(Tape 94-6 - Side 1) CHAIRMAN GREEN: I call the Special House Committee on Oil and Gas Matters together at five minutes after five. We are on teleconference with Anchorage and Fairbanks. Can you hear us in Anchorage? ANCHORAGE LIO: Anchorage hears you just fine. Fairbanks has not joined the conference as yet. CHAIRMAN GREEN: Is there anybody in Anchorage that will be wanting to testify? ANCHORAGE LIO: Mr. Ottesen is here to answer questions. He is from the Department of Transportation. CHAIRMAN GREEN: Okay. He just wants to answer questions, rather than testify? ANCHORAGE LIO: If you have any of them. CHAIRMAN GREEN: Okay. Thank you. Well, we are going to take up House Concurrent Resolution 12, natural gas as a fuel for motor vehicles first, and then we will be fortunate to actually get an overview from the Joint Pipeline Coordinator's Office to discuss the overview, oversight of the Alyeska Pipeline. So first we are going to have the -- is there someone here -- okay. If you would like to come up and give us a run through. Please identify yourself for the record, David, and we will be off on House Concurrent Resolution 12. REPRESENTATIVE FINKELSTEIN: Thank you, Mr. Chairman, members of the committee. My name is David Finkelstein. Where we left off last year was, we discussed the resolution. The department and others had a number of suggestions. So the CS that is before you, has a couple added from that hearing that members of the committee showed an interest in. One of them was, "Whereas natural gas could benefit the commercial motor carriage through the availability of reliable inexpensive fuel, meet the pending low sulphur requirements of the Clean Air Act, and whereas natural gas has improved and performed the arctic conditions of Alaska, having been in use in the North Slope Borough for more than ten years on a year round basis. And then there is some other changes made that were comments from committee members, and exactly who the copies of the resolution were sent to, which is getting to be quite a list. Other than that, the situation is basically the same. I did attend some of the meetings that the state sponsored during the interim on their cooperative approach in trying to advance natural gases as a fuel in vehicles. I think there is a lot of optimism. I just passed out an article from February 7 in the Anchorage Daily News on the same subject. And other than that, I would be glad to answer any questions. CHAIRMAN GREEN: Are there any questions from any of the committee members, for Representative Finkelstein? (No audible response.) Do -- are there currently places that people can get natural gas, if they had the conversion, in Alaska. REPRESENTATIVE FINKELSTEIN: There are some. In Anchorage there is basically a fast fueling spot and a slow fuel spot out. The conclusion of the working group to date, from the meetings I attended, and the minutes I've read, is that is the bottle neck of the system at this point, that -- of private fleets, especially, are not about to convert until they have some minimum level which, I think, the Department, the state views as about four -- four to five in Anchorage, so that it is reasonably convenient. There are other communities, though, that can operate off of just one fueling spot for the town. It's just the nature of Anchorage, that is relatively inefficient to travel beyond that to get to the fueling spot. The view of those who might be in the business of selling natural gas is -- it's hard for them to make the commitment without any sense that the Department is going to follow through, as well as the municipality, private fleets, and the federal government are going to follow through, that there really will be a market out there, if they make the expenditure. But in all levels that is happening, there is still strong support within the municipality of Anchorage, at least for that one city. And on the federal level, Clinton has recently imposed to a higher level of expectation for natural gas vehicles in the federal fleet. And from my understanding, in talking to the Department of Transportation people, the private fleet managers seem to be as interested as ever. So I've got faith that -- and I've been fairly impressed with the efforts the department has made in trying to work cooperatively with industry, and sort of move together, so that by the time these refueling stations might be put in, there really will be enough demand out there. CHAIRMAN GREEN: Is there a preferred -- is it, like, a cryogenic compartment that this gas would go into and be stored as a compressed gas, or would it be liquified, or... REPRESENTATIVE FINKELSTEIN: I think all -- someone from the department could add to this, once I'm finished. But I don't think they have operated any liquified stations. There is a bit more technology involved there. I think, generally, they unloaded, and they have the transfer station, and from then on out, the distribution system is just compressed gas. But, they can correct me if I'm wrong. CHAIRMAN GREEN: How does it compare economic wise, if you had the conversion? Say, your vehicle was ready to run on natural gas? REPRESENTATIVE FINKELSTEIN: The range of figures that I've seen, and, again, the department's experience is much more relevant here -- but the range of figures that I've seen is anywhere from 40 percent of the cost, up to 80 or 90 percent. That it's always lower per BTU, and lower -- I think BTU is the term used, rather than "thermal unit." And, usually, 50 to 60 percent of the figures that I hear. It is very efficient, and it can be argued -- if you have refueling available, it can be argued it's worth the investment for even each of us right now. It's just the refueling station issue, that's, you know, created the problem. It has a variety of other benefits on the engine as well. It's a more clean burning fuel. It doesn't have the tendency to build up deposits. CHAIRMAN GREEN: Do you suppose it would ever be clean enough that you wouldn't have to have a certificate inspection, if you had a gas car? REPRESENTATIVE FINKELSTEIN: Well, those are a lot after carbon monoxide. I don't know how we deal with the particular exemption program, but I don't think you get the variation you get in traditional gasoline powered engines, where it's dependant on a complex technology to reduce the emissions. It's, you know, inherent in the engines, so even the -- a more poorly tuned engine isn't going to be off to the extreme. But all these things, you should ask, again, the department, if they have any thoughts beyond mine, because I would not pretend to be an automotive expert. I can barely keep my car running. CHAIRMAN GREEN: Anybody else have any questions for Representative Finkelstein? (No audible response.) Any questions from Anchorage? JEFF OTTESEN (VIA ANCHORAGE): Mr. Chairman? CHAIRMAN GREEN: Yes, sir. JEFF OTTESEN (VIA ANCHORAGE): This is Jeff Ottesen. I'm with the Department of Transportation, and have been, I guess, spearheading, more or less, the -- our conversion of our fleet -- partial conversion to natural gas for the last few years. It is interesting that your meeting is today. I spent the last three days riding one of our first new CNG vehicles here in Anchorage around. I drove a CNG vehicle to this meeting in the last 15 minutes. And I could tell you that they operate every bit as well as a gasoline vehicle; you can't tell the difference. To answer a couple of questions that were raised. The exemption for I & M. If your vehicle is a dedicated CNG vehicle, that is, it only can burn CNG, yes, it can be exempt. If it's a dual fuel vehicle, which is probably the most practical choice, that is a vehicle that can burn either gasoline or CNG -- it's a switch -- then it has to maintain the I & M, because of the gasoline that is present there. As far as the LNG versus CNG, that's really the same chemical fuel source, it's only a matter of how it is stored. Either being delivered to the refueler, or, ultimately, to the vehicle. LNG is simply natural gas that has been liquified. It can (indiscernible) many temperatures. CNG is simply natural gas that has been compressed to very high pressures, but it's not being stored at cryogenic temperatures. There are advantage to the LNG that we have available there at Kenai, that's a very economical method of transporting natural gas. It can be put in a truck like gasoline. It can be carried to the refueling location, beyond the range of the current pipelines. To places like Fairbanks. Stored there at refueler, and then loaded into automobiles or heavy trucks, for ultimate use by the vehicle. So I think Representative Finkelstein is right. The problem now is the refueling infrastructure. There is a lot of interest in fleet owners here in Anchorage, from what I hear, in getting into the business of having CNG. They have no place to buy the gas right now. CHAIRMAN GREEN: Would it be a fair assumption, then, that the -- if you were going to a cryogenic system, that you would have a greater range than you would under compression? JEFF OTTESEN (VIA ANCHORAGE): That is correct. If you go to cryogenic as your source on board, that is beginning to show up more and more in the commercial side of the industry. That is the -- I know the bus system in Seattle has just opted to go to LNG, because they get greater range than tanks. Likewise, the long over-the-road carriers now, around the country, are converting to natural gas. But once the gas is being used by the engine itself, it's the same gas as if it were stored in the compressed form. The LNG is just a more dense form of storage. CHAIRMAN GREEN: And I guess my last questions -- I don't want to monopolize the questions. But how would, say, either a compressed gas, or a liquified gas, be safety wise, as compared to conventional gasoline? JEFF OTTESEN (VIA ANCHORAGE): Well, I'm not an expert, but I've listened to a lot of experts talk. And my own skepticism, I think, has come full circle -- or, I should say, half circle. I have come from being a skeptic of safety, and now believing that natural gas is probably safer. And I will give you a few reasons why. One, the tanks, themselves, are much more durable, much stronger than a conventional gasoline tank. They are capable of withstanding a high velocity of rifle rounds. They are capable of being dropped off a six-story building, and surviving in tact. So just their durability, as compared to sheet metal, which is how gasoline is stored, is much better. Secondly, the fuel has a lower range of ignition. The range that it will ignite, the amount of gasoline versus the atmospheric conditions, has a much narrower band of accountability than gasoline. And then, finally, the gas, if it does have a spill, you do have a break in storage, it's lighter than air. It quickly dissipates and blows away. Where, gasoline, being heavier than air, pools and settles down. But for all those reasons, it's really a safer fuel. CHAIRMAN GREEN: Thank you, Jeff. Any questions from anyone in the audience? (No audible response.) What we need to do, I think, is first adopt the substitute as the bill. I would entertain a motion to that effect. REPRESENTATIVE KOTT: Well, Mr. Chairman, I wonder if I might be able to ask Jeff a question. CHAIRMAN GREEN: Sure. REPRESENTATIVE KOTT: It seems to be in order at this particular point in time. Jeff, Representative Kott here. I just have a question for you regarding the number of natural gas vehicles that are currently in operation in the state of Alaska. Do you have any estimate as to how many those are? JEFF OTTESEN (VIA ANCHORAGE): I don't have a hard estimate. I think, from what I've heard at the various conferences we've held, I think it's well over 100 now, and growing. The state fleet here is just in the process of adding six to its inventory. That will be our first six. We have a variety of vehicle types, as well as some that are dedicated natural gas. That is, that is the only fuel. We also have a Ford Taurus that is a bi-fuel. Some are off the factory assembly line conversions, and some are being converted -- after-market conversions. That is, the state has done it itself. So we even have these vehicles available for people that are visiting Anchorage, and need to use a state car for a day or three. They could be made available. Give me a call there in Juneau, and I could put you in touch with people that could schedule that car. REPRESENTATIVE KOTT: I would be more than happy to oblige you in using one of those vehicles, as long as I don't have to report it on my ethics report. Those numbers that you cited, over 100, are those state owned vehicles, or is that a combination of public and private? JEFF OTTESEN (VIA ANCHORAGE): I believe that's public and private. There are people that own these vehicles as individual citizens. There are various businesses that are using them now. There is a new coalition of public and private fleet managers here in Anchorage that are just this week, I believe, going to sign their resolution as -- basically, their bylaws, and that includes one of the Anchorage taxi cab fleets, the municipality and state fleet, and other fleet owners, basically getting together and trying to work -- get a teamwork environment to make this happen. In the three or four days here in town that I've had a vehicle, driving around, and I have been stopped three times with people wanting to know what this car is all about, and how does it drive. Does it work? There's a lot of difference. REPRESENTATIVE KOTT: Thank you for your comments. CHAIRMAN GREEN: Jeff, I have another comment. This is Representative Green. How does the maintenance compare on a natural gas engine to a gasoline engine? JEFF OTTESEN (VIA ANCHORAGE): We held a conference a year ago December, where we brought fleet managers from around the country here to talk about that, and they all reported the same thing. The engines simply burn cleaner on natural gas. It doesn't put the contaminates into the oil. It doesn't foul the spark plugs. You don't get the (indiscernible) on valves, and that sort of thing, in the engine, or the rings. they'll last a long time. CHAIRMAN GREEN: Thank you. Any other questions? (No audible response.) Okay. I would entertain a motion to adopt the committee substitute. REPRESENTATIVE KOTT: So moved. CHAIRMAN GREEN: It's been so moved by Representative Kott. Any objections? (No audible response.) So ordered. I would now entertain a motion... UNIDENTIFIED MALE: Mr. Chairman, do we have anybody from the oil and gas industry in the audience that can give us an estimation as to how many natural gas vehicles are currently in operation on the North Slope Borough, since they've been up there for about 10 years or so? Any idea? CHAIRMAN GREEN: I don't know whether industry -- I see, we have a member, Department of Environmental Conservation. Do you happen to know, or have a feel for -- I guess what you're really after, is just kind of an approximation. UNIDENTIFIED SPEAKER: Yes. MEAD TREADWELL: Mr. Chairman, Mead Treadwell, Deputy Commission, ADEC. As I understand it, the firm NORGAS, which is one of the people you are directing this to, has been operating its truck fleet on the North Slope. I don't know how many it is, but it's not a large fleet. My guess is five to 10 vehicles at this point. There has been -- there is also a source of natural gas, as you know, that's not connected to Prudhoe Bay, that operates in Barrow. And we had at the conference last year, a representative of the North Slope Borough, and I believe they had, with that gas utility, maybe three to five vehicles, as well. They actually -- it was kind of an interesting situation there, because the price of gasoline was far more expensive than the price of natural gas, and you would think that many more vehicles would have converted. But the explanation given at the conference was that the owners -- the people who sold gasoline had a major choice in the decision of what kind of cars were purchased, and that's why they stuck with gasoline. But the utility that controlled its own vehicles, has been running on natural gas for some time, and that's the gas utility fleet there. So the two North Slope gas utilities have it. Mr. Chairman, I had raised my hand when you were asking for questions, and if Jeff is still on the line, I -- perhaps a colloquy between the two departments. Jeff had asked me the other day what additional incentives DEC might be able to come up with to help on this. And as you may be aware, our state implementation plan for clean air is in the Department of Law right now for review. It's a 3,000 page document. It's probably the weightiest set of regulations ever contemplated, much less, had anything to do with developing. But that's what we were required to do, and that's about one-eighth the size of Oregon's 20,000 page submission on the Clean Air Act. But anyway, that is in the Department of Law right now for review, and as soon as that is adopted, we have the authority to trigger a mechanism that would allow the Department of Transportation to use some of its so-called CMAC funds to help buy a gas refueling station. And if we do that, I know that -- Jeff, you might want to explain the public-private partnership that you have in mind that could help get some greater refueling facilities in the marketplace. JEFF OTTESEN (VIA ANCHORAGE): Would that be appropriate? CHAIRMAN GREEN: Yes, please go ahead. CHAIRMAN GREEN: The notion is, we could give some of our -- some of our highway funds are dedicated to a purpose called CMAC, or Conjunction Mitigation/Air Quality. How we use that money is controlled by the state implementation plan that Mead just talked about. He needs to adjust this plan to make our spending, in this fashion, legitimate. What then happens -- what we are hoping to envision would be, some form of a joint public-private partnership allowing one or more stations to go in the Anchorage area, that would be available to both public fleets and to private fleets. I think, just in kind of a broad brush thinking proposal, or strong (indiscernible) proposal, we're imagining an RFP, which would basically say, we have this much money available to install the system. We are looking for a private partner to come in, make that installation, operate it and maintain it, and to sell the natural gas automotive fuel back to the state's fleet, on a long term basis, at a discounted cost. So that we would recoup that investment. At the same time, those (indiscernible) system would be available to any other user that would care to come in and get refueled. CHAIRMAN GREEN: Thank you. Thank you, Mead, and thank you, Jeff. Representative Kott? REPRESENTATIVE KOTT: Thank you, Mr. Chairman. I would just call your attention to page 2, line 8, where it talks about the number of natural gas vehicles currently in operation within Alaska. And per the testimony of Jeff, I think we can probably make this -- tighten it up a little more, and make it a little more palatable to those who would not seemingly think it's a good idea, by, perhaps, offering a friendly amendment, making that number 50 to 100. Since we do have over 600,000 registered vehicles in the state, I think it would add a little more thrust to the proposal. I'm certainly not wanting to hold this up in this committee, because it does have two additional committees, plus finance, which it probably ought to be away from, but -- I think it would give it a little more teeth in the matter, if we substantiated the number to a higher number. CHAIRMAN GREEN: Do you feel comfortable with that, David, that -- is that still a number that you can live with? REPRESENTATIVE FINKELSTEIN: Actually, Jeff's view is more important. If Jeff thinks it is correct, then that's more correct. I just... REPRESENTATIVE KOTT: I'd offer that as a friendly amendment, then. THE COURT: And the sponsor has no problem with that? (No audible response.) Anybody else have any comment on that? (No audible response.) You're offering that as an amendment? (No audible response.) Okay. That will then read, over 100 natural gas vehicles. REPRESENTATIVE OLBERG: Should we ask for unanimous consent? CHAIRMAN GREEN: Beg your pardon? REPRESENTATIVE KOTT: And I would ask unanimous consent of this amendment, with no objection. Don't think about it too long. CHAIRMAN GREEN: Any objection to that change? REPRESENTATIVE GARY DAVIS: Good observations. CHAIRMAN GREEN: If not, so ordered. REPRESENTATIVE KOTT: And, Mr. Chairman, I make a motion, I would move this out of committee, with unanimous consent, as amended, to the next committee referral, which is Resources. I think this is a good idea. We've ridden this horse around the corral for a long time, and it's time to open the corral door and let it loose. CHAIRMAN GREEN: Any objection? (No audible response.) So ordered. REPRESENTATIVE FINKELSTEIN: Thank you, sir.