Legislature(2003 - 2004)
01/21/2004 03:35 PM RES
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
SB 241-APPROP: NATURAL GAS DEVELOPMENT AUTHORITY SENATOR GENE THERRIAULT, sponsor of SB 241, informed members that SB 241 would appropriate the remaining $2.15 million of the Alaska Natural Gas Development Authority (ANGDA) board's request for $2.5 million made last year. He told the ANGDA board members to be prepared to justify the need for the appropriation to the legislative committees. He noted that [after ANGDA was created by initiative] last year, the Legislature appropriated $150,000 to the ANGDA board to pull the organization together and make a proposal for additional money. He worked with members of the board and the administration to secure another $200,000 from the Legislative Budget and Audit Committee to undertake a benefit analysis of in-state use. His primary interest is to quantify the economic benefit to Alaska citizens if North Slope natural gas is made available through any delivery system. He believes that information would be useful to the Legislature regardless of the entity involved in a natural gas project. ANGDA has entered into a contract to gather that information with Northern Economics, Inc. SENATOR THERRIAULT told members that if the Legislature is asked to enact tax deferrals or relief of any kind that would cost the citizens of the state, the Legislature should know the value that will accrue to the state to offset that cost. He believes the Legislature should ask ANGDA board members to be prepared to determine how it can partner with any project to improve the project's economics through ANGDA's tax exempt status if the state receives a proposal to take the resource to market overland through Canada. He would like to know whether ANGDA can help with the economics of an overland project. He suggested that ANGDA might own the line from the North Slope to Delta to tidewater, thereby lowering the cost of the infrastructure. He said several legislators from the Southcentral area of the state are interested in accessing natural gas, which ANGDA board members have discussed. That question could also be part of an in-state benefits analysis. SENATOR THERRIAULT told the committee that the ANGDA board provided a spreadsheet, with a timeline, that describes how it proposes to use the appropriation. He said as Senate President, he referred the bill to the Senate Resources and Finance Committees. He expects the Senate Finance Committee to focus on the cost justification. He asked that the Senate Resources Committee focus on how the ANGDA entity can be used to help with the economics of any proposal, how it can work as a stand-alone project and how much that will cost. He informed the committee that he and ANGDA board members were available to answer questions. CHAIR OGAN announced that Senator Seekins joined the committee a while ago. He then noted that committee members had no questions of the sponsor and asked Mr. Heinze to testify. MR. HAROLD HEINZE, Chief Executive Officer of ANGDA, was testifying before the committee via teleconference from Anchorage. He told members he has been employed by ANGDA since July of 2003. He introduced ANGDA board members Bob Favretto, Dan Sullivan, John Kelsey, Scott Heyworth and Andy Warwick (who was participating via teleconference from Fairbanks). He explained that ANGDA is a public corporation of the state, meaning it functions in some ways as a state agency and in other ways as a private agency. He referred to a handout that justifies ANGDA's $2.15 million request and made the following comments about its three main points: ...the benefits to the State of Alaska and basically the ballot initiative that set up the Alaska Natural Gas Development Authority passed by a very large percentage. If you ask people what they voted for and why they voted so strongly for it, one of the two answers you get is that the people lack the confidence that whatever is done with the North Slope gas - that it would derive direct benefits to Alaska. So, one of the first focuses of the board was to identify those potential benefits and you should have in front of you somewhere an exhibit that says 'Benefits to Alaskans' and ... if you look at that chart in some detail, you will find that we have identified ways that Alaska gas could be directly impacting probably 99 percent of the population of the state. We think that is an extraordinarily important focus for whatever we do. What we found is that, as we looked at those potential uses of gas in the state, that there was not enough opportunity in terms of that volume to assure that the project or delivering that gas was economic. Basically, while Alaska uses are important, they are so small in volume you cannot construct any major project that delivers them because of the small size. We were able then to kind of look at how a project like this, in terms of an export project, would work with those Alaska benefits and that synergy is very important and that was what led us to look at an export project as our focus. Once you start to look at that export project, then a lot of the benefits became easy to identify and frankly become fairly easy to deliver. The second thing we did in the benefits area is that we realized that the current analysis of major projects, in particular the gas projects in Alaska, was very limited. Generally people have talked only in terms of investor type measures - rate of return or return on investment or even present worth. And those are fine for the people that are actually investors in the project but they do not portray in anyway the value to Alaska of a project. So people then turned around and they started to add a measure of wellhead value or basically revenues to the state as a measure of the benefit. And what we found was that that really is a very unsophisticated measure of the total impact on Alaskans of these kinds of major projects. So we have contracted for - and working away already - is a contractor building a transparent publicly usable spreadsheet model that will integrate all of the benefits, including the economic impacts, the job impacts, the reduced cost of heating homes and so on, etcetera - everything we can think of that is a potential benefit of one of these projects and integrate it into one measure. When that project is finished in the middle of March, then that result will become available for use in analyzing any and all projects. We will certainly continue on to do further work with the model to input, in particular, specific benefits we think we can attribute to a group like the Authority. For instance, the Authority has the ability through contracting, through work rules and other things to cause things to be built with a higher Alaska hire percentage than maybe some other entities. And we want to understand what the impact of that is in terms of total benefits to Alaska. We have every reason to believe it will be significant but as we finish our work in June, that full result will become available. The second basic area that ANGDA makes a contribution in has to do with what I call broadly the business structure issues. This is to recognize that one of the very powerful things we discovered very quickly, as we started to look at how the Authority could do its business and what powers and opportunities it was given, was we realized in performing a public service of transporting a public resource, was tax exempt. And we then have looked at business structures that will allow us to pass that tax avoidance on to lowering the cost of service of delivering the gas. That contribution is probably more significant than any other single factor that has ever been discussed in terms of making these projects work and I'll show you some numbers in a little bit that maybe will illustrate how much that is but I would ask you to realize that is an extraordinarily important and powerful tool. It is a tool that can be applied not only to the LNG project, but it is a tool that can influence the marketability of North Slope gas to any market under any circumstance. Now there is a lot we have to understand about the dos and don'ts of how to keep that tax advantage. But I assure you it is extraordinarily important in terms of the totality of what the state has to contribute towards bringing that public resource to market. We also obviously, as part of that, will look at the funding and a large number of other issues of who we can relate to, how we can relate to them, and how best to structure our business. These are issues that are of billion dollar impact so we have tried to hire some of the best people we can find anywhere to advise us on the structure issues. And then finally, we talked specifically about the project that we are working on, which is an export project. I have provided in the information I gave you a table that shows the ANGDA project concept and costs, which shows basically four different project elements: a treatment plant on the North Slope, a pipeline, a liquefaction plant, and the LNG tankers. The total cost of those elements is $12 billion. Again, this is based upon fortunately a lot of public work that is available as a result of Yukon Pacific's efforts and frankly because of some results that have been released by other people. It does not represent, at this point, any detailed engineering. There are a lot of improvements, we believe, that can be made in the quality of that cost estimate. However, our opinion at this point is that the estimate is probably high rather than low and, again, each of the individual elements there is part of our funding requirement to refine the quality of those estimates and, in particular, look for the opportunities for cost savings. In this case, the money you'll see is barely over a million dollars to accomplish that. You all are aware, for instance, the producers have recently done a study. They spent over $100 million to look at a high quality cost estimate for their project. To even do this estimate in a feasibility phase if I was back in [the] private sector, I would estimate the cost to do this at 10 or 20 or 30 times more than what I've allowed for here. One of the reasons we can do this for a lesser cost frankly is that there is a lot of information available to us. Yukon Pacific has been more than willing to share information with us. We also get some very free expert advice from a company called Mitsubishi and that allows us to place confidence in some of these numbers without having spent a lot of money. 3:55 p.m. If you take the $12 billion as a starting point, and you start to look at the economics of the project, the first calculations I made are illustrations on a table called 'NOTIONAL Cost of Service Comparison' and these numbers are a single value expression of the cost of moving North Slope gas ... to a port in, say, the West Coast. The first entry in the table is $2.90. That is the number I would calculate if I was a commercial business investing in a high risk project such as this kind of a transportation project and expecting to earn a fairly high rate of return. And what I got was $2.90. Now the way you use these kinds of numbers is - to get you a rough feel of where you are in terms of the market and everything else - if, for instance, I was to assume the market at the wellhead price was $1, I would add $1 to the $2.90 and that would say the value delivered or the value I've invested in getting the gas to market in, say, Long Beach, is $3.90 - $2.90 plus $1. Well, if you looked at the marketplace in Long Beach today, it would be something over $5. Well, you yell Hallelujah at that point because that's a good deal because you're getting $5 for something that, including your return on your investment and everything, you spent $3.90. Unfortunately the problem is that people don't project that the price in Long Beach will be $5 for an extended period of time. The price they do project is much more in the range of $3 to $3.50. And, again, if you ask a lot of experts and poll a lot of folks, very few people predict prices below $3 but most would not predict prices over $3.50 in the long term. So if I was a commercial company, I would conclude, based on [those] kinds of numbers and that kind of thinking, that the project is not economic. That is what basically ConocoPhillips told us in July of last year and that's what led to this calculation because I said somehow that isn't reflecting what the Authority would do. That leads to the second column. As a public service transporting the gas, we are not taxable. If you eliminate the tax, the number $2.90 drops to $2.20. And now if you add a $1 wellhead value to that and it's $3.20 sitting in the port of Long Beach, [indisc.] I'd be very happy today with $5 but I am very resilient even in a world where prices are ranging between $3 and $3.50. And then I did one more calculation to try and test what at the extreme - and I say at the extreme the Authority could do - if it wanted to lower its cost structure to the absolute lowest number it could visualize. And I made the assumption that instead of building a pipeline, we're building a highway for gas, because when we build a highway in the state of Alaska, we don't ask ourselves the rate of return. We believe that the economic activities we generate by connecting A and B is worthy of the investment and all we require is that we be able to service the debt of the bond that we built the highway with. And if we took that approach on the pipeline, now our cost of service number drops to $1.65. And that is important because when we look at all the other projects that we would have to compete with, $1.65 is superior to all those projects. So that says, at the extreme, the Authority has the ability to compete even in a highly competitive world, even in a world where we have some disadvantages. But, the tremendous advantage of an infrastructure approach or approach that could not pay federal income tax is very significant. 4:00 p.m. CHAIR OGAN said he has listened to a lot of energy analysts at Energy Conference meetings this year and heard that a lot of gas is closer to tidewater with a much cheaper wellhead price. He asked about the cost of building a liquefaction plant. MR. HEINZE said in this case, ANGDA included a cost of $4 billion. However, a modern-designed plant would cost less. CHAIR OGAN said he was told the cost was about $1.5 billion but suggested the cost may be cheaper in some other foreign countries. He then stated, "The overriding consensus of all the talking heads in the oil industry and the analysts is that the world is awash in LNG right now." He expressed concern that a stand-alone project might not be as economical as a project designed around the hub concept. He said what is most important now is that ANGDA justify why it needs the money. MR. HEINZE stated that ANGDA is very sensitive to the fact that the LNG project is one that would have to compete in the market. However, that can be said about any project that moves Alaska gas to market. The [state] has not had any extensive discussion about the market penetration issues related to any of the projects. He pointed to two key slides he included in ANGDA's briefing package. One shows the Asia-Pacific key LNG suppliers, which proves Chair Ogan's point that a lot of gas is available. That gas is controlled by entities such as Shell, ExxonMobil, BP, Chevron Texaco and ConocoPhillips. He told members the five "mega-majors" have, by merger, made it clear that they intend to be very dominant factors in LNG. Within the last month, ExxonMobil and ConocoPhillips announced major investments in Qatar. In addition, BP has announced major supplies from Indonesia to the West Coast. The market is very dynamic and competitive. MR. HEINZE said the basic fundamentals of what he is trying to describe are illustrated on the next table, entitled 'Estimated Cost of Service Comparison to the West Coast of North America,' produced by ConocoPhillips. ConocoPhillips broadly explained how it calculated the numbers. The table shows the prices delivered from various countries to the West Coast vary from $2.20 at the low end to $2.90 at the high end for Alaska LNG. He said he has already discussed how ANGDA can very successfully compete with any of those prices. He said he is not prepared at this moment to prove that but the information available provides enough insight with which to determine that ANGDA has the opportunity to compete. The people who will ultimately make that judgment are not in Alaska; they are most likely the bankers who will decide whether to loan the state the money and they will provide the test of whether the project economics are there. 4:05 p.m. SENATOR DYSON asked Mr. Heinze to address the problems associated with the Jones Act and the ability to build, buy or rent tankers in this world market. MR. HEINZE said that ANGDA has taken the view that the Jones Act is an issue that must be dealt with. It creates a problem in that the portion of gas shipped to the West Coast must move in more expensive tankers. The question of how much more expensive those tankers will be is open. The Jones Act clearly mandates that the tanker hulls must be U.S. built; it is also clear that the tankers' interiors could be installed at a foreign shipyard. ANGDA has looked at ways to reflag some of the older U.S. built tankers and at other logistical approaches to the problem. He offered to furnish the committee with papers made available to ANGDA by the Attorney General's Office that illustrate the range of solutions available. He said he has not concluded which solution is best. He pointed out: In any case, the Jones Act impacts $2 billion of the $12 billion investment and even when I paint the worst case of the Jones Act, it won't add but a half billion dollars to the cost estimate ... We don't have to have all the tankers be from American shipyards. He said he does not see the Jones Act issue as threatening the economic viability of the project. CHAIR OGAN asked Mr. Heinze if his assumption of $1 is a price the gas producers would be willing to accept. MR. HEINZE said he would not negotiate price in public for many reasons. In addition, ANGDA was given the authority to buy and sell gas if that is necessary. At this point, ANGDA has not determined, as a matter of business structure, whether it would be a transporter of gas or a buyer and seller of gas. He referred to the conceptual schedule and pointed out that one of the first things to happen when ANGDA determines feasibility is that an open season would be declared. ANGDA will determine whether it needs to be a buyer and seller of gas only after that occurs. It is possible that ANGDA could propose such a great project that all gas owners would rush forward, requiring ANGDA to consider expanding the gas line. He said he used $1 because of the ease of the arithmetic but he has reason to believe the producers turned down an offer of 75 cents and, because $1.35 showed up in the national energy legislation, he believes that is the high number an investor would consider in a risky project. If ANGDA were to offer a price for a no-risk project, he suspects it would be lower than $1. That is how he would approach the problem if ANGDA were the buyer. CHAIR OGAN said he has been hearing, "Build it and they'll sell you the gas." MR. HEINZE said the project schedule illustrates some of the more project-oriented steps necessary to move through a feasibility phase that allows one to obtain funding. The first step involves the $2.5 million appropriation that will pay for the feasibility study to be completed by June of 2004. That study will provide enough information from which Governor Murkowski, the Legislature and the public can determine whether this project is worthwhile. If the project is deemed as such, a series of things will happen over the subsequent 24 months. ANGDA would sell $200 million worth of financial instruments to investors who are willing to accept a lot of risk. The $200 million would be used to determine who wants to ship on the gas line, the details of the design, the necessary financial arrangements, the required permits and other information to present to the investment banks who do not want to take risk and would sell $10 million worth of bonds. MR. HEINZE said if ANGDA receives this appropriation, its milestone will be the June report because unless ANGDA, Governor Murkowski, the Legislature, and the public see the project as feasible and want to go forward, there will be no way to raise money. SENATOR LINCOLN asked Mr. Heinze if ANGDA has developed any criteria to be used by the four groups to determine the feasibility of the project. She also asked whether his reference to the public means he is proposing that the question be put before the voters. MR. HEINZE said the bill contains a list of 11 requirements to be addressed in the development plan. He believes the list contains the kinds of things necessary to use as a decision- making tool. Regarding feedback from the public, he believes the governor and Legislature will seek feedback from their constituents. In addition, any broad consensus shows up quickly through the media. In addition, ANGDA has considered issuing a grubstake bond certificate and offering Alaskans the opportunity to participate in the high-risk investment group. He said a recent poll conducted by a local television station revealed that 40 percent of those polled believe the gas line is the most important issue before the Legislature this session. SENATOR LINCOLN asked how ANGDA proposes to get the approval of the Legislature. MR. HEINZE said if Governor Murkowski and the Legislature believe this to be a very important topic, they might convene a special session. He then said the last part of his presentation involves the funding plan, which is broken into three major categories. The ANGDA category represents the cost of the Authority itself. The business contract category is comprised of contractors who will answer the business related questions regarding taxation, marketing, financing and the economics. The last category represents those contractors that would be looking at project related issues. He noted ANGDA has already spent the $350,000 it was authorized to spend on contracts. A minimal amount of the additional $2.15 million would go to ANGDA itself; the vast majority will be spent on contracts, primarily for engineering design. He said the contract money would be spent by June of this year. The business contractors will provide advice that is relevant to any project, any structure, and any business aspect of ANGDA. The project contracts will be a little more specific and will focus on the design aspect and the route to Valdez. 4:20 p.m. SENATOR LINCOLN said she was just notified that Governor Murkowski will be holding a press conference tomorrow on the natural gas pipeline. She asked if that press conference is in conjunction with what ANGDA is doing. MR. HEINZE said he knows no more than Senator Lincoln and presumes the press conference is about potential sponsors of another gas pipeline. He emphasized that ANGDA, since its inception, has looked at ways to make its project fit with a highway project; it sees itself as compatible and not in competition with a gas line that follows the highway route. TAPE 04-1, SIDE B CHAIR OGAN announced that he expects to receive information from the Alaska Oil and Gas Conservation Commission (AOGCC) next week on the effect of the drawdown on gas from the Prudhoe Bay unit. He asked committee members to review that information. He then noted that Senator Elton joined the committee some time ago and asked Mr. Anderson to testify. MR. NELS ANDERSON, Jr., thanked Senators Therriault and Wagoner for introducing SB 241 and SB 247. As a supporter of the initiative that created ANGDA, he appreciates the fact that the Legislature is following through on that initiative. He expressed confidence in Mr. Heinze's ability to move this project forward; he has diligently moved ahead despite the fact that ANGDA has not been adequately funded. ANGDA needs all of the support it can get as it presents an opportunity for all Alaskans to lower their costs of energy and it will provide jobs, especially in Bristol Bay. In addition, it will bring new revenue to the state treasury, benefiting schools and communities. MR. PAUL FUHS, representing Backbone 2, told members that Backbone 2 is a citizen organization dedicated to the expeditious development of Alaska's North Slope gas reserves in a way that would provide maximum benefits to Alaskans. Backbone 2 is made up of past and current political leaders, union and municipal representatives and ordinary Alaskan citizens. Backbone 2 will be publishing a series of full-page ads and will be launching a website. MR. FUHS said that Backbone 2 sees potential benefits to public ownership of the project. Almost every other jurisdiction in the world that controls its resources participates in similar projects in an ownership fashion to provide more benefits to its citizens. In Qatar, ConocoPhillips agreed to a 30 percent take while Qatar will receive 70 percent. He said it is hard to imagine that ConocoPhillips would not be willing to participate in some way with one of the states in America. Backbone 2 believes one of the main benefits of the ANGDA project is that it could actually be built. The heads of ConocoPhillips, BP and ExxonMobil have recently stated that the Canadian highway project is not economically feasible without price subsidies. He asked members to take that into consideration when it decides whether to take the stranded gas applications seriously. MR. FUHS said a few companies have shown that the ANGDA project could generate $1 billion per year for Alaska, based on a 12 percent rate of return. The oil companies say that is not enough, they want a 15 to 20 percent return. He said legislators need to decide whether $1 billion per year is enough for Alaska in its current fiscal environment. The choices, if the state cannot raise revenues through resource development, are taxes, loss of permanent funds and further reduction of government services. He said if LNG can be transported to tidewater, it could be moved around the state. At a recent presentation in Anchorage, Enstar said the last contract it signed resulted in a 14 percent increase in gas in Southcentral and that in five years it will be cheaper to import LNG from Indonesia to Cook Inlet than to buy from the producers in Cook Inlet. MR. FUHS said it is not unusual for governments to be involved in gas projects these days. Several countries and the states of Wyoming and Georgia formed authorities similar to ANGDA to build projects that the private sector would not build, especially in the area of transportation. He said the funding for ANGDA could also help provide some of the analysis that Senator Ogan included in his bill, SB 271, in terms of potential financing for a portion of the Canadian line. He pointed out ANGDA's tax exempt status will provide a 30 percent reduction in income tax. The ANGDA initiative was written to give ANGDA the flexibility to partner with the private sector. He said he provided members with the results of Proposition 3 by election district to show how their constituents voted on the initiative. He asked members to respect the will of their constituents and support this legislation. He added that the highest wellhead price, worldwide, that Backbone 2 has been able to find is 85 cents in Trinidad so $1.35 is outrageously high. He repeated that ANGDA's model is based on $1. CHAIR OGAN commented the wellhead price contracts are not public information. MR. FUHS agreed and told members that BP complained because it had to pay too much at the wellhead for its LNG project in Trinidad so the information was published in a trade publication, which is where Backbone 2 found it. CHAIR OGAN questioned how Backbone 2 would know that the price isn't higher elsewhere. MR. FUHS said at the Asia Pacific Conference held in Anchorage, a few different analysts from Asia posted wellhead prices. He said it is his understanding that Mr. Heinze plans to contract with Wood-Mackenzie for information on international projects. MR. GEORGE BRIGGS, Director of the Dillingham Chamber of Commerce, said the Dillingham business community is very concerned about the cost of energy. West coast communities experience a very high cost of energy, which translates to added expenses to citizens and high energy costs make it very difficult to attract new business. If ANGDA is funded, it can provide information about a better energy delivery system to communities. The Dillingham Chamber of Commerce supports this legislation. CHAIR OGAN asked Mr. Griggs if Dillingham is planning to ship LNG in. MR. BRIGGS said that would be the ultimate goal. MR. SPUD WILLIAMS, testifying on his own behalf, told members he believes SB 241 is appropriate in that it shows BP is serious about developing the gas. He believes BP has held the gas hostage so that it would not compete while it developed fields all over the world and solidified markets in overseas markets. He noted when ARCO began talking about developing Alaska gas, it was taken out of the picture and all of a sudden ConocoPhillips became a partner in the gas fields on the North Slope. He pointed out the study ConocoPhillips did was based on natural gas only, not on natural gas liquids. That study showed a 10 percent margin, which is considerable on a project of that size and excluded a large potential profit margin from natural gas liquids. The original gas line feasibility studies from Prudhoe Bay to the coast showed that natural gas liquids and the other resources listed by Mr. Heinze, such as the petrochemical industry, in large part made the project feasible. Other governments involved in a gas line would want to strip the natural gas liquids because they know its worth. MR. WILLIAMS indicated the petrochemical industry will provide long-term employment. He said the state must tax the gas in place so that it is a liability to the [producers] before they let that gas free. CHAIR OGAN stated, for the record, that he told the Canadian energy minister that Canada couldn't have all of the liquids. MR. RAY SCANDURA, representing RPC Energy Services, told members the cost of the infrastructure for a gas line is substantial and the marketability of the liquefied natural gas will be the deciding factor. Alaskans pay the highest prices for their daily energy use because Alaska is at the end of the run. This project will give Alaskans a reliable fuel supply. He believes that although the cost savings are difficult to calculate, the marketability will pay for the infrastructure and the long-term benefits to rural Alaska will be immense. 4:41 p.m. SENATOR LINCOLN asked Deputy Commissioner Porter to respond to Mr. Heinze's comment regarding the Governor's press conference tomorrow that the ANGDA project will go hand-in-hand with a highway route gas line. MR. STEVE PORTER, Deputy Commissioner of the Department of Revenue (DOR), said the state's position is consistent with Mr. Heinze's response. DOR believes that ANGDA can bring many benefits to the state, whether building the gas line or complementing it with a spur line or another form of support. SENATOR LINCOLN asked Deputy Commissioner Porter if he has worked with the cost figures provided by Mr. Heinze on ANGDA's conceptual schedule. DEPUTY COMMISSIONER PORTER said the $200 million and $10 billion estimates are reasonable for those stages of the project. DOR has not concluded whether $2.5 million is necessary to fulfill ANGDA's statutory responsibility. However, DOR supports providing the Authority with the funds necessary to answer questions on this or any other project so that the state can make good decisions. SENATOR ELTON asked Mr. Porter if he believes the role Mr. Heinze plays would cost the amount being requested from the general fund as a supplemental to the FY04 budget. DEPUTY COMMISSIONER PORTER said DOR is currently evaluating that amount and does not have a specific amount to recommend at this time. SENATOR ELTON stated: Clearly, this isn't a surprise - I mean [ANGDA] began speaking months ago about the need for an additional amount of money. When do you anticipate that the administration will be done with the review to make the recommendation, whether it's less or more than the amount requested? DEPUTY COMMISSIONER PORTER replied DOR began to work with the Authority last summer to get the additional $200,000 to make sure that ANGDA maximizes what that money is used for. He said DOR is now moving into the next phase; it would have been helpful to have the information the Authority will collect but DOR is going to have to make some decisions prior to getting it. DOR will have to sit down, look at each element, identify the cost associated with each element and make recommendations. SENATOR ELTON said the committee is now talking about a four- month window instead of a six-month window and noted one can make a decision by not making a decision. CHAIR OGAN told members he does not intend to move the bill from committee today and asked Mr. Porter to let him know when the administration will have a recommendation. SENATOR BEN STEVENS asked if the committee should expect ANGDA to ask for more money if tomorrow's press conference delivers news that would lead ANGDA to look at alternative ways to participate. DEPUTY COMMISSIONER PORTER said DOR's goal, over the next few weeks, is to look at the plan to move forward on gas and the gas line and the associated costs in 2004 and 2005 and come to the legislature with a package, whether that is the ANGDA project or any other option. DOR needs a little time to evaluate the future of the state and make a determination on the cost. SENATOR BEN STEVENS commented the request in SB 241 is for $2.1 million for due diligence on the North Slope liquefaction facility, to transport and to build the ships. He asked: But what happens if there's another proposal that comes in? Are we going to look at ANGDA doing two or three different diligence exercises or are we going to ... how are we going to interface with a proposal that comes forward? If that interface is perhaps at a lesser extent, are you going to readjust that request? MR. HEINZE told Senator Stevens the money requested by ANGDA is to finish the charge provided for in Ballot Measure 3. That charge is very project specific. If ANGDA were asked to be the sponsor of an entirely different project, ANGDA would have to go out and contract for answers to new design questions. ANGDA has a great deal of information about the route from Prudhoe Bay to Valdez from Yukon Pacific and others, so it has been able to minimize the engineering cost. However, if ANGDA was asked to be the project sponsor and had to design a pipeline from the North Slope to the Canadian border, that would take a considerable sum of money. One group in the state has already done that; if it made that design available, ANGDA could do a good job at a low cost. ANGDA does not know what the governor is going to announce at this time. If the governor announces that another entity is going to do the design work, he would not expect ANGDA to require much, if any, additional money. DEPUTY COMMISSIONER PORTER said he believes Senator Stevens is asking if DOR is going to require ANGDA to do additional things for other issues if the state receives other project proposals. ANGDA will comply only with that charge unless the Legislature changes that charge. The Legislature passed another piece of legislation known as the Stranded Gas Development Act. Negotiations for financial incentives with an applicant under that Act would not involve ANGDA. SENATOR BEN STEVENS pointed out that [SB 247] does change the statute and again asked if the legislature should anticipate another funding request from ANGDA if it passes SB 247. DEPUTY COMMISSIONER PORTER said it should. If the Legislature asks ANGDA to do more work, ANGDA would require more cash for additional contractors. SENATOR ELTON commented that he is ready to vote for anything but he believes the problem is that this and the previous administration have talked about only one way to get this project done. He thinks the time has come for the state to give the resources to those who are thinking outside of the box, whether that is an LNG to tidewater project or pipeline builders instead of producers. He said he is tired of waiting for the producers to get this project going. He is somewhat distressed that the [administration] does not have a response to the appropriation bill before the committee. The appropriation request comes as no surprise to anyone. He added that he believes the committee should move the legislation quickly before the four-month window becomes even shorter. CHAIR OGAN said he concurs with some of Senator Elton's comments; he is also tired of talking about this issue and wants to see action. He announced the committee would take up SB 247.