Legislature(2003 - 2004)

03/23/2004 01:45 PM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= 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.                                                                                                           
                                                                                                                                

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