SB 125-EXTEND BOND AUTH FOR INTERIOR ENERGY PROJ  3:31:27 PM SENATOR PETE KELLY, Alaska State Legislature, presented SB 125 as prime sponsor. He said the proposed bill was the companion to HB 261. He explained it would extend the authorization date for AIDEA bonds for the Interior Energy Project (IEP). He gave some history of the projects and bonds. He said the sunset is nearing. He spoke to air quality concerns in the Interior. He said to date the project is going well. He said the project has taken a lot of time for due diligence. He spoke to the distribution system for natural gas in the area. He said construction had begun on a storage facility. He underlined the proposed bill does not propose spending more money, just reauthorizes a project that the AIDEA board has already vetted. 3:35:34 PM CHAIR KITO asked how much has been spent on the project. JOSEPH BYRNES, Staff, Senator Pete Kelly, answered questions in the hearing on SB 125. He referred to the quarterly report on the project. 3:36:18 PM REPRESENTATIVE WOOL asked about the ramifications on the project if the funding is not provided. SENATOR KELLY suggested the project may be "demobbed." 3:37:07 PM GENE THERRIAULT, Alaska Industrial Development and Export Authority (AIDEA), testified in the hearing on SB 125. He pointed to a table on page 9 of the report showing expenditures to date. He underlined that none of the bonds have been spent to date. He spoke to storage issues and an increased source of LNG. He said there was a general understanding that Fairbanks, Alaska, has fairly limited overall demand for natural gas. He said a lot of time was spent negotiating consolidation of the utilities. REPRESENTATIVE BIRCH asked how flexible the system is to source gas from multiple areas. MR. THERRIAULT answered the project had continually evaluated the issue. He said it took longer to get a high level of conversions. He spoke to sourcing from Cook Inlet. He said supply had been negotiated with Hilcorp. He spoke to working closely with the railroad. He said the railroad lends itself to bulk shipments which are more than the current supply. He said working out logistics with the railroad might tip the costs in its favor, but currently tankers were used. He said it would continue to be examined. 3:44:00 PM REPRESENTATIVE KNOPP asked what is going to be the storage capacity in the tanks that were being used. MR. THERRIAULT answered the tank being constructed is 5.2 million gallons. The existing tank is about 300,000 to 350,000 gallons. He said the tank will be redeployed out to North Pole, Alaska. He said the two tank farms would link together. CHAIR KITO referred to the report and asked why the authorized funding is not available for the component of the project. MR. THERRIAULT answered the remaining capital funds are committed to Pentex assets for the local utility. He added the storage tank being constructed is using Sustainable Energy Transmission and Supply Development Fund (SETS) money. CHAIR KITO asked for an explanation of the ultimate ownership of the project. He shared his concern that the state of Alaska is paying to capitalize a purchase of a utility. MR. THERRIAULT gave some history of the funding. He described the AIDEA revolving loan fund. He said AIDEA would oversee the SETS loans. 3:50:07 PM CHAIR KITO suggested Mr. Therriault was saying that the money being used for the utility will be paid back. He said he was trying to understand what capital the state is putting into the project and what the benefit to the state is. MR. THERRIAULT said when AIDEA stepped in, it did not use IEP funds, but revolving load funds. It was agreed there would be temporary ownership while an agreement was negotiated with a local entity. He said the original purchase price came with an interest rate of 5.06 percent while the funds were deployed. He said at the end of May the original purchase price plus interest would be repaid and the revolving loan fund would be made whole. He explained that as those funds come back, they will be made available for AIDEA to relend under the terms of the SETS fund. CHAIR KITO asked how much state General Fund (GF) money is going into this utility. MR. THERRIAULT answered that at closing the deal at the end of May, the full $57.5 million of GF will have been expended to consolidate the utilities under local control. CHAIR KITO asked whether the state was purchasing a utility or a part of the utility. MR. THERRIAULT answered the funds were provided to the project to consolidate the project under local control. CHAIR KITO suggested the money is being given to the utility directly from AIDEA. MR. THERRIAULT answered in the affirmative. 3:53:57 PM JOMO STEWART, Interior Gas Utility, testified in support of SB 125. He stated the plan calls for the use of over $40 million of the $57 million for bonding authority. He added that the remaining amount of the funds in the SETs fund would be quite small. 3:55:11 PM CHAIR KITO opened public testimony on SB 125. 3:55:24 PM JON COOK, CFO, Airport Equipment Rentals, testified in support of SB 125. He stated he was affiliated with a number of entities in Fairbanks, Alaska, which own the largest retail properties in the area. He said the lack of an uninterruptable supply of gas has meant they could not bring new box stores to town, as all major box stores use natural gas for heating and cooling. He said having the supply will mean major retailers can come to town and keep the costs low in the cities and villages. 3:56:59 PM ELIZABETH WARLICK, Greater Fairbanks Chambers of Commerce, testified in support of SB 125. She said the extension of AIDEA bonding would be an essential financing component for the project. 3:57:36 PM JIM WILLIAMS, Chief of Staff, Fairbanks North Star Borough Mayor, Testified in support of SB 125. He said the Interior Gas Utility (IGU) project is a priority for consistency in pricing. He said it is believed natural gas is a solution to the area's air quality problem. He said there was an expectation that the price of diesel fuel could go up another .43 per gallon due to new regulations. He urged support of the proposed bill. 3:59:51 PM CHAIR KITO held over SB 125.