HOUSE SPECIAL COMMITTEE ON OIL AND GAS January 27, 2000 11:20 a.m. COMMITTEE CALENDAR PRESENTATION: Alaska Gasline Port Authority Plans for Commercialization of Alaska North Slope Gas TAPE 00-6, SIDES A AND B CALL TO ORDER Representative Whitaker, Chairman, re-convened the House Special Committee on Oil and Gas meeting at 11:20 a.m. [This meeting was the second of three held on the same date. This second meeting was a continuation of the one scheduled for 10:00 a.m., and was further continued to 1 p.m.] PRESENT Committee members present at the call to order were Representatives Dyson, Phillips, Green, Harris, Porter, Kemplen, Smalley, and Whitaker. SUMMARY OF INFORMATION CHAIRMAN WHITAKER introduced three spokesmen for the Alaska Gasline Port Authority: Brent Schirfey of Bechtel, Inc.; Dave Cobb, Mayor of Valdez; and Hank Hove, Mayor of Fairbanks North Star Borough. HANK HOVE, Mayor, Fairbanks North Star Borough, narrated a visual presentation, "Alaska LNG Gasline Project, Overview and Benefits." In that presentation, he said: The project involves treating and transporting natural gas via pipeline from Prudhoe Bay to Valdez, essentially paralleling the Trans Alaska Pipeline System (TAPS). Plans call for converting the gas to liquid natural gas (LNG) at a site near Valdez, and shipment of LNG to Far East markets. Facilities will include a gas conditioning plant at Prudhoe Bay, an 800-mile pipeline with the capacity to carry up to four billion cubic feet of gas per day, and an LNG plant at Valdez to chill the gas to a liquid. Technical and environmental challenges include: (1) building and operating in a harsh, cold-weather environment, including areas of permafrost; (2) transporting chilled gas at high pressure in a long pipeline; (3) preserving sensitive fish and wildlife habitats; (4) minimizing impact on the ongoing operation of TAPS; and (5) minimizing impact on existing Prudhoe Bay operations. Numerous studies over the past 20 years attempted to define, design, market and fund an Alaska natural gas project. A project driven by energy market conditions has not promised sufficient financial returns to private enterprise. That has led to the innovative and creative public/private imitative that the Port Authority is bringing to the table at this time. Factors that make this project different from other proposals include: (1) the substantial fiscal advantage of the Alaska Gasline Port Authority; (2) the Port Authority focus on a single project; (3) regulatory efficiency; (4) cost-effective technology; (5) project economics; and (6) speed of development. Benefits to Alaskans will include: (1) lowered power and heating costs from natural gas; (2) new energy supplies to stimulate business development statewide; (3) potential for a spur line to Cook Inlet, providing more gas for consumers there and for gas-intensive industrial development; and (4) assurance of long-term gas availability. During construction, the project will create more than 10,000 construction jobs and contribute $2-3 billion to the Alaskan economy. Once in operation, it will provide 400 jobs, inject more than a $100 million per year into the Alaskan economy, improve the national balance of payments, and contribute significantly to state revenues. It will improve air quality and is designed as an exemplary environmental project and for utmost safety. North Slope producers will benefit from having to make little or no capital investment, from significant revenues generated by the sale of gas, and from increased field life and rates of recovery. Current activities of the Port Authority include initiating gas marketing activities in the Far East and applying for an Internal Revenue Service ruling to exempt the Port Authority from federal income taxes. BRENT SHIRFEY, Bechtel, Inc., continued the presentation, addressing technical aspects of the gas pipeline project, including a review of the regulatory and environmental permitting and approval process. He also discussed: (1) design of gas processing, pipeline, and LNG facilities; (2) plans for procurement, transportation, and delivery of material; (3) the project construction plan and schedule, including environmental monitoring; (4) labor and skills training requirements; (5) planning for operation and maintenance; (6) estimates of capital cost and of operating and maintenance expenses; (7) economic modeling and feasibility; (8) commercial structuring; (9) preliminary financing; and (10) plans for assessing and mitigating risks. JIM WEEKS, a consultant for the Port Authority, then was introduced and joined the spokesmen for a question-and-answer period. Additional information provided in that session included: (1) the projected time for completion of permitting is two years, and (2) House Bill 290, "An Act relating to stranded gas pipeline carriers and to the intrastate regulation by the Regulatory Commission of Alaska of pipelines and pipeline facilities of stranded gas pipeline carriers," would have little or no effect on project plans. COMMITTEE ACTION The committee took no action. ADJOURNMENT The meeting recessed at 12:12 p.m. to convene again at 1 p.m. NOTE: The meeting was recorded and handwritten log notes were taken. A copy of the tape and log notes may be obtained by contacting the House Records Office at 129 6th Street, Suite 229, Juneau, Alaska 99801-2197, (907) 465-2214, and after adjournment of the second session of the Twenty-first Alaska State Legislature this information may be obtained by contacting the Legislative Reference Library at 129 6th Street, Suite 102, (907) 465-3808.