HB 4-ALASKA GASLINE DEVELOPMENT CORP; RCA 3:40:16 PM CO-CHAIR FEIGE announced that the next order of business would be SPONSOR SUBSTITUTE FOR HOUSE BILL NO. 4, "An Act relating to the Alaska Gasline Development Corporation; making the Alaska Gasline Development Corporation, a subsidiary of the Alaska Housing Finance Corporation, an independent public corporation of the state; establishing and relating to the in-state natural gas pipeline fund; making certain information provided to or by the Alaska Gasline Development Corporation and its subsidiaries exempt from inspection as a public record; relating to the Joint In-State Gasline Development Team; relating to the Alaska Housing Finance Corporation; relating to the price of the state's royalty gas for certain contracts; relating to judicial review of a right-of-way lease or an action or decision related to the development or construction of an oil or gas pipeline on state land; relating to the lease of a right-of-way for a gas pipeline transportation corridor, including a corridor for a natural gas pipeline that is a contract carrier; relating to the cost of natural resources, permits, and leases provided to the Alaska Gasline Development Corporation; relating to procurement by the Alaska Gasline Development Corporation; relating to the review by the Regulatory Commission of Alaska of natural gas transportation contracts; relating to the regulation by the Regulatory Commission of Alaska of an in-state natural gas pipeline project developed by the Alaska Gasline Development Corporation; relating to the regulation by the Regulatory Commission of Alaska of an in-state natural gas pipeline that provides transportation by contract carriage; relating to the Alaska Natural Gas Development Authority; relating to the procurement of certain services by the Alaska Natural Gas Development Authority; exempting property of a project developed by the Alaska Gasline Development Corporation from property taxes before the commencement of commercial operations; and providing for an effective date." CO-CHAIR FEIGE opened public testimony on HB 4. 3:40:37 PM TERRY HINMAN, Community Advisory Committee for Alaska Stand Alone Pipeline (ASAP), paraphrased from a prepared statement [Included in members' packets]: I live north of Healy in the Denali Borough and represent Denali Borough on the ASAP Community Advisory Committee. My time and my expenses are borne by myself. I'm not funded by any entity or any affiliation. I believe the Alaskan "Resident" pipeline is at this time the only real pipeline project with tangible substantial assets including route, right of way, and environmental impact study. Further, I feel we are at a critical time with energy costs, certainly in the Interior, and depending on the discovery and development of more gas in SouthCentral and the Cook Inlet Basin, potentially all of Alaska is at risk for excessive energy costs. I believe the Alaska Stand Alone Pipeline project offers a long term, approximately 100 years, of solution for the largest number of Alaskans. True, the pipeline itself would traverse a relatively small portion of the state, but the pipeline would serve a large population. Also, with the lean gas scenario, which is now proposed for the Stand Alone Pipeline, which includes methane and propane, so the ability to deliver propane at a much lower cost via the river system, highway system, and ocean exists. Additionally, the ability to generate much lower cost electricity delivered via the grid. The energy situation in the Interior is critical. Some small businesses have closed due to excessive costs and more may also. Personally, I have seen my energy costs soar to the point I have to make a decision on how long I can afford to live here. I am retired so I live on a fixed income, yet with increasing light and heat costs I am at the juncture to go back to work or leave where I live. I'm fortunate that physically I can go back to work, for others that is not an option. Many who watch their savings and finances erode at an increasing rate just to stay warm are at the breaking point. When staying or leaving becomes solely cost driven with the largest expense being energy the math and decision become obvious. To some the loss of retirees or other residents is of little consequence however more than the impact of the loss of a participant in the economy is the loss of the skill, knowledge, wisdom, and experience. The greatest loss is the hours of volunteering. HB 4 is a huge step in taking action to move forward with an energy plan. 3:46:30 PM REPRESENTATIVE SEATON emphasized that the State of Alaska did, indeed, consider that seniors, and others, were valuable to the state. MR. HINMAN clarified that it was difficult to place a value on those contributions to the communities and the state. He stated that there were many people who had to consider departure from Alaska because of the high cost of living. 3:48:23 PM BILL SHEFFIELD declared that he was in support of the in-state gas line, and that he had spoken to many groups throughout the state in promotion of the gas line. He stated that it was important to Alaska and Alaskans. He reported that Alaska had been granted statehood more than 50 years ago because the state had resources to "take care of ourselves, and it's time we started to do it." He pointed to the importance of gas, and noted that Anchorage was "running out of gas." He listed some large businesses that had a shortage of gas, and shared the importance to the railroad of gas shipment on it. He suggested that more jobs would be created with manufacturing expansion, instead of shipping out gas. He announced that it was important to Alaskans, and that the legislature should appropriate the necessary $320 million for the Alaska Gasline Development Corporation (AGDC), in order to move into the open season, at which point the questions would be answered. He opined that this commitment would result in a contract by 2016, with gas in Fairbanks by 2019. He stated that gas could be trucked, and propane could be made available on the river systems. He urged moving forward to get AGDC into the open season. 3:52:50 PM KEN HALL declared that this was a tremendous opportunity for the gas line to move forward, and that proposed HB 4 was an improvement over previous proposals. He stated that it would be a travesty to not allow this to move forward, as it provided an opportunity to get gas into Fairbanks and develop businesses. He offered his belief that the legislature had concerns for the amount of control to relinquish to the AGDC, and recommended that AGDC be run as a state operated corporation, similar to Alaska Housing Finance Corporation (AHFC). He opined that it would then run more smoothly. He expressed support for proposed HB 4, as it benefitted all Alaskans. 3:55:51 PM WILLIAM WARREN stated that the past failure to bring natural gas to Alaskans had resulted in a "full blown crisis, not just a tough spot, but a crisis." He declared that he would need to import gas to run his ranch. He pointed out that the Cook Inlet natural gas supply was still an unknown. He listed the previous advocates and programs for a gas pipeline. He stated, "this is our way out." He announced that it was necessary to move to open season in order to better "know what we have" and that he supported a high pressure pipeline to transport the natural gas liquids (NGLs). He acknowledged his support for other forms of energy, including tidal and wind tunnels, but emphasized that it was now necessary to move forward with this program. He endorsed the proposed bill. 4:00:43 PM RON LONG, Assistant City Manager, City of Seward, shared that he was also a member of the Community Advisory Committee for Alaska Stand Alone Pipeline (ASAP). He affirmed that Seward did not have natural gas, and that home heating costs were very high, often higher than a mortgage payment. He reflected that, although ASAP would not immediately bring gas to Seward, it would keep electricity costs from increasing so dramatically. He surmised that this project was "not incompatible with the governor's big line proposal... nor was it incompatible or a disincentive to the folks that are doing some pretty exciting things in Cook Inlet." He opined that this was the only solution for bringing Alaska gas to Alaskans first. He urged that this pipeline project be moved along toward an open season as expeditiously as can responsibly be done. He declared that many challenges existed to obtain low cost energy and prevent cost increases. 4:03:43 PM JIM PLAQUET, Alaska Industry Support Alliance, declared that "Alaska needs energy and HB 4 provides the Alaska Gasline Development Corporation to serve as Alaska's natural gas pipeline corporation, giving Alaskans the needed energy they need for space heating and economic survival." He cited that the proposed bill would direct AGDC to carry 500 million cubic feet of gas per day, at the lowest possible cost, from the North Slope to Fairbanks and SouthCentral Alaska. He commented that proposed HB 4 would also consider other in-state gas pipeline projects, as well as participation in a larger pipeline to tidewater with a liquid natural gas export component. He detailed that the proposed bill would avoid duplication of state efforts and spending, while calling on state and local agencies to assist and share information. He expressed that this legislation would reduce the rates paid for gas. He reported that proposed HB 4 would waive property taxes during pipeline construction, requiring that local resources be made available at usual rates, and not rolled into the costs Alaskans would pay for the gas. He summarized that proposed HB 4 was the vehicle to supply the energy needs for Alaskans. 4:06:42 PM RICK ROGERS, Executive Director, Resource Development Council, pointed out that the Resource Development Council (RDC) was a statewide business association which represented the forestry, oil and gas, mining, tourism, and fishing industries, with a mission to grow Alaska's economy through responsible resource development. He affirmed that RDC supported proposed HB 4, and he reflected on the diversity of RDC, in order to appreciate the significance of its support. He explained that RDC represented the producers of energy resources, and included development and exploration companies of all sizes. He noted that RDC also represented rural, urban, commercial, and residential energy consumers. He reported that RDC closely reviewed proposed HB 4, to ensure that the bill "did not pit one energy resource against the other." He established that the best energy solutions for Alaskans were the ones that provided the best value for consumers, and balanced low cost with reliability over the long term. He offered that the "invisible hand of the free market" would result in the best energy solutions for Alaskans. He indicated that the proposed bill would supply the necessary organization structure, tools, and resources to advance an in- state gas project to an open season. He declared that the open season would allow a project to succeed or fail on its economic merits. He expressed hope for a large diameter pipeline to tidewater, which would render the stand-alone gas pipeline unnecessary. He noted that proposed HB 4 would then allow AGDC to assist with expansion of intrastate gas transportation. He suggested that the AGDC enabling legislation be modified to consider sunset language should its mission become obsolete. He ascertained that the project viability would be uncertain until it reached an open season. He observed that the deliverance of reliable and cost effective energy to Alaskans was critical to future prosperity, and he declared support for the proposed bill. He referenced a letter of support from RDC, dated February 1, 2013 [Included in members' packets.] 4:10:44 PM ALAN LEMASTER reported that his business operations costs had increased every year, "most of which can be directly attributed to the ever increasing cost of energy, both heating oil and electrical power." He described the ad hoc organization, the Alaska Natural Gas Pipeline Coalition, which had formed to bring to the attention of the legislature that the best route for providing the lowest cost energy to most Alaskans was the Trans- Alaska Pipeline System (TAPS) along the Richardson Highway corridor. He listed the members of this coalition to include the Cities of Valdez, Delta Junction, North Pole, and Fairbanks, as well as the North Star Borough, Copper Valley Chamber of Commerce, Copper Valley Electric Association, the Alaska Municipal League, and the Copper Valley Development Association. Each member had written a resolution which stated support for an All Alaska Natural Gas Pipeline from the North Slope to Valdez, with a spur line to Anchorage, to supply 80 percent of the population of Alaska with low cost energy. He declared that it would be necessary to export a significant amount of the natural gas in order to make the project economical. He opined that these profits could exceed the value of the Permanent Fund. He endorsed continued opposition to any efforts for developing a natural gas line along the Parks Highway corridor, and stated support for the route along the aforementioned Richardson Highway corridor. 4:13:46 PM REPRESENTATIVE SEATON requested copies of the aforementioned resolutions. MR. LEMASTER agreed to send in the resolutions. 4:14:57 PM JASON HOKE, Executive Director, Copper Valley Development Association, declared that the proposed bill would advance Alaska, and was the first in many incremental steps to move all the regions of the state into development and prosperity. He clarified that the Copper Valley Development Association was in support of an in-state gas pipeline, and "we are agnostic about placement." He suggested that this "is the first domino for the state that will set off a bunch of other energy solutions for Rural Alaska." He declared support for proposed HB 4, suggesting that it was time for "getting something done; I think we all need to stop bickering about who controls what and where it's gonna go, and let's just get 'er done." 4:16:43 PM MERRICK PIERCE declared that "the bullet line is an uneconomic boondoggle. The project does not have economy of scale and seeks to convey gas to a region of Alaska that has a 200 year gas supply." He pointed to the abundance of dry natural gas, 19 trillion cubic feet in Cook Inlet, as estimated by scientists at US Geological Survey (USGS) and the Department of Energy, which was perfect for home heating and electrical generation. Based upon the use of 240 million cubic feet of use per day, this would last for more than 200 years. He compared the PFC Energy capital expenditure estimate of $2 billion over ten years for drilling out Cook Inlet with a high end cost estimate for the bullet line of $10 billion. He reported that a bullet line supplying 500 million cubic feet of gas per day would envision no more natural gas from Cook Inlet, and that in-state gas consumption would double in the near future, which he stated was "ridiculous." He shared that the AGDC had privately stated it would export any surplus gas, but he pointed out that the Henry Hub price for gas was very low. He declared that money should not be wasted on this project as it was "patently uneconomic," and, instead, focus on a short term solution for Fairbanks, which was to pipe natural gas from Big Lake and an existing Enstar pipeline with unused capacity. Using a publicly owned right of way traded by AGDC from Big Lake, a pipeline could be built within a year for $200 million, which was half the cost the proposed bill was seeking solely for studies. He spoke about a big pipeline, and noted that there were almost 19 LNG export projects in North America either under review or under construction, which would compete with Alaska. He declared that the key to success were a pipeline and tankers big enough to have economy of scale. He explained that the deep water, ice- free Port of Valdez had the existing infrastructure. He opined that it was better to invest in an All-Alaska gas line, if the 20 year LNG contracts could be secured. He summarized that, instead of spending the money from proposed HB 4, the same amount of money should be used to build the aforementioned small bore pipeline from Big Lake to Fairbanks, while a large pipeline should also be started so that Alaska did not lose the world market contracts. 4:21:20 PM BILL WALKER explained that proposed HB 4 had morphed into a $7 - $10 billion, 36 inch mega-project, which would be the largest pipeline project built in America. He reported that it was estimated to take 10 years to build, but that Fairbanks needed gas much sooner. He declared the need for a more efficient, quicker project and referred to an earlier study which projected the cost for LNG to Cook Inlet to be about $80 million, and completed within 18 months. Mr. Walker expressed his concern that an earlier open season on September 14, 2012 had not generated any response [from the legislature], as there had been a focus, instead, on the proposed HB 4 project. He suggested that more immediate options for gas to Fairbanks from Cook Inlet were ready to move forward, and did not require $400 million of studies. He declared that a 10 year construction project did not resolve the immediate needs for Fairbanks or Cook Inlet. He asked that all other options be considered prior to funding another mega-project. [HB 4 was held over.]