SB 121 - RIGHT-OF-WAY LEASING ACT Number 0090 VICE CHAIR FATE announced the first item of business, CS FOR SENATE BILL NO. 121(RES), "An Act adding, for purposes of the Alaska Right-of-Way Leasing Act, a definition of 'substantial change' as applied to an amended right-of-way lease application; and providing for an effective date." Number 0129 ANNETTE KREITZER, Staff to Senator Loren Leman, presented SB 121 on behalf of the sponsor. She requested that Jim Eason [lobbyist on behalf of Foothills Pipe Lines Ltd.] join her at the witness table. She then explained that Senator Leman wants to remove real and potential roadblocks to the commercialization of Alaska's North Slope gas. Therefore, SB 121 provides a definition of the term "substantial change" as used in AS 38.35.050(c), which reads: (c) Any amendment to an application filed under this section which constitutes a substantial change in the application is subject to all provisions of this chapter applying to an original application. MS. KREITZER pointed out that currently whether an amendment to a pipeline is or isn't a substantial change is decided by the Department of Natural Resources (DNR) on a case-by-case basis. The concern isn't that, but is the challenge to that decision on a case-by-case basis in which the court would make the decision instead of its being a policy [decision] of the department. MS. KREITZER noted that the following would be consistent with existing department policy, and under SB 121 would constitute a substantial change that would require restarting the entire process: a 10 percent net increase in state acreage beyond what was in the original application; using less-effective environmental or safety-mitigation measures than proposed in the original application; or proposing a fundamental change in the route as proposed in the original application. Number 0284 MS. KREITZER drew attention to page 2 of the bill, suggesting that the language about the acreage not included in the 10 percent net increase may be somewhat confusing. She reminded members that if it is a 10 percent net increase in state acreage beyond what was in the original application, it would be a "substantial change" under this bill. However, not included would be acreage attributed to an amendment to an existing right-of-way lease across federal lands originally issued by the federal government - regardless of whether the state or federal government administers the land - or land under a federal right- of-way grant that is transferred to the state for administration. MS. KREITZER explained the reason for the foregoing exceptions. When there are right-of-way leases across federal and state lands, federal rights-of-way are, by law, 50 feet plus the amount of the improvement - typically about 80 feet. By contrast, state rights-of-way are 100 to 150 feet, and most of the North Slope rights-of-way are 150 feet. This provision allows for alignment of those rights-of-way without making them subject to the 10 percent net increase. MS. KREITZER concluded by saying SB 121 provides an increased measure of certainty and will minimize unnecessary challenges and delays in processing, approving, and issuing right-of-way leases. Number 0432 JAMES E. EASON, Lobbyist for Foothills Pipe Lines Ltd., testified in support of SB 121, noting that [he and the company] had worked closely with the sponsor to draft legislation that would meet the requirements of DNR's pipeline office as well as comport with what they believe to be the traditional criteria that the department looks to in determining whether an amendment to an application is or is not considered substantial. MR. EASON agreed that the concern is not with the commissioner or the pipeline office; instead, lacking a definition of "substantial change" for the purposes of the statute, the courts ultimately will make that decision on a case-by-case basis, if a project has a high enough profile so that someone challenges a decision by the commissioner or the pipeline office regarding whether a change is substantial. Mr. Eason suggested that is not in the best interest of either the state or a company trying to commercialize gas on behalf of the state. He encouraged adoption of the policy suggested by the bill, as well as the definitions, in order to give guidance to the court, the commissioner, and the commissioner's staff in processing and adjudicating applications. Number 0555 VICE CHAIR FATE asked whether anyone else wished to testify; there was no response. REPRESENTATIVE OGAN remarked that the bill has some of the most common-sense, unambiguous language he has seen. He suggested it is timely and that it should be moved from committee. Number 0641 REPRESENTATIVE DYSON made a motion to move CSSB 121(RES) from committee with individual recommendations and the zero fiscal note. There being no objection, CSSB 121(RES) was moved out of the House Special Committee on Oil and Gas.