Legislature(2009 - 2010)BARNES 124

04/13/2009 01:00 PM House RESOURCES

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* first hearing in first committee of referral
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= bill was previously heard/scheduled
Heard & Held
Moved Out of Committee
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
Moved CSHB 163(RES) Out of Committee
HB 163-ALASKA NATURAL GAS DEVELOPMENT AUTHORITY                                                                               
1:06:23 PM                                                                                                                    
CO-CHAIR NEUMAN  announced that  the first  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."                                                                                                  
CO-CHAIR  JOHNSON  moved that  the  committee  adopt version  26-                                                               
GH1057\R, Bullock, 4/13/09 (Version  R), as the working document.                                                               
There being no objection, Version R was before the committee.                                                                   
CO-CHAIR NEUMAN  referred members  to the  April 13,  2009, legal                                                               
explanation  received   from  Mr.   Bullock  in  regard   to  the                                                               
conceptual amendments incorporated into Version R.                                                                              
1:07:15 PM                                                                                                                    
CO-CHAIR   JOHNSON  asked   whether  Representative   Seaton  had                                                               
reviewed  the  legal  opinion  as to  the  incorporation  of  his                                                               
amendment regarding  the [Alaska]  outer continental  shelf (OCS)                                                               
[Conceptual Amendment 1 passed on April 11, 2009].                                                                              
REPRESENTATIVE  SEATON   explained  that  his  intent   with  the                                                               
amendment was to  take input of gas into a  pipeline, not build a                                                               
pipeline offshore  to an  OCS supply.   Therefore,  he continued,                                                               
the wording in Version R accomplishes the goal of the amendment.                                                                
1:08:36 PM                                                                                                                    
CO-CHAIR JOHNSON noted  that Version R may  not have incorporated                                                               
Representative  Guttenberg's  amendment [Conceptual  Amendment  2                                                               
passed on April 11, 2009].                                                                                                      
REPRESENTATIVE GUTTENBERG replied that Version R does not.                                                                      
CO-CHAIR JOHNSON said  he thinks Mr. Bullock  has amendments that                                                               
will do what Representative Guttenberg wants to do.                                                                             
REPRESENTATIVE   GUTTENBERG  moved   Amendment  1,   labeled  26-                                                               
G1057\A.2, Bullock, 4/13/09, as follows:                                                                                        
     Page 2, line 2:                                                                                                            
          Delete "the pipeline system project"                                                                                  
          Insert "[THE] pipeline system projects [PROJECT]"                                                                 
     Page 2, line 11:                                                                                                           
          Delete "markets"                                                                                                  
          Insert "a market"                                                                                                 
     Page 2, line 12, following "or":                                                                                       
          Insert "to a market in the state and"                                                                             
CO-CHAIR JOHNSON objected for purposes of discussion.                                                                           
REPRESENTATIVE  GUTTENBERG  said his  intent  is  to ensure  that                                                               
every time a market or project  is described it includes a market                                                               
in the state.                                                                                                                   
1:10:25 PM                                                                                                                    
DONALD BULLOCK  JR., Legislative  Counsel, Legislative  Legal and                                                               
Research  Services,  Legislative  Affairs  Agency,  Alaska  State                                                               
Legislature, understood the intent of  the amendment is to ensure                                                               
that no  matter the project, it  include delivery to a  market in                                                               
the state.  Therefore, he continued,  Amendment 1 says that it be                                                               
to a  market in  the state  or to a  market in  the state  and to                                                               
alternative  tidewater  points,  Cook Inlet  and  Prince  William                                                               
REPRESENTATIVE SEATON  asked whether Amendment 1  would mean that                                                               
an export  market could not  be built  unless there is  also some                                                               
other delivery in the state.                                                                                                    
MR.  BULLOCK responded  that it  avoids the  issue of  a pipeline                                                               
that  would bypass  all the  in-state  markets by  going just  to                                                               
tidewater  and being  exported.   He  understood the  amendment's                                                               
intent is to ensure that there  is gas delivered from the project                                                               
to a market  in the state; whether  or not some of  the other gas                                                               
is exported would not be affected.                                                                                              
1:12:15 PM                                                                                                                    
REPRESENTATIVE  GUTTENBERG,  in   response  to  Co-Chair  Neuman,                                                               
agreed [Amendment  1 was to the  original version of HB  163, not                                                               
Version R].  He said he  believes that in Version R the amendment                                                               
would apply to page 2, line 12,  after the last "or".  In further                                                               
response,  he said  page 2,  [lines  12-13], of  Version R  would                                                               
therefore read:                                                                                                                 
     North Slope of Alaska or other regions of the state to                                                                     
     market in the state or to a market in the state and to                                                                     
     tidewater at a point on Prince William Sound                                                                             
1:13:37 PM                                                                                                                    
CO-CHAIR  NEUMAN  inquired  whether  Representative  Guttenberg's                                                               
intent is  to ensure  that gas coming  down an  in-state pipeline                                                               
can only be sold to markets in the state.                                                                                       
REPRESENTATIVE  GUTTENBERG answered  no.   He explained  that any                                                               
gasline in  the state  under the  Alaska Natural  Gas Development                                                               
Authority (ANGDA) has to have an  in-state use component.  If gas                                                               
must be  exported in order  to make the project  economical, some                                                               
component  of the  project's gas  will also  be used  in-state; a                                                               
project could not  be built just for export.   It does not matter                                                               
what  is taken  off for  use  in-state, it  could be  any of  the                                                               
1:14:32 PM                                                                                                                    
CO-CHAIR NEUMAN surmised that Amendment  1 would disallow running                                                               
gas down a pipeline to Valdez for liquefaction and export.                                                                      
REPRESENTATIVE GUTTENBERG  responded that some component  of such                                                               
a pipeline would have to be used for in-state market.                                                                           
CO-CHAIR NEUMAN said he is wary of the language.                                                                                
CO-CHAIR JOHNSON  said his understanding  of Amendment 1  is that                                                               
it would assure off-take points  somewhere along the pipeline for                                                               
use of  in-state gas  and is therefore  consistent with  what was                                                               
done for  the "big  line".   He said he  thinks it  is consistent                                                               
with what is needed.                                                                                                            
1:15:48 PM                                                                                                                    
CO-CHAIR NEUMAN  moved that  the line numbers  in Amendment  1 be                                                               
amended to conform to Version R.                                                                                                
REPRESENTATIVE GUTTENBERG agreed.                                                                                               
MR. BULLOCK clarified  that to conform to Version  R, Amendment 1                                                               
would need to be amended to read as follows:                                                                                    
     Page 2, line 3:                                                                                                            
          Delete "the pipeline system project"                                                                                  
          Insert "[THE] pipeline system projects [PROJECT]"                                                                 
     Page 2, line 12:                                                                                                           
          Delete "markets"                                                                                                  
          Insert "a market"                                                                                                 
     Page 2, line 12, following "or":                                                                                       
          Insert "to a market in the state and"                                                                             
There  being  no objection,  the  amendment  to Amendment  1  was                                                               
1:16:49 PM                                                                                                                    
REPRESENTATIVE SEATON outlined  a scenario in which  gas from the                                                               
Nenana basin supplies Fairbanks prior  to the building of ANGDA's                                                               
line  and then  no one  buys gas  from an  off-take on  this line                                                               
because  it is  more expensive  than the  Nenana gas.   He  asked                                                               
whether Amendment  1 would then  mean that  the gas could  not be                                                               
exported because  none is  supplied for in-state  use.   In other                                                               
words, a  gas line could not  be built unless it  supplies gas to                                                               
an in-state market, even if it provides access to supply.                                                                       
REPRESENTATIVE  GUTTENBERG replied  that  that  reading would  be                                                               
right should  the market  in the  state for  gas be  satiated and                                                               
there are  economics for another  line, which is something  he is                                                               
unsure he  will see in his  lifetime.  However, he  continued, he                                                               
wants to ensure that the  project description now, going forward,                                                               
says that any project will have an in-state use component.                                                                      
MR. BULLOCK pointed out that the focus  of HB 163 is on a project                                                               
by  the Alaska  Natural Gas  Development Authority  and therefore                                                               
Amendment 1  would not be applicable  to any other pipeline.   He                                                               
said he  believes the original  intent of  part of ANGDA  was not                                                               
only to  get gas  produced, but  also to get  it to  Alaskans, so                                                               
Amendment  1  follows the  original  intent  that Alaskans  would                                                               
benefit from an ANGDA project.   Amendment 1 would have no effect                                                               
on a project outside of ANGDA, he pointed out.                                                                                  
1:19:28 PM                                                                                                                    
REPRESENTATIVE EDGMON  inquired whether the wording  presently in                                                               
HB 163  is sufficient to  carry out  the purpose of  Amendment 1,                                                               
which seems to add a finer level of detail to the meaning.                                                                      
MR.  BULLOCK answered  that he  thinks  Amendment 1  specifically                                                               
clarifies that whether  the option is to a market  in-state or to                                                               
tidewater, there is  going to be a  market in the state.   As the                                                               
bill is currently  written, it could be read as  an alternative -                                                               
either to a market in the state or to tidewater.                                                                                
1:20:15 PM                                                                                                                    
REPRESENTATIVE SEATON  argued that this constraint  means that if                                                               
Nenana comes on  line and supplies gas cheaper  to Fairbanks than                                                               
could be supplied  from the North Slope, ANGDA could  not build a                                                               
line to Valdez for export because  it would not also be supplying                                                               
gas for in-state.   He said he thinks the  taxation structure for                                                               
exports  provides a  natural incentive  for a  supplier to  first                                                               
fill  up as  much of  the local  market as  possible.   He feared                                                               
that,  in the  future,  Amendment  1 could  put  a constraint  on                                                               
ANGDA's ability to build an export gasline.                                                                                     
REPRESENTATIVE GUTTENBERG responded that  his job as a legislator                                                               
is to  ensure that  ANGDA's project,  at this  point, has  an in-                                                               
state component,  and someone  else can build  a project  that is                                                               
outside  of this.   Until  such time  as the  in-state market  is                                                               
satiated, he said, ANGDA's proposals  should have a component for                                                               
in-state use.                                                                                                                   
1:23:29 PM                                                                                                                    
REPRESENTATIVE  SEATON  described  a  scenario in  which  gas  is                                                               
brought to  [the Nikiski liquefied  natural gas (LNG)  plant] for                                                               
export and  Cook Inlet gas  provides the supply for  in-state use                                                               
in Southcentral Alaska.   He asked whether it is  a net amount of                                                               
gas that is being talked about  or molecules of gas as regards to                                                               
how the restriction would work.                                                                                                 
REPRESENTATIVE GUTTENBERG  replied that  when the  development of                                                               
projects  in Southcentral,  Southeast, and  Interior Alaska  have                                                               
changed  that  much, there  will  likely  be legislation  brought                                                               
forward  that clarifies  those purposes,  the  markets, and  Cook                                                               
Inlet  exports.   At  that  point  he  would consider  all  those                                                               
changes, but right  now on ANGDA's project he wants  to make sure                                                               
there is an in-state use component.                                                                                             
1:26:03 PM                                                                                                                    
CO-CHAIR JOHNSON said he  sympathizes with Representative Seaton,                                                               
but thinks it  is acceptable for someone with a  project from the                                                               
North Slope to  Valdez with no in-state use component  to have to                                                               
come back  to the legislature.   Therefore, based on what  he has                                                               
heard from his  constituents, the mandate in Amendment  1 for in-                                                               
state supply  is appropriate.  For  now the message must  be very                                                               
loud  and clear  to  ANGDA,  the governor,  and  the citizens  of                                                               
Alaska that the in-state use of  natural gas is the top priority.                                                               
He withdrew his objection to Amendment 1.                                                                                       
1:27:12 PM                                                                                                                    
REPRESENTATIVE SEATON  objected to  Amendment 1, saying  he wants                                                               
to get the  intent of the amendment on record.   He asked whether                                                               
it would  be considered an  in-state use of  gas if a  gasline is                                                               
brought to Southcentral Alaska that  is no larger than the export                                                               
amount of  gas from [the Nikiski  LNG plant] and the  plant could                                                               
only  get its  export license  renewed with  that additional  gas                                                               
coming in,  so it is  a net export  of that gas.   Is it  net, he                                                               
asked, or  since it comes  into the  pipeline system is  it mixed                                                               
gas and therefore the project could  go forward, or would it have                                                               
to come back to the legislature in order to be moved forward.                                                                   
MR.  BULLOCK clarified  that  the  policy aspect  of  this is  to                                                               
determine what  the basic purpose of  ANGDA is and what  the kind                                                               
of project is  that ANGDA is developing.  If  the purpose is only                                                               
to get gas  produced in the state to get  the state royalties and                                                               
production tax, then it does  not matter where the pipeline goes.                                                               
But, if the  purpose of ANGDA is also to  make sure that Alaskans                                                               
have  the  benefit of  the  gas  resources, then  identifying  or                                                               
requiring a  certain amount to  be available  to a market  in the                                                               
state would be an alternative purpose of ANGDA.                                                                                 
1:29:21 PM                                                                                                                    
REPRESENTATIVE  TUCK outlined  a scenario  in which  there is  an                                                               
existing  ANGDA gasline  serving both  export and  in-state uses,                                                               
and a supplier wants to build  a line that ties into the existing                                                               
line, but that  supplier's line would carry gas that  is only for                                                               
export.   He offered his  opinion that the supplier's  line would                                                               
fall outside  of ANGDA's jurisdiction  and would have to  be done                                                               
some another way.                                                                                                               
CO-CHAIR NEUMAN  agreed that it is  a question of how  to mix the                                                               
1:30:07 PM                                                                                                                    
REPRESENTATIVE  SEATON  said  Mr.  Bullock may  have  solved  his                                                               
problem with  the word available.   He moved to amend  line 10 of                                                               
Amendment 1  by adding the  words "to  be available" in  front of                                                           
"to a market in the state and".   Thus, he explained, even if the                                                           
economics are such that the market  in the state does not wish to                                                               
buy that  gas, the gas  would be  made available in  the proposed                                                               
CO-CHAIR NEUMAN objected to the amendment to Amendment 1.                                                                       
REPRESENTATIVE GUTTENBERG  said it  is his hope  that the  gas be                                                               
more than available should ANGDA  builds a gasline from anywhere.                                                               
Just saying  make available does  not make ANGDA  responsible for                                                               
guaranteeing  that  part  of  the project  is  in-state  use,  he                                                               
argued.   He said  that he  wants to ensure  that a  component of                                                               
this  project  is  specifically  for in-state  use  and  part  of                                                               
ANGDA's role is to make sure that happens.                                                                                      
1:32:09 PM                                                                                                                    
CO-CHAIR  NEUMAN  inquired  whether  the  scenario  described  by                                                               
Representative  Tuck, the  mixing  of molecules,  would have  any                                                               
effect on this.                                                                                                                 
MR. BULLOCK  answered that the focus  of ANGDA is for  a project,                                                               
more so  than what goes into  it.  If this  amendment is accepted                                                               
and ANGDA's  effort is  toward the  pipeline, then,  whatever the                                                               
gas source,  there will be  gas from somewhere flying  through an                                                               
ANGDA pipeline  to a market  somewhere in  this state as  well as                                                               
possible export.                                                                                                                
REPRESENTATIVE SEATON argued  that the project needs  to make the                                                               
gas available, but  it should not be vetoed if  there are cheaper                                                               
alternatives for local  areas and those areas do not  want to buy                                                               
the gas.   The amendment to  Amendment 1 makes the  gas available                                                               
to  a market,  which  is  the critical  factor  that members  are                                                               
trying to get to.  The  state's tax rate will stimulate any owner                                                               
of  gas to  want to  sell  as much  gas in-state  as possible  to                                                               
reduce  taxes.   He agreed  that in-state  use is  definitely the                                                               
priority, but maintained  that not enough due  diligence has been                                                               
done for  putting the  onus on  gas owners that  the gas  must be                                                               
sold in-state,  possibly at less  than market price, in  order to                                                               
do the project.  He said he thinks this amendment is a way out.                                                                 
1:34:37 PM                                                                                                                    
REPRESENTATIVE TUCK said  he thinks the language  in the proposed                                                               
original amendment  allows for  both export  and in-state  use of                                                               
gas, which  is the original  intent of  ANGDA.  He  expressed his                                                               
concern that  accepting the amendment  to Amendment 1  will allow                                                               
the building of pipelines for export only.                                                                                      
MR.  BULLOCK recommended  inserting "be  available" before  "to a                                                       
market" on  line 10 of  Amendment 1.  Thus,  it would read:   "or                                                       
other regions  of the state  or be available  to a market  in the                                                           
state and".                                                                                                                 
REPRESENTATIVE   SEATON  said   he   understands  Mr.   Bullock's                                                               
recommendation and would consider that.                                                                                         
REPRESENTATIVE   GUTTENBERG   also   understood   Mr.   Bullock's                                                               
CO-CHAIR  NEUMAN  removed  his  objection  to  the  amendment  to                                                               
Amendment 1.  There being  no further objection, the amendment to                                                               
Amendment 1 was passed.                                                                                                         
There being no objection, Amendment 1, as amended, was passed.                                                                  
1:36:41 PM                                                                                                                    
REPRESENTATIVE SEATON  understood that  Amendment 1,  as amended,                                                               
was conceptual.                                                                                                                 
CO-CHAIR NEUMAN said correct.                                                                                                   
CO-CHAIR JOHNSON  removed any objections  he may have had  on the                                                               
CO-CHAIR JOHNSON moved to report  the committee substitute for HB
163, labeled  26-GH1057\R, Bullock,  4/13/09, as amended,  out of                                                               
committee with  individual recommendations and zero  fiscal note.                                                               
There being no  objection, CSHB 163(RES) was reported  out of the                                                               
House Resources Standing Committee.                                                                                             

Document Name Date/Time Subjects
HB 163 04.13.09 Leg Legal Memo.pdf HRES 4/13/2009 1:00:00 PM
HB 163
CSHB163(RES) work draft.pdf HRES 4/13/2009 1:00:00 PM
HB 163
HB 163 Amendment 4.13.09.pdf HRES 4/13/2009 1:00:00 PM
HB 163
HJR 33.pdf HRES 4/13/2009 1:00:00 PM
HJR 33
HB 217.pdf HRES 4/13/2009 1:00:00 PM
HB 217
HJR 33 packet.pdf HRES 4/13/2009 1:00:00 PM
HJR 33
SJR 16 packet.pdf HRES 4/13/2009 1:00:00 PM
SJR 16