HB 307-EXTEND BOND AUTH FOR INTERIOR ENERGY PROJ  5:30:44 PM CO-CHAIR FIELDS announced that the final order of business would be HOUSE BILL NO. 307, "An Act relating to the financing and issuance of bonds for a liquefied natural gas production system and natural gas distribution system; and providing for an effective date." 5:31:11 PM JOE HARDENBROOK, Staff, Representative Grier Hopkins, Alaska State Legislature, introduced HB 307 on behalf of Representative Hopkins, sponsor. He explained that HB 307 is part of the solution to a difficult problem faced by the residents of Fairbanks, North Pole, and surrounding communities who have struggled with some of the worst air quality in the nation. He spoke from the sponsor statement, which read as follows (original punctuation provided): In 2009, the U.S. Environmental Protection Agency (EPA) designated the more populated portions of the Fairbanks North Star Borough (FNSB) as a nonattainment area for air quality related to [particulate matter (PM)] 2.5. Since that time, the communities of Fairbanks and North Pole, State of Alaska, [Alaska Industrial Development and Export Authority (AIDEA)], and Interior Gas Utility (IGU) have been actively engaged in expanding the availability and use of natural gas through the implementation of the Interior Energy Project (IEP), a project designed to bring lower-cost energy to as many Interior residents and businesses as possible, as quickly as possible. A key to reducing PM2.5 air pollution in the long term is expanding the availability of affordable, clean burning Alaska natural gas. A critical component of the IEP is financing for the development of a unified public gas utility with competitive rates. [Senate th Bill] 23 (chapter 26 SLA 13) was passed by the 28 Alaska Legislature in 2013 giving the Alaska Industrial Development Authority (AIDEA) the ability to provide financing tools for the development of the IEP. Among the financial tools granted to AIDEA for the IEP was the ability to issue up to $150 million in conduit revenue bonds to help develop an integrated natural gas supply chain, including expansion of natural gas liquefaction facilities in the Matanuska-Susitna Borough and expansion of natural gas mains and service lines in the FNSB. Authorization under [Senate Bill] 23 for issuing these bonds was originally scheduled to expire June 30, 2018. Through the passage of [House Bill] 119 (chapter 64 SLA 18) in 2018, the Alaska Legislature extended access to AIDEA bonding an additional five years to June 30, 2023. Given market conditions and turmoil related to the COVID-19 pandemic, IGU has paused the final investment decision on its Titan liquid natural gas (LNG) plant expansion project located in the Mat-Su Borough, which will necessitate access to AIDEA bonds. Bonds of $136 million of the original $150 million authorized may be issued to provide up to the $275 million financing cap authorized under [Senate Bill] 23. HB 307 extends the authorization for AIDEA to issue IEP-related bonds for an additional five years to June 30, 2028. MR. HARDENBROOK drew attention to AIDEA's letter of support for HB 307 in the committee packet, as well as AIDEA's January 2022 quarterly report to the legislature on the progress of the IEP. 5:34:32 PM MR. HARDENBROOK provided the sectional analysis for HB 307. He stated that Section 1 amends the uncodified law of the State of Alaska enacted in 2013 to replace the expiration date of AIDEA's authority to issue bonds in support of the project from 6/30/23 to 6/30/28. Section 2 contains the immediate effective date clause. 5:34:47 PM CO-CHAIR FIELDS opened invited testimony on HB 307. 5:35:01 PM DAN BRITTON, General Manager, Interior Gas Utility (IGU), provided invited testimony in support of HB 307 to extend AIDEA's authorization to finance and issue bonds targeting the Interior Energy Project (IEP). He stated that AIDEA and IGU have been working closely on all aspects of the IEP, including liquefaction, transport, storage, regasification, and distribution of natural gas in the Interior. MR. BRITTON stated that to date AIDEA and IGU have advanced the goals of the IEP in several ways. He specified that [Fairbanks Natural Gas LLC (FNG)] and IGU were consolidated under one natural gas utility to expand the availability of lower cost energy to as many Interior residents and businesses as possible, as quickly as possible. Approximately 215 miles of natural gas distribution lines were installed throughout Fairbanks and North Pole. Natural gas mains in the City of Fairbanks were expanded to now serve about 1,550 residential and commercial customers, up from about 1,200 customers a few years ago. Natural gas mains that have been installed in Fairbanks could serve up to 8,500 properties. Gas distribution lines in the City of North Pole now serve more than 125 customers and natural gas mains in North Pole could serve up to 3,000 properties. A 5.25 million gallon liquefied natural gas (LNG) storage and gasification facility was completed in Fairbanks in late 2019. A separate 150,000-gallon LNG storage and gasification facility was completed in North Pole in early 2021. The customer base of IGU has increased 40 percent since these storage facilities were completed. It is anticipated that an additional 600 customers will convert to natural gas in 2022. MR. BRITTON said AIDEA bonding is critical for the continued success of the project to help finance increased LNG production capacity and long-term gas distribution expansion in the Interior. As the IGU customer base grows, AIDEA bonding will need to be utilized to add approximately 100,000 gallons per day of liquefaction capacity to the present output of IGU's Titan facility located in the Matanuska-Susitna Borough. The existing plant has a production capacity of 50,000 gallons per day. Also, IGU plans to use the bonding to further expand natural gas mains and services into more neighborhoods in the Fairbanks and North Pole communities. The bonding has not yet been fully utilized, he continued, given project delays related to market conditions such as the [COVID-19] pandemic and resulting oil price drop and economic uncertainties, and IGU anticipates advancing the projects requiring the funding in the next few years. Passage of HB 307 provides additional time for the IEP to progress towards the Interior's goal of realizing affordable clean burning natural gas to as many people as possible. 5:38:21 PM CO-CHAIR FIELDS [held over HB 307].