Legislature(2003 - 2004)
03/23/2004 01:45 PM FIN
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
CS FOR SENATE BILL NO. 241(FIN) An Act making an appropriation to the Department of Revenue for work related to bringing North Slope natural gas to market; and providing for an effective date. SENATOR GENE THERRIAULT explained the intent of SB 241. The appropriation is proposed to provide funding for the administrative agencies and Alaska Natural Gas Pipeline Development Authority (ANGDA) in order to move forward in the effort to bring natural gas to market. The funding would be provided through the Department of Revenue, which would provide the accounting mechanism. Senator Therriault pointed out that the original bill provided $2 million dollars. In a Senate Finance Committee meeting, there was discussion regarding funding for 2005, and it was agreed that should be contained in next years budget. Thus, the funding was decreased to $1 million dollars addressing the items critical at the present time. He stressed that it is important to provide funding at this time for contracts associated with the Stranded Gas Act. STEVE PORTER, (TESTIFIED VIA TELECONFERENCE), DEPUTY COMMISSIONER, DEPARTMENT OF REVENUE, ANCHORAGE, noted that the Department of Revenue had requested $1 million dollars for the purpose of supporting stranded gas development and the work of ANGDA. He pointed out that the total amount, which could be spent, obviously would exceed $1 million dollars, made available through the legislation. The amount would be spent in FY04 to deal primarily with tariff issues, fiscal terms, petro-chemical analysis, social impacts and understanding route assessment. HAROLD C. HEINZE, (TESTIFIED VIA TELECONFERENCE), CHIEF EXECUTIVE OFFICER, ALASKA NATURAL GAS PIPELINE AUTHORITY (ANGDA), ANCHORAGE, stated that he had faxed a handout, identifying how ANGDA is doing concerning the taxes, funding and then identifying current contracts that are underway. (Copy on File). He added that the handout indicate work skills performed under the contracts. The work currently done by ANGDA continues to be positive and encouraging to the Authority's role as a mechanism to help the financing improve the marketability of the North Slope gas as well as providing benefits to Alaskans by delivering gas to the Cook Inlet region. The Board has considered SB 241 and has taken a positive view toward that legislation. Additionally, the operating budget proposed by the Administration has been amended to provide a total of $256 thousand dollars in FY05. Mr. Heinze offered to provide contract details, pointing out several needing immediate attention through the approval of the proposed legislation. Mr. Heinze urged that the project move forward. Representative Chenault questioned the projected scenario of delivering gas to the Cook Inlet area at $1 to $1.25 dollars and asked if that would be the total cost including the tariffs to Cook Inlet. Mr. Heinze explained that those amounts are estimates determined for various approaches of getting gas to Cook Inlet. They are the numbers projected for getting the North Slope conditioning, pipelining and delivery into the Cook Inlet natural gas system. BOB FAVRETTO, (TESTIFIED VIA TELECONFERENCE), ALASKA NATURAL GAS DEVELOPMENT AUTHORITY BOARD, ANCHORAGE, offered to address the amendments as they are brought forward. JERRY MCCUTCHEON, (TESTIFIED VIA TELECONFERENCE), ANCHORAGE, noted his concern that the Legislature understand "What they are dealing with on the North Slope", particularly regarding Prudhoe Bay. He commented on a suit that occurred in that area in which "records had been sealed". He claimed that the current Administration is "blinded". The oil is two- thirds recoverable if the gas is kept in the reservoir. He projected that oil prices will increase the first few years and then they will crash. Mr. McCutcheon recommended that there be a commitment on record to find out how much really exists. Representative Croft MOVED to ADOPT Amendment #1, #23- LS1279\I.1, Utermohle, 3/22/04. (Copy on File). Co-Chair Williams OBJECTED. Representative Croft noted that the amendment attempts to change the amount back to $3 million dollars, creating an equal distribution between ANGDA and the Department of Revenue. He acknowledged that the Department would need some funding under the Stranded Gas Act but that money should be separate from the purpose of funding ANGDA. ANGDA is an independent body with an independent Board, which needs and deserves full funding. Senator Therriault advised the proposed funding passed through the Department of Revenue and was endorsed by the th ANGDA Board through a resolution passed at the February 16 meeting. ANGDA has indicated that they are "comfortable" with the current plan. He pointed out that in the Senate Finance Committee meeting, both the Majority and the Minority members agreed that it was more appropriate for ANGDA to come back to the FY05 budget process for further allocations. Senator Therriault stated that his preference would be to stick with the original amount. Co-Chair Harris asked if Mr. Heinze was aware of the amendment and the on-going negotiations between both bodies regarding the amount being made available to ANGDA. Mr. Heinze replied that he was aware of the proposed amendment and that he had responded to Representative Croft. The response included that while the original bill funded both FY04 and FY05, it was clear during the discussions in the Senate Finance Committee that the preference was to decide only about FY04 funding. That Committee proposed that it would be a better process to address only the FY04 budget needs at this time. He added that the $1 million dollar allocation for the two remaining months could be sufficient and that ANGDA would look forward to additional funding in the FY05 budget for the stranded gas effort. Co-Chair Harris asked if ANGDA was satisfied with the $1 million dollar appropriation at this time, knowing that there would be fair opportunity in the FY05 Capital Budget for more funding. Mr. Heinze reiterated that they would, submitting that ANGDA prefers the adoption of the Senate version of the bill, hoping that it would move to the floor as quickly as possible. Mr. Favretto spoke to Amendment #1. He voiced concern with the funding mechanisms to support ANGDA. He understood and appreciated Representative Croft's concern with the funding level for ANGDA but noted his concern with getting the bill back through the Senate in time for adjournment. He emphasized that ANGDA could live with the $1 million dollar allocation to finish the tasks at hand. Representative Croft elaborated that his interests in ANGDA rests with the independence of the Board and hope it will bring the issues to the State. The Administration and the Legislature have shown over 1.5 years of neglect, compromising that independence. The Board does not have any choice left, as they never have had the funding needed to do the appropriate studies. Their requests have continually been reduced. Representative Croft doubted that the $1 million appropriation would be sufficient with the funds passing through the Department of Revenue. He emphasized that the Amendment would provide enough funding and is "the right thing to do", by providing ANGDA some financial security. He noted that he was disappointed that ANGDA was willing to settle for only the $1 million dollars allocation. A roll call vote was taken on the MOTION. IN FAVOR: Moses, Chenault, Croft OPPOSED: Hawker, Joule, Meyer, Stoltze, Fate, Foster, Harris, Williams The MOTION FAILED (3-8). Representative Croft MOVED to ADOPT Amendment #2, #23- LS1279\I.2, Utermohle, 3/22/04. (Copy on File). Co-Chair Williams OBJECTED. Representative Croft explained that if the amount allocated to the request is $1 million dollars, then it should be guaranteed that at least half of that amount goes to ANGDA. The amendment would provide an allocation within the $1 million dollar appropriation. Senator Therriault advised that on the Senate side, he had directed that the money pass through the Department of Revenue, which is the manner in which the Legislative Budget and Audit (LBA) Committee had routed it. Members of the ANGDA Board have indicated that their relationship with the Department has improved. They are comfortable with routing the money through the Department of Revenue. Acceptance of th the routing was included in their February 16 resolution passed by the entire ANGDA Board. If the Legislature sees that the Department and the Board are not working well together, then the FY05 budget could be handled differently. He did not foresee problems. In response to Co-Chair Harris, Mr. Heinze explained that in addition to the authority provided by the voters in the November 2002 election, the State has entered into the stranded gas process with a number of applicants. There are a myriad of issues facing the State related to natural gas. The basic idea of ANGDA working with the Department of Revenue contributes to the total effort. There have been "honest hearings regarding the efforts proposed". He elaborated that he was comfortable at this time working in a team effort with the Department of Revenue. Representative Croft commented that he was not sure that the treasurer handling the "purse strings" for ANGDA would agree with Mr. Heinze. He thought that at this point, ANGDA was putting forward a "desperate plea" for anything. Board members are still not confirmed and ANGDA is not going to exist in the manner that the voters intended. He suggested that ANGDA has become a "weird" subdivision of the Department of Revenue and that it is not independent. A roll call vote was taken on the motion. IN FAVOR: Joule, Moses, Stoltze, Croft OPPOSED: Meyer, Chenalut, Fate, Foster, Hawker, Williams, Harris The MOTION FAILED (4-7). PAUL FUHS, BACK BONE 2, JUNEAU, testified in support for the proposed legislation. He noted that Back Bone 2 is a citizen's organization to advocate for the fulfillment of Proposition #3, which was overwhelmingly adopted by the citizens of Alaska. He believed that information that would come forward from studies through the Department of Revenue and would be thoroughly utilized. He referenced his handouts. (Copy on File). Mr. Fuhs stressed that Alaska is in a "race" for the development market. There are a number of companies that are interested in Alaskan gas. The three major producers have noticed the continual delays on the pipeline projects in Alaska. Mr. Fuhs indicated his concern with the funding being provided, wanting to accept and believe the word from the Department of Revenue by Mr. Steve Porter. The contracts are ready to go and the people of the State will know immediately if the Department has not followed through on them. He encouraged member's to check out the Back Bone 2 website for more in-depth information regarding these concerns. Vice Chair Meyer inquired if an application had been received from Mid America. (Mr. Porter was no long on line to respond). Co-Chair Williams said that he did not know about that application. Representative Foster MOVED to report CS SB 241 (FIN) out of Committee with individual recommendations. There being NO OBJECTION, it was ordered. CS SB 241 (FIN) was reported out of Committee with a "do pass" recommendation.