ALASKA STATE LEGISLATURE
SENATE RESOURCES STANDING COMMITTEE
February 24, 2010
3:41 p.m.
MEMBERS PRESENT
Senator Lesil McGuire, Co-Chair
Senator Bill Wielechowski, Co-Chair
Senator Charlie Huggins, Vice Chair
Senator Hollis French
Senator Thomas Wagoner
MEMBERS ABSENT
Senator Bert Stedman
Senator Gary Stevens
COMMITTEE CALENDAR
SENATE BILL NO. 220
"An Act declaring a state energy policy; relating to energy
efficiency and alternative energy; establishing the energy
efficiency grant fund, an emerging energy technology fund, a
renewable energy production tax credit, and an energy use index;
and relating to a fuel purchasing cooperative, to energy codes
and efficiency standards, to energy conservation targets in
public buildings, to a state agency energy use reduction plan,
to the alternative energy revolving loan fund, and to the
renewable energy grant fund."
- HEARD AND HELD
OVERVIEW: ALASKA RAILROAD BONDING AUTHORITY AND GAS LINE
DEVELOPMENT
- HEARD
PREVIOUS COMMITTEE ACTION
BILL: SB 220
SHORT TITLE: ENERGY EFFICIENCY/ ALTERNATIVE ENERGY
SPONSOR(s): RESOURCES
01/19/10 (S) READ THE FIRST TIME - REFERRALS
01/19/10 (S) RES, FIN
01/20/10 (S) RES AT 3:30 PM BUTROVICH 205
01/20/10 (S) Heard & Held
01/20/10 (S) MINUTE(RES)
01/21/10 (S) RES AT 3:30 PM BUTROVICH 205
01/21/10 (S) -- MEETING CANCELED --
01/25/10 (S) RES AT 3:30 PM BUTROVICH 205
01/25/10 (S) Heard & Held
01/25/10 (S) MINUTE(RES)
01/27/10 (S) RES AT 3:30 PM BUTROVICH 205
01/27/10 (S) Heard & Held
01/27/10 (S) MINUTE(RES)
02/03/10 (S) RES AT 3:30 PM BUTROVICH 205
02/03/10 (S) <Bill Hearing Postponed>
02/11/10 (S) RES AT 3:30 PM BUTROVICH 205
02/11/10 (S) <Bill Hearing Postponed to 2/15/10>
02/15/10 (S) RES AT 3:30 PM BUTROVICH 205
02/15/10 (S) Heard & Held
02/15/10 (S) MINUTE(RES)
02/17/10 (S) RES AT 3:30 PM BUTROVICH 205
02/17/10 (S) <Bill Hearing Canceled>
02/18/10 (S) RES AT 3:30 PM BUTROVICH 205
02/18/10 (S) Heard & Held
02/18/10 (S) MINUTE(RES)
02/22/10 (S) RES AT 3:30 PM BUTROVICH 205
02/22/10 (S) Heard & Held
02/22/10 (S) MINUTE(RES)
02/24/10 (S) RES AT 3:30 PM BUTROVICH 205
WITNESS REGISTER
MIKE PAWLOWSKI
Aide to Senator McGuire
Alaska State Legislature
Juneau, AK
POSITION STATEMENT: Explained amendments to CSSB 220(RES)
version D.
JAY LIVEY
Aide to Senator Hoffman
Alaska State Legislature
Juneau, AK
POSITION STATEMENT: Explained Amendment 1 to CSSB 220(RES)
version D.
WILDA LAUGHLIN, Legislative Liaison
Department of Health and Social Services (DHSS)
Juneau, AK
POSITION STATEMENT: No position on Amendment 1 to CSSB 220(RES)
version D.
GENE THERRIAULT, Senior Policy Advisor
In-state Energy
Office of the Governor
Juneau, AK
POSITION STATEMENT: Commented on Amendment 5 to CSSB 220(RES)
version D.
SHARON LONG, aide to Senator Huggins, said she had not read all
of the federal regulations, but she had talked to someone who
had taken a nuclear project farther than anyone else had in
Alaska.
POSITION STATEMENT: Commented on Amendment 5 to CSSB 220(RES)
version D.
GENERAL PATRICK GAMBLE, President and CEO
Alaska Railroad Corporation (ARRC)
Anchorage AK
POSITION STATEMENT: Presented overview of the Alaska Railroad
Bonding Authority and Potential Role in Gas Line Development.
BILL O'LEARY, Chief Financial Officer
Alaska Railroad Corporation (ARRC)
Anchorage, AK
POSITION STATEMENT: Answered questions on Alaska Railroad
bonding authority and financing mechanisms.
ACTION NARRATIVE
3:41:05 PM
CO-CHAIR LESIL MCGUIRE called the Senate Resources Standing
Committee meeting to order at 3:41 p.m. Present at the call to
order were Senators French, Wielechowski, Wagoner, and McGuire.
SB 220-ENERGY EFFICIENCY/ ALTERNATIVE ENERGY
3:42:04 PM
CO-CHAIR MCGUIRE announced SB 220 to be up for consideration
[CSSB 220(RES) version K was before the committee].
MIKE PAWLOWSKI, aide to Senator McGuire, said Amendment K.13 [1]
was the first amendment they would take up today and Jay Livey
would explain it.
CO-CHAIR MCGUIRE said this would be called Amendment 1.
26-LS1197\K.13
Chenoweth/Kane
AMENDMENT 1
OFFERED IN THE SENATE TO:
CSSB 220(RES), Draft Version "K"
Page 1, line 3, following "cooperative,":
Insert "to the Alaska affordable heating
program,"
Page 13, following line 18:
Insert new bill sections to read:
"* Sec. 21. AS 47.25.621 is amended to read:
Sec. 47.25.621. Alaska affordable heating
[ASSISTANCE] program. (a) The Alaska affordable
heating [ASSISTANCE] program is established in the
Department of Health and Social Services to provide
expanded eligibility for Alaska residents for home
heating assistance, to the extent funds are available
in the Alaska affordable heating fund [APPROPRIATED BY
THE LEGISLATURE FOR THAT PURPOSE].
(b) The Alaska affordable heating [ASSISTANCE]
program established under this section is in addition
to the federal low-income heating and energy
assistance provided under 42 U.S.C. 8621 - 8629 (Low-
Income Home Energy Assistance Act of 1981), as
amended, and implementing regulations.
* Sec. 22. AS 47.25.621 is amended by adding a new
subsection to read:
(c) The Alaska affordable heating fund is
established as a separate fund to be managed by the
Department of Revenue. The fund consists of
appropriations made to it. Interest earned by the fund
may be appropriated to it. The Department of Health
and Social Services shall use money in the fund for
Alaska affordable heating payments.
* Sec. 23. AS 47.25.622 is amended to read:
Sec. 47.25.622. Duties. The Department of Health
and Social Services [DEPARTMENT] shall
(1) administer the Alaska affordable
heating [ASSISTANCE] program provided under
AS 47.25.621;
(2) adopt regulations under AS 44.62
(Administrative Procedure Act) to carry out the
purpose of the program;
(3) coordinate payments among other heating
assistance programs to avoid duplication of payments.
* Sec. 24. AS 47.25.623 is amended to read:
Sec. 47.25.623. Eligibility; payment amount. An
individual is eligible for home heating assistance
payments under the Alaska affordable heating
[ASSISTANCE] program if the individual
(1) is a resident of the state;
(2) is physically present and resides in a
home in the state when the home heating costs are
incurred;
(3) for assistance calculated under (b) and
(c) of this section, has gross household income not to
exceed, as a percentage of the federal poverty
guideline for Alaska set by the United States
Department of Health and Human Services and revised
under 42 U.S.C. 9902(2),
(A) 225 percent for a determination to be
made under (c)(1) - (3) of this section; and
(B) 250 percent for a determination to be
made under (c)(4) of this section; and [HAS GROSS
HOUSEHOLD INCOME ABOVE 150 PERCENT BUT THAT DOES NOT
EXCEED 225 PERCENT OF THE FEDERAL POVERTY GUIDELINE
FOR ALASKA SET BY THE UNITED STATES DEPARTMENT OF
HEALTH AND HUMAN SERVICES AND REVISED UNDER 42 U.S.C.
9902(2);]
(4) meets other eligibility requirements
specified in regulations adopted under AS 47.25.622.
* Sec. 25. AS 47.25.623 is amended by adding new
subsections to read:
(b) The Department of Health and Social Services
shall determine the number of points for each eligible
individual based on the point formula used under 42
U.S.C. 8621 - 8629 (Low-Income Home Energy Assistance
Act of 1981), as amended, and implementing
regulations. Except as provided in (d) of this
section, the amount of the Alaska affordable heating
payment for an individual equals the base amount
calculated under (c) of this section minus the amount
the individual is eligible to receive under the
federal low-income home energy assistance program
under 42 U.S.C. 8621 - 8629, as amended, and
implementing regulations.
(c) The Department of Health and Social Services
shall calculate the base amount of the Alaska
affordable heating payment for the individual based on
points determined under (b) of this section and on the
average price a barrel of Alaska North Slope crude oil
for sale on the United States West Coast during
September through February of the preceding fiscal
year as follows:
(1) $130 a point when the average price is
not more than $75 a barrel;
(2) $140 a point when the average price is
more than $75 and not more than $100 a barrel;
(3) $150 a point when the average price is
more than $100 and not more than $150 a barrel;
(4) $165 a point when the average price is
more than $150 a barrel.
(d) Under the program authorized by AS 47.25.621
- 47.25.626, taking into consideration the gross
household income rates established in (a) of this
section and the base amounts to be calculated under
(b) and (c) of this section,
(1) if insufficient money is appropriated
to fully fund the Alaska affordable heating payments
during the fiscal year, the department
(A) shall, for the duration of that fiscal
year, suspend calculation and payment under (a)(3)(B)
of this section and calculate and pay all eligible
individuals under (a)(3)(A) of this section; and
(B) may, to the extent there is or may be
an appropriation balance surplus to the amount
required to make all payments under (A) of this
passenger, by regulation, establish at any time during
the fiscal year a prospective pro rata reduction of
the payment rates that the department will pay to
eligible individuals under the program during that
fiscal year qualifying under (a)(3)(B) of this section
and, thereafter, may provide for prorated payments;
and
(2) if the commissioner reasonably
determines that the total of appropriations from all
sources during the fiscal year may exceed the amount
required to fully fund all applications for assistance
for Alaska affordable heating payments, the
commissioner may expend the amount of excess money,
not to exceed the total amount of the appropriations,
to carry out the purpose of AS 47.25.621 - 47.25.626;
under the authority of this paragraph, the
commissioner shall distribute the estimated excess
money pro rata among individuals receiving assistance
under this section without regard to the limitations
set out in the dollar value of the point formula
expressed in (c)(1) - (4) of this section.
* Sec. 26. AS 47.25.626(a) is amended to read:
(a) The Department of Health and Social Services
[DEPARTMENT] may develop a regional Alaska heating
[ASSISTANCE] program for the administration of
AS 47.25.621 - 47.25.626 to provide home heating
assistance in a uniform and cost-effective manner in a
region of this state if an Alaska Native organization
is authorized to implement a federally approved tribal
family assistance plan that includes that region and
has been awarded a tribal energy assistance grant for
a program that includes that region under 42 U.S.C.
8623(d).
* Sec. 27. AS 47.25.626(b) is amended to read:
(b) The department may award contracts to
implement a program developed under (a) of this
section. A contract authorized for delivery of home
heating assistance under a regional Alaska heating
[ASSISTANCE] program under this section is exempt from
the competitive bid requirements of AS 36.30 (State
Procurement Code). Subject to appropriation, a
contract under this section must be in an amount that
represents a fair and equitable share of the money
appropriated for the Alaska affordable heating
[ASSISTANCE] program under AS 47.25.621 - 47.25.626 to
serve the state residents specified in (a) of this
section. The authority provided under this section to
contract is in addition to the authority to contract
in AS 47.05.015 or other law.
* Sec. 28. AS 47.25.626(f) is amended to read:
(f) If the department establishes a regional
Alaska heating [ASSISTANCE] program and awards a
contract to provide home heating assistance under this
section, a person applying for home heating assistance
under AS 47.25.621 - 47.25.626 in the region of the
state covered by the regional Alaska heating
[ASSISTANCE] program may obtain home heating
assistance from the department only through the
organization designated by the department to serve the
region."
Renumber the following bill sections accordingly.
JAY LIVEY, aide to Senator Hoffman, turned to Amendment K.13
version labeled for this meeting as Amendment 1.
CO-CHAIR WIELECHOWSKI moved to adopt Amendment 1 labeled 26-
LS1197\K.13.
SENATOR FRENCH objected for discussion purposes.
MR. LIVEY explained that the first change appears in the
previous section on page 3, lines 2-8. He recalled that when the
numbers of points an applicant would achieve through the heating
assistance programs were calculated before, they included one
additional point for applying to the weatherization program.
From a policy perspective they thought it was a good way to get
folks into that program. In further talks with the department
they determined that is a very administratively burdensome item
for them. So it was deleted.
3:44:29 PM
MR. PAWLOWSKI thanked Mr. Livey for working with them to find a
way to fit efficiency standards into this amendment, but finding
out it was too difficult to do. It was a good effort.
CO-CHAIR WIELECHOWSKI asked if the administration had a position
on the amendment.
WILDA LAUGHLIN, Legislative Liaison, Department of Health and
Social Services (DHSS), said this amendment was currently under
consideration and they didn't have a position on it.
SENATOR FRENCH withdrew his objection and Amendment 1 [K.13] was
adopted.
CO-CHAIR MCGUIRE found no further objection to Amendment 1 and
so it was adopted.
3:46:18 PM
CO-CHAIR WIELECHOWSKI moved to adopt Amendment 2, labeled 26-
LS1197\K.2, Kane [referred to as K.2 in 2/18/10 meeting].
26-LS1197\K.2
Kane
AMENDMENT 2
OFFERED IN THE SENATE SENATORS WIELECHOWSKI AND
MCGUIRE TO: CSSB 220(RES), Draft Version "K"
Page 1, line 3:
Delete the first occurrence of "and"
Page 1, line 5, following the second occurrence of
"fund":
Insert "establishing an Alaska energy efficiency
revolving loan fund; and authorizing and relating to
the issuance of bonds by the Alaska Housing Finance
Corporation"
Page 3, line 18:
Delete "sec. 15"
Insert "secs. 6, 17, and 29"
Page 3, following line 20:
Insert a new bill section to read:
"* Sec. 4. AS 14.08.101 is amended to read:
Sec. 14.08.101. Powers. A regional school board
may
(1) sue and be sued;
(2) contract with the department, the
Bureau of Indian Affairs, or any other school
district, agency, or regional board for the provision
of services, facilities, supplies, or utilities;
(3) determine its own fiscal procedures,
including but not limited to policies and procedures
for the purchase of supplies and equipment; the
regional school boards are exempt from AS 37.05
(Fiscal Procedures Act) and AS 36.30 (State
Procurement Code);
(4) appoint, compensate, and otherwise
control all school employees in accordance with this
title; these employees are not subject to AS 39.25
(State Personnel Act);
(5) adopt regulations governing
organization, policies, and procedures for the
operation of the schools;
(6) establish, maintain, operate,
discontinue, and combine schools subject to the
approval of the commissioner;
(7) recommend to the department projects
for construction, rehabilitation, and improvement of
schools and education-related facilities as specified
in AS 14.11.011(b), and plan, design, and construct
the project when the responsibility for it is assumed
under AS 14.11.020;
(8) by resolution adopted by a majority of
all the members of the board and provided to the
commissioner of the department, assume ownership of
all land and buildings used in relation to the schools
in the regional educational attendance area, as
provided for in AS 14.08.151(b);
(9) provide housing for rental to teachers,
by leasing existing housing from a local agency or
individual, by entering into contractual arrangements
with a local agency or individual to lease housing
that will be constructed by the local agency or
individual for that purpose, or, without using for the
purpose that portion of public school funding that
consists of state aid provided under AS 14.17, by
constructing or otherwise acquiring housing that is
owned and managed by the regional educational
attendance area for rental to teachers;
(10) employ a chief school administrator;
(11) apply for and use the proceeds of a
loan from the Alaska energy efficiency revolving loan
fund (AS 18.56.855);
(12) exercise those other functions that
may be necessary for the proper performance of its
responsibilities."
Renumber the following bill sections accordingly.
Page 3, following line 25:
Insert a new bill section to read:
"* Sec. 6. AS 18.56 is amended by adding a new section to read:
Sec. 18.56.855. Alaska energy efficiency revolving loan fund. (a) The
Alaska energy efficiency revolving loan fund is established in the corporation to
carry out the purposes of this section. The revolving loan fund consists of money
or assets appropriated or transferred to the corporation for the revolving loan
fund, including money and assets deposited in the revolving loan fund by the
corporation and earnings on investments of money held in the revolving loan
fund. The corporation may establish separate accounts in the fund. The
corporation shall establish the interest rates, security provisions, and other terms
of a loan made under this section taking into consideration the corporation's cost
of funds and other factors the corporation considers appropriate.
(b) Money and other assets of the Alaska energy efficiency revolving loan
fund may be used to
(1) make loans to regional educational attendance areas or to
municipal governments, including subdivisions of municipal governments, or to
the state for the purpose of financing energy efficiency improvements to buildings
owned by regional educational attendance areas, by the state, or by municipalities
in the state;
(2) secure bonds issued by the corporation to finance the loans
described in (1) of this subsection;
(3) pay costs of administering the revolving loan fund; and
(4) pay the costs of administering and enforcing the terms of loans
made by the corporation from the revolving loan fund.
(c) Before a regional educational attendance area, a municipal
government, or a subdivision of a municipal government, may borrow money
from the corporation under this section, the regional educational attendance area
or the municipal government shall waive any sovereign immunity defense it may
have available to it with respect to enforcement of the terms of the loan. A
regional educational attendance area or a municipal government may waive
sovereign immunity to comply with the requirement of this subsection. The state
waives any sovereign immunity defense against enforcement of the terms of a
loan made to the state under this section. A person or corporation having a claim
under this section shall bring an action in a state court in Alaska that has
jurisdiction over the claim.
(d) All regional educational attendance areas and municipal governments
in the state are authorized to borrow from the corporation under this section. The
corporation shall set out the terms of a loan to a regional educational attendance
area in a loan agreement or similar document. At the discretion of the corporation,
a borrowing by a regional educational attendance area or a municipal government
under this section may be effected by use of a loan agreement or similar document
evidencing and setting out the terms of the loan or by issuance of a bond by the
municipal government to the corporation. Notwithstanding a charter provision
requiring public sale by a regional educational attendance area or a municipality
of its municipal bonds or other indebtedness, a regional educational attendance
area or municipality may sell its bonds under this section to the corporation at a
negotiated, private sale. At the discretion of the corporation, the bonds or other
indebtedness of the municipality may be general obligations of the municipality
or may be secured by an identified revenue source or by a combination of the full
faith and credit of the municipality and an identified revenue source.
(e) Notwithstanding any other provision of law, to the extent that a
department or agency of the state is the custodian of money payable to a regional
educational attendance area or to a municipality, at any time after written notice to
the department or agency head from the corporation that the regional educational
attendance area or municipality is in default on the payment of principal of or
interest on municipal bonds or other indebtedness then held or owned by the
corporation, or amounts due under an agreement between the corporation and a
regional educational attendance area or a municipality, the department or agency
shall withhold the payment of that money from that regional educational
attendance area or municipality and pay over the money to the corporation for the
purpose of paying the principal of and interest on the bonds or indebtedness. The
notice must be given in each instance of default. If a notice is given under this
subsection and under AS 44.85.170 and the default is continuing under this
subsection and under AS 44.85.170, the department or agency shall make
payment to the corporation and to the Alaska Municipal Bond Bank Authority on
a pro rata basis, taking into consideration the principal amount of the respective
default amounts.
(f) An authorized state officer may borrow from the corporation under
this section for buildings owned by the state. The superintendent of a regional
educational attendance area, at the direction of the regional educational
attendance area school board, may borrow from the corporation under this section
for buildings owned by the regional educational attendance area.
(g) In addition to other security that may be given with respect to a loan
made under this section, the corporation may require a deed of trust on the
building that is the subject of the energy efficiency loan and the real estate on
which the building is located. A regional educational attendance area or a
municipality may grant a deed of trust to the corporation as needed for this
purpose. An authorized state officer may grant a deed of trust to the corporation
as needed for this purpose.
(h) The corporation shall administer the Alaska energy efficiency
revolving loan fund in accordance with regulations adopted by the corporation.
The corporation may adopt regulations under AS 18.56.088 to carry out the
purposes of this section.
(i) This section applies to home rule municipalities.
(j) In this section, "authorized state officer" means
(1) the commissioner of the department of the state for a building
owned by the state;
(2) the executive director of a public corporation for a building
owned by the public corporation;
(3) the legislative council for a building owned by the legislature;
(4) the administrative director of courts for a building owned by
the judicial system;
(5) any other person designated in writing by a person listed in (1)
- (4) of this subsection."
Renumber the following bill sections accordingly.
Page 13, line 20:
Delete "sec. 15"
Insert "sec. 17"
Page 13, line 21:
Delete "sec. 11"
Insert "sec. 13"
Page 13, lines 21 - 22:
Delete "sec. 12"
Insert "sec. 14"
Page 13, line 27:
Delete "sec. 13"
Insert "sec. 15"
Page 14, following line 10:
Insert new bill sections to read:
"* Sec. 29. The uncodified law of the State of
Alaska is amended by adding a new section to read:
BOND AUTHORIZATION AND PROVISIONS. (a) In addition to the
powers in AS 18.56.090, the Alaska Housing Finance Corporation may issue
bonds in an amount not to exceed $250,000,000 to make loans from the energy
efficiency revolving loan fund established by AS 18.56.855, enacted by sec. 6 of
this Act, and to finance the purposes permitted by AS 18.56.855, enacted by sec.
6 of this Act. AS 18.56.110 - 18.56.190 and 18.56.855, enacted by sec. 6 of this
Act, apply to bonds issued under this section, except that bonds issued under this
section are not subject to, and may not be counted against, the bond issuance
limitation set out in AS 18.56.110(g).
(b) The Alaska Housing Finance Corporation shall deposit the proceeds
of bonds issued under (a) of this section in the Alaska energy efficiency revolving
loan fund in accordance with AS 18.56.855, enacted by sec. 6 of this Act.
* Sec. 30. The uncodified law of the State of Alaska is amended by adding a
new section to read:
REVISOR'S INSTRUCTION. The revisor of statutes is instructed to
change the heading of art. 6 of AS 18.56 from "Article 6. Energy Conservation"
to "Article 6. Energy Efficiency and Conservation Programs.""
SENATOR FRENCH objected for discussion purposes.
MR. PAWLOWSKI reminded members that this was the AHFC program
that took the federal money and worked it into a revolving loan
fund for energy efficiency. The change that was made from the
governor's bill in this amendment was the inclusion of regional
education attendance areas so that they could qualify to borrow
from the fund. This in large part was to be included in the CS
in lieu of the Energy Efficiency Grant Fund that was taken out
of the K version of SB 220. Originally that fund was dealt with
through grant funds where one-time monies would be spent
upgrading buildings and state public facilities. The revolving
loan fund was viewed as a more sustainable mechanism where money
could be loaned out, the work could be done, and the energy
savings would come in and refill the coffers for the next round
of work.
CO-CHAIR WIELECHOWSKI said he was pleased with this amendment.
It will take $18 million of the federal stimulus money and
leverage it into $250 million. It will save Alaskans tens if not
hundreds of millions of dollars and create about 1500-2000 jobs.
CO-CHAIR MCGUIRE said she is also pleased.
SENATOR FRENCH withdrew his objection and Amendment 2 was
adopted.
3:49:50 PM
CO-CHAIR WIELECHOWSKI moved Amendment 3, labeled 26-LS1197\K.3.
26-LS1197\K.3
Kane
AMENDMENT 3
OFFERED IN THE SENATE TO: CSSB 220(RES), Draft
Version "K"
Page 1, line 3:
Delete the first occurrence of "and"
Page 1, line 5, following the second occurrence of
"fund":
Insert "; and directing the Department of
Transportation and Public Facilities to prepare a
report on the feasibility of using compressed natural
gas to power vehicles in the state, including vehicles
owned or operated by the state, and including in that
study, if warranted, a pilot program proposal for
powering some vehicles owned or operated by the state
with compressed natural gas"
Page 14, following line 10:
Insert a new bill section to read:
"* Sec. 27. The uncodified law of the State of
Alaska is amended by adding a new section to read:
USE OF COMPRESSED NATURAL GAS TO POWER VEHICLES;
PILOT PROGRAM; STUDY; PROPOSAL; REPORT. (a) The
Department of Transportation and Public Facilities
shall, under the authority of AS 44.42.020(a)(3),
study the feasibility of using compressed natural gas
to power vehicles in the state. The study must
(1) review existing government programs and
incentives offered in Utah and other North American
jurisdictions that promote the use of compressed
natural gas to power vehicles;
(2) review and summarize relevant studies
and investigations on existing public policy
incentives that encourage the use of compressed
natural gas to power vehicles;
(3) evaluate the environmental benefits and
technical merits of using compressed natural gas to
power vehicles;
(4) consider the economic, environmental,
and technological advantages and disadvantages of
using and promoting the use of compressed natural gas
to power vehicles in the state; and
(5) if warranted by the findings of the
study, set out a proposal for a pilot program in the
state to test the use of compressed natural gas to
power vehicles owned or operated by the state; the
proposal must
(A) recommend the most cost-effective and
appropriate departments and geographic locations for a
pilot program;
(B) detail how the pilot program, if
successful, could be expanded to provide for increased
use of compressed natural gas to power vehicles owned
or operated by the state, as well as privately owned
or operated vehicles;
(C) estimate the costs to the state of a
pilot program in which the state would purchase
vehicles powered by compressed natural gas or convert
existing vehicles to be powered by compressed natural
gas, including
(i) the costs of maintaining vehicles
powered by compressed natural gas and training
maintenance personnel;
(ii) the costs of adapting, or encouraging
the adapting of, state vehicle fueling locations to
provide compressed natural gas;
(iii) the costs of using compressed natural
gas instead of diesel fuel or gasoline;
(iv) the costs of expanding the pilot
program or developing additional pilot programs under
(B) of this paragraph;
(v) other costs or savings that can be
reasonably expected to accompany the pilot program.
(b) The Department of Transportation and Public
Facilities shall prepare a report containing the
results of the study under (a) of this section not
later than December 1, 2010. The department shall
notify the legislature when the report is available."
SENATOR FRENCH objected for discussion purposes.
MR. PAWLOWSKI recalled that Amendment 3 was offered through the
chair at the request of Senator Dyson. It directs the Department
of Transportation and Public Facilities (DOTPF) to prepare a
report on the feasibility of using compressed natural gas to
power transportation vehicles.
CO-CHAIR MCGUIRE remarked that Barrow was considering setting up
a compressed natural gas station.
SENATOR DYSON thanked them for bringing this issue up for
consideration. He said he could have lined up a number of people
to testify on how this works very well in their jurisdictions,
but he didn't. He assumed there was support for it.
CO-CHAIR WIELECHOWSKI commented that he thought this was a great
amendment, particularly as people reach points in the next
decade where we have oil to gas price ratios of 15:1 or 20:1.
This is a great step forward. This makes all the sense in the
world in terms of cost and environmental savings. It also starts
moving the state in the direction of powering vehicles with
natural gas seeing as how the state has so much of it.
SENATOR DYSON added that Merrill Field has enough gas coming off
of the regional landfill to power all of the government vehicles
in the Anchorage Bowl area nearly for free. Environmental folks
always like this. Most of the resistance he has had is from is
"bureaucratic inertia." This study would help get past the
"sticking point" of getting some high compression filling
stations that can fill a vehicle up quickly.
SENATOR FRENCH removed his objection.
CO-CHAIR MCGUIRE found no further objection and Amendment 3 was
adopted.
3:53:19 PM
CO-CHAIR MCGUIRE brought up an Amendment labeled 26-LS1197\K.6.
SENATOR WAGONER said he withdrew it the other day and that he
wanted to work on it for later.
CO-CHAIR MCGUIRE moved Amendment 4, labeled 26-LS1197\K.11.
26-LS1197\K.11
Kane
AMENDMENT 4
OFFERED IN THE SENATE BY SENATOR MCGUIRE
TO: CSSB 220(RES), Draft Version "K"
Page 12, line 3, through page 13, line 18:
Delete all material and insert:
"* Sec. 17. AS 45.88.010(a) is amended to read:
(a) There is established in the Department of
Commerce, Community, and Economic Development the
alternative energy conservation revolving loan fund to
carry out the purposes of AS 45.88.010 - 45.88.090.
Loans made under AS 45.88.010 - 45.88.090 are to be
used
(1) to develop means of energy production
utilizing one or more alternative energy systems; and
(2) to purchase, construct, and install
energy conservation improvements in commercial
buildings [ENERGY SOURCES OTHER THAN FOSSIL OR NUCLEAR
FUEL, INCLUDING, BUT NOT LIMITED TO, WINDMILLS, WATER
AND SOLAR ENERGY DEVICES].
* Sec. 18. AS 45.88.010 is amended by adding a new
subsection to read:
(e) The Alaska energy conservation revolving
loan fund consists of
(1) money appropriated to the fund by the
legislature;
(2) gifts, bequests, or contributions from
other sources;
(3) principal and interest payments or
other income earned on loans or investments in the
fund and appropriated to the fund; and
(4) money chargeable to principal or
interest that is collected through liquidation by
foreclosure or other processes on loans made under
AS 45.88.010 - 45.88.090 and appropriated to the fund.
* Sec. 19. AS 45.88.020(a) is amended to read:
(a) The department may
(1) make loans for the purchase,
construction, and installation, in commercial
buildings that are located in the state, of
(A) alternative energy systems; and
(B) energy conservation improvements;
(2) adopt regulations necessary to carry
out the provisions of AS 45.88.010 - 45.88.090,
including regulations to establish reasonable fees for
services provided and charges for collecting the fees;
(3) collect the fees and collection charges
established under this subsection.
* Sec. 20. AS 45.88.025 is amended by adding a new
section to read:
Sec. 45.88.025. Eligibility. To be eligible for a
loan under AS 45.88.010 - 45.88.090, an applicant must
(1) physically reside in the state and
maintain a domicile in the state during 12 consecutive
months prior to the date of application for a loan and
may not have
(A) declared or established residency in
another state; or
(B) received residency or a benefit based
on residency from another state;
(2) be at least 51 percent owned by
individuals described in (1) of this section if the
applicant is a corporation, joint venture, or
partnership; or
(3) be a nonprofit organization under
AS 10.20.
* Sec. 21. AS 45.88.030(a) is repealed and
reenacted to read:
(a) A loan made under AS 45.88.010 - 45.88.090
may not exceed $50,000. If the requested loan amount
exceeds $30,000, the applicant must deliver to the
department a document from a financial institution
stating that
(1) the applicant has been denied a loan
for the same purpose; or
(2) the loan from the financial institution
is contingent on the applicant also receiving a loan
from the fund.
* Sec. 22. AS 45.88.030(e) is amended to read:
(e) The rate of interest for a loan under
AS 45.88.010 - 45.88.090 shall be the prime rate, as
defined by AS 44.88.599, plus one percentage point,
but may not be less than five percent a year [FOR AN
ALTERNATIVE ENERGY SYSTEM IS FIVE PERCENT FOR THE
FIRST $15,000 OF THE LOAN AND 15 PERCENT FOR THE
AMOUNT OF THE LOAN THAT EXCEEDS $15,000].
* Sec. 23. AS 45.88.030 is amended by adding a new
subsection to read:
(f) A loan under AS 45.88.010 - 45.88.090 must
be secured by a mortgage or other security instrument
in the real property to be improved and a lien on the
improvements financed with the loan.
* Sec. 24. AS 45.88.090(a) is amended to read:
(a) In AS 45.88.010 - 45.88.090,
(1) "alternative energy system"
(A) [(1)] means a source of thermal,
mechanical or electrical energy that [WHICH] is not
dependent on oil or gas or a nuclear fuel for the
supply of energy for space heating and cooling,
refrigeration and cold storage, electrical power,
mechanical power, or the heating of water;
(B) [(2)] includes
(i) [(A)] an alternative energy property as
defined by 26 U.S.C. 48(a)(3)(A) (Sec. 301, P.L. 95-
618, Internal Revenue Code);
(ii) [(B)] a method of architectural design
and construction which provides for the collection,
storage, and use of direct radiation from the sun;
(iii) [(C)] a woodstove with a catalytic
converter or a catalytic converter for a wood stove;
[AND]
(iv) [(D)] a steam, hot water, or ducted
hot air central heating system that uses wood or coal
for fuel; and
(v) a high efficiency wood pellet stove;
(C) [(3)] does not include
(i) [(A)] a stove that uses only wood,
coal, or oil for fuel; or
(ii) [(B)] a fireplace or fireplace insert;
(2) "commercial building"
(A) means a building that is intended to be
used for commercial purposes;
(B) does not include
(i) a residential structure or mobile home
that contains one to four family housing units; or
(ii) individual units of condominiums or
cooperatives;
(3) "energy conservation improvement" means
(A) structural insulation;
(B) thermal windows and doors;
(C) a furnace replacement burner designed
to achieve a reduction in the amount of fuel consumed
as a result of increased combustion efficiency;
(D) a device for modifying flue openings
designed to increase the efficiency of operation of
the heating system;
(E) an electrical or mechanical furnace
ignition system that replaces a gas pilot light;
(F) an automatic energy-saving setback
thermostat;
(G) a meter that displays the cost of
energy usage;
(H) caulking and weather stripping of doors
and windows;
(I) insulating shades and shutters;
(J) air and water recuperators."
Renumber the following bill sections accordingly.
Page 13, line 19, following "45.88.010(c),":
Delete "45.88.030(e)"
Insert "45.88.030(c), 45.88.030(d),"
Page 14, following line 10:
Insert a new bill section to read:
"* Sec. 31. The uncodified law of the State of
Alaska is amended by adding a new section to read:
REVISOR'S INSTRUCTION. The revisor of statutes
shall change the heading of art. 1 of AS 45.88 from
"Alternative Energy Revolving Loan Fund" to
"Alternative Energy Conservation Revolving Loan
Fund.""
SENATOR FRENCH objected for discussion purposes.
MR. PAWLOWSKI clarified that members' amendments on line 19 and
22 should be crossed out. This repeals and replaces Sections 20-
23 of the K version of SB 220. It resurrects the Alternative
Energy Loan Fund, an old program through the Department of
Commerce, Community and Economic Development (DCCED) that
provided small loans to residences and businesses that allowed
for conservation programs. He recalled that this program
actually returned money to the state in the long run and the
money was appropriated out of what was a successful program. So
they have lain dormant on the statute books. The idea was to
resurrect that program and extend it to more commercial
entities. However, when this amendment was brought up in the
last committee, they had just learned from the DCCED that the
federal laws relating to how mortgage lenders were governed
changed July 1, getting in the way of helping residences. So,
K.11 is only for commercial alternative energy conservation
loans. The important points are that language on page 1, line
19, was crossed out at the direction of the department
specifically because the intent was to be a revolving loan fund
similar to the AHFC fund and this created problems in the way
the money would revolve through the fund.
The other final important point is that Section 21 on page 2,
lines 22-28 - the "turn down provision" for loans of $30,000-
$50,000 to work with private sector commercial banks. It was
found that it was better to work with the traditional
marketplace of public banks for amounts over $30,000. This
allows businesses to borrow from the state usually when they
don't have access to other financing to do small projects to
provide efficiency. It fills an important hole within the
Omnibus as a whole to get to the commercial side.
CO-CHAIR MCGUIRE said many Alaskans, particularly small business
owners, have asked for this kind of a provision. And it does
fill a hole.
MR. PAWLOWSKI thanked Greg Winegar who presented this amendment
for the DCCED at the last committee hearing. This actually
started as an idea in Senator Egan's office, and they worked
closely with his staff to integrate his concepts.
SENATOR FRENCH withdrew his objection and Amendment 4 was
adopted.
3:58:33 PM
CO-CHAIR MCGUIRE offered Amendment 5, labeled 26-LS1197\K.10.
26-LS1197\K.10
Kane
AMENDMENT 5
OFFERED IN THE SENATE TO: CSSB 220(RES), Draft
Version "K"
Page 1, line 5, following "loan fund,":
Insert "to nuclear waste material, to nuclear
energy production and facilities, to the definition of
'power project' or 'project' as it relates to rural
and statewide energy programs and the Alaska Energy
Authority, to the definition of 'alternative energy
system,'"
Page 3, line 18:
Delete "sec. 15"
Insert "sec. 20"
Page 3, following line 20:
Insert new bill sections to read:
"* Sec. 4. AS 18.45.020 is amended to read:
Sec. 18.45.020. United States licenses or permits
required. A person may not manufacture, construct,
produce, transfer, acquire, or possess a special
nuclear material, by-product material, special nuclear
material facility, by-product material facility,
production facility, or utilization facility, or act
as an operator of a production facility or utilization
facility, wholly within the state without first
obtaining a license or permit for the activity in
which the person proposes to engage from the Nuclear
Regulatory Commission if the commission requires a
license or permit to be obtained by persons proposing
to engage in the activities.
* Sec. 5. AS 18.45.025(a) is amended to read:
(a) A person may not construct a nuclear fuel
production facility, nuclear utilization facility,
utilization facility, reprocessing facility, or
nuclear waste disposal facility in the state without
first obtaining a permit from the Department of
Environmental Conservation to construct the facility
on land designated by the legislature under (b) of
this section.
* Sec. 6. AS 18.45.025(b) is amended to read:
(b) The legislature shall designate by law the
land in the state on which a nuclear fuel production
facility, nuclear utilization facility, utilization
facility, nuclear reprocessing facility, or nuclear
waste disposal facility may be located. In designating
the land in the state on which
(1) a nuclear utilization facility or
utilization facility may be located, the legislature
shall act in the interest of regulating the economics
of nuclear energy;
(2) a nuclear fuel production facility,
[NUCLEAR UTILIZATION,] nuclear reprocessing facility,
or nuclear waste disposal facility may be located, the
legislature shall act to protect the public health and
safety.
* Sec. 7. AS 18.45.025(c) is repealed and reenacted
to read:
(c) The Department of Environmental Conservation
shall adopt regulations governing the issuance of
permits required by (a) of this section. However, a
permit may not be issued until the municipality with
jurisdiction over the proposed facility site has
approved the permit."
Renumber the following bill sections accordingly.
Page 7, following line 28:
Insert a new bill section to read:
"* Sec. 15. AS 42.45.990(4) is amended to read:
(4) "power project" or "project" means a
plant, works, system, or facility, together with
related or necessary facilities and appurtenances,
including a divided or undivided interest in or a
right to the capacity of a power project or project,
that is used or is useful for the purpose of
(A) electrical or thermal energy production
[OTHER THAN NUCLEAR ENERGY PRODUCTION];
(B) waste energy utilization and energy
conservation; or
(C) transmission, purchase, sale, exchange,
and interchange of electrical or thermal energy,
including district heating or interties;"
Renumber the following bill sections accordingly.
Page 12, following line 2:
Insert a new bill section to read:
"* Sec. 22. AS 44.83.990(6) is amended to read:
(6) "power project" or "project" means a
plant, works, system, or facility, together with
related or necessary facilities and appurtenances,
including a divided or undivided interest in or a
right to the capacity of a power project or project,
that is used or is useful for the purpose of
(A) electrical or thermal energy production
[OTHER THAN NUCLEAR ENERGY PRODUCTION];
(B) waste energy utilization and energy
conservation; or
(C) transmission, purchase, sale, exchange,
and interchange of electrical or thermal energy,
including district heating or interties;"
Renumber the following bill sections accordingly.
Page 13, following line 18:
Insert a new bill section to read:
"* Sec. 27. AS 46.11.900(1) is amended to read:
(1) "alternative energy system"
(A) means a source of thermal, mechanical,
or electrical energy that is not dependent on oil or
gas [OR A NUCLEAR FUEL] for the supply of energy for
space heating and cooling, refrigeration and cold
storage, electrical power, mechanical power, or the
heating of water;
(B) includes
(i) an alternative energy property as
defined by 26 U.S.C. 48(a)(3)(A); and
(ii) a method of architectural design and
construction that provides for the collection,
storage, and use of direct radiation from the sun;"
Renumber the following bill sections accordingly.
Page 13, line 19:
Delete "AS 45.88.010(c)"
Insert "AS 18.45.027; AS 45.88.010(c)"
Page 13, line 20:
Delete "sec. 15"
Insert "sec. 20"
Page 13, line 21:
Delete "sec. 11"
Insert "sec. 16"
Page 13, lines 21 - 22:
Delete "sec. 12"
Insert "sec. 17"
Page 13, line 27:
Delete "sec. 13"
Insert "sec. 18"
SENATOR FRENCH objected for discussion purposes.
CO-CHAIR MCGUIRE explained that fundamentally the notion is that
nuclear is a type of energy production that may be beneficial to
Alaska; it might solve problems particularly in rural Alaska.
She said it was left it out of the original legislation because
it is controversial.
MR. PAWLOWSKI said Section 4 provides conforming language to
include "special nuclear material facility", kind of grabbing
the universe of facilities on page 1, lines 16-17, into the
express provision in state law that says you have to go to NRC.
4:00:19 PM
SENATOR HUGGINS joined the committee.
MR. PAWLOWSKI explained that Section 5 was more conforming
language including that new form of facility. Section 6 deals
with some questionable law on how the state can regulate health
and safety on nuclear waste disposal facilities, while it does
have the ability to regulate on the economics of nuclear energy.
Section 6 gives the state and the legislature the ability of
regulating the economics of nuclear energy.
He said Section 7 changes existing statute to repeal the
governor from issuing a permit for nuclear facility within the
state; it would be NRC, the Department of Environmental
Conservation (DEC), and then the municipality with jurisdiction
would be allowed to overrule the sighting of a facility. Section
15 is a revision in the Power Project Loan statutes within AEA
allowing nuclear projects to qualify. Right now they can't.
Section 22 is the Power Project Fund information.
4:02:34 PM
Section 27 is in the definition of alternative energy as it
relates to the consideration of financing for energy
improvements. So when banks are financing energy improvements
they have to look at alternative energy life-cycle costs.
Current law would not allow nuclear to be considered in that.
So, if the state was building a school in Galena and they had a
small nuclear reactor, the state would consider what the long
term life-cycle costs of that energy system.
On page 4, lines 9-11, were crossed out because it repealed the
prohibition against the transportation of nuclear material in
statue. When they did further research, they found that language
wasn't necessary because the prohibition was on the transport of
high level nuclear waste material except for the purposes of
disposal out of state. Therefore, the existing prohibition made
sense and rather than repealing it, they crossed out that
language.
CO-CHAIR MCGUIRE said this should be a Huggins amendment and she
asked if he wanted to add anything to the discussion.
SENATOR HUGGINS said there was discussion about the approval
authority and the attempt he is making is to depoliticize that.
He recalled that the governor doesn't have approval authority on
other energy projects.
MR. PAWLOWSKI said the governor has the line item veto authority
if the state was funding projects. He said it's also important
to recognize that the governor, being the head of state, and the
DEC being tasked with permitting, that the relationship between
the department and the governor is fairly direct.
SENATOR HUGGINS said the governor is the control factor, but he
doesn't have the final approval and he didn't have a problem
with that.
CO-CHAIR WIELECHOWSKI applauded the effort in bringing this
issue forward. They heard a lot from people when they traveled
the state that they wanted the option and opportunity to talk
about nuclear energy in Alaska. He had one slight philosophical
difference on the approval issue in Section 7. He thought this
was a major policy shift in moving towards nuclear and he would
feel more comfortable letting the governor have the final say -
only because when you give it to one department, the DEC, they
would look at DEC issues. Whereas the governor would bring in
other departments like Public Safety, for instance, to verify
that this couldn't be accessed, or Health And Social Services
commissioners and staff to assess whether or not this was a
public health issue, or other departments like ADF&G.
SENATOR HUGGINS said he hoped any projects, not just nuclear,
would have those considerations and balances. This doesn't
change the fact that the governor has a chief of staff that has
all the agencies working through him to the governor.
CO-CHAIR WIELECHOWSKI asked if the administration has a position
on this issue.
4:08:13 PM
CO-CHAIR MCGUIRE called an at ease from 4:08:13 to 4:08:25.
GENE THERRIAULT, Senior Policy Advisor, In-state Energy, Office
of the Governor, said they have to make a policy call. Right now
if the requirement is that the governor makes the decision, all
the departments are below him; so he would be soliciting
information out of the agencies where it might be applicable. If
they put the responsibility into one of the agencies, they have
to decide if there is a guarantee that that agency would reach
across to another and bring information in. He mentioned an
email from "geologic folks" saying there could be some seismic
issues. In conversation with Senator Huggins' staff it's been
said that maybe the federal process reviews all of that
adequately.
He said if they give authority to an agency, there would
probably be some language either in statute or regulation that
they will render a decision in consultation with another agency.
It's possible that some valuable information to the decision
that is to be made could be lost otherwise.
MR. PAWLOWSKI clarified that language on page 2, lines 17-18,
directs the DEC to adopt regulations to govern the universe of
options to them in granting permits; it's very broad language.
CO-CHAIR MCGUIRE asked him to comment on the federal
regulations.
MR. PAWLOWSKI said he wouldn't feel comfortable doing that.
CO-CHAIR MCGUIRE said her concern is if a governor had a
particular opinion about nuclear, that could somehow infiltrate
the decision making process and be the preventative first step.
4:11:04 PM
SHARON LONG, aide to Senator Huggins, said she had not read all
of the federal regulations, but she had talked to someone who
had taken a nuclear project farther than anyone else had in
Alaska. He said the NRC has control over all health and safety
issues - the seismic, the geologic, the air, the water.
According to the legislature's legal advisors, the state can
legislate only on economic issues related to a nuclear project.
This legislation is wide open for the state to adopt regulations
requiring whatever level of scrutiny it they may think are
necessary to look at it. The State of Alaska doesn't have any
nuclear regulations on the books. Thirty-one other states have
commercial nuclear industry and she assumed Alaska wouldn't have
to reinvent the wheel.
SENATOR HUGGINS said it's important to get nuclear on the books,
and he preferred to not belabor the approval or disapproval
part. He agreed with Senator McGuire on the political piece, but
politics plays in about everything they do. He didn't think it
was that huge of a deal. He was firmly convinced that no matter
who was governor or commissioners that the NRC will be in the
driver's seat.
CO-CHAIR WIELECHOWSKI said he thought this was an important
amendment in moving Alaska into the nuclear age. He didn't know
enough about nuclear to know whether the NRC would do enough and
he was concerned about taking away an extra layer of protection.
When nuclear goes wrong, it's big. He would feel more
comfortable in having the governor ultimately approving the
permit.
CO-CHAIR MCGUIRE said, "Depending on who is the governor at the
time."
CO-CHAIR WIELECHOWSKI said you can't escape politics. Removing
Section 7 on page 2, lines 16-20, would alleviate his concerns.
CO-CHAIR WIELECHOWSKI moved to amend Amendment 5 by deleting
Section 7 on page 2, lines 16-20.
CO-CHAIR MCGUIRE called an at ease from 4:17:31 to 4:18:03.
4:18:03 PM
SENATOR HUGGINS objected. A roll call vote was taken: Senators
French and Wielechowski voted yea; Senators Huggins, Wagoner and
McGuire voted nay. So the Amendment 1 to Amendment 5 failed to
pass.
SENATOR FRENCH removed his objection to Amendment 5.
CO-CHAIR MCGUIRE found no further objections and so Amendment 5
was adopted.
SENATOR HUGGINS moved conceptual Amendment 6 as follows:
On page 2, line 24 to insert "nuclear" after "including".
There were no objections and it was so ordered.
CO-CHAIR MCGUIRE recapped that SB 220 had 6 amendments and set
it aside.
^
Overview: Alaska Railroad Bonding Authority
and Gas Line Development
4:20:24 PM
CO-CHAIR MCGUIRE announced an overview of the Alaska Railroad
Bonding Authority and Potential Role in Gas Line Development
would be the next order of business. She said prior to the start
of session, they had a Senate retreat in which the role of in-
state gas was discussed. She and Senate Huggins had different
ideas and decided to have an in-state gas caucus to find a place
in the legislation where the issue could get discussed without
dealing with the return to the treasury of a bigger line. The
overall mission is to get, as soon as possible, natural gas into
the hands of Alaskans, both for residential and commercial
purposes. For a fresh look they came up with two different
entities: the first was the Alaska Housing Finance Corporation
(AHFC) and the second was the Alaska Railroad Corporation
(ARRC). When it was fine-tuned the thinking was the ARRC.
She said AS 42.40.560 specifically pertains to a North Slope
natural gas pipeline and the following language was imbedded
already about the ARRC:
May provide financing for the acquisition,
construction, improvement, maintenance, equipping and
operation of a natural gas pipeline and related
facilities for the transportation of natural gas
recovered from the North Slope of this state without
regard to whether the facilities are or will be owned
in whole or in part by the corporation or located on
land owned by the corporation.
She said below that was a broader reference to the Kenai
gasification project. Her point is that the ARRC has already
been referenced with respect to a natural gas pipeline and other
economic development opportunities in the state.
CO-CHAIR MCGUIRE said the caucus met with General Gamble and his
staff and talked with them about the unique bonding authority
ARRC has. She asked them to come here today to talk a little bit
about that. She said the ARRC is a non-political entity and
would take no position on SB 287 that would task them with this
project.
4:25:39 PM
GENERAL PATRICK GAMBLE, President and CEO, Alaska Railroad
Corporation (ARRC), introduced himself.
BILL O'LEARY, Chief Financial Officer, Alaska Railroad
Corporation (ARRC), introduced himself.
4:26:19 PM
MR. GAMBLE said the legislative intent language of the corporate
act that created the railroad had four items: one was
transportation and three were economic development for the State
of Alaska. The railroad has grown up as a separate entity from
the Department of Transportation and Public Facilities (DOTPF).
In that lifespan they have developed a methodology for
independently dealing with railroad projects. He and his staff
actually go out to the communities and talk to them about
railroad projects as opposed to having it done by the
department. The small ones are as important as the large ones.
That cuts two ways, he said; one is trying to work with cities
through which the proposed rail line (spurs or extensions) might
go. They have also developed the ability in-house to do projects
that are getting larger and larger. He remarked that the fact of
their getting invited here today says something about their
track record and a level of trust.
He said the Railroad deals in things like export coal, marketing
out of state and internationally; they have worked hard to
increase passenger service and moved toward becoming more
commuter oriented rather than recreation.
MR. GAMBLE said they have gotten used to going after federal
money, to advocating for certain kinds of dollars for certain
kinds of projects, for permitting, licensing, and figuring out
how to fit into certain pots of federal money.
4:29:55 PM
The Railroad Corporate Act set them up in 1985 to do these
things, but they have just recently started doing them. Now they
are talking about a project of significant magnitude. In fact on
the financing side, the Act foresaw the development of the State
of Alaska and set the Railroad up with certain powers alongside
its independency that allows the state to use it as a tool for
economic development on a macro scale. That is what they are
discussing today.
MR. GAMBLE said the original intent was for projects like
funding the gas pipeline under the Knowles Administration for
$17 billion. This unique function had not been taken advantage
of before. The ARRC talked to the Legislature about a $2.9
billion project for Agrium. So there is the knowledge that the
Railroad can contribute to large scale economic development in
Alaska. The Railroad has those powers and it has some powers
that AHFC doesn't have. Mr. O'Leary could help discuss those
differences.
MR. GAMBLE said the Railroad Corporation is "hunkered down"
right now with the rest of the economy in Alaska and will
probably continue that for a few years until recovery begins to
show in Alaska. They have reduced the size of the railroad by
20-25 percent, management has been cut back and they have hiring
freezes. They have managed to preserve the bottom line
reasonably well; they are not deferring huge amounts of
maintenance. But the Railroad is in "reasonably good shape." He
said the management team is one of the things they would be
concerned about if they went forward with something like this
proposal.
In the meantime the ARRC is going ahead with several large
projects; they are contracting to a project at Port McKenzie
$300 million, a project in Fairbanks that could run close to
that amount and they are continuing to build the rail line
between Anchorage and Fairbanks, which they bonded $165 million
for. They are on time and on money and four years into a six
year project.
4:34:55 PM
MR. GAMBLE said they have sold debt five times over the life of
the Railroad; four of those have no expiration date and are on
the books. One of them is the Agrium project with a termination
date of June 2015. The associated $300 million Port McKenzie
piece was tacked on and has a sunset date of 2012.
CO-CHAIR WIELECHOWSKI said his understanding is that the idea of
having the Railroad do a bullet line has come up before and he
asked why it hasn't happened in the past.
MR. GAMBLE answered that the only time it formally came up was
when Governor Knowles announced the tax free capability for
financing the big gas pipeline in order to move the project
forward. It flared and died. Since that time they have had no
other overtures.
CO-CHAIR WIELECHOWSKI asked if there are IRS issues.
MR. GAMBLE replied that the IRS issues are definitely there; and
they would have to get a letter of ruling from the IRS, which
Mr. O'Leary could explain.
4:37:34 PM
MR. O'LEARY answered that when the Railroad was transferred from
the federal government in the Federal Transfer Act, there was a
provision the effectively removes the Railroad for many of the
IRS rules related to tax exempt bonds. One of the biggest issues
with tax exempt debt is in most situations you can't use it for
the benefit of private entities. Normally it has to be used for
governmental purposes. The provision in the Transfer language
appears to put the Railroad outside of those particular rules.
Therefore, it can issue debt in an unlimited quantity to support
private activity, a very unique provision. It is the only entity
in the United States that has it. A number of different law
firms, including the legislature have reviewed this issue and
each one has come back, in varying degrees, of agreeing that the
Railroad does have this ability, but they have all said they
would need to go through the "private letter ruling process"
with the Internal Revenue. It is project specific and the
project would have to be further along to be able to bring to
them a plan of finance.
Also, he said, before the Railroad can issue any public debt it
has to get legislative approval. Any use of these abilities
would have to have substantial Railroad involvement. For
example, the Agrium project would have been a significant
financial benefit to the Railroad because it would have hauled
the coal, a lot of it.
CO-CHAIR WIELECHOWSKI asked if this project were to cost $65
billion and the Railroad would bond for it, what kind of
interest rate would it have and what would be the annual
payment.
MR. O'LEARY said he couldn't guess. He would have to know who
the actual owner would be, the term of the debt and the security
behind it. If the state were the security behind the debt, he
could generate those numbers based on the state's credit rating.
CO-CHAIR WIELECHOWSKI asked if the Railroad could bond for a
private entity, like EnStar who could go out and build the line
and pay back the Railroad; so nothing would come out of the
general fund.
O'LEARY replied that was one possibility.
4:42:30 PM
MR. GAMBLE said the Railroad would be a conduit financier; there
would be no recourse to the Railroad or to the State, and he
assumed that model would be the one they would be most
interested in. The Railroad would be the administrator for the
life of the bonds, but they would take a fee for that and make
some money for the Railroad as well.
4:44:01 PM
SENATOR WAGONER asked what he saw as the complexity in the
Railroad financing a megaproject like a gas line.
MR. GAMBLE replied that the bigger and more complex a project is
the more leadership is needed. If it gets diluted the project
will consume itself. Leadership strength causes difficulties in
large business deals, but it's also the strength. Their
reputation for getting things done depends on them being very
"authoritative" about the way it's done. The project leadership
has to have support. In his view it is the number one threat to
a large project. If you're an engineer, you just build bigger.
That's not where the complexity lies.
SENATOR WAGONER said that isn't what he has been told by other
people who have megaprojects.
SENATOR HUGGINS said that is why they approached the Railroad.
They are talking about unanimity of effort.
4:48:58 PM
MR. GAMBLE said he didn't want to trivialize the complexity of
this project. Second to leadership and support for leadership to
get the project done, there has to be a business case. He's
assuming there is one. If you're building a rail or a pipeline
one of the biggest jobs you have is moving dirt; with a rail,
however, you can't go over a 3 percent grade and you have to go
around things. Things could be simplified with permitting and
coordination. He said Enstar had approached them about using
their rights-of-way a couple of years ago.
CO-CHAIR MCGUIRE said he has talked about their mission being
broad economic development, bonding and financing authority,
rights-of-way, and she wanted to talk a little about experience.
One of the difficulties with an in-state gas line is the
business of making it economic - bringing in the residential and
industrial anchors. What intrigued her about the Railroad is
that as well as being a public private entity geared toward
profit and other things, he brings buyers and sellers together
for transportation opportunities. She asked him how the Railroad
reaches out to the private sector.
4:53:30 PM
MR. GAMBLE answered that two things come to mind. One gets back
to the fact that there needs to be a business case. You've got a
producer and a buyer and they link the two as a transportation
organization. The Railroad has people who manage construction
projects, like the extension from Fairbanks to Delta Junction,
but those are rail not pipelines. They have people who do
marketing and go out and talk to customers, but they don't
necessarily talk to the kinds of customer relationships they
would see in an open season between a producer on the North
Slope and a buyer in California.
When Governor Knowles "dropped this bomb on us," years ago, Mr.
Gamble said, he went on TV and said the Railroad was ready to
go. But a pipeline is so different from what the Railroad's core
business is - even though they are into real estate, which is
where they make a lot of their money. He said people realized
they couldn't hurt the ARRC in an attempt to take something like
this on. So, they thought they would have to wall-off the
corporation and create a subsidiary or an LLC or something like
that that could handle the new tasking. It would make as much
sense today as it did then.
CO-CHAIR MCGUIRE said under AS 18.56.086 the Railroad has the
authority to create subsidiaries. Have they done that yet?
4:56:55 PM
MR. O'LEARY answered that is Title 18, which is the AHFC
statute. The ARRC is Title 42, and they have not created any
subsidiary corporations.
CO-CHAIR MCGUIRE asked if the board believed they had the
authority to create a subsidiary when Knowles said it without
further statutory change.
MR. GAMBLE answered that it was an informal discussion that
never went very far because the initiative didn't go very far.
CO-CHAIR MCGUIRE speculated that they might want to replicate
Title 18 for the Railroad at some other time. She thanked
everyone.
MR. GAMBLE said he didn't want to appear as an advocate at this
early stage. It is very complicated and a lot is at stake. He
has not had a discussion with his board other than to inform
them of the meeting. "But at the end of the day our position is
when the Governor signs a bill, we'll follow the law."
4:59:22 PM
CO-CHAIR MCGUIRE thanked him again for his willingness to
consider this issue and adjourned the meeting at 4:59 p.m.