Legislature(2003 - 2004)

03/22/2004 01:10 PM RES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
SB 264-REPEAL PIPELINE PREAPPLICATION DEADLINE                                                                                
CO-CHAIR MASEK announced  that the final 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."                                                                                               
Number 2239                                                                                                                     
RICHARD   LeFEBVRE,   Deputy    Commissioner,   Office   of   the                                                               
Commissioner, Department  of Natural Resources  (DNR), testified,                                                               
and stated support for SB 264.   He explained that the purpose of                                                               
the bill is  to repeal the sunset date in  AS 38.35.145(c).  This                                                               
statute  allows DNR  to enter  into  agreements with  prospective                                                               
lessees   to   recover  the   costs   of   preliminary  work   or                                                               
"preapplication   work"   on   a  pipeline   right-of-way   lease                                                               
application.  He  said the provision ended on  December 31, 2003.                                                               
Mr.  LeFebvre   offered  some  background   on  the   subject  by                                                               
explaining that  the pipeline right-of-way lease  applicants must                                                               
submit  very  detailed   applications  that  require  significant                                                               
engineering, detail  and design work.   The requirement  for that                                                               
is  under AS  38.35.050 and  .100.   He  said in  doing this  the                                                               
[applicant] must  invest significant  financial resources  into a                                                               
project just  to complete  the application.   He  said applicants                                                               
have found  that this is  very useful, to have  agencies involved                                                               
in pre-application  phase, so  [DNR] is  aware of  the permitting                                                               
issues at  an early stage,  and can  address those issues  in the                                                               
MR. LeFEBVRE said  it provides both sides, the  applicant and the                                                               
agencies, to  get a good feel  for what the requirements  will be                                                               
for the final application.  He  explained that DNR has also found                                                               
that the  preapplication participation of agencies  expedites the                                                               
review and  approval of the project.   It also provides  for more                                                               
certainty  up  front  and  less   uncertainty  further  into  the                                                               
process, he noted.                                                                                                              
MR.  LeFEBVRE said  the aforementioned  provision  has been  used                                                               
most  recently  in  a  preapplication  work  done  on  the  Point                                                               
Thompson project before it was delayed,  and was also used on the                                                               
Kenai-Kachemak pipeline  extension.  He explained  that the types                                                               
of  assistance  that are  provided  at  the preapplication  stage                                                               
include identification  and explanation of applicable  state laws                                                               
and  regulatory  requirements,  as  well as  explanation  of  the                                                               
regulatory process itself.  Mr.  LeFebvre said the identification                                                               
of land  ownership, including state,  federal, and  private land,                                                               
affects  the applicant  and  must  be dealt  with.    He said  it                                                               
benefits  both  sides  to  get  a good  feel  exactly  where  the                                                               
alignment is  or the  corridor may be,  and how  that interaction                                                               
and interface  would be with  either the private  sector, federal                                                               
agencies, or state agencies.                                                                                                    
Number 2380                                                                                                                     
MR.   LeFEBVRE  explained   that   the   identification  of   any                                                               
restrictions that  exist on the  affected state lands  that might                                                               
interfere  with  authorizing  the   right-of-way  or  hinder  the                                                               
applicant's   construction  itself   might  include   third-party                                                               
interests  such  as  utility   rights-of-ways  or  other  outside                                                               
influences such as  possibly archeological sites.   He said [DNR]                                                               
also  gets into  the  identification  of potential  environmental                                                               
issues such  as stream crossings  and how those will  be handled.                                                               
He said  it is beneficial to  both sides to resolve  those issues                                                               
in a preapplication period instead  of having to do modifications                                                               
to the  applications later on  or something  to that effect.   He                                                               
explained  that the  preapplication  process  could also  include                                                               
assistance in reaching out to  other affected parties such as the                                                               
utilities themselves,  other landowners, or  competing applicants                                                               
who understand  the issues, and  to help  resolve them.   He said                                                               
DNR   also   provides   assistance  with   development   of   the                                                               
application's initial project description and application.                                                                      
MR. LeFEBVRE explained  that it also allows DNR to  staff up in a                                                               
timely  fashion,  so   when  the  applicant  does   turn  in  the                                                               
application; DNR  is ready to  move quickly into the  project and                                                               
through  the process.   He  pointed out  that the  preapplication                                                               
work  is completely  applicant initiated  and  voluntary, and  he                                                               
explained  that an  applicant may  initiate the  request for  the                                                               
preapplication services  but are  under no  obligation to  do so.                                                               
However,  he said  without this  legislation DNR  is not  able to                                                               
work with applicants until an application is received.                                                                          
MR. LeFEBVRE  said DNR uses  the funds  it receives to  allow the                                                               
staff to participate  in that particular project.   He said there                                                               
is no fiscal  impact for having this legislation,  but the impact                                                               
of not passing it is  significant because without it [DNR] cannot                                                               
enter  into  the  reimbursable  agreements  with  the  applicants                                                               
desiring  the  preapplication  assistance   [DNR]  offers.    Mr.                                                               
LeFebvre  noted  that  DNR  does   not  have  any  general  funds                                                               
available to use to provide this preapplication assistance.                                                                     
Number 2498                                                                                                                     
REPRESENTATIVE  STEPOVICH asked  if  this  new legislation  would                                                               
have sped  up the Point  Thompson project  and how long  ago that                                                               
occurred.  He also asked how often the applications are done.                                                                   
MR. LeFEBVRE asked for clarification.                                                                                           
REPRESENTATIVE STEPOVICH  clarified that  he was asking  how many                                                               
applications  were submitted  with regard  to the  Point Thompson                                                               
MR.   LeFEBVRE  said   [ExxonMobil  Corporation]   submitted  one                                                               
application related  to the  Point Thompson project.   He  said a                                                               
total  of approximately  six applications  have been  received on                                                               
pipeline right-of-way leases.                                                                                                   
REPRESENTATIVE STEPOVICH asked if  these applications are part of                                                               
the unitization process.                                                                                                        
MR. LeFEBVRE replied  that it is totally separate and  is part of                                                               
the  development   process  "once  they  have   all  their  other                                                               
paperwork in order and they want  to go ahead and actually do the                                                               
development work."  He said there  were two portions to the Point                                                               
Thompson  project   -  the  right-of-way  lease   itself  to  the                                                               
pipeline, which would go from  Point Thompson to Prudhoe Bay, and                                                               
the  authorizations  that  were  being  sought  for  the  project                                                               
development itself right at Point Thompson.                                                                                     
Number 2581                                                                                                                     
CO-CHAIR MASEK, upon  determining no one else  wished to testify,                                                               
closed public testimony.                                                                                                        
Number 2586                                                                                                                     
CO-CHAIR DAHLSTROM moved  to report SB 264 out  of committee with                                                               
individual  recommendations and  the  accompanying fiscal  notes.                                                               
There being no objection, SB 264 was reported from the House                                                                    
Resources Standing Committee.                                                                                                   

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