Legislature(2003 - 2004)
03/17/2004 03:42 PM Senate RES
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
SB 247-AK NATURAL GAS DEV. AUTHORITY INITIATIVE CHAIR SCOTT OGAN called the Senate Resources Standing Committee meeting to order at 3:42 p.m. Present were Senators Thomas Wagoner, Ben Stevens, Kim Elton and Chair Scott Ogan. Senator Ralph Seekins arrived shortly thereafter. The first order of business to come before the committee was SB 247. MS. MARY JACKSON, staff to Senator Thomas Wagoner, sponsor of SB 247, said the bill had been before the committee two times and nothing had changed. The fiscal note is indeterminate. CHAIR OGAN expressed concern over getting permits to build something to tide water in Cook Inlet and sending a mixed signal to the private sector that would invest in such a project. At some point, we need to quit cutting bait and get our lines in the water and decide what we're doing here. I guess I want to get it on the record that at some point in the very near future, we're going to have to rally behind the project in this state. SENATOR THOMAS WAGONER said this bill does what the governor wants it do, which is establish a spur line to Cook Inlet, which currently has state infrastructure for manufacturing in light of the fact that Alaska is short on proven gas reserves. MS. JACKSON informed the committee that she attended an Alaska Natural Gas Development Authority (ANGDA) meeting in Kenai and was heartened by comments from members about the need to recognize the value of the Cook Inlet Basin. She pointed out that there is no permit yet for the Cook Inlet or the Southcentral route under the ANGDA. "Anything that can be done to elevate the Southcentral and Cook Inlet Basin is of value to the whole state." SENATOR RALPH SEEKINS said he considered different possibilities for getting a line to Cook Inlet, but after much thought concluded that the market should determine which route would be used rather than the government. In that regard, I'm willing to take a look at alternative routes to the ones that have already been suggested, because I think it opens it to market demand rather than legislative dictate. That's why I intend to vote for this particular bill. CHAIR OGAN responded: I'm not going to object to the bill moving today, but I do want to put on the record that a number of years th ago - this is my 10 year working on commercializing natural gas; so I've got a little bit of history with it - a number of years ago, we had representatives that the governor's office hired, you might recall, Senator Elton, the consultants in Taiwan and Korea.... who said that Alaska appears dysfunctional to the market.... I agree with Senator Wagoner that at this point we don't want to close off our options and we need to keep all the tools we can in the toolbox. But, if we have a viable investor, when that happens we need to get unified and we need to send a positive message to the people that are going to risk billions of dollars. With that reservation on the record, I'm not going to object to the thing moving out today, but I do want to keep mindful of that. SENATOR KIM ELTON said the chair had expressed his concerns, as well. I do have a concern that we are kind of all over the dartboard on this and having more tools in the toolbox isn't necessarily bad as long as we don't feel like we have to use them all and have a defused effort.... I also believe, that if in fact, there was an entity that wanted to advance the possibility of delivering to tidewater in Cook Inlet and it was a serious interest, I think at that time, we could do it in two weeks.... MR. HAROLD HEINZE, CEO, ANGDA, said he wanted to make sure that the authority would be looking at delivering gas via a spur line to the Cook Inlet area. His view is that from the 20,000 ft. level, the different routes cost about the same. We will definitely be doing this. It is one of the most important parts of what the authority is about. It is a mandate in the ballot measure as it was passed.... In terms of determining the feasibility of the project, I am not uncomfortable in adding that part to the mission. If you told me I had to recommend to you a choice between the two routes, I would be extremely uncomfortable, but that would require a great deal of work that we have neither the funding nor time to do. CHAIR OGAN said the feds hired a consultant who did a report on gas in Cook Inlet and asked if the report was out yet. MR. HEINZE replied that he is one of the reviewers of that report in draft form and has had a chance to look through it. The report basically says that there is more gas to be found in Cook Inlet, but it is not cheap gas and that the price would go up close to the price of gas in the Lower 48. That price is what it takes to attract the capital necessary for exploration. If we do the spur line, what I've roughly calculated at this point and it seems to be a similar number to what they have calculated, is that the price in this area would be around $1 to $1.50 less than the price in the Lower 48. So, that is some advantage of this in terms of pricing and it has to do with the fact that there's a different tariff to the Lower 48 than there is to here.... A lot of that has to be tested. I will tell you also I have some other reports in draft form that don't necessarily reach that same conclusion. I am unable to tell you at this point how the jury will come down in terms of the different viewpoints as they exist. CHAIR OGAN said he would be interested to see what dollar amount gas would actually have to get to amortize a spur line. There were no further questions. SENATOR WAGONER moved to pass SB 247 from committee with individual recommendations and attached fiscal note. There were no objections and it was so ordered.