SB 215-GASLINE DEV. CORP: IN-STATE GAS PIPELINE  3:36:13 PM CO-CHAIR PASKVAN announced consideration of SB 215 and opened public testimony. 3:37:08 PM BILL WARREN, representing his daughter who lived in Fairbanks, Kenai, AK, supported SB 215. He said Alaska is in an energy crisis while ExxonMobil is making a killing in Qatar. He said our number-one priority should be getting a 36 inch, 2.5 bcf gas line from the North Slope to Fairbanks and then have an open season and see what happens. They also need to run a 24 inch pipeline from Cook Inlet to Palmer and Glennallen to Fairbanks to catch all the military bases. "Then if miracles happen and we get a big line and it comes down to Valdez, they loop the 24 inch into the 36 inch and away we go." 3:42:15 PM MERRICK PEIRCE, Board Member, Alaska Gasline Port Authority (AGPA), North Pole, AK, said he was speaking on his own behalf in support of SB 215. He said the high cost of energy in the Interior was crippling the economy. He was "delighted" the sponsors of SB 215 recognized what the USGS scientists, the Department of Energy and those in industry were telling them: that Cook Inlet has as much as 24 tcf/gas, a 200 year supply for Alaskans. He offered four suggestions for their consideration as they develop this pipeline idea: look for redundancy, integration, greatest population served and a minimal return on equity. MR. PEIRCE said in considering a small diameter pipeline from Cook Inlet to Fairbanks it is important to route it through the correct corridor and the best one is from Palmer to Glennallen and Glennallen to Fairbanks. While it is longer by almost 100 miles, it serves a larger population with significant potential industrial usage for mining. A longer line does not necessarily mean more expensive gas. If the longer route serves a substantially larger population the cost of gas could even be less due to improved economies of scale. The military bases need affordable gas, too, and reducing their costs is very important Mr. Peirce said. For example, national missile defense at Fort Greely runs their power plant on expensive diesel fuel. MR. PEIRCE said because earthquakes, fires, floods and tsunamis all happen here, people need to think about how to build redundancy with the gas grid for the same reasons as the power grid. Being able to pull gas from Cook Inlet, the Copper River Basin or the North Slope through an interconnected grid brings that redundancy. The Cook Inlet gasline can be integrated into the planning for the large diameter gasline, as well; the number of wet gas take off points can be reduced from the large line if the same populations are served through a gas-fed parallel spur line. This would significantly reduce the Capex for the large line gas take off points and if the infrastructure is provided to allow gas to move to Valdez from the spur line to Glennallen, this allows Cook Inlet drillers access to a deep water ice free port where people expect to have an economical LNG export facility. He said that ANGDA had already created a gasline corridor for a spur line to Glennallen and a final EIS was completed for the Yukon Pacific version of the all-Alaska gasline adjacent to the TAPS corridor, thus demonstrating that such a route is permit- able reducing permitting risk. Finally, he said to consider the benefits of little or no return on equity saying the state does not ask for return on equity with most public infrastructure like highways, airports and ports. They provide great public benefit. The same logic should apply to a gasline that serves Alaskans. 3:45:21 PM A good example of what they must not do is seen with HB 9 where the sponsors contemplated double digit return on about $3 billion in equity. With a 14 percent return, it would cost $420 million per year (built into the tariff) to support that equity return. With an out of state owner, the $420 million would be transferred per year out of the Alaskan economy. To provide a sense of scale, this amount of money represents about half of what is paid in annual Permanent Fund Dividends each year, and they have a positive impact on Alaskan economy. 3:46:09 PM JOMO STEWART, Fairbanks Economic Development Corporation (FEDC), Fairbanks, AK, supported SB 215. It would help address Fairbanks' energy cost issue as well as their PM2.5 issue. That support is qualified because they believe this is one portion of a multi-phased multi stage project that brings volume gas at an affordable price to not only to Fairbanks and the Interior, but hopefully kick starts broader energy distribution to the rest of the state. 3:48:20 PM CO-CHAIR PASKVAN, finding no further comments, closed public testimony and invited the bill sponsor forward. SENATOR MCGUIRE said she supported the concept in SB 215 and that there are no bad ideas when it comes to considering how to get energy to Fairbanks. Her only question was whether they should consider removing the word "construct" on lines 1 and 9 on page 2, because maybe they want to be cautious about how far they "push these guys" in AGDC with regard to the larger in- state line. She was worried that language said they have to construct it and maybe they should say they want them to study it and come back with a proposal. 3:50:06 PM SENATOR THOMAS, Alaska State Legislature, Juneau, AK, sponsor of SB 215, said the word "construct" was used to avoid the word "study," because they are studying that proposal right now. The AGIA proposal might be a little bit more in play and this is intended to make sure they are keeping on track. He didn't want people to think they are starting over with a new study. SENATOR MCGUIRE said she wanted to get that on the record and she agreed. SENATOR THOMAS said he appreciated the committee hearing the bill and had no additional comments. SENATOR FRENCH thanked him for this bill and noted that three Anchorage Senators had signed onto this bill primarily because it gets gas to Fairbanks as fast as possible. CO-CHAIR WAGONER said he was going to vote to pass SB 215 from the committee, but it's a question about knowing exactly how much reserves Cook Inlet has to develop and send to Fairbanks. This is a little premature, but he also saw the pain on peoples' face in Fairbanks. SENATOR THOMAS said everyone realizes that the resource has to be proved up before moving forward. 3:53:52 PM SENATOR WIELECHOWSKI said they think there is enough gas in Cook Inlet to power the state for 200 years, and it's a lot cheaper than bringing gas down from the North Slope, because you don't need a conditioning plant or to go over tough terrain and the Brooks Range. It also has a railroad for transporting goods. But this is also good for Anchorage and Southcentral, Senator Wielechowski said, because it will spur more exploration. Over the years they have heard that the problem with Cook Inlet is if you find gas there you have nowhere to sell it. If the line is built to Fairbanks, they now have a market to Fairbanks, but it also connects to the big line that is showing some promise of being built. On the other hand, if it does turn out that Cook Inlet has problems, and they do get a big line, they would have a spur line into Anchorage and Southcentral. This is a win/win for Southcentral, the Interior and for Fairbanks as well as for more exploration in Cook Inlet. CO-CHAIR PASKVAN echoed the sentiments and added that as a matter of state policy, having a singular energy system from the Kenai through Southcentral to Interior Alaska makes a lot of sense. 3:56:04 PM CO-CHAIR WAGONER moved to report SB 215, version \M, from committee with individual recommendations and forthcoming fiscal note. There were no objections and it SB 215 moved from the Senate Resources Standing Committee.