HOUSE BILL NO. 229 "An Act authorizing the Alaska Railroad Corporation to participate in a project consisting of the acquisition, construction, improvement, maintenance, equipping, or operation of real and personal property, including facilities and equipment, for the Kenai gasification project, authorizing the corporation to issue bonds to finance all or a portion of the project, and identifying these as bonds for an essential public and governmental purpose; and providing for an effective date." DEVEN MITCHELL, EXECUTIVE DIRECTOR, ALASKA MUNICIPAL BOND BANK AUTHORITY, DEPARTMENT OF REVENUE, offered to answer questions. Representative Hawker asked Mr. Mitchell if the legislation causes any problems for the state. Mr. Mitchell explained that it appears that a double benefit will be gained by this legislation: developing use of a raw resource with the coal and anchoring Agrium in the Kenai Peninsula where it has a huge economic impact. He addressed non-recourse revenue bonds where the railroad has a unique ability to contemplate issuing industrial development bonds that are now precluded by the Tax Reform Act of 1986. He suggested that the project, as proposed, makes sense. Representative Hawker spoke of a concern over the industrial development bonds and the effect on the state's rating. Mr. Mitchell replied that it should have not impact and there has never been an issue in that regard. He gave an example of development bonds from the City of Valdez. 2:02:12 PM Representative Gara asked how a railroad that generated such large profits last year can issue $2.6 billion worth of bonds. Mr. Mitchell responded that the market would have to validate a high probability of success. Representative Gara asked about a state-owned gas pipeline and its effect on the bonding. Mr. Mitchell replied that it would have no impact on this bonding proposal. Representative Kelly wondered about pulling the authorization some time in the future if it doesn't get used. Mr. Mitchell reported that once the bond is issued there are contractual issues. Representative Kelly restated the question. Mr. Mitchell explained that if the bonds are not issued, statute can be changed. 2:05:25 PM Representative Gara MOVED to ADOPT Amendment #1: Page 4, line 4, following "this Act,": Insert "and compliance with the requirement of (b) of this section," Page 4, following line 23: Insert a new subsection to read: "(b) The Alaska Railroad Corporation may not issue bonds under the authorization and approval set out in this section unless the Department of Environmental Conservation certifies that the coal gasification and electrical power generation facility will be designed and operated in a manner that does not release more carbon dioxide into the atmosphere, per megawatt of power produced, than the average carbon dioxide released per megawatt during calendar year 2006 by the Beluga natural gas power plant, located on the western coast of Cook Inlet." Re-letter the following subsections accordingly. Co-Chair Meyer OBJECTED. Representative Gara explained that the amendment deals with carbon emissions from the coal plant. He wanted to regulate carbon emissions in exchange for the bonding request. Co-Chair Meyer noted that Co-Chair Chenault was not in support of the amendment. He said he sees the bill as a financial tool. 2:08:26 PM Representative Kelly spoke strongly against Amendment #1. LISA PARKER, CORPORATE AFFAIRS, Agrium, testified that there are regulations already in place regarding this issue. Representative Gara emphasized the importance of limiting carbon emissions and the problem of the greenhouse effect. He requested pro-active steps to reduce carbon emissions. Co-Chair Meyer spoke against Amendment #1. Representative Kelly explained his beliefs regarding global warming. He termed the amendment irresponsible relative to global warming. 2:13:39 PM Co-Chair Meyer MAINTAINED his objection. A roll call vote was taken on the motion. IN FAVOR: Gara, Nelson OPPOSED: Thomas, Hawker, Kelly, Stoltze, Meyer Representatives Crawford, Foster, Joule, and Chenault were absent for the vote. The MOTION FAILED (2-5). 2:15:13 PM Representative Hawker acknowledged a concern about the impact of the bill on the state; however, he stated support for the bill in its present form. Vice Chair Stoltze stated concerns by the Mat-Su about a rail extension to Port McKenzie being shut out due to this bill. He referred to a letter from the Mat-Su Borough (copy on file.) He spoke in support of the Agrium project but not at the expense of the Port McKenzie project. He mentioned that the Mayor of Wasilla has had no contact with the Alaska Railroad Corporation (ARRC). He brought out concerns about the Port of Anchorage route. He concluded by stating support for the bill. 2:22:28 PM PAT GAMBLE, PRESIDENT AND CEO, ALASKA RAILROAD CORPORATION, thought that Vice Chair Stoltze was correct about the Wasilla-to-Anchorage corridor problems. He spoke in favor of the extension to Port McKenzie, but thought the project decision was up to Agrium. It is not a preference issue for the railroad; at issue is the urgency and need to meet a timeline. The railroad is the easiest component, but works in response to Agrium's direction. Vice Chair Stoltze apologized for the use of the word "cavalier" in reference to ARRC. Representative Thomas asked about the Beluga Coal Mine route and the possibility of saving money. Ms. Parker said that had been looked into and both options are being considered. 2:29:30 PM Vice Chair Stoltze MOVED to REPORT HB 229 out of Committee with individual recommendations the accompanying fiscal note. There being NO OBJECTION, it was so ordered. CSHB 229 (FIN) was REPORTED out of Committee with a "no recommendation" and with a new fiscal note by the Department of Commerce, Community and Economic Development. 2:30:47 PM