Legislature(2015 - 2016)BUTROVICH 205

03/27/2015 03:30 PM Senate RESOURCES

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Bills Previously Heard/Scheduled: TELECONFERENCED
Moved SB 8 Out of Committee
-- Public Testimony --
Moved CSHB 132(L&C) Out of Committee
Scheduled but Not Heard
-- Public Testimony --
          HB 132-AGDC SUPPORT OF NATURAL GAS PROJECTS                                                                       
3:40:24 PM                                                                                                                    
CHAIR GIESSEL announced consideration  of HB 132. [CSHB 132(L&C),                                                               
version  29-LS0623\G, was  before  the committee.]  She said  she                                                               
closed public testimony at the  last meeting and noted one letter                                                               
of support.                                                                                                                     
SENATOR  WIELECHOWSKI asked  to  hear  Deputy Commissioner  Marty                                                               
Rutherford's take on HB 132.                                                                                                    
MARTY  RUTHERFORD,  Deputy  Commissioner, Department  of  Natural                                                               
Resources (DNR),  Anchorage, Alaska, lead on  the AKLNG Projects,                                                               
reiterated that the governor has  stated to her that his priority                                                               
is  the AKLNG  Project and  has asked  her to  work very  hard to                                                               
accomplish it. She  reiterated the essence of letter  sent to the                                                               
chair by Governor  Walker earlier today. The letter  says that he                                                               
and  his administration  are focusing  on and  intending for  the                                                               
AKLNG  Project to  succeed. He  clearly recognized  the work  the                                                               
legislature did  on SB 138,  because it created both  a structure                                                               
and  a process  that  greatly  increases the  chance  to reach  a                                                               
successful project.  However, it does not  absolutely guarantee a                                                               
project. That is  why he wants to continue the  process of making                                                               
the ASAP an economically viable  backup. It is his intention that                                                               
people  working on  AKLNG continue  to  diligently negotiate  and                                                               
work with the producers on it.                                                                                                  
The  governor  said  he  is proposing  that  the  state  evaluate                                                               
increasing the  Alaska Stand Alone  Project (ASAP)  Project's gas                                                               
throughput to make  it an economically viable  backup. The Alaska                                                               
Gasline Development  Corporation (AGDC)  board recently  passed a                                                               
resolution  that  directed  the  corporation to  develop  a  cost                                                               
estimate  and schedule  for a  36 inch  diameter pipeline  at two                                                               
different strengths:   at 600  and 900  psi, in keeping  with the                                                               
2013 AGDC  project plan  amendment that  increased the  pipe size                                                               
from 24 inch to 36 inches. He  also clearly stated that it is his                                                               
plan that  the state continue  discussions with Asian  LNG buyers                                                               
to  preliminarily  explore  their   interest  in  a  backup  ASAP                                                               
pipeline should the AKLNG Project fail to come to fruition.                                                                     
3:45:02 PM                                                                                                                    
MS. RUTHERFORD  said the  governor has  specific reasons  to move                                                               
the ASAP  forward as an  economically viable backup  project: the                                                               
decision  on whether  to advance  the AKLNG  Project to  the next                                                               
phase  of  engineering  and  design   is  not  simply  a  state's                                                               
decision;  it is  in the  hands of  the partners,  as well.  That                                                               
decision is  currently scheduled for  2nd Quarter 2016,  which is                                                               
when the  three producer partners and  TransCanada decide whether                                                               
to move  forward with  the FEED decision.  The ASAP  project will                                                               
provide a  backup project for any  producer party as well  as the                                                               
state to ship gas if the AKLNG Project does not advance.                                                                        
MS. RUTHERFORD  said the Governor  noted as well that  nothing in                                                               
the proposed expanded  ASAP diminishes or in any  way impinges on                                                               
the chances  of the  AKLNG Project succeeding.  He notes  that he                                                               
contacted  AKLNG  producer  partners  at  high  levels  prior  to                                                               
announcing his  plan for an  expanded ASAP project  and continues                                                               
having   discussions   with   them.   All   have   indicated   an                                                               
understanding of  the proposal and their  willingness to continue                                                               
to make  progress on AKLNG. That  is, in fact, the  case, as they                                                               
have  begun  full-fledged   negotiations  on  various  commercial                                                               
agreements  on  AKLNG.  (She  just emerged  from  three  days  of                                                               
The Governor notes that having  a viable backup plan is typically                                                               
how the producer partners do  business and that ExxonMobil stated                                                               
in a March 4, 2015 analyst meeting:                                                                                             
     Simply  put, our  large resource  base  affords us  the                                                                    
     flexibility to  select and develop the  most attractive                                                                    
     opportunities.  We start  with  high quality  resources                                                                    
       with stable competitive fiscal terms from resource                                                                       
     owners and we choose to invest selectively in only the                                                                     
     most attractive.                                                                                                           
He also noted  his reason for opposing HB  132, including putting                                                               
the ASAP  expanded project on  hold, which in his  opinion, would                                                               
be  betting  the entire  fiscal  future  of  Alaska on  all  four                                                               
companies  - ExxonMobil,  ConocoPhillips,  BP  and TransCanada  -                                                               
even  though  all  agree  that  the AKLNG  Project  is  the  most                                                               
attractive of each company's multiple options.                                                                                  
3:48:11 PM                                                                                                                    
MS.  RUTHERFORD said  the governor  also noted  that in  2006 the                                                               
Stranded Gas Development Act (SGDA)  failed because the state put                                                               
all  its eggs  in one  basket  and imposed  timelines on  itself,                                                               
which leveraged  the its ability  to negotiate  acceptable terms.                                                               
He believes  that tying  our hands through  passing HB  132 would                                                               
not provide Alaska with a viable  alternative and run the risk of                                                               
making the same mistake.                                                                                                        
He went  on to  say that  HB 132  substantially harms  the team's                                                               
ability to  negotiate favorable terms within  the AKLNG framework                                                               
without a  best alternative structure  to go to should  the AKLNG                                                               
framework  and negotiations  fail. Further,  she said,  the AKLNG                                                               
Project is scheduled to make a  FEED decision in 2nd Quarter 2016                                                               
and HB 132 grants an extension of  that date to July 1, 2017, and                                                               
that managing a  project such as AKLNG  through legislation isn't                                                               
in the state's best interest.                                                                                                   
He closed the letter by saying  that the AKLNG Project is his and                                                               
his administration's  preferred option, but that  the state needs                                                               
to be  prepared with  a fallback if  the parties  associated with                                                               
the AKLNG negotiations  are not able to meet the  hurdles set out                                                               
in the 2014 Heads Of Agreement (HOA) that preceded SB 138.                                                                      
3:50:51 PM                                                                                                                    
CHAIR  GIESSEL  thanked  her  on her  review  of  the  Governor's                                                               
SENATOR  WIELECHOWSKI asked  her to  address the  sponsor's three                                                               
arguments: that  this could  create confusion  in the  market and                                                               
with the state's partners,- that it  could cost the state to have                                                               
a duplicative  effort, and why  not wait until the  AKLNG Project                                                               
potentially doesn't succeed.                                                                                                    
MS.  RUTHERFORD answered  that  the  governor's letter  clarifies                                                               
that  this  is  a  backup  project  and  would  clarify  for  the                                                               
purchasing Asian market  that the State of Alaska  (SOA) is fully                                                               
committed to an  AKLNG project and its intent is  to advance one.                                                               
But should the AKLNG effort  fail for some unforeseen reason, the                                                               
SOA will undertake an alternative  project to bring Alaska gas to                                                               
3:53:24 PM                                                                                                                    
Regarding it being  a duplicative effort, the  AGDC board members                                                               
have all  indicated they are looking  at ways of moving  a backup                                                               
project forward during  the next year while the  AKLNG Project is                                                               
going through  the commercial negotiations  leading up to  a FEED                                                               
decision in  2nd Quarter 2016.  It is interested in  finding ways                                                               
to move a backup project  without spending a tremendous amount of                                                               
money and has just begun focusing on a 36-inch pipe.                                                                            
3:54:35 PM                                                                                                                    
Why not  wait until  some decision is  made? The  letter restated                                                               
that  waiting is  no longer  in  the state's  best interest,  Ms.                                                               
Rutherford said, since the general  fund faces such a significant                                                               
deficit.  A project  is  needed that  will  underpin the  state's                                                               
economy for the next four  decades. It's not in anyone's interest                                                               
to  just  sit back  and  assume  that  AKLNG  will, in  fact,  be                                                               
successful, but to have something  that is sitting there ready to                                                               
move forward  as an  alternative if a  successful outcome  is not                                                               
reach with AKLNG.                                                                                                               
3:55:53 PM                                                                                                                    
CHAIR  GIESSEL said  the  governor's letter  refers  to the  AGDC                                                               
project  as  a  backup  and an  alternative,  which  is  somewhat                                                               
different and asked her to explain what "alternative" means.                                                                    
MS. RUTHERFORD explained that it  is simply her being inaccurate.                                                               
She should  continually call  it a backup  project. She  said the                                                               
discussions occurring with the markets  during the pre-FEED stage                                                               
are at  a very high  level and  the potential of  another smaller                                                               
project  being  available  through  it if  AKLNG  does  not  move                                                               
forward to FEED. It is indeed a backup.                                                                                         
CHAIR GIESSEL asked  if she was an Asian, an  Indian or a Chinese                                                               
buyer and watched the news, and  knew a project was going forward                                                               
with the three  producers in an equal partnership  and 25 percent                                                               
for Alaska,  with companies  that can easily  fund their  part of                                                               
the  bill and  also know  that the  SOA has  this other  project,                                                               
wouldn't she  be playing one against  the other. It seems  like a                                                               
difficult marketing position for the state to be in.                                                                            
MS. RUTHERFORD  responded that at  this stage of any  project the                                                               
LNG marketing discussions  as she understands them  are very high                                                               
level  about not  price  and specific  delivery  dates, but  that                                                               
there is an intention by parties  to move gas to market. There is                                                               
little opportunity  for anyone  to leverage  the state  on price.                                                               
The state can clearly explain that  it's in its own best interest                                                               
that the  AKLNG Project is  the preferred option. They  intend to                                                               
deliver that  project, however if  it should for  whatever reason                                                               
not  move forward,  the state  has  every intention  of moving  a                                                               
backup project forward that may be of slightly less volume.                                                                     
4:00:31 PM                                                                                                                    
CHAIR  GIESSEL  stayed with  the  marketing  issue and  asked  if                                                               
something is  preventing the governor from  marketing the state's                                                               
gas now under the AKLNG Project.                                                                                                
MS. RUTHERFORD answered  no. In fact, Audie  Setters, the state's                                                               
outside expert  since he was  hired in 2014, is  in conversations                                                               
with various parties in the  Asian markets. The Governor has also                                                               
worked with DNR, which is  handling the marketing effort that has                                                               
sent  a   letter  to  Asian   markets  reiterating   the  state's                                                               
commitment  to bring  Alaska gas  to market.  There are  plans to                                                               
escalate the outreach to the Asian  market over the course of the                                                               
next few months.                                                                                                                
4:02:10 PM                                                                                                                    
CHAIR GIESSEL  remarked that  was good to  know. Having  a backup                                                               
plan  is important  and a  critical piece  of SB  138, which  was                                                               
deliberated at  length with more  than 51 hearings  and countless                                                               
public  testimony through  the  legislative process.  Consultants                                                               
and financial advisors evaluated fiscals.  She asked if the AKLNG                                                               
Project turns  out to not be  economic, how it would  be possible                                                               
that the smaller line would then become economic.                                                                               
MS. RUTHERFORD  answered that  the governor's  concern is  that a                                                               
decision  on economics  would  not  be what  would  slow or  stop                                                               
AKLNG, but rather  where one of the parties decided  they did not                                                               
want to  commit their funding to  this alternative but to  one of                                                               
their  other LNG  export options.  He does  not want  to see  the                                                               
state's  gas  moving to  market  based  upon simply  a  company's                                                               
alternative priorities.  His interest  in moving a backup project                                                               
forward  is simply  so that  if such  a decision  were made  that                                                               
would stall AKLNG,  there is something that is ready  to take the                                                               
next step forward to move Alaska's gas to market.                                                                               
CHAIR GIESSEL  asked if one party  dropped out - it  could be the                                                               
State of  Alaska -  couldn't another  party come  in to  join the                                                               
AKLNG Project partnership.                                                                                                      
MS. RUTHERFORD answered  yes; it's fair to say that  if one party                                                               
dropped out another  party could be found to  move AKLNG forward.                                                               
She doesn't  hear the Governor  saying that alternative  would be                                                               
unacceptable. If  no other party  was found to take  their place,                                                               
something  must be  available  to  pick up  the  pieces and  move                                                               
forward. Finding a  replacement for one party's  decision to drop                                                               
out is  an option and  one that the  state would want  to pursue,                                                               
because they  want the strength  of the large  producers involved                                                               
in an Alaska gasline project.                                                                                                   
CHAIR  GIESSEL  added  that the  legislature's  consultants  have                                                               
pointed  out that  in many  cases  of large  projects around  the                                                               
world  new participants  came in  during  the development  stage,                                                               
even during construction.                                                                                                       
She went  to the  question of  confusion and  said she  was aware                                                               
that  ASAP (the  smaller, 100  percent state-owned  pipeline) had                                                               
applied  for an  Environmental  Impact Statement  (EIS) from  the                                                               
Corps  of  Engineers  (COE),  and earlier  this  month  when  the                                                               
governor  said he  was  going  to enlarge  it  to  actually be  a                                                               
conflicting project,  the Corps  told Alaska  Gasline Development                                                               
Corporation (AGDC) they were putting  the EIS on hold. Isn't this                                                               
an example of uncertainty by federal regulators?                                                                                
4:06:41 PM                                                                                                                    
MS. RUTHERFORD  answered that she  is not within AGDC  and didn't                                                               
know  about their  communication with  the federal  regulators on                                                               
ASAP,  but  she had  heard  second  hand  that EIS  activity  was                                                               
stopped  pending  clarification  on  how the  project  wishes  to                                                               
proceed.  In  working  with various  federal  agencies  over  the                                                               
years, she said  it's not unusual for them to  say there seems to                                                               
be some  lag or confusion on  a project simply because  there are                                                               
limited resources to  work on projects and  they get prioritized.                                                               
They are probably  quite open to picking up the  effort with some                                                               
CHAIR GIESSEL acknowledged that Ms.  Rutherford is focused on the                                                               
AKLNG Project.                                                                                                                  
4:08:20 PM                                                                                                                    
SENATOR  MICCICHE  asked  when Ms.  Rutherford  talks  about  the                                                               
danger of  one of the companies  or the SOA dropping  out and the                                                               
economy of scale  that a 25 percent ownership of  the model AKLNG                                                               
is working  with, under  what conditions  would a  less favorable                                                               
scale, smaller  diameter line at  a significantly higher  risk to                                                               
Alaskans  be more  likely  to  succeed if  the  economics of  the                                                               
larger scale were not to prove up, so to speak.                                                                                 
MS. RUTHERFORD answered if project  economics was the reason that                                                               
a party  decided to leave the  AKLNG Project she wasn't  sure the                                                               
state would say  an alternative project is in  its best interest.                                                               
The governor's concern  is that the economics  of another party's                                                               
project could be more economic for them.                                                                                        
SENATOR  MICCICHE remarked  that  there is  a  reason that  these                                                               
projects are at an increasingly  larger scale; very few decide to                                                               
modularize  to become  more efficient.  The very  conditions that                                                               
would cause the  state to not move forward with  AKLNG are likely                                                               
to  be economic  conditions  that make  it  unlikely for  another                                                               
option  to  be economic  unless  it  was  a very  small  diameter                                                               
instate option to get gas to Alaskans.                                                                                          
4:11:34 PM                                                                                                                    
SENATOR WIELECHOWSKI asked  if our partners in  the AKLNG Project                                                               
have  other projects  around the  world that  they are  currently                                                               
evaluating, that are in competition with the AKLNG Project.                                                                     
MS. RUTHERFORD  answered there  is a  mix of  answers. ExxonMobil                                                               
does: one in  British Columbia that is approximately  at the same                                                               
stage; ConocoPhillips doesn't and she didn't know about BP.                                                                     
SENATOR  WIELECHOWSKI asked  if  the governor's  concern is  that                                                               
ExxonMobil does  some extensive economic  analysis and  finds out                                                               
they  can make  a 12  percent versus  10 percent  rate of  return                                                               
(ROR) on a Canadian line even  though it would make Alaska a heck                                                               
of a lot of money.                                                                                                              
MS.  RUTHERFORD answered  that captured  the governor's  concern;                                                               
it's  not that  the project  is not  economic but  rather that  a                                                               
major  player or  players decide  to not  pursue AKLNG  because a                                                               
better  project  is  in  their portfolio  that  draws  them  away                                                               
because of limited capital.                                                                                                     
4:13:58 PM                                                                                                                    
SENATOR COSTELLO  said the  AKLNG Project  has been  described as                                                               
five  mega  projects  in  one  and  asked  at  a  time  when  the                                                               
legislature  cut live  homework help  for students  and principal                                                               
mentoring  how  can  the governor  justify  adding  another  mega                                                               
project all  for the simple  reason that  the state is  unable to                                                               
wait until  the 2nd Quarter  2016 when  it will know  whether the                                                               
AKLNG goes  forward for certain. Why  would we pay twice  for the                                                               
same information?                                                                                                               
4:15:26 PM                                                                                                                    
MS. RUTHERFORD  responded that the  AGDC is very  concerned about                                                               
not expending  duplicate monies or wasting  the state's resources                                                               
and  is talking  about ways  of moving  a backup  project forward                                                               
without duplication of efforts.                                                                                                 
4:16:11 PM                                                                                                                    
SENATOR COSTELLO said the state  has no gas treatment plant (GTP)                                                               
and no  LNG plant,  and no  gas for  the ASAP  line, and  yet the                                                               
letter describes  the intent to  bring ASAP to a  viable project.                                                               
How  is a  project  brought  forward without  spending  a lot  of                                                               
MS.  RUTHERFORD replied  that she  is not  inside AGDC  - she  is                                                               
focused on AKLNG - and could  not speak to what specific elements                                                               
they are considering moving forward or  how they intend to move a                                                               
backup  concept forward  regarding liquefaction  or expansion  of                                                               
the project, but there are probably ways to do that.                                                                            
4:17:35 PM                                                                                                                    
SENATOR  COSTELLO said  it  sounds  as if  the  governor has  the                                                               
ability to  market Alaska's gas  now and  asked if that  would be                                                               
the best  way to  move forward,  and if we  find early  next year                                                               
AKLNG is not going to work -  and in the meantime he is marketing                                                               
Alaska's gas - and then ASAP  comes on line if needed. She didn't                                                               
see  how  that  plan  was   not  in  the  state's  best  interest                                                               
especially when they are cutting live homework help.                                                                            
4:18:34 PM                                                                                                                    
MS. RUTHERFORD  responded that the  governor can move  forward on                                                               
marketing Alaska's gas,  but the message he wants to  send to the                                                               
markets  and have  something substantive  to support  it is  that                                                               
should AKLNG,  which is the  state's primary focus, not  work for                                                               
whatever  reason, that  the  SOA  has put  money  into moving  an                                                               
alternative project forward so that  it is not just starting over                                                               
from a static position.                                                                                                         
CHAIR GIESSEL said  the AGDC board has $200  million remaining in                                                               
the ASAP  fund. Their resolution  was to start spending  that now                                                               
to determine  the costs to  expand the smaller gas  pipeline, and                                                               
she  agreed that  it's probably  not  a good  expenditure of  the                                                               
4:21:03 PM                                                                                                                    
SENATOR   COGHILL   asked   what  favorable   negotiating   terms                                                               
(mentioned  in  the  governor's  letter)  will  be  substantially                                                               
harmed if this bill passes.                                                                                                     
MS. RUTHERFORD  responded that was  referencing a  basic standard                                                               
of   negotiation,   a   premise  when   going   into   commercial                                                               
negotiations: if,  in fact,  you have  no good  alternative, your                                                               
ability to negotiate terms is extremely limited.                                                                                
SENATOR  COGHILL said  that sounds  like a  competing alternative                                                               
rather than  a backup  alternative. The  governor also  said that                                                               
the state  would take an  extreme risk  of being able  to attract                                                               
customers if  this bill passes. He  asked if she had  seen failed                                                               
attempts of  the partners in trying  to co-op Alaska, or  not act                                                               
in good faith, or anything showing this is a bad partnership.                                                                   
MS.  RUTHERFORD   answered  no;  the  parties   under  AKLNG  are                                                               
negotiating in  very good faith  and everyone is working  hard to                                                               
find solutions  to problems and  challenges that every  party has                                                               
with  commercial  agreements.  Things are  progressing  extremely                                                               
well. She  explained that any  commercial agreement  has inherent                                                               
in  it the  risk  of failure  that the  middle  ground cannot  be                                                               
found.  The  intention is  simply  to  have a  valid  alternative                                                               
backup  to  AKLNG, but  the  AKLNG  is  ahead  and it  has  "huge                                                               
advantages to it."                                                                                                              
SENATOR COGHILL  said HB  132 just says  if a  partner withdraws,                                                               
you can't  move forward  without a  frontend design.  AGDC hasn't                                                               
been taken off the table, yet.                                                                                                  
MS.  RUTHERFORD  said  there  is   always  risk  that  commercial                                                               
agreements won't come  together and in this case  where there are                                                               
so  many,  there  is  risk. She  personally  believes  and  fully                                                               
expects to  get to  a FEED  decision. But the  issue is  that the                                                               
alternative AGDC  project is  limited to  500 mmcf  and is  not a                                                               
good economic  alternative. It is  a project that because  of the                                                               
low  throughput would  require a  tremendous  amount of  subsidy.                                                               
So,  the  governor  wants  it  expanded  to  make  it  much  more                                                               
economically viable as a backup if AKLNG is not successful.                                                                     
4:28:49 PM                                                                                                                    
SENATOR MICCICHE said we are  partnered with - not dependent upon                                                               
-  three companies  that have  successfully  and actively  traded                                                               
trillions of cubic  feet of LNG in Asian markets  for the last 45                                                               
years and posited: "Don't we  have lower risk with companies with                                                               
those  decades  of experience  versus  a  company hopeful  to  be                                                               
engaged in the LNG business in the future?"                                                                                     
MS.  RUTHERFORD replied  of  course  there is  less  risk if  the                                                               
state's  partners are  ExxonMobil, BP,  and ConocoPhillips.  They                                                               
are world  class producers and marketers  of LNG, and they  are a                                                               
wonderful team to be in partnership  with. That is the essence of                                                               
why  it  is the  governor's  preferred  alternative. But,  should                                                               
something occur  that causes AKLNG  not to move forward,  he does                                                               
not  want the  State of  Alaska to  be flat-footed,  and have  no                                                               
backup plan  that is moving forward  and able to deliver  for the                                                               
state's economic future.                                                                                                        
SENATOR MICCICHE said he doesn't  like risk and feels comfortable                                                               
with where the  state is in this process with  these partners and                                                               
wondered why  there is this rub.  Increasing polarization doesn't                                                               
result in a  better outcome. He hoped everyone could  come to the                                                               
same table and work this  out. Working through severance, royalty                                                               
and property taxes  with the partners has worked  out pretty well                                                               
for  Alaska  over the  years.    It's  been a  pretty  successful                                                               
relationship.   Those   companies    have   all   had   operating                                                               
relationships  that are  very complicated  but  have worked  out:                                                               
think  about the  Kuparuk operating  agreement,  the Prudhoe  Bay                                                               
operating  agreement   and  the   Beluga  River   unit  operating                                                               
agreement.  These folks  could  look at  other  choices in  other                                                               
places  and  chose to  work  together  for  a great  outcome  for                                                               
Alaska. This is  the first time Alaska will be  a partner in this                                                               
project.  Other  projects don't  make  the  same claim  that  the                                                               
terminus is in  Nikiski, which happens to be in  his district and                                                               
he is pretty focused on that.                                                                                                   
4:33:51 PM                                                                                                                    
SENATOR  WIELECHOWSKI  said  in  the  time he  had  been  in  the                                                               
legislature he had been though  the Alaska Gasline Port Authority                                                               
(AGPA),  the Alaska  Natural Gas  Development Authority  (ANGDA),                                                               
the Stranded  Gas Act  (SGA), the  Alaska Gasline  Inducement Act                                                               
(AGIA), Denali, and  it feels like Lucy and  the football. Alaska                                                               
has waited for  30 years for the largest undeveloped  oil and gas                                                               
reserve in North  America to be developed, which  is Pt. Thomson,                                                               
and the  only way it got  developed is when the  state yanked the                                                               
leases.  The tariff  disputes  have cost  the  state billions  in                                                               
which  a  judge   said  the  state  was   guilty  of  inexcusable                                                               
trustfulness in its  dealings with the oil  industry. The concern                                                               
over  this  project comes  from  the  history. It's  from  people                                                               
getting bribed down the street in a hotel room.                                                                                 
SENATOR COSTELLO objected  for a point of order;  she wasn't here                                                               
at that time.                                                                                                                   
CHAIR GIESSEL asked him to stick to the bill.                                                                                   
SENATOR WIELECHOWSKI  explained that  he was talking  about where                                                               
some of the concern comes from and asked permission to continue.                                                                
CHAIR GIESSEL said as long as it sticks to the bill.                                                                            
SENATOR WIELECHOWSKI  stated section  3 says the  corporation may                                                               
not  market gas  owned  or  controlled by  an  entity other  than                                                               
itself  without express  written consent  from that  entity. That                                                               
appears  to  give the  producers  veto  power and  there  doesn't                                                               
appear  to  be  any  expiration  date on  it  and  asked  if  Ms.                                                               
Rutherford had any concerns about that section.                                                                                 
MS. RUTHERFORD said  she wasn't very familiar  with that section,                                                               
but it  sounds like it limits  the ability to discuss  gas from a                                                               
smaller project, such  as ASAP. ASAP, at 500 mmcf,  must sell gas                                                               
outside of the  State of Alaska, because the state  could not use                                                               
that much.  So, ASAP  gas would  have to be  marketed even  as it                                                               
stands now. Yes,  she has some concern with section  3 as he read                                                               
it  to her.  She reiterated  that the  governor isn't  suggesting                                                               
anything more  than that the  state move forward a  more economic                                                               
backup project.                                                                                                                 
CHAIR GIESSEL asked  if Audie Setters with  the Alaska Department                                                               
of  Natural Resources  (DNR) will  actually be  marketing gas  on                                                               
Alaska's behalf for the AKLNG Project.                                                                                          
MS. RUTHERFORD answered yes, Audie  Setters is housed in DNR, but                                                               
other parties may be involved in the marketing effort.                                                                          
CHAIR  GIESSEL said  she is  referring to  marketing the  state's                                                               
royalty  gas   that  still  requires   a  decision  by   the  DNR                                                               
commissioner to take that gas in kind versus in value.                                                                          
MS. RUTHERFORD  answered that was  accurate. AKLNG  would trigger                                                               
the ability  of the  producers to elect  to pay  their production                                                               
taxes  as  gas so  the  state's  share  of gas  throughput  would                                                               
increase from an average of 12.5 percent to close to 25 percent.                                                                
CHAIR GIESSEL thanked her for  the clarification and said that is                                                               
what makes  the state an  equal 25  percent partner in  the AKLNG                                                               
4:41:39 PM                                                                                                                    
REPRESENTATIVE  CHENAULT,  co-sponsor  of HB  132,  Alaska  State                                                               
Legislature,  Juneau,   Alaska,  said   they  are  glad   to  see                                                               
something,  which  is  the  governor's  letter,  to  explain  the                                                               
expansion of the  ASAP. It answers some questions,  but brings up                                                               
Earlier  he  said  it  was  mentioned  that  ExxonMobil,  BP  and                                                               
ConocoPhillips have projects  all over the world and  up and down                                                               
the West Coast,  but, for the record, BP  and ConocoPhillips have                                                               
no proposed LNG  project in British Columbia or  anywhere else in                                                               
North America. ExxonMobil is part  of a British Columbia project,                                                               
which is not as far along as the AKLNG Project.                                                                                 
4:44:34 PM                                                                                                                    
REPRESENTATIVE  HAWKER,  co-sponsor  of   HB  132,  Alaska  State                                                               
Legislature, Juneau,  Alaska, said he is  concerned about hearing                                                               
a  backup project  being characterized  as  being an  alternative                                                               
project and  a place  for an  unsatisfied party  to turn  to. Ms.                                                               
Rutherford  kept   coming  back  to  that   word  constantly.  An                                                               
alternative  is   a  competing  project  that   casts  doubt  and                                                               
questions on the market. All have  the same objective, but HB 132                                                               
is a temporary statement by all  of Alaska that says give success                                                               
a chance.  HB 132 says  wait until the  FEED decision on  July 1,                                                               
2017.  HB 132  is not  creating an  extension; all  of the  dates                                                               
deadlines  are defined  in  the  HOA, the  MOU  and the  enabling                                                               
legislation passed last year.                                                                                                   
4:47:50 PM                                                                                                                    
RENA  DELBRIDGE, staff  to  Representative  Hawker, Alaska  State                                                               
Legislature,  Juneau, Alaska,  said HB  132 does  not extend  any                                                               
timeline.  She  explained  that section  3  restricts  AGDC  from                                                               
marketing gas it  does not own or have title  to.  Ms. Rutherford                                                               
suggested that would be a problem  for the ASAP project, but AGDC                                                               
within the  AKLNG Project, can still  market gas that is  held by                                                               
someone else  with written  consent to do  so. They  can't market                                                               
gas  that they  don't own  or control.  If the  state has  gas in                                                               
ASAP, it  too, would  be in  DNR's title as  royalty gas  and the                                                               
same principles  apply, and  they are still  welcome and  able to                                                               
ask AGDC and give them consent to market that gas.                                                                              
4:48:59 PM                                                                                                                    
REPRESENTATIVE  CHENAULT  closed  saying that  uncertainty  kills                                                               
projects.  The governor's  letter talks  about what  happens with                                                               
somebody leaves  the project. Upsizing  the AGDC  Project creates                                                               
the  uncertainty  of  AKLNG partners  not  liking  something  and                                                               
trying to negotiate with ASAP.                                                                                                  
4:51:30 PM                                                                                                                    
CHAIR GIESSEL  said the new  fiscal note  is still zero,  but the                                                               
narrative on page  2 updates language to correspond  with what is                                                               
actually in HB 132.                                                                                                             
SENATOR  COSTELLO asked  if Miles  Baker AGDC  could explain  the                                                               
4:52:15 PM                                                                                                                    
MILES  BAKER,  Director,   Governmental  Relations  and  External                                                               
Affairs,   Alaska   Gasline   Development   Corporation   (AGDC),                                                               
Anchorage,  Alaska, explained  that  the principal  change is  on                                                               
page 2 of  the fiscal note where paragraph 3  describes section 2                                                               
of the bill that sets the  three earliest date conditions. One of                                                               
the amendments clarified the first  condition that the party that                                                               
withdraws  has to  be  a  venture party  that  holds natural  gas                                                               
SENATOR WIELECHOWSKI asked to hear from the state's partners.                                                                   
CHAIR GIESSEL responded that this is  a bill about SB 138 and not                                                               
about their participation in the  project, so she had not invited                                                               
them to speak on the subject.                                                                                                   
SENATOR WIELECHOWSKI said  it's a fairly major  policy change and                                                               
the legislature  hears from the  partners on every  major gasline                                                               
issue and he couldn't move the bill without hearing from them.                                                                  
CHAIR  GIESSEL  said it  isn't  a  policy change;  it's  actually                                                               
substantiating SB  138, which they  passed after  having multiple                                                               
SENATOR  WIELECHOWSKI respectfully  disagreed and  said they  had                                                               
heard significant testimony indicating  that this will impact the                                                               
state's partners  by creating uncertainty  and the  committee has                                                               
an obligation to hear from the partners.                                                                                        
CHAIR GIESSEL respectfully  differed that it is  a policy change,                                                               
but rather HB 132 just  substantiates the findings and directions                                                               
that the state is already taking in SB 138.                                                                                     
SENATOR  MICCICHE   commented  that   he  sees  this   as  policy                                                               
preservation  and that  a 52-8  vote  is fairly  sure policy.  He                                                               
hoped  that this  weekend folks  could get  together and  come to                                                               
some agreement.                                                                                                                 
SENATOR  COGHILL said  it is  confusing that  the governor  might                                                               
want to build  a project that would be at  least ready to compete                                                               
before  getting to  the  FEED decision  and  he supported  moving                                                               
forward with  this bill. He  thought the governor wants  the same                                                               
thing,  but HB  132 pushes  him to  stay with  an agreement  that                                                               
happened  before he  became governor.  Until they  know that  the                                                               
AKLNG  Project is  not viable,  he  didn't know  how a  competing                                                               
project could go along side of it.                                                                                              
4:58:24 PM                                                                                                                    
SENATOR  COSTELLO  moved to  report  CSHB  132(L&C), version  29-                                                               
LS0623\G, from committee with  individual recommendations and new                                                               
attached zero fiscal note dated March 6, 2015.                                                                                  
SENATOR  WIELECHOWSKI   objected  saying  this  bill   is  moving                                                               
extremely fast  and it has  only one referral. It's  important to                                                               
hear from  the partners,  because that is  the major  reason this                                                               
legislation is needed. It would seem common sense.                                                                              
CHAIR GIESSEL  responded that the  policy change would  come from                                                               
the administration, which  is actually changing the  ASAP line to                                                               
a larger diameter,  and AGDC's Board is deciding  to expend money                                                               
next  Tuesday when  the state  is actually  going forward  with a                                                               
project. HB 132 actually creates certainty for the state.                                                                       
A roll call vote was  taken: Senators Coghill, Micciche, Costello                                                               
and Giessel voted yea; Senator  Wielechowski voted nay; therefore                                                               
CSHB   132(L&C)  moved   from  the   Senate  Resources   Standing                                                               

Document Name Date/Time Subjects
SB8_GOV POM-Frank Turney.pdf SRES 3/27/2015 3:30:00 PM
SB 8
HB132-Letter of Support-Mike Prax.pdf SRES 3/27/2015 3:30:00 PM
HB 132
CSSB 57 Version S.pdf SRES 3/27/2015 3:30:00 PM
SB 57
SB 57 Explanation of Changes Version G to S.pdf SRES 3/27/2015 3:30:00 PM
SB 57
SB 57 ver S Sponsor Statement.pdf SRES 3/27/2015 3:30:00 PM
SB 57
SB57-Tribe-Peabody_111(d)_Comments_(filed).pdf SRES 3/27/2015 3:30:00 PM
SB 57
SB8-Letter of Support-Meyers .pdf SRES 3/27/2015 3:30:00 PM
SB 8
HB 132-Gov. Walker testimony.pdf SRES 3/27/2015 3:30:00 PM
HB 132