SB 215-GASLINE DEV. CORP: IN-STATE GAS PIPELINE  3:53:34 PM CO-CHAIR PASKVAN announced consideration of SB 215 and that the committee had invited testimony. 3:54:51 PM CARL HANNEMAN, International Tower Hill Mines, Fairbanks, AK, thanked the committee for the opportunity to offer their comments in support of their efforts to bring more cost effective energy to the Interior as soon as possible. He said that Tower Hill Mines is new and is conducting a feasibility study on the potential development of the Livengood Gold project located by paved highway 70 miles north of Fairbanks. With a gold resource of over 20 million ounces, he said this project is ranked in the top tier of undeveloped gold deposits in the world. The project is planned as a large surface mine with a capital investment in excess of $1.6 billion, a mine life of 23 years, over 1,000 jobs during construction and approximately 500 long term jobs for generations of Alaskans. MR. HANNEMAN said they didn't have enough of the facts to be able to choose between specific projects or legislation, but he said they support the work legislators are going to bring real solutions to the high cost of energy in Interior Alaska. Tower Hill had been working with the Fairbanks Chamber of Commerce to develop a unified position that recognizes the need for both short-term and long-term solutions, and resolution of those challenges could make a meaningful difference to a long-term project like the one in Livengood. He said they believe the community could benefit from a short term project like natural gas trucking that could result in up to $40 million in annual energy savings and allow the community to begin preparing for a permanent natural gas pipeline project. The Healy Clean Coal project could create similar savings if it could ever come on line; it is now struggling through the permitting process. Mr. Hanneman said the community should aggressively support both of these projects, because they can provide real meaningful relief in the two-to-three year time period. MR. HANNEMAN said mid-term solutions are significant, too, and the gasline in SB 215 is one of those. They believe that tariffs could be adjusted and incorporated so that the Interior could achieve long-term fair pricing stability that would "open up" the community. In conclusion, he said they support the gasline proposals with the necessary engineering and environmental work on an expedited basis. The state should also continue to pursue the economic long-term energy solutions such as Susitna/Watana. All together the short-term, mid-term and long-term solutions could make a meaningful difference. 3:58:37 PM MICHAEL LAMB, CFO, Fairbanks Northstar Borough, Fairbanks, AK, said he was pleased to hear Mr. Hanneman's comments and that he also supported SB 215.{ When the gas pipeline gets built, it will actually allow for gas to flow in both directions, which is a long-term win-win conclusion. The cost of heating fuel is dramatic in the Interior and hundreds of millions of dollars leave the community because of it. This is the only project that is really doable in the near-term timeframe, and he would support it in any way he could. MR. LAMB said many discussions had taken place about how the cost of energy impacts the Department of Defense facilities and it has become even more critical in looking at what is happening to the federal budget. 4:02:21 PM CO-CHAIR WAGONER asked how the bases get their power now. MR. LAMB replied that they use coal generation, but a lot more was getting done by diesel. In addition, Fairbanks has issues with federal PM2.5 requirements and clean air. There are a lot of reasons that getting clean energy, including converting existing coal to natural gas, makes a lot of sense. CO-CHAIR WAGONER asked if the federal government is committed to taking the coal-fired generation of their power generation off line and installing gas generation or buying it from somewhere else in the immediate area. MR. LAMB replied that he couldn't speak for the federal government, but he understood that four power plants were in the process of being switched in Eielson and it looked like things in general were going in that direction. 4:05:17 PM At ease from 4:05 to 4:06 p.m. 4:06:47 PM GENE THERRIAULT, Vice President, Resource Development and External Affairs, Golden Valley Electric Association (GVEA), Fairbanks, AK, supported SB 215 and said as a large industrial consumer, they are anxiously watching proposals that can deliver gas to the Interior. He said GVEA provides electric service to 44,000 individual customer accounts in Interior Alaska going from Fairbanks to Fort Greely on the Richardson Highway and Fairbanks to Cantwell on the Parks Highway, an area that is home to approximately 100,000 Alaskans. MR. THERRIAULT said they are also closely monitoring announcements regarding gas development in the Cook Inlet basin whose preliminary results have the potential to assist with the energy needs if surplus quantities of gas are available at an affordable price and for a long-enough period of time. If these parameters are met, GVEA would be very interested in switching as much of their oil fired generation as possible to natural gas. MR. THERRIAULT said to facilitate meeting that goal, GVEA supported state participation in the development of a pipeline system and an associated tariff structure that would assure Interior residents would be able to access the state natural gas resources. To that end, they support the efforts of Senator Joe Thomas on SB 215 and appreciated that the legislation proposes to use a portion of the right-of-way. To ensure that a pipeline will have the largest possible natural gas market to serve immediately upon completion, GVEA is currently working on a project to transport gas to the region via trailer. Such a project will allow industrial and residential use in the Interior to develop now, which will improve the economics of a future pipeline. While GVEA still believes that a large-volume pipeline may still be constructed to serve an export market under AGIA, it is prudent to undertake pipeline efforts that are focused on serving in-state needs. If the governor's request that North Slope producers align under a new effort to build a large pipeline to tidewater results in moving forward, the infrastructure proposed by SB 215 would be of tremendous value to continue serving in-state needs or to potentially transport Cook Inlet or Nenana Basin gas to the export line. In closing, he said that GVEA believed that pipeline infrastructure supported by SB 215 will be important infrastructure no matter how natural gas ultimately gets developed across the state. As a result, they encourage the passage of SB 215 from the committee today so that the matter may be considered by the Senate Finance Committee. 4:10:22 PM CO-CHAIR PASKVAN asked what the potential for gas would mean to GVEA in providing power to the Tower Hill Mine, Pogo or some other major development in the Interior. MR. TERRIAULT answered because of some work they have already done on trucking, GVEA knew if a gas product were to be delivered to the turbine (a 12 bcf/plant that serves space heat and some industrial needs) in North Pole that the price of gas could be brought down to $8 to $10 and that would result in a an overall savings of $30-40 million to current customers. New generation might have to be brought on to serve a large new project like Tower Hill Mine, but the existing plant was designed specifically to be able to double its capacity. He explained that it is basically a large aircraft engine with a heat capture unit on the back end that generates steam that in turn generates additional electricity. This backend unit was oversized so that an additional jet engine, basically, could be added to that facility; gas could fire it, too. The potential savings, even though the plant would have to be upsized for a 100 megawatt mine coming on line, but they would hopefully still be able to continue those savings. CO-CHAIR PASKVAN thanked him and went to the invited testimony saying they would have public hearings on SB 215 on Monday. 4:13:23 PM FRED PARADY, Executive Director, Alaska Miners Association, Barrow, AK, said SB 215 could bring gas to the Interior market sooner than any other line. He said the association was established in 1939 to represent the mining industry in Alaska and they are composed of more than 1,400 individual prospectors, geologists, engineers, vendors, suction dredge miners, small family mines, junior mining companies and major mining companies. They produce gold, silver, platinum, diamonds, lead, zinc, copper, coal, limestone, sand and gravel, crushed stone, armor rock and other materials who work throughout the state in each of their legislative districts. Based on the potential new finds showing up to 19 tcf/gas modeled by the USGS, Mr. Parady said that SB 215 could bring gas to the Interior sooner than any other line. It has the clear advantage of 305 miles versus 737 miles for the ASAP line. Because it's a shorter distance, the construction timeline is shorter, too. It's cheaper to build, has better access to transportation, supplies, infrastructure like railroads and housing, and well-maintained roads. He said that many mines along the way - Donlin and International Tower Hill - would have access to gas sooner. The operating life of Pogo and Fort Knox could be extended with more affordable energy on the GVEA grid. MR. PARADY said that creating a larger market for Cook Inlet gas would incentivize development and increase the economic viability of bringing new finds on line. SB 215 helps to create this larger market and it works with any pipeline being discussed today and is not an either/or situation. Coming from another western mining state, he could say that Alaska is resource rich and infrastructure poor and they should load as many options into the legislative pipeline as possible. CO-CHAIR PASKVAN announced that Senator Thomas, sponsor of SB 215, was in attendance. 4:17:22 PM JERRY CLEWORTH, Mayor, City of Fairbanks, Fairbanks, AK, said he was encouraged by all of their efforts including the ones in SB 215. Everyone realizes there is a crisis in Interior Alaska and the Bush community in terms of staggering fuel costs that take any wealth out of it. If they are ever going to be compliant with the PM2.5 (particle pollution) requirement, it will probably be gas that will do it for them and they are working on getting the distribution system in place. CO-CHAIR WAGONER asked if he was talking about the distribution system for just Fairbanks or the whole geographic area. MAYOR CLEWORTH replied that the original distribution study broke it down into the urbanized area where it would be simpler to put down lines and the more questionable areas for private companies. They want to get it to the most homes possible. The Fairbanks Economic Development Corporation (FEDC) is spearheading that along with the borough. 4:20:54 PM BILL WALKER, Attorney, Walker & Levesque, representing the Alaska Gasline Port Authority (AGPA), Anchorage, AK, brought their attention to a big book he brought saying it was Volume 1 of two volumes of gasline announcements that have happened since 1987. Thinking about gas going north from Cook Inlet is the same thought process as going south from Prudhoe Bay; everyone agrees the best way to get more oil in the pipeline is to have a gasline coming south. The same can be true for a Cook Inlet line going north. A bigger market will work for either route, and if you're looking for oil you can find oil or gas or both. He related that the president of Buccaneer said Alaska is the best place in the world to do business. He was very aggressive about what was going to happen in Cook Inlet and the market opportunities there were good for everybody. The obvious positive for gas going from south to north was no need for gas conditioning facility because gas is dryer. He said they might want to consider a different route going north. Some time ago, the Fairbanks Economic Development Corporation did an analysis of the Parks Highway v. the Richardson Highway and found a significant difference in the population of the two; about 10,000 going north on the Parks and about 18,000 going by way of Glennallen. But the analysis didn't anticipate that Glennallen was the power generation hub for that region and already had a transmission line between it and Valdez. Power could be pushed through it into the Alyeska Marine Terminal where they preferred using electricity for unloading the tankers to using heavy sulfur diesel. MR. WALKER said he found the Mining Association's conclusion interesting in comparing the developable resources going up the Parks v. the Richardson and concluded that the difference was that the Richardson route would have between 53 million and 30 billion more resources available for development. He applauded their efforts to get gas north sooner rather than later. He concluded by saying that even though this route is about 100 miles longer, it would deliver more bang for the buck and bring energy to another 10 or 15,000 people in homes that are having a tough time surviving. 4:26:07 PM He also had Yukon Pacific Corporation's final environmental impact statement (EIS) for the Richardson Highway with him, one of about 12 permits they had received. The military bases were important pieces and Ahtna had conducted about $20 million worth of gas exploration in the Copper River Basin. This line would provide an opportunity for an outlet for their gas finds. CO-CHAIR PASKVAN thanked him and said that concluded invited testimony. He asked Senator Thomas if he had any remarks. 4:27:47 PM SENATOR JOE THOMAS, sponsor of SB 215, Alaska State Legislature, Juneau, AK, said he didn't prepare comments, but wanted to say that gas pipelines had been talked about for a long time and it was hard to believe that one of them hadn't happened yet, because it would provide so many benefits to the Interior. He thanked them for taking public testimony today and he looked forward to answering any questions now and into the future. CO-CHAIR PASKVAN said the USGS announced a likely discoverable 19 tcf/gas in Cook Inlet and that created the potential for serious consideration of this line along with not needing a gas treatment facility. This line could also serve as a lateral for a large diameter line because the gas can flow either way in the pipeline. [SB 215 was held in committee.]