ALASKA STATE LEGISLATURE                                                                                  
               HOUSE RESOURCES STANDING COMMITTEE                                                                             
                        February 8, 2012                                                                                        
                           1:03 p.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Eric Feige, Co-Chair                                                                                             
Representative Paul Seaton, Co-Chair                                                                                            
Representative Peggy Wilson, Vice Chair                                                                                         
Representative Alan Dick                                                                                                        
Representative Neal Foster                                                                                                      
Representative Bob Herron                                                                                                       
Representative Cathy Engstrom Munoz                                                                                             
Representative Berta Gardner                                                                                                    
Representative Scott Kawasaki                                                                                                   
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
All members present                                                                                                             
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
HOUSE JOINT RESOLUTION NO. 29                                                                                                   
Urging the  United States Department  of the Interior,  Bureau of                                                               
Land Management,  to plug  legacy wells  properly and  to reclaim                                                               
the legacy  well sites as  soon as  possible in order  to protect                                                               
the environment in the Arctic region.                                                                                           
                                                                                                                                
     - HEARD & HELD                                                                                                             
                                                                                                                                
HOUSE BILL NO. 9                                                                                                                
"An Act requiring the Joint  In-State Gasline Development Team to                                                               
report to the  legislature recommended changes to  state law that                                                               
are required to  enable or facilitate the  design, financing, and                                                               
construction of an in-state natural  gas pipeline so that the in-                                                               
state  natural  gas  pipeline is  operational  before  2016;  and                                                               
providing for an effective date."                                                                                               
                                                                                                                                
     - HEARD & HELD                                                                                                             
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
BILL: HJR 29                                                                                                                  
SHORT TITLE: BLM LEGACY OIL WELL CLEAN UP                                                                                       
SPONSOR(s): REPRESENTATIVE(s) MILLETT                                                                                           
                                                                                                                                
01/17/12       (H)       READ THE FIRST TIME - REFERRALS                                                                        
01/17/12       (H)       RES                                                                                                    
02/08/12       (H)       RES AT 1:00 PM BARNES 124                                                                              
                                                                                                                                
BILL: HB   9                                                                                                                  
SHORT TITLE: IN-STATE GASLINE DEVELOPMENT CORP                                                                                  
SPONSOR(s): REPRESENTATIVE(s) CHENAULT                                                                                          
                                                                                                                                
01/18/11       (H)       PREFILE RELEASED 1/7/11                                                                                
01/18/11       (H)       READ THE FIRST TIME - REFERRALS                                                                        
01/18/11       (H)       RES, FIN                                                                                               
02/06/12       (H)       RES AT 1:00 PM BARNES 124                                                                              
02/06/12       (H)       Heard & Held                                                                                           
02/06/12       (H)       MINUTE(RES)                                                                                            
02/08/12       (H)       RES AT 1:00 PM BARNES 124                                                                              
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
REPRESENTATIVE CHARISSE MILLETT                                                                                                 
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Testified as prime sponsor of HJR 29.                                                                    
                                                                                                                                
CATHERINE FOERSTER, Engineering Commissioner                                                                                    
Alaska Oil and Gas Conservation Commission (AOGCC)                                                                              
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Provided a PowerPoint presentation and                                                                   
testimony in support of HJR 29.                                                                                                 
                                                                                                                                
TED MURPHY, Deputy State Director of Resources                                                                                  
Division of Resources                                                                                                           
Alaska State Office                                                                                                             
U.S. Bureau of Land Management                                                                                                  
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Testified during the hearing on HJR 29.                                                                  
                                                                                                                                
RENA DELBRIDGE, Staff                                                                                                           
Representative Mike Hawker                                                                                                      
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION  STATEMENT:    During  the hearing  on  HB  9,  provided                                                             
answers  on  behalf of  Representative  Hawker,  sponsor, to  the                                                               
questions  that  were  posed  by  the  House  Resources  Standing                                                               
Committee on 2/6/12.                                                                                                            
                                                                                                                                
JOE DUBLER, Vice President                                                                                                      
Alaska Gasline Development Corporation (AGDC)                                                                                   
Director of Finance, Alaska Housing Finance Corporation (AHFC)                                                                  
Department of Revenue (DOR)                                                                                                     
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  During the hearing on HB 9, assisted in                                                                  
providing answers to questions posed by committee members during                                                                
the committee's 2/6/12 hearing on the bill.                                                                                     
                                                                                                                                
KIRSTEN SIKORA, Acting CEO                                                                                                      
Alaska Natural Gas Development Authority (ANGDA)                                                                                
Office of the Commissioner                                                                                                      
Department of Revenue (DOR)                                                                                                     
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  During the hearing on HB 9, discussed the                                                                
accomplishments of ANGDA.                                                                                                       
                                                                                                                                
SCOTT HEYWORTH, Chairman                                                                                                        
Board of Directors                                                                                                              
Alaska Natural Gas Development Authority (ANGDA)                                                                                
Office of the Commissioner                                                                                                      
Department of Revenue (DOR)                                                                                                     
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Expressed concerns with HB 9.                                                                            
                                                                                                                                
KAYE LAUGHLIN, Permitting Coordinator                                                                                           
Alaska Natural Gas Development Authority (ANGDA)                                                                                
Office of the Commissioner                                                                                                      
Department of Revenue (DOR)                                                                                                     
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  During the hearing on HB 9, outlined the                                                                 
specific work that ANGDA has completed.                                                                                         
                                                                                                                                
CORRIE YOUNG                                                                                                                    
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Expressed concern with HB 9.                                                                             
                                                                                                                                
JAMES FIELDS                                                                                                                    
Glennallen, Alaska                                                                                                              
POSITION STATEMENT:  Testified in opposition to HB 9.                                                                         
                                                                                                                                
MERRICK PEIRCE                                                                                                                  
Fairbanks, Alaska                                                                                                               
POSITION STATEMENT:  Testified in opposition to HB 9.                                                                         
                                                                                                                                
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
1:03:59 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  PAUL   SEATON  called  the  House   Resources  Standing                                                             
Committee meeting to order at  1:03 p.m.  Representatives Herron,                                                               
P. Wilson, Kawasaki,  Gardner, Feige, and Seaton  were present at                                                               
the  call to  order.   Representatives  Munoz,  Foster, and  Dick                                                               
arrived as the meeting was in progress.                                                                                         
                                                                                                                                
              HJR 29-BLM LEGACY OIL WELL CLEAN UP                                                                           
                                                                                                                                
1:04:17 PM                                                                                                                    
                                                                                                                                
CO-CHAIR SEATON announced that the  first order of business would                                                               
be  HOUSE  JOINT RESOLUTION  NO.  29,  Urging the  United  States                                                               
Department of  the Interior, Bureau  of Land Management,  to plug                                                               
legacy wells  properly and  to reclaim the  legacy well  sites as                                                               
soon  as possible  in order  to  protect the  environment in  the                                                               
Arctic region.                                                                                                                  
                                                                                                                                
1:05:15 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE CHARISSE MILLETT,  Alaska State Legislature, prime                                                               
sponsor,  predicted that  by bringing  up the  subject of  legacy                                                               
wells HJR  29 will result in  big impacts on the  state of Alaska                                                               
because  it will  lead  to discussions  and  agreements with  the                                                               
federal government about  the wells.  She  explained that between                                                               
1944  and  1981  approximately  136 wells  were  drilled  in  the                                                               
National Petroleum Reserve-Alaska (NPR-A).   Some were drilled by                                                               
the U.S.  Navy and some by  the U.S. Geological Survey.   Some of                                                               
the wells  are being  used as climate  change mechanisms,  but an                                                               
extraordinary  number of  these  wells have  not  been capped  or                                                               
mitigated at all.  This has caused  a lot of issues to arise with                                                               
the Alaska  Oil and Gas  Conservation Commission  (AOGCC) because                                                               
the wells pose a risk to both  wildlife and human life.  The well                                                               
sites  are unattractive  with  many barrels  around  them.   Some                                                               
wells can no  longer be found because they were  just bore holes,                                                               
or have  eroded, or have  [sunken] into lakes.   This is  a black                                                               
eye  on  Alaska even  though  those  wells  were drilled  by  the                                                               
federal government.   Therefore, HJR 29 urges the  U.S. Bureau of                                                               
Land Management  (BLM) to take  responsibility and  continue with                                                               
mitigation of the wells.                                                                                                        
                                                                                                                                
1:07:20 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  MILLETT said  she introduced  HJR 29  because the                                                               
squeaky wheel  gets the  grease.   There is  disagreement between                                                               
BLM and AOGCC regarding how many  wells have been capped, but she                                                               
said she thinks there are about  110 wells that are worrisome, 42                                                               
that  are  very  worrisome,  and  she  would  like  to  see  some                                                               
movement.  She conveyed that  according to the BLM, getting money                                                               
for this  type of  thing is difficult  to do,  especially without                                                               
the earmark process.   However, Alaskans and  the legislature can                                                               
take  a lead  in encouraging  Congress to  clean up  these wells.                                                               
Creative solutions have been proposed  to the BLM, such as giving                                                               
the land  to the State of  Alaska and then the  state would clean                                                               
up the  wells.  She  related that  some producers have  said they                                                               
would  take over  the mitigation  costs if  they could  lease the                                                               
land for exploration.                                                                                                           
                                                                                                                                
REPRESENTATIVE  MILLETT  reiterated  that  the  resolution  would                                                               
start a dialogue amongst Alaskans,  Congress, and BLM.  She would                                                               
like to see the wells capped,  mitigated, and [the land put] back                                                               
in the pristine condition that  the state relies on its producers                                                               
to do.   If any private  producer left wells like  these anywhere                                                               
in  Alaska, the  environmental groups  would be  screaming.   She                                                               
said she has  reached out to 24 environmental  groups urging them                                                               
to get  behind this cause, but  has had little feedback.   When a                                                               
"thimble  of oil"  is dropped  on the  North Slope  it becomes  a                                                               
front page  story, but  the NPR-A  wells have yet  to be  a front                                                               
page  story and  only two  articles have  been written  about the                                                               
issue.   Raising  awareness of  these  wells that  have not  been                                                               
remediated over the  past 60 years is a long  time in coming, and                                                               
it is sickening the way the lands have been left.                                                                               
                                                                                                                                
CO-CHAIR SEATON  concurred that  this is  an important  topic for                                                               
everyone.                                                                                                                       
                                                                                                                                
1:10:01 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  P.   WILSON  remarked   how  dare   [the  federal                                                               
government]  request Alaska  to do  things  when it  does not  do                                                               
those things itself.                                                                                                            
                                                                                                                                
REPRESENTATIVE  MILLETT  responded  that   this  is  in  Alaska's                                                               
backyard.   The federal government controls  and restricts Alaska                                                               
on every  aspect of  development in  the state,  yet this  is the                                                               
legacy that the federal government has left Alaska.                                                                             
                                                                                                                                
1:10:35 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE KAWASAKI thanked the  sponsor for bringing forward                                                               
the resolution.   In regard to the third [whereas]  on page 2, he                                                               
inquired whether any  of the unplugged legacy  wells have damaged                                                               
the surface vegetation, groundwater,  fish, land mammals, and sea                                                               
mammals.                                                                                                                        
                                                                                                                                
REPRESENTATIVE MILLETT replied that it  is hard to equate because                                                               
not  a lot  of travel  is done  on the  NPR-A.   The North  Slope                                                               
Borough  has taken  over  some of  the wells,  she  said, so  the                                                               
borough could  be contacted about  the wells, the  land transfer,                                                               
and the responsibility that now  lies with the borough.  However,                                                               
right now  it is out  in the wilderness.   There is  open diesel,                                                               
but no  one is  studying water contamination,  so the  effects on                                                               
wildlife will not be known until there is someone monitoring it.                                                                
                                                                                                                                
1:11:47 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GARDNER  thanked  the sponsor  for  raising  this                                                               
issue and  writing the  resolution.  She  shared that  this issue                                                               
has been  raised by  many legislators  when meeting  with federal                                                               
officials  in  Washington,  DC, but  the  officials  have  always                                                               
pleaded  poverty  and no  money  for  amelioration.   Noting  the                                                               
various people  to whom the  resolution would be sent,  she asked                                                               
whether there are others who  should receive the resolution given                                                               
that funding is what is needed.                                                                                                 
                                                                                                                                
REPRESENTATIVE MILLETT agreed  HJR 29 should go  to everyone that                                                               
can be thought  of, including every member of  Congress and every                                                               
environmental organization.   She said she would  be accepting of                                                               
any  suggestions from  Representative Gardner  regarding who  the                                                               
resolution should be sent to.                                                                                                   
                                                                                                                                
1:13:04 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  KAWASAKI asked  whether well  reclamation efforts                                                               
between the years 1944 and  1981 were not properly understood and                                                               
the requirements  under law at that  time were done, but  now the                                                               
wells are out  of compliance because the laws  have changed since                                                               
then.                                                                                                                           
                                                                                                                                
REPRESENTATIVE  MILLETT concurred,  but said  that just  as there                                                               
are  legacy wells  in other  areas of  the state  that have  been                                                               
drilled  since 1959,  the owner/operator  of that  well is  still                                                               
required to make the  well right to standards of today.   It is a                                                               
case of what is  good for one group of people  should be good for                                                               
all  groups of  people.    Anyone drilling  in  Alaska should  be                                                               
responsible for the legacy that it leaves.                                                                                      
                                                                                                                                
1:14:05 PM                                                                                                                    
                                                                                                                                
CO-CHAIR FEIGE,  observing that reporters  were in  the committee                                                               
room, said  that maybe  the press  would pick up  the story.   He                                                               
requested the sponsor  to review who she talked  to regarding the                                                               
aforementioned  land swap,  and presumed  that such  a land  swap                                                               
would include the subsurface as well as the surface.                                                                            
                                                                                                                                
REPRESENTATIVE  MILLETT  deferred  to  AOGCC  commissioner  Cathy                                                               
Foerster to  provide the  specific details  because it  was AOGCC                                                               
that was involved in these talks.                                                                                               
                                                                                                                                
1:14:48 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HERRON  suggested that  the resolution be  sent to                                                               
the  boards of  the Sierra  Club,  World Wildlife  Fund, and  all                                                               
other non-governmental  organizations (NGOs)  so that  the boards                                                               
of the organizations could decide, not the executive director.                                                                  
                                                                                                                                
REPRESENTATIVE  MILLETT  replied  that the  resolution  has  been                                                               
sent,  but sending  the actual  resolution,  if it  passes, is  a                                                               
great idea.   The more  that awareness  can be raised  about this                                                               
issue, the more likely it will become a front page story.                                                                       
                                                                                                                                
REPRESENTATIVE  HERRON  suggested  the committee  work  with  the                                                               
sponsor to add all of those NGOs to the mailing list.                                                                           
                                                                                                                                
CO-CHAIR  SEATON said  that could  come forward  as an  amendment                                                               
when the committee is considering amendments.                                                                                   
                                                                                                                                
1:16:36 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE P. WILSON  commented that a way to  get front page                                                               
news is  for the State of  Alaska to tell the  federal government                                                               
that it  will not  pay any  more money  until something  is done.                                                               
She  inquired whether  the  sponsor has  spoken  to the  governor                                                               
about how far he is willing to go regarding this issue.                                                                         
                                                                                                                                
REPRESENTATIVE   MILLETT  responded   that   the  Department   of                                                               
Environmental Conservation  (DEC) is  aware of  this issue.   She                                                               
allowed she  probably has not  given enough credit to  the Alaska                                                               
contingent of the  BLM, which has made this issue  its number one                                                               
priority.  She acknowledged that  the Alaska BLM's hands are tied                                                               
through the federal appropriations process  and said the wells in                                                               
Alaska are competing  with many other sites around  the U.S. from                                                               
the 1940s.   Unfortunately, the State of Alaska  cannot force the                                                               
federal  government to  abide by  state law  or pay  fines.   She                                                               
pointed  out that  offshore NPR-A  lease sales  have brought  the                                                               
federal government  $9 billion, but not  a cent of that  has been                                                               
re-appropriated back to this area.                                                                                              
                                                                                                                                
1:18:19 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  DICK  commented   that  if  environmental  groups                                                               
really  are  concerned about  cleaning  up  the environment  this                                                               
should be  a number one  priority.  But, if  environmental groups                                                               
are only concerned  about locking up land, then he  can see where                                                               
the land  is already locked up  and there really is  not a motive                                                               
to do  anything further here.   He said it  seems to him  that if                                                               
environmental  groups really  do get  on board  with the  sponsor                                                               
that is  proof that  they really  do care  about cleaning  up the                                                               
environment; if they  do not, then maybe their  motives should be                                                               
questioned.                                                                                                                     
                                                                                                                                
CO-CHAIR  SEATON  reminded  members  that  the  resolution  is  a                                                               
communication  from  the  legislature  and the  governor,  if  it                                                               
passes and  the governor signs it.   He said he  agrees it should                                                               
be  sent to  parties  that should  be  interested, but  questions                                                               
their named involvement in a resolution from the legislature.                                                                   
                                                                                                                                
REPRESENTATIVE   MILLETT  offered   her   appreciation  for   the                                                               
committee's consideration  of HJR 29  and said that  as awareness                                                               
is raised it ensures that folks  doing business in Alaska will be                                                               
expected to do  it right and within  the letter of the  law.  The                                                               
legacy wells  on the NPR-A send  a mixed message to  people about                                                               
how pristine  Alaska's environment  is.   Maybe the  squeaky well                                                               
will get the cap.                                                                                                               
                                                                                                                                
1:21:10 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  FOSTER  inquired  about the  estimated  cost  for                                                               
plugging an open well.                                                                                                          
                                                                                                                                
REPRESENTATIVE  MILLETT answered  that the  BLM has  provided two                                                               
numbers  - one  for complete  remediation and  one for  plugging.                                                               
These two different things can be  done separately or at the same                                                               
time, she explained,  but she does not have a  total number.  The                                                               
most concern  is just  plugging the  open wells.   The  last well                                                               
cost around $16  million for that one well one  time.  Ideas have                                                               
been floated that  a group of wells could be  plugged at the same                                                               
time which  would lower the cost  [per well].  However,  there is                                                               
no real handle on  the total package of what it  would cost to do                                                               
remediation.                                                                                                                    
                                                                                                                                
CO-CHAIR SEATON moved to testimony  from representatives of AOGCC                                                               
and BLM.                                                                                                                        
                                                                                                                                
1:22:59 PM                                                                                                                    
                                                                                                                                
CATHERINE FOERSTER, Engineering Commissioner,  Alaska Oil and Gas                                                               
Conservation  Commission  (AOGCC),   thanked  the  committee  for                                                               
allowing her  to testify  in support  of HJR 29.   She  said this                                                               
subject has  been dear  to her since  becoming a  commissioner in                                                               
2005.  Responding to  Representative Kawasaki's earlier question,                                                               
she said some  of these wells were drilled after  1959, which was                                                               
when   the  AOGCC   came  into   being  and   established  proper                                                               
requirements for  plugging and abandonment (P&A);  therefore, the                                                               
wells  drilled  after that  were  out  of compliance  with  AOGCC                                                               
regulations.   In  response  to  Representative Foster's  earlier                                                               
question, she  said that so far  the cost per well  for the BLM's                                                               
"attempts" to  P&A and  remediate has  averaged $4.6  million per                                                               
site.   She  noted  that  she is  saying  "attempts" because  BLM                                                               
claims to  have plugged and  abandoned and remediated  more wells                                                               
than AOGCC  acknowledges as having  been done properly,  so there                                                               
is  a  dispute in  this  regard.   Responding  to  Representative                                                               
Gardner's earlier  question, Ms.  Foerster said that  her sister-                                                               
in-law has suggested that today's  PowerPoint presentation be put                                                               
on YouTube  as a way to  reach more people.   Addressing Co-Chair                                                               
Feige's earlier question, she offered  her understanding that the                                                               
land swap was  grassroots to granite, so the  mineral and surface                                                               
rights were  swapped as  was the  remediation obligation.   Thus,                                                               
the North Slope Borough now has  responsibility for 33 of the 136                                                               
wells.                                                                                                                          
                                                                                                                                
1:25:29 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GARDNER, in  regard to  the [state]  leasing this                                                               
land for development, inquired what  confidence could be had that                                                               
the state  would not face a  similar situation for any  new wells                                                               
that  are  drilled,  given  the   previous  defiance  of  AOGCC's                                                               
regulations.                                                                                                                    
                                                                                                                                
MS. FOERSTER  replied that  AOGCC has not  had any  problems with                                                               
any  operators in  the state  of  Alaska other  than the  federal                                                               
government.  She added that  the federal government is not taking                                                               
out any leases from  AOGCC and has not come to  AOGCC in the last                                                               
year and a half for a permit to drill.                                                                                          
                                                                                                                                
1:26:36 PM                                                                                                                    
                                                                                                                                
MS. FOERSTER  began reviewing the  photographs in  her PowerPoint                                                               
presentation,  explaining  that  between the  mid-1940s  and  the                                                               
early  1980s the  federal government  drilled  numerous wells  in                                                               
northern Alaska to test the  viability of oil and gas development                                                               
in the arctic  environment.  She said these legacy  wells are all                                                               
in the  western North Slope,  an area with geography  and biology                                                               
like that of  the Arctic National Wildlife Refuge  (ANWR).  While                                                               
the area the wells are in  is called a national petroleum reserve                                                               
rather than a  national wildlife refuge, that does  not make what                                                               
has happened there okay.                                                                                                        
                                                                                                                                
MS.  FOERSTER related  that the  U.S. Bureau  of Land  Management                                                               
(BLM),  within the  U.S. Department  of Interior,  is the  agency                                                               
that operates  these wells.   While the  BLM is not  the operator                                                               
that drilled  the wells, it  has been assigned  responsibility by                                                               
the federal government to manage  these wells.  Essentially every                                                               
one  of the  136 wells  has been  out of  compliance with  Alaska                                                               
regulations at  one time or another  and most of them  still are.                                                               
Given  the condition  of these  wells, review  of the  applicable                                                               
federal regulations  would likely reveal  that they are  not even                                                               
in compliance  with the regulations  of the entity that  owns and                                                               
manages them.                                                                                                                   
                                                                                                                                
1:28:09 PM                                                                                                                    
                                                                                                                                
MS. FOERSTER  prefaced that  she will be  covering only  the most                                                               
troubling  issues, not  every issue,  that AOGCC  has with  these                                                               
wells.   Displaying the photo  labeled "Solid waste  primarily in                                                               
the form of  empty drums litter the area around  Skull Cliff Core                                                               
Test," she  pointed out that the  objects in the picture  are not                                                               
caribou or  musk ox, but  rusting barrels  and drums.   While the                                                               
BLM says there is insufficient  budget to clean up these hundreds                                                               
of  rusting  drums,  it  has  a  big  enough  budget  to  rent  a                                                               
helicopter  to fly  out  and take  pictures of  the  drums.   She                                                               
suggested that  the next time the  BLM is out taking  pictures it                                                               
should bring  along a  big net,  gather up  the drums,  and carry                                                               
them out.   Additionally, she  continued, while the BLM  does not                                                               
have enough  money to clean up  its mess, it has  enough money to                                                               
write a report about it; this  picture and the others she will be                                                               
showing  are taken  from a  BLM  report that  used to  be on  the                                                               
agency's web site.                                                                                                              
                                                                                                                                
MS.  FOERSTER urged  that as  members view  these pictures,  they                                                               
consider the  hypocrisy of the  federal government in  wanting to                                                               
protect the  Arctic National Wildlife  Refuge from the  very sort                                                               
of mess that  the federal government has caused,  and is allowing                                                               
to continue, elsewhere in Alaska.                                                                                               
                                                                                                                                
1:29:46 PM                                                                                                                    
                                                                                                                                
MS. FOERSTER  allowed that to  be fair to the  federal government                                                               
and current administration, the legacy  wells have been a problem                                                               
since  the middle  of the  last century  and are  not solely  the                                                               
fault  of  the current  administration.    However, because  this                                                               
administration is the  only one in place now, it  is the only one                                                               
that the  state can hold  accountable.  Also,  to be fair  to the                                                               
Alaska BLM folks  who are Alaskans too, she said  she thinks that                                                               
they would  like to clean  up the mess  as well, but  their hands                                                               
are  tied by  their meager  annual  budget of  about $1  million,                                                               
which enables  them to write a  report and take pictures  and not                                                               
much else.   However, she stressed,  she is not going  to cut the                                                               
federal  government any  slack because  it takes  in billions  of                                                               
dollars from  Alaska lease  sales and some  of that  money should                                                               
come  back to  Alaska to  fix this  mess.   She shared  that when                                                               
making this presentation to the  Ground Water Protection Council,                                                               
a group  of state  and federal regulators  from across  the U.S.,                                                               
she asked  that people in  the audience  stand up if  the picture                                                               
depicted  a   proper  P&A  and   remediate;  no   one,  including                                                               
representatives of the BLM, stood up for any of the pictures.                                                                   
                                                                                                                                
1:31:11 PM                                                                                                                    
                                                                                                                                
MS. FOERSTER,  moving to the  photo labeled "North Simpson  #1 is                                                               
partially submerged  in the  summer," stated  that in  Alaska the                                                               
proper plugging and  abandonment of wells is  governed by Article                                                               
2 of  AOGCC regulations.   The purpose  of properly  plugging and                                                               
abandoning  wells  includes  public  safety,  protection  of  the                                                               
environment, and  protection of sources  of drinking water.   She                                                               
asked, rhetorically,  whether anyone would  want to take  a drink                                                               
from the lake in the photo.                                                                                                     
                                                                                                                                
MS. FOERSTER  stated that  proper plugging  and abandonment  of a                                                               
well  includes sufficient  downhole  cement and  plugs to  ensure                                                               
that  underground fluids  cannot migrate.   With  few exceptions,                                                               
none of  the [136] legacy  wells complies with  this requirement.                                                               
Turning to the  photo labeled "Simpson Core #29,"  she noted that                                                               
the well  is open to  the surface with  no downhole plugs  at all                                                               
and with  no wellhead.   The mud or  diesel that was  probably in                                                               
the well at  one time has likely gone into  the environment.  The                                                               
earlier  question about  whether  there has  been  damage to  the                                                               
environment can be  answered by looking at the  pictures of these                                                               
wells.   Several of the wells  were left filled with  diesel, she                                                               
said, and  she thinks this  is one of  them, although she  is not                                                               
sure.                                                                                                                           
                                                                                                                                
1:32:25 PM                                                                                                                    
                                                                                                                                
MS.  FOERSTER,  displaying  the photo  labeled  "Light  trash  is                                                               
present in the  seep between Cores #30 and  #30A," explained that                                                               
the well was  drilled in a seep,  so the oil on the  surface is a                                                               
naturally occurring seep.   Proper plugging and  abandonment of a                                                               
well  requires that  all underground  pipe be  cut off  five feet                                                               
below ground level so that  it cannot create an excavation hazard                                                               
or  become a  problem  during subsidence  or  other normal  earth                                                               
movement.   With  few exceptions,  she said,  none of  the legacy                                                               
wells complies with this requirement.                                                                                           
                                                                                                                                
MS. FOERSTER,  moving to the  photo labeled "Awuna  wellhead with                                                               
exposed wooden  pilings and Styrofoam," stated  that this picture                                                               
has been used in mailers  and fundraisers opposing development of                                                               
the Arctic National  Wildlife Refuge.  She said  the oil industry                                                               
was probably  blamed for this  well and  this is another  part of                                                               
the legacy  that these  wells are leaving  for Alaska.   Properly                                                               
plugging and  abandonment of a  well requires  sufficient surface                                                               
remediation that the site blends  in with the natural vegetation,                                                               
and within  a few seasons  there should be no  surface indication                                                               
of  a  well's location.    Many  of  the  legacy well  sites  are                                                               
permanent  eyesores littered  with rotting  wood, rusting  metal,                                                               
and other  debris.   However, because the  legacy wells  have not                                                               
been  properly plugged,  those wells  that  are re-vegetated  are                                                               
potentially  more serious  downhole  mechanical integrity  issues                                                               
because they  are out of  site and out  of mind but  not secured.                                                               
She said the helicopter shown  in this picture re-emphasizes that                                                               
the BLM has enough money to rent helicopters.                                                                                   
                                                                                                                                
1:33:52 PM                                                                                                                    
                                                                                                                                
MS.  FOERSTER  pointed  out  that   the  delay  in  plugging  and                                                               
abandonment has  caused at least  three of  the wells to  be lost                                                               
due to subsidence  and other normal earth movement.   The BLM has                                                               
taken these wells  off its concern list because it  can no longer                                                               
find them, she said.  Two of the  wells are at the bottom of what                                                               
subsidence and snowmelt have turned  into lakes and the third has                                                               
been buried  by a landslide.   Additionally, wells can  simply be                                                               
no longer found and there is  no explanation for why.  Postponing                                                               
the abandonment of these wells  simply puts the remainder of them                                                               
at risk of also becoming lost.   Losing a well does not mean that                                                               
it is no longer a  mechanical integrity or environmental concern;                                                               
it  is just  one that  cannot be  seen.   She explained  that the                                                               
[Awuna well] is  on its way to being lost  as the subsidence lake                                                               
develops.   How long before it  is lost, she asked,  and how much                                                               
will it cost to find and fix it after that happens.                                                                             
                                                                                                                                
MS. FOERSTER,  turning to the  photo labeled "East Simpson  #2 is                                                               
partially  submerged  during the  spring  thaw,"  noted that  the                                                               
question  with this  legacy well  is how  long will  it take  for                                                               
natural  subsidence to  submerge  this site  completely and  what                                                               
will be the cost to find it and fix it in the middle of a lake.                                                                 
                                                                                                                                
1:35:15 PM                                                                                                                    
                                                                                                                                
MS. FOERSTER, displaying the photo  labeled "Kaolak #1 with cabin                                                               
on  the  drill pad,"  asserted  that  allowing these  unsafe  and                                                               
unsightly wells  to litter Alaska's wilderness  while threatening                                                               
both   human  safety   and  the   environment  is   unacceptable.                                                               
Nonetheless, BLM  has properly plugged  and abandoned  fewer than                                                               
10 of  the 136  wells.  If  these wells were  operated by  an oil                                                               
company  the AOGCC  would force  compliance with  its regulations                                                               
and impose  fines for non-compliance,  she said.   Unfortunately,                                                               
while BLM can  be found in violation of  AOGCC regulations, AOGCC                                                               
has no legal  authority to force the U.S.  Department of Interior                                                               
into compliance.   Additionally, she continued,  AOGCC should not                                                               
have to.  Showing the photo  labeled "Umiat #1 is located about 5                                                               
miles from the  Umiat airstrip," she said  the federal government                                                               
should provide  adequate funding specifically designated  for the                                                               
purpose  of bringing  its own  wells  into regulatory  compliance                                                               
with its and  AOGCC's regulations.  This funding  could come from                                                               
the  billions  of  dollars  collected  in  lease  sales  or  from                                                               
stimulus efforts.   For  example, jobs could  have been  given to                                                               
displaced Gulf  of Mexico workers  after the Macondo  disaster to                                                               
come to Alaska and plug and abandon these wells.                                                                                
                                                                                                                                
MS.   FOERSTER   reiterated  Representative   Millett's   earlier                                                               
statement  that oil  companies are  interested  in leasing  these                                                               
lands  and to  have the  remediation  be part  of their  leasing.                                                               
There  are opportunities  to  make these  problems  go away,  she                                                               
said, and  making this happen  is a part of  her job.   She vowed                                                               
that as long as she is with  AOGCC she will be haranguing to make                                                               
it happen.   She cannot  force the  BLM into compliance,  but she                                                               
can embarrass  them in the court  of public opinion and  find and                                                               
work with the reasonable people to try to move this forward.                                                                    
                                                                                                                                
1:37:17 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GARDNER inquired  whether the  information gained                                                               
when  these  wells  were  drilled  is in  the  public  domain  or                                                               
available to potential lessors.                                                                                                 
                                                                                                                                
MS.  FOERSTER responded  that AOGCC  has scant  records on  these                                                               
wells and  she does not  know how  much information the  BLM has;                                                               
however, anything that AOGCC has is available to the public.                                                                    
                                                                                                                                
REPRESENTATIVE P.  WILSON suggested that the  resolution could be                                                               
amended  with a  whereas clause  asking  the BLM  to provide  the                                                               
state with  the information that  the agency has on  these wells.                                                               
She  inquired  about the  cabin  depicted  in the  photo  labeled                                                               
"Kaolak#1 with cabin on the drill pad."                                                                                         
                                                                                                                                
MS. FOERSTER  answered that  as far  as she  knows the  cabin was                                                               
part  of  the activity  around  that  well.   She  expressed  her                                                               
optimism that the  Alaska BLM representatives and  the AOGCC will                                                               
collaborate moving  forward with  the legacy  wells and  that BLM                                                               
will provide  AOGCC with whatever  information it has.   She said                                                               
she is therefore unsure that such a whereas clause is necessary.                                                                
                                                                                                                                
1:39:22 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  KAWASAKI  asked  how many  of  the  approximately                                                               
2,200  legacy wells  on  the  North Slope  are  not currently  in                                                               
compliance with AOGCC's regulations for capping.                                                                                
                                                                                                                                
MS. FOERSTER replied that the BLM  is by far the biggest violator                                                               
of AOGCC's regulations.  Many, many  wells on the North Slope are                                                               
long-term shut-in wells on active  pads, she continued, and these                                                               
are  looked at  every  day  by operators.    A  handful of  wells                                                               
needing cleanup  are located in  exploratory sites and  AOGCC has                                                               
given   notice  to   those  operators   and  the   operators  are                                                               
proceeding.  Two or three  wells between Anchorage and Fairbanks,                                                               
the Rosetta wells,  are true orphan wells for  which AOGCC cannot                                                               
find the  owners.  Other  than the  Rosetta wells, the  only ones                                                               
that  have   not  been  remediated   are  a  few   Point  Thomsen                                                               
exploratory  wells that  ExxonMobil  and BP  admit  they own  and                                                               
admit they  owe remediation.   However, due  to high  pressure in                                                               
the  Thomsen reservoir  and the  way that  those wells  were left                                                               
because it was thought at the  time that they would be re-entered                                                               
soon, re-entering  the wells for  plugging and  abandonment poses                                                               
severe dangers that the companies do  not know how to get around.                                                               
The wells  are partially plugged  and abandoned, so they  are not                                                               
an immediate environmental risk.  It  would be a far greater risk                                                               
to go in without a  thoroughly prepared plan, which the companies                                                               
and AOGCC are working on.                                                                                                       
                                                                                                                                
1:42:12 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE KAWASAKI,  in regard to AOGCC  rules about whether                                                               
a gravel  pad is  still active,  inquired whether  AOGCC actually                                                               
looks to see if  a pad qualifies as active.  He  said it seems to                                                               
him that a company not wanting  to do remediation could just keep                                                               
leasing the  ground and say  that it is actively  monitoring that                                                               
site.                                                                                                                           
                                                                                                                                
MS. FOERSTER  clarified that an  active pad is producing,  so oil                                                               
and gas production is coming from that pad.                                                                                     
                                                                                                                                
MS.  FOERSTER,  responding to  Co-Chair  Feige,  said she  joined                                                               
AOGCC nearly seven years ago at the end of March 2005.                                                                          
                                                                                                                                
CO-CHAIR  FEIGE asked  how  many  wells the  BLM  has drilled  in                                                               
Alaska over the past seven years.                                                                                               
                                                                                                                                
MS. FOERSTER responded  she does not have an exact  count for the                                                               
last seven  years, but  a handful of  coalbed methane  test wells                                                               
have been  drilled in or  near the  city of Wainwright  since her                                                               
arrival at AOGCC.  One well  was drilled before she arrived and a                                                               
few more were drilled after she arrived.                                                                                        
                                                                                                                                
CO-CHAIR FEIGE  inquired whether  BLM followed  all of  the AOGCC                                                               
regulations that it was supposed to follow.                                                                                     
                                                                                                                                
MS. FOERSTER answered no, it did not.                                                                                           
                                                                                                                                
1:44:11 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE MUNOZ offered her  appreciation for Ms. Foerster's                                                               
work  to raise  awareness  of this  issue.   She  asked what  the                                                               
[federal] government's  original purpose  was for  drilling these                                                               
wells.                                                                                                                          
                                                                                                                                
MS. FOERSTER  replied that the  original purpose was to  find out                                                               
whether  oil   and  gas   drilling  was   viable  in   an  arctic                                                               
environment.  Geologists  had long recognized the  North Slope as                                                               
an  oil-rich area  and  after World  War II  the  U.S. wanted  to                                                               
ensure its own  energy security.  So, it was  exploration, but as                                                               
seen by  the surface  oil seeps  in her  presentation it  was not                                                               
hard to imagine that  the area was oil rich.   She added that the                                                               
exploration was very shallow.                                                                                                   
                                                                                                                                
REPRESENTATIVE  MUNOZ inquired  whether the  [federal] government                                                               
has ever  used any of  the resources there for  military activity                                                               
or other purposes.                                                                                                              
                                                                                                                                
MS. FOERSTER responded she does not  know and deferred to the BLM                                                               
to answer the question.                                                                                                         
                                                                                                                                
REPRESENTATIVE  MUNOZ   asked  whether  the   U.S.  Environmental                                                               
Protection Agency (EPA) has been involved or notified.                                                                          
                                                                                                                                
MS. FOERSTER  answered that the  Alaska EPA has been  informed of                                                               
this and has  offered its moral support to AOGCC.   When she made                                                               
her presentation at the Ground  Water Protection Council, several                                                               
federal  EPA  people  in  attendance   were  aghast  and  offered                                                               
suggestions to  her that AOGCC has  already tried.  Thus,  EPA is                                                               
aware of the issue, but has not made the issue its mission.                                                                     
                                                                                                                                
REPRESENTATIVE GARDNER  inquired about  the current  condition of                                                               
the BLM's coalbed methane wells.                                                                                                
                                                                                                                                
MS. FOERSTER  replied that those  wells have been abandoned.   In                                                               
further response, she  said the wells are  plugged and abandoned,                                                               
and that it was not  AOGCC's abandonment regulations that the BLM                                                               
did not follow.                                                                                                                 
                                                                                                                                
1:47:31 PM                                                                                                                    
                                                                                                                                
TED  MURPHY,  Deputy State  Director  of  Resources, Division  of                                                               
Resources, Alaska  State Office, U.S. Bureau  of Land Management,                                                               
stated that  he is  before the committee  to answer  questions on                                                               
the legacy  well program within  Alaska.   He said he  thinks the                                                               
BLM is  on track to  continue working  closely with the  state to                                                               
reach resolution, a  common understanding of where  the wells are                                                               
at, the  condition the  wells are  in, and  how to  remediate and                                                               
plug  those  wells  into  the   future.    Collaboration  is  the                                                               
component that everyone needs to do to get this done.                                                                           
                                                                                                                                
CO-CHAIR  SEATON  asked whether  Mr.  Murphy  disagrees with  the                                                               
facts as  they have been  presented or  that the pictures  do not                                                               
truly represent the situation around the wells.                                                                                 
                                                                                                                                
MR.  MURPHY   responded  that  the   pictures  are   an  accurate                                                               
reflection of  the condition of the  wells.  He said  the federal                                                               
government does  not control  136 wells  in the  NPR-A.   Some of                                                               
those  were conveyed  in the  Barrow Gas  Field Transfer  Act [of                                                               
1984] and some  of those wells, while called  wells, are actually                                                               
cores or shallow wells that were  never cased.  They were used to                                                               
determine  the  thickness  of  the   permafrost  and  maybe  some                                                               
geologic  structures.   They  may  have  ranged anywhere  from  a                                                               
couple hundred feet to nearly a thousand feet.                                                                                  
                                                                                                                                
CO-CHAIR  SEATON requested  Mr. Murphy  to provide  the committee                                                               
with a written commentary about the  number of wells and the type                                                               
of wells.                                                                                                                       
                                                                                                                                
1:50:13 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HERRON requested Mr. Murphy  to say "mia culpa" on                                                               
behalf of the BLM and the federal government.                                                                                   
                                                                                                                                
MR. MURPHY stated "mia culpa."                                                                                                  
                                                                                                                                
REPRESENTATIVE GARDNER, in regard  to Mr. Murphy's statement that                                                               
BLM  is   working  closely  with   the  state  to   reach  common                                                               
understanding,  inquired what  the  active parts  are of  working                                                               
closely.                                                                                                                        
                                                                                                                                
MR. MURPHY  answered that it begins  with the 2004 report  on the                                                               
legacy wells  that he put back  on the BLM's web  site yesterday.                                                               
He said BLM is making an  amendment to that report.  He explained                                                               
that some  of the pictures  shown earlier are a  re-visitation of                                                               
those wells  and it is important  to understand that the  BLM has                                                               
chosen to address  those wells being impacted  by coastal erosion                                                               
and  that would  have  been  overrun by  the  ocean  in the  near                                                               
future.  Those wells were plugged and the mud pits remediated.                                                                  
                                                                                                                                
REPRESENTATIVE GARDNER  understood Mr.  Murphy to be  saying that                                                               
the wells likely  to be impacted by coastal erosion  or that have                                                               
been  impacted   by  coastal  erosion   have  been   plugged  and                                                               
remediated.                                                                                                                     
                                                                                                                                
MR. MURPHY  said yes, within the  next five years.   The BLM does                                                               
not have an  accurate representation of what  the coastal erosion                                                               
impacts will  be into the future,  but the BLM has  addressed the                                                               
ones that will be overrun or have been overrun by the ocean.                                                                    
                                                                                                                                
1:52:19 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE KAWASAKI  offered his understanding that  12 wells                                                               
have been  plugged since the 2004  inventory, one in 2010  at the                                                               
cost of $17  million and Umiat #9  that was plugged in  2011 at a                                                               
cost of  $2.5 million.   In  regard to  reassessment of  the 2004                                                               
inventory,  he asked  what the  process will  be for  determining                                                               
which wells should be first.   He further asked when the BLM will                                                               
get done.                                                                                                                       
                                                                                                                                
MR. MURPHY replied he  does not know when BLM will  be done as it                                                               
is contingent on a number of  factors, but he is committed to BLM                                                               
continuing to  address the  problem.   He outlined  the screening                                                               
process  that will  occur:   condition  of the  existing pad  and                                                               
pits;  visible  solid  waste,  such  as  equipment,  piping,  and                                                               
barrels;  whether the  bore  hole penetrated  known  oil and  gas                                                               
stratigraphy; whether  the well had  an oil  or gas show  and, if                                                               
so, is  the well  capable of  flowing; whether  the well  is near                                                               
human activity  and, if so,  whether it is  a risk to  the people                                                               
near the  well; the condition  of the wellhead and  whether there                                                               
has been previous  problems or repair work on  that wellhead; and                                                               
whether the presence  of the unplugged well has  the potential to                                                               
negatively impact anticipated development.                                                                                      
                                                                                                                                
1:54:11 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  FEIGE allowed  that much  of this  happened before  Mr.                                                               
Murphy  came onboard  the  BLM  and that  Mr.  Murphy is  working                                                               
towards a  solution.  As  far as  the solutions of  removing pits                                                               
and reclaiming  the wells being  impacted by coastal  erosion, he                                                               
said the BLM is keeping pilots like  him employed.  He said he is                                                               
disturbed  by   the  BLM's  failure  to   follow  existing  AOGCC                                                               
regulations for the wells drilled  near Wainwright.  While he did                                                               
not know whether that was  a willful disregard of the regulations                                                               
or simply  a lack of  knowledge or expertise  on the part  of the                                                               
people  that were  doing those  wells, he  asked that  Mr. Murphy                                                               
pass on  to the federal government  that the state does  not take                                                               
kindly to the violation of its laws.                                                                                            
                                                                                                                                
REPRESENTATIVE  MUNOZ  inquired  what   the  top  federal  agency                                                               
funding  priorities are  for Alaska  and  where this  remediation                                                               
effort fits into those priorities.                                                                                              
                                                                                                                                
MR. MURPHY  explained that  the Alaska BLM  budget is  based upon                                                               
the  conveyance  program, which  is  the  largest funded  program                                                               
within BLM  Alaska, followed  by the oil  and gas  "1310 program"                                                               
and then the recreational components.   As far as priorities, the                                                               
annual  budget for  the  legacy  well program  is  a  base of  $1                                                               
million and supplementals are addressed thereafter.                                                                             
                                                                                                                                
CO-CHAIR  SEATON requested  the committee  members to  submit any                                                               
other questions  they may  have and that  BLM provide  in writing                                                               
any disputes  it has  with HJR  29 so  the committee  may address                                                               
them.                                                                                                                           
                                                                                                                                
CO-CHAIR SEATON held over HJR 29.                                                                                               
                                                                                                                                
            HB   9-IN-STATE GASLINE DEVELOPMENT CORP                                                                        
                                                                                                                                
1:56:49 PM                                                                                                                    
                                                                                                                                
CO-CHAIR SEATON announced  that the next order  of business would                                                               
be  HOUSE  BILL NO.  9,  "An  Act  requiring the  Joint  In-State                                                               
Gasline   Development  Team   to   report   to  the   legislature                                                               
recommended changes to  state law that are required  to enable or                                                               
facilitate  the design,  financing,  and construction  of an  in-                                                               
state  natural gas  pipeline so  that the  in- state  natural gas                                                               
pipeline  is  operational  before  2016;  and  providing  for  an                                                               
effective date."   [Before the  committee was Version  U, labeled                                                               
27-LS0075\U, Bullock,  1/19/12, adopted  as the  working document                                                               
on 2/6/12.]                                                                                                                     
                                                                                                                                
The committee took an at-ease from 1:57 p.m. to 1:58 p.m.                                                                       
                                                                                                                                
1:58:44 PM                                                                                                                    
                                                                                                                                
RENA DELBRIDGE,  Staff, Representative Mike Hawker,  Alaska State                                                               
Legislature, on  behalf of Representative Hawker,  sponsor, noted                                                               
that committee members posed a number  of questions about HB 9 at                                                               
the  committee hearing  on  2/6/12.   She  directed attention  to                                                               
these  questions   and  the  answers   provided  in   a  [2/8/12]                                                               
memorandum   [from  Representative   Chenault,  prime   sponsor,]                                                               
included  in  the committee  packet.    She addressed  the  first                                                               
question, paraphrasing  from the  memorandum, written  as follows                                                               
[original punctuation provided]:                                                                                                
                                                                                                                                
 1. Provide a comparison of the authorities granted to the                                                                    
     Alaska Gasline  Development Corporation (AGDC) in  HB 9                                                                  
     with those granted under  the Alaska Gasline Inducement                                                                  
     Act  (AGIA), and  note which,  if any,  are authorities                                                                  
     unique to the AGDC and AGIA projects.                                                                                    
                                                                                                                                
MS. DELBRIDGE  prefaced that  the memorandum's  answer is  a very                                                               
cursory   comparison   and  should   not   be   construed  as   a                                                               
comprehensive legal analysis of AGIA and  HB 9.  She related that                                                               
should the committee want such  an analysis, the sponsor suggests                                                               
a  review from  parties that  are expert  in AGIA  and applicable                                                               
laws.    She  paraphrased  the memorandum's  answer,  written  as                                                               
follows [original punctuation provided]:                                                                                        
                                                                                                                                
     In a  broad sense,  AGIA and AGDC  are similar  in that                                                                    
     both projects  may exercise  eminent domain;  AGDC acts                                                                    
     as  a coordinator  of an  instate project  much as  the                                                                    
     State Pipeline Coordinator's Office  serves as such for                                                                    
     an   AGIA  project;   both  projects   enjoy  expedited                                                                    
     permitting  processes;   both  provide  confidentiality                                                                    
     protecting commercial negotiations  or proprietary work                                                                    
     products; and  both limit judicial review  claims in an                                                                    
     attempt  to   prevent  unwarranted  delays   in  state-                                                                    
     sanctioned projects.                                                                                                       
                                                                                                                                
2:00:18 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE KAWASAKI  inquired whether  Representative Hawker,                                                               
as co-sponsor  of the bill,  has ever requested a  specific legal                                                               
analysis of whether HB 9 and  AGIA are compatible and, if not, is                                                               
that something the co-sponsor or the committee would do.                                                                        
                                                                                                                                
MS.  DELBRIDGE offered  her  belief that  the  question posed  on                                                               
2/6/12 was not  compatibility but what HB 9  offers in comparison                                                               
to  what AGIA  offers.   Compatibility,  such  as concerns  about                                                               
violating the  half a billion cubic  feet a day limit  under AGIA                                                               
with an  in-state line,  is already addressed  in House  Bill 369                                                               
that  prohibits  AGDC  from  pursuing  any  project  that  is  in                                                               
violation of AGIA.                                                                                                              
                                                                                                                                
2:01:11 PM                                                                                                                    
                                                                                                                                
MS.  DELBRIDGE   moved  to  the   second  question   and  answer,                                                               
paraphrasing from  the memorandum,  written as  follows [original                                                               
punctuation provided]:                                                                                                          
                                                                                                                                
 2. Does HB 9 contain a date or similar benchmark                                                                             
     requiring AGDC  to return to  the Legislature  with its                                                                  
     findings   on  planning   and  developing   an  instate                                                                  
     gasline?                                                                                                                 
                                                                                                                              
     HB 9  does not specifically  include a date  certain by                                                                    
     which AGDC  must return to  the Legislature.   However,                                                                    
     AGDC  is subject  to  the Executive  Budget  Act; as  a                                                                    
     public  corporation,  AGDC  is unable  to  spend  funds                                                                    
     without  an  appropriation.     Without  a  significant                                                                    
     appropriation, AGDC would lack  the means to sanction a                                                                    
     project and proceed with construction.                                                                                     
                                                                                                                                
MS. DELBRIDGE said  there is every expectation that  at the point                                                               
of sanctioning  AGDC would  return to  the legislature  with that                                                               
funding request because it would  be hundreds of millions, if not                                                               
over a billion, dollars.                                                                                                        
                                                                                                                                
2:02:08 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  SEATON understood  that AGDC  could not  sign contracts                                                               
that obligate the  state without the appropriation  from, and the                                                               
approval of, the legislature.                                                                                                   
                                                                                                                                
MS. DELBRIDGE deferred to Mr. Dubler.                                                                                           
                                                                                                                                
JOE   DUBLER,   Vice   President,  Alaska   Gasline   Development                                                               
Corporation (AGDC),  Director of Finance, Alaska  Housing Finance                                                               
Corporation, Department of Revenue  (DOR), explained that all the                                                               
contracts  that   AGDC  enters  into,  similar   to  other  state                                                               
agencies, are subject  to appropriation.  To the  extent there is                                                               
no appropriation, the contract expires.                                                                                         
                                                                                                                                
MS. DELBRIDGE  pointed out that  House Bill 369, passed  in 2010,                                                               
had a  date certain at which  AGDC was to deliver  a project plan                                                               
to  the legislature  and that  was done  on schedule  on July  1,                                                               
2011.    Additionally, AGDC  has  been  providing monthly  status                                                               
reports to  the legislature so  there is a continuing  process of                                                               
keeping tabs on that work and the status of that work.                                                                          
                                                                                                                                
2:03:07 PM                                                                                                                    
                                                                                                                                
MS.  DELBRIDGE   continued  paraphrasing  from   the  memorandum,                                                               
turning to  question and answer  3, written as  follows [original                                                               
punctuation provided]:                                                                                                          
                                                                                                                                
 3. HB 9 grants AGDC the ability to use eminent domain.                                                                       
     What does this authority do in practical terms?                                                                          
                                                                                                                                
     Eminent domain is a power  granted under 09.55.240 (see                                                                    
     attached), allowing eminent domain  to be exercised for                                                                    
     most   public  uses,   including  uses   authorized  by                                                                    
     governments   and,  per   09.55.240(a)(13),  "for   the                                                                    
     location  of  pipelines  for  gathering,  transmitting,                                                                    
     transporting,   storing,  or   delivering  natural   or                                                                    
     artificial  gas  or  oil  or   any  liquid  or  gaseous                                                                    
     hydrocarbons,  including, but  not limited  to, pumping                                                                    
     stations, terminals, storage  tanks, or reservoirs, and                                                                    
     related installations."                                                                                                    
                                                                                                                                
     HB  9, in  Section 1,  Lines 15-16,  explicitly ensures                                                                    
     AGDC will  be able to  exercise this power  as provided                                                                    
     in  09.55.240-460.   This legislation  does not  expand                                                                    
     eminent domain.                                                                                                            
                                                                                                                                
REPRESENTATIVE GARDNER  asked why  it is necessary  to explicitly                                                               
ensure.                                                                                                                         
                                                                                                                                
MS.  DELBRIDGE understood  there are  occasional legal  questions                                                               
brought as  to what entity  specifically in a  given circumstance                                                               
can exercise eminent domain.                                                                                                    
                                                                                                                                
2:04:50 PM                                                                                                                    
                                                                                                                                
MS. DELBRIDGE commenced paraphrasing  from the memorandum, citing                                                               
questions  and answers  4  and 5,  written  as follows  [original                                                               
punctuation provided]:                                                                                                          
                                                                                                                                
 4. Section 4, lines 24-25 of HB 9 address duplication of                                                                     
     state  efforts. Has  duplication  of  efforts, such  as                                                                  
     ownership  of   studies,  been  an  issue,   or  is  it                                                                  
     anticipated to be an issue?                                                                                              
                                                                                                                                
     AGDC is  working diligently  to avoid  duplicating work                                                                    
     funded  by other  state money.    The sponsors  believe                                                                    
     efficiency with state resources  is important, and will                                                                    
     offer  an amendment  to this  paragraph retracting  the                                                                    
     deletion, but  keeping the change replacing  the "Joint                                                                    
     In-State   Gasline  Development   Team"  with   "Alaska                                                                    
     Gasline development Corporation."                                                                                          
                                                                                                                                
 5. Would waiving costs or rental fees for a lease or                                                                         
     right-of-way  provided  by  the Department  of  Natural                                                                  
     Resources require a fiscal note?  If not, how would the                                                                  
     costs incurred by the agency be covered?                                                                                 
                                                                                                                                
     Generally,  the sponsors  suggest  that  a fiscal  note                                                                    
     should  come from  the department  affected.   However,                                                                    
     AGDC  is now  paying  the state  Department of  Natural                                                                    
     Resources $189,000  per year for a  right-of-way lease;                                                                    
     Section  6  would  eliminate  or  reduce  that  charge.                                                                    
     Additionally, as discussed in  committee on Feb. 6, the                                                                    
     sponsors are developing an amendment to Section 6(g).                                                                      
                                                                                                                                
2:06:40 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  SEATON said  the question  on 2/6/12  was whether  AGDC                                                               
could  obligate DNR  and other  departments  to prioritize  their                                                               
budgets without  going through  a budgetary  process and  have to                                                               
absorb the  costs out of  their existing programs.   He requested                                                               
further clarification.                                                                                                          
                                                                                                                                
MR. DUBLER  responded that the forthcoming  amendment will modify                                                               
this  so it  is not  gratis and  will be  at usual  and customary                                                               
charges.  Regarding expediency, he  related that the sponsors are                                                               
standing  by   the  expediency   issue  whereby   the  individual                                                               
departments will prioritize this  project ahead of other projects                                                               
to the  extent it is necessary  to complete it on  a timely basis                                                               
[see  2:27:09 timestamp  for a  correction  by Mr.  Dubler].   In                                                               
further   response  to   the  co-chair,   Mr.  Dubler   said  the                                                               
forthcoming amendment will modify the  part about it being at the                                                               
department's  cost  to  being  that   AGDC  will  pay  usual  and                                                               
customary  charges  for  the services  and/or  products  that  it                                                               
receives.                                                                                                                       
                                                                                                                                
2:08:26 PM                                                                                                                    
                                                                                                                                
MS. DELBRIDGE  returned to the memorandum,  paraphrasing question                                                               
and   answer  6,   written  as   follows  [original   punctuation                                                               
provided]:                                                                                                                      
                                                                                                                                
 6. Section 6 (e) of HB 9 allows AGDC to enter into                                                                           
     confidentiality  agreements  as  needed to  acquire  or                                                                  
     provide information. Information  that falls under such                                                                  
     an  agreement is  not subject  to  disclosure under  AS                                                                  
     40.25.110.  Is  this   confidentiality  provision  also                                                                  
     contained in AGIA?                                                                                                       
                                                                                                                                
     While  AGIA has  some  confidentiality provisions,  the                                                                    
     primary function is  to protect proprietary information                                                                    
     of  private  interests,  provided   to  the  state  for                                                                    
     informational and not  decision-making purposes.  Under                                                                    
     AGDC,   the  protection   primarily   becomes  one   of                                                                    
     protecting AGDC and private parties  it engages with in                                                                    
     commercial negotiations  and other  matters.   The role                                                                    
     of the state is different under AGIA than under AGDC.                                                                      
                                                                                                                                
2:09:57 PM                                                                                                                    
                                                                                                                                
CO-CHAIR SEATON  recalled that  this became  a huge  issue during                                                               
the Alaska Stranded Gas Development  Act when the legislature was                                                               
unable  to find  out any  of  the operating  provisions with  the                                                               
operating  company.   He asked  whether this  same problem  would                                                               
occur  under HB  9, whereby  the  legislature would  be asked  to                                                               
sanction something that it is unable to find out about.                                                                         
                                                                                                                                
MR.  DUBLER replied  that the  confidentiality discussion  talked                                                               
about  here  is  imperative.   For  example,  AGDC  is  currently                                                               
attempting to work  with some producer companies  on alignment on                                                               
issues  of gas  composition.   However,  the  companies will  not                                                               
share any information  with AGDC because they  are concerned that                                                               
that  information  will  become  public; so  right  now  AGDC  is                                                               
shooting in  the dark.   Referencing question 4 about  sharing of                                                               
information  and  duplicating  efforts,  he said  that  for  this                                                               
summer's field work  AGDC is focusing its  efforts from Fairbanks                                                               
down so  that if  there is  an alignment with  the AGIA  and AGDC                                                               
projects,  AGDC  will  not  be   duplicating  any  efforts  above                                                               
Fairbanks  where the  AGIA  efforts are  focused.   The  proposed                                                               
confidentiality would  prevent people from being  able to request                                                               
information provided  by companies to  AGDC for the  project that                                                               
the companies would not otherwise  be obligated to provide to the                                                               
public.                                                                                                                         
                                                                                                                                
2:12:01 PM                                                                                                                    
                                                                                                                                
CO-CHAIR SEATON said  he appreciates and does not  have a problem                                                               
with  that.   However, he  is  asking whether  this provision  is                                                               
structured  so broadly  that it  would allow  the confidentiality                                                               
agreements  of  an  operating  entity to  be  withheld  from  the                                                               
legislature,  although  AGDC  would   know.    For  example,  the                                                               
legislature would be unable to  find out the operating conditions                                                               
and veto  rights of the operating  entity.  He cautioned  that if                                                               
HB  9 sets  up the  same controversial  structure as  was in  the                                                               
Alaska Stranded  Gas Development Act  it will be  problematic for                                                               
moving the bill through the system.                                                                                             
                                                                                                                                
MR.  DUBLER  answered  that  he is  unfamiliar  with  the  Alaska                                                               
Stranded Gas Development Act  and its confidentiality provisions,                                                               
so he cannot  compare what AGDC is asking for  here with what was                                                               
in that bill.   What AGDC is  asking for here is  similar to what                                                               
exists  under AGIA.    In  AGIA the  state  is  the licensor  and                                                               
TransCanada  the licensee,  and he  offered his  belief that  the                                                               
agreements   between    the   two   parties   are    subject   to                                                               
confidentiality agreements.                                                                                                     
                                                                                                                                
CO-CHAIR SEATON  stated that this  question will  need resolution                                                               
from Legislative Legal and Research Services or the sponsor.                                                                    
                                                                                                                                
MR. DUBLER agreed to get an answer to the committee.                                                                            
                                                                                                                                
2:14:17 PM                                                                                                                    
                                                                                                                                
MS.   DELBRIDGE  continued   her   review   of  the   memorandum,                                                               
paraphrasing question and answer  7, written as follows [original                                                               
punctuation provided]:                                                                                                          
                                                                                                                                
 7. Is there a provision, similar to one in AGIA, that                                                                        
        requires a body of work developed under AGDC be                                                                       
     remanded to  the state  in the event  a project  is not                                                                  
     sanctioned   or  is   unable   to  attract   sufficient                                                                  
     customers?                                                                                                               
                                                                                                                                
     As  a state  corporation, all  work product  and assets                                                                    
     developed  by AGDC  belong to  the state.  Depending on                                                                    
     the circumstances,  AGIA provides  for the  transfer of                                                                    
     work  by  the  private-sector  licensee  to  the  state                                                                    
     either at  no cost to  the state,  or at some  level of                                                                    
     cost, per AS 43.90.200: ...                                                                                                
                                                                                                                                
CO-CHAIR SEATON  surmised that the  state would have  the product                                                               
and  if  the  project  did not  go  forward  the  confidentiality                                                               
agreements would  not prevent the  state or the  legislature from                                                               
having that information.                                                                                                        
                                                                                                                                
MS. DELBRIDGE  agreed to  check on that  in conjunction  with the                                                               
co-chair's previous question.                                                                                                   
                                                                                                                                
2:15:26 PM                                                                                                                    
                                                                                                                                
MS. DELBRIDGE paraphrased  question and answer 8,  written in the                                                               
memorandum as follows [original punctuation provided]:                                                                          
                                                                                                                                
 8. The Alaska Natural Gas Development Authority has                                                                          
     engaged  in  work  related to  a  right-of-way  between                                                                  
     Glennallen and  Palmer. Is  there an  asset, such  as a                                                                  
     right-of-way  lease,  and if  so,  will  that lease  be                                                                  
     transferred to AGDC upon passage of HB 9?                                                                                
                                                                                                                                
     Alaska Natural Gas  Development Authority assets remain                                                                    
     with  the Authority.   However,  under HB  9, the  AHFC                                                                    
     Board, as directors  of ANGDA and AGDC,  would have the                                                                    
     ability  to  transfer  assets from  one  subsidiary  to                                                                    
     another.                                                                                                                   
                                                                                                                                
MS. DELBRIDGE offered her belief  that the conditional lease held                                                               
by  Alaska Natural  Gas  Development  Authority (ANGDA)  requires                                                               
commissioner  approval  in  order  to transfer.    She  continued                                                               
paraphrasing  the rest  of the  memorandum's  answer, written  as                                                               
follows [original punctuation provided]:                                                                                        
                                                                                                                                
     The  right-of-way lease  ANGDA secured  is conditional,                                                                    
     and as  such, may  require significant  additional time                                                                    
     and investment  to upgrade  to an  unconditional lease.                                                                    
     Consultation  with  the  State  Pipeline  Coordinator's                                                                    
     Office (SPCO)  clarified that a conditional  lease does                                                                    
     not  grant  an  interest  in   state  land,  but  is  a                                                                    
     'reservation' allowing  10 years  to convert to  a non-                                                                    
     conditional  lease.    A conditional  lease  cannot  be                                                                    
     renewed. In further  clarification, ANGDA's conditional                                                                    
     lease  does  not   technically  follow  the  Richardson                                                                    
     Highway,  but  begins  in   Palmer  and  terminates  in                                                                    
     Glennallen.  ANGDA  began  work on  a  further  segment                                                                    
     between  Glennallen  and  Delta Junction,  but  to  the                                                                    
     SPCO's  knowledge, never  acquired the  right to  state                                                                    
     land for that segment.                                                                                                     
                                                                                                                                
2:17:30 PM                                                                                                                    
                                                                                                                                
CO-CHAIR SEATON  noted that ANGDA  is online and will  respond to                                                               
the question of whether there is or is not a right-of-way.                                                                      
                                                                                                                                
REPRESENTATIVE HERRON inquired how many  of the conditions of the                                                               
conditional lease  have been met  and satisfied.  In  response to                                                               
Co-Chair Seaton, he agreed to pose this question to ANGDA.                                                                      
                                                                                                                                
2:18:18 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  FEIGE, in  regard to  ANGDA's work  on the  conditional                                                               
right-of-way  lease between  Palmer  and  Glennallen, asked  what                                                               
would be  the value of letting  that work be abandoned.   He said                                                               
that  if a  bullet line  to Anchorage  went in,  it seems  that a                                                               
right-of-way  to  connect the  electrical  grid  to a  source  of                                                               
cheaper  electrical  generating  energy  would  be  a  reasonable                                                               
benefit  to  the  people  of that  region.    Glennallen,  Copper                                                               
Center,  Kenny Lake,  Chitina, and  Valdez  are all  on the  same                                                               
electrical  grid,  he  continued,  and  they  pay  a  significant                                                               
premium to what is paid by the folks in the Anchorage Bowl.                                                                     
                                                                                                                                
MS.  DELBRIDGE replied  that she  does not  believe there  is any                                                               
intent to abandon the right-of-way  that ANGDA has acquired.  She                                                               
said  she believes  that it  is seen  as an  asset that  AGDC and                                                               
ANGDA  together under  the AHFC  board can  further build  on and                                                               
make use of.                                                                                                                    
                                                                                                                                
MR. DUBLER added that there are  at least 25 conditions that have                                                               
to be met  and those are project plans that  have to be submitted                                                               
for review  and approval to  the Department of  Natural Resources                                                               
(DNR). A significant amount of work  needs to be done to get this                                                               
to a lease  that would actually be useful in  terms of putting in                                                               
a pipeline,  but some work  has been done  and that would  not be                                                               
abandoned.  He offered his  belief that this conditional lease is                                                               
in effect  until July 2016,  so four  years are left  to complete                                                               
all of  the requirements that  DNR has  put on ANGDA  to complete                                                               
this lease.                                                                                                                     
                                                                                                                                
2:20:08 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  FEIGE  noted  that  AGDC  could  be  fully  engaged  in                                                               
developing and building a pipeline  to the Anchorage Bowl in 2016                                                               
when  this  conditional  right-of-way  expires.   Assuming  HB  9                                                               
becomes law,  he asked  whether it would  be prudent  and whether                                                               
AGDC would  pursue extension of that  conditional right-of-way to                                                               
preserve it  for future use,  given a significant amount  of work                                                               
has been done.                                                                                                                  
                                                                                                                                
MR. DUBLER said  he is not sure  he would describe the  work as a                                                               
significant amount.   While he  does not  know how much  work has                                                               
been done, he  can see how much  has not been done by  what is in                                                               
the  conditions  in the  lease.    He  said his  recollection  of                                                               
reading the lease is that it  is not subject to extension, but to                                                               
the extent that there is a lease  in place now he would hope that                                                               
the commissioner  of DNR would  be able to  issue a new  one that                                                               
replicates what  is existing.   In  further response  to Co-Chair                                                               
Feige, Mr. Dubler agreed that  AGDC would consult the legislature                                                               
if it is found that the conditional lease needs to be extended.                                                                 
                                                                                                                                
2:21:23 PM                                                                                                                    
                                                                                                                                
MS.  DELBRIDGE moved  to question  and answer  9, written  in the                                                               
memorandum as follows [original punctuation provided]:                                                                          
                                                                                                                                
 9. What are the potential impacts to the state and local                                                                     
     governments  if state  resources, such  as land,  water                                                                  
     and  gravel as  specified in  Section 6,  of HB  9, are                                                                  
     provided to an AGDC project  at no cost and the gasline                                                                  
     includes commercial gas exports?                                                                                         
                                                                                                                                
     The sponsors expect an amendment under development to                                                                      
     Section 6, (g), of HB 9 to address this concern.                                                                           
                                                                                                                                
MS.  DELBRIDGE recalled  the committee's  concern that  the state                                                               
could  end up  subsidizing  commercial gas  exports, and  assured                                                               
members that it is not the  intent of the sponsors to create that                                                               
sort of subsidy.                                                                                                                
                                                                                                                                
2:22:07 PM                                                                                                                    
                                                                                                                                
MS. DELBRIDGE  addressed question and  answer 10, written  in the                                                               
memorandum as follows [original punctuation provided]:                                                                          
                                                                                                                                
 10. Regarding HB9 Section 12, what are the existing                                                                          
     timelines for judicial review?                                                                                           
                                                                                                                                
     Judicial  review  of   decisions  by  commissioners  on                                                                    
     right-of-way leases is already limited in statute: ...                                                                     
                                                                                                                                
MS. DELBRIDGE  noted that this  limited judicial review is  in AS                                                               
38.35.200, included in the memorandum.   She paraphrased the rest                                                               
of the  answer in  the memorandum,  written as  follows [original                                                               
punctuation provided]:                                                                                                          
                                                                                                                                
     Sections  12 and  13 in  HB  9 work  together to  add a  new                                                               
     subsection  (c) incorporating  the  judicial review  process                                                               
     created  for  the  Trans-Alaska  Pipeline  System.  Judicial                                                               
     review is  already statutorily  limited to  60 days  per the                                                               
     Right-of-Way Leasing Act (AS 38.35.200);  the new Section 13                                                               
     (c) defines  the jurisdiction  for a  claim and  prohibits a                                                               
     court  from  issuing  injunctive  relief  that  would  delay                                                               
     project  progress while  a claim  is heard.  Section 13  (c)                                                               
     also  specifies  a 60-day  window  for  claims to  be  filed                                                               
     alleging denial of rights under the state Constitution.                                                                    
                                                                                                                                
MR.  DUBLER added  that this  provision is  not intended  to take                                                               
away the  rights of citizens  to object to  this project.   It is                                                               
meant  to push  the objection  to  the beginning  of the  project                                                               
rather than when a billion dollars'  worth of pipe is ready to go                                                               
into the  ground and  a claim  is suddenly  filed that  stops all                                                               
work for  a year  and a half  while the issue  is resolved.   The                                                               
intent is to resolve those issues  up front and not wait until it                                                               
is time to dig the ditch.                                                                                                       
                                                                                                                                
CO-CHAIR SEATON said the committee appreciates that.                                                                            
                                                                                                                                
2:23:56 PM                                                                                                                    
                                                                                                                                
MS. DELBRIDGE  paraphrased questions  and answers  11-12, written                                                               
in the memorandum as follows [original punctuation provided]:                                                                   
                                                                                                                                
 11. What is the anticipated impact to municipalities                                                                         
     associated  with Section  6,  HB 9,  exempting an  AGDC                                                                  
     project from state and  municipal property taxes during                                                                  
     construction?  What  are  the  anticipated  impacts  to                                                                  
     municipalities during a pipeline construction phase?                                                                     
                                                                                                                                
     At this  point, without  final project  engineering and                                                                    
     costs,  it  is  difficult to  determine  the  potential                                                                    
     impacts.  Additionally,  municipal taxes  could  change                                                                    
     between  now and  a taxable  period. The  sponsors have                                                                    
     requested  a legal  opinion  on  what pipeline  project                                                                    
     assets  and activities  are taxable,  and will  provide                                                                    
     additional information  to the committee as  it becomes                                                                    
     available.                                                                                                                 
                                                                                                                                
 12. Provide an AGDC analysis of international fiscal                                                                         
     systems consultant Pedro [van  Meurs'] assessment of an                                                                  
     Alaska gas  export project, as  presented in  a seminar                                                                  
     to legislators in December 2011.                                                                                         
                                                                                                                                
     This  request will  take additional  time, as  AGDC was                                                                    
     not  present at  [van Meurs']  presentation and  has no                                                                    
     access to  the assumptions that went  into the original                                                                    
     analysis.                                                                                                                  
                                                                                                                                
2:25:28 PM                                                                                                                    
                                                                                                                                
MS. DELBRIDGE paraphrased question and  answer 13, written in the                                                               
memorandum as follows [original punctuation provided]:                                                                          
                                                                                                                                
 13. Be prepared to discuss Section 25 of HB 9, exempting                                                                     
     from  Regulatory   Commission  of  Alaska   review  any                                                                  
     agreement or amendment to an  agreement entered into by                                                                  
     AGDC  with a  public utility,  for as  long as  debt is                                                                  
     outstanding on an AGDC pipeline.                                                                                         
                                                                                                                                
     AGDC has  indicated it is  prepared to discuss  this at                                                                    
     the committee's pleasure.                                                                                                  
                                                                                                                                
CO-CHAIR SEATON said  the committee will leave that  at this time                                                               
because there are no commissioners  available and no one from the                                                               
Regulatory Commission of Alaska (RCA)  available.  He offered his                                                               
appreciation for the answers provided.                                                                                          
                                                                                                                                
2:27:09 PM                                                                                                                    
                                                                                                                                
MR. DUBLER corrected  his earlier statement that under  HB 9 AGDC                                                               
would have  the highest  priority in  obtaining permits  from the                                                               
state's agencies; rather, AGDC would be second to AGIA.                                                                         
                                                                                                                                
CO-CHAIR SEATON  inquired whether Mr. Dubler  is representing the                                                               
administration's or AGDC's position on HB 9.                                                                                    
                                                                                                                                
MR. DUBLER  replied he  is just answering  questions on  the bill                                                               
and said  the governor is  not sponsoring HB  9.  He  offered his                                                               
belief that the governor's position is to let the legislative                                                                   
process work and if HB 9 passes the governor will consider the                                                                  
bill at that time.                                                                                                              
                                                                                                                                
CO-CHAIR SEATON opened public testimony on HB 9.                                                                                
                                                                                                                                
2:29:27 PM                                                                                                                    
                                                                                                                                
KIRSTEN SIKORA, Acting CEO, Alaska Natural Gas Development                                                                      
Authority (ANGDA), Office of the Commissioner, Department of                                                                    
Revenue (DOR), testified as follows:                                                                                            
                                                                                                                                
     For the past  eight and a half years  ANGDA has focused                                                                    
     on its mission  to bring the most  affordable energy to                                                                    
     Alaskan  consumers.    ANGDA   has  been  flexible  and                                                                    
     transparent  in  all of  our  undertakings.   Over  the                                                                    
     years ANGDA  has participated in several  projects that                                                                    
     are noteworthy.                                                                                                            
                                                                                                                                
     ANGDA  has secured  a conditional  right-of-way between                                                                    
     Palmer and  Glennallen.   ANGDA completed  the required                                                                    
     wetlands  study,  conceptual   design,  and  the  route                                                                    
     delineation  to  the  draft EIS  [environmental  impact                                                                    
     statement] stage  on a bi-directional  pipeline between                                                                    
     the Beluga  Field and Fairbanks.   ANGDA secured status                                                                    
     as a  shipper in TransCanada's Alaska  Pipeline Project                                                                    
     [APP],  which  will  provide the  lowest  gas  pipeline                                                                    
     tariff  rates   possible  to  the   Alaskan  consumers.                                                                    
     ANGDA's  participation  in  the  APP  open  season  has                                                                    
     effectively secured  a 30  percent discount  over other                                                                    
     entrants that  may come  into the  project at  a future                                                                    
     date.   ANGDA  worked  with  private sector  companies,                                                                    
     Native  corporations,  and  rural  communities  on  the                                                                    
     Alaska propane  project.  This project  is an excellent                                                                    
     example of  how government  and the private  sector can                                                                    
     work  together to  provide energy  solutions and  local                                                                    
     economic  impacts.   As  part  of  our statewide  view,                                                                    
     ANGDA   has  provided   delivery   options  and   other                                                                    
     logistical considerations to  deliver the clean-burning                                                                    
     alternative  fuels to  those residents  in Alaska  that                                                                    
     will not benefit from an in-state gasline.                                                                                 
                                                                                                                                
     In closing, ANGDA's  body of work is  good and valuable                                                                    
     and can benefit the State  of Alaska and its consumers.                                                                    
     Governor Parnell  has stated that projects  will align.                                                                    
     ANGDA's spur  line right-of-way and  our status  in the                                                                    
     open  season will  greatly complement  AGIA.   Again, I                                                                    
     thank you for  the opportunity to share  just a snippet                                                                    
     of what  ANGDA has accomplished  over the years.   And,                                                                    
     as  a   mother  of   three,  I  truly   appreciate  the                                                                    
     opportunity to  be a part  of this  monumental decision                                                                    
     for our future generations.                                                                                                
                                                                                                                                
2:32:05 PM                                                                                                                    
                                                                                                                                
CO-CHAIR FEIGE inquired  about the approximate value  on the work                                                               
for the conditional right-of-way between Palmer and Glennallen.                                                                 
                                                                                                                                
MS. SIKORA replied  that she does not have an  exact value on the                                                               
segment  from Glennallen  to Palmer,  but said  she will  provide                                                               
that information by  tomorrow.  In further response,  she said it                                                               
would be roughly $6 million.                                                                                                    
                                                                                                                                
2:32:41 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE KAWASAKI  said he is  not yet sure what  he thinks                                                               
of HB 9.   He related that a 1/30/12  letter from Representatives                                                               
Chenault and  Hawker to the  ANGDA Board of Directors  states the                                                               
sponsors'  belief  that  ANGDA's  statutory  language  is  overly                                                               
prescriptive and limits the scope  of mission that is critical to                                                               
adapt to  changing markets.   He requested Ms. Sikora  to address                                                               
this.                                                                                                                           
                                                                                                                                
MS.  SIKORA deferred  to ANGDA's  chairman [Mr.  Scott Heyworth],                                                               
saying that it is a policy issue the board can speak to.                                                                        
                                                                                                                                
CO-CHAIR SEATON  requested Mr. Heyworth to  present his testimony                                                               
first and then answer Representative Kawasaki's question.                                                                       
                                                                                                                                
2:33:50 PM                                                                                                                    
                                                                                                                                
SCOTT HEYWORTH, Chairman, Board  of Directors, Alaska Natural Gas                                                               
Development  Authority  (ANGDA),   Office  of  the  Commissioner,                                                               
Department  of Revenue  (DOR), cautioned  that  the committee  is                                                               
being  asked to  take a  very risky  political action  that could                                                               
close the  door on more  economically viable gas projects  in the                                                               
state.   He said HB 9  would abolish a citizens'  initiative that                                                               
passed with  over 63 percent approval  10 years ago.   He assured                                                               
the committee that ANGDA has  always kept the interest of Alaskan                                                               
consumers at the forefront.                                                                                                     
                                                                                                                                
MR. HEYWORTH said several aspects  of the bill cause him specific                                                               
concern.    Regarding  the provision  that  would  eliminate  RCA                                                               
oversight, he asked who would  protect the consumers' interest in                                                               
a  tariff  that  may  prove   highly  inefficient  to  consumers.                                                               
Regarding Section 18 that would  repeal and re-enact AS 41.41.020                                                               
dealing with the  authority's governing body, he  said the Alaska                                                               
Housing Finance Corporation (AHFC)  is not the appropriate agency                                                               
to oversee ANGDA  because it is an inherent  conflict of interest                                                               
between shipper and  pipeline builder.  Both  the Alaska Pipeline                                                               
Project and Denali-The Alaska Gas  Pipeline project went to great                                                               
extents  to keep  a  distance between  the  commercial team,  the                                                               
pipeline builders,  and the potential  shippers.  While  the AHFC                                                               
board  has  experience  in  financial  transactions  and  housing                                                               
expertise, it has  none in energy or gaslines.   He stressed that                                                               
ANGDA  has  participated in  the  Alaska  Pipeline Project  as  a                                                               
shipper,  and   therefore  cannot  turn  over   its  confidential                                                               
agreements to AGDC unless the parties it is working with agree.                                                                 
                                                                                                                                
2:36:14 PM                                                                                                                    
                                                                                                                                
MR. HEYWORTH, continuing with his  specific concerns, stated that                                                               
Section  27,  which proposes  to  add  a  new subsection  to  the                                                               
exemptions in AS  42.05.711, would leave no check  and balance in                                                               
the mega-project development to protect  the public interest.  It                                                               
would  give carte  blanche to  the AGDC,  with AGDC  becoming the                                                               
self-regulator, developer,  and shipper  of a pipeline  in Alaska                                                               
and  an unregulated  State of  Alaska  monopoly.   He said  ANGDA                                                               
would  never  have looked  for  these  types  of changes  in  its                                                               
mission,  statutes,  or  exemptions  from  regulatory  oversight.                                                               
Regarding Section  31, [which  would repeal  Section 1  of Ballot                                                               
Measure No. 3],  he strongly suggested that HB 9  receive a great                                                               
deal  of  scrutiny during  the  legislative  session, given  that                                                               
ANGDA  was created  by the  will of  the people.   The  people of                                                               
Alaska are  counting on legislators  to question whether HB  9 is                                                               
in the best interests of all Alaskans.                                                                                          
                                                                                                                                
MR.  HEYWORTH urged  committee members  to  consider whether  the                                                               
needs of  the consumers are being  placed first, whether it  is a                                                               
viable project without complete  state subsidies, and whether the                                                               
project is  the right size and  going to the right  location, all                                                               
of  which  has  yet  to  be  determined.    He  asked  where  the                                                               
industrial  anchor   tenants  have  weighed  in;   where  do  the                                                               
producers  and industrial  users  want  to go  -  Valdez or  Cook                                                               
Inlet; and whether this project is the right size.                                                                              
                                                                                                                                
2:38:06 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  KAWASAKI reiterated  his  question regarding  the                                                               
1/30/12 letter from Representatives Chenault and Hawker.                                                                        
                                                                                                                                
MR. HEYWORTH deferred to Ms. Sikora.                                                                                            
                                                                                                                                
MS. SIKORA replied that in the  past ANGDA has demonstrated it is                                                               
always  flexible and  open to  changes.   She said  she does  not                                                               
believe that at the time this  authority was given to ANGDA under                                                               
AS 41.41 it was overly prescriptive.   She added that ANGDA looks                                                               
forward to  working with the  legislature and  the administration                                                               
on the  best way forward  to provide Alaska's consumers  with the                                                               
lowest cost energy.                                                                                                             
                                                                                                                                
REPRESENTATIVE  HERRON  reiterated  his  earlier  question  about                                                               
whether all of the conditions  in the conditional lease have been                                                               
met and satisfied.                                                                                                              
                                                                                                                                
MS.  SIKORA  referenced  Co-Chair   Feige's  statement  that  the                                                               
conditional right-of-way could be of  value and would be of value                                                               
to the people  of Southcentral.  Saying she did  not have a line-                                                               
item  description  of  the  work that  has  been  completed,  she                                                               
deferred to  ANGDA's permitting  coordinator, Ms.  Kaye Laughlin,                                                               
to provide further information.                                                                                                 
                                                                                                                                
2:40:15 PM                                                                                                                    
                                                                                                                                
KAYE  LAUGHLIN,   Permitting  Coordinator,  Alaska   Natural  Gas                                                               
Development  Authority  (ANGDA),   Office  of  the  Commissioner,                                                               
Department  of  Revenue  (DOR),   explained  that  she  has  been                                                               
involved in the spur line,  which is the conditional right-of-way                                                               
pipeline  lease  referenced  earlier.   She  clarified  that  the                                                               
conditional  spur line  lease  is actually  part  of the  overall                                                               
Beluga  to  Fairbanks  pipeline right-of-way  lease  application.                                                               
She noted  that the state  pipeline coordinator was  not involved                                                               
in the  federal EIS review  that got to  the draft EIS  stage for                                                               
the Beluga to Fairbanks pipeline project.   She said there are no                                                               
conditions  yet because  ANGDA  does not  have  any permits  that                                                               
would carry conditions.                                                                                                         
                                                                                                                                
MS. LAUGHLIN  stated that a great  deal of work has  been done by                                                               
ANGDA and outlined the work that  has already been done by ANGDA:                                                               
completion of  conceptual pipeline  system design;  completion of                                                               
land  ownership  surveys;  completion  of  wetlands  delineation;                                                               
cultural  resources  clearances;   360  degree  immersive  video;                                                               
earthquake studies;  the project plans  required for the  EIS and                                                               
future permits;  access roads;  materials sites;  cultural review                                                               
by the  State Historic  Preservation Officer  (SHPO); government-                                                               
to-government involvement  meetings; the numbers of  culverts and                                                               
power  lines along  the route;  assessments  of wildlife,  flora,                                                               
fauna,  threatened   and  endangered  species,   invasive  weeds,                                                               
migratory  waterfowl,  and  air  quality;  and  seismic  activity                                                               
analysis.                                                                                                                       
                                                                                                                                
MS.  LAUGHLIN  specified that  this  work  was done  for  ANGDA's                                                               
preferred pipeline  route, as  well as  for the  five alternative                                                               
routes, and this work is in  ANGDA's custody.  Over 90 percent of                                                               
the existing  route is within  existing rights-of-way,  she said.                                                               
Additionally, ANGDA has done  traffic counts, anadromous streams,                                                               
and  distance and  compatibility with  the Trans-Alaska  Pipeline                                                               
System (TAPS).                                                                                                                  
                                                                                                                                
2:42:53 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HERRON requested that  an explanation of the value                                                               
of  the conditional  right-of way  be compiled  and given  to the                                                               
committee co-chairs.  He further  requested that someone from the                                                               
administration explain conditional and non-conditional leases.                                                                  
                                                                                                                                
CO-CHAIR SEATON directed  attention to the 2/7/12,  4:19 p.m., e-                                                               
mail from Ms.  Sikora in the committee packet,  which states that                                                               
the  right-of-way valuation  for  the full  pipeline length  from                                                               
Palmer  to  Delta  Junction  is valued  at  $12,522,943  in  2011                                                               
dollars.   He said that  Co-Chair Feige's question was  about the                                                               
value of a  segment of that right-of-way and  when that breakdown                                                               
is  received  from  ANGDA  the   co-chairs  will  forward  it  to                                                               
committee members.                                                                                                              
                                                                                                                                
CO-CHAIR  SEATON posed  the question  as  to whether  there is  a                                                               
conflict  if ANGDA  is a  shipper and  requested that  a detailed                                                               
answer be provided to the committee.                                                                                            
                                                                                                                                
2:46:04 PM                                                                                                                    
                                                                                                                                
CORRIE  YOUNG,   reminded  committee   members  that   ANGDA  was                                                               
established by an  overwhelming vote of confidence  by the people                                                               
of  Alaska.   [The initiative]  passed in  every district  in the                                                               
state, she said.   Therefore, HB 9 would  be abolishing something                                                               
that  was   created  by  the   will  of  the  people   who  spoke                                                               
overwhelmingly that  an entity is  needed solely for  Alaskans to                                                               
produce North Slope  natural gas and propane for  the citizens of                                                               
today and of the future.                                                                                                        
                                                                                                                                
CO-CHAIR SEATON clarified that HB  9 would not abolish ANGDA, but                                                               
would roll  together the structures  to create a pipeline  and to                                                               
move that forward.  He said he  is not commenting on the bill one                                                               
way or another, just explaining  that the bill changes the format                                                               
somewhat while  keeping the goal  of an in-state gas  project and                                                               
trying to move that project forward.                                                                                            
                                                                                                                                
2:48:38 PM                                                                                                                    
                                                                                                                                
JAMES FIELDS  stated that  he is the  school board  president for                                                               
the Copper River School District as  well as a business owner and                                                               
parent.   He stressed  that gas  is needed in  his area  now; the                                                               
area's residents cannot wait for  something to get from Palmer to                                                               
Glennallen and then  on over to the Copper River  Basin.  Despite                                                               
the government,  highway, and other  infrastructure in  his area,                                                               
he continued, school enrollment has  declined 36 percent over the                                                               
last nine years,  which is huge and shows what  the population is                                                               
doing in  the region.  People  moved to the region  when fuel oil                                                               
was  50 cents  a gallon,  not  when it  was  $4 per  gallon.   He                                                               
postulated that  Anchorage has not  seen as big a  price increase                                                               
due  to its  larger population,  but  said the  residents of  his                                                               
community are citizens like the people in Anchorage are.                                                                        
                                                                                                                                
MR. FIELDS related that ANGDA knocked  on his door five years ago                                                               
and  he and  others  were excited  when  that happened;  however,                                                               
since then  it has been  a complete  roller coaster of  whether a                                                               
pipeline is  happening.  He  said he is opposed  to HB 9  and has                                                               
not met  anyone in the  Copper River Basin  who is for  the bill.                                                               
He urged the committee to do  what is the best long-term solution                                                               
for the  whole state, not  a short-term solution for  the biggest                                                               
population area.   A long-term solution will count  in matters of                                                               
tourism, he said; if the Interior  goes away, then only the coast                                                               
will have tourism.  He said  people of the Copper River Basin are                                                               
listening and  aware of this issue,  but they are busy  trying to                                                               
make ends meet when it is 50 below and there is no fuel subsidy.                                                                
                                                                                                                                
2:51:17 PM                                                                                                                    
                                                                                                                                
CO-CHAIR SEATON presumed that Mr. Fields is in favor of an in-                                                                  
state gasline and in-state gas  supplies to communities, but that                                                               
Mr. Fields  is fearful of the  proposed route that would  go down                                                               
the Parks Highway.                                                                                                              
                                                                                                                                
MR.  FIELDS   responded  that  that  was   the  case  originally.                                                               
However,  after  listening  to  the other  testimony  he  is  now                                                               
fearful of  the whole idea because  it takes away the  mandate of                                                               
the  people  and takes  away  certain  rights.    He said  he  is                                                               
therefore fearful  of both and  he thinks that ANGDA  should stay                                                               
in place and go forward as the people wanted it to.                                                                             
                                                                                                                                
2:52:16 PM                                                                                                                    
                                                                                                                                
MERRICK PEIRCE testified  that he has spent the  last half decade                                                               
working to see  the voter-mandated All-Alaska Gasline  built.  He                                                               
noted that  he is a board  member and CFO of  Alaska Gasline Port                                                               
Authority (AGPA),  but that his comments  today are his own.   He                                                               
said something  very important is missing  from the presentations                                                               
he  has  heard today  as  well  as on  2/6/12.    To explain,  he                                                               
presented  a  scenario  in  which  he brings  forth  a  piece  of                                                               
legislation that would  do everything HB 9  proposes, but instead                                                               
of building a  gas pipeline his legislation would  build a multi-                                                               
billion dollar water  pipeline to transport ocean  water from the                                                               
Arctic Ocean to Cook Inlet.   He predicted that committee members                                                               
would respond  to his proposed  legislation by saying  that there                                                               
is  plenty of  water in  Cook  Inlet and  a water  pipeline is  a                                                               
pointless costly boondoggle.  He  said this absurd scenario helps                                                               
illustrate the most  fundamental of the many problems  with HB 9,                                                               
which  is:   Why would  Alaska spend  billions to  take gas  from                                                               
Prudhoe Bay to Cook Inlet when  there are trillions of cubic feet                                                               
of  Cook Inlet  gas  that  can be  delivered  to  customers at  a                                                               
fraction of the cost of the bullet line?                                                                                        
                                                                                                                                
MR.  PEIRCE maintained  that to  take HB  9 seriously,  committee                                                               
members would  have to  believe that  the U.S.  Geological Survey                                                               
(USGS), other agencies,  and various gas companies  are all wrong                                                               
in their belief that there are  trillions of cubic feet of gas in                                                               
Cook Inlet.  He respectfully  suggested that the committee invite                                                               
these experts to explain why  they believe there are trillions of                                                               
cubic feet of gas under Cook  Inlet and to explain their concerns                                                               
about marketing that gas.                                                                                                       
                                                                                                                                
2:54:30 PM                                                                                                                    
                                                                                                                                
MR. PEIRCE said the real question is  what to do with all the gas                                                               
in Cook  Inlet.  He  related that  the USGS believes  19 trillion                                                               
cubic  feet  of gas  are  under  Cook  Inlet,  in 2004  the  U.S.                                                               
Department  of  Energy  estimated   21-25  trillion  cubic  feet,                                                               
Buccaneer Energy  has told him  it thinks 16 trillion  cubic feet                                                               
are likely, and  Escopeta recently found 3.5  trillion cubic feet                                                               
in its  first well  in the  Kitchen Lights  Unit.   Therefore, he                                                               
asserted,  this  question  is  so fundamental  that  it  must  be                                                               
addressed for  the evaluation  of HB 9  to have  any credibility.                                                               
He pointed  out that one trillion  cubic feet of gas  would be an                                                               
11-year  supply for  the Railbelt  at  its current  usage of  240                                                               
million cubic feet per day.   Ten trillion cubic feet, about half                                                               
of what  USGS believes exists,  would be  a supply of  111 years.                                                               
The 3.5 trillion  cubic feet in the Kitchen Lights  Unit could be                                                               
as much as a 40-year supply for the Railbelt.                                                                                   
                                                                                                                                
2:55:22 PM                                                                                                                    
                                                                                                                                
MR.  PEIRCE  argued that  the  bullet  line,  also known  as  the                                                               
pipeline to poverty, is not  what Alaska voters asked for because                                                               
it follows  the wrong route  and bypasses Fairbanks,  North Pole,                                                               
the  state's  critical  military  bases,  and  the  vast  mineral                                                               
resource  potential along  the Richardson  Highway corridor.   It                                                               
only offers two gas take-off points  for the entire state and has                                                               
no economy of scale, so it  will not deliver affordable energy to                                                               
Alaskans.  He said it is known that  the cost of gas - based upon                                                               
current  usage and  no  Cook Inlet  supply -  would  be over  $20                                                               
freight on board  (FOB) Anchorage, and offers  no new substantial                                                               
revenue to Alaska.  This AGDC  project is a disaster, he charged,                                                               
which is why so many entities  that have carefully looked at this                                                               
project are  opposed to it, among  them the City of  Valdez, City                                                               
of North  Pole, Fairbanks  North Star  Borough Assembly,  and the                                                               
Alaska Municipal League.   He added that the  league voted nearly                                                               
unanimously in favor of building  the All-Alaska Gasline and that                                                               
vote was  after hearing from AGDC,  AGPA, and ANGDA.   He said he                                                               
is really disappointed that the  legislators sponsoring HB 9 took                                                               
office by  the will  of the  people, but  once elected  worked to                                                               
subvert the  will of the  people that  was expressed in  the 2002                                                               
voter mandate.  He urged defeat of HB 9.                                                                                        
                                                                                                                                
2:57:21 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  SEATON closed  public testimony  after ascertaining  no                                                               
one else  wished to  testify.   He noted  there would  be invited                                                               
testimony from the RCA and possibly others at a later date.                                                                     
                                                                                                                                
[HB 9 was held over.]                                                                                                           
                                                                                                                                
2:58:09 PM                                                                                                                    
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being no  further business before the  committee, the House                                                               
Resources Standing Committee meeting was adjourned at 2:58 p.m.