SB 76-RIGHT-OF-WAY LEASING ACT    CHAIRMAN JOHN TORGERSON called the Senate Resources Committee meeting to order at 3:35 p.m. and announced SB 76 to be up for consideration. SENATOR THERRIAULT, sponsor of SB 76, said since the bill's introduction, the Administration has carried on negotiations with officials at Alyeska regarding terms. All have agreed to the language in the sponsor substitute. He explained the contents of the bill as follows. Section 1 modifies the length in which a lease for a pipeline right-of-way can be granted from 10 years to 30 years. That would conform to federal law. He thought it made sense to conform our law to federal laws so that pipelines that cross both state and federal lines would be assured they have a right-of-way to continue operations. Section 2 deals with the issue of how to deal with ongoing negotiations that exceed the original lease length. The state does not want to be subject to litigation just because negotiations are ongoing. Section 3 deals with reimbursements of the state's expense in negotiating for a lease extension, language that was in the Governor's original bill. Section 4 deals with the definition of state land and rights-of-way across it. Section 5 deals with the 30 years applicable to leases that are currently in existence. SENATOR ELTON asked if there is a definition in statute of "timely requested." SENATOR THERRIAULT answered that there is no definition of that term in statute but there is one in regulation that says two years. He thought the committee might want to allow some flexibility in regard to the TransAlaska pipeline. SENATOR LINCOLN said the fiscal note indicates a potential savings to the state that would begin to accrue in 2014. She asked if he had any idea what the cost savings would be. SENATOR THERRIAULT replied, "The expense of the permitting process will get rolled into the tariff that is paid for shipping the product down the line. That impacts on the state treasury, because it reduces the wellhead value. It doesn't start accruing until then, because right now if existing law continued, it would be back before us in 10 years…" MR. STEVE JONES, TransAlaska Pipeline System right-of-way renewal project manager, stated support for SB 76 and pointed out that they had spent the last month and a half working on language that everyone would be happy with. MR. BILL BRITT, State Pipeline Coordinator, stated support for SB 76. Regarding Senator Elton's question about the term, "timely requested," the Right-of-way Leasing Act only applies to large common carrier oil and gas pipelines and does not apply to the smaller gathering lines. CHAIRMAN TORGERSON asked what his intentions are for the renewal, which says up to 30 years. MR. BRITT answered they would first have to receive an application and the applicant would request the term of renewal. He presumes it will be 30 years. He said they are in the process of cooperating with Alyeska to do a reliability center maintenance study, which will give them the exact physical condition of what they consider to be the critical systems on the TransAlaska Pipeline. He also pointed out that five other pipeline right-of-way leases on the North Slope expire on the same day as the TransAlaska Pipeline's right-of-way lease. DNR will have to deal with those five pipelines at the same time. CHAIRMAN TORGERSON asked what DNR will do if they are found to be out of compliance with the lease and they have signed a 30-year lease. MR. BRITT said he presumed Senator Torgerson meant they had a 30 year lease and encountered a problem after the renewal. He explained the lease has a number of tools so that, "We can issue orders directing Alyeska to take specific actions." They have done this a number of times and Alyeska has responded to every one of those. MR. BRITT explained, "Should that fail, we have the ability to go perform the work ourselves and bill the operator for doing the work. Should the operator not respond, we have the ability to go to court and a whole series of tools we can use to affect whatever change we think is necessary." SENATOR LINCOLN asked how many times the state has utilized the "recourse" he is talking about. MR. BRITT said he has been employed in this position for the last four years and prior to that some actions were taken. During his term, he has issued about 10 directives instructing Alyeska to take specific actions. No further steps needed to be taken. SENATOR ELTON asked if he supports the legislation. MR. BRITT responded that he does support it. SENATOR ELTON asked his definition of "timely requested." MR. BRITT stated that DNR has recently promulgated regulations that ask that applications be submitted two years prior to the expiration of the lease and that would be his definition. The regulations allow the commissioner to waive that period should circumstances warrant a waiver. He reiterated for the purpose of this bill, he is only talking about the big pipelines. SENATOR ELTON asked how he would define a feeder line off the pipeline, like the feeder line to Williams. MR. BRITT told members DNR does not have a separate lease for that line; it is covered by the TAPS right-of-way lease. Number 1000 SENATOR PEARCE moved to pass SSSB 76 from committee with its zero fiscal note and individual recommendations. There were no objections and it was so ordered.