Legislature(2009 - 2010)BARNES 124

03/28/2009 10:00 AM House ENERGY

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HB 163-ALASKA NATURAL GAS DEVELOPMENT AUTHORITY                                                                               
CO-CHAIR  MILLETT  announced that  the  final  order of  business                                                               
would be HB 163.                                                                                                                
11:30:54 AM                                                                                                                   
MR. BALASH  reiterated HB 163 is  one of the three  components of                                                               
the  administration's plan  to initiate  an in-state  natural gas                                                               
pipeline project.   He recalled a 2002  ballot initiative created                                                               
the  Alaska Natural  Gas Development  Authority  (ANGDA) and  the                                                               
original language  of the initiative  directed ANGDA to  pursue a                                                               
project  from  Prudhoe  Bay  to   Valdez  with  a  spur  line  to                                                               
Southcentral.  In 2004, the  legislature expanded ANGDA's mission                                                               
to  include a  pipeline to  Cook Inlet.   Mr.  Balash noted  that                                                               
today the energy needs of  Alaskans requires further expansion of                                                               
ANGDA's purpose  as a useful  tool to  facilitate pre-development                                                               
11:33:23 AM                                                                                                                   
MR. BALASH, in response to  Representative Johansen, restated the                                                               
initiative was  enacted in 2002,  and amended by  the legislature                                                               
in 2004.                                                                                                                        
11:34:23 AM                                                                                                                   
REPRESENTATIVE JOHANSEN  observed this  was a  citizen initiative                                                               
and the bill  is a proposal by the governor  to amend the citizen                                                               
initiative.  He asked whether  the amendment is necessary because                                                               
there  is new  information, or  a changing  environment affecting                                                               
the statute.                                                                                                                    
MR.   BALASH  opined   that  was   part  of   the  consideration.                                                               
Additionally,  however,  ANGDA  has  been  operating  beyond  its                                                               
statutory mission,  albeit with  the legislature's  knowledge and                                                               
funding, and the  bill allows the agency to become  a vehicle for                                                               
getting gas and moving it anywhere in the state.                                                                                
11:37:15 AM                                                                                                                   
REPRESENTATIVE  JOHANSEN  said  it  was a  valid  point  for  the                                                               
legislature and  the governor to  readdress the statute  and make                                                               
11:37:55 AM                                                                                                                   
REPRESENTATIVE  PETERSEN  asked  whether  HB 163  would  allow  a                                                               
company to build a short  pipeline that connected to the existing                                                               
pipeline system.                                                                                                                
MR.  BALASH said  Sec. 1  would allow  ANGDA to  look beyond  the                                                               
North  Slope  for a  supply  of  gas.    In further  response  to                                                               
Representative  Petersen, he  indicated  that a  pipeline of  any                                                               
length would be allowed.                                                                                                        
11:39:12 AM                                                                                                                   
CO-CHAIR MILLETT  recalled ANGDA was  directed to complete  a gas                                                               
pipeline  by  2007.    She  asked  for  an  overview  of  ANGDA's                                                               
accomplishments;  how much  money the  state has  appropriated to                                                               
ANDGA; and what its work product has been.                                                                                      
11:40:03 AM                                                                                                                   
MR. BALASH related that after  the initiative was passed in 2002,                                                               
the Murkowski  Administration appointed a board  of directors for                                                               
ANGDA.  A  modest appropriation funded the agency to  do the work                                                               
required under the original initiative,  which was to investigate                                                               
the  feasibility and  economic  viability of  a pipeline  project                                                               
from Prudhoe  Bay to  Prince William  Sound with  a spur  line to                                                               
Southcentral.   The authority  prepared a  report to  Alaskans in                                                               
2004; also  during that year  the legislature  reviewed statutory                                                               
changes  and  expanded the  authority's  scope.   Also  in  2004,                                                               
applications  began  to  be  submitted  under  the  Stranded  Gas                                                               
Development   Act  (SGDA),   and   it  became   clear  that   the                                                               
administration's  priority was  a  large diameter  pipeline.   In                                                               
fact, ANDGA  began to focus  on developing the spur  line service                                                               
from the big line to Southcentral.   The authority also looked at                                                               
opportunities  for  petrochemical   development;  other  uses  of                                                               
natural gas; and  propane distribution along the  rivers of rural                                                               
Alaska.   During 2005-2006 ANGDA secured  a conditional right-of-                                                               
way lease from the Department  of Natural Resources (DNR) for the                                                               
spur line project along the Glenn  Highway.  Early in the days of                                                               
the  Palin  Administration,  ANGDA   was  directed  back  to  the                                                               
original project; thus in 2007  major funding was used to develop                                                               
an AGIA application.  In  2008, that application was rejected for                                                               
11:45:26 AM                                                                                                                   
CO-CHAIR MILLETT asked whether ANGDA  submitted an application to                                                               
build a pipeline.                                                                                                               
MR.  BALASH explained  ANGDA's application  was to  build a  spur                                                               
line along the  Glenn Highway connecting to an  LNG applicant, or                                                               
to  continue  up the  Richardson  Highway  to Delta  Junction  to                                                               
connect with one of the large pipeline projects.                                                                                
CO-CHAIR  MILLETT  asked,  "So,  ANGDA  would  own  and  build  a                                                               
pipeline, was that the idea?"                                                                                                   
MR. BALASH expressed  his belief that ANGDA's plan was  to do the                                                               
pre-development  work necessary  to turn  the project  over to  a                                                               
private  developer/owner/operator.   After  the  issuance of  the                                                               
AGIA  license  to  TransCanada, the  administration  received  an                                                               
estimate of the  funding needed for ANGDA to  continue work until                                                               
the open season in 2010.  He then  pointed out that at the end of                                                               
the  legislative  session  of  2008,  the  legislature  passed  a                                                               
resolution in  support of in-state  gas; however,  the governor's                                                               
request  for $10  million to  study  routes for  an in-state  gas                                                               
pipeline was denied and $4 million was appropriated to ANGDA.                                                                   
11:48:53 AM                                                                                                                   
MR. BALASH,  referring back to Co-Chair  Millett's question, said                                                               
the authority has  been appropriated about $10  million in total.                                                               
He assured the  committee ANGDA is ready to begin  its next stage                                                               
of  work in  pursuit  of  the spur  line  project;  in fact,  the                                                               
administration has done  its best to keep in  sight the statutory                                                               
mission, as  well as the  purpose behind  specific appropriations                                                               
made by the legislature.                                                                                                        
11:50:03 AM                                                                                                                   
REPRESENTATIVE  TUCK   asked  about   the  Alaska   Gasline  Port                                                               
Authority (AGPA).                                                                                                               
11:50:31 AM                                                                                                                   
MR.  BALASH  said,  "ANDGA  and   AGPA  are  two  very  different                                                               
organizations with very different track records."                                                                               
REPRESENTATIVE   JOHANSEN   asked   who   sponsored   the   ANGDA                                                               
MR.  BALASH said  one sponsor  was Scott  Hayworth who  is now  a                                                               
member of the board of directors.                                                                                               
11:51:30 AM                                                                                                                   
HAROLD  HEINZE, CEO,  Alaska  Natural  Gas Development  Authority                                                               
(ANGDA),  Office  of  the  Commissioner,  Department  of  Revenue                                                               
(DOR),  informed the  committee the  ballot statement  of support                                                               
for ANGDA  was signed by Mike  Macy (ph), Tyrone Neill  (ph), and                                                               
Scott Hayworth.   Mr. Heinze continued to explain  that the ANGDA                                                               
initiative  passed in  the 2002  election by  a 2:1  margin.   He                                                               
added  that the  initiative was  born of  frustration during  the                                                               
Knowles Administration.   In the summer of 2003,  the ANGDA board                                                               
of directors was  appointed and official work  began in September                                                               
2003.  The first  task undertaken by ANGDA was to  look at an LNG                                                               
project;  after  eighteen months  of  study  ANGDA concluded  the                                                               
project was  economic, competitive, and feasible,  but beyond the                                                               
means  of ANGDA.   Also,  at that  time, SGDA  deflected interest                                                               
away from an  LNG project.  The authority  focused on development                                                               
of  the  spur  line;  obtained  a  conditional  right-of-way  for                                                               
Glennallen to Palmer  that is worth several  million dollars; and                                                               
submitted  an  application under  the  AGIA  process.   The  AGIA                                                               
application was  focused on  ANGDA's part  of a  partnership that                                                               
was dependent on a private  sector partner.  Mr. Heinze clarified                                                               
that ANGDA is  not interested in owning and  building a pipeline,                                                               
but  is interested  in "making  one happen."   Other  events that                                                               
have  influenced  ANGDA's interest  include  the  recent rise  in                                                               
energy prices  and the propane  project on  the North Slope.   He                                                               
emphasized that ANGDA continues to  advance the spur line through                                                               
the  regulatory approval  process  and has  almost established  a                                                               
"ready to build  status" for any private sector  party coming in.                                                               
Mr.  Heinze opined  House Bill  163 is  necessary for  clarity so                                                               
that ANGDA can qualify for major financing.                                                                                     
11:57:39 AM                                                                                                                   
CO-CHAIR  MILLETT recalled  the initiative  tasked ANGDA  with 12                                                               
goals,  and  the final  goal  was  to have  a  gas  line in  full                                                               
production by 2007.  She asked  how much closer [the state is] to                                                               
getting an in-state gas line.                                                                                                   
MR. HEINZE acknowledged  that Sec. 5, Item 11,  of the initiative                                                               
petition set  out a series of  plans, and the goal  of having the                                                               
Alaska gas line in production by  2007 was missed.  The intent of                                                               
Sec. 5  was to provide a  first year task; however,  the focus of                                                               
the  governor and  the legislature  was on  the pipeline  through                                                               
Canada and  ANGPA was working  on an  LNG project.   He discussed                                                               
his experience in  the industry back to 1969.   Mr. Heinze opined                                                               
that  "things  are in  good  shape"  because  of the  two  groups                                                               
working  on  the  big  pipeline through  Canada  and  their  FERC                                                               
applications.  The primary focus for  ANGDA now is to assure that                                                               
the in-state side  is well represented in the FERC  process.  The                                                               
in-state  project must  be  prepared to  interface  with the  big                                                               
project between  January and July  2010, and be  further prepared                                                               
to  participate as  provided for  under  the federal  legislation                                                               
that  will  guide FERC  in  its  proceedings  on the  Alaska  gas                                                               
CO-CHAIR MILLETT  asked if  ANGDA asked  for an  appropriation in                                                               
the operating budget.                                                                                                           
MR. HEINZE  said ANGDA requested  $315,000, and he  described his                                                               
office staff.   Regarding further  appropriations, he  said ANGDA                                                               
has  received approximately  $10  million  in appropriations  and                                                               
with  operating expenses  has  received about  $12  million.   In                                                               
return  for  that,  the  state has  several  projects  where  the                                                               
private sector  can move forward.   He opined the  private sector                                                               
lacks the ability to see  with certainty whether the big pipeline                                                               
will succeed or not; once that  question is answered, there are a                                                               
number  of pipeline  companies  that will  be  interested in  the                                                               
Alaska line.                                                                                                                    
12:04:11 PM                                                                                                                   
CO-CHAIR  MILLETT   asked  about  the  level   of  interest  from                                                               
producers on the rights-of-way ANGDA has obtained.                                                                              
MR. HEINZE  said several  large Lower  48 pipeline  companies are                                                               
interested in the  spur line project; in fact,  their interest is                                                               
due to  the work  ANGDA has  done.   Furthermore, he  assured the                                                               
committee  that  it is  clear  to  interest parties  that  public                                                               
monies expended by ANGDA must be reimbursed.                                                                                    
12:05:20 PM                                                                                                                   
CO-CHAIR MILLETT announced HB 163 was held over.                                                                                

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