Legislature(2015 - 2016)BELTZ 105 (TSBldg)

03/10/2015 03:30 PM SPECIAL CMTE ON ENERGY

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03:33:58 PM Start
03:34:36 PM SB50
03:56:33 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Location Change & Time Change --
Heard & Held
-- Testimony <Invitation Only> --
        SB 50-AIDEA: BONDS; PROGRAMS; LOANS; LNG PROJECT                                                                    
3:34:36 PM                                                                                                                    
CO-CHAIR MICCICHE announced the consideration of SB 50.                                                                         
3:35:26 PM                                                                                                                    
FRED  PARADY,   Acting  Commissioner,  Department   of  Commerce,                                                               
Community  and Economic  Development,  Juneau, Alaska,  explained                                                               
that Governor Walker issued Administrative  Order 272 (AO 272) in                                                               
late January that directed the  Commissioner of the Department of                                                               
Commerce, Community, and Economic  Development to collaborate and                                                               
facilitate  at  the  highest  levels  of  the  Administration  in                                                               
pursuit of  two topics: one  is consumer energy across  the state                                                               
of Alaska,  but the other  was to keep  the focus on  an Interior                                                               
Energy  Development  Project to  lower  the  cost of  energy  for                                                               
consumers  and  improve air  quality  for  Interior residents  in                                                               
Fairbanks.  He said  AO  272, in  addition to  HB  105, seeks  to                                                               
essentially  switch the  evaluation  of the  gas  supply for  the                                                               
Interior Energy Project from the north to the south.                                                                            
3:36:30 PM                                                                                                                    
EUGENE THERRIAULT,  Director, Energy Policy and  Outreach, Alaska                                                               
Energy Authority  (AEA), Anchorage, Alaska, stated  that he would                                                               
provide the committee with a sectional analysis of SB 50.                                                                       
Section  1  is a  portion  that  suggests the  Alaska  Industrial                                                               
Development and Export Authority's  (AIDEA) limits be adjusted to                                                               
compensate for the erosion of  purchasing power due to inflation.                                                               
He detailed that the suggestion is  to increase the limit from $6                                                               
million to  $10 million for  projects that AIDEA  participates in                                                               
that require the  consent of the local government  for siting the                                                               
project. He noted that the language  for the $6 million limit was                                                               
originally  put  into the  statutes  in  1990  and has  not  been                                                               
adjusted since.                                                                                                                 
Section 2 of  the bill is a further adjustment  in bond financing                                                               
authorization for  AIDEA for project  development. He  noted that                                                               
the  current  limitation  of  $10  million  is  suggested  to  be                                                               
increased to  $25 million.  He pointed out  that the  $10 million                                                               
limit was also put into statute in 1990 with no adjustment.                                                                     
3:38:14 PM                                                                                                                    
Section 3 proposes  two separate adjustments from  $20 million to                                                               
$25 million with AIDEA requesting  that the two dollar amounts to                                                               
be the same.                                                                                                                    
Section 4 is  the proposed change to the  Interior Energy Project                                                               
(IEP)  financing.  He  detailed  that  IEP's  original  financing                                                               
package was limited  to the "North Slope" via an  LNG project. He                                                               
said  due to  the LNG  Project's infrastructure  price coming  in                                                               
higher  than  expected,  consideration  was given  to  whether  a                                                               
source  of natural  gas  can  be identified  in  the Cook  Inlet.                                                               
[Section 4  deletes the phrase  "on the North Slope"  and changes                                                               
it to  "in the state."] He  noted that there was  concern amongst                                                               
members  of the  Interior Delegation  on  the House  side that  a                                                               
modification be  made to make  sure the focus on  Interior Alaska                                                               
as  the  anchor-demand to  justify  the  infrastructure would  be                                                               
retained. He noted  that the suggested language  is available for                                                               
the committee to consider.                                                                                                      
3:40:38 PM                                                                                                                    
Section 5 is the proposed repeal  of a portion of a previous bond                                                               
authorization  used   to  build  the  FedEx   facilities  at  the                                                               
Anchorage  Airport that  was never  utilized.  He explained  that                                                               
AIDEA's  bond-counsel   suggested  that  its  old   surplus  bond                                                               
authorizations be  removed. He  noted that  active authorizations                                                               
are taken into account when AIDEA goes to the bond market.                                                                      
Section 6  suggests removal of  old bond authorizations  that did                                                               
not move forward. He noted that  the authorizations are all at an                                                               
age that the AIDEA board of directors would not utilize them.                                                                   
Section 7 calls for an immediate effective date.                                                                                
3:42:23 PM                                                                                                                    
SENATOR  STEDMAN stated  that he  appreciated seeing  language in                                                               
the bill  that reins  in loose  bond authority.  He asked  if the                                                               
bill removes all  of the bond authority that is  older than 2004.                                                               
He inquired if  a substantial amount of old  bond authority still                                                               
remains on the books to build a gas-line.                                                                                       
3:43:33 PM                                                                                                                    
TED  LEONARD, Executive  Director, Alaska  Industrial Development                                                               
and  Export Authority  (AIDEA), Anchorage,  Alaska, replied  that                                                               
AIDEA does  not have any  bond authorizations that deal  with the                                                               
gas-line. He  stated that the changes  in the bill takes  care of                                                               
any unused AIDEA  bond authorizations. He revealed  that new bond                                                               
authorizations will have five year sunset provisions.                                                                           
SENATOR STEDMAN  recalled that the  Alaska Railroad has  a number                                                               
of unused  bond authorizations.  He suggested that  the committee                                                               
look to clean  up addition bond authorizations.  He remarked that                                                               
he likes the  idea of a five year authorization  window and noted                                                               
that the concept is good business.                                                                                              
CO-CHAIR BISHOP  concurred with Senator Stedman  that cleaning up                                                               
authorizations going back to 1994 is good business.                                                                             
CO-CHAIR  MICCICHE  addressed  Section   1  and  noted  that  the                                                               
increase from $6 million to $10  million was roughly a 64 percent                                                               
increase.  He  asked  if  the   proposed  increase  is  based  on                                                               
inflation numbers or right-sizing the limit.                                                                                    
3:45:23 PM                                                                                                                    
MR.  LEONARD answered  that the  Consumer Price  Index (CPI)  was                                                               
used from  1990 to  2015 and  the end result  was a  multiple of:                                                               
1.79. He  detailed that the  proposed increase was  calculated to                                                               
$10.7 million and AIDEA rounded the amount to $10 million.                                                                      
He noted  that even though  the proposed limit changes,  under AS                                                               
44.88.172, AIDEA  does not have to  go back and get  approval for                                                               
anything under $10  million. He asserted that AIDEA  still has an                                                               
obligation  to  confer  with  any  governmental  bodies  involved                                                               
within any project's area.                                                                                                      
CO-CHAIR  MICCICHE  asked  if "government  bodies"  included  the                                                               
MR. LEONARD answered that the  Legislature is not specified under                                                               
that statute.  He detailed that  "government bodies"  meant local                                                               
governing local  in the area where  a project is going  to reside                                                               
3:47:33 PM                                                                                                                    
CO-CHAIR MICCICHE  asked Mr. Therriault  to address  the proposed                                                               
adjustments  made for  inflation.  He noted  that one  adjustment                                                               
goes  from  $6 million  to  $10  million,  roughly a  64  percent                                                               
increase.  He  pointed out  that  the  other proposed  inflation-                                                               
adjustment in  Section 2 due  to inflation goes from  $10 million                                                               
to $25 million.                                                                                                                 
MR.  THERRIAULT answered  that the  proposed  adjustments were  a                                                               
combination of inflation and purchasing power.                                                                                  
CO-CHAIR MICCICHE noted  that Mr. Therriault used  the same logic                                                               
in Sections 1 and 2.                                                                                                            
MR.  THERRIAULT  replied that  the  numbers  were thought  to  be                                                               
reasonable adjustments and round numbers.                                                                                       
CO-CHAIR  MICCICHE asked  if  there was  another  reason for  the                                                               
difference  between  a 64  percent  increase  and a  250  percent                                                               
3:48:42 PM                                                                                                                    
MR. LEONARD answered  that Co-Chair Micciche was  correct and the                                                               
actual amount  would be  around $18  million for  just purchasing                                                               
power. He noted  that the adjustment also takes  into account the                                                               
types of financing needed. He  explained that intent was to align                                                               
bonding and  loan participation funding.  He said  AIDEA believes                                                               
that $25 million was a reasonable number.                                                                                       
3:50:21 PM                                                                                                                    
CO-CHAIR MICCICHE  asked Mr. Leonard  to repeat why the  limit is                                                               
being set at $25 million rather than $18 million.                                                                               
MR. LEONARD specified as follows:                                                                                               
     To bring parity  between the tools that  we can finance                                                                    
     through  bonding  between  our different  programs,  we                                                                    
     would be  able to bond  for a loan participation  up to                                                                    
     $25 million.  So we are  trying to bring parity  in our                                                                    
     development  finance program  to say  it have  the same                                                                    
     bonding capability  for that tool in  our toolbox under                                                                    
     the development finance program.                                                                                           
CO-CHAIR MICCICHE  noted that he  intended to offer  an amendment                                                               
during the  previous legislative  session to  remove the  "on the                                                               
Slope" language  under his  own suspicions  that the  project was                                                               
inadequately funded.  He remarked that  he agrees with  the House                                                               
on bringing  lower cost and  reliable energy to the  Interior. He                                                               
noted that he is concerned about  the "in the state" language and                                                               
remarked that  the committee should  address that  language later                                                               
on. He asked  for AIDEA to address the  eight bond authorizations                                                               
noted in  the Governor's  letter that the  bill would  repeal. He                                                               
asked if  the noted projects  have been completed and  that there                                                               
was no additional use for any of the authorizations.                                                                            
3:52:34 PM                                                                                                                    
MR.  LEONARD replied  that AIDEA  has no  projects that  would be                                                               
utilizing the  noted bond authorizations. He  asserted that AIDEA                                                               
would  feel  obligated  to  come   back  to  the  Legislature  if                                                               
consideration was  given to do a  project under any of  the noted                                                               
CO-CHAIR  MICCICHE remarked  that  committee  staff-time will  go                                                               
into looking at other "stale" authorizations.                                                                                   
3:53:50 PM                                                                                                                    
CO-CHAIR BISHOP  noted Co-Chair  Micciche's comments  on previous                                                               
legislation that limited the state  to just the "North Slope." He                                                               
remarked that the  new language in Section 4 has  benefit for not                                                               
only   the  Interior   Energy  Project,   but  maybe   for  other                                                               
communities  yet  to  be  identified.  He  pointed  out  that  he                                                               
appreciates Mr.  Shefchik, [Interior  Gas Utility],  reaching out                                                               
and meeting with folks from Glennallen regarding gas.                                                                           
3:54:50 PM                                                                                                                    
SENATOR STEDMAN noted that it is  rare for Senators who have been                                                               
around for  a while to  ever listen  to a freshman  Senator, even                                                               
when the Senator is right.                                                                                                      
CO-CHAIR MICCICHE  summarized that  he believes that  everyone is                                                               
particularly focused on a reliable  source of energy for Interior                                                               
Alaska, something that he thinks  is about time. He asserted that                                                               
he is  focused on all options,  but is concerned about  a mirage.                                                               
He said he  is very focused on some real  solutions and noted the                                                               
inclusion  of language  into the  bill  that may  help with  more                                                               
economically feasible  long-term options  as well.  He summarized                                                               
that  it  is imperative  the  state  moves beyond  the  emergency                                                               
management stage of energy to the Interior.                                                                                     
[SB 50 was held in committee.]                                                                                                  
3:56:33 PM                                                                                                                    
There being no further business to come before the committee,                                                                   
Co-Chair Micciche adjourned the Senate Special Energy Committee                                                                 
hearing at 3:56 p.m.                                                                                                            

Document Name Date/Time Subjects
SB50 ver A.pdf SNRG 3/10/2015 3:30:00 PM
SRES 4/10/2015 3:30:00 PM
SB 50
SB50 Transmittal Letter.pdf SNRG 3/10/2015 3:30:00 PM
SB 50
SB50 Fiscal Note-DCCED-AIDEA-Zero-2-11-15.pdf SNRG 3/10/2015 3:30:00 PM
SB 50
SB50 Sectional Analysis.pdf SNRG 3/10/2015 3:30:00 PM
SRES 4/3/2015 3:30:00 PM
SB 50
SB50 Fact Sheet.pdf SNRG 3/10/2015 3:30:00 PM
SRES 4/10/2015 3:30:00 PM
SB 50
FBX North Star Borough R2015-08.pdf SNRG 3/10/2015 3:30:00 PM
SRES 4/10/2015 3:30:00 PM
SB 50
Fairbanks Chamber Letter of Support for HB 105 & SB 50.pdf SNRG 3/10/2015 3:30:00 PM
SRES 4/10/2015 3:30:00 PM
HB 105
SB 50