Legislature(2003 - 2004)

02/17/2004 09:08 AM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                                                                                                                                
     SENATE BILL NO. 241                                                                                                        
     "An Act making an appropriation to the Alaska Natural Gas                                                                  
     Development Authority; and providing for an effective date."                                                               
                                                                                                                                
                                                                                                                                
This  was the first  hearing  for this  bill in  the Senate  Finance                                                            
Committee.                                                                                                                      
                                                                                                                                
Co-Chair  Wilken  explained  that  SB 241  would  appropriate  $2.15                                                            
million to the  Alaska Natural Gas Development Authority  (ANGDA) to                                                            
conduct an analysis  regarding the development of  an Alaska natural                                                            
gas pipeline. These funds,  he shared, would lapse in the year 2009.                                                            
Continuing,  he  noted  that  a  new  Finance  Committee   committee                                                            
substitute has been provided  for consideration that would: increase                                                            
the amount  of the appropriation  to $3  million; would appropriate                                                             
the funds to the Department  of Revenue rather than ANGDA; and would                                                            
expand the scope of how the funds could be used.                                                                                
                                                                                                                                
Co-Chair  Green  moved  to adopt  the  Finance  Committee  committee                                                            
substitute, Version 23-LS1279\H, as the working document.                                                                       
                                                                                                                                
There being  no objection,  Version "H" was  adopted as the  working                                                            
document.                                                                                                                       
                                                                                                                                
SENATOR  GENE THERRIAULT,  the bill's  sponsor,  explained that  the                                                            
original bill  was introduced to support  "the wishes of  the public                                                            
to create" the Alaska Natural  Gas Development Authority (ANGDA) "to                                                            
bring the natural  gas on the North  Slope to market via  a pipeline                                                            
to tidewater  in Valdez" in a liquefied  form "to serve Pacific  Rim                                                            
markets."  He noted that  the bill, as  introduced, specified  $2.15                                                            
million to support the  project because that was the amount of money                                                            
that ANGDA had  remaining in the previous year's appropriation,  and                                                            
he had determined  that that amount "would be a good  starting point                                                            
for discussion." Continuing,  he shared that he had clarified to the                                                            
ANGDA Board of Directors  that they would be required to justify the                                                            
funding in  order to receive the appropriation.  He stated  that the                                                            
ANGDA  Board of  Directors  has  been meeting  with  Governor  Frank                                                            
Murkowski's  Administration   since  the  beginning  of  the  second                                                            
session of  the Twenty-third  Legislature.  He noted that the  State                                                            
has received  two applications, through  the Stranded Gas  Act, that                                                            
are also furthering  the necessity to consider developing  a natural                                                            
gas  pipeline to  deliver  the gas  via  an overland  route  through                                                            
Canada to the Midwest or to Canadian markets.                                                                                   
                                                                                                                                
Senator Therriault continued  that the committee substitute, Version                                                            
"H,"  "is a  blending  of  the two  ideas"  in  that it  focuses  on                                                            
bringing  the natural gas  from the North  Slope "to market"  rather                                                            
than specifying  that either  an overland  or tidewater pipeline  be                                                            
furthered.  Furthermore, he envisioned  that the objectives  of both                                                            
the  ANGDA   Board  and  the  Administration's   Stranded   Gas  Act                                                            
negotiations be combined  to further the goal of bringing the gas to                                                            
market.  He  noted  that  routing  the  appropriation   through  the                                                            
Department of  Revenue mirrors how the appropriation  was previously                                                            
funneled to ANGDA from  such entities as the Division of Legislative                                                            
Budget & Audit  and the Administration. He stated  that this routing                                                            
would also provide the  ANGDA Board with the Department of Revenue's                                                            
auditing,  contracting,  and  accounting   mechanism  resources.  He                                                            
reiterated that  questions seeking justification for  the $3 million                                                            
appropriation  amount  should be  directed  at the  ANGDA Board.  He                                                            
noted that  at the  February 16,  2004 ANGDA meeting,  the Board  of                                                            
Directors passed a resolution  in support of the language in Version                                                            
"H." He read a portion of that resolution as follows.                                                                           
                                                                                                                                
     "The  Alaska Natural  Gas  Development Authority  supports  the                                                            
     appropriation  of $3 million  in the remainder of FY  04 to the                                                            
     Department  of  Revenue for  work related  to  bring the  North                                                            
     Slope natural gas to market."                                                                                              
                                                                                                                                
Senator Hoffman  inquired  to the reason  that ANGDA was  eliminated                                                            
from the language in the committee substitute.                                                                                  
                                                                                                                                
Senator  Therriault  responded   that  the  reason  that  ANGDA  was                                                            
eliminated  was "the realization"  that the  efforts to further  the                                                            
goal of getting  natural gas to market would involve  an overlapping                                                            
of  various  entities.  He  continued  that  "generic"  rather  than                                                            
specific legislation would be more beneficial to that end.                                                                      
                                                                                                                                
Senator Bunde  noted that while he  knows what LNG is, he  is unsure                                                            
of the definition of "LPG."                                                                                                     
                                                                                                                                
Senator Therriault  stated that the representative  from ANGDA would                                                            
best explain LPG.                                                                                                               
                                                                                                                                
Co-Chair Green  asked whether the  Stranded Gas Act Application  fee                                                            
of $1.5 million would be used to support this endeavor.                                                                         
                                                                                                                                
Senator Therriault  responded that the $1.5 million  fee is required                                                            
to fund the  expenses associated with  processing, negotiating,  and                                                            
evaluating  each  proposal.  He  shared  that while  the  fee  would                                                            
provide  funding for the  process associated  with the application,                                                             
the $3  million  attached to  this bill  would support  the  State's                                                            
endeavor to  be adequately prepared  "to negotiate with some  degree                                                            
of knowledge  and strength."  Furthermore,  he noted that  currently                                                            
the $1.5 million  Stranded Gas Act  applicant fee could not  be used                                                            
to "cover any costs" associated  with the ANGDA proposal. Therefore,                                                            
he continued,  the generic terminology presented in  the Version "H"                                                            
committee  substitute would  allow the Administration  to use  those                                                            
funds to prepare  for negotiations relating to the  Stranded Gas Act                                                            
and to help  gather information pertinent  to the ANGDA project.  To                                                            
include, he  continued, studies relating  to spur pipelines,  access                                                            
taps along the pipeline  to serve local markets, and economic impact                                                            
studies.                                                                                                                        
                                                                                                                                
Co-Chair  Green asked which  entities, in  addition to ANGDA,  might                                                            
request funding in this endeavor.                                                                                               
                                                                                                                                
Senator Therriault responded  that other State agencies, such as the                                                            
Department  of Natural Resources,  might need to "secure  particular                                                            
expertise"  or a consultant  or funding for  a Request for  Proposal                                                            
(RFP) in order to develop an economic model.                                                                                    
                                                                                                                                
Co-Chair  Green asked whether  the sponsor  is comfortable  with the                                                            
broadened  language  in  Version  "H;"  specifically   the  language                                                            
pertaining  to getting the product  from the North Slope  to market.                                                            
                                                                                                                                
Senator  Therriault  responded  that  he  is  comfortable  with  the                                                            
"fairly broad  language" because he  is familiar with the  multitude                                                            
of legislation  that the Legislature  has entertained regarding  the                                                            
issue. In addition,  he stressed the  importance of the State  being                                                            
"well-prepared  and tough  advocates  on behalf of  the citizens  of                                                            
Alaska…."  In order  to accomplish  that objective,  he stated  that                                                            
funding "for  some preparation and  some technical advice"  would be                                                            
required.                                                                                                                       
                                                                                                                                
Senator   Therriault  reiterated   that  he   had  introduced   this                                                            
legislation  to "jump start  the discussions;"  however, he  advised                                                            
the Committee that as long  as the funding issue "moved forward," he                                                            
would  not  object  were  other  legislation  submitted  or  another                                                            
funding mechanism or level of funding identified.                                                                               
                                                                                                                                
                                                                                                                                
SFC 04 # 11, Side B 09:56 AM                                                                                                    
                                                                                                                                
                                                                                                                                
HAROLD  HEINZE,   Chief  Executive   Officer,  Alaska  Natural   Gas                                                            
Development Authority,  testified via teleconference  from Anchorage                                                            
and referred  the  Committee  to a graph  that ANGDA  had  developed                                                            
titled  "Alaska Natural  Gas  Development  Authority  FY 04  Funding                                                            
Plan" [copy on file]. This  graph, he noted, depicts ANGDA's initial                                                            
funding;  the $2.1 million  that was added  in FY 04; and the  FY 04                                                            
Total Funding of $2.5 million.                                                                                                  
                                                                                                                                
Mr. Heinze  reviewed that $150,000  initial funding was used  to set                                                            
up the Corporation and  conduct some Board of Directors meetings. He                                                            
stated  that the outcome  of those  meetings  was the determination                                                             
that a Liquid Natural Gas  (LNG) project and the delivery of natural                                                            
gas  in  Alaska  would "make  sense"  provided  the  State  use  its                                                            
financial  abilities to support  the project,  as, he explained,  it                                                            
might not attract  private support due to the fact  that there might                                                            
not  be the  potential  for  a high  rate  of return  to  commercial                                                            
investors or "high interest  borrowers." He commented that the State                                                            
could participate  via the Authority. He also noted  that during the                                                            
initial meetings, the Authority  identified some of the major issues                                                            
that would require addressing.                                                                                                  
                                                                                                                                
Mr. Heinze  stated that the Board  requested an additional  $200,000                                                            
to fund the  Business Contractors  component depicted on  the graph,                                                            
which includes  such things as a Benefit  Analysis, Market  Insight,                                                            
and  Tax  Advice.  He stated  that  the  Authority  determined  that                                                            
previous  Benefit Analysis  studies  of the project  were narrow  in                                                            
scope in that they were  limited to such things as "a rate of return                                                            
type model for  making decisions" or "how much money  was flowing to                                                            
the State of  Alaska in forms of government  revenue." He  continued                                                            
that the Authority  recognized that  "the benefit of bringing  North                                                            
Slope gas to  market were much more  broader than that and  had much                                                            
more  value." He  stated  that the  Tax  Advice and  Market  Insight                                                            
followed the Benefit Analysis  determination. He summarized that the                                                            
Current  Spending  Column  on the  graph  reflects how  the  initial                                                            
$350,000 funding authorization was used.                                                                                        
                                                                                                                                
Mr.  Heinze  continued   that  the  graph  also  depicts   that  the                                                            
additional FY 04 funding  authorization of $2.15 million was used to                                                            
fund the operations  of the ANGDA Board and the Business  Contracts.                                                            
Additionally,  he specified that the funds were expanded  to support                                                            
the Project  Contract component.  He stressed  that identifying  the                                                            
proper business  structure is important as it would  address how "to                                                            
lower the  cost of service  of transporting  the gas" as that  would                                                            
"increase  the value  at the wellhead,  and that  makes the  project                                                            
better  for  both  project  proponents  as  well  as  increases  the                                                            
revenues to the State of Alaska."                                                                                               
                                                                                                                                
Mr.  Heinze   stressed  the  importance   of  getting  Alaskans   to                                                            
understand and support  the concept of producing natural gas, as, he                                                            
contended,  its  development  would lower  residents'  expenses.  He                                                            
noted that  people living  in Anchorage  are currently experiencing                                                             
low natural gas  supplies and consequently, are paying  high prices.                                                            
He stated that  were a spur natural gas line provided,  communities,                                                            
such  as Anchorage,  would  benefit. In  addition,  he reminded  the                                                            
Committee that  the Authority was charged with addressing  the basic                                                            
project,  project design,  and project scheduling  in the  Statewide                                                            
Ballet  Measure 3  Initiative  that  established the  Authority.  He                                                            
shared that,  early in the  process, the  Authority worked  with the                                                            
Murkowski Administration  to identify  the types of contractors  who                                                            
would  be  required  to conduct  the  various  jobs;  the  kinds  of                                                            
expertise  that  would  be  required;  questions  and  issues  would                                                            
require answers;  what internal resources  were available;  and what                                                            
kind of  work had already  been conducted.  Therefore, he  clarified                                                            
that the Project  Contractors specified on the graph  are those that                                                            
the State does not have expertise in.                                                                                           
                                                                                                                                
Mr. Heinze  noted that the  fact that two  Stranded Gas natural  gas                                                            
applications  have  recently  been  received  is  important  to  the                                                            
Authority,  as some of the work already  conducted by the  Authority                                                            
would contribute  to the State's efforts in moving  forward with the                                                            
applications.  He avowed that the  fact that the first 530  miles of                                                            
both the over-land  and to tidewater  routes are in common  and thus                                                            
could   "contribute   toward  each   other's   financial   success."                                                            
Additionally,   he  attested,  that   while  both  the  applicant's                                                             
"benefits to  Alaska are weak," ANGDA  "could help in that  regard."                                                            
                                                                                                                                
Mr. Heinze informed  that ANGDA has responded favorably  to Governor                                                            
Murkowski's Administration  request that it "work as part of a team"                                                            
in  the endeavor  to  bring  Alaska's  North  Slope natural  gas  to                                                            
market, and in  that regard, he mentioned that ANGDA  has introduced                                                            
itself to both of the Stranded Gas applicants.                                                                                  
                                                                                                                                
Senator Hoffman  inquired as to whether ANGDA would  be providing an                                                            
annual  report  of its  expenditures  to  the Legislature  and  also                                                            
whether additional funding requests might be forthcoming.                                                                       
                                                                                                                                
Mr. Heinze  replied  that the Authority  has been  established  as a                                                            
public corporation, and  as public entity, convenes monthly Board of                                                            
Director's  meetings and generates  full monthly accountings  of the                                                            
it's expenditures  and contracts.  Therefore, he stated that  a full                                                            
accounting  on a monthly  or annual basis  could be provided  to the                                                            
Legislature.                                                                                                                    
                                                                                                                                
Mr.  Heinze  communicated  that  while  the  two  Stranded  Gas  Act                                                            
applications  have caused an increase  in activity, he is  unsure of                                                            
the affect  the applications would  have on the Authority.  However,                                                            
he shared  that,  in anticipation  of  further involvement,  he  has                                                            
developed alternate funding  models for the corporation. He reminded                                                            
that  the  Authority   is  statutorily  charged  with   providing  a                                                            
development plan for the  spur project by June 15, 2004; however, he                                                            
stated  that were ANGDA  directed  to assist with  the Stranded  Gas                                                            
applications that  requirement might be deferred.  He mentioned that                                                            
while this  might delay some of ANGDA's  activities, he anticipated                                                             
the  delay to  be  short term.  He  deferred  to the  Department  of                                                            
Revenue to  provide a more  thorough analysis  of ANGDA's  budgetary                                                            
projections.                                                                                                                    
                                                                                                                                
Senator B. Stevens commented  that the cost of developing a LNG spur                                                            
line has been consistently  estimated to cost $20 million. He voiced                                                            
that the amount is confusing  in that other legislation and expanded                                                            
routing alternatives  have  been proposed that  might have  had some                                                            
affect on the spur line's expense.                                                                                              
                                                                                                                                
Mr. Heinze corrected that  rather than being $20 million, the amount                                                            
in question  is $20,000. Continuing,  he explained that the  amount,                                                            
which is a "rough estimate,"  focuses on determining the feasibility                                                            
of a spur line rather than  being inclusive to such things as design                                                            
work.  Furthermore,  he noted  that the  engineering  and cost  work                                                            
expenses are low because  a lot of the expertise has been donated or                                                            
provided at no charge.  He stated that were ANGDA to have fully paid                                                            
for all  the components  required,  the expense  would have been  in                                                            
"the tens of millions  of dollars." He stated that  the goal of this                                                            
exercise  is for the State  to be able to  make a decision  based on                                                            
adequate  information. He  contended that  there are numerous  other                                                            
studies that must be conducted over time.                                                                                       
                                                                                                                                
STEVE  PORTER,  Deputy Commissioner,  Office  of  the Commissioner,                                                             
Department of  Revenue, testified via teleconference  from Anchorage                                                            
and explained  that the $3 million  funding request included  in the                                                            
legislation  would assist the State  in addressing the two  Stranded                                                            
Gas applications.  He noted that per an agreement  between the State                                                            
and each  applicant, the  applicant could  be required to  reimburse                                                            
the State for  expenses associated  with such things as independent                                                             
contractors. He  noted that while the funding recipient  was changed                                                            
from  ANGDA  to the  Department  of  Revenue,  the process  has  not                                                            
changed.  Furthermore,  he  stated  that  were  expertise  available                                                            
within the Department of  Revenue, the service and information would                                                            
be provided at  no charge. However, he continued were  the expertise                                                            
unavailable  in house, or had been  conducted by another  entity, it                                                            
might require  a purchase. He stated  that either the Department  of                                                            
Revenue  or  ANGDA  could  make  the  purchase,   depending  on,  he                                                            
declared,  how the  information would  be utilized.  He stated  that                                                            
were "the information  to be kept confidential then  ANGDA would not                                                            
be the proper  forum to request or fund it." In addition,  he stated                                                            
that  were  the expense  to  be a  reimbursable  expense,  then  the                                                            
Department  of Revenue  would  be the  proper forum.  Therefore,  he                                                            
concluded,  in  order to  maximize  efficiency,  the  most  flexible                                                            
manner to address  funding needs would  be to allocate the  funds to                                                            
the Department of Revenue.                                                                                                      
                                                                                                                                
Senator  Hoffman  stated  that  the  backup  material  contains  two                                                            
separate LNG Project  schedules: one titled "ANGDA  All-American LNG                                                            
Project Conceptual Schedule"  amounting to $10 billion using Revenue                                                            
Bonds;  and  the  other  titled  "ANGDA   Project  Concept  &  Cost"                                                            
amounting  to  $12 billion.  He  asked  that  the two  schedules  be                                                            
reconciled.                                                                                                                     
                                                                                                                                
Mr. Heinze responded that  the $2 billion difference is that two LNG                                                            
tankers would be leased rather than purchased.                                                                                  
                                                                                                                                
Senator  Hoffman noted  that the  information contained  in the  $10                                                            
billion  project  specifies  that two  Jones  Act tankers  would  be                                                            
built.                                                                                                                          
                                                                                                                                
Mr. Heinze  clarified that  the information  is all encompassing  in                                                            
that it  reflects the  major elements  included  in the project.  He                                                            
clarified that the tankers would be built by another entity.                                                                    
                                                                                                                                
Senator  Hoffman  understood  therefore   that  everything  but  the                                                            
tankers would be owned and operated by ANGDA.                                                                                   
                                                                                                                                
Mr. Heinze  pointed out  that the term  "conceptual" best  describes                                                            
the plan as currently determined.  He stated that such things as the                                                            
business structure,  interest rates,  and bonds are unconfirmed.  He                                                            
stressed  that  the chart  is  designed to  reflect  components  and                                                            
monies  that  might  be supported   by bonds.  He  stated  that  the                                                            
Authority might  not be involved in all of the various  aspects that                                                            
have  been  itemized;  however,  he continued  it  is  charged  with                                                            
developing   a  comprehensive  plan   in  order  to  determine   the                                                            
feasibility  of the  project.  He exampled  that  while a  treatment                                                            
plant to remove CO2 must  be built on the North Slope, the producers                                                            
rather than the State might  desire to own the plant. He stated that                                                            
the  $2 million  treatment  plant  is included  in  the itemization                                                             
because  somebody would  be required  to build  it,  as part of  the                                                            
project's operational needs.                                                                                                    
                                                                                                                                
Co-Chair Wilken asked regarding  the "Alaska Natural Gas Development                                                            
Authority Alternate  FY 04 Funding  Strategies" chart that  has been                                                            
provided.                                                                                                                       
                                                                                                                                
Mr.  Heinze responded  that  this  chart  was developed  to  reflect                                                            
alternate  FY 04  funding strategies  that  might occur  due to  the                                                            
Authority's response and  involvement in the recent Stranded Gas Act                                                            
applications.  He noted that, in addition to providing  the entities                                                            
with information regarding  such things as tax write-offs, timelines                                                            
might require being revised as things develop.                                                                                  
                                                                                                                                
Co-Chair Wilken  referenced the letter  from Mr. Heinze to  the Vice                                                            
Presidents  of ANS Gas Development,  ConocoPhillips; Alaska  Gas, BP                                                            
Exploration   Alaska;  and  ExxonMobil   Alaska  Production,   dated                                                            
February 13, 2004 [copy  on file] that references an alternate route                                                            
to the  Beaufort Sea. He  asked that further  information  regarding                                                            
the  reference to  this  route be  provided,  as that  route is  not                                                            
commonly considered to be an option.                                                                                            
                                                                                                                                
Mr. Heinze responded that  this letter and the letter to MidAmerican                                                            
Energy Holdings  Company,  dated February 12,  2004, [copy  on file]                                                            
were  generated in  response  to these  entities'  Stranded Gas  Act                                                            
applications to the State.  He continued that the application by the                                                            
producers:  ConocoPhillips;  BP Exploration  Alaska; and  ExxonMobil                                                            
Alaska Production,  "made it  very clear that  in their minds,  both                                                            
routes  were on the  table." He  continued that  Governor  Murkowski                                                            
informed them that the  Beaufort Sea route was not to be considered.                                                            
However,  he  stated  that the  Authority's  desire  to  initiate  a                                                            
relationship with  the applicants is apparent in that  it recognizes                                                            
"the  fact the  one  of the  producers"  supports the  Beaufort  Sea                                                            
alternative.  Overall  though,  he stated  that  the intent  of  the                                                            
letter is  to offer assistance  in a mutually  beneficial manner  to                                                            
both the applicant and to ANGDA.                                                                                                
                                                                                                                                
Co-Chair Wilken  thanked Mr. Porter for the explanation  as he would                                                            
not desire  "that sentence  to become a lighting  rod that  affects"                                                            
other efforts.                                                                                                                  
                                                                                                                                
Co-Chair Wilken  stated that there are "two camps"  in regard to the                                                            
gas pipeline: those who  say "show me a customer and I'll show you a                                                            
gas line,"  or those who support building  a gas line as  the belief                                                            
is that the  customer will come."  He asked who potential  customers                                                            
of the State's natural gas might be.                                                                                            
                                                                                                                                
Mr. Heinze  responded  that the  marketing question  of whether  the                                                            
pipeline or the customer  occurs first "is one of the key questions"                                                            
and issues  when seeking financing.  He noted that while  there is a                                                            
market for natural  gas in the State, this intrastate  market, while                                                            
important, is  not large enough "to justify the project."  Secondly,                                                            
he noted,  that the  process of  transiting the  natural gas  to LNG                                                            
would allow the  product to be shipped via tanker  to the west coast                                                            
of North  America or to  Asian economies such  as Japan, Taiwan  and                                                            
Korea  who are traditional  LNG  consumers. He  assured that  Alaska                                                            
natural gas could  be competitive in all those markets;  however, he                                                            
reiterated there  being "no single customer at any  single moment in                                                            
time" who would  purchase the volume required to support  the entire                                                            
project. Continuing, he  shared that discussions are underway with a                                                            
"mega-company,"    Mitsubishi   Corporation   that    acquires   and                                                            
distributes LNG to customers worldwide.                                                                                         
                                                                                                                                
Co-Chair Wilken  stated that the conceptual schedule  specifies that                                                            
the gas could  be available for market as soon as  2010. Continuing,                                                            
he asked who the customers of that gas might be.                                                                                
                                                                                                                                
Mr.  Heinze replied  that  those  "potential  customers  would be  a                                                            
mixture  of the  west coast  of  North America"  as  well as  Japan,                                                            
Taiwan, and Korea.                                                                                                              
                                                                                                                                
Co-Chair   Wilken   asked  whether   conversations   with   specific                                                            
countries,  which might be  interested in  purchasing Alaska  gas in                                                            
2010, have occurred.                                                                                                            
                                                                                                                                
Mr.  Heinze responded  that  the LNG  market  on the  West Coast  is                                                            
"rapidly  evolving," and that  a port in the  Baja, Mexico  area and                                                            
two or three  other ports on the West  Coast are moving forward.  He                                                            
anticipated  that the State would  be able to provide LNG  to one or                                                            
two of these ports. Additionally,  he stated that a port in Korea is                                                            
possible  and that the  State has  been encouraged  by the  response                                                            
from other Asian markets.  He stated that, "being able to compete is                                                            
the  essential  ingredient,"  and  therefore,  the  State  "needs  a                                                            
business  structure that  lowers our  cost of service  to the  point                                                            
that  we are  competitive."  He continued  that this  would  require                                                            
long-term commercial  transactions, and that the fact  the Alaska is                                                            
part  of  the  United  States  is  a  strong  element  in  terms  of                                                            
marketing.  None-the-less,   he stated  that  the  project  must  be                                                            
"economic and competitive."                                                                                                     
                                                                                                                                
Senator Dyson  voiced that it is "very difficult"  to understand how                                                            
Alaska natural  gas could be competitive with other  worldly markets                                                            
on the Pacific Rim such as Qatar.                                                                                               
                                                                                                                                
Mr. Heinze  expressed that  the proposed  $12 billion investment  in                                                            
Alaska LNG must  have a high rate of return in order  to advance. He                                                            
referenced  the "Notional  Cost of Service  Comparison" calculation                                                             
chart [copy on file] that reads as follows.                                                                                     
                                                                                                                                
                  Notional Cost of Service Comparison                                                                           
                Does not include Wellhead Purchase Price                                                                        
                                                                                                                                
                     High ROR        Not       Benefit Drive                                                                    
             Commercial      Taxable   Infrastructure                                                                         
     Pipeline        $ 1.40          $ 1.00          0.75                                                                       
     LNG             $ 1.50          $ 1.20          0.90                                                                       
     TOTAL COST      $ 2.90          $ 2.20         $1.65                                                                       
     OF SERVICE                                                                                                                 
                                                                                                                                
Mr. Heinze stated  that, based on this calculation,  the natural gas                                                            
target level  should be $3.50. He  shared that experts in  the field                                                            
predict  that long-term  gas prices  would range  between $3.00  and                                                            
$3.50,  and that  some existing  fields, such  as the  one in  Qatar                                                            
ranges around $3.50. He  pointed out that were the cost of the total                                                            
$12 billion  Alaska natural  gas project factored  in, "the  cost of                                                            
service  becomes  very low  for our  gas," and  he  continued, at  a                                                            
wellhead value  ranging between $3.00 and $3.50, the  State could do                                                            
"very well," and "do more  than service our debt on the project." He                                                            
noted that price  factors would be affected by various  factors such                                                            
as whether the pipeline  follows the highway, is converted into LNG,                                                            
or distributed  into the  market in a number  of different  ways. He                                                            
noted  the "Estimated  Cost  of Service  Comparison  to WCNA"  (West                                                            
Coast  North  America)  chart   [copy  on  file]  and  stated  that,                                                            
depending  on how  the State  and the  Authority  use their  "unique                                                            
financial structures,"  the cost of service could be reduced further                                                            
and the State could be competitive with any of its competitors.                                                                 
                                                                                                                                
Mr.  Heinze explained,  in  response  to  an earlier  question  from                                                            
Senator  Bunde, that LPG  is things  such as propane  or butane.  He                                                            
stated that natural  gas liquids (NGL) are liquids  that are derived                                                            
from gas that  is being produced,  and he continued that  LPG is the                                                            
same as  NGL except that  it is derived from  the gas after  the gas                                                            
has been transported.  He noted that  LPG fuels are easy  to use and                                                            
easy to transport.                                                                                                              
                                                                                                                                
Mr. Heinze stressed  that the timing of the receipt  of this funding                                                            
is very  important to  ANGDA, as  the initial  $350,000 funding  has                                                            
been expended.  Therefore, he urged  the Committee to expedite  this                                                            
legislation, as more funding  would be required in order for further                                                            
work to be done.                                                                                                                
                                                                                                                                
Mr. Porter also voiced  support for expediting the request, as there                                                            
are several  AGNDA contract requests  that are awaiting funding  and                                                            
should be "executed."                                                                                                           
                                                                                                                                
Co-Chair Wilken ordered the bill HELD in Committee.                                                                             
                                                                                                                                

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