Legislature(2003 - 2004)

03/16/2004 03:15 PM O&G

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
SB 264-REPEAL PIPELINE PREAPPLICATION DEADLINE                                                                                
                                                                                                                                
CHAIR KOHRING  announced that the  first order of  business would                                                               
be SENATE BILL NO. 264, "An  Act repealing the time limitation on                                                               
the authority  of the  Department of  Natural Resources  to enter                                                               
into agreements with  a person or persons desiring to  own an oil                                                               
or natural gas pipeline proposed to  be located on state land for                                                               
the purposes  of providing  for payment  of the  reasonable costs                                                               
incurred  in  preparing  for  activities  before  receipt  of  an                                                               
application  under  the  Alaska  Right-of-Way  Leasing  Act;  and                                                               
providing for an  effective date."  [SB 264 was  sponsored by the                                                               
Senate Rules Standing Committee by request of the governor.]                                                                    
                                                                                                                                
Number 0135                                                                                                                     
                                                                                                                                
MARTY   RUTHERFORD,   Deputy    Commissioner,   Office   of   the                                                               
Commissioner,  Department of  Natural Resources  (DNR), presented                                                               
SB 264  and testified in support  of it.  She  explained that its                                                               
purpose  is to  repeal  the  sunset date  in  AS 38.35.145(c),  a                                                               
statute   that  allows   DNR  to   enter  into   agreements  with                                                               
prospective lessees  to recover  the costs for  their preliminary                                                               
work,  which  DNR  calls "preapplication  work,"  on  a  pipeline                                                               
right-of-way lease application.   This particular provision ended                                                               
December 31, 2003.                                                                                                              
                                                                                                                                
MS. RUTHERFORD noted that  pipeline right-of-way lease applicants                                                               
must  submit  detailed  applications; this  requires  significant                                                               
engineering and design  work, at a significant  cost.  Applicants                                                               
have  found it  very  useful  to have  agencies  involved in  the                                                               
preapplication  process so  they  are fully  aware of  permitting                                                               
issues  at  an  early  stage   and  can  address  them  in  their                                                               
applications.   Furthermore,  [DNR]  has found  that such  agency                                                               
participation ultimately  expedites project review  and approval.                                                               
She  said this  provision  was used  recently for  preapplication                                                               
work on  the Point Thomson project  before it was delayed  and on                                                               
the Kenai Kachemak Pipeline extension.                                                                                          
                                                                                                                                
MS.   RUTHERFORD   listed    examples   of   agency   assistance:                                                               
identification  and  explanation  of applicable  state  laws  and                                                               
regulations and the regulatory  process; identification of state,                                                               
federal,   and   private   land  ownership;   identification   of                                                               
restrictions on  affected state lands  that might  interfere with                                                               
authorizing a  right-of-way lease or might  hinder an applicant's                                                               
construction, including  third-party interests such as  a utility                                                               
right-of-way  or even  the existence  of  an archeological  site;                                                               
identification   of  potential   environmental   issues  such   a                                                               
difficult stream crossings; assistance  when an applicant reaches                                                               
out to  other affected  parties such as  utilities or  other land                                                               
owners  so  the  applicant  better  understands  the  third-party                                                               
interests and  issues; and assistance with  actual development of                                                               
the project application.   And for a large project,  she said the                                                               
ability   to   enter   into   a   reimbursement   agreement   for                                                               
preapplication  work  allows  [DNR]   to  "staff  up"  the  Joint                                                               
Pipeline Office in a timely fashion.                                                                                            
                                                                                                                                
MS. RUTHERFORD emphasized that  this preapplication is completely                                                               
applicant-initiated;  an applicant  may  initiate  a request  for                                                               
preapplication services,  but is  under no  obligation to  do so.                                                               
Without  this  legislation,  however,  DNR cannot  work  with  an                                                               
applicant  until  it receives  the  application.   She  said  the                                                               
fiscal impact  of the  bill is  zero, whereas  the impact  of not                                                               
passing  it  would be  rather  significant.   Without  it,  [DNR]                                                               
cannot enter  into reimbursement agreements with  applicants in a                                                               
"preapplication  mode"  and has  no  general  funds available  to                                                               
provide this assistance.                                                                                                        
                                                                                                                                
Number 0539                                                                                                                     
                                                                                                                                
REPRESENTATIVE HEINZE  mentioned stranded  gas and  related money                                                               
being sent  [to DNR].  She  asked whether any of  that work would                                                               
be in this application.                                                                                                         
                                                                                                                                
MS.  RUTHERFORD  replied no;  that  work  is totally  focused  on                                                               
analyzing  and developing  a fiscal  contract under  the stranded                                                               
gas Act,  and none of  the people  who put in  applications under                                                               
the stranded gas  Act are at the point of  being prepared to move                                                               
a right-of-way application forward.                                                                                             
                                                                                                                                
REPRESENTATIVE HEINZE asked  whether DNR has the  staff to handle                                                               
these applications and do this work.                                                                                            
                                                                                                                                
MS.  RUTHERFORD answered  that  it  depends on  the  size of  the                                                               
project.   For a very large  one, it would be  critical [for DNR]                                                               
to  have this  vehicle available  if an  applicant chose  to work                                                               
with [DNR]  on three  applications, for example,  in order  to be                                                               
able to staff up; a [major] gas  line is the type of project that                                                               
would require hiring  new staff.  For a  reasonably small project                                                               
such as  the Kenai Kachemak  Pipeline, however, [DNR]  can handle                                                               
it with  staff that aren't  focused on either another  project or                                                               
TAPS [Trans-Alaska Pipeline System] oversight activity.                                                                         
                                                                                                                                
CHAIR KOHRING announced the arrival of Representative Crawford.                                                                 
                                                                                                                                
Number 0677                                                                                                                     
                                                                                                                                
CHAIR KOHRING  requested confirmation that this  just removes the                                                               
date  of December  31, 2003,  from  statute and  leaves it  open-                                                               
ended.                                                                                                                          
                                                                                                                                
MS. RUTHERFORD said that's the proposal in the bill.                                                                            
                                                                                                                                
CHAIR KOHRING  surmised that it's  legally acceptable to  do this                                                               
retroactively, even though the deadline has passed.                                                                             
                                                                                                                                
MS. RUTHERFORD  replied that removing  that date allows  [DNR] to                                                               
once   again    accept   reimbursement   agreements    and   work                                                               
preapplication   activities.      During   the   period   between                                                               
December 31 and now,  it hasn't been doing so,  and removing that                                                               
date simply gives [DNR] the authorization without any end date.                                                                 
                                                                                                                                
CHAIR  KOHRING  asked  whether anyone  else  wished  to  testify.                                                               
[There was no response.]  He said he'd like to move the bill.                                                                   
                                                                                                                                
Number 0800                                                                                                                     
                                                                                                                                
REPRESENTATIVE HEINZE  moved to  report SB  264 out  of committee                                                               
with  individual  recommendations   and  the  accompanying  [zero                                                               
fiscal  note].   There being  no objection,  SB 264  was reported                                                               
from the House Special Committee on Oil and Gas.                                                                                
                                                                                                                                

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