Legislature(2009 - 2010)

04/11/2009 02:02 PM House RES

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02:02:32 PM Start
02:03:03 PM Alaska Oil and Gas Conservation Commission
02:08:39 PM Alaska Commercial Fisheries Entry Commission
02:24:54 PM HB163
03:30:20 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
HB 163-ALASKA NATURAL GAS DEVELOPMENT AUTHORITY                                                                               
2:24:54 PM                                                                                                                    
CO-CHAIR JOHNSON  announced that the  final order of  business is                                                               
HOUSE BILL NO. 163, "An Act  clarifying the purpose of the Alaska                                                               
Natural Gas  Development Authority;  and relating  to definitions                                                               
of certain terms in AS 41.41."                                                                                                  
2:25:18 PM                                                                                                                    
JOE   BALASH,  Inter-Governmental   Coordinator,  Department   of                                                               
Natural  Resources, explained  that HB  163 is  one element  of a                                                               
three-part agenda that  Governor Palin has initiated  to get work                                                               
started on an in-state natural gas  pipeline.  The first piece of                                                               
legislation  is a  funding request,  the second  piece is  HB 164                                                               
dealing  with right-of-way  leasing and  "the pipeline  act", and                                                               
the  third piece  is  HB  163 which  makes  some  changes to  the                                                               
statutory  duties  and prerogatives  of  the  Alaska Natural  Gas                                                               
Development Authority (ANGDA).                                                                                                  
2:27:17 PM                                                                                                                    
MR.  BALASH said  ANGDA was  created by  a 2002  voter initiative                                                               
that  went  into law  in  2003.   Then-Governor  Frank  Murkowski                                                               
appointed the  board and began  the preliminary steps  of getting                                                               
the  organization  up  and  running.    The  original  initiative                                                               
directed ANGDA to  put together a feasibility plan  for a natural                                                               
gas pipeline running from the  North Slope to tidewater at Prince                                                               
William Sound, with a spur line  to Southcentral Alaska.  In 2004                                                               
the legislature unanimously  opened up the statute  to examine an                                                               
alternative route to  look at a destination at  tidewater on Cook                                                               
Inlet.   Over the years  ANGDA has  looked at additional  ways of                                                               
commercializing natural gas or otherwise  bringing natural gas to                                                               
Alaskans  and  it has  kept  the  legislature and  administration                                                               
informed in this regard.  This  fall a request came through ANGDA                                                               
to examine  a pipeline  heading west.   However, when  a contract                                                               
was  generated  and sent  to  the  desk  of the  Commissioner  of                                                               
Revenue it was discovered that there  is no real authority in the                                                               
statute or  the underlying appropriation  and therefore  this was                                                               
beyond what ANGDA should be doing.                                                                                              
CO-CHAIR JOHNSON  surmised that  it is  unclear whether  ANGDA is                                                               
authorized only for  a pipeline from Prudhoe Bay  to tidewater at                                                               
Prince William Sound and the spur.                                                                                              
MR.  BALASH responded  that it  will  become clearer  as he  goes                                                               
through HB 163.                                                                                                                 
2:29:32 PM                                                                                                                    
CO-CHAIR  NEUMAN asked  Mr.  Balash to  speak  further about  the                                                               
pipeline heading west.                                                                                                          
MR. BALASH  replied that the  request came  from a member  of the                                                               
other body who wanted to see  whether there was an opportunity to                                                               
build  a pipeline  to  the southwest  portion of  the  state.   A                                                               
feasibility  contract authorized  by  the [ANGDA]  board cited  a                                                               
particular appropriation as the  funding authority; however, that                                                               
particular  funding  authority  was  specific  to  a  project  to                                                               
tidewater as  opposed to a  destination in western Alaska.   This                                                               
caused  an   examination  of  the  underlying   statute  and  the                                                               
authorities and directions given to  ANGDA by the initiative, the                                                               
legislature, and the  appropriation.  He said  the governor would                                                               
like ANGDA  to be able to  identify a gas supply  anywhere in the                                                               
state of Alaska and be able to  deliver that gas to any market in                                                               
Alaska.   Thus, the changes made  by HB 163 would  allow ANGDA to                                                               
look at places other than the  North Slope for supply and to take                                                               
gas to any market in Alaska.                                                                                                    
2:31:29 PM                                                                                                                    
MR.  BALASH  noted that  page  1,  line 7,  of  HB  163 adds  the                                                               
language  "or   other  regions  within  the   state";  thus,  [AS                                                               
41.41.010(a)] is  modified to  say, "bring  natural gas  from the                                                               
North Slope  or other  regions within the  state to  market, ..."                                                               
For example, he  continued, the present statute  does not clearly                                                               
address the  moving of  gas from  the Nenana  Basin to  market in                                                               
Southcentral Alaska should gas be  discovered in the Nenana Basin                                                               
this summer.  He said the  governor thinks the language should be                                                               
made clear  that ANGDA has  both the authority and  the directive                                                               
to identify sources  of supply in the state and  be able to bring                                                               
that supply to market wherever that market might be in Alaska.                                                                  
2:32:49 PM                                                                                                                    
REPRESENTATIVE  GUTTENBERG suggested  taking  out  the old  North                                                               
Slope language  and not adding the  new language so that  page 1,                                                               
line 7, states "order to bring natural gas to market,".                                                                         
MR. BALASH pointed out  that Representative Guttenberg's proposed                                                               
language would allow  ANGDA to bring gas to any  market in Alaska                                                               
or the  U.S., while the  intent is to make  clear that it  is gas                                                               
supplies in Alaska to markets in Alaska.                                                                                        
REPRESENTATIVE   GUTTENBERG    disagreed   with    Mr.   Balash's                                                               
interpretation of what his suggested language would do.                                                                         
2:34:16 PM                                                                                                                    
CO-CHAIR NEUMAN  surmised that  the term  "gas" includes  all the                                                               
components of gas - natural  gas, liquids, propanes, butanes, and                                                               
ethanes - not just methane.                                                                                                     
MR.  BALASH  replied that  he  does  not  believe there  are  any                                                               
restrictions.    He cited  page  1,  line  9, which  states  "the                                                               
acquisition and conditioning of [NORTH  SLOPE] natural gas;".  He                                                               
said he does not believe  that in the definitions section natural                                                               
gas is defined to mean only methane.                                                                                            
2:35:20 PM                                                                                                                    
REPRESENTATIVE  SEATON inquired  whether  gas  from the  six-mile                                                               
range off the Alaska coast could be bid into a gas line.                                                                        
MR. BALASH  answered that he  is not certain which  definition of                                                               
the  state because  it would  be beyond  the three-mile  offshore                                                               
boundary.   However, he said  he thinks  that six miles  is still                                                               
the state even if it is not state land that lies beneath.                                                                       
REPRESENTATIVE  SEATON asked  whether  the  administration has  a                                                               
problem with  "other regions  of the  state, including  the outer                                                               
continental shelf off Alaska".                                                                                                  
MR. BALASH responded no.                                                                                                        
2:36:41 PM                                                                                                                    
REPRESENTATIVE  KAWASAKI  noted  that  the  Alaska  Gasline  Port                                                               
Authority was established  in 1999 with the idea that  the gas go                                                               
to tidewater for  the liquefied natural gas market.   He inquired                                                               
what the impact of the amendment  in Section 2 would be in regard                                                               
to the liquefied gas market.                                                                                                    
MR. BALASH replied that the  language is still very explicit that                                                               
delivery  be to  markets  within  the state  for  use by  markets                                                               
within the  state or to tidewater  for shipment to market.   This                                                               
is well within the bounds and  mission of the authority, with the                                                               
essential point being that markets within the state are served.                                                                 
2:38:01 PM                                                                                                                    
CO-CHAIR NEUMAN asked what powers ANGDA was given.                                                                              
MR. BALASH  answered that he  does not  have the full  statute in                                                               
front  of him,  but  that ANGDA  has a  wide  range of  corporate                                                               
powers,  such  as  the  ability  to  enter  into  contracts,  buy                                                               
property, and  enter into leases.   However, Section 1 of  HB 163                                                               
speaks  to  the  body  of   law  regarding  the  purpose  of  the                                                               
corporation as opposed to the powers.                                                                                           
CO-CHAIR NEUMAN, in  response to Co-Chair Johnson,  said he knows                                                               
the purpose  is to get  in-state gaslines,  but he wants  to know                                                               
about the powers.                                                                                                               
2:39:34 PM                                                                                                                    
REPRESENTATIVE OLSON  said that if  the Agrium plant was  on line                                                               
today the  demand for  the bullet  line would  be well  under 0.5                                                               
billion cubic feet  (bcf) a day, but to efficiently  build a line                                                               
it would  take 1.5-2.0 bcf per  day.  He understood  that 1.5-2.0                                                               
bcf per  day would  trigger the triple  damages under  the Alaska                                                               
Gasline Inducement Act (AGIA).                                                                                                  
MR. BALASH responded that this  is probably incorrect.  The first                                                               
question that  arises when the  project assurances clause  in the                                                               
AGIA statute and  AGIA license is considered is whether  or not a                                                               
project is a competing project  and that is regardless of whether                                                               
it is 500 million cubic feet (mmcf) per day or more.                                                                            
REPRESENTATIVE OLSON interjected that that is based on capacity.                                                                
MR. BALASH  continued, saying  that the  second question  is "Has                                                               
that  competing  project  been  granted  a  preferential  tax  or                                                               
royalty consideration  or has it  been granted state  dollars ...                                                               
for the purpose of constructing the pipe?"                                                                                      
2:41:12 PM                                                                                                                    
REPRESENTATIVE OLSON  inquired whether  the use of  "Foothills or                                                               
Nenana  gas" in  the line  that is  being talked  about would  be                                                               
deemed as being gas that could have been used for AGIA.                                                                         
MR.  BALASH replied  that there  is a  qualification within  AGIA                                                               
that speaks  to North Slope  gas with regard  to the notion  of a                                                               
competing project and the project  assurances clause.  He said he                                                               
therefore believes that "Nenana  gas" would not affect regardless                                                               
of whether it is a competing project.                                                                                           
REPRESENTATIVE  OLSON  said  he  believes North  Slope  gas  also                                                               
covers the Gubic Gas Field.                                                                                                     
MR.  BALASH, speaking  from memory,  recalled that  the AGIA  law                                                               
defines North  Slope as  68 degrees and  therefore the  Gubic Gas                                                               
Field is in.                                                                                                                    
REPRESENTATIVE GUTTENBERG  requested that  Mr. Balash be  able to                                                               
finish his opening statement.                                                                                                   
MR. BALASH said he is finished with his statement.                                                                              
2:43:25 PM                                                                                                                    
CO-CHAIR  JOHNSON understood  it is  the administration's  desire                                                               
that ANGDA take  the lead on in-state gas development  and HB 163                                                               
would provide that additional authority.                                                                                        
MR. BALASH  said that is  a good  summation and added  that ANGDA                                                               
has within its powers some  tools that could be very constructive                                                               
in  moving   in-state  gas  projects   forward.    He   said  the                                                               
administration wants to  ensure that the purpose of  ANGDA is not                                                               
in any  way limited beyond what  it could do for  the citizens in                                                               
the state of Alaska.                                                                                                            
CO-CHAIR JOHNSON  related that he  has heard some  concerns about                                                               
expanding ANGDA's  power, but  he is  not terribly  concerned and                                                               
believes it makes sense given that ANGDA is quasi-government.                                                                   
2:44:44 PM                                                                                                                    
CO-CHAIR NEUMAN asked for clarification  on whether the Gubic Gas                                                               
Field is considered North Slope gas.                                                                                            
MR.  BALASH  said  he  will  check the  definition  in  the  AGIA                                                               
statute, but he  believes that 68 degrees is used  as the line of                                                               
demarcation, in  which case  the Gubic Gas  Field is  included in                                                               
the definition of North Slope gas.                                                                                              
CO-CHAIR  NEUMAN understood  that gas  from the  Gubic Gas  Field                                                               
would be a competing gas.                                                                                                       
MR. BALASH  said yes, it would  be competing if it  is a pipeline                                                               
that:   begins at the North  Slope, delivers North Slope  gas, is                                                               
more than  500 mmcf, and  receives a preferential tax  or royalty                                                               
CO-CHAIR NEUMAN  surmised that under HB  163 it would be  okay to                                                               
build a pipeline with the capacity  to carry more than 500 mmcf a                                                               
MR. BALASH  responded that  the statute  dealing with  ANGDA does                                                               
not speak to  capacity or to a specific project,  so he is unsure                                                               
how to answer the question.                                                                                                     
2:46:52 PM                                                                                                                    
CO-CHAIR  NEUMAN  inquired  whether AGIA's  conditions  would  be                                                               
violated if  ANGDA built a  pipeline to other regions  within the                                                               
state with  the capacity to  carry 1.3-1.8  bcf per day  but only                                                               
shipped 0.5 bcf of gas per day.                                                                                                 
MR.  BALASH replied  that several  fundamental questions  must be                                                               
answered  to determine  whether  a project  violates  AGIA.   The                                                               
first question is  whether the project is designed  to carry more                                                               
than 500  mmcf a day  at the  initial design and  capacity stage.                                                               
Any pipeline  can be  expanded to virtually  any capacity,  it is                                                               
just  a matter  of whether  this is  done through  compression or                                                               
looping.   Illogical conclusions  can be reached  if one  were to                                                               
say  "any capacity  of  the  pipe".   After  the questions  about                                                               
design, carrying capacity, and how long  the pipe will be at that                                                               
capacity,  another  set  of  questions   can  be  asked.    These                                                               
questions  are about  preferential  tax  and royalty  treatments,                                                               
grants  of state  cash, and  whether the  pipeline is  in fact  a                                                               
competing project with the AGIA project.                                                                                        
2:48:51 PM                                                                                                                    
CO-CHAIR  NEUMAN said  he  hopes  there will  be  the ability  to                                                               
expand opportunities to other regions within the state.                                                                         
MR. BALASH  assured members that voting  yes for HB 163  will not                                                               
trigger triple  damages under  the AGIA license.   The  bill does                                                               
not ask for  preferential tax or royalty treatment or  to build a                                                               
particular project, he said.   It only makes slight modifications                                                               
to the purpose of the Alaska Natural Gas Development Authority.                                                                 
2:49:55 PM                                                                                                                    
REPRESENTATIVE GUTTENBERG  said he  thinks the  word "or"  in the                                                               
amending language in Section 3,  line 12, could be interpreted to                                                               
mean that this  project does not have to include  in-state use of                                                               
gas.  He asked whether this is the intent.                                                                                      
MR. BALASH  answered that  the intent is  to allow  "project", as                                                               
defined  within  the  ANGDA  section of  statute,  to  include  a                                                               
project that would  come from the North Slope or  from some other                                                               
region within the state and then  take it to tidewater at a point                                                               
on  Prince William  Sound or  Cook Inlet,  but it  is to  markets                                                               
within the state.                                                                                                               
CO-CHAIR  JOHNSON added  that  it  is not  that  the language  is                                                               
exclusionary and requires  that one or the other  be done; rather                                                               
both could be done.                                                                                                             
2:51:50 PM                                                                                                                    
REPRESENTATIVE GUTTENBERG  said he hopes  both will be  done, but                                                               
the second  "or" in  the amending language  [Section 3,  line 12]                                                               
makes it  look that theoretically  it could be just  to tidewater                                                               
and not necessarily for in-state use  and he is wondering if that                                                               
is the intent, although it could just be grammatical.                                                                           
MR.  BALASH  responded that  the  primary  directive here  is  to                                                               
markets within  the state.   If  "and" to  tidewater was  used it                                                               
would  suggest  that  the  gas  must get  to  tidewater  and  the                                                               
administration  is not  trying to  do that.   The  desire is  the                                                               
authority to  have the flexibility to  just take gas to  a market                                                               
in-state  without  having  to necessarily  go  to  tidewater  for                                                               
export.  He provided a theoretical  example of gas being found in                                                               
the Nenana  Basin and the  examination of building a  pipeline to                                                               
the Donlin  Creek area to  support the  mine, a situation  of not                                                               
building to tidewater at all.                                                                                                   
REPRESENTATIVE GUTTENBERG  said he understands this  and that the                                                               
intent  is to  hopefully do  both of  them, so  he will  speak to                                                               
someone who knows about grammar.                                                                                                
CO-CHAIR JOHNSON stated that he  is not sure "or" is exclusionary                                                               
and means doing one or the other; it could mean doing both.                                                                     
2:54:24 PM                                                                                                                    
REPRESENTATIVE   TUCK  said   he  believes   that  Representative                                                               
Guttenberg's worry  is that  gas taken  by pipeline  to tidewater                                                               
not be  for export  only, that it  also be able  to go  to Alaska                                                               
markets.    Representative  Tuck  asked   if  he  is  correct  in                                                               
surmising that gas is being taken  to tidewater so that it can be                                                               
distributed to places elsewhere in Alaska.                                                                                      
MR. BALASH replied,  "In a manner of speaking, yes".   In further                                                               
response, he  said export  would still  be allowed  and possible.                                                               
There was  a very specific  project for which ANGDA  was created,                                                               
he  continued, and  for  that  reason project  was  defined in  a                                                               
particular way.   However, that  aspect of ANGDA and  its mission                                                               
has been satisfied and now  the administration wants to make sure                                                               
that  the definition  of  project is  not  overly restrictive  as                                                               
ANGDA pursues projects.                                                                                                         
2:56:59 PM                                                                                                                    
REPRESENTATIVE OLSON  understood that Gubic  gas was not  used in                                                               
the initial  calculation of  gas available for  the AGIA  line by                                                               
either the Alaska Oil and  Gas Conservation Commission (AOGCC) or                                                               
the Department of Natural Resources (DNR).                                                                                      
MR. BALASH said  he believes that is correct in  terms of day-one                                                               
gas in the models that were used for the AGIA findings.                                                                         
REPRESENTATIVE OLSON suggested adjusting  the degrees to take out                                                               
the Gubic Gas  Field to clear up any problem  with triple damages                                                               
as respects that gas.  If it  was not used in the calculations in                                                               
the first place, he opined, it  should not be deemed as competing                                                               
CO-CHAIR JOHNSON said  he does not have a problem  with this line                                                               
of  questioning,  but  he  does  not want  to  revisit  the  AGIA                                                               
licensing at this point.                                                                                                        
MR. BALASH offered to work  with Representative Olson off line to                                                               
understand how this  might be accomplished and how  this might be                                                               
received by the licensee and the  license issuers.  He said he is                                                               
uncertain what  the effect would be  if any part of  that statute                                                               
were amended at this point in time.                                                                                             
REPRESENTATIVE OLSON said he is not planning on amending HB 163.                                                                
2:59:07 PM                                                                                                                    
CO-CHAIR NEUMAN  surmised that the  expansion provided by  HB 163                                                               
to other  regions and markets  within the state, which  he likes,                                                               
would allow taking off propane at  the Yukon River and sending it                                                               
to villages in western Alaska.                                                                                                  
MR. BALASH  said that this  is largely  correct.  There  are some                                                               
arguments  that can  be made  about  being able  to take  propane                                                               
directly at Prudhoe  Bay as the law currently  stands and, rather                                                               
than relying on legal interpretations, this just makes it clear.                                                                
CO-CHAIR  NEUMAN noted  he is  bringing  this up  because of  the                                                               
language on page 2, lines 14 and  15.  He understood that part of                                                               
the intent  of HB  163 is  to use gas,  if it  is found,  to help                                                               
generate electricity in other regions and markets in the state.                                                                 
MR. BALASH answered correct.                                                                                                    
3:01:27 PM                                                                                                                    
HAROLD   HEINZE,   Executive   Director,   Alaska   Natural   Gas                                                               
Development Authority,  Department of  Revenue, pointed  out that                                                               
ANGDA is a public corporation of  the state.  Therefore ANGDA has                                                               
the same business authorities as  any other business entity, such                                                               
as  the ability  to sue,  be  sued, make  contracts, make  deals,                                                               
spend  money,  and  accept  gifts.   In  addition,  as  a  public                                                               
corporation  and political  subdivision of  the state,  ANGDA was                                                               
granted the authority  for bonding.  In the  evolution of ANGDA's                                                               
role in in-state gas, this  bonding authority may become the most                                                               
important aspect  of what ANGDA does.   Over its six  years ANGDA                                                               
has evolved and what it looks at has evolved.                                                                                   
3:04:09 PM                                                                                                                    
MR. HEINZE  explained that initially  ANGDA was assigned  to look                                                               
at  a  liquefied  natural  gas   (LNG)  project  out  of  Valdez.                                                               
Although  ANGDA  determined  the   project  to  be  economic  and                                                               
feasible, it  was decided that  it was too  big a project  for an                                                               
entity  like  ANGDA.    In  looking  at  other  projects  in  the                                                               
feasibility  sense, it  became clear  to ANGDA  that getting  gas                                                               
into Southcentral Alaska  through a spur line was  a project that                                                               
offered the maximum  benefit to Alaskans, so that  is where ANGDA                                                               
then focused  its efforts.  This  is the one project  where ANGDA                                                               
has progressed  beyond the  feasibility level  to looking  at the                                                               
alignment  and  obtaining   a  conditional  right-of-way  between                                                               
Glennallen and Palmer.                                                                                                          
3:05:16 PM                                                                                                                    
MR. HEINZE said  ANGDA's current activities on  the pipeline side                                                               
are now  focused on  advancing that spur  line and  advancing its                                                               
tie-in to either  Denali - The Alaska Gas  Pipeline ("Denali") or                                                               
TransCanada's Alaska  Pipeline Project and preparing  for an open                                                               
season in  2010 or early [2011].   Other projects that  ANGDA has                                                               
looked at include a propane facility on the North Slope.                                                                        
MR. HEINZE referenced an [April  7, 2009] opinion letter from the                                                               
attorney general  and explained  that questions were  raised late                                                               
last  year.   One of  these questions  was in  regard to  Senator                                                               
Hoffman's  request  that  ANGDA  look  at  pipelines  to  western                                                               
Alaska,  something  ANGDA thought  worth  doing.   However,  "the                                                               
system" balked,  so ANGDA  referred it  back to  Senator Hoffman.                                                               
He  said ANGDA  thinks this  could  easily be  cured through  the                                                               
appropriation process:   when money is appropriated  to ANGDA the                                                               
language can  instruct the  agency to  look at  that feasibility.                                                               
Other questions  were raised about  a number of the  other things                                                               
ANGDA was  doing, he continued.   The attorney  general's opinion                                                               
letter clarifies  that ANGDA's  authorities are  very broad.   In                                                               
short, ANGDA was formed to deal  with the issues of getting North                                                               
Slope gas to market and to do it  in such a way that it benefited                                                               
Alaskans.  Within  this very broad grant of  authority, ANGDA has                                                               
chosen to focus down much closer on  things and not try to be all                                                               
things to  all people.   For instance,  he explained,  the Alaska                                                               
Gasline Port Authority is still looking  at an LNG project out of                                                               
Valdez,   so  ANGDA   has  backed   away  from   the  LNG   area.                                                               
Additionally, ANGDA's intent on the  spur line has been simply to                                                               
advance  the project  to  a  point where  the  front-end risk  is                                                               
lessened and the private sector can do the project.                                                                             
3:07:52 PM                                                                                                                    
MR.  HEINZE stressed  that ANGDA  is neither  interested in,  nor                                                               
focused on,  being the builder of  a pipeline, but thinks  it can                                                               
play  a role  in assisting  the private  sector in  accomplishing                                                               
this.   He said  that in ANGDA's  mind the reason  for HB  163 is                                                               
simply clarification.  There is no  conflict in a real sense that                                                               
ANGDA is aware of  between what it has wanted to  do and what the                                                               
statute allows it to do.   The attorney general's opinion affirms                                                               
the breadth of ANGDA's authority  in general, and while there may                                                               
be some  limitations on the  project definition, the  language of                                                               
HB 163 clarifies that and makes it sufficiently broad.                                                                          
MR. HEINZE pointed  out that the legislature  has control through                                                               
the appropriations  process.  Also, the  legislature has provided                                                               
approval on a year-to-year basis of  what ANGDA has said it would                                                               
do and checked back  to make sure it was done.   In addition, the                                                               
legislature  has  provided guidance  to  ANGDA.   Similarly,  the                                                               
administration, through the power of  the governor to appoint the                                                               
seven-member  public board,  has  maintained  control of  ANGDA's                                                               
direction  throughout at  least  two administrations.   He  added                                                               
that  HB  163 is  helpful  in  the longer  run  in  terms of  the                                                               
financing  ability of  ANGDA  working in  concert  to help  bring                                                               
about some projects.                                                                                                            
3:10:28 PM                                                                                                                    
CO-CHAIR  JOHNSON remarked  that it  is good  to hear  Mr. Heinze                                                               
thinks HB 163 will be helpful.                                                                                                  
REPRESENTATIVE  KAWASAKI said  he thinks  the power  of authority                                                               
section seems  fairly clear, but  the big difference is  that the                                                               
project scope  and project  definition are  being changed.   When                                                               
voters created  ANGDA in  2002, he continued,  it was  clear they                                                               
wanted tidewater market  in Valdez or Prince William  Sound and a                                                               
spur line from  Glennallen to Southcentral Alaska.   He proffered                                                               
that taking those  out and broadly defining  other regions within                                                               
the  state  is  not  necessarily clearer  guidance  but  actually                                                               
expanding the  envelope of what a  project could mean.   He asked                                                               
Mr. Heinze to comment in this regard.                                                                                           
MR.  HEINZE   replied  that  ANGDA's   thinking  has   been  that                                                               
regardless of which  pipeline system develops in  Alaska, it will                                                               
- in  the long  run - link  many different places.   This  is why                                                               
ANGDA has been very comfortable  thinking about all the different                                                               
dots  and showing  in its  diagrams everything  it can  think of,                                                               
including  the  marine  transportation  of propane  to  make  the                                                               
linkage.  The attorney general's  opinion says that when ANGDA is                                                               
dealing with things that are not  real project specific, it has a                                                               
lot of room to maneuver.   Thus, ANGDA can make contracts, deals,                                                               
and business arrangements.   He said he believes  that when ANGDA                                                               
is dealing with  something that is very specific  to the project,                                                               
this language  will be  helpful in  that it  makes it  clear that                                                               
ANGDA  has a  lot of  flexibility as  long as  the pipelines  are                                                               
inside the  state of Alaska  and serving markets that  are either                                                               
internal markets or export markets in the state of Alaska.                                                                      
3:13:22 PM                                                                                                                    
MR.  HEINZE added  that HB  163  does not  represent ANGDA  doing                                                               
anything  new  or changing  direction.    Rather, it  reflects  a                                                               
progression  from looking  at broad  feasibilities to  looking at                                                               
very   specific   projects,  particularly   private-sector-driven                                                               
projects, to  be driven  forward with  the help,  potentially, of                                                               
public financing.                                                                                                               
REPRESENTATIVE  KAWASAKI offered  his opinion  that amending  the                                                               
definition  of project  in Section  3 seems  fairly specific  and                                                               
liberalizes  the definition  of project.   While  not opposed  to                                                               
this, he  said he wants  to be  clear where [the  legislature] is                                                               
CO-CHAIR JOHNSON interjected that he  thinks broadening it out is                                                               
where [the  legislature] is headed.   In-state gas is  a priority                                                               
for committee  members' constituents  and this  is an  attempt to                                                               
start to get there.                                                                                                             
3:15:08 PM                                                                                                                    
REPRESENTATIVE SEATON  inquired whether  ANGDA believes  that the                                                               
language in  Section 3, page 2,  of HB 163 clarifies  for bonding                                                               
purposes that  which is written  on page  4, paragraph 2,  of the                                                               
[April 7, 2009] attorney general's opinion.                                                                                     
MR.  HEINZE qualified  that  he  is not  a  lawyer  and that  the                                                               
opinion letter  was written separate from  HB 163.  He  said that                                                               
since he  believes the  attorney general's  office has  a similar                                                               
source, he therefore believes that  within the attorney general's                                                               
office the answer  to the question should be yes.   He added that                                                               
ANGDA  recently  commissioned a  private  contractor  to look  at                                                               
public/private  partnership and  this  contractor also  suggested                                                               
that  the language  related  to  an exact  project  that one  was                                                               
undertaking the financing on be  authorized by the legislature as                                                               
part of  the bonding approval.   He said  he cannot say  that the                                                               
fix provided by  [Section 3] is the ultimate  fix for everything,                                                               
but he  believes it  provides the clarity  to convince  people to                                                               
consider  the financial  aspects of  ANGDA and  its ability  as a                                                               
public entity to bond pipeline projects.                                                                                        
3:17:45 PM                                                                                                                    
REPRESENTATIVE SEATON asked  Mr. Heinze's opinion in  regard to a                                                               
potential conceptual  amendment for  page 1,  line 7,  that would                                                               
add "including Alaska outer continental  shelf" so there would be                                                               
no  ambiguity  that gas  from  this  area  could  be put  into  a                                                               
MR. HEINZE responded  that he is unsure of the  linkage.  He said                                                               
ANGDA has  viewed its authority to  obtain gas as the  ability to                                                               
work with  people that would  wish to  tender gas during  an open                                                               
season.    If  ANGDA  was  involved in  either  an  ownership  or                                                               
financing aspect  of a  pipeline from the  North Slope  area, its                                                               
intention would be  to make sure that that  access was available.                                                               
He added  that ANGDA  has also  looked at  ways it  can encourage                                                               
people  to put  their  gas in.    In terms  of  working with  the                                                               
sellers of gas, he continued, ANGDA  might be of aid to local gas                                                               
consumers,  particularly the  electric  utilities, in  purchasing                                                               
long-term supplies  of gas  in the ground  which would  provide a                                                               
better deal than a year-to-year  contract.  Therefore it would be                                                               
ANGDA's intent  to work  with a  company [that  has gas  from the                                                               
outer continental shelf] and assure access to the pipeline.                                                                     
3:20:15 PM                                                                                                                    
CO-CHAIR  JOHNSON asked  whether adding  the language  "including                                                               
Alaska outer  continental shelf" to  the gas supplies  would hurt                                                               
Mr. Heinze's feelings.                                                                                                          
MR. HEINZE reiterated that he is  not a lawyer, but that it would                                                               
never hurt his feelings expanding ANGDA's authority.                                                                            
REPRESENTATIVE KAWASAKI  inquired whether ANGDA must  come before                                                               
the legislature for approval of any bonding.                                                                                    
MR. HEINZE  answered that  the ANGDA statute  is very  clear that                                                               
the  legislature  has  control  of   the  limit  on  the  bonding                                                               
authority.   It is not  a matter  of bringing forward  the actual                                                               
bond, but the  legislature must approve the amount  of bonds that                                                               
can be issued.                                                                                                                  
3:21:51 PM                                                                                                                    
CO-CHAIR NEUMAN  understood that  the language  in HB  163 allows                                                               
for the  construction of what  is commonly considered  and called                                                               
the "bullet line".                                                                                                              
MR. BALASH responded yes.                                                                                                       
CO-CHAIR NEUMAN requested  Mr. Balash to provide  a definition of                                                               
"bullet line".                                                                                                                  
MR.  BALASH replied  he is  unaware  of any  legal definition  of                                                               
"bullet line".  He continued:                                                                                                   
     In  sort  of  the  vernacular of  Alaska  gas  pipeline                                                                    
     projects, the  bullet line has  been identified  as one                                                                    
     that travels  generally from the North  Slope along the                                                                    
     Parks Highway  to Cook  Inlet.   That is  distinct from                                                                    
     what's been  referred to as  the all-Alaska  line which                                                                    
     would travel  from Prudhoe down  to Fairbanks  and then                                                                    
     along  the Richardson  Highway  to  the Prince  William                                                                    
     Sound  area.    Those   aren't  legal  distinctions  or                                                                    
     definitions,  but for  label purposes  that's how  I've                                                                    
     come to know the differentiation.                                                                                          
3:22:57 PM                                                                                                                    
CO-CHAIR JOHNSON  pointed out that one  other term used a  lot is                                                               
"spur  line" and  his understanding  is that  this would  be from                                                               
"Delta to  market in Southcentral  Alaska someplace, so  it would                                                               
not exclude that either in any case".                                                                                           
MR. BALASH answered correct.                                                                                                    
CO-CHAIR JOHNSON  added that  members likely  knew the  answer to                                                               
these questions,  but he wanted  the answers  on the record.   He                                                               
said he  thinks HB 163 is  critical legislation that needs  to go                                                               
forward for the advancement of a bullet line.                                                                                   
CO-CHAIR JOHNSON opened public testimony  on HB 163.  There being                                                               
no one wishing to testify, he closed public testimony.                                                                          
3:24:44 PM                                                                                                                    
REPRESENTATIVE SEATON moved Conceptual Amendment 1 as follows:                                                                  
     Page 1, line 7, after "state":                                                                                             
         Insert "including the Alaska outer continental                                                                         
      Page 2, line 5, and page 2, line 11, after the first                                                                      
     "within the state":                                                                                                        
         Insert "including the Alaska outer continental                                                                         
CO-CHAIR  JOHNSON  objected  in  order to  note  that  Conceptual                                                               
Amendment 1  clarifies that any  oil found beyond  the three-mile                                                               
limit is  included and that  if the  U.S. becomes a  signatory of                                                               
the Law of  the Sea Treaty it  would extend up to 350  miles.  He                                                               
said he thinks Conceptual Amendment 1 is appropriate.                                                                           
3:26:24 PM                                                                                                                    
REPRESENTATIVE  SEATON pointed  out that  Conceptual Amendment  1                                                               
would be inserted  into those places where there  is language for                                                               
the procurement of gas, but not the marketing of gas.                                                                           
CO-CHAIR JOHNSON  added that  a vote  for Conceptual  Amendment 1                                                               
and/or for HB  163 does not necessarily mean  the member endorses                                                               
the Alaska  outer continental shelf,  although he  hopes everyone                                                               
does.  He asked whether  Mr. Balash or the administration opposes                                                               
Conceptual Amendment 1.                                                                                                         
MR. BALASH answered no.                                                                                                         
CO-CHAIR JOHNSON withdrew his objection.   There being no further                                                               
objection, Conceptual Amendment 1 was passed.                                                                                   
3:27:41 PM                                                                                                                    
REPRESENTATIVE  GUTTENBERG expressed  his concern  about amending                                                               
the definition  of the word  project and leaving out  "to markets                                                               
within the  state" after each  "or", saying he believes  it needs                                                               
to be  redundant each time.   He moved Conceptual Amendment  2 as                                                               
     On page  2, Section 3  of the  bill, line 9,  (3), when                                                                    
     ...  defining the  project:   each time  we define  the                                                                    
     project it includes the parameters  that the project is                                                                    
     described to  include using the gas  for markets within                                                                    
     the  state, not  exclusively,  but  markets within  the                                                                    
     state as inclusive.                                                                                                        
3:29:10 PM                                                                                                                    
MR. BALASH, in response to  Co-Chair Johnson, said he understands                                                               
the intent  of Conceptual Amendment  2 and that it  is consistent                                                               
with  the  intent of  the  administration  if lawyers  think  the                                                               
change is needed.                                                                                                               
CO-CHAIR JOHNSON objected to Conceptual  Amendment 2 for purposes                                                               
of discussion.                                                                                                                  
CO-CHAIR NEUMAN also objected.   He clarified that markets within                                                               
the state could be propanes,  butanes, gas-to-liquids (GTLs), and                                                               
any other capacity or use within the state.                                                                                     
REPRESENTATIVE GUTTENBERG agreed with Co-Chair Neuman.                                                                          
CO-CHAIR JOHNSON  added that market  is any exchange of  goods or                                                               
services for  money and it would  not be limiting in  any form or                                                               
3:30:20 PM                                                                                                                    
CO-CHAIR  NEUMAN  removed  his objection.    [Co-Chair  Johnson's                                                               
objection  was  treated as  removed.]    There being  no  further                                                               
objection, Conceptual Amendment 2 was passed.                                                                                   
CO-CHAIR JOHNSON held over HB 163.                                                                                              

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