms of permits or rights of way. REPRESENTATIVE STAPP noted that HB 119 would add a requirement to the list of things that AGDC must do for the State of Alaska. This additional requirement appears on page 2, lines 9-11, and read as follows [original punctuation provided]:   an in-state natural gas pipeline advanced under this  paragraph must include a direct spur line to the City  of Fairbanks and the Fairbanks North Star Borough;  REPRESENTATIVE STAPP explained that if there is going to be a gasline developed in Alaska with state resources, it should not skip the second largest town in the state. He welcomed questions from the committee. 4:26:40 PM REPRESENTATIVE MCCABE asked what the distance was between the proposed Alaska LNG gasline and Fairbanks. BERNARD AOTO, Staff, Representative William Stapp, Alaska State Legislature, on behalf of Representative Stapp, prime sponsor of HB 119, responded that the proposed gasline would be approximately 40 miles from Fairbanks. REPRESENTATIVE MCCABE commented that he has always found it ridiculous that Fairbanks is 475 miles from the largest gas field on the planet but burns heating oil that originates from Alaska and is sent down to Washington refineries before being imported once again. He said that it can cost $600 to $900 a month for heating oil costs in Fairbanks. 4:27:25 PM CHAIR CARRICK noted that as someone who pays these high heating oil costs, Representative McCabe's comment "hit home." She asked Representative Stapp to elaborate on the current cost of energy in Fairbanks relative to other communities such as Anchorage or even other communities along the proposed pipeline. 4:28:08 PM REPRESENTATIVE STAPP responded that currently the residential electricity rate in Fairbanks is about 27 cents a kilowatt whereas Anchorage is lower. He said that he has been in Juneau during the legislative session and his recent Golden Valley Electric bill was more than $350 for his home. He said that it is not currently occupied other than two cats; the fridge is on, the boiler is running and maybe a light or two is on. He said this puts Fairbanks energy prices into context for what expected rates could be. REPRESENTATIVE STAPP remarked that most of Fairbanks power is generated from either coal or oil, and oil is substantially more expensive than natural gas. He said that this impacts every aspect of the town, including education. He said that for every dollar invested into education, more of it would go to energy costs in Interior communities with high energy costs. He said that Fairbanks sees outmigration that is more intense than other parts of the state due to these high energy costs. He said that the state has put a lot of economic resources into Cook Inlet gas development over the years to ensure that the state's population has affordable gas prices; however, Fairbanks has never had access to a stable supply of natural gas. He said that a few years ago, in anticipation of getting gas off the North Slope, Fairbanks formed its own public utility called "Interior Gas Utility" to build domestic gaslines. He said this service via the Alaska Industrial Development and Export Authority (AIDEA) was being paid by Fairbanks residents. He said that he was unaware who made and paid for the gas connections in Interior. 4:31:06 PM REPRESENTATIVE HOLLAND said that he read through the fiscal note and analysis, and he asked if Representative Stapp could elaborate on it. REPRESENTATIVE STAPP responded that all the proposed bill would do is insert language into a portion of the project that is not current pursued by AGDC. REPRESENTATIVE HOLLAND said that he is guessing the obvious question is why this is not already being done. REPRESENTATIVE STAPP responded there could be multiple proposed committee substitutes "until the mood improves." 4:33:08 PM REPRESENTATIVE MOORE asked whether there has been any opposition to the proposed bill. REPRESENTATIVE STAPP responded that most of the feedback has been fairly positive. He said most people concur that gas should be available to Fairbanks if a gasline is developed. He reiterated that the response from AGDC has been vague. He commented on the uncertain nature of who pays the costs and said that these questions are the most important ones as the project progresses. 4:35:00 PM REPRESENTATIVE MCCABE asked whether Representative Stapp has inquired whether building a spur at the same time as the main pipeline was discussed or even whether to place the gasline closer to Fairbanks would make sense. REPRESENTATIVE STAPP responded that in theory there was supposed to be an off-take valve made near Fairbanks during construction. He noted that it does not make a lot of sense to build a $50 billion project but then assume that in the uncertain future and with an uncertain cost that a $150-200 million spur line will get constructed. He said that this reminds him of when Senator Ted Stevens got gas infrastructure developed in Prudhoe Bay. Ted Stevens felt that since he failed to get the Arctic National Wildlife Refuge (ANWR) included on the deal then it probably wouldn't be part of the deal in the future. He said that today this remains the case. He spoke about GRIP funding in the past and the failure for previous projects to materialize. He said that often it is heard that if you wait your turn you will be next in line and then next in line never happens. 4:37:37 PM REPRESENTATIVE HIMSCHOOT noted that her district was looking forward to getting natural gas to Alaskans and asked what form of energy Fairbanks currently used. REPRESENTATIVE STAPP replied that the town primarily runs off oil fire heat; he has oil boilers at home for instance. He said that lots of money has been invested to accommodate natural gas heating, which is both less expensive and burns cleaner than oil fired sources. REPRESENTATIVE HIMSCHOOT asked whether the goal was to convert the Fairbanks power plant to natural gas but not necessarily homes to natural gas. She also asked what the extent of energy transition was for Fairbanks. REPRESENTATIVE STAPP responded that Fairbanks goals regarding energy improvements is multi-pronged. He said Golden Valley Utility has pursued a diversified strategy regarding energy production, including the state's largest wind farm. He said that the city is also converting residential homes to gas. He said that Fort Wainwright has an antiquated coal plant that it is looking to replace; it is the second largest military base in Alaska. He said "gassifying" Fort Wainwright is an objective shared by federal partners, as well. He said that until a reliable and stable source of gas is available, these conversions cannot commence. REPRESENTATIVE HIMSCHOOT asked, if a spur that connects Fairbanks to the pipeline were built, who would maintain it and who would own it. REPRESENTATIVE STAPP said that this is the purpose of HB 119. He said that he would like to know this as well. He said that management for this section of energy infrastructure is somewhat vague. He said that Frank Richards with AGDC was online and could speak to this. 4:40:46 PM CHAIR CARRICK commented that Fairbanks was unique in that it already has an "all of the above" approach to energy and there was little consistency amongst the municipality. She said that the municipality had a new coal plant on the University of Fairbanks campus capable of burning natural gas for fuel, they don't because it is not currently cost effective. She said that many homes still heat with wood due to its low cost, but it adversely impacts air quality. She said that Frank Richards could speak to operation and maintenance of any spur line connection. 4:41:44 PM FRANK RICHARDS, President, Alaska Gasline Development Corporation, answered that that Section of AS 31.25.005, regarding the purpose of the corporation, addresses advancing an in-state natural gas pipeline, and it was the original language that was provided to AGDC when looking at opportunities to develop an in-state line to provide natural gas to Fairbanks and to the south. He said this is referred to as the "in-state project," and the legislature provided funding not only for permitting but also for design work on the project. He noted the design work includes a lateral spur into Fairbanks. He pointed out the map that was provided to committee members [copy available in committee file] and noted that a connection point would allow for a lateral spur leading into Fairbanks before the pipeline would continue south and connect with pre-existing Enstar natural gas system in Southcentral Alaska. He said that this design work was conducted from 2012 to 2015 and AGDC had completed what is known as the "front-end engineering and design". He said that AGDC was granted the "right of way" for both the mainline and the lateral line into Fairbanks. He said that the work on the lateral line was been advanced in 2015 with what is called the "class 3 cost estimate." Additionally, the legislature gave AGDC the responsibility in 2014 to represent the state for the Alaska LNG project. He said ultimately in the 2016 and 2017 timeframe, the legislature redirected all the funds available for advancing the "in-state project" and it was put on the shelf. However, AGDC still owns the designs and the permits that were granted for the 32 miles for the lateral line connection into Fairbanks, also known as the Spur. He said that plenty of work has been done advancing the lateral line project. Currently, AGDC has been waiting for stakeholders to come together and finalize something that is economically and commercially viable, and Glenfarne Group was a part of this process. MR. RICHARDS noted that there has been keen interest from Alaska Pipeline developers to come in and take responsibility for connecting the Fairbanks spur line with the main line of the Alaska LNG project. He said that information would continue to come forward as discussions take place. This developer would likely update the "front end engineering design" and run this effort in parallel with work completed on the Alaska LNG project. He said that those entities that develop this project would have the commercial arrangement regarding gas offtake for Fairbanks. 4:47:05 PM REPRESENTATIVE STAPP said that he appreciated the history and how AGDC looked at these things. He questioned why, if all these things have already been completed by AGDC, the corporation wouldn't roll them in and include the Fairbanks lateral line into the project. MR. RICHARDS responded that it had to do with the regulatory environment. If the in-state natural gas was done by an Army Corps of Engineers Impact Statement and the Alaska LNG was taken as an integrated project under the Federal Energy Regulatory Commission, then two different authorizations are in place. He said that adding the lateral line to the Alaska LNG project would cause additional regulatory hurdles. He said that there are two entities at play. REPRESENTATIVE STAPP said that this illustrates his point. He said he understands that there are different permitting processes, but questioned why AGDC would go through the permit process for 800 miles of pipeline and not get the additional 32 miles permitted for a spur project. MR. RICHARDS explained that when AGDC was working with the joint development partners, the design concept that was put forward for the permitting process was an integrated project that did not include any laterals. He said that this was not a choice by AGDC but the lead developer at the time. 4:50:44 PM REPRESENTATIVE VANCE said that she appreciates Representative Stapp asking these questions. She asked how long the permits are considered valid and whether they could move forward with current permitting. MR. RICHARDS responded that he did not have an answer on duration of permits from the Army Corps of Engineers but could follow up with an answer. REPRESENTATIVE VANCE said that pulling up the map of the proposed pipeline, she shares the frustration that the second largest city that contains many state expenses was not integrated into the main project. She said that getting natural gas to the Kenai Peninsula was transformative for its residents in a positive way. By including the spur line into Fairbanks, it would decrease energy costs. She questioned holding back HB 119 because she deemed it to be a straight-forward piece of legislation. She indicated that now that she has more insight into what is taking place with the permitting process, she thinks it is something that warrants further discussion. 4:54:05 PM CHAIR CARRICK noted that she appreciated the discussions and concurred that it would be better for the entirety of the state to have inexpensive energy. After ascertaining that there was no additional committee questions, she announced that HB 119 was held over.