SENATE BILL NO. 140 "An Act creating the Arctic infrastructure development program and fund in the Alaska Industrial Development and Export Authority." 10:30:53 AM SENATOR LESIL MCGUIRE, introduced SB 140 and related that the bill was a result of work that had been done by the Alaska Arctic Policy Commission. She relayed some background on the make-up and duties of the commission. She shared that over the course of one year the commission had compiled a preliminary report, which could be found at akarctic.com. The bill would develop and contrive a funding and implementation mechanism for constructing and maintaining Arctic infrastructure and economic development. She asserted that the Alaskan Arctic was one of the least developed areas of the state, yet one of the most open and ready for opportunity. The intent of the legislation was to develop the vision statements, policy statement and strategic recommendations of the Alaska Arctic Policy Commission. She contended that Arctic policy was part of a global discussion and that the state was behind the other seven Arctic Nations when it came to infrastructure development. She relayed that Alaska has the longest coastline in the United States; Alaska's Arctic coastline extends from the Northeastern Canadian border, west across the Arctic Ocean, and south covering western Alaska, then 1500 miles down to the Aleutian Chain. She stated that within the entire coastline the only deep draft port was in Dutch Harbor. She lamented that the lack of infrastructure in Unalaska limited any support for new traffic coming from the Northwest Passage. She added that telecommunications, emergency and spill response, search and rescue, national defense and other critical needs were all addressed within the legislation. Senator McGuire proclaimed that Alaska was blessed with untold natural resource wealth in the Arctic that would provide opportunity for future generations, but nothing could be done without sufficient infrastructure. She shared that there was an estimated $100 billion in private funding that was waiting to be invested in the Arctic, which was considered to be one of the last great economic global opportunities. 10:38:07 AM Senator McGuire provided a further sponsor statement: Globally, all eyes are on the Arctic. The World Economic Forum has recently identified Arctic Infrastructure development as one of the top Four (4) challenges facing the regions. Alaska's future is in the Arctic, and in order for Alaskans to capitalize on the incredible opportunities and overcome the significant challenges that this region presents, we must begin to build infrastructure now. Aside from a few areas in Norway and the Russian Federation the Arctic as a whole remains vastly underserved by transportation, ports, communication, emergency response, defense and other critical infrastructure. For further development to occur, which Alaskans deserve, both public and private interests must come together to boost the investment in the Arctic. For these reasons I have introduced Senate Bill 140, Arctic Infrastructure Development Fund ("AIDF"). The CS SB 140 (L&C) expands AIDEA's tool bag by extending the same authority for loans, loan guarantees, bonds and bond guarantees that it currently utilizes in the energy sector via the SETS fund (AS 44.88.650- 690) in order to develop Infrastructure in the Arctic. AIDEA used SETS to facilitate the financing of the Interior Energy Project. This tool helps to create the public- private partnerships that are needed to encourage large investment in capital intensive infrastructure. CS SB 140 (L&C) extends AIDEA's existing power to finance, or facilitate the financing of projects to the realm of Arctic Infrastructure by granting the Authority the ability to: 1. Insure project obligations and guarantee loans or bonds for projects. 2. Defer principle payments and capitalize interest. 3. Offer financing terms of up to 40 years. 4. Enter into lease agreements, sales-lease-back agreements, build-operate-transfer agreements and other agreements to finance Arctic infrastructure projects. 5. Finance certain aspects of Fisheries in the Arctic. Many of these powers already provide flexible terms that can reduce the ultimate cost of energy (via the SETS program) to consumers, and if it can work in the energy realm, it can work for infrastructure. However, CSSB 140 (L&C) also requires legislative approval for investments that are more than one-third of a project's capital costs or if a loan guarantee exceeds $20 Million. By subjecting certain investments to legislative approval, CSSB 140 (L&C) maintains an appropriate level of due diligence for projects. By making financing available we can empower communities and attract a global pool of investment that is an alternative to the traditional grant model that too often underfunds projects and leads to delays. Relying on credit also ensures that sponsors have some skin in the game and a stake in the project's success. Most importantly, we expand the arena of where Alaskan assets are working in order to grow our own economy. Currently, many of Alaska's savings accounts are invested in stocks and bonds that drive economic activity outside of Alaska. CSSB 140(L&C) suggests instead that some of those savings be invested here in Alaska through AIDEA, not as blank checks for development, but as investments for our future in Arctic Infrastructure. For the purposes of this Act, I propose that this program and fund focus infrastructure development in the geographical definition of the Arctic as laid out in Arctic Research and Policy Act (amended 1990). That definition includes the area of the State of Alaska north of the Arctic Circle, north and west of the boundary formed by the Porcupine, Yukon, and Kuskokwim Rivers, all contiguous seas, including the Arctic Ocean, and the Beaufort, Bering, and Chukchi Seas, and the Aleutian chain. With AIDF I am proposing that the State expand AIDEA's existing authority to finance, or facilitate the financing of, Arctic Infrastructure. 10:43:01 AM Senator McGuire asserted that it would be irresponsible to ignore the obligation of the state to develop infrastructure in the Arctic. 10:43:41 AM Co-Chair Meyer requested that the sponsor list any sideboards that had been written into the bill. 10:44:02 AM JESSE LOGAN, STAFF, SENATOR LESIL MCGUIRE, offered a sectional analysis (copy on file): Section 1. AS 44.88.088(a) is amended o This section establishes that the Alaska Industrial Development and Export Authority (AIDEA) shall adopt a policy for payment of a dividend from the Arctic infrastructure development fund (AS 44.88.810) to the state each fiscal year. o The dividend may not be less than 25% nor more than 50% of the net income of the fund. o This puts the AIDF in-line with AIDEA's sustainable energy transmission and supply development fund (SETS) (AS 44.88.660). Section 2. AS 44.88.088(b)(2) is amended o This section defines "net income" for the purposes of this chapter. o The definition now includes the AIDF. Section 3. AS 44.88.088(b)(3) is amended