Legislature(2003 - 2004)

02/19/2004 03:20 PM O&G

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
HB 417-AK NATURAL GAS DEV. AUTHORITY INITIATIVE                                                                               
                                                                                                                                
[Contains discussion of SB 247 and SB 241]                                                                                      
                                                                                                                                
REPRESENTATIVE  HOLM announced  that the  only order  of business                                                               
would be HOUSE  BILL NO. 417, "An Act amending  the definition of                                                               
'project'  in  the  Act  establishing   the  Alaska  Natural  Gas                                                               
Development Authority; and providing for an effective date."                                                                    
                                                                                                                                
Number 0101                                                                                                                     
                                                                                                                                
REPRESENTATIVE MIKE CHENAULT,  Alaska State Legislature, sponsor,                                                               
explained  that HB  417  amends the  definition  of "project"  to                                                               
include other  options for a  terminus of the Alaska  natural gas                                                               
pipeline;   it   specifically   identifies  Cook   Inlet   as   a                                                               
possibility.   He  noted  that the  City of  Kenai  had passed  a                                                               
resolution  in support  of  the Senate  companion  bill, SB  247,                                                               
which was introduced by Senator Thomas Wagoner.                                                                                 
                                                                                                                                
Number 0296                                                                                                                     
                                                                                                                                
REPRESENTATIVE HOLM  offered his  understanding that  the purpose                                                               
of the  bill is  to ensure  that Cook Inlet  is considered  as an                                                               
outlet for natural gas from the North Slope.                                                                                    
                                                                                                                                
REPRESENTATIVE CHENAULT  said he  thought all the  options should                                                               
be looked at.                                                                                                                   
                                                                                                                                
REPRESENTATIVE HOLM asked if it could be used in Fairbanks.                                                                     
                                                                                                                                
REPRESENTATIVE  CHENAULT said  he didn't  believe so.   He  added                                                               
that he  thought there  were myriad reasons  for the  belief that                                                               
Cook Inlet tidewater should be considered.                                                                                      
                                                                                                                                
REPRESENTATIVE HOLM said  it's nice to do this  [in statute], but                                                               
is probably also in the plan.                                                                                                   
                                                                                                                                
Number 0356                                                                                                                     
                                                                                                                                
REPRESENTATIVE CRAWFORD  said he is  in favor of the  concept and                                                               
wants gas to  go to Cook Inlet, but the  initiative that was done                                                               
had a  time limit; there  is also trouble  with the funding.   He                                                               
asked if  this is going to  add to the difficulty  for the Alaska                                                               
Natural Gas Development  Authority (ANGDA) to do its  work by the                                                               
deadline, and  if it would  cost more money.   He said  he didn't                                                               
want to jeopardize the project.                                                                                                 
                                                                                                                                
REPRESENTATIVE CHENAULT  said he  didn't believe it  would extend                                                               
[ANGDA's]  timeline.     He  said  he  thought  a   lot  of  this                                                               
information was available  and that [ANGDA] may need  to "pull it                                                               
together."    He noted  that  he  hadn't specifically  talked  to                                                               
ANGDA's  chief executive  officer,  Harold Heinze,  or any  board                                                               
members about  whether they agreed  this may be  something they'd                                                               
like to see.  Representative Chenault  said if the pipeline is in                                                               
Alaska's  future,  all available  options  should  be looked  at,                                                               
rather than settling for the only option available.                                                                             
                                                                                                                                
REPRESENTATIVE CRAWFORD  asked if Mr. Heinze  should be consulted                                                               
to find  out whether [ANGDA]  would need  [another] appropriation                                                               
in order to  get the work done, and whether  Mr. Heinze could get                                                               
it done with this addition by the [June 15] deadline.                                                                           
                                                                                                                                
REPRESENTATIVE CHENAULT said  it would be up to  the committee to                                                               
decide.    Legislation  to  fund  ANGDA  is  moving  through  the                                                               
legislature, and  the governor's  budget includes added  money to                                                               
try to push the complete project.                                                                                               
                                                                                                                                
Number 0559                                                                                                                     
                                                                                                                                
REPRESENTATIVE HOLM  indicated Mr. Heinze had  been consulted and                                                               
thought his work  in considering Cook Inlet or  Glennallen [for a                                                               
terminus]  would probably  take  a couple  of  months beyond  the                                                               
June 30  deadline.   He said  he  didn't think  [Mr. Heinze]  was                                                               
going to discount that.                                                                                                         
                                                                                                                                
REPRESENTATIVE CHENAULT remarked:                                                                                               
                                                                                                                                
     I think  that a  project that's  this important  in the                                                                    
     state,  realizing we  don't want  to create  a quagmire                                                                    
     where we  don't have  the option, but  we also  want to                                                                    
     make sure that  we do look at the options  that are the                                                                    
     biggest  benefit  to  the  state of  Alaska  --  and  I                                                                    
     believe that an option to  Cook Inlet is to the biggest                                                                    
     benefit to the state of Alaska.                                                                                            
                                                                                                                                
Number 0643                                                                                                                     
                                                                                                                                
REPRESENTATIVE HEINZE noted that it  appears to be an "either/or"                                                               
situation:   either to  tidewater at Prince  William Sound  or to                                                               
Cook Inlet.   She asked, "Do we  have to be one or  the other, or                                                               
... could there be  gas to Cook Inlet and a  spur line to Valdez,                                                               
or visa versa ... or both?"                                                                                                     
                                                                                                                                
REPRESENTATIVE  CHENAULT replied  that  he believed  it could  be                                                               
either way, but the options need to  be looked at to see which is                                                               
in  the best  interests  of Alaskans;  then  [the better  option]                                                               
should be moved forward.   He added that he didn't  want it to be                                                               
an "either/or"  and that the options  should be looked at  to see                                                               
which is most viable.                                                                                                           
                                                                                                                                
REPRESENTATIVE HEINZE  asked if the  bill could be amended  so it                                                               
isn't "either/or."                                                                                                              
                                                                                                                                
REPRESENTATIVE  CHENAULT  said  he  is  agreeable  to  that,  but                                                               
reiterated  the desire  to have  the option  to have  that looked                                                               
into.                                                                                                                           
                                                                                                                                
Number 0774                                                                                                                     
                                                                                                                                
REPRESENTATIVE  ROKEBERG  offered  his  view  that  the  bill  is                                                               
drafted so  options include  "either Prince  William Sound  and a                                                               
spur  line or  a tidewater  to Cook  Inlet."   He expressed  some                                                               
doubt that  the current  language prohibits  any major  amount of                                                               
delivery to Cook Inlet.  If  the pipeline is built to Valdez, the                                                               
initiative  [which established  ANGDA]  does provide  for a  spur                                                               
line.   He asked if one  objective is to create  a greater amount                                                               
of  gas  flowing  to  Cook  Inlet  to  be  used  for  value-added                                                               
processing to  take advantage  of "green  field and  brown field"                                                               
industrial site  locations.  He asked  Representative Chenault if                                                               
he thought the current spur language was adequate to cover that.                                                                
                                                                                                                                
REPRESENTATIVE CHENAULT remarked, "The  spur, maybe."  He related                                                               
the belief that  the spur-line language is there,  but the option                                                               
to take  the pipeline to  the Southcentral  gas grid is  a better                                                               
option for  Alaskan residents.   He said  if that is  the option,                                                               
that option needs to be pursued.                                                                                                
                                                                                                                                
Number 0958                                                                                                                     
                                                                                                                                
REPRESENTATIVE  ROKEBERG  relayed   his  understanding  that  the                                                               
current provision  and language provide for  the Southcentral gas                                                               
distribution  grid   spur  line.     He  surmised  it   could  be                                                               
interpreted to mean it could have sufficient passage.                                                                           
                                                                                                                                
REPRESENTATIVE CHENAULT said that's correct.                                                                                    
                                                                                                                                
REPRESENTATIVE ROKEBERG asked if the  intention of the bill is to                                                               
ask ANGDA  to look at  a discrete, stand-alone pipeline  that may                                                               
not deliver to Valdez, but might deliver to Cook Inlet.                                                                         
                                                                                                                                
REPRESENTATIVE CHENAULT said that would  be one definition of it.                                                               
He added  that the  project needs  to be looked  at to  see which                                                               
route  is  the best  for  Alaska.    He  added that  the  current                                                               
authority allows for a spur line to Southcentral Alaska.                                                                        
                                                                                                                                
Number 1070                                                                                                                     
                                                                                                                                
REPRESENTATIVE KERTTULA asked if  the initiative language allowed                                                               
for a spur line to Cook Inlet.   She said the grammar in the bill                                                               
limits [the  options] for  a stand-alone pipeline  to one  or the                                                               
other;  these aren't  spur  lines anymore.    She questioned  the                                                               
wisdom of placing a limitation,  rather than figuring out what is                                                               
best for all of Alaska.                                                                                                         
                                                                                                                                
REPRESENTATIVE CHENAULT  said it  is currently limited  to Valdez                                                               
with the spur line.                                                                                                             
                                                                                                                                
REPRESENTATIVE  KERTTULA offered  her reading  that there  was no                                                               
spur line to Cook Inlet in the initiative that was voted on.                                                                    
                                                                                                                                
Number 1222                                                                                                                     
                                                                                                                                
STEVEN PORTER, Deputy Commissioner,  Department of Revenue (DOR),                                                               
said  the  wording of  bill,  without  the underlined  provisions                                                               
[which add new language], is the  initiative as written.  He read                                                               
AS 41.41.990(3) into the record, which states:                                                                                  
                                                                                                                                
     (3)  "project"  means  the gas  transmission  pipeline,                                                                    
     together with  all related property and  facilities, to                                                                    
     extend from the Prudhoe Bay  area on the North Slope of                                                                    
     Alaska to tidewater at a  point on Prince William Sound                                                                    
     and the  spur line from Glennallen  to the Southcentral                                                                    
     gas distribution  grid, and includes  planning, design,                                                                    
     and  construction of  the  pipeline  and facilities  as                                                                    
     described in AS 41.41.010(a)(1) - (5).                                                                                     
                                                                                                                                
Number 1269                                                                                                                     
                                                                                                                                
REPRESENTATIVE   KERTTULA   asked   if   the   Southcentral   gas                                                               
distribution grid is Cook Inlet.                                                                                                
                                                                                                                                
MR. PORTER answered affirmatively.                                                                                              
                                                                                                                                
REPRESENTATIVE KERTTULA said she  was unsure because "Cook Inlet"                                                               
wasn't  specified.    She  asked   whether  it  is  wise  to  say                                                               
"either/or" because she  doesn't know whether it is  needed.  She                                                               
said  it's sort  of  all-encompassing.   Representative  Kerttula                                                               
asked if the  stand-alone pipeline is needed and  whether that is                                                               
the distinction.                                                                                                                
                                                                                                                                
REPRESENTATIVE  ROKEBERG offered  his understanding  that HB  417                                                               
will allow  ANGDA to look  at an  alternate route in  addition to                                                               
the route specified in the initiative.                                                                                          
                                                                                                                                
REPRESENTATIVE CHENAULT concurred.                                                                                              
                                                                                                                                
REPRESENTATIVE ROKEBERG offered his understanding:                                                                              
                                                                                                                                
     In other words,  you could come down  the Parks Highway                                                                    
     to Cook Inlet  and not go to Prince  William Sound with                                                                    
     your language,  but you couldn't  otherwise.   The only                                                                    
     route  you  can  look  at  in  the  initiative  is  the                                                                    
     Richardson-Highway-to-Valdez  route.  ... The  spur  is                                                                    
     provided for  in the  initiative, but  only as  a spur,                                                                    
     not as ... a direct route  to Cook Inlet, and this just                                                                    
     actually,  by giving  it the  "either/or," expands  the                                                                    
     options to the authority to look at it.                                                                                    
                                                                                                                                
REPRESENTATIVE CHENAULT said that was correct.                                                                                  
                                                                                                                                
Number 1383                                                                                                                     
                                                                                                                                
REPRESENTATIVE HEINZE suggested the  possibility of the following                                                               
conceptual  [amendments  on page  1,  lines  6-7]:   after  "on",                                                               
delete "the  North Slope  of Alaska  to tidewater  at a  point on                                                               
Prince William  Sound" and  insert "and/or a  spur line";  and on                                                               
[page 1, line 8] following "grid", insert "and/or to tidewater".                                                                
                                                                                                                                
REPRESENTATIVE ROKEBERG said the  drafting manual doesn't provide                                                               
for "and/or".                                                                                                                   
                                                                                                                                
Number 1434                                                                                                                     
                                                                                                                                
REPRESENTATIVE   ROKEBERG   requested  verification   about   the                                                               
legislature's right to revise an  initiative.  He said he thought                                                               
[the  legislature] had  the right  to make  some amendments,  but                                                               
couldn't change  the substance.   He expressed concern  about the                                                               
legal ability,  within a two-year  window, of the  legislature to                                                               
take this  action, and  suggested it should  be addressed  on the                                                               
record.                                                                                                                         
                                                                                                                                
REPRESENTATIVE CHENAULT  said the  question has  come up,  but he                                                               
didn't have anybody from Legislative  Legal and Research Services                                                               
to speak  to it.   He offered his  understanding that as  long as                                                               
[the revision]  is adding to  the initiative and not  taking away                                                               
from it or restricting the rights  that were provided in it, then                                                               
it is legal for the legislature to [make modifications].                                                                        
                                                                                                                                
REPRESENTATIVE  ROKEBERG suggested  it  would  be appropriate  to                                                               
clarify it.  He recalled  his experience that the legislature has                                                               
acted to  modify initiatives,  but normally  with the  consent of                                                               
the initiative's writers.   He said there is  a certain statutory                                                               
basis on  which [the legislature]  can and  cannot act, so  it is                                                               
important to ensure that this is within that purview.                                                                           
                                                                                                                                
Number 1564                                                                                                                     
                                                                                                                                
JERRY  McCUTCHEON, Anchorage,  related his  view that  unless any                                                               
gas line from the North Slope  serves Anchorage and Kenai, no gas                                                               
line should be  constructed.  He remarked, "It's not  a matter of                                                               
would be allowed; I'm talking about  being mandated."  He said no                                                               
doubt an all-Alaska  liquid natural gas (LNG)  line could deliver                                                               
gas to  Los Angeles  more cheaply  than a  2500-mile gas  line to                                                               
Alberta and the Lower 48.   However, can Alaskan LNG compete with                                                               
world LNG?   "After going through ... 800 miles  of gas line, the                                                               
answer is no," he answered.  He continued:                                                                                      
                                                                                                                                
     I think  you people are thinking  of a gas line  or gas                                                                    
     in a  reservoir as water  in a  tank.  It  doesn't work                                                                    
     that  way.   If that  were  true, the  south 48  states                                                                    
     would not be  needing gas from Alaska.   It's pressure-                                                                    
     dependent, and you're  going to lose a  lot of pressure                                                                    
     real quick  at four and  a half billion cubic  feet per                                                                    
     day for the Alcan, and  another couple of billion cubic                                                                    
     feet per day  for an LNG line, so I  think you're going                                                                    
     to  find yourselves  limited to  about 2  billion cubic                                                                    
     feet a day.                                                                                                                
                                                                                                                                
MR. McCUTCHEON  mentioned perhaps  providing some old  reports he                                                               
had  relating to  gas-withdrawal  rates  and past  oil-production                                                               
"crashes."                                                                                                                      
                                                                                                                                
Number 1696                                                                                                                     
                                                                                                                                
MR.  McCUTCHEON  suggested amending  page  1,  line 8,  following                                                               
"Glennallen",  by adding  "Livengood, to  Nenana down  the Alaska                                                               
Railroad  to about  Willow to  Kenai".   He  said [the  suggested                                                               
amendment]  was   BP's  choice   for  an  all-Alaska   gas  line;                                                               
furthermore, it  is easier,  cheaper, and  does more  for Alaska.                                                               
Mr. McCutcheon said  an independent engineering firm  did a study                                                               
for somebody, but wouldn't tell him  who it was, and he suggested                                                               
that the economic studies could be bought.                                                                                      
                                                                                                                                
REPRESENTATIVE ROKEBERG  thanked Mr. McCutcheon for  his interest                                                               
in this subject,  and his long interest in the  activities of the                                                               
legislature  over the  decades.   He suggested  that passing  the                                                               
bill  as  written would  basically  do  what Mr.  McCutcheon  had                                                               
suggested with his  proposed amendment, and it may  have a little                                                               
more  flexibility.   He said  rather than  be specific  about the                                                               
exact  route,  he  thought  this   [bill]  would  accomplish  Mr.                                                               
McCutcheon's goal.  He asked Mr. McCutcheon if he agreed.                                                                       
                                                                                                                                
MR.  McCUTCHEON replied  that he  disagreed.   He suggested  [the                                                               
State of  Alaska should  attempt to purchase]  BP's studies.   He                                                               
called the  route from Glennallen  a "Mickey Mouse" route  and an                                                               
afterthought, and said he didn't think  it would ever come to be.                                                               
He  remarked, "I  think you  have to  look at  the best  shot you                                                               
have, and  the best shot  you have is to  Kenai."  He  noted that                                                               
there is a lot of money tied up  in this, and he remarked, "If it                                                               
takes another year, it takes another year."                                                                                     
                                                                                                                                
Number 1857                                                                                                                     
                                                                                                                                
HAROLD  HEINZE,  Chief  Executive  Officer,  Alaska  Natural  Gas                                                               
Development Authority (ANGDA), testified:                                                                                       
                                                                                                                                
     Bringing gas  to Cook Inlet is  extremely important for                                                                    
     two reasons.   Number  one, it's  specified in  the law                                                                    
     itself  that the  spur  line  be looked  at.   But  the                                                                    
     second thing is,  even a preliminary glance  at some of                                                                    
     the  benefit analysis  work we're  doing suggests  that                                                                    
     when  you're dealing  with  a  couple hundred  thousand                                                                    
     residents  of  Alaska  and you're  looking  at  heating                                                                    
     prices and  electricity prices  that could  double over                                                                    
     the  next  five   to  seven  years.     And  here's  an                                                                    
     opportunity to  prevent that from happening.   That's a                                                                    
     pretty  significant impact  right there.  ... For  that                                                                    
     reason alone, we have put  a lot of priority on looking                                                                    
     at the spur line.                                                                                                          
                                                                                                                                
Number 1915                                                                                                                     
                                                                                                                                
REPRESENTATIVE HOLM  asked Mr. Heinze  if he was talking  about a                                                               
significant cost-benefit analysis.                                                                                              
                                                                                                                                
MR. HEINZE explained that one  high-priority study [for ANGDA] is                                                               
a full benefit  analysis of the entire project  and its elements.                                                               
He remarked:                                                                                                                    
                                                                                                                                
     Currently, people have tended  to look at the decisions                                                                    
     we're faced with here on  which project or what line or                                                                    
     how to  do this  on strictly  sort of  a rate-of-return                                                                    
     approach, like we  were an investor. ...  I'm not going                                                                    
     to  say we're  going to  ignore economics,  but there's                                                                    
     more important  things than that.   For  instance, some                                                                    
     people have  just used the  measure of the  revenues to                                                                    
     the State  of Alaska, and again,  while it's important,                                                                    
     it  doesn't capture  anywhere near  the real  impact on                                                                    
     most Alaskans  - the availability of  gas itself; jobs;                                                                    
     the  economy;  the  growth in  property  values,  which                                                                    
     represent most people's savings account. ...                                                                               
                                                                                                                                
     So, all  those kind  of factors  are important,  and we                                                                    
     are, right  now, building at  a model  which integrates                                                                    
     all those  benefits.   And I'm  just suggesting  to you                                                                    
     that  without even  having done  the arithmetic  to all                                                                    
     the other avenues,  one of things we will  find is that                                                                    
     there is  a lot of benefit  ... in bringing gas  to the                                                                    
     broad Cook Inlet area.                                                                                                     
                                                                                                                                
     It's a no-brainer  in my mind that that  will be found.                                                                    
     What we  are doing is,  we've proposed when we  get our                                                                    
     additional funding,  on a very high-priority  basis, to                                                                    
     study  the spur  line  from Glennallen  in, because  we                                                                    
     have no cost estimate for that  at this time.  We would                                                                    
     look at  a range  of pipe sizes  from 20-inch  on, with                                                                    
     the 30-inch.                                                                                                               
                                                                                                                                
Number 2033                                                                                                                     
                                                                                                                                
MR. HEINZE continued:                                                                                                           
                                                                                                                                
     That  range  of  pipe  sizes  would  accommodate,  very                                                                    
     broadly, volumes  which are consistent with  either ...                                                                    
     the current  usage or a  much expanded usage of  gas in                                                                    
     the  Cook  Inlet  area.     Secondly,  ...  because  of                                                                    
     testimony ConocoPhillips  made to us last  July, we are                                                                    
     aware that there was one study  done of a major look at                                                                    
     pipelining  from the  North Slope  direct  to the  Cook                                                                    
     Inlet area, and then turning it into LNG. ...                                                                              
                                                                                                                                
     While  ConocoPhillips  was  kind enough  to  share  the                                                                    
     conclusion  of   that  study,   there  was   really  no                                                                    
     information  made available  from  it in  any level  of                                                                    
     detail.  BP [and]  several other companies participated                                                                    
     in it.   I'm sure  it was a fairly  good-quality study,                                                                    
     in that,  as I  recollect, the price  tag was  seven or                                                                    
     eight million  dollars that  they told  us they  had to                                                                    
     spend.  ... That  would buy  a pretty  good feasibility                                                                    
     study of the route.                                                                                                        
                                                                                                                                
     Third point  is, one  of my  difficulties right  now is                                                                    
     keeping straight  how accurate you want  the answers to                                                                    
     be.  We  are asking for funding; we are  doing work for                                                                    
     ... a  feasibility study, and  very frankly,  all we're                                                                    
     trying  to  guard  against  is  ...  decisions  to  not                                                                    
     proceed. ... If  we decide not to proceed  and it's the                                                                    
     wrong  decision, we're  going to  feel really  bad. ...                                                                    
     We're  spending enough  money  to  guard against  that,                                                                    
     that  if we  do  ... at  the  end of  the  day reach  a                                                                    
     negative decision,  we ... at  least know we gave  it a                                                                    
     good go.                                                                                                                   
                                                                                                                                
     That's an  entirely different  level of  study required                                                                    
     than, say,  choosing between two routes,  especially if                                                                    
     the two routes end up  being fairly close in their cost                                                                    
     estimates, and  if there's only,  ... say, a  5 percent                                                                    
     difference  in the  cost  estimates  between these  two                                                                    
     routes, if  you put us  in the terrible  dilemma, then,                                                                    
     as to how you spend money and what you look at. ...                                                                        
                                                                                                                                
     Also,  I would  point out  ... that  we are  looking at                                                                    
     other   legislation  which   would   broaden  ...   the                                                                    
     consideration of  the business structure of  ANGDA. ...                                                                    
     For instance,  it may be that  we could ... go  back to                                                                    
     the companies  that looked  at a  more direct  route or                                                                    
     some  other route  other  than the  spur  line in  from                                                                    
     Glennallen,  and say  to them,  ... "If  we had  enough                                                                    
     information, maybe  we could  look at how  our business                                                                    
     structure might  enhance the economics of  that project                                                                    
     and how  it might work  better as an  authority project                                                                    
     than when you looked at it."                                                                                               
                                                                                                                                
Number 2184                                                                                                                     
                                                                                                                                
MR. HEINZE continued:                                                                                                           
                                                                                                                                
     [In] all  of our  discussions so  far, we've  looked at                                                                    
     all these  amendments from the  point of view  [of] ...                                                                    
     if they  added to the  direction that ANGDA  was given,                                                                    
     that was fine; as long as  you didn't tell us to not do                                                                    
     something that  we had, by the  public, been instructed                                                                    
     to do, we had really no  objections.  We consider it as                                                                    
     a friendly  amendment.  I  have also ... tried  to say,                                                                    
     "Please,  no   unfunded  mandates."  ...   Gladly,  the                                                                    
     authority will  do whatever you  wish, but if  you tell                                                                    
     us  to   do  something   that  is  very   detailed  and                                                                    
     challenging,  I will  tell you  that the  funding we've                                                                    
     requested doesn't provide the room to do that.                                                                             
                                                                                                                                
Number 2225                                                                                                                     
                                                                                                                                
REPRESENTATIVE HOLM asked if [the  bill] would add more work that                                                               
could not be done with [ANGDA's] present amount of funding.                                                                     
                                                                                                                                
MR.  PORTER   said  he   thought  Mr.   Heinze  offered   a  good                                                               
perspective.  He  explained that feasibility is  being looked at.                                                               
For  example,  if $9  million  to  $10  million  is spent  on  an                                                               
industry study and  if it shows that there is  a relatively close                                                               
cost range  between a pipeline  to Cook  Inlet and a  pipeline to                                                               
Valdez, the  issue really isn't  the cost of the  pipeline either                                                               
way;  rather, the  issue is  feasibility  and whether  it can  be                                                               
determined  that this  can be  an [economically  viable] project.                                                               
He said  choosing one route  over the  over is not  a significant                                                               
factor because  they are so  close in price  at the level  of the                                                               
analysis being done.   He suggested [Mr.  Heinze] should consider                                                               
it.  Moreover, in terms of  the state's position, ANGDA should be                                                               
looking  at  all  in-state gas  benefits  because  [the  state's]                                                               
responsibility  is  to  the  residents of  Alaska.    Mr.  Porter                                                               
remarked:                                                                                                                       
                                                                                                                                
     We  don't believe  that ...  whether or  not you  spend                                                                    
     additional  incremental  money researching  a  specific                                                                    
     line  from Fairbanks  to  Cook  Inlet is  incrementally                                                                    
     important right  now.  Should  that be a part  of their                                                                    
     overall  responsibility  in  terms of  ...  the  longer                                                                    
     term?   Yes, in terms of  the next five or  six months.                                                                    
     ... In  terms of the  developmental plan, I  think that                                                                    
     ...  it  doesn't  add  ...   a  significant  amount  of                                                                    
     increase  to responsibility  or  work to  come up  with                                                                    
     those  answers,   because  the   two  routes,   from  a                                                                    
     historical standpoint [as] we look  at the data ... and                                                                    
     the research that's been done,  they're fairly close in                                                                    
     economics between the two of them.                                                                                         
                                                                                                                                
Number 2342                                                                                                                     
                                                                                                                                
REPRESENTATIVE HEINZE said she has  been vocal about the shortage                                                               
of gas,  particularly as it  relates to [the  state's] utilities,                                                               
and so she is  very supportive of this.  She  asked Mr. Heinze to                                                               
comment on the bill.                                                                                                            
                                                                                                                                
MR. HEINZE said the preliminary  look [ANGDA] has taken in making                                                               
some  very  rough  estimates  in   costs  of  the  spur  line  in                                                               
Glennallen and "kind of backing up  the other numbers of costs we                                                               
have" would  indicate gas  could probably  be delivered  into the                                                               
Cook  Inlet area  for about  the  average gas  price that  exists                                                               
today,  about $2.25  to $2.50.   He  said in  looking at  current                                                               
studies relating  to new supplies  being brought on line  in Cook                                                               
Inlet, the price that's suggested  is probably twice that number.                                                               
He   remarked,  "That   number  will   translate  directly   into                                                               
everybody's gas  bills and  electricity bills  in the  broad Cook                                                               
Inlet area."                                                                                                                    
                                                                                                                                
MR. HEINZE said  the thought is that it's enough  of an incentive                                                               
to look hard at  how gas is brought here.   He explained that one                                                               
difficulty  of doing  this study  is [determining]  the level  of                                                               
commercial and, in particular,  industrial activities that occur.                                                               
Currently, the  big gas  users in  Cook Inlet  are the  Kenai LNG                                                               
plant and the  Agrium plant, and those volumes are  key to making                                                               
the  economics work.   He  said  the future  of those  facilities                                                               
isn't  known; he  proposed  looking  at a  range  of pipe  sizes,                                                               
because  that   would  cover  the   extremes  of   those  plants'                                                               
continuing  their  current  operations   as  well  as  additional                                                               
opportunities  that may  be  found.   He  said  on a  feasibility                                                               
level, that's all  he has to work  with right now, and  if one of                                                               
the companies  or somebody else  would like  to provide a  lot of                                                               
information, he'd  be happy to "stew  it into the equation."   He                                                               
said he  didn't believe [ANGDA] had  the time or money  to go out                                                               
and develop, design,  and do other things for  all the variations                                                               
on the table right now.                                                                                                         
                                                                                                                                
Number 2497                                                                                                                     
                                                                                                                                
MR.  HEINZE,  in  response  to  a  question  from  Representative                                                               
Rokeberg, said  he'd taken no position  on the bill.   Rather, he                                                               
was pointing out that [ANGDA]  absolutely agrees with the part of                                                               
the bill that  says looking at Cook Inlet is  very important, and                                                               
[ANGDA] intends to do that.  He  said he'd prefer to do it in the                                                               
broadest  way  possible.    If  it is  really  important  to  the                                                               
legislature  to look  at direct  routing to  Cook Inlet,  he'd be                                                               
happy to do that, he added.                                                                                                     
                                                                                                                                
MR.  HEINZE remarked,  "Until you  tell me  that's what's  really                                                               
high on  your list,  and you  tell me I  can go  talk to  the oil                                                               
companies and offer them some  money to buy a multimillion-dollar                                                               
study, I don't know  how I can do much more  than what I'm doing,                                                               
which is basically  a feasibility study."  He said  as Mr. Porter                                                               
explained, [the legislature] can tell  him to do this, but beyond                                                               
the feasibility level he won't do  any more work than he is doing                                                               
right  now.    He  said   if  [the  legislature]  wants  a  route                                                               
comparison,  that's a  much  more detailed  question  than he  is                                                               
prepared to take on right now at these funding levels.                                                                          
                                                                                                                                
Number 2571                                                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG said  he tended to agree  with Mr. Heinze                                                               
that this  would be an  unfunded mandate.   He asked for  a short                                                               
update on  the funding  proposition he'd  recently read  about in                                                               
the press about  requests of the administration and  [ANGDA].  He                                                               
said [ANGDA]  has requested  $2.15 million  to complete  its work                                                               
"when you have recommendation to  increase that slightly and then                                                               
expand the scope of work  that seems somewhat along these lines."                                                               
He asked if the request is before the House Finance Committee.                                                                  
                                                                                                                                
MR.   HEINZE  explained   that   SB  241,   which  provided   the                                                               
supplemental  funding, was  already heard  in the  Senate Finance                                                               
Committee, and  is at the  Senate "leadership's desk."   He noted                                                               
that he'd testified  on a House bill  sponsored by Representative                                                               
Croft  that has  been through  two committees.   He  remarked, "I                                                               
think ...  we're kind of wherever  the leadership wants to  be on                                                               
both the bills and both the houses."                                                                                            
                                                                                                                                
MR.  PORTER  responded that  the  amount  is  $3 million  to  the                                                               
Department of Revenue  (DOR) on behalf of the  department and the                                                               
Department of  Natural Resources (DNR), Department  of Law (DOL),                                                               
and  ANGDA   to  deal   with  stranded   gas  and   with  ANGDA's                                                               
responsibilities to  complete its  obligations under  the statute                                                               
[created by Proposition 3, the ballot initiative].                                                                              
                                                                                                                                
Number 2695                                                                                                                     
                                                                                                                                
REPRESENTATIVE  ROKEBERG offered  his understanding  that if  the                                                               
legislature were  to pass this bill  and expand the scope  of the                                                               
authority, $3 million  wouldn't be adequate to  do the additional                                                               
work.                                                                                                                           
                                                                                                                                
MR. PORTER replied:                                                                                                             
                                                                                                                                
     Because of the level  of responsiveness, I guess you've                                                                    
     got to  understand what the  authority's responsibility                                                                    
     is underneath  the development plan.   It really  is to                                                                    
     cross this  ... next  hurdle, ... the  research they're                                                                    
     doing.   And  that's why  I mentioned  that it  doesn't                                                                    
     matter  if they're  looking at  Valdez or  at the  Cook                                                                    
     Inlet,  because the  economics of  both are  very, very                                                                    
     close together in terms of  ... 5 or 10 percent, within                                                                    
     a range. ...                                                                                                               
                                                                                                                                
     Really, what  we're looking at,  ANGDA's responsibility                                                                    
     right now,  is really  looking at their  basic business                                                                    
     structure,   financing   auditing,   those   types   of                                                                    
     developments  that will  significantly impact  the cost                                                                    
     of service.  ... If they  can ... cross that  hurdle to                                                                    
     basically  understand  if   they're  a  basic  economic                                                                    
     venture, then  ... the details  of whether or  not it's                                                                    
     Valdez  or  Cook  Inlet isn't  critical,  and  I  don't                                                                    
     consider this  bill to add  incremental costs  to their                                                                    
     responsibility.                                                                                                            
                                                                                                                                
     It's  up to  the  legislature on  whether  or not  they                                                                    
     expand  it.   In terms  of  ... our  beliefs about  the                                                                    
     Alaska  Natural Gas  Development Authority,  we believe                                                                    
     that  they  ought   to  be  looking  at   all  the  gas                                                                    
     opportunities that  the state  has to  utilize in-state                                                                    
     gas  use and  to benefit  the state.   This  is one  of                                                                    
     them. ...                                                                                                                  
                                                                                                                                
     This  is the  people's authority;  their responsibility                                                                    
     is to be answerable to  the people for in-state gas for                                                                    
     everybody.  That could be  Yukon River; it could be the                                                                    
     coastal communities;  it could  be Southeast.   And all                                                                    
     those  opportunities  may  kind  of  fall  out  of  the                                                                    
     options if we end up with  a major trunk line to Canada                                                                    
     or if we  don't do an LNG line either  to Cook Inlet or                                                                    
     to Valdez.                                                                                                                 
                                                                                                                                
Number 2799                                                                                                                     
                                                                                                                                
MR. HEINZE  clarified that as  long as it's understood  that this                                                               
amendment would  affect the  work he's  doing in  the feasibility                                                               
study, then  this is a burden  [ANGDA] can stand; it's  doable at                                                               
the feasibility  level to look  at this.   If the  question being                                                               
asked  is  which of  these  two  projects  or routes  is  better,                                                               
however, that's more work than he is prepared to do right now.                                                                  
                                                                                                                                
REPRESENTATIVE  HOLM  related  his understanding  that  the  bill                                                               
doesn't ask Mr. Heinze to do that.                                                                                              
                                                                                                                                
REPRESENTATIVE ROKEBERG  said he  thought it  would put  ANGDA in                                                               
the  position  of  making  a   recommendation,  because  it's  an                                                               
"either/or" in a  sense and begs for a comparative  analysis.  He                                                               
said  he understands  Mr.  Heinze  to be  saying  he  could do  a                                                               
feasibility study,  but to  judge which would  be superior  or to                                                               
recommend a route would be a further burden.                                                                                    
                                                                                                                                
REPRESENTATIVE  ROKEBERG   expressed  concern  about   the  tight                                                               
timeframe.   He remarked, "I  think we'd  me remiss if  we didn't                                                               
look at all the alternatives, and  I think that's what Mr. Porter                                                               
was saying here, so there's some  nuances here that are not quite                                                               
translating out."   Representative Rokeberg  said he is  in favor                                                               
of  the bill  as written,  but  is concerned  about not  properly                                                               
funding  it and  getting  the  answers to  the  public and  about                                                               
making valid choices.                                                                                                           
                                                                                                                                
Number 2904                                                                                                                     
                                                                                                                                
REPRESENTATIVE HEINZE  agreed.  She  said Cook Inlet has  to have                                                               
gas, and asked what would  happen if [Cook Inlet] wasn't included                                                               
in the bill.                                                                                                                    
                                                                                                                                
REPRESENTATIVE ROKEBERG  said he'd support the  bill and adequate                                                               
funding for  [ANGDA] "in working  with the Department  of Revenue                                                               
to  make sure  they have  adequate funding  to do  the job."   He                                                               
remarked, "This  is too important an  issue to be penny  wise and                                                               
pound  foolish."     He  emphasized   the  need,  when   doing  a                                                               
comparative  analysis,  to  look  at the  alternatives  and  have                                                               
adequate funding in order to do it in a reasonable timeframe.                                                                   
                                                                                                                                
Number 2999                                                                                                                     
                                                                                                                                
REPRESENTATIVE CRAWFORD said  he didn't want to  do anything that                                                               
sinks the  larger project under  excess weight, and wants  to get                                                               
gas to  Cook Inlet as  well.  He said  he thought that  was being                                                               
done with the spur-line concept.   He expressed some concern with                                                               
the "either/or" language.                                                                                                       
                                                                                                                                
TAPE 04-4, SIDE B                                                                                                             
Number 3003                                                                                                                     
                                                                                                                                
REPRESENTATIVE  CRAWFORD  continued,   suggesting  there  may  be                                                               
enough land for a port for the gas near Valdez.                                                                                 
                                                                                                                                
REPRESENTATIVE ROKEBERG said it is pretty limited.                                                                              
                                                                                                                                
REPRESENTATIVE  CRAWFORD told  members he  wanted to  see [ANGDA]                                                               
move ahead and  make the timeline, but was  highly concerned that                                                               
this  bill muddied  the  waters.   He added,  "I  don't have  any                                                               
doubts that  if we  get gas  coming down  to Southcentral  ... we                                                               
will get gas in Cook Inlet."                                                                                                    
                                                                                                                                
Number 2953                                                                                                                     
                                                                                                                                
REPRESENTATIVE  HEINZE   asked  Representative  Rokeberg   if  an                                                               
amendment could  be added in order  to move the bill  and provide                                                               
more comfort.                                                                                                                   
                                                                                                                                
REPRESENTATIVE  ROKEBERG said  he  thought the  wording could  be                                                               
restructured, but  he didn't  have an  idea without  analyzing it                                                               
further.   He remarked that an  "either/or" seems to beg  for the                                                               
comparative  analysis leading  to  a recommendation  as to  which                                                               
line  is  better.   He  mentioned  perhaps adding  language  that                                                               
merely  introduced the  feasibility level,  which Mr.  Heinze had                                                               
indicated he thought was doable at this juncture.                                                                               
                                                                                                                                
REPRESENTATIVE  HOLM  asked  Representative Rokeberg  if  he  was                                                               
offering a conceptual amendment.                                                                                                
                                                                                                                                
REPRESENTATIVE ROKEBERG said  he wasn't sure.   He then suggested                                                               
moving  the bill  out with  a proviso  that [the  House Resources                                                               
Standing  Committee] make  a decision  after conferring  with the                                                               
sponsor.   Saying  he  thought  this was  an  important bill,  he                                                               
mentioned a backlog in the current committee.                                                                                   
                                                                                                                                
Number 2818                                                                                                                     
                                                                                                                                
BOB  FAVRETTO,  Board  Member,  Alaska  Natural  Gas  Development                                                               
Authority (ANGDA),  said he  understands funding  mechanisms that                                                               
provide  [ANGDA]  with  the  ability  to give    answers  to  the                                                               
legislature  and the  administration  by June  15.   Noting  that                                                               
[ANGDA]  hasn't received  the money  it asked  for, he  expressed                                                               
concern  about  doing  this  as quickly  as  possible  and  being                                                               
fiscally responsible in doing so.   He explained that there isn't                                                               
much time left to respond to what was sought in [Proposition 3].                                                                
                                                                                                                                
MR. FAVRETTO  said he  thought there  was agreement  that [ANGDA]                                                               
needed  to expand  what it  does, but  it would  cost money.   He                                                               
indicated the issue has to be  addressed, and said he didn't want                                                               
this  slowed down.   Mr.  Favretto said  he didn't  think it  was                                                               
necessary to change  the language in the amendment  because it is                                                               
pretty  clear.   He  noted  the  sense  of urgency  from  Agrium,                                                               
ConocoPhillips, the community, and [the utility companies].                                                                     
                                                                                                                                
Number 2687                                                                                                                     
                                                                                                                                
REPRESENTATIVE  ROKEBERG said  the timing  and scope  need to  be                                                               
decided;  [ANGDA]  needs  additional  funding  and/or  the  scope                                                               
should be  limited.  He suggested  that the sponsor take  this up                                                               
with [the  co-chairs of the  House Resources  Standing Committee]                                                               
to decide whether to resolve it.                                                                                                
                                                                                                                                
REPRESENTATIVE HOLM proposed adding a fiscal note.                                                                              
                                                                                                                                
REPRESENTATIVE ROKEBERG pointed  out that if the  decision is not                                                               
to add a  fiscal note, then the scope of  inquiry can be narrowed                                                               
to  the feasibility.   He  suggested  the sponsor  work with  Mr.                                                               
Heinze and  DOR to ensure  that everybody's "on the  right page."                                                               
He said if  it doesn't get fixed,  it won't make it  to the House                                                               
floor.                                                                                                                          
                                                                                                                                
Number 2566                                                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG moved  to report HB 417  out of committee                                                               
with  individual   recommendations  and  the   accompanying  zero                                                               
"speculative" fiscal notes and footnotes.                                                                                       
                                                                                                                                
REPRESENTATIVE HOLM asked if there was any objection.                                                                           
                                                                                                                                
REPRESENTATIVE  CRAWFORD   again  registered   reservations  that                                                               
moving this  forward might put  the project at risk,  although he                                                               
agreed with Representative Rokeberg that  if the scope is limited                                                               
or  funding  is  provided,  perhaps  this  could  be  fixed.  [In                                                               
response  to Representative  Rokeberg,  he clarified  immediately                                                               
after  the adjournment  was announced  that he  didn't object  to                                                               
moving the bill out of committee.]                                                                                              
                                                                                                                                
[There being  no objection,  HB 417 was  reported from  the House                                                               
Special Committee on Oil and Gas.]                                                                                              

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