HOUSE BILL NO. 296 "An Act relating to service of process on prisoners; relating to the crime of escape; relating to the definition of 'correctional facility'; amending Rule 4, Alaska Rules of Civil Procedure; and providing for an effective date." HB 296 was SCHEDULED but not HEARD. 4:47:36 PM RECESSED 6:54:36 PM RECONVENED Co-Chair Stoltze apologized for the teleconference connection difficulties that were making it hard for people to call into the meeting. RICHARD ODSATHER, ODSATHER INTERNATIONAL MARKETING, FAIRBANKS (via teleconference), voiced his opposition to the bill. He remarked that he did not understand why the Joint Pipeline Office had not been used in making decisions. He believed the HB 9 proposals were counterproductive to Alaska and that the entire bill should be killed. The major problem in Fairbanks was that one of the spur lines extended 39 miles through some of the state's worst soils and terminated at the university experimental farm fields. It fell far short of the refinery located 20 miles further south in North Pole. He said one project would cost over $200 million and wondered who would pay for it. The new project wanted to export gas, which was never stated in the public hearings. Large methane tankers could not operate in the upper Cook Inlet basin because of water depth, steerage, and six months of ice flow. New docks would have to be built a mile offshore to accommodate the tankers. The public had been told that the off-takes in Nenana and the Yukon River would have to be done after the open season; Nenana had been told it was supposed to get a methane and propane off-take, but it had not happened. There were many things in the bill that need to be taken care of. He was concerned about tariff prices. MERRICK PEIRCE, BOARD MEMBER, ALASKA GASLINE PORT AUTHORITY, NORTH POLE (via teleconference), did not support the bill. He offered a shareholder and public perspective. He stressed that hundreds of millions of dollars had been wasted on a project that would not be built. The bill was good for Exxon, given that there was an estimated 250 trillion feet of gas worth trillions in the Asian market. He stated that Exxon wanted to grab the resources cheaply then sit on them until the value increased; it had been warehousing the gas in the North Slope and Pt. Thompson for forty years. He believed that allowing Alaska gas to enter the world market too early threatened Exxon profits. The passage of HB 9 allowed for the warehousing of Alaska gas to continue by diverting public attention, time, and resources away from a credible project. He opined that Alaska was afraid to act and was allowing others make decisions about Alaska's future. He believed that HB 9 offered the wrong route, crossed the entire state with only two take-out points, did not provide Alaskans with affordable energy, did not provide gas for the military bases, and sought double digit return in equity which would cost Alaskans $420 million per year. He did not understand what rational policy maker would want to see $420 million transferred out of the Alaska economy to the owners of the project. He pointed out that the projects were opposed by the city of Valdez, North Pole City Council, Fairbanks North Star Borough Assembly, and the Alaska Municipal League. He cautioned that Alaska was competing with five projects in the lower 48, Canada, Russia and Australia. He stressed that the focus must be on a large gasline to Valdez. 7:03:56 PM Representative Wilson asked about the status and future plan for the All Alaskan project. Mr. Pierce replied that he could not publically expose who the entity was talking with for confidentiality restrictions. He declared that it was hard to move forward when the North Slope developers did not want to sell the gas; it was hard to move to the next step without the commitment of the gas. Representative Wilson wondered whether he would be against the project if the gas reached Fairbanks sooner rather than later. Mr. Pierce remarked that the Wood MacKenzie research showed a $419 billion benefit for the Alaska LNG project with a large gasline. He stated that Alaska should be pursuing a large gasline project to assure Alaskans get the most affordable energy. Interior residents would see an 80 percent reduction with gas from the large pipeline rather than a bullet line. He pointed out that time and resources should not be spent on a project that was not economical. 7:05:55 PM Representative Neuman asked if Mr. Pierce was proposing and supporting spending the Permanent Fund Dividend to build a gas pipeline. Mr. Pierce replied that the Alaska Permanent Fund Corporation had $41.5 billion in the different state savings accounts; without ever touching the Permanent Fund Dividend it could come up with the equity portion of the project and the state take control of the project and not wait for others who had a conflict of interest. The state had the resources, money, and talent to build the pipeline. Once the state has 51 percent equity position, the state could invite partners into the project, who he believed would come on board immediately. LARRY WOOD, SELF, PALMER (via teleconference), testified in opposition to the bill. In 2002 Alaska voted to build the pipeline, but every legislature and governor had ignored the will of the people. He pointed out that $14 million had been spent so far and nothing had been done; there had been no permits issued and the route has not been firmed up. The All Alaska Natural Gas Pipeline brought the benefit of the pipeline to Fairbanks, Ft. Greely, down the Richardson Highway, and a spur across the Dalton Highway. He wondered what the legislative body did not understand about value added resource development. Alaskans voted for the All Alaska Natural Gas Pipeline that existed in statute under Title 41, Section 41 to keep the gas in-state for the interior and long-term benefit of Alaska. Japan was interested in the gas. A Japanese delegation was in town, but the public was not privy to anything that was said to the governor or the legislature. There had been no public discussion from the legislature. He could not understand why the public was being ignored in the discussion. He wondered where the outrage was when the president of Conoco pulled out of the Denali project because they had intended to warehouse Alaska's gas all along; he opined that the project had been fostered on the state and it was done in a way to influence public decision. 7:12:28 PM JIM SYKES, SELF, PALMER (via teleconference), testified strongly against the bill. He was troubled by many things related to the legislation. The Alaska Gasline Development Corporation would have almost unlimited authority to determine ownership, operation, and financing. The agency would be exempt from Regulatory Commission of Alaska regulation which could result in forcing Alaskans to pay the highest price for gas in the world. Although the gas would be Alaskan, the consumers would be forced to repay for the cost of the line while the owner company would be assured of long-term profit regardless of the cost of the line. He found it to be troubling. The current route along the Parks Highway would bypass three military bases. The spur lines for Fairbanks the bases and the Richardson Highway had not been included in the costs. It was unclear if there would be an export component and there was an underestimation of what it would be; without export the line would only be half full. The tariff would be so excessive it would be uneconomical. The Department of Natural Resources estimated that there was as much gas in Cook Inlet as there had been taken out. He sympathized with the desire to get North Slope gas, but opined that HB 9 needed to be on backburner while other options were seriously considered. There had been talk about the larger line. He felt that HB 9 was the worst of all the gasline options and was a loser. 7:16:10 PM Representative Mike Hawker recapped the Regulatory Commission of Alaska amendment adopted earlier in the day. The sponsors of the legislation brought forth the amendment that provided a regulatory structure for the pipeline in the Alaska that was specifically authorized by statute to operate as contact carriers. That regulatory authority was vested in the authority of the RCA and fulfilled the discussion in the House Resources committee. He stated that the House Finance Committee passed the amendment without objections. Representative Gara interjected that he and Representative Guttenberg had tried to amend the RCA Amendment and believed the regulations could have been stronger. He felt that the RCA should have the power to ensure that the tariff rates were just and reasonable. His amendment had not passed. He relayed that the committee's support for the bill was not unanimous. 7:18:19 PM MICHAEL DUKES, ASSEMBLY MEMBER, FAIRBANKS NORTH STAR BOROUGH, NORTH POLE (via teleconference), voiced his opposition to the bill for several reasons. He believed it contradicted the will of the people as stated by previous testifiers. The fact that the people voted to incorporate and create an agency that would develop their own pipeline had been ignored by administrations and legislators. He believed it was insulting to the people of Alaska. The economics of the proposed line would have the people in Fairbanks paying more than Anchorage. The line would be passing outside Dunbar and although Representative Wilson stated there could be an amendment to pass the gasline into Fairbanks, the problem was that the tariff cost could be close to the cost of current heating oil, which would not help. There had to be a difference in the cost between natural gas and heating oil. He stated that for a mass conversion to take place in a market for natural gas there had to be a substantive difference between the cost of natural gas and the cost of heating oil or people would not spend the thousands of dollars to convert to gas. There will be no benefits in air quality or space heating in the homes. He opined that the proposal completely ignored the military bases even though they have been using those numbers to justify the pipeline. He felt that there were many things wrong with HB 9 and that the people in Fairbanks did not really support it. He stated that the proposed pipeline in HB 9 would not solve the problem. [Lost call for short period]. He believed that the problem was a failure in leadership with the administration and legislature to put forth a line that would benefit the entire state. He stressed that HB 9 needed to be defeated. Japan was currently looking for 30 million metric tons of gas; therefore it was the time to strike to bring needed revenue into the state. He urged the defeat of HB 9. 7:23:13 PM Representative Guttenberg pointed out that Mr. Dukes was not speaking for the borough assembly, but for himself. Mr. Dukes replied that the borough assembly passed a resolution supporting an All Alaska Gas Pipeline along with the City of Valdez and the Alaska Municipal League. ALAN LEMASTER, SELF, GAKONA (via teleconference), testified against the bill. He owned a small business in Copper Valley and paid extremely high energy rates, which would not get better with the passage of HB 9. He urged the committee to put aside his or her own limited vision for their districts, personal ambitions, and legacy hopes, and instead to support what was best for all the people of Alaska. He asked the committee to widen its vision to include the future of the children in Alaska. He felt that HB 9 was not the best plan on the table to bring low cost energy to the greatest number of Alaskans. The inability for Alaska's judiciary, the RCA, and the citizens of the state to challenge and object to any and all of the provisions within the bill exhibited a lack of transparency and was not acceptable. He stated that it was technically legal to repeal a ballot measure but, he advised that the ballot represented the will of the people and that repealing it (i.e. Section 29 of the bill) would not be popular with the people. He remarked that any project considered must include producing a pipeline to tidewater for export to ports outside the state of Alaska; the bullet line did not meet the directive on several levels. Valdez was the only port in the state that could handle the large ships necessary for such a project. He pointed to public concern that the process was superfluous, resulting in a great deal of effort, a lot of money spent, for very little or no gain. He urged denying HB 9 until it was compatible with all the provisions of the many bills and regulations that preceded it. 7:28:11 PM Co-Chair Stoltze once again explained the teleconference difficulties and apologized to the people who might be waiting to speak. PARK KRINER, SELF, GLENNALLEN (via teleconference), voiced opposition to the bill. After 41 years of living and having a business in the Alaska he believed that the Valdez route was financially, socially, employment percent wise, business wise, and morally the right way to go. He believed the health and future of Alaska depended on the decisions made. He stressed the extremely large energy costs to his business over the years. He believed there would be substantial savings with propane and natural gas. With the savings he would hire, build, and expand his business. He remarked on the advantages of an All Alaska Gas Pipeline. He recommended ending HB 9 and promoted the proposals of knowledgeable experts, like Representative Gara. He recommended that people read Representative Gara's "sensible" amendment recommendation. Representative Gara thanked him for his support. 7:33:38 PM RANDY WAGNER, SELF, GLENNALLEN (via teleconference), testified against the bill. He agreed with the amendments of Representative Gara and the former teleconference speakers. He supported the pipeline to send the gas down to Valdez. He believed that Alaska and the U.S. could profit from selling the gas to Japan. He indicated that there was an economic war with China; the Japanese could buy Chinese gas, but that would result in a loss of money for Alaska. 7:36:20 PM AT EASE 7:54:31 PM RECONVENED HB 9 was HEARD and HELD in Committee for further consideration.