SJR 4-NATURAL GAS FOR STATE RESIDENTS    CHAIR ELLIS announced SJR 4 to be up for consideration. 1:44:57 PM SENATOR WIELECHOWSKI, sponsor of SJR 4, explained how the people of Southcentral Alaska have seen soaring heating costs in the past five years and there are about 340,000 Alaskans that use Cook Inlet gas to heat their homes from Fairbanks and Anchorage to the Kenai Peninsula. Since 2002 the prices of natural gas have increased 97 percent with a 30 percent increase this year alone. The average cost of heating a home has approximately doubled from about $750 five years ago to about $1,544 today. He said the increases have caused severe hardship especially to those on fixed incomes. Constituents are looking to the legislature to control the costs. The company that delivers gas to residents of Southcentral Alaska, Enstar Natural Gas Company, reports that its share of gas costs have declined. The big issue according to them is the cost at which they are securing gas from Cook Inlet producers because the Inlet's known gas supplies are being depleted. The DNR estimates there is approximately 1.7 tcf of gas reserves remaining out of about 8.8 tcf that have been discovered in the Inlet. At the same time the Southcentral businesses and residents are struggling to pay their soaring heating costs, the owners of the Kenai Liquefied Natural Gas Plant are applying for a two-year extension of their license to export natural gas to Japan. ConocoPhillips and Marathon currently export 1.3 metric tons of LNG or about 36 percent of the gas produced each year in the Inlet to Tokyo Japan for use by the Tokyo Electric Power Company and Tokyo Gas. SJR 4 calls on the Attorney General, in consultation with the Department of Natural Resources, to evaluate whether the extension of the export license is in the interests of local consumers in the state and whether the non-renewal of the license will result in lower prices for local businesses and residents. It also calls on the producers of natural gas in Cook Inlet to work with local utilities to provide more affordable gas for Alaskans. SENATOR WIELECHOWSKI said he has been told by several knowledgeable individuals that the cost of producing gas from Cook Inlet, particularly from the Legacy Fields, is less than $1 per mcf while Enstar consumers are paying $6. He has also heard, but cannot verify because the information is proprietary, that Tokyo utilities are paying roughly the same or less for their gas than local consumers despite the fact it has to add the cost of transportation over 6,600 nautical miles round trip to Japan and the cost of liquification and regasification to it. In a recent proposed contract between Marathon and Enstar, Enstar agreed to pay Marathon at a rate tied to the Henry Hub pricing point in Louisiana. Over the last two years the Henry Hub rate has averaged about $7.60. This rate spiked in 2005 because of Hurricane Katrina, so local consumers are paying high prices in part because of a hurricane that occurred thousands of miles away. The Henry Hub benchmark for pricing Cook Inlet gas is relatively new. Prior to 2004, the contracts relied primarily on the price of oil. Gas under these contracts cost Enstar significantly less than the Henry Hub rate. SENATOR WIELECHOWSKI said the intent of SJR 4 is to express the will of the legislature that producers offer terms as beneficial as possible to local consumers recognizing that natural gas sells on a world market and Alaska is competing in it for exploration dollars and that high prices may serve as an incentive for more exploration. 1:46:55 PM SENATOR WIELECHOWSKI said a first reasonable step is to evaluate whether continuing the export of Cook Inlet's gas is in the best interests of those who rely on it. The third thing SJR 4 does is it calls on the Regulatory Commission of Alaska to expedite review of any contract that will provide long-term affordable gas for Alaskans. He has heard from both the utilities and the producers that the timelines under which the RCA operates need to be tightened in the interests of everyone. 1:47:12 PM CHAIR ELLIS said he has heard the same from his constituents and he appreciated him addressing the issue. SENATOR BUNDE pointed out that people in the Cook Inlet have had below-market natural gas prices for a long time and going to market price would naturally be shocking because of that. He asked Senator Wielechowski if people realize that prohibiting commercialization of the gas will probably make the price go up even more and that commercialization of the gas allows a volume to be produced that reduces consumers' price overall. Household consumption would not use the large volume that would help amortize the cost of exploration. 1:48:51 PM SENATOR WIELECHOWSKI responded that he is just asking that the Attorney General consider whether it is in Southcentral's best interest to export 36 percent of its gas. SENATOR BUNDE said he hoped the Attorney General would consider that the resource belongs to the whole state, not just Southcentral and if the state's economy would be negatively impacted by subsidizing Southcentral. SENATOR WIELECHOWSKI replied that Cook Inlet supplies natural gas to 473,000 people, two-thirds of all Alaskans. 1:51:28 PM SENATOR STEVENS asked if Agrium's use is part of the 64 percent that remains in Alaska. He also didn't quite understand where the cost of gasification fit in with his comparison of the gas prices in Tokyo and Alaska. What happens to the gas that would make him think the cost would be higher? SENATOR WIELECHOWSKI replied that the percentages vary, but roughly 36 percent of the gas goes oversees; roughly 20 percent goes to Agrium; 36 percent to ConocoPhillips and Marathon; 16 percent goes to EnStar users, and varying percentages go to utilities. The vast majority is going to users in Kenai. He thought one of the reasons Tokyo users pay less is because they have a longer term contract, which is coming up for renewal. The price might go up then. But when all the costs of getting the gas up, liquification, regasification and transportation are factored in, the residents of Japan are paying roughly the same, if not less, than the residents of Southcentral are paying. 1:54:12 PM SENATOR STEVENS asked how many years he expected this to continue before the gas supply goes into decline. SENATOR WIELECHOWSKI replied that the 1.7 tcf of gas is estimated to last eight years at current use. While there is a dispute over how much gas Alaska has to fill its needs, Southcentral now doesn't have enough. Agrium cannot operate in the winter because a spike of natural gas is needed then for Enstar consumers and businesses. He stated: Some people say that we don't have a shortage. I guess I would like to point to the fact that we have consumers who aren't using as much gas as they would like to and I would also point to the fact that we've had increases of 97 percent - supply and demand. 1:55:42 PM CHAIR ELLIS asked for his suggested amendments. SENATOR WIELECHOWSKI responded that he has three amendments. AMENDMENT 1 On page 2, line 12: after "many benefits to the state," replace the existing clause with "the state must have as a priority the availability of affordable gas to meet the needs of its people." 1:56:48 PM SENATOR BUNDE asked if the state could subsidize the cost of gas for people in Southcentral, how would "affordable" be defined. SENATOR WIELECHOWSKI replied when people are making choices between paying rent, buying food or buying gas. He repeated that prices have increased 97 percent. CHAIR ELLIS asked Senator Wielechowski to think about this point for a CS and asked him to go on to the next amendments. SENATOR WIELECHOWSKI went on. AMENDMENT 2  On page 2, line 15: after "attorney general" add "in coordination with the Department of Natural Resources," AMENDMENT 3  On page 2, line 17: replace "termination" of the license with "non-renewal" of the license. 1:58:26 PM SENATOR BUNDE saw a potential financial penalty to the state from terminating someone's license and he also wanted to know if there would be possible litigation involved in non-renewal of a license. BARBARA WILLIAMS, Alaska Public Interest Research Group (AKPIRG), related how some families couldn't afford gas at all because they needed to eat. Some people who qualify for energy assistance aren't getting it because of the numbers of people who live in their households. Her own gas price has doubled. She concluded saying she wants affordable gas for all Alaskans. SENATOR BUNDE asked if natural gas should be added to welfare benefits. MS. WILLIAMS replied yes. 2:02:44 PM PAUL KENDALL, Anchorage resident representing himself, supported SJR 4. He advocated establishing an Energy Bill of Rights for single-family homeowners and residential dwellings stating the four essential needs: clean air, clean water, a balanced environment and energy. He said a raise in energy prices translates many times over into the prices people pay for the four essentials. He said they need a "true and actual impact cost accounting....at the wellhead of where that gas comes in at." He reasoned that public utilities were set up so that the public has to have some secure position beyond normal capitalism or free enterprise. MR. KENDALL suggested adding language saying that all information has to be made available to the general public. Now the companies say the information is proprietary and many companies have a history of manipulating the price for their own welfare. He also said he heard that a private company put in an offer to purchase Enstar and he thought allowing that would be a terrible mistake. When that happens a company can seal its records and you'll never get to distribution networks, points and profit additions without a major legal undertaking. He also said he wanted to know more about the hydrogen production and if it is being generated where it is sent. 2:09:34 PM SENATOR BUNDE said he didn't want Mr. Kendall to have any illusions that this is just a resolution and has no force of law. 2:10:06 PM PAT LUBY, Advocacy Director, AARP, said he has no expertise in gas issues, but if SJR 4 could help bring down heating costs for older and younger Alaskans, he would welcome it. He said the Enstar increase in January hit many of his members hard and it has additional increase proposals before the RCA at this time. He said that consumers in the Lower 48 often do pay more for their gas, but their constituents are unaware of that and don't care. They're worried about what they have to pay each month. Alaska has a means-tested welfare program that does include utilities called the Low Income Home Energy Assistance Program (LIHEAP) and both Senators have been very good about increasing the federal emergency funding for that in the past. CHAIR ELLIS held SJR 4 for a CS.