ALASKA STATE LEGISLATURE                                                                                  
                         JOINT MEETING                                                                                        
               HOUSE RESOURCES STANDING COMMITTEE                                                                             
               HOUSE SPECIAL COMMITTEE ON ENERGY                                                                              
                       Anchorage, Alaska                                                                                        
                         June 23, 2009                                                                                          
                           9:02 a.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
HOUSE RESOURCES                                                                                                                 
                                                                                                                                
 Representative Craig Johnson, Co-Chair                                                                                         
 Representative Bryce Edgmon                                                                                                    
 Representative Kurt Olson                                                                                                      
 Representative Paul Seaton (via teleconference)                                                                                
 Representative David Guttenberg (via teleconference)                                                                           
 Representative Scott Kawasaki                                                                                                  
 Representative Chris Tuck (via teleconference)                                                                                 
                                                                                                                                
HOUSE SPECIAL COMMITTEE ON ENERGY                                                                                               
                                                                                                                                
 Representative Bryce Edgmon, Co-Chair                                                                                          
 Representative Charisse Millett, Co-Chair                                                                                      
 Representative Nancy Dahlstrom                                                                                                 
 Representative Jay Ramras                                                                                                      
 Representative Pete Petersen                                                                                                   
 Representative Chris Tuck (via teleconference)                                                                                 
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
HOUSE RESOURCES                                                                                                                 
                                                                                                                                
 Representative Mark Neuman, Co-Chair                                                                                           
 Representative Peggy Wilson                                                                                                    
                                                                                                                                
HOUSE SPECIAL COMMITTEE ON ENERGY                                                                                               
                                                                                                                                
 Representative Kyle Johansen                                                                                                   
                                                                                                                                
OTHER LEGISLATORS PRESENT                                                                                                     
                                                                                                                                
Representative John Coghill                                                                                                     
Representative Mike Chenault                                                                                                    
Representative Lindsey Holmes                                                                                                   
Representative Harry Crawford                                                                                                   
Representative Bob Buch                                                                                                         
Representative Bob Herron                                                                                                       
Representative Mike Kelly (via teleconference)                                                                                  
Representative Mike Hawker                                                                                                      
Representative Bob Lynn                                                                                                         
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
OVERVIEW(S):  TRANSCANADA AND EXXONMOBIL PARTNERSHIP REGARDING                                                                  
THE AGIA NATURAL GAS PIPELINE                                                                                                   
                                                                                                                                
     - HEARD                                                                                                                    
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
No previous action to record                                                                                                    
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
TONY PALMER, Vice President                                                                                                     
Alaska Business Development                                                                                                     
TransCanada Alaska Company, LLC (TransCanada)                                                                                   
Calgary, Alberta Canada                                                                                                         
POSITION STATEMENT:  Testified as one of the presenters of the                                                                
overview regarding the natural gas pipeline under the Alaska Gas                                                                
Inducement Act (AGIA).                                                                                                          
                                                                                                                                
MARTIN MASSEY, U.S. Joint Interest Manager                                                                                      
ExxonMobil Production Company (ExxonMobil)                                                                                      
Houston, Texas                                                                                                                  
POSITION STATEMENT:  Testified as one of the presenters of the                                                                
overview regarding the natural gas pipeline under the AGIA.                                                                     
                                                                                                                                
PAT GALVIN, Commissioner                                                                                                        
Department of Revenue (DOR)                                                                                                     
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Provided testimony and answered questions                                                                
on the Denali Alaska Gas Pipeline project on behalf of DOR.                                                                     
                                                                                                                                
MARTY RUTHERFORD, Deputy Commissioner                                                                                           
Department of Natural Resources (DNR)                                                                                           
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Provided testimony and answered questions                                                                
on the Denali Alaska Gas Pipeline project on behalf of DOR.                                                                     
                                                                                                                                
BUD FACKRELL, President                                                                                                         
Denali-The Alaska Gas Pipeline (Denali)                                                                                         
Anchorage, Alaska                                                                                                               
POSITION  STATEMENT:   Testified  and answered  questions on  the                                                             
Denali Alaska Gas Pipeline project.                                                                                             
                                                                                                                                
CLAIRE  FITZPATRICK,  Senior   Vice  President,  Chief  Financial                                                               
Officer                                                                                                                         
BP Exploration (Alaska) Inc. (BP)                                                                                               
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Provided testimony and answered questions.                                                             
                                                                                                                                
WENDY KING, Director of External Strategies                                                                                     
ANS Gas Development Team                                                                                                        
ConocoPhillips Alaska, Inc.                                                                                                     
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Provided testimony and answered questions.                                                               
                                                                                                                                
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
9:02:56 AM                                                                                                                    
                                                                                                                                
CO-CHAIR  CRAIG JOHNSON  called the  joint meeting  of the  House                                                             
Resources Standing  Committee and the House  Special Committee on                                                               
Energy to order at  9:02 a.m.  Present at the  call to order from                                                               
the  House  Resources  Standing  Committee  were  Representatives                                                               
Johnson,   Olson,  Seaton   (via  teleconference),   Edgmon,  and                                                               
Kawasaki;  Representatives  Guttenberg (via  teleconference)  and                                                               
Tuck  (via   teleconference)  arrived  as  the   meeting  was  in                                                               
progress.   Present from  the House  Special Committee  on Energy                                                               
were  Representatives Edgmon,  Millet,  Dahlstrom, and  Peterson;                                                               
Representatives Ramras  and Tuck (via teleconference)  arrived as                                                               
the meeting was in progress.   Representatives Coghill, Chenault,                                                               
Holmes,    Crawford,    Buch,    Herron,   Lynn,    Kelly    (via                                                               
teleconference), and Hawker were also in attendance.                                                                            
                                                                                                                                
^Overview(s):   TransCanada and ExxonMobil  Partnership Regarding                                                             
the AGIA Natural Gas Pipeline                                                                                                 
                                                                                                                                
9:03:28 AM                                                                                                                    
                                                                                                                                
CO-CHAIR JOHNSON announced  that the only order of  business is a                                                               
presentation   regarding    the   TransCanada    and   ExxonMobil                                                               
partnership as  it relates to  the Alaska Gasline  Inducement Act                                                               
(AGIA) natural gas pipeline.                                                                                                    
                                                                                                                                
CO-CHAIR JOHNSON noted that  the presenters have confidentiality,                                                               
proprietary,  and regulatory  constraints, and  asked members  to                                                               
respect those constraints.                                                                                                      
                                                                                                                                
9:06:30 AM                                                                                                                    
                                                                                                                                
TONY  PALMER,   Vice  President,  Alaska   Business  Development,                                                               
TransCanada   Alaska  Company,   LLC  (TransCanada),   began  his                                                               
PowerPoint presentation by  explaining that ExxonMobil Production                                                               
Company (ExxonMobil) is actively  participating in the joint AGIA                                                               
project;  that  the  joint  project team  is  separate  from  and                                                               
independent  of ExxonMobil's  producing and  marketing interests;                                                               
and  that  the  lead  manager  for  the  project,  an  ExxonMobil                                                               
employee,  will  report  directly to  the  management  committee,                                                               
which he himself will chair.                                                                                                    
                                                                                                                                
9:08:11 AM                                                                                                                    
                                                                                                                                
MR. PALMER  stated that TransCanada  and ExxonMobil  have reached                                                               
agreement  to  work  together on  TransCanada's  Alaska  Pipeline                                                               
Project  [slide  2].    There  is  already  immediate  ExxonMobil                                                               
participation and  project support  via integrated  teams working                                                               
to advance the project.   Both companies will jointly advance all                                                               
aspects  of  the  project -  technical,  commercial,  regulatory,                                                               
financial, and so forth.   ExxonMobil is contributing prior study                                                               
results and  existing right-of-way  (ROW) data,  thus eliminating                                                               
the need  for TransCanada to reproduce  that work.  He  also said                                                               
that TransCanada and Foothills Pipe  Lines Ltd. remain the Alaska                                                               
Gasline  Inducement Act  (AGIA)  licensees; that  the rights  and                                                               
obligations  under the  AGIA are  unchanged and  remain with  the                                                               
licensees; that  ExxonMobil is  ready to work  with the  State of                                                               
Alaska  to enable  full participation  in the  AGIA license;  and                                                               
that the project schedule is  unchanged; for example, the initial                                                               
open season is still targeted for completion by July 2010.                                                                      
                                                                                                                                
9:10:25 AM                                                                                                                    
                                                                                                                                
MR. PALMER said the AGIA  project scope is unchanged and includes                                                               
a gas  treatment plant (GTP) and  a pipeline from Prudhoe  Bay to                                                               
Alaska delivery  points [slide 3].   Liquefied natural  gas (LNG)                                                               
will be provided  to Lower 48 or Asian markets  via Valdez, or to                                                               
Lower 48  markets via the  Alberta Hub.  Furthermore,  outside of                                                               
the AGIA project and thus  ineligible for AGIA reimbursement will                                                               
be the advancement  by TransCanada and ExxonMobil  of an upstream                                                               
gas transmission  pipeline from  Point Thomson  to the  GTP; that                                                               
section  of  pipe  will  be  offered  for  service  to  potential                                                               
customers during the open season.                                                                                               
                                                                                                                                
9:11:26 AM                                                                                                                    
                                                                                                                                
[Not  on  the  official  recording,  but  reconstructed  from  an                                                               
alternate   recording,   was   the  following   short   bracketed                                                               
statement]:                                                                                                                     
                                                                                                                                
MR. PALMER said:                                                                                                                
                                                                                                                                
     [The   current   alignment  between   TransCanada   and                                                                    
     ExxonMobil]  is not  contingent on  any commitments  by                                                                    
     the   state,   and   we  can   progress   the   project                                                                    
     independently,  if  we  so elect,  using  all  jointly-                                                                    
     developed  assets and  information.   Clearly it's  our                                                                    
     goal, over  time, to develop this  project jointly with                                                                    
     ExxonMobil  to successful  completion.    In the  event                                                                    
     that  we  come  apart  for  any  reason,  the  jointly-                                                                    
     developed assets will be on  our hands, and we'll be in                                                                    
     a position to use them to complete the project.                                                                            
                                                                                                                                
9:11:51 AM                                                                                                                    
                                                                                                                                
MR.  PALMER, on  the issue  of legislation  and regulation,  said                                                               
TransCanada will  use the  2004 Alaska  Natural Gas  Pipeline Act                                                               
(ANGPA) in Alaska and the  Northern Pipeline Act in Canada [slide                                                               
4].   TransCanada  has increased  the up-front  spending to  $150                                                               
million,   and  this   additional  front-end   spending  reflects                                                               
increased emphasis on early  execution and construction planning,                                                               
additional efforts in regulatory,  environmental, and land areas,                                                               
as well as the size,  complexity, and execution challenges of the                                                               
gas  treatment plant  (GTP).   The  legislature has  appropriated                                                               
about $45  million to  date for  this project,  and TransCanada's                                                               
expectation  is that  this  amount will  be  sufficient to  cover                                                               
Alaska's  share  of the  project  through  [this interim].    The                                                               
development  costs   will  be  shared  between   TransCanada  and                                                               
ExxonMobil,  and  the  two companies  will  retain  the  majority                                                               
interest, with  the state's  total reimbursement  contribution of                                                               
up to $500 million to remain unchanged.                                                                                         
                                                                                                                                
9:13:12 AM                                                                                                                    
                                                                                                                                
MR.  PALMER  explained  that   subsequent  to  the  legislature's                                                               
approval of  issuing the AGIA license  to TransCanada, ExxonMobil                                                               
commenced the discussions and negotiations  between Fall 2008 and                                                               
May 2009 [slide 5].   These negotiations resulted in an agreement                                                               
between  the two  corporations.   TransCanada  advised the  state                                                               
administration of these  actions, but did not  divulge the nature                                                               
or details of  the negotiations, he said.  However,  at the point                                                               
TransCanada met with  its board, TransCanada, under  AGIA, had an                                                               
obligation to  share the information  with the state, and  did so                                                               
in early May,  including sharing the details of  the structure of                                                               
the  arrangement between  TransCanada and  ExxonMobil.   However,                                                               
TransCanada did  not believe this  constituted a  project change,                                                               
which   would    have   required   approval   by    the   state's                                                               
administration.  He emphasized that  TransCanada did not find the                                                               
negotiations  to constitute  a  contract  change.   Subsequently,                                                               
after six  weeks of  review the state  ultimately agreed  that no                                                               
action was necessary.  He recapped  the "Bottom Line" on slide 5,                                                               
such that TransCanada  believes that real progress  has been made                                                               
to align  the all parties  for a  successful project.   He opined                                                               
that  the   combination  of  these  companies   brings  unrivaled                                                               
expertise and experience  to the project, and all  share a common                                                               
goal, which is realization of an Alaskan pipeline project.                                                                      
                                                                                                                                
MR. PALMER  offered to proceed to  the more complex topic  of the                                                               
structure of the arrangement between TransCanada and ExxonMobil.                                                                
                                                                                                                                
9:15:47 AM                                                                                                                    
                                                                                                                                
CO-CHAIR JOHNSON  asked about the  assets that  ExxonMobil brings                                                               
to  the  project, particularly  the  right-of-way  of the  Trans-                                                               
Alaska Pipeline  System (TAPS) information, and  if the right-of-                                                               
way costs  will be a  reimbursable expense.   He said  he thought                                                               
the  TAPS  reimbursable expense  has  already  been paid  through                                                               
tariffs.  Thus,  he surmised the information is  owned by several                                                               
companies  and asked  for the  arrangement of  how that  would be                                                               
shared.    Further,  he  asked   for  clarification  of  how  the                                                               
producers  could share  something that  technically belongs  to a                                                               
third  party, which  is  TAPS.   He  said he  did  not expect  an                                                               
immediate answer to these questions.                                                                                            
                                                                                                                                
MR. PALMER  offered to begin  to answer the questions,  but added                                                               
that Mr.  Massey, ExxonMobil,  could also  expand on  his answer.                                                               
He explained that the assets  would not be reimbursable expenses,                                                               
but would be contributed to the  project.  Thus, the Alaska North                                                               
Slope (ANS) producer's study that  ExxonMobil brings to the table                                                               
will  not be  reimbursable  by AGIA  participants.   He  reminded                                                               
members  that  only  expenditures  after December  5,  2008,  are                                                               
reimbursable  under AGIA.   He  restated that  none of  the costs                                                               
that  TransCanada has  incurred prior  to December  5, 2008,  are                                                               
reimbursable.  Further, the TAPS  information is not reimbursable                                                               
under the $500 million AGIA legislation.                                                                                        
                                                                                                                                
CO-CHAIR  JOHNSON  acknowledged  the   distinction  for  what  is                                                               
reimbursable,  but  related  his understanding  that  the  assets                                                               
would be an expense to TransCanada.   He said he anticipated that                                                               
these  costs  would be  rolled  into  the  tariffs, which  for  a                                                               
project  of  its  size,  the $100  million  is  not  significant.                                                               
However,  he understood  that the  TAPS  information has  already                                                               
been paid for  in tariffs.  He asked whether  it would constitute                                                               
a duplicate cost if the TAPS  information is also rolled into the                                                               
gas tariffs.   He realized the administration may  need to answer                                                               
this  question  as,  from inception,  the  legislature  has  been                                                               
advised to contain costs for the pipeline.                                                                                      
                                                                                                                                
9:18:32 AM                                                                                                                    
                                                                                                                                
MARTIN   MASSEY,   U.S.   Joint  Interest   Manager,   ExxonMobil                                                               
Production  Company (ExxonMobil)  replied that  clearly the  TAPS                                                               
information  expense is  not reimbursable  under AGIA  provision.                                                               
However, the question of whether  TAPS information will be valued                                                               
in the  tariff is a  question that ExxonMobil cannot  yet answer.                                                               
ExxonMobil will  make the case,  if there is  a case to  be made,                                                               
that TAPS  information should  be valued.   Further,  the Federal                                                               
Energy Regulatory Commission (FERC)  will ultimately decide if it                                                               
is a  legitimate expense,  and whether  the TAPS  information has                                                               
been already been  paid.  He added that all  expenses included in                                                               
the tariff  will need  to be  qualified by  FERC.   However, this                                                               
will be  a future decision and  the parties have not,  as part of                                                               
this agreement, made any consideration  that the TAPS information                                                               
is a value that must be included in the tariffs.                                                                                
                                                                                                                                
9:19:46 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  PETERSEN  recalled   testimony  that  TransCanada                                                               
plans  to  build  a  pipeline  from  Point  Thomson  to  the  gas                                                               
treatment plant (GTP).   He asked if the route  and pipeline size                                                               
have been identified.                                                                                                           
                                                                                                                                
MR. PALMER answered  that work is currently underway  and will be                                                               
completed when the rest of the  design work is done and that this                                                               
information will be  available for parties next year.   While the                                                               
initial assessment has been done  and the route and pipeline size                                                               
is generally known, it has not specifically been determined.                                                                    
                                                                                                                                
CO-CHAIR MILLETT  asked whether  the line  from Point  Thomson to                                                               
connect to the  pipeline is a reimbursable cost  through the AGIA                                                               
process.                                                                                                                        
                                                                                                                                
MR. PALMER  answered no.  He  related that the line  was not part                                                               
of the application  process under AGIA so it will  not qualify as                                                               
expenditures and is not reimbursable.                                                                                           
                                                                                                                                
CO-CHAIR  JOHNSON recalled  testimony  that  the producers  would                                                               
have an option to  use the pipeline or the GTP.   If producers do                                                               
not choose  to do so,  what other  options would be  available to                                                               
them.                                                                                                                           
                                                                                                                                
MR.  PALMER clarified  that  he was  referring  to not  currently                                                               
knowing  the  location  of  gas sources  from  producers  or  any                                                               
potential  customers.   He pointed  out that  some parties  might                                                               
have a gas  source at Point Thomson while others  may solely have                                                               
a supply at Prudhoe Bay.  If  the gas source is at Point Thomson,                                                               
and the  producers chose to  use the  main pipeline and  the GTP,                                                               
they  would likely  select  usage of  the  pipeline.   Otherwise,                                                               
these producers would  be in a position to build  their own line,                                                               
he added.                                                                                                                       
                                                                                                                                
CO-CHAIR JOHNSON stated that the  line does not concern him since                                                               
it  is a  relatively small  cost, but  the gas-  to-liquids (GTL)                                                               
option does.  He inquired as  to whether the producers would also                                                               
have an option to build their own GTL plant.                                                                                    
                                                                                                                                
MR.  PALMER  answered that  the  pipeline  will require  pipeline                                                               
quality gas.   Thus, if the  gas comes from Prudhoe  Bay, it will                                                               
be necessary  to remove  the carbon  dioxide.   In the  event the                                                               
producers elect  not to use the  plant, the gas would  need to be                                                               
gas  that  does  not  require  treatment or  they  must  seek  an                                                               
alternative to  the proposed GTP,  which is always an  option for                                                               
potential customers.   In further  response to  Co-Chair Johnson,                                                               
Mr. Palmer  clarified producers  would need  to use  the proposed                                                               
GTP  plant, build  another GTP  plant, or  transport gas  that is                                                               
pipeline quality gas.                                                                                                           
                                                                                                                                
9:22:30 AM                                                                                                                    
                                                                                                                                
MR.  PALMER  continued.   He  detailed  the  "Project  Framework"                                                               
between the two companies listed  on slide 6 of his presentation.                                                               
He stated  the objectives  are clear -  to perform  the necessary                                                               
work to  facilitate completion by  TransCanada licensees  of open                                                               
seasons in  Canada and  the U.S.  by the  July 2010  target date.                                                               
Additionally,  another objective  is  to continue  to pursue  the                                                               
regulatory authorization  for pipeline construction.   He offered                                                               
to  walk members  through the  flowchart beginning  at the  right                                                               
side [of  slide 6].   He stated  that TransCanada  and ExxonMobil                                                               
have reached an  Interim Project Agreement (IPA)  to complete the                                                               
project  work  and  transfer  that   project  work  to  the  AGIA                                                               
licensees, which  is depicted  by an arrow.   The  AGIA licensees                                                               
will  transfer  back the  parties'  non-voting  interest.   Thus,                                                               
TransCanada would  retain 100 percent  of the voting  interest as                                                               
the AGIA licensee.  However,  TransCanada's subsidiaries, as well                                                               
as ExxonMobil, will be earning  nonvoting interest.  In the event                                                               
ExxonMobil  resolves all  issues  with the  state and  ExxonMobil                                                               
becomes  a  full participant,  the  nonvoting  interests will  be                                                               
converted  into voting  interest, and  ExxonMobil would  become a                                                               
full participant, or  basically a common shareholder  of the AGIA                                                               
licensee.                                                                                                                       
                                                                                                                                
9:24:47 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE RAMRAS  asked when questions could  be directed to                                                               
the leaseholder.                                                                                                                
                                                                                                                                
MR.  MASSEY explained  that the  structure  is under  discussion.                                                               
Once that  is completed, the  leaseholder will be better  able to                                                               
answer questions.  After the  structure discussion, he planned to                                                               
leave in order  to allow TransCanada to provide an  update on the                                                               
specific  TransCanada project.    Since  ExxonMobil is  currently                                                               
becoming a  shipper/producer, in that  status he is  not entitled                                                               
to any  special preference.   Thus, ExxonMobil  will be  party to                                                               
information at  the same time  as any other shipper  or producer.                                                               
He offered  to answer  questions after  Mr. Palmer  has completed                                                               
his discussion on the project framework.                                                                                        
                                                                                                                                
CO-CHAIR JOHNSON noted that the  FERC requirements were discussed                                                               
and agreed this is an area that will require care be taken.                                                                     
                                                                                                                                
9:26:10 AM                                                                                                                    
                                                                                                                                
MR.  PALMER went  on to  explain that  those AGIA  licensees will                                                               
then  determine   and  submit  any  qualified   expenditures  for                                                               
reimbursement.    Once  reviewed   and  approved  by  the  state,                                                               
reimbursements will be  made to the AGIA licensees  and will flow                                                               
through to the  ExxonMobil entity.  Thus, as  the TransCanada and                                                               
ExxonMobil entities  incur the costs,  the reimbursement  will be                                                               
shared by the parties.                                                                                                          
                                                                                                                                
9:27:03 AM                                                                                                                    
                                                                                                                                
MR. PALMER  elaborated that the  IPA establishes the  basis under                                                               
which TransCanada  and ExxonMobil  work together  [slide 7].   He                                                               
identified  that  the  Project   Funding  Agreements  (PFAs)  are                                                               
companion  agreements to  IPA,  and  are executed  simultaneously                                                               
with IPA, with a separate PFA  for the U.S. and Canada since they                                                               
are separate licensees.  He noted  that the PFAs provide a bridge                                                               
between  the   TransCanada  licensees  and  IPA   parties.    The                                                               
TransCanada licensees  maintain the interface with  the state and                                                               
retain   AGIA  obligations,   while  the   TransCanada  licensees                                                               
maintain sole  discretion over the request  for reimbursement for                                                               
qualified expenditures.                                                                                                         
                                                                                                                                
MR. PALMER related that he  already addressed the first bullet on                                                               
the  top of  slide 8,  a continuation  of the  project framework,                                                               
such  that TransCanada's  licensees will  have the  right to  all                                                               
work provided to them by IPA  parties for purposes of meeting the                                                               
TransCanada obligation  under the  AGIA license.   He highlighted                                                               
that this is  critical, not only for the  project completion, but                                                               
also under AGIA, and under  certain circumstances the state would                                                               
have the right to take over and will need to have those assets.                                                                 
                                                                                                                                
MR.  PALMER   continued.    He   said  that  all   major  project                                                               
components,   including  regulatory   filings  and   open  season                                                               
contracts will  be made  or entered  into in the  name of  and on                                                               
behalf  of the  AGIA  licensees.   The  AGIA  licensees have  the                                                               
right, at  all times, to progress  the project alone, if  they so                                                               
choose.  He added that  clearly that is not TransCanada's intent,                                                               
but they do have a right  to all the jointly-developed assets and                                                               
both parties will retain rights  to the project information.  The                                                               
parties have  agreed to  a reasonable  transition period  to sole                                                               
management by TransCanada  in the event of a  termination.  Thus,                                                               
ExxonMobil  could  not  pull  up  stakes  if  it  terminated  its                                                               
affiliation, but  would need to  provide a  reasonable transition                                                               
period for  an orderly  management of the  project.   The parties                                                               
will earn  nonvoting interests in the  TransCanada licensees upon                                                               
transfer of the work product, he stated.                                                                                        
                                                                                                                                
MR. PALMER continued with the  project framework [slide 9].  Once                                                               
ExxonMobil  is  a  participant   in  the  TransCanada's  license,                                                               
nonvoting   interests  will   convert  automatically   to  voting                                                               
interests  in  the  licensees.    State  reimbursements  will  be                                                               
distributed  in proportion  to their  participating interests  in                                                               
the IPA.   The IPA includes the typical joint  venture terms, and                                                               
in  terms of  the structure  of  the management  of the  project,                                                               
TransCanada and  ExxonMobil have  fully integrated  teams engaged                                                               
on the project.                                                                                                                 
                                                                                                                                
9:29:32 AM                                                                                                                    
                                                                                                                                
CO-CHAIR  MILLETT asked  for clarification  of what  it means  to                                                               
have ExxonMobil become a participant in the TransCanada license.                                                                
                                                                                                                                
MR.  PALMER   explained  that  as   the  legislature   is  aware,                                                               
ExxonMobil  must resolve  some issues  with the  state before  it                                                               
becomes a  full participating  party in the  AGIA licensees.   He                                                               
stressed that if ExxonMobil resolves  its issues, then ExxonMobil                                                               
will  become a  voting  shareholder  in TransCanada's  licensees.                                                               
While ExxonMobil does not currently  hold that status, ExxonMobil                                                               
is earning  nonvoting interest which  is, in effect,  a financial                                                               
interest  rather  than a  voting  interest.   However,  once  the                                                               
issues  are resolved  ExxonMobil will  convert to  a full  common                                                               
shareholder with financial voting interest.                                                                                     
                                                                                                                                
9:30:38 AM                                                                                                                    
                                                                                                                                
CO-CHAIR MILLETT asked for clarification of unresolved issues.                                                                  
                                                                                                                                
MR. MASSEY  explained that, first,  it is important to  note that                                                               
TransCanada's obligations under AGIA  are unchanged with this new                                                               
relationship.  He  stated TransCanada is fully  committed to meet                                                               
its  AGIA   obligations.    Secondly,  ExxonMobil   has  come  to                                                               
understand   that  the   state  has   approved  AGIA,   that  the                                                               
administration  and  the   legislature  represent  the  preferred                                                               
process  for  an  Alaskan  pipeline  project.   In  order  to  be                                                               
successful  in  the  project ExxonMobil  must  work  within  that                                                               
framework.     He  emphasized  that  ExxonMobil   needs  to  have                                                               
predictable  and  durable fiscal  terms  as  a condition  of  any                                                               
project  in  the world  of  this  magnitude.   He  restated  that                                                               
ExxonMobil realizes  that working  through AGIA  is the  means to                                                               
achieve  the  project.   The  good  news  is that  ExxonMobil  is                                                               
working with TransCanada  to progress the project  and is willing                                                               
to work  parallel to the state  to address the fiscal  terms.  He                                                               
offered  his hope  that ExxonMobil  achieves confidence  with the                                                               
technical work done  during the open season, and if  so, the only                                                               
remaining issue will be to  assess predictable and durable fiscal                                                               
terms.                                                                                                                          
                                                                                                                                
9:32:14 AM                                                                                                                    
                                                                                                                                
MR. MASSEY, in  response to Co-Chair Millett,  reiterated that no                                                               
conditions  were   necessary  in   order  to   join  TransCanada.                                                               
However, ExxonMobil  hopes that  by working with  TransCanada and                                                               
the AGIA process,  it can address durable  and predictable terms,                                                               
he said.  He defined  durable and predictable terms as everything                                                               
in AGIA or not in AGIA  that relates to understanding whether the                                                               
project  will be  a viable  project.   In other  words, he  asked                                                               
whether ExxonMobil  could predict reasonably well  what the taxes                                                               
and  the state  take  will be  such that  ExxonMobil  can make  a                                                               
determination about  the viability  of the  project.   He related                                                               
that if it is  in the AGIA and relates to  the overall state take                                                               
and how  the state's  return might be  influenced over  time then                                                               
yes that would be something to discuss with the state.                                                                          
                                                                                                                                
CO-CHAIR MILLETT  clarified her interest  is in knowing  if other                                                               
issues  within  the  AGIA  framework   should  be  addressed  for                                                               
ExxonMobil as a producer or shipper.                                                                                            
                                                                                                                                
MR. MASSEY  responded that ExxonMobil appreciates  what the state                                                               
would like  to achieve under  the AGIA  process.  He  opined that                                                               
working with  TransCanada, ExxonMobil can meet  the state's goals                                                               
under AGIA  as well  as TransCanada and  ExxonMobil's needs.   He                                                               
said, "That  is our hope  and that's what  we're going to  try to                                                               
work toward in achieving with our discussions with the state."                                                                  
                                                                                                                                
9:34:34 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE RAMRAS remarked  that he is glad  ExxonMobil is at                                                               
the table.   He questioned whether ten years  [of unchanged state                                                               
taxes in AGIA] would qualify as a definition for durable.                                                                       
                                                                                                                                
MR. MASSEY answered that there is  a moral obligation for the ten                                                               
years in  AGIA.  He  interpreted the  AGIA statutes to  mean that                                                               
the state will make an effort  to avoid changing the terms within                                                               
the  ten  years,  but  not  a guarantee  since  nothing  in  AGIA                                                               
prevents the  state from changing  the terms within the  ten year                                                               
period.   He stated  that he likes  the dictionary  definition of                                                               
durable,  which  is  lasting  and   enduring,  but  whether  that                                                               
translates to ten  years, or to a longer period  is a matter that                                                               
ExxonMobil will need to discuss with the state.                                                                                 
                                                                                                                                
REPRESENTATIVE  RAMRAS  surmised  that  ten  years  is  not  good                                                               
enough, but  also that the  state may  extend terms for  a longer                                                               
period.    He related  his  understanding  that ExxonMobil  "Mid-                                                               
stream Gas Investments  LLC" is interested in the  GTP, while the                                                               
larger ExxonMobil  entity would be  willing to talk to  the state                                                               
about  the ten-year  term contained  in AGIA,  with perhaps  some                                                               
implied  notion that  the terms  would be  extended for  a longer                                                               
period.                                                                                                                         
                                                                                                                                
MR.   MASSEY   clarified   that   he   was   referring   to   the                                                               
producer/shipper who would  commit the gas to the  project.  With                                                               
respect  to the  issue of  the pipeline,  he said  ExxonMobil and                                                               
TransCanada hold  the same  view:   that this  issue needs  to be                                                               
worked  on  between  the  state  and the  shippers  to  insure  a                                                               
successful open season.   He offered his belief that  the 10 year                                                               
period is not  sufficient, but the 35 years  previously agreed to                                                               
was enough.   The question remains  as to what the  terms will be                                                               
for this pipeline, but the open dialogue continues.                                                                             
                                                                                                                                
9:37:52 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  DAHLSTROM  asked  whether  ExxonMobil  will  have                                                               
equal voting rights with TransCanada.                                                                                           
                                                                                                                                
MR. PALMER  explained that in  the event ExxonMobil  resolves its                                                               
issues  with the  state and  converts from  nonvoting to  voting,                                                               
TransCanada will retain the majority,  and ExxonMobil will hold a                                                               
minority voting interest.                                                                                                       
                                                                                                                                
9:38:28 AM                                                                                                                    
                                                                                                                                
CO-CHAIR  JOHNSON  related  his  understanding  that  TransCanada                                                               
either pre-filed  or would ask to  pre-file with FERC.   He asked                                                               
whether FERC will require TransCanada to modify its application.                                                                
                                                                                                                                
MR. PALMER explained that TransCanada  pre-filed with FERC at the                                                               
end  of April  2009.   That pre-file  application was  made under                                                               
TransCanada's name, which  is the entity that  will move forward,                                                               
although  ExxonMobil will  contribute  to the  work jointly  with                                                               
TransCanada.    He said  that  TransCanada  licensees will  still                                                               
pursue  all  the  regulatory   applications  and  contracts  with                                                               
customers in their own name.   He clarified that applications and                                                               
contracts would be pursued in the  name of the AGIA licensees and                                                               
no issue has arisen with the FERC.                                                                                              
                                                                                                                                
MR. PALMER  continued.   He stated  that approximately  70 people                                                               
are  currently  working  on fully  integrated  teams  staffed  by                                                               
TransCanada and ExxonMobil,  with ExxonMobil as the  IPA lead and                                                               
TransCanada as the  sub-IPA lead for the Canadian  portion of the                                                               
project.   He related that  TransCanada is  primarily responsible                                                               
through the open season for  the overall pipeline and compression                                                               
work, while  ExxonMobil will be  responsible for the GTP.   Thus,                                                               
the bulk  of TransCanada's employees  will work on  the pipeline,                                                               
but  will   be  supplemented  with  ExxonMobil,   and  conversely                                                               
ExxonMobil employees will primarily  handle the GTP, supplemented                                                               
by TransCanada's staff.  He identified  Paul Pike as the IPA lead                                                               
who will  report to the  management committee,  currently chaired                                                               
by him.  The management  committee will have representatives from                                                               
ExxonMobil  and TransCanada,  and project  costs will  be jointly                                                               
funded based on the parties' proportionate shares.                                                                              
                                                                                                                                
9:40:56 AM                                                                                                                    
                                                                                                                                
MR.  PALMER,  stated  that  TransCanada  believes  this  addition                                                               
represents real  progress to  align all  essential parties  for a                                                               
successful  project  [slide 10].    Last  summer TransCanada  was                                                               
successful  in  obtaining  the  legislature's  approval  for  the                                                               
license issued on December 5,  2008.  He recalled that ExxonMobil                                                               
testified that  joining TransCanada supports the  progress of the                                                               
project  under  AGIA  and  their willingness  to  become  a  full                                                               
participant in  those licensees.   He remarked that in  the event                                                               
discussions  occur   between  ExxonMobil  and  the   state,  that                                                               
TransCanada  will not  be a  party to  the discussions,  but will                                                               
remain an interested observer.                                                                                                  
                                                                                                                                
9:41:53 AM                                                                                                                    
                                                                                                                                
CO-CHAIR  MILLETT  recalled  that   immediately  after  the  AGIA                                                               
license was  signed, TransCanada's chief executive  officer (CEO)                                                               
stated  that nothing  moves forward  unless ExxonMobil  is happy.                                                               
She asked for clarification of what that statement would mean.                                                                  
                                                                                                                                
MR. PALMER interpreted  that what TransCanada's CEO  meant by the                                                               
statement  is  that  during  any   major  pipeline  project  some                                                               
alignment  must  occur between  the  principal  producers in  the                                                               
basin.   Potential shippers  must be aligned  in some  fashion or                                                               
there  will  not  be  a  successful project.    He  recalled  his                                                               
frequent testimony that TransCanada  needs customer contracts and                                                               
regulatory approval.  Thus, what  TransCanada's CEO recognized in                                                               
his  statement  is  that  ExxonMobil is  the  largest  holder  of                                                               
discovered reserves  on the  North Slope  of Alaska.   Therefore,                                                               
TransCanada needs alignment with ExxonMobil,  as well as with the                                                               
other  two  producers.   TransCanada  seeks  that approval.    He                                                               
stated that while  he would not speak to  what brought ExxonMobil                                                               
to the  table, TransCanada  is very pleased.   TransCanada  is in                                                               
the  position of  providing a  credible cost  estimate for  third                                                               
party producers  because of  its alignment  with ExxonMobil.   He                                                               
noted  that TransCanada  does not  profess to  be an  expert with                                                               
GTPs.   However, with  ExxonMobil on  board, TransCanada  has the                                                               
strongest player  in the  GTP business  worldwide, which  adds to                                                               
the project.   Further,  with ExxonMobil  jointly working  on the                                                               
pipeline, TransCanada  hopes that the revised  cost estimate will                                                               
also satisfy  other similarly situated  producers.   He suggested                                                               
that Mr. Massey may wish to  address the committee on the matter,                                                               
but  from   the  TransCanada   perspective  the   alignment  with                                                               
ExxonMobil is satisfactory.                                                                                                     
                                                                                                                                
9:44:15 AM                                                                                                                    
                                                                                                                                
MR. MASSEY  related that ExxonMobil  evaluated the full  range of                                                               
options  of   how  to  progress  the   projects,  which  included                                                               
consideration   of    joining   Denali,    joining   TransCanada,                                                               
considering itself alone, or postponing  and showing up during an                                                               
open season.   ExxonMobil  analyzed what  could move  the project                                                               
forward  and the  success in  bringing all  the parties  together                                                               
pointed  to TransCanada  via  AGIA as  the  best opportunity  for                                                               
success.                                                                                                                        
                                                                                                                                
9:45:33 AM                                                                                                                    
                                                                                                                                
CO-CHAIR  JOHNSON  asked  about the  statement  that  TransCanada                                                               
would not be  involved in the negotiation of physical  terms.  He                                                               
opined that one  major hurdle remaining is the  type of structure                                                               
with the state that will insure  durable fiscal policy.  He asked                                                               
how TransCanada's  stockholders could  allow TransCanada  to "sit                                                               
on the sideline" during that process.                                                                                           
                                                                                                                                
MR.  PALMER  answered   that  TransCanada's  stockholders  expect                                                               
TransCanada to  keep its word.   Further, TransCanada  has agreed                                                               
with  the state  to remain  outside negotiations.   He  said that                                                               
TransCanada's  CEO  has  repeated   this  agreement  on  numerous                                                               
occasions, most recently to the  governor of Alaska the day prior                                                               
to the announcement of the transaction.                                                                                         
                                                                                                                                
9:46:27 AM                                                                                                                    
                                                                                                                                
MR.  PALMER outlined  the benefits  of alignment  with ExxonMobil                                                               
[slide 10].  He related  that TransCanada has over 2,000 pipeline                                                               
employees and  currently transports 20 percent  of North American                                                               
gas daily.  He detailed  recent TransCanada activities, including                                                               
that  TransCanada  is  a  100  percent owner  of  a  $12  billion                                                               
Keystone  Project   underway  that  will  take   4.5  years  from                                                               
announcement to  completion, will span 4,000  miles, and traverse                                                               
13 states.   Secondly, TransCanada  is involved in building  a $2                                                               
billion  project, to  move gas  from western  Alberta to  eastern                                                               
Alberta, at  the existing Meikle  River Compressor Station.   The                                                               
North Central Corridor Project,  comprised of a 42-inch pipeline,                                                               
is currently  under construction, with the  first phase completed                                                               
last winter and  the second phase next winter.   Another project,                                                               
Bison,  will   move  gas  out   of  the  Rockies   connecting  to                                                               
TransCanada's   pipeline   in   the   Midwest.      Additionally,                                                               
TransCanada  was  awarded  the  right to  build  the  Guadalajara                                                               
Pipeline in Mexico.                                                                                                             
                                                                                                                                
MR.  PALMER   described  further   benefits  of   alignment  with                                                               
ExxonMobil  [slide  11].    He related  that  the  financial  and                                                               
project   management  strengths   of  ExxonMobil   are  generally                                                               
recognized.   ExxonMobil  is the  recognized  industry leader  in                                                               
execution of  large complex  projects, has  substantial financial                                                               
resources, and is  the largest holder of  discovered Alaska North                                                               
Slope  natural  gas  resources.    Further,  ExxonMobil  has  the                                                               
expertise and  technology for GTPs  as well as  pipeline systems,                                                               
has been in Alaska for  decades, brings to the project previously                                                               
described  assets,  as  well  as the  commitment  to  the  timely                                                               
development of  Alaska's gas resources.   This combination brings                                                               
unparalleled  experience  in  project  execution.    ExxonMobil's                                                               
focus  is on  costs  and schedule.    TransCanada and  ExxonMobil                                                               
share a common  philosophy in that they are  jointly committed to                                                               
advance  the project,  need the  full support  of the  state, the                                                               
U.S.  and Canada  government, North  Slope  producers, and  other                                                               
interested  parties to  fulfill  the project.   Yet,  TransCanada                                                               
recognizes that  to succeed in  a project of this  scale requires                                                               
alignment  with  government.    He  highlighted  TransCanada  has                                                               
previously  succeeded  in  these  types of  projects.    However,                                                               
commercial   ventures   cannot   succeed  alone;   they   require                                                               
alignment.   TransCanada  is  ready to  move  forward with  other                                                               
parties when they are ready to do so                                                                                            
                                                                                                                                
MR. PALMER  stated that  Mr. Massey will  excuse himself  at this                                                               
time if there are no further questions for him.                                                                                 
                                                                                                                                
9:50:47 AM                                                                                                                    
                                                                                                                                
CO-CHAIR JOHNSON recalled prior  testimony that ExxonMobil is the                                                               
largest  holder of  gas reserves  on  the North  Slope, which  he                                                               
assumes  also  include Point  Thomson.    With respect  to  Point                                                               
Thomson, he  asked whether it  was part of the  discussion during                                                               
ExxonMobil's negotiations  and whether the state  was involved in                                                               
discussions regarding the settlement of  Point Thomson.  He asked                                                               
Mr. Massey to state the facts for the record.                                                                                   
                                                                                                                                
MR. MASSEY answered  there were no commitments from  the state to                                                               
sell Point Thomson  in order for ExxonMobil  to join TransCanada.                                                               
He  related  that  with  respect  to  Point  Thomson,  the  state                                                               
continues  to   have  technical  questions  about   the  proposed                                                               
project.  The state is  currently going through its due diligence                                                               
process, is reviewing work that  has been accomplished, which has                                                               
led  ExxonMobil  to  believe  that Point  Thomson  is  the  right                                                               
project to  propose.  He  said he  hopes the state  will conclude                                                               
and agree  that ExxonMobil  has taken the  right approach.   Once                                                               
that process  is completed, ExxonMobil  can hold  good settlement                                                               
discussions that will result in  an outcome that both parties are                                                               
comfortable  with  to  allow  them  to  move  together  on  Point                                                               
Thomson.    Point Thomson  as  critically  important to  the  gas                                                               
pipeline as it represents 25 percent  of the gas resource.  Thus,                                                               
he  offered his  belief  that  it is  important  to resolve  this                                                               
matter and move forward.                                                                                                        
                                                                                                                                
CO-CHAIR JOHNSON  asked if it  would be  a fair statement  to say                                                               
that  without Point  Thomson  the probability  of  a pipeline  is                                                               
diminished considerably.                                                                                                        
                                                                                                                                
MR.  MASSEY  answered yes.    He  reiterated that  Point  Thomson                                                               
represents  25 percent  of the  gas  resource, and  said that  it                                                               
would  be  a  much  different   project  without  Point  Thomson.                                                               
However, that does  not necessarily mean that  Point Thomson must                                                               
be available on the "first" day  because it is possible to "flow"                                                               
Prudhoe  Bay harder  and  bring  Point Thomson  in  later.   Many                                                               
permutations can  be considered for the  overall project success.                                                               
Ultimately,  Point  Thomson  gas  is  needed  in  order  for  the                                                               
pipeline to be a go, he said.                                                                                                   
                                                                                                                                
9:53:38 AM                                                                                                                    
                                                                                                                                
MR. MASSEY,  in response to  Co-Chair Johnson, responded  that if                                                               
Prudhoe Bay  is the only field  the risk is higher,  but if Point                                                               
Thomson is available  then two fields are involved,  and it would                                                               
reduce the risk  of the big financial commitment  to underpin the                                                               
pipeline project.   Thus, it is important for  ExxonMobil to know                                                               
of the gas commitment.   In further response to Co-Chair Johnson,                                                               
Mr.  Massey  stated  that ExxonMobil  is  optimistic  the  issues                                                               
related  to Point  Thomson will  be resolved  before the  initial                                                               
open season.   However, if that is not the  case, then ExxonMobil                                                               
will reevaluate the  project at that time.  He  opined that it is                                                               
difficult to speculate any outcome at this time.                                                                                
                                                                                                                                
9:55:22 AM                                                                                                                    
                                                                                                                                
MR. MASSEY,  in response to Representative  Olson, confirmed that                                                               
the state  did not make  any assurances related to  Point Thomson                                                               
in  order for  ExxonMobil  to join  TransCanada.   He  reaffirmed                                                               
there were no linkages of any kind.                                                                                             
                                                                                                                                
CO-CHAIR  JOHNSON   asked  whether  ExxonMobil  would   still  be                                                               
involved in the  pipeline project had it not  obtained the leases                                                               
back.                                                                                                                           
                                                                                                                                
MR. MASSEY answered yes.                                                                                                        
                                                                                                                                
9:57:20 AM                                                                                                                    
                                                                                                                                
MR. PALMER  highlighted the alternatives between  delivery points                                                               
in Alaska,  and Alberta Hub enroute  the Lower 48 [maps  on slide                                                               
12].  He  reviewed the project schedule [slide  13], pointing out                                                               
that the  FERC pre-filing request  was met  at the end  of April,                                                               
some two years  earlier than originally contemplated  in the AGIA                                                               
schedule.   The FERC indicated  it preferred TransCanada  to pre-                                                               
file,  TransCanada  held  comprehensive  discussions  with  FERC,                                                               
reached an agreement, and the  pre-filed application was accepted                                                               
on May 1, 2009.   He noted the only other  change to the timeline                                                               
shown is  the addition of  a Canadian  timeline.  In  response to                                                               
Representative  Ramras, said  that  TransCanada's preference  and                                                               
goal is for  customers to commit gas in the  initial open season.                                                               
However,  it would  not  be unusual  for  potential customers  to                                                               
condition their  bid, which he  characterized as often  the norm.                                                               
While  is possible  that fiscal  issues may  remain an  issue for                                                               
ExxonMobil or  other potential  shippers, and may  be set  out in                                                               
their conditions,  this is clearly  nothing that  TransCanada can                                                               
resolve.   He related  that if a  resolution was  not forthcoming                                                               
after July 2010, TransCanada still  has an obligation to continue                                                               
to solicit the market every two years.                                                                                          
                                                                                                                                
MR. PALMER recalled past testimony  and then addressed one of the                                                               
strengths of  the AGIA  process.   He indicated  that TransCanada                                                               
was  initially  not  amenable  to  continue  regulatory  approval                                                               
subsequent to  a failed open  season, that TransCanada  agreed it                                                               
would  continue  to  seek  customers, but  would  not  spend  the                                                               
hundreds of  millions of dollars for  regulatory approval without                                                               
committed  customers.     However,  AGIA  was   passed  with  the                                                               
obligation to  continue regulatory approval and  the state agreed                                                               
to a financial  contribution to the regulatory costs  and so will                                                               
share those costs.                                                                                                              
                                                                                                                                
MR. PALMER addressed the timing of  the project, such that in the                                                               
event of an unsuccessful open season  in the summer of 2010, that                                                               
TransCanada will continue to pursue  customers and the regulatory                                                               
approvals as it  is required to do under AGIA.   If resolution is                                                               
reached on  fiscal matters in  2011 and customers are  willing to                                                               
commit, then TransCanada  would not need to wait two  years and a                                                               
delay would not  jeopardize the schedule.   However, the schedule                                                               
would  be  jeopardized  if  regulatory  approval  is  given,  but                                                               
customers  have  not  committed since  regulatory  approvals  and                                                               
customers are both required.                                                                                                    
                                                                                                                                
10:02:20 AM                                                                                                                   
                                                                                                                                
MR.  PALMER,  in  response to  Co-Chair  Millet,  explained  that                                                               
TransCanada  reached an  agreement with  FERC on  the information                                                               
that must be  submitted as part of the FERC  pre-file, as well as                                                               
the timing of  submittal of additional information.   This became                                                               
necessary  since TransCanada  would normally  pre-file post  open                                                               
season and  would have more  information to  submit to FERC.   He                                                               
restated  that  TransCanada and  FERC  agreed  on the  timing  of                                                               
submitting information to FERC.                                                                                                 
                                                                                                                                
10:03:32 AM                                                                                                                   
                                                                                                                                
MR. PALMER,  in response to  Co-Chair Johnson, responded  that to                                                               
determine whether  it is considered  a failed open season  or not                                                               
would  depend  upon  the conditions  set  by  potential  shippers                                                               
during the open season.  It  is not unusual for customers to have                                                               
conditions  for regulatory  approvals  and  sometimes for  fiscal                                                               
resolution, but those  types of conditions cannot  be resolved by                                                               
TransCanada.  Thus,  the outcome would depend  on what conditions                                                               
potential  shippers required.   TransCanada  would consider  it a                                                               
failed  open season  if, after  the July  2010 date,   it  cannot                                                               
readily resolve any  of the conditions set.   In further response                                                               
to  Co-Chair Johnson,  Mr. Palmer  answered that  so long  as the                                                               
standard terms  are met,  and the  only condition  that customers                                                               
place on  their commitment of  gas is FERC  approval, TransCanada                                                               
would determine it to be a successful open season.                                                                              
                                                                                                                                
CO-CHAIR JOHNSON  clarified that  he was  referring to  the state                                                               
fiscal concerns.                                                                                                                
                                                                                                                                
MR. PALMER agreed  that at some point  unresolved fiscal concerns                                                               
would result in an unsuccessful open season.                                                                                    
                                                                                                                                
MR. PALMER,  in response  to Co-Chair  Johnson, outlined  that in                                                               
the event the  state fiscal issues are  not resolved, TransCanada                                                               
would  take the  same actions  to prepare  its October  2012 FERC                                                               
filing.   However, he  emphasized that  TransCanada would  have a                                                               
much stronger FERC filing if  it has full gas commitments without                                                               
state fiscal concerns  by October 2012.   TransCanada will pursue                                                               
FERC regulatory approvals whether it  has succeeded or not during                                                               
the  initial open  season.   However,  the  application would  be                                                               
commercially  weaker if  it does  not have  customer commitments.                                                               
He reiterated that if customers  are ready to commit before 2012,                                                               
"great."    TransCanada  will also  hold  a  second  solicitation                                                               
during the  summer of  2012.   He said  he hopes  whatever issues                                                               
potential customers may  have would be resolved by  then.  Again,                                                               
TransCanada is not in control of those issues, he stated.                                                                       
                                                                                                                                
10:07:22 AM                                                                                                                   
                                                                                                                                
MR. PALMER addressed  matters that arose during  his testimony in                                                               
2008.  He  reminded members that last year  TransCanada started a                                                               
ten-year  schedule;    thus,  TransCanada is  one year  into that                                                               
process.  He highlighted accomplishments  since June 2008 [slides                                                               
14 and  15]:   TransCanada's application  was reviewed,  the AGIA                                                               
license was  approved by  the legislature,  the AGIA  license was                                                               
issued  on  December  5,  2008,   and  an  AGIA  coordinator  was                                                               
appointed.    TransCanada has  achieved  real  progress toward  a                                                               
broader  alignment with  ExxonMobil.   TransCanada has  performed                                                               
engineering, environmental,  and limited  field work  towards the                                                               
capital  cost estimate  with  significant Alaskan  participation.                                                               
The  addition of  ExxonMobil's personnel  broadens the  expertise                                                               
and  experience  of  TransCanada's  project  team,  and  enhances                                                               
credibility  with  potential  customers  and  the  likelihood  of                                                               
success.    TransCanada  is currently  holding  discussions  with                                                               
potential  customers for  deliveries in  Alaska and  to Lower  48                                                               
markets via  the Alberta  Hub, and  is drafting  commercial terms                                                               
for the initial open season.                                                                                                    
                                                                                                                                
MR. PALMER, in regard to  the liquefied natural gas (LNG) project                                                               
component, stated  that TransCanada  has moved forward  with cost                                                               
estimation  and drafting  of commercial  terms, has  been holding                                                               
discussions   with   potential   customers  which   resulted   in                                                               
modifications  to  a  3.0  billion cubic  feet  per  day  (Bcf/d)                                                               
design.   Potential customers can  now select Valdez  as delivery                                                               
point  in an  initial open  season.   He opined  that TransCanada                                                               
does not believe sufficient gas  will be committed in the initial                                                               
open season  for 4.5 Bcf/d  to the Alberta  Hub and 3.0  Bcf/d to                                                               
Valdez.   It will be  either one or the  other, but not  both, he                                                               
said.                                                                                                                           
                                                                                                                                
MR.  PALMER  continued  with the  project  accomplishments.    He                                                               
addressed  the  Canadian  regulatory  accomplishments  listed  on                                                               
slide  16, including  that ExxonMobil  reviewed and  endorsed the                                                               
Northern Pipeline  Agency (NPA) as the  Canadian regulatory model                                                               
for the project,  re-staffing of the NPA is underway,  the NPA is                                                               
coordinating  the project  within  the  Canadian government  with                                                               
Canadian provinces, and multi-department  meetings have been held                                                               
with   federal  agencies,   the   British   Columbia  and   Yukon                                                               
governments.   He  restated  that on  the  U.S. regulatory  side,                                                               
TransCanada  pre-filed  with  FERC  two years  earlier  than  the                                                               
approved AGIA  schedule, is progressing communications  with FERC                                                               
project staff,  has held multi-agency meetings,  and continues to                                                               
hold  ongoing discussions  with  federal  and state  coordinating                                                               
agencies.                                                                                                                       
                                                                                                                                
10:11:42 AM                                                                                                                   
                                                                                                                                
MR.  PALMER,  in  response to  Co-Chair  Johnson,  answered  that                                                               
TransCanada will  bear the  full cost  of the  NPA, that  the re-                                                               
staffing will  end up as part  of the tariff, which  is the usual                                                               
and  customary process.   If  there is  an unsuccessful  project,                                                               
TransCanada's  shareholders would  bear  the costs.   In  further                                                               
response to Co-Chair Johnson, Mr.  Palmer responded that specific                                                               
legislation  is limited  to this  project and  not for  any other                                                               
project.   He added that the  pre-build costs are charged  to the                                                               
western  Canadian producers,  but  for the  northern section  the                                                               
costs are as  previously described.  He elaborated  that there is                                                               
not  any  current  activity  with  the NPA  since  they  are  not                                                               
approving  facilities, but  in the  event that  the NPA  approves                                                               
facilities the pre-build costs would be charged.                                                                                
                                                                                                                                
10:13:48 AM                                                                                                                   
                                                                                                                                
MR.  PALMER  continued  his  review  of  project  accomplishments                                                               
[slide 17].  TransCanada has  contacted all Canadian right-of-way                                                               
First  Nations  and  offered  to  negotiate  first  participation                                                               
agreements, he said.   Five of eight Yukon  First Nations parties                                                               
are  currently ready  to hold  discussions,  and TransCanada  has                                                               
held negotiations  with some parties.   In response  to, Co-Chair                                                               
Johnson,  Mr. Palmer  acknowledged  that  negotiations have  been                                                               
held  with more  than  one party,  and while  he  is not  certain                                                               
whether that number has now increased  to two or three, it is not                                                               
as high as five.                                                                                                                
                                                                                                                                
MR. PALMER,  in response to  Representative Olson,  answered that                                                               
with  respect to  British Columbia's  First Nations,  TransCanada                                                               
has made  the same offer.   He related that Fort  Nelson on south                                                               
is  an  active  project  area   and  is  being  processed  on  an                                                               
integrated  basis as  TransCanada proposes  pipelines into  those                                                               
sections of British Columbia.                                                                                                   
                                                                                                                                
10:16:07 AM                                                                                                                   
                                                                                                                                
MR. PALMER  updated the committee  on the partnership  with other                                                               
subsidiaries  of  TransCanada,   stating  that  Alaska  Northwest                                                               
Natural Gas  Transportation Company (ANNGTC) might  cause delays.                                                               
There are partnership  agreements related to efforts  in the late                                                               
1970s and 1980s  to build a gas pipeline from  the North Slope to                                                               
markets in  the Lower 48.   He recalled extensive  testimony last                                                               
year that  ANNGTC would not be  an issue, but since  some parties                                                               
expressed  concern, TransCanada  took  additional  actions:   The                                                               
ANNGTC  partnership   is  currently   in  dissolution,   and  the                                                               
conditional  FERC certificate,  federal  right-of-way, and  water                                                               
permits have all been returned.   He advised that TransCanada did                                                               
not own  six withdrawn  partners, but has  in hand  full releases                                                               
from all but  one of the six withdrawn partners.   In response to                                                               
Co-Chair Johnson, Mr.  Palmer emphasized that all  of the parties                                                               
were substantial and significant commercial  parties.  He said he                                                               
is  not  at  liberty  to   disclose  any  names  due  to  ongoing                                                               
negotiations.                                                                                                                   
                                                                                                                                
10:17:46 AM                                                                                                                   
                                                                                                                                
MR.  PALMER   recalled  identifying   a  significant   upside  by                                                               
commercially  aligning  the  section  of the  project  from  Fort                                                               
Nelson  to  the Alberta  border  with  TransCanada's Alberta  Hub                                                               
system.   He  elaborated that  it  would physically  be the  same                                                               
pipeline,  but  commercially,  it  would  be  averaged  with  the                                                               
Alberta  system.   This  pipeline  represents  about a  200  mile                                                               
section of  pipeline and,  if successful, would  result in  an 18                                                               
cent  per  thousand  thousand   British  thermal  units  (MMBTUs)                                                               
benefit to the  Alaska customers or about $300  million per year.                                                               
This project still requires  regulatory approval, but TransCanada                                                               
has made significant  progress.  He pointed out  that the Alberta                                                               
section of  the pipeline system  has been  provincially regulated                                                               
for  50  years and  prohibited  from  physically or  commercially                                                               
crossing    any   borders.       One    significant   TransCanada                                                               
accomplishment is  an application  a year  ago with  the National                                                               
Energy  Board (NEB)  and the  Canadian government,  with Canadian                                                               
approval  for   TransCanada's  Alberta  System.     Additionally,                                                               
TransCanada  has  proposed  two  small  pipelines  into  northern                                                               
British Columbia  - Groundbirch  and Horn River  - to  move shale                                                               
gas.   If  successful, it  will  be excellent  precedent for  the                                                               
Alaska project, he predicted.                                                                                                   
                                                                                                                                
10:21:10 AM                                                                                                                   
                                                                                                                                
MR. PALMER,  in response to  Representative Ramras,  related that                                                               
TransCanada's Anchorage  office answered  his letter on  June 17,                                                               
2009.   He recalled the  questions about the  differences between                                                               
the proven reserves  and total reserves.  He  explained that Horn                                                               
River is  in the early  stages of  development as are  many other                                                               
shale  reserves in  North America,  but proven  reserves are  not                                                               
clearly defined  today.  He acknowledged  differences in Canadian                                                               
and  U.S. terminology  for  "gas  in place".    Canada's "gas  in                                                               
place"  implies the  total reserves  including proven,  probable,                                                               
potential, and  speculative.  He estimated  a range of 100  - 400                                                               
trillion  cubic  feet  (tcf)  for   Horn  River  reserves.    The                                                               
recoverable  resource  is expected  to  be  20  - 50  tcf,  which                                                               
includes  proven, probable,  and potential,  but not  speculative                                                               
gas  reserves.   It is  probable that  the 20  - 50  tcf will  be                                                               
recovered, but  the speculative reserve  will not  likely happen,                                                               
although it is too soon to know.   He estimated that 20 to 50 tcf                                                               
of gas will  likely be produced over  the life of the  basin.  In                                                               
response to Co-Chair Johnson, Mr.  Palmer clarified the effect of                                                               
these  basins on  TransCanada's  proposed  Alaska pipeline  under                                                               
AGIA.   If 20  to 50  tcf is  produced overall,  Western Canada's                                                               
production, which  has recently declined,  would be enhanced   He                                                               
emphasized that  these projects must compete  in the marketplace,                                                               
which helps illustrate why TransCanada  is so focused on cost and                                                               
schedule.    The  proposed  AGIA   pipeline  project  will  be  a                                                               
competitive  project if  TransCanada can  contain its  production                                                               
costs to  below $3.   He underscored that every  project estimate                                                               
he has reviewed shows that ten  years from now the projected cost                                                               
of the proposed pipeline will be at  $6 - $8 or higher.  Thus, if                                                               
costs  can be  held to  $3, TransCanada's  AGIA pipeline  project                                                               
will certainly be competitive.   However, dramatic cost increases                                                               
or significant  price reductions  will impact  this project.   It                                                               
does  not change  TransCanada's commitment,  but reinforces  that                                                               
costs must be controlled.                                                                                                       
                                                                                                                                
10:25:09 AM                                                                                                                   
                                                                                                                                
MR.  PALMER  pointed  out  that developing  a  pipeline  is  very                                                               
different from  developing shale gas  since the bulk of  the cost                                                               
is for  exploration and  development, which  has always  been the                                                               
case for Alberta gas, relative to  Lower 48 gas, since its gas is                                                               
farthest  from market.   Thus,  TransCanada has  had to  focus on                                                               
keeping pipeline costs low.  Alaska  is no different except it is                                                               
even farther from  the markets.  If  Alaska gas can be  held to a                                                               
$3 range in  9 years time then it will  be competitive with other                                                               
sources  of gas.   He  said he  would be  surprised if  shale gas                                                               
price  stays at  $2  forever,  but shale  gas  prices affect  the                                                               
economics of  every project,  including the  proposed TransCanada                                                               
AGIA  pipeline project.    Current total  gas  produced in  North                                                               
America  is about  75  Bcf per  day.   He  conveyed that  without                                                               
drilling  any wells  in North  America the  natural depletion  is                                                               
still 10 to 15 Bcf per day,  which is huge.  Producers will drill                                                               
when it is profitable to do  so and producers believe that over a                                                               
sustained period  they can make  a profit, they will  continue to                                                               
drill either to maintain or  grow production.  He reiterated that                                                               
he  did not  believe  that  $2 or  $3  is  sustainable, unless  a                                                               
massive  amount  of  gas  is  discovered.   He  pointed  out  the                                                               
discrepancy between oil  prices in Alaska in the $60  - $70 range                                                               
and the  world market.   If natural  gas prices in  North America                                                               
are  vastly different  on a  worldwide scale,  he predicted  that                                                               
parties are  likely to  commit to  the proposed  TransCanada AGIA                                                               
project.  He doubted  that over time the gas to  oil ratio of 17,                                                               
18,  or  20,  similar  to   today's  ratio  will  be  maintained.                                                               
However,  if the  gas to  oil ratio  does prevail,  producers can                                                               
make significant money  shipping gas off this  continent to other                                                               
countries.                                                                                                                      
                                                                                                                                
MR. PALMER, in response to  Representative Ramras, indicated that                                                               
TransCanada currently  employs two  Alaskans.   More importantly,                                                               
TransCanada employed  84 Alaskans  last year, which  continues to                                                               
ramp up.   TransCanada will  leverage TransCanada  and ExxonMobil                                                               
employees'  skills and  power to  contain costs  and advance  the                                                               
project  competitively   worldwide.    In  further   response  to                                                               
Representative  Ramras,  Mr.  Palmer  explained that  it  is  not                                                               
relevant as to  the duties of the two  employees, but TransCanada                                                               
plans to ramp  up the number of Alaskan employees  as the project                                                               
advances.  TransCanada currently  provides lower project costs by                                                               
using in-house expertise.                                                                                                       
                                                                                                                                
REPRESENTATIVE  RAMRAS pressed  for the  duties of  TransCanada's                                                               
Alaska employees.                                                                                                               
                                                                                                                                
MR.  PALMER  replied that  TransCanada  currently  has an  office                                                               
manager and an external affairs  position in Alaska.  TransCanada                                                               
normally hires  contract employees  during the  development stage                                                               
of the project.                                                                                                                 
                                                                                                                                
MR.  PALMER,  in  response to  Co-Chair  Millett,  answered  that                                                               
subsequent  to the  AGIA application,  TransCanada  has not  been                                                               
inactive in Washington, D.C.,  that TransCanada provided comments                                                               
to  the U.S.  Senate  Energy committee  when  it considered  loan                                                               
guarantees  being increased.   He  acknowledged  that during  the                                                               
U.S. national  elections and  transition period,  TransCanada has                                                               
been inactive and  will have to reassess with  ExxonMobil how the                                                               
structure will move forward.                                                                                                    
                                                                                                                                
CO-CHAIR MILLETT  asked for a  summary of  TransCanada's comments                                                               
before the U.S. Senate Energy Committee.                                                                                        
                                                                                                                                
MR. PALMER  answered that TransCanada  supported the  proposal to                                                               
increase the loan guarantee from  $18 billion to $30 billion, and                                                               
to provide access  to the federal financing bank.   If access was                                                               
in place,  it would potentially  lower the cost of  borrowing for                                                               
the project.   He noted a  1 percent change in  the interest rate                                                               
would lower  the toll by $.09,  or $150 million per  year for the                                                               
project.   He said he  was not necessarily suggesting  the change                                                               
would be 1 percent, but used  it to provide a point of reference.                                                               
It is also  an indication of why the loan  guarantee is important                                                               
for  TransCanada's  AGIA  pipeline project  and  why  TransCanada                                                               
supports  any  moves by  Congress  to  enhance  it.   In  further                                                               
response   to  Co-Chair   Millett,   Mr.   Palmer  related   that                                                               
TransCanada  supported the  initiative  when it  passed from  the                                                               
U.S. Senate Energy Committee, that  the proposal must still go to                                                               
the full Senate, and if it  does pass, that it will substantially                                                               
enhance the loan guarantee.                                                                                                     
                                                                                                                                
10:33:36 AM                                                                                                                   
                                                                                                                                
MR.  PALMER,   continuing  with   TransCanada's  accomplishments,                                                               
turned to slide 18, and explained that FERC also requires an in-                                                                
state gas  study, which  was awarded  to Northern  Economics, and                                                               
whose  subcontractor  is the  Institute  of  Social and  Economic                                                               
Research  (ISER).   This  work  is underway  and  will assist  to                                                               
identify   the  in-state   offtake   locations.     TransCanada's                                                               
Anchorage office opened in early  2009, some 18 months in advance                                                               
of its  schedule, with a  planned expansion later this  summer as                                                               
the project ramps up.                                                                                                           
                                                                                                                                
MR.  PALMER,  in  response  to   Co-Chair  Johnson,  offered  his                                                               
understanding that  the in-state  gas study  would be  filed with                                                               
FERC and thus be made public.                                                                                                   
                                                                                                                                
MR. PALMER  reviewed the next  steps through open season  to July                                                               
2010 [slide 19].   He stated that this  period, TransCanada will:                                                               
complete  the capital  cost  estimate  by the  end  of the  first                                                               
quarter  (Q1)  2010,  including engineering,  environmental,  and                                                               
field work;  finalize commercial terms and  precedent agreements;                                                               
advance Canadian First Nations  participation agreements, as well                                                               
as  the Fort  Nelson issue.   TransCanada  will complete  the in-                                                               
state  gas  study later  this  year  and  will continue  to  have                                                               
ongoing  discussions  with   potential  customers.    TransCanada                                                               
prefers a dialogue between the  state and ExxonMobil to achieve a                                                               
successful initial  open season.  Additionally,  TransCanada will                                                               
file  an  open  season  package  with FERC  and  hope  to  obtain                                                               
approval.    He  concluded  his   presentation  by  stating  that                                                               
TransCanada will  conduct the  open season  and hope  for success                                                               
during the 13 month period.                                                                                                     
                                                                                                                                
10:36:35 AM                                                                                                                   
                                                                                                                                
MR. PALMER,  in response to  Co-Chair Johnson, answered  that the                                                               
TAPS study  will not shorten TransCanada's  timeframe to complete                                                               
the open season.  He  explained that TransCanada's other critical                                                               
path items  need completion prior to  the open season due  to the                                                               
advances necessary in  many areas.  He pointed out  that the open                                                               
season  packet  submission  date  is the  end  of  January  2010,                                                               
leaving  the  company  with  seven months  to  complete  all  the                                                               
necessary work.   In  further response  to Co-Chair  Johnson, Mr.                                                               
Palmer related  that time is money  but work is also  money, too.                                                               
While  the study  will reduce  the amount  of work,  it will  not                                                               
shorten the  timeframe to conclude  the open season.   He offered                                                               
that two components are replacement of  work and delay.  To date,                                                               
TransCanada  and ExxonMobil  have not  put  a value  on the  TAPS                                                               
study,  nor  sought   reimbursement,  although  TransCanada  will                                                               
ultimately need to  provide a value for FERC, who  will judge the                                                               
value.                                                                                                                          
                                                                                                                                
10:39:27 AM                                                                                                                   
                                                                                                                                
CO-CHAIR MILLETT asked whether TransCanada  sees the link between                                                               
fiscal  stability,  the  gas  tax  regime  in  the  state,  to  a                                                               
successful open season.                                                                                                         
                                                                                                                                
MR.  PALMER  responded  that  in the  past  few  years  potential                                                               
customers  related  that they  perceive  a  link and  would  need                                                               
resolution on  the fiscal stability  issues.  However, he  is not                                                               
familiar with  the details  and the  discussions are  between the                                                               
producers, the  administration, and the legislature.   In further                                                               
response to  Co-Chair Millett, Mr. Palmer  answered that pipeline                                                               
companies  seek successful  open  seasons and  will control  what                                                               
they can to meet their goals of  holding them.  In the event that                                                               
potential customers have other issues  to resolve with government                                                               
entities, pipeline companies have no  area of influence, but will                                                               
work to encourage resolution of the issues.                                                                                     
                                                                                                                                
10:41:15 AM                                                                                                                   
                                                                                                                                
CO-CHAIR  EDGMON recalled  the  AGIA vote,  and an  understanding                                                               
that AGIA was awarded to an  independent third party.  Today, the                                                               
context  is   different,  in  terms  of   alignment  between  the                                                               
independent third  party and  one of the  leaseholders.   He then                                                               
posed  a scenario  in  which ExxonMobil  would  earn full  voting                                                               
rights with  TransCanada and resolve  its issues with  the state.                                                               
He  presumed in  the  scenario that  ExxonMobil  would then  seek                                                               
different  fiscal  terms  from  the  legislature  than  the  AGIA                                                               
license envisioned,  as well  as changes to  the rolled  in rates                                                               
and  expansion terms.   He  inquired as  to whether  any scenario                                                               
exists  in which  the $500  million state  contribution would  be                                                               
negotiable  as   part  of  the  tax   regime  discussions,  since                                                               
TransCanada's partner is the largest corporation in the world.                                                                  
                                                                                                                                
10:44:01 AM                                                                                                                   
                                                                                                                                
MR. PALMER answered that the  AGIA terms were established for any                                                               
party to  bid, with  terms similar to  those that  an independent                                                               
pipeline would supply  to potential customers.  At  that time the                                                               
state did  not know the  identity of  the bidders, and  whether a                                                               
bidder  would   be  TransCanada   or  perhaps  all   three  major                                                               
producers.   The terms were  set to satisfy the  state regardless                                                               
of the owner's identity.   The outcome:  TransCanada prevailed in                                                               
the AGIA  award.   He offered that  TransCanada committed  to the                                                               
AGIA terms, which have been  reaffirmed during its alignment with                                                               
ExxonMobil.   He pointed out  that part of the  difficulty within                                                               
TransCanada  during the  AGIA process  was the  obligation to  go                                                               
beyond  an  unsuccessful  open  season.    However,  the  state's                                                               
financial contribution of $500 million  helped resolve that issue                                                               
for TransCanada.   He recapped that the  contribution is excluded                                                               
from the rate base, will lower  the state's tolls, will result in                                                               
a higher netback  to the state, and will  increase state revenues                                                               
so long as the project succeeds.   He acknowledged that while the                                                               
state  risks its  $500 million,  TransCanada's shareholders  also                                                               
face risks.  In the event  that TransCanada has a successful open                                                               
season and has rock solid commitments  for 4.5 Bcf per day, there                                                               
is no question  the value of the state's  $500 million investment                                                               
would  decrease.    However,  TransCanada  has  not  changed  its                                                               
commitment to the project since  AGIA.  The AGIA obligation rests                                                               
with TransCanada, and he surmised  that AGIA contemplated that at                                                               
some  point   TransCanada  would  be  successful   in  attracting                                                               
customers.   Currently, TransCanada continues to  seek customers.                                                               
He  recalled  testimony last  year  by  producers that  indicated                                                               
TransCanada's cost  estimate would  not be  credible.   He opined                                                               
that  it will  be difficult  to  argue that  when TransCanada  is                                                               
working with  ExxonMobil.  He  acknowledged TransCanada  does not                                                               
yet have gas  commitments.  If TransCanada attains them  in 12 or                                                               
13  months,  the  state's  investment   has  less  value  to  the                                                               
pipeline, but  it absolutely has  value to TransCanada  today, he                                                               
said.                                                                                                                           
                                                                                                                                
MR. PALMER summarized his response,  which is that he cannot give                                                               
a  definitive  answer  except   to  restate  TransCanada  remains                                                               
committed  to   its  AGIA   obligations,  the   AGIA  obligations                                                               
contemplated terms that  are similar to those  for an independent                                                               
pipeline, the winner happened to  be TransCanada, and TransCanada                                                               
will provide the service it is obliged to provide.                                                                              
                                                                                                                                
10:48:06 AM                                                                                                                   
                                                                                                                                
CO-CHAIR  JOHNSON summarized  Mr.  Palmer's  response, such  that                                                               
TransCanada is committed  to the terms of the  AGIA agreement and                                                               
expects  the same  commitment  from the  legislature.   Thus,  he                                                               
suggested that the answer to  Representative Edgmon's question is                                                               
that the state's $500 million is  not on the table, will still be                                                               
available even if  the initial open season is  successful, and is                                                               
committed regardless of who partners  with TransCanada.  He asked                                                               
Mr. Palmer if he had any issues with the response.                                                                              
                                                                                                                                
MR. PALMER answered no.                                                                                                         
                                                                                                                                
The committee took an at-ease from 10:49 a.m. to 11:00 a.m.                                                                     
                                                                                                                                
11:01:05 AM                                                                                                                   
                                                                                                                                
PAT GALVIN, Commissioner, Department  of Revenue (DOR), explained                                                               
that  the  state's  role  was to  review  the  agreement  between                                                               
TransCanada and ExxonMobil and determine  if the new relationship                                                               
required  additional  approval   under  AGIA,  specifically  with                                                               
respect  to   Section  210   of  the   Act,  which   pertains  to                                                               
modifications of the  AGIA license.  The state  team was provided                                                               
with  all the  documents associated  with this  new relationship,                                                               
including  the  interim  project  agreement  (IPA),  the  project                                                               
funding agreement  (PFA), and all  the ancillary documents.   The                                                               
DOR brought together members of  the state team, and also outside                                                               
consultants  to  review  the  commercial,  technical,  and  legal                                                               
aspects of the  proposed project in order to  provide guidance to                                                               
determine  if this  relationship  modifies  the state's  interest                                                               
under the AGIA license.  Through  that process the DOR sought and                                                               
received  oral and  written clarifications  from TransCanada  and                                                               
ExxonMobil with  respect to the  agreements to  better understand                                                               
the relationship.   Ultimately, DOR determined that  there was no                                                               
diminishment of  the state's rights  under the AGIA license  as a                                                               
result  of  the  new  relationship   with  ExxonMobil,  and  that                                                               
TransCanada retains  all the obligations  under the  AGIA license                                                               
and  has structured  this agreement  with ExxonMobil  to preserve                                                               
its opportunity and right to  respond to the state's requirements                                                               
under AGIA.                                                                                                                     
                                                                                                                                
COMMISSIONER GALVIN related that  the state's final conclusion is                                                               
that no action is necessary  by the state regarding the alignment                                                               
with  respect to  AGIA.   He offered  that the  state is  excited                                                               
about  this development,  that alignment  is precisely  what AGIA                                                               
intended to  provide and facilitate,  and that  ExxonMobil brings                                                               
tremendous  value  to  this  project.    The  administration  has                                                               
concluded  that from  the state's  perspective this  alignment is                                                               
very good for  the project, and the  administration looks forward                                                               
to further alignments as the project proceeds.                                                                                  
                                                                                                                                
11:05:10 AM                                                                                                                   
                                                                                                                                
COMMISSIONER  GALVIN,  in  response to  Representative  Kawasaki,                                                               
answered  that  no  discussions were  held  with  TransCanada  to                                                               
change AGIA.  In further  response to Representative Kawasaki, he                                                               
stated  that the  administration  also did  not hold  discussions                                                               
about  making  changes  to  AGIA   in  the  upcoming  legislative                                                               
session.   He  related that  the representations  made throughout                                                               
the state's discussions are  embodied in TransCanada's testimony.                                                               
Further,  the state  will continue  to pursue  a durable  system.                                                               
However, the state  holds firm to its position which  is that the                                                               
state currently  provides a durable  and economic  fiscal system.                                                               
Inducements in AGIA  allow the shippers to take  advantage of the                                                               
ten year period,  with respect to taxes.   The royalty provisions                                                               
provided  within AGIA  would  extend the  length  of the  leases,                                                               
which are  not limited to ten  years.  Again, there  were not any                                                               
overtures or discussions  held during this period  with regard to                                                               
changes to AGIA.                                                                                                                
                                                                                                                                
11:07:53 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE RAMRAS  asked what the administration  is doing to                                                               
modify  royalties   to  satisfy  ExxonMobil's  concern   about  a                                                               
financial stable tax regime.                                                                                                    
                                                                                                                                
COMMISSIONER GALVIN replied  it would be an  overstatement to say                                                               
that the  administration intends to satisfy  ExxonMobil's demands                                                               
via royalties.   The administration  is holding  discussions with                                                               
regard to establishing the  upstream royalty provisions available                                                               
under  AGIA.   The state  is implementing  the terms  of AGIA  in                                                               
order to  put in place  an opportunity  for shippers that  make a                                                               
commitment at the  initial open season to enjoy  a more favorable                                                               
methodology  with regard  to valuing  the gas,  as well  as enjoy                                                               
modifications to  the state's rights to  switch between "royalty-                                                               
in-value royalty-in-kind  options."   Those terms are  not viewed                                                               
as a  vehicle for satisfying  the producers' desires,  but rather                                                               
are  seen as  clarification and  implementation of  the terms  of                                                               
AGIA, and to establish the methodology legislation process.                                                                     
                                                                                                                                
11:10:02 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE   RAMRAS   described  royalty-in-kind   (RIK)   or                                                               
royalty-in-value   (RIV)   and  suggested   Commissioner   Galvin                                                               
elaborate on the definitions.   He asked if the administration is                                                               
contemplating relaxing the royalties' regime.                                                                                   
                                                                                                                                
11:11:10 AM                                                                                                                   
                                                                                                                                
COMMISSIONER  GALVIN explained  the oil  and gas  royalty revenue                                                               
process.  The  royalty revenue the state  receives represents the                                                               
state's benefit for owning the  resource and leasing the right to                                                               
explore and develop  it to companies.  The terms  of these leases                                                               
establish contractual  relationships between the parties  and the                                                               
state  with respect  to the  state's  royalty share  of the  gas.                                                               
This  is how  any other  owners of  oil and  gas resources  would                                                               
establish their  royalty rights, and  the state has done  so with                                                               
its  leases.   In  most  instances in  the  North  Slope, a  12.5                                                               
percent rate  is the norm;  a 12.5  percent ownership of  the oil                                                               
and gas  that is produced.   The state  has the option  to either                                                               
take  possession  of the  oil  and  gas  at  the wellhead  or  be                                                               
responsible for  the delivery  and sale  at the  market.   Or the                                                               
state can allow  the producer to bring the oil  and gas to market                                                               
and the state receives its share  via that transaction.  The AGIA                                                               
provides an  opportunity to clarify within  the royalty structure                                                               
the determination  of the value of  the gas.  For  example, under                                                               
the oil  system, the  lease establishes a  value, referred  to as                                                               
the higher up,  that the state is  not bound by the  best price a                                                               
leaseholder may achieve in the  market.  Instead, the leaseholder                                                               
remits the  royalty based on  the highest value that  is received                                                               
by any  of the leaseholders  within a particular pool;  the state                                                               
receives the highest  value among any of its  competitors.  Thus,                                                               
the state wants  to protect value, and when the  state receives a                                                               
royalty payment,  it verifies the payment  everyone else received                                                               
and performs  a "true-up" at the  end, such that if  someone else                                                               
received  more,  the  state  can   collect  the  value  from  the                                                               
leaseholders.    Companies  do  not  like  that  as  it  provides                                                               
uncertainty;  they make  a good  faith sale,  and after  the fact                                                               
must  pay the  state additional  money as  the result  of someone                                                               
else receiving a better price.                                                                                                  
                                                                                                                                
COMMISSIONER GALVIN  noted that  with the  gas market,  the state                                                               
will offer  in AGIA to  create some methodology to  establish the                                                               
value different  from the "higher  up" process.  Under  AGIA, the                                                               
state will create  a formula based upon prices  that will provide                                                               
greater predictability  for the  companies in  terms of  what the                                                               
royalties will be  based upon.  The state views  these changes as                                                               
a  value to  the  producers;  as an  inducement  to producers  to                                                               
commit their  gas to  the open season.   Additionally,  the state                                                               
can provide more predictability to  producers with respect to the                                                               
RIK  and RIV.   In  most  instances the  state has  the right  to                                                               
switch between with  a relatively short notice of  six months, or                                                               
so,   but  this   unpredictability  has   been  problematic   for                                                               
producers, who  must take firm  commitments.  Thus, one  time the                                                               
shipper may ship a volume of  gas and the state request that they                                                               
ship  more gas,  or the  state may  inform the  shipper that  six                                                               
months from  now, the  state will  ship some of  the gas  and the                                                               
shipper will  have less.   Thus, the state shrinking  its options                                                               
with   respect  to   switching  and   providing  more   certainty                                                               
represents value  to shippers.   He recapped  that those  are the                                                               
two  things  on  the  table  in terms  of  the  state  evaluating                                                               
royalties  on gas  as the  open  season approaches:  what is  the                                                               
methodology for  establishing the value under  royalties and what                                                               
is the methodology for switching between RIK and RIV.                                                                           
                                                                                                                                
11:15:56 AM                                                                                                                   
                                                                                                                                
COMMISSIONER  GALVIN,   in  response  to   Representative  Ramras                                                               
explained  that  the  state  considers  its  current  tax  system                                                               
sufficient to  provide an economic project  for all participants.                                                               
If  the  producers  provide  the   state  with  information  that                                                               
demonstrates  changes  are necessary,  then  the  state would  be                                                               
willing to  consider changes.   He  characterized the  premise of                                                               
the state attempting to satisfy  producers through royalties as a                                                               
faulty  premise.   He  suggested that  the  state fiscal  system,                                                               
royalty and tax, is sufficient  at this time; that the durability                                                               
is  sufficient for  this  project in  AGIA.   He  noted that  Mr.                                                               
Massey  expressed  some  concern  over the  lack  of  contractual                                                               
stability to the  ten year tax commitment.  He  recalled that the                                                               
administration's  original  AGIA proposal  contained  contractual                                                               
gas  tax  certainty  provisions,   subsequently  removed  by  the                                                               
legislature,   which  the   administration  believes   should  be                                                               
considered collectively by  the state.  The current  package is a                                                               
reasonable  proposal, and  the state's  system is  adequate.   He                                                               
restated that the  DOR is willing to  address producers' concerns                                                               
over time  as the project moves  forward.  The AGIA  process will                                                               
continue  to  move  forward;  Mr. Palmer  agreed  that  the  AGIA                                                               
process  will  continue  through  an  open  season  to  the  FERC                                                               
certificate.                                                                                                                    
                                                                                                                                
11:20:00 AM                                                                                                                   
                                                                                                                                
CO-CHAIR JOHNSON  asked whether the  changes would be  in statute                                                               
or regulation.                                                                                                                  
                                                                                                                                
COMMISSIONER GALVIN  answered that  in order  to make  changes to                                                               
address concerns, the producers  would require statutory changes;                                                               
whether  or  not   that  is  ultimately  needed  is   yet  to  be                                                               
determined.  He clarified that  the revenue Representative Ramras                                                               
brought up  earlier points  to the  necessity of  some regulatory                                                               
aspects of AGIA not yet resolved;  the state has an obligation to                                                               
put regulations in place that  clarify the royalty aspects of the                                                               
upstream  inducements.   He  reiterated  that  issues related  to                                                               
durability and fiscal issues would require statutory changes.                                                                   
                                                                                                                                
11:21:44 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  RAMRAS  asked  whether  the  administration  will                                                               
offer  the largest  tax concession  in the  history of  Alaska in                                                               
order to invite ExxonMobil into AGIA.                                                                                           
                                                                                                                                
COMMISSIONER GALVIN said no.                                                                                                    
                                                                                                                                
11:22:08 AM                                                                                                                   
                                                                                                                                
CO-CHAIR MILLETT asked  if the administration is  waiting for the                                                               
producers or  the legislature  to propose  changes to  the fiscal                                                               
tax regime.   She remarked that the number one  impediment to the                                                               
gas pipeline is fiscal stability.                                                                                               
                                                                                                                                
COMMISSIONER  GALVIN recalled  earlier  discussions, then  stated                                                               
that the DOR considers significant  distinctions between what the                                                               
producers want,  voice, and ultimately  need to commit  their gas                                                               
to the AGIA project.  The  question is whether the state needs to                                                               
do anything to  arrive at what producers need.   He said AGIA was                                                               
designed to  move the project  forward as the  discussion ensues.                                                               
Thus, time  and goal are not  lost, which is first  gas under the                                                               
timeline  of   AGIA  framework.     The  state  considers   it  a                                                               
significant  downside  for  the  state  to  become  desperate  to                                                               
resolve fiscal terms at an  early juncture.  He characterized the                                                               
previous  administration's agreement  as  ill-advised because  it                                                               
gave up  considerably more  than necessary  in exchange  for very                                                               
little  in  return.    The  AGIA  process  provides  for  forward                                                               
movement;   the    costs,   economics,   and    the   fundamental                                                               
underpinnings  of  this  project   become  clearer  as  the  date                                                               
approaches.  The state's fiscal  issues are only one component of                                                               
the  process, and  it  is not  in the  state's  interest to  feel                                                               
compelled to satisfy the fiscal  component before an open season.                                                               
He  recalled Mr.  Palmer's testimony  that regardless  of whether                                                               
the state reaches agreement with  the producers, the AGIA project                                                               
will move  forward along the timeline  until TransCanada acquires                                                               
a FERC certificate,  which is a critical component  of AGIA, with                                                               
respect  to the  state's interest.   It  is a  critical component                                                               
because the administration did not  wish the project to stall and                                                               
place  the  state in  a  leveraged  position.   He  recapped  his                                                               
answer:  the  state does not intend to  negotiate against itself,                                                               
to sabotage  itself.   The state  will not  propose a  tax change                                                               
simply  to "throw  something more  on the  table."   The analysis                                                               
indicates the  project is economic  under the current  system, he                                                               
advised.    However,  the  state  is willing  to  listen  to  any                                                               
proposal the producers wish the state  to consider.  He said, "We                                                               
believe the ball  is in their court.  The  state has put together                                                               
a fiscal system and a durability  package already.  We don't need                                                               
to  negotiate against  ourselves;  we'll wait  to  hear what  the                                                               
producers have to say about that."                                                                                              
                                                                                                                                
11:26:38 AM                                                                                                                   
                                                                                                                                
COMMISSIONER GALVIN, in response  to Co-Chair Johnson, identified                                                               
that   Marty   Rutherford   remains  the   gasline   team   lead.                                                               
Commissioner  Irwin retains  the  prerogatives as  it relates  to                                                               
Department of Natural Resources (DNR)  issues, and he retains the                                                               
prerogatives  for DOR.   Thus,  the  three would  respond to  any                                                               
requests by the producers and are prepared to respond.                                                                          
                                                                                                                                
CO-CHAIR MILLETT asked  if it is in the state's  best interest to                                                               
hold  negotiations on  fiscal  terms  in the  event  of a  failed                                                               
initial open season.                                                                                                            
                                                                                                                                
COMMISSIONER GALVIN  answered no, it  is not in the  state's best                                                               
interest.   However,  nothing is  prohibiting the  producers from                                                               
clarifying  their  position  with  regard  to  a  durable  fiscal                                                               
system.   The  state  doesn't  need to  continue  to put  forward                                                               
additional  proposals  or add  more  value.    The state  is  not                                                               
seeking to postpone the discussion.   He suggested that those who                                                               
create  the perception  that the  open  season is  a deadline  to                                                               
conclude fiscal terms  are creating a false deadline.   He agreed                                                               
alignment and  forward progress is  in the state's  interest, and                                                               
whether that  happens before  or after the  open season  will not                                                               
change the  timeline since AGIA  is designed to  prohibit delays.                                                               
He  suggested that  the state  needs to  be open  and willing  to                                                               
engage in the fiscal regime  discussion, but additional deadlines                                                               
or inducements are unnecessary.                                                                                                 
                                                                                                                                
11:31:12 AM                                                                                                                   
                                                                                                                                
COMMISSIONER GALVIN,  in response  to Co-Chair  Millett, answered                                                               
that  the renegotiation  of the  state's royalty  terms, and  the                                                               
legislature's  statement  that  it  will not  change  the  fiscal                                                               
system  for  ten  years  is   a  reasonable  starting  point  and                                                               
significant advancement  for the  state.   The question  is where                                                               
this  position is  in  relationship to  ultimately  what will  be                                                               
necessary to have the project  move forward.  In further response                                                               
to Co-Chair Millett, Commissioner Galvin  said that the state has                                                               
always  been  willing  to  talk to  producers  about  the  fiscal                                                               
regime.                                                                                                                         
                                                                                                                                
11:32:53 AM                                                                                                                   
                                                                                                                                
COMMISSIONER GALVIN,  in response  to Co-Chair  Johnson, deferred                                                               
to TransCanada  and ExxonMobil, with respect  to the confidential                                                               
information about  terms and  whether it  will be  made available                                                               
only  to the  legislature in  an executive  session.   He offered                                                               
that the  AGIA provisions require  confidentiality.   However, he                                                               
also  considered that  TransCanada  and  ExxonMobil would  likely                                                               
share  information.   In further  response  to Co-Chair  Johnson,                                                               
Commissioner  Galvin advised  that  any confidential  information                                                               
released   to   the   administration   would   require   specific                                                               
authorization from TransCanada and  ExxonMobil prior to releasing                                                               
it to the  legislature.  He further explained that  under AGIA, a                                                               
distinction  was made  between the  protocols of  the application                                                               
process  which had  specific provisions  for  the legislature  to                                                               
gain access through confidentiality agreements, and the post-                                                                   
licensure  that does  not have  a  similar protocol  in place  to                                                               
share information with the legislature.                                                                                         
                                                                                                                                
11:34:35 AM                                                                                                                   
                                                                                                                                
COMMISSIONER   GALVIN,   in   response   to   Co-Chair   Johnson,                                                               
Commissioner Galvin said the evaluation  team included members of                                                               
the  DOR,  DNR,  and  Department   of  Law;  legal  counsel  from                                                               
Greenberg  Taurig, LLP,  who  provided  FERC pipeline  expertise;                                                               
Gaffney Cline  and Associates; Goldman  Sachs; C. Scott  Hobbs of                                                               
Energy  Capital Advisors,  Inc.;  and Patrick  Anderson of  PINGO                                                               
International Inc., a technical contractor on pipeline issues.                                                                  
                                                                                                                                
CO-CHAIR JOHNSON  asked whether the contractors  were included in                                                               
the AGIA  budget or if there  will be a request  for supplemental                                                               
funding.                                                                                                                        
                                                                                                                                
COMMISSIONER  GALVIN offered  that with  the acceleration  of the                                                               
schedule,  the administration  would likely  request supplemental                                                               
funding next  legislative session.   In  further response  to Co-                                                               
Chair Johnson,  he recalled  that leading up  to the  open season                                                               
the figure  was $84 million,  of which the state  would reimburse                                                               
half, and  the revised amount is  $150 million for the  same time                                                               
frame.   The schedule DOR  has reviewed exhausts the  $42 million                                                               
through  the first  quarter of  2010.   Thus,  a supplemental  is                                                               
necessary to reimburse expenditures into the first quarter.                                                                     
                                                                                                                                
CO-CHAIR JOHNSON  inquired as to whether  the outside consultants                                                               
are being paid by TransCanada or the state.                                                                                     
                                                                                                                                
COMMISSIONER GALVIN answered the  outside consultants are paid by                                                               
the state.                                                                                                                      
                                                                                                                                
11:37:47 AM                                                                                                                   
                                                                                                                                
MARTY  RUTHERFORD,  Deputy  Commissioner, Department  of  Natural                                                               
Resources  (DNR), explained  that  the  department requested  re-                                                               
appropriation of some  funding to pull $.7 million  from the $5.5                                                               
million,  which was  initially requested  for the  first year  of                                                               
AGIA, and the  re-appropriation was not made to the  team.  Thus,                                                               
the    department   would    likely   request    a   supplemental                                                               
appropriation.                                                                                                                  
                                                                                                                                
CO-CHAIR  JOHNSON recalled  that ultimately  some producers  have                                                               
suggested  they   want  to   own  a   portion  of   the  pipeline                                                               
commensurate to  the amount of  gas they commit to  the pipeline.                                                               
He further recalled that is the  case with ExxonMobil, but he was                                                               
not  certain  of other  producers.    He questioned  whether  the                                                               
current situation creates a producer-owned pipeline.                                                                            
                                                                                                                                
COMMISSIONER  GALVIN answered  that AGIA  was designed  to ensure                                                               
that  whoever owned  the pipeline  would act  like a  third-party                                                               
owned pipeline.   He  asserted that DOR  has never  deviated from                                                               
that stance.   He denied  the supposition that AGIA  was intended                                                               
to  preclude  the producers  from  owning  the licensed  project,                                                               
pointing  out  that at  least  two-thirds  of the  must-haves  in                                                               
AGIA's  structure anticipate  that  it will  be a  producer-owned                                                               
pipeline in  the sense that contractual  agreements are necessary                                                               
in order for  it to act like  a third-party pipeline.   If it was                                                               
designed  to be  an  independent pipeline,  that the  contractual                                                               
agreements  would be  unnecessary.   Regardless of  who owns  the                                                               
AGIA pipeline, it will act  like a third-party pipeline, which is                                                               
the  intent.    Thus,  the  state can  enjoy  the  values  of  an                                                               
expandable,  open-access   low-tariff  pipeline,   regardless  of                                                               
ownership.                                                                                                                      
                                                                                                                                
11:42:19 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE RAMRAS  questioned whether Commissioner  Galvin is                                                               
emphatically stating that the terms  for royalties on North Slope                                                               
gas would  not change in  order to  induce the producers  to come                                                               
together on a pipeline.                                                                                                         
                                                                                                                                
CO-CHAIR  JOHNSON  clarified that  the  question  is whether  the                                                               
administration will ask the legislature for those changes.                                                                      
                                                                                                                                
COMMISSIONER GALVIN  said he was  unaware of any discussion.   It                                                               
is DNR's purview,  not DOR's, he continued, and he  is unaware of                                                               
any modifications with respect to the AGIA pipeline.                                                                            
                                                                                                                                
11:45:54 AM                                                                                                                   
                                                                                                                                
BUD   FACKRELL,  President,   Denali-The   Alaska  Gas   Pipeline                                                               
(Denali),  began  his  PowerPoint presentation  by  stating  that                                                               
Denali is still moving forward [slide  2].  Denali was created by                                                               
BP  Exploration (Alaska)  Inc. (BP)  and ConocoPhillips  to build                                                               
the Alaska Gas  Pipeline (Denali).  Denali  is uniquely qualified                                                               
to  build the  complex and  enormous  project, he  said.   Denali                                                               
brings  unparalleled North  Slope  and Arctic  experience to  the                                                               
project, and Denali has worldwide  experience in construction and                                                               
operation  of  mega  projects  by   virtue  of  its  two  owners.                                                               
Additionally,  Denali  brings  a  strong  balance  sheet  to  the                                                               
project.   Denali remains on track  to conduct an open  season in                                                               
2010  and  is  in  position  to  provide  a  superior  commercial                                                               
offering, which  should be good  for the state.   Finally, Denali                                                               
has  not changed  its focus,  despite the  economic turmoil,  and                                                               
remains focused on the long term view, he stated.                                                                               
                                                                                                                                
MR. FACKRELL  provided an overview  of the gas fields  located on                                                               
the North Slope [slide 3].   He informed members that the Prudhoe                                                               
Bay and Point  Thomson field contains the majority of  the 35 Tcf                                                               
in  discovered  gas   resources.    According  to   a  2004  U.S.                                                               
Geological Survey  (USGS) additional 100-200 Tcf  in undiscovered                                                               
potential resources   has been  identified, he  said.  Of  the 35                                                               
Tcf, BP  and ConocoPhillips  are 50  percent leaseholders  of the                                                               
resource.    Additionally,  BP   and  ConocoPhillips  operate  99                                                               
percent  of the  North Slope  production today.   He  pointed out                                                               
that the  Oooguruk field, operated  by Pioneer  Natural Resources                                                               
Company, is the  only field currently in  production not operated                                                               
by BP  and ConocoPhillips.   Thus, Denali producers  provide over                                                               
30 years  of operating expertise on  the North Slope.   These two                                                               
companies  built  the  North Slope  infrastructure  and  the  gas                                                               
treatment plants along the pipeline corridor, he advised.                                                                       
                                                                                                                                
MR. FACKRELL  reviewed the regulatory  framework in the  U.S. and                                                               
Canada [slide  4].   He explained that  the proposed  pipeline is                                                               
controlled by  the federal governments'  in the U.S.  and Canada.                                                               
In the U.S.,  FERC is responsible for  authorizing and regulating                                                               
the project.   The AGIA  is not an  exclusive license to  build a                                                               
pipeline; Denali can proceed outside AGIA, and is doing so.                                                                     
                                                                                                                                
MR.  FACKRELL  related  that  in  Canada,  Denali  is  using  the                                                               
National  Energy Board  (NEB) process  which incorporates  all of                                                               
the modern environmental  regulations and is open  to any project                                                               
proponent.  He  remarked that the NEB and FERC  have a history of                                                               
working together to approve cross-border energy projects.                                                                       
                                                                                                                                
MR. FACKRELL  focused on the  Denali Terms of  Service summarized                                                               
on slide  5 of his  PowerPoint presentation.   Denali is  an open                                                               
access pipeline.   "That's the  law," he said.   FERC was  here a                                                               
year  ago  and  testified  to  that  fact."    Denali's  offering                                                               
includes a  gas treatment  plant (GTP)  and Denali  brings unique                                                               
expertise to building  the GTP.  He recognized  the importance to                                                               
Alaskans  for distance  sensitive  transportation  for local  use                                                               
that Denali  will use.   He remarked  that Denali will  use FERC-                                                               
mandated rolled-in  rates, which  is part  of the  FERC governing                                                               
process.  The  Denali pipeline design will  provide for efficient                                                               
expandability  and   will  solicit   shippers  every   two  years                                                               
regarding pipeline  expansion.   He stressed the  importance that                                                               
North  Slope exploration  occurs, that  35 Tcf  will not  provide                                                               
enough gas for  a 30-year pipeline, and that  additional gas will                                                               
be needed.   Denali  will have  at least  five offtake  points in                                                               
Alaska and will provide the necessary offtake points in Canada.                                                                 
                                                                                                                                
MR. FACKRELL  reviewed Denali's progress and  key accomplishments                                                               
[slide 6].   Denali has  spent $100 million  in the past  year to                                                               
move the project forward.   Denali has mobilized its project team                                                               
and  has a  core team  of 80  to 90  people located  primarily in                                                               
Anchorage   or  in   its  Canadian   headquarters.     At  FERC's                                                               
suggestion, Denali pre-filed  with FERC over a year  ago, and has                                                               
forged  an extremely  beneficial  working  relationship.   Denali                                                               
also filed the right-of-way on  Alaska lands with the U.S. Bureau                                                               
of  Land  Management (BLM),  which  represents  one-third of  the                                                               
proposed pipeline  route as well  as an interactive  process with                                                               
BLM.                                                                                                                            
                                                                                                                                
11:52:53 AM                                                                                                                   
                                                                                                                                
MR. FACKRELL  pointed out Denali's  successful 2008  summer field                                                               
program, which  primarily focused  on the corridor  between Delta                                                               
Junction  and  the  Canadian  border.    Work  was  performed  on                                                               
hydrology  studies,   archeological  surveys,   and  contaminated                                                               
sites.  Additionally, Denali held  extensive outreach programs in                                                               
Alaska  and  Canada.     He  highlighted  workforce  development,                                                               
including that Denali partnered  with the University of Fairbanks                                                               
(UAF)  on  an archeological  assistance  program.   The  surveyor                                                               
apprentices  completing the  program can  be used  by anyone,  he                                                               
noted.  Denali held extensive  meetings with Alaskan and Canadian                                                               
government  officials.     Finally,  Denali  awarded   two  major                                                               
contracts,  with  Fluor/Worley  Parsons  for the  GTP,  and  with                                                               
Bechtel  for  the  main  proposed pipeline  to  assist  with  the                                                               
engineering cost estimate and the compressor station design.                                                                    
                                                                                                                                
MR. FACKRELL  listed many of the  contractor companies supporting                                                               
Denali's work [slide  7].  He characterized the Denali  team as a                                                               
"top-notch,  class A  team, Alaskans,  Arctic experience,  Alaska                                                               
experience,   and   two   worldwide  engineering   companies   to                                                               
supplement that.  We're poised for success."                                                                                    
                                                                                                                                
11:54:45 AM                                                                                                                   
                                                                                                                                
MR. FACKRELL  stated that Denali  is focused on the  initial open                                                               
season [slide  8].   Denali's 2009 program  is much  broader than                                                               
its  2008  program,  such  that  Denali  will  conduct  the  work                                                               
necessary for  the 2010 open  season.   Denali is focused  on the                                                               
cost  estimate, which  is a  critical component  of the  project,                                                               
since it is  vitally important to convey  confidence to potential                                                               
shippers that Denali  understands the costs, given  the degree of                                                               
definition  currently  available'  and using  the  assistance  of                                                               
contractors like  Fluor/Worley Parsons  and Bechtel.   Denali has                                                               
ongoing work with agencies such as  DNR, FERC, NEB, the Office of                                                               
the  Federal Coordinator  (OFC),  and BLM.    Denali is  actively                                                               
working with the FERC on  its pre-file application; FERC requires                                                               
a third-party  environmental contractor,  and Denali  is actively                                                               
working on  a contract  with Argon  National Laboratories,  to be                                                               
the specified FERC contractor.                                                                                                  
                                                                                                                                
MR.  FACKRELL offered  that Denali  has engaged  in conversations                                                               
with Department  of Transportation  & Public  Facilities (DOT/PF)                                                               
because  the infrastructure  will  need to  be  updated for  this                                                               
pipeline project, including roads,  ports, highways, and the rail                                                               
system.    Additionally,  Denali  is involved  in  a  field  work                                                               
program focused  on Canada.   He restated efforts taken  with the                                                               
Alaska  Workforce Development.   Stakeholder  engagement activity                                                               
continues  in  Alaska,  and  BP  and  ConocoPhillips  have  large                                                               
operations in Canada, which assists  with First Nations and other                                                               
aboriginal groups along the proposed corridor.                                                                                  
                                                                                                                                
MR. FACKRELL concluded  by reiterating that Denali's  focus is on                                                               
the  initial 2010  open season  and the  cost estimate  that will                                                               
provide confidence to  shippers [slide 9].   Denali is positioned                                                               
for a  superior commercial offering,  which will benefit  the two                                                               
owners, the  citizens of  Alaska, and the  state.   He emphasized                                                               
that Denali does not require  outside funding, and Denali's long-                                                               
term focus  protects it from  disruptions by the  current economy                                                               
and competition.                                                                                                                
                                                                                                                                
11:58:33 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  DAHLSTROM asked  whether satisfactory  agreements                                                               
have been reached with all of  the First Nations groups along the                                                               
proposed route.                                                                                                                 
                                                                                                                                
MR. FACKRELL  characterized the work  with First  Nations parties                                                               
as a  process.  Although  Denali has not reached  agreements with                                                               
all of the parties, it feels good about the progress.                                                                           
                                                                                                                                
11:59:17 AM                                                                                                                   
                                                                                                                                
MR. FACKRELL  in response to  Co-Chair Millett, pointed  out that                                                               
all  pipeline  companies  have testified  to  the  importance  of                                                               
fiscal stability; that shippers want to know the fiscal regime.                                                                 
                                                                                                                                
MR. FACKRELL,  in response  to Co-Chair Johnson,  said that  as a                                                               
pipeline company, Denali  will not be negotiating  with the state                                                               
on fiscal certainty; that is the role of shippers and producers.                                                                
                                                                                                                                
MR.  FACKRELL, in  response to  Representative Ramras,  commented                                                               
that Denali believes it has a  level playing field, and finds DNR                                                               
cooperative and  the people qualified to  review its application.                                                               
Although  Denali does  not currently  have a  signed reimbursable                                                               
services  agreement (RSA),   Denali  is moving  forward with  the                                                               
process, and  is continuing to  perform field work.   Denali does                                                               
have  an RSA  with BLM  for the  filing on  the right-of-way,  he                                                               
noted.                                                                                                                          
                                                                                                                                
12:02:27 PM                                                                                                                   
                                                                                                                                
MR.  FACKRELL, in  response to  Representative Ramras,  responded                                                               
that  there is  only enough  natural  gas available  for one  gas                                                               
pipeline.  He said, "Let's make  sure we're clear on that.  There                                                               
will not be two pipelines  built."  Denali has held conversations                                                               
with  FERC about  the  process,  and FERC  intends  to allow  two                                                               
applications to move forward since  producers could commit gas to                                                               
two competing  gas pipeline companies.   However,  economics will                                                               
win out  in the end  and once financial commitments  are secured,                                                               
only one pipeline will go forward.                                                                                              
                                                                                                                                
REPRESENTATIVE RAMRAS  pointed out that in  Oregon five pipelines                                                               
and  two  LNG facilities  have  all  been permitted,  but  Oregon                                                               
recognizes that only one LNG and one pipeline will be built.                                                                    
                                                                                                                                
12:03:40 PM                                                                                                                   
                                                                                                                                
MR. FACKRELL, in response to  Co-Chair Johnson, offered to put on                                                               
the  record  Denali's  independence   from  the  producers.    He                                                               
referred back to  slide 5, stating that Denali is  an open access                                                               
pipeline, according to the law.  He said:                                                                                       
                                                                                                                                
     When  the Natural  Gas  Act for  Alaska  was passed  in                                                                    
     2004, it  designated FERC to set  up a set of  rules to                                                                    
     govern this  pipeline and conduct  an open season.   As                                                                    
     part  of  that  we  have to  be  separate,  a  distinct                                                                    
     entity.    We  have  to function  separately  from  the                                                                    
     shippers.   And that is what  we are in the  process of                                                                    
     doing  right now,  making sure  we  are compliant  with                                                                    
     that, and  it is our intent  when we go to  open season                                                                    
     that we will be able to  pass the muster on FERC rules,                                                                    
     but  FERC  is  going  to be  very  careful  about  that                                                                    
     governance  piece  and  ensure   that  no  one  has  an                                                                    
     opportunity, our  two owners don't have  an opportunity                                                                    
     on  shipping  side  beyond any  potential  shipper  out                                                                    
     there.                                                                                                                     
                                                                                                                                
CO-CHAIR  JOHNSON  stated  that  Denali  has  partners  that  are                                                               
producers.    TransCanada  has  a partner  that  is  a  producer,                                                               
providing information to them on the 2002 study.                                                                                
                                                                                                                                
12:06:13 PM                                                                                                                   
                                                                                                                                
MR. FACKRELL, in response to  Co-Chair Johnson, responded that in                                                               
2001-2002  the  producers,  ExxonMobil, BP,  and  ConocoPhillips,                                                               
performed  a  study  for  about $125  million  over  an  18-month                                                               
period.   All  three  producers have  proprietary  rights on  the                                                               
information and can  share it.  Denali has  held that information                                                               
since Denali was formed, which is  similar to TAPS.  Thus, Denali                                                               
has used  the study for  over a year  to build its  cost estimate                                                               
and work  program, including updates.   In fact,  Denali expended                                                               
effort to  update its cost  estimate to give  shippers confidence                                                               
on the  overall project  cost.  In  further response  to Co-Chair                                                               
Johnson, Mr. Fackrell advised that  the original study cost about                                                               
$125  million, but  he  was uncertain  of the  cost  of the  TAPS                                                               
study.                                                                                                                          
                                                                                                                                
12:07:32 PM                                                                                                                   
                                                                                                                                
MR.  FACKRELL,  in response  to  Co-Chair  Johnson, advised  that                                                               
every  piece  of the  tariff  is  subject  to FERC's  review  and                                                               
approval;  FERC will  analyze whether  the tariff  is being  paid                                                               
twice.                                                                                                                          
                                                                                                                                
12:08:47 PM                                                                                                                   
                                                                                                                                
CLAIRE  FITZPATRICK,   Senior  Vice-President,   Chief  Financial                                                               
Officer,  BP  Exploration (Alaska)  Inc.  (BP),  stated that  she                                                               
recently  assumed responsibilities  for upstream  gas activities.                                                               
She represents  BP as a  potential shipper and leaseholder.   She                                                               
provided a  shipper's perspective on regulations,  shipping, open                                                               
season, and  ExxonMobil's joining  TransCanada.  She  stated that                                                               
FERC requires  separation of  interest from  pipeline activities,                                                               
which  means  that  selling  and   shipping  activities  must  be                                                               
separated from  direct or indirect  interest in a pipeline.   She                                                               
cannot  discuss  Denali  as  a legal  entity,  but  just  matters                                                               
related  to  potential  shipper and  leaseholder.    Her  primary                                                               
objective is  to monetize  the gas, which  needs to  be economic.                                                               
Since BP is also an operator  at Prudhoe Bay, BP has requirements                                                               
and agreements  with working  interest owners  to ensure  that as                                                               
information is  shared with  TransCanada, ExxonMobil,  or Denali,                                                               
that it  is shared  on an  equitable and  unbiased basis  and the                                                               
working interest  owners must be  made aware of  the information,                                                               
as well.  As a  shipper BP continually evaluates opportunities to                                                               
monetize  gas, and  to  identify ways  to  eliminate or  decrease                                                               
identified  risks.   The Alaska  gas project  has many  risks and                                                               
many  will be  borne  by the  shippers.   She  reviewed four  key                                                               
risks:   actual presence of the  gas, market value of  gas, costs                                                               
associated  with  the   gas  in  terms  of   tariff,  and  fiscal                                                               
framework.                                                                                                                      
                                                                                                                                
MS. FITZPATRICK  discussed the actual presence  of gas, recalling                                                               
that  35 Tcf  was previously  mentioned, which  is not  enough to                                                               
fill the pipeline for  30 years.  She said BP's  risk is how much                                                               
gas is available, and what commitment  BP will make.  She related                                                               
that  BP has  observed huge  volatility of  gas not  only in  oil                                                               
prices but  gas prices in the  market value of gas.   However, BP                                                               
must view selling  gas in a market of 2020  and beyond in Alaska,                                                               
Canada, Lower 48,  and possibly broader than that if  LNG is also                                                               
considered.   Thus,  the  risk analysis  is  much different  when                                                               
considering longer term versus shorter term gas sales.                                                                          
                                                                                                                                
MS. FITZPATRICK, with  respect to costs associated  with the gas,                                                               
stated  that these  costs pose  a  large impact,  and range  from                                                               
combined  capital and  operating  costs, which  are  paid by  the                                                               
shipper in the form of tariff.                                                                                                  
                                                                                                                                
MS. FITZPATRICK,  with respect to  fiscal framework,  stated that                                                               
tax  and tax  stability are  important to  BP, recalling  similar                                                               
words  expressed by  other speakers  today as  predictability and                                                               
durability.  BP  has not approached the state with  what BP would                                                               
need to  make this project viable,  since it is based  on ongoing                                                               
analysis.  All of these  risks must be taken under consideration,                                                               
and BP must arrive at what is  an acceptable risk as a shipper in                                                               
order  to  make  the  commitment.     She  restated  that  BP  is                                                               
continuing to make those assessments.                                                                                           
                                                                                                                                
12:14:24 PM                                                                                                                   
                                                                                                                                
CO-CHAIR  JOHNSON inquired  as  to the  point at  which  BP as  a                                                               
shipper   will  determine   whether  the   fiscal  framework   is                                                               
appropriate.                                                                                                                    
                                                                                                                                
MS. FITZPATRICK  responded that all  scenarios will  be reviewed;                                                               
that it is  a balance between must-haves and  need-to-haves.  She                                                               
related that once BP gets to  open season and reviews the initial                                                               
package, BP  will assess the  quality of the engineering  and the                                                               
risk and  variables.  If  that starts to  eliminate a lot  of the                                                               
risks,  then   the  total  acceptable  risk   begins  to  change.                                                               
Currently,  BP runs  various scenarios  to frame  up ideas  of at                                                               
what point does the project break.   She speculated that BP would                                                               
likely  be ready  to begin  discussions, ahead  of receiving  the                                                               
full initial open season package.                                                                                               
                                                                                                                                
CO-CHAIR  JOHNSON asked  for clarification  of the  timeframe for                                                               
commitment of gas.                                                                                                              
                                                                                                                                
MS.  FITZPATRICK  FERC  answered   that  FERC  will  specify  the                                                               
timetable, but she recalled the preferred timeframe is 90 days.                                                                 
                                                                                                                                
CO-CHAIR JOHNSON  in terms of  timing, when the state  would hold                                                               
discussions on the fiscal stability.                                                                                            
                                                                                                                                
MS. FITZPATRICK  related that  after BP  reviews the  open season                                                               
packet, and  assuming it  is acceptable,  BP would  then indicate                                                               
that  it was  prepared  to  make a  commitment  based on  certain                                                               
conditions, and  fiscal stability  is likely to  be one  of those                                                               
conditions.                                                                                                                     
                                                                                                                                
MS.  FITZPATRICK,  in  further   response  to  Co-Chair  Johnson,                                                               
offered that BP would prefer  to have fiscal stability ironed out                                                               
prior  to committing  gas, but  she is  not sure  it is  a viable                                                               
outcome.                                                                                                                        
                                                                                                                                
12:19:33 PM                                                                                                                   
                                                                                                                                
MS. FITZPATRICK described the open  season process, such that all                                                               
open seasons  will be treated  equitably, that BP  is indifferent                                                               
to pipe ownership,  but its interest would be to  obtain the best                                                               
option for  BP.  The  firm transportation commitment  decision is                                                               
huge since it  means that BP will commit a  certain volume of gas                                                               
for a  certain timeframe,  on the basis  that conditions  will be                                                               
resolved  to everyone's  satisfaction.   The  firm commitment  is                                                               
made  up front,  at which  time BP  accepts identified  risks and                                                               
parameters,  including that  BP  may commit  to  unknown gas  and                                                               
price.  During the open season  BP will assess the quality of the                                                               
work and  best estimates  will be  made and  built into  the risk                                                               
assessment.   With respect  to the  impact of  ExxonMobil joining                                                               
TransCanada,  ExxonMobil brings  experience, which  suggests that                                                               
quality  brought to  open season  will be  higher.   Furthermore,                                                               
competition  is  good  for  the shipper  since  it  provides  the                                                               
shipper with options.   Ultimately, BP will make  the choice that                                                               
is best for its shareholders.                                                                                                   
                                                                                                                                
12:22:11 PM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  RAMRAS  recalled   Mr.  Massey's  testimony  that                                                               
ExxonMobil desires ownership  in proportion to its  volume of gas                                                               
and asked if that is a requirement of BP.                                                                                       
                                                                                                                                
MS. FITZPATRICK  responded that BP  assesses risk  and absolutely                                                               
wants  interest  in  a  pipeline  equal  to  its  own  interests.                                                               
However,  BP has  instances  in which  it  ships product  through                                                               
someone  else's  pipeline.    Thus,  it  really  depends  on  the                                                               
circumstances.                                                                                                                  
                                                                                                                                
12:23:16 PM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  RAMRAS  remarked  that  ExxonMobil  is  tough  in                                                               
business and  dynamic.  He  posed a scenario in  which ExxonMobil                                                               
engages in  a discussion regarding durable  and predictable terms                                                               
and enters AGIA as a builder.   In that situation its interest in                                                               
achieving a  low tariff would  be beneficial to  other producers.                                                               
Thus, if  terms are acceptable  to ExxonMobil, would BP  would be                                                               
more or less likely to join the project.                                                                                        
                                                                                                                                
MS.  FITZPATRICK answered  that BP  would perform  an independent                                                               
assessment of fiscal terms.   In the scenario described, she said                                                               
she hopes  that BP would  have been  a party to  the negotiations                                                               
for fiscal  terms, and if so,  the terms may be  favorable to the                                                               
company.   However,  the fact  that the  terms are  good for  one                                                               
party is not  a guarantee that it is good  for another, since the                                                               
pipeline companies are independent.                                                                                             
                                                                                                                                
REPRESENTATIVE  RAMRAS  surmised  that  if BP  is  successful  in                                                               
negotiating  terms  with  the Palin  Administration,  similar  to                                                               
those  negotiated  with  the Murkowski  Administration,  that  BP                                                               
would review the four categories of risk.                                                                                       
                                                                                                                                
MS. FITZPATRICK noted  her agreement.  While the  terms under the                                                               
Murkowski  Administration were  more favorable  than the  current                                                               
terms, BP would still need to evaluate them, she said.                                                                          
                                                                                                                                
12:26:41 PM                                                                                                                   
                                                                                                                                
MS. FITZPATRICK, in response  to Representative Coghill, answered                                                               
that FERC  sets out  requirements for  separation of  function to                                                               
ensure that  shippers without  affiliates and  pipeline companies                                                               
without  connections to  producers  receive fair  treatment.   In                                                               
terms   of  FERC's   assessment  of   bids,  the   economics  are                                                               
considered, but  multiple risks  are involved  and BP  performs a                                                               
total risk assessment.                                                                                                          
                                                                                                                                
REPRESENTATIVE  COGHILL recalled  the  reference by  TransCanada,                                                               
BP, and Denali about their  responsibility to their shareholders.                                                               
He stated his interest in  knowing the "tipping point," realizing                                                               
that both risk and return on investment are considerations.                                                                     
                                                                                                                                
MS. FITZPATRICK  agreed that  it is  about return  on investment,                                                               
but  she would  not be  performing  her duty  if BP  shareholders                                                               
thought  the  investment  into an  affiliate  company  would  not                                                               
produce a better return.                                                                                                        
                                                                                                                                
CO-CHAIR  JOHNSON  pointed out  that  the  responsibility to  the                                                               
stockholder  is  the same,  that  it  is sometimes  difficult  to                                                               
understand the  separation.  He  remarked that FERC has  made the                                                               
clear distinction  so the  stockholders do not  need to  make the                                                               
determination.                                                                                                                  
                                                                                                                                
12:29:13 PM                                                                                                                   
                                                                                                                                
MS. FITZPATRICK, in response to  Co-Chair Millett, responded that                                                               
she cannot  comment whether BP  is talking to any  other pipeline                                                               
companies,  since  she  is  not a  party  to  the  conversations.                                                               
However, as  a shipper, she  said that BP is  holding discussions                                                               
with  TransCanada and  Denali and  is making  it clear  that they                                                               
each have access to exactly the same information.                                                                               
                                                                                                                                
12:30:29 PM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  DAHLSTROM asked  if  ten years  of tax  stability                                                               
would be sufficient.                                                                                                            
                                                                                                                                
MS.  FITZPATRICK answered  that ideally  the producer  would like                                                               
tax stability for the timeframe of the commitment.                                                                              
                                                                                                                                
12:31:23 PM                                                                                                                   
                                                                                                                                
REPRESENTATIVE COGHILL surmised that  BP holds contracts on North                                                               
Slope operations in  Prudhoe Bay, and that gas  from those fields                                                               
will  be part  of  the open  season.   He  asked  how BP  manages                                                               
discussions  with  respect to  competing  interests  in the  unit                                                               
agreement.                                                                                                                      
                                                                                                                                
MS. FITZPATRICK  replied that  the agreement  used is  the actual                                                               
working  interest owner's  agreement and  the parties  must reach                                                               
agreement for  gas offtake, although multiple  scenarios exist to                                                               
do so.   While it  is managed through contractual  agreement, the                                                               
process can be very complicated.                                                                                                
                                                                                                                                
12:33:28 PM                                                                                                                   
                                                                                                                                
CO-CHAIR  JOHNSON suggested  that having  ExxonMobil joining  the                                                               
team must be helpful in terms of confidence of the shipper.                                                                     
                                                                                                                                
MS. FITZPATRICK agreed.                                                                                                         
                                                                                                                                
12:34:21 PM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  RAMRAS asked  whether discussions  and strategies                                                               
are  being  held  with ExxonMobil,  the  leaseholder,  to  obtain                                                               
fiscal certainty from the state.                                                                                                
                                                                                                                                
MS. FITZPATRICK replied  not at the moment.   In further response                                                               
to  Representative  Ramras,  she  said that  given  the  relative                                                               
recent announcement of ExxonMobil  joining with TransCanada, that                                                               
BP has not  had a conversation about the matter  so she could not                                                               
answer.                                                                                                                         
                                                                                                                                
12:35:52 PM                                                                                                                   
                                                                                                                                
CO-CHAIR MILLETT asked if BP,  the shipper, is holding discussion                                                               
with  TransCanada  about  joining  the  projects  together,  that                                                               
Alaskans would enjoy having one project moving forward.                                                                         
                                                                                                                                
MR.  FACKRELL  responded that  at  this  juncture Denali  is  not                                                               
holding discussions with TransCanada.   The Denali owners did not                                                               
file application under  AGIA because they did not  agree with the                                                               
terms, so  to join owners now  would be problematic.   In further                                                               
response to  Co-Chair Millett, she  said that Denali has  not yet                                                               
held discussions  with ExxonMobil,  the shipper,  but anticipates                                                               
it will  do so.   Denali wants  to insure proper  separation, and                                                               
plans to hold discussions with all shippers.                                                                                    
                                                                                                                                
12:37:50 PM                                                                                                                   
                                                                                                                                
WENDY KING, Director of External  Strategies, ANS Gas Development                                                               
Team, ConocoPhillips  Alaska, Inc. began  by stating that  she is                                                               
representing  ConocoPhillips   as  leaseholder   and  prospective                                                               
shipper.  ConocoPhillips is a major  owner of North Slope oil and                                                               
natural  gas leases,  and  is  the largest  oil  producer in  the                                                               
state, she pointed out.   First and foremost, ConocoPhillips will                                                               
seek the  best solution to  transport North Slope gas  to market,                                                               
and ConocoPhillips will remain engaged  and interested in all gas                                                               
pipeline projects.   She  characterized ConocoPhillips  as keenly                                                               
interested  in  a  gas  pipeline  project.   With  a  36  percent                                                               
ownership in  the Prudhoe Bay unit  and an interest in  the Point                                                               
Thomson  field,  ConocoPhillips  is  motivated  to  monetize  the                                                               
natural  gas  in  an  economically  viable  way.    Additionally,                                                               
ConocoPhillips  is one  of the  largest active  explorers in  the                                                               
state.   However, it is  not just the aspect  of ConocoPhillips's                                                               
portfolio.   Any  gas pipeline  will have  an implication  on the                                                               
life and  viability of all North  Slope assets, such that  if the                                                               
gas  pipeline  happens  and  extends  the  field  life,  it  will                                                               
increase  the opportunity  for more  oil  to flow  down the  TAPS                                                               
pipeline, and it will impact  the economic viability of satellite                                                               
fields.    It will  also  incentivize  oil and  gas  exploration.                                                               
Thus, as exploration  occurs for natural gas, more  oil is likely                                                               
to be found.                                                                                                                    
                                                                                                                                
12:40:48 PM                                                                                                                   
                                                                                                                                
MS. KING discussed a list of  economic drivers going into an open                                                               
season, beginning with the view  of long-term natural gas prices.                                                               
Each  company will  make assessments  spanning  a 20  to 30  year                                                               
timeframe  to  project natural  gas  prices  for  the life  of  a                                                               
potential project.   Another  economic driver  will be  to assess                                                               
the   natural  gas   that  is   available   to  ship,   including                                                               
deliverability  of the  gas -  the  volume, rate,  and length  of                                                               
time.    Typically, the  nature  of  the  terms of  the  shipping                                                               
commitment  are not  necessarily a  commitment to  ship gas,  but                                                               
merely a  commitment to pay a  toll, whether or not  gas actually                                                               
flows, and  represents a  risk borne by  shippers of  whether the                                                               
gas will  be there over  the specified timeframe.   Additionally,                                                               
ConocoPhillips  will  review  the transportation  costs  for  the                                                               
actual toll  to move gas  from the North  Slope to the  Lower 48.                                                               
The  fourth   economic  driver  includes  all   other  terms  and                                                               
transportation  fees, including  many  details.   One key  detail                                                               
will  be  the  term  or  the length  of  the  long-term  shipping                                                               
commitment.    Other  economic   drivers  include  the  financial                                                               
arrangements,  and how  that translates  into an  actual cost  of                                                               
service;  and  the  receipt  and  delivery  points,  and  whether                                                               
ConocoPhillips obtains  the best opportunity to  move natural gas                                                               
to  the   Lower  48  markets   for  the  lowest   cost  possible.                                                               
ConocoPhillips will  review all  tariff terms and  conditions, as                                                               
well as  all state and federal  tax and royalty structures.   She                                                               
noted the  potential for changes  to the federal  tax structures.                                                               
Thus, perspective  shippers will be engaged  in projecting actual                                                               
tax and  royalty terms  that will  apply over  the period  of any                                                               
shipping commitment.   She offered  her belief that the  risks of                                                               
the project remain high.                                                                                                        
                                                                                                                                
12:44:11 PM                                                                                                                   
                                                                                                                                
MS. KING,  in response to  Representative Ramras,  responded that                                                               
ConocoPhillips  views  ExxonMobil's  involvement  as  a  positive                                                               
step, and one  that will increase the quality of  an initial open                                                               
season.   She  differentiated between  the diverse  interests and                                                               
equity between ConocoPhillips and  ExxonMobil on the North Slope.                                                               
Thus,  ConocoPhillips will  be actively  engaged in  the pre  and                                                               
post-open   season  process,   and  will   continue  to   monitor                                                               
ExxonMobil and TransCanada in order  to ensure shareholder return                                                               
as  the prospective  pipeline project.   In  further response  to                                                               
Representative  Ramras,  she  answered  that  ConocoPhillips  has                                                               
indicated  numerous times  its willingness  to make  changes from                                                               
the previous  contract under the  Murkowski Administration.   She                                                               
offered  that  this   is  not  the  starting   point.    Instead,                                                               
ConocoPhillips views the current  situation as an open discussion                                                               
about the  terms and conditions  today as a  prospective shipper.                                                               
With  anticipated  updated  cost estimates,  ConocoPhillips  will                                                               
consider  the  appropriate  package  that  will  move  the  issue                                                               
forward,  being  mindful  that   there  are  broader  discussions                                                               
happening, not just with state taxes and royalties.                                                                             
                                                                                                                                
12:49:12 PM                                                                                                                   
                                                                                                                                
REPRESENTATIVE RAMRAS  offered his  view that ExxonMobil  was the                                                               
toughest   negotiator  during   the   negotiations  between   the                                                               
producers  and  the  state under  the  Murkowski  Administration.                                                               
ExxonMobil was  the producer that  demanded the hardest  terms at                                                               
the table,  while ConocoPhillips  exhibited the  most flexibility                                                               
in revisiting  terms.   It is interesting  to view  ExxonMobil on                                                               
the inside while BP and ConocoPhillips  are on the outside of the                                                               
current AGIA pipeline, he said.                                                                                                 
                                                                                                                                
12:50:27 PM                                                                                                                   
                                                                                                                                
CO-CHAIR  JOHNSON noted  his appreciation  for the  institutional                                                               
knowledge brought forth  today, the focus on the  future, and how                                                               
to bring forth  Alaska's natural gas resource into  a natural gas                                                               
pipeline.   He characterized that process  as problematic without                                                               
everyone on the same page.                                                                                                      
                                                                                                                                
12:53:27 PM                                                                                                                   
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being no further business  before the committees, the joint                                                               
meeting of the  House Resources Standing Committee  and the House                                                               
Special Committee on Energy was adjourned at 12:53 p.m.