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HB 4, for AGDC, clears Senate Finance As amended, bill includes reference to rural, coastal communities, adds propane and associated gas-related hydrocarbons to charge Kristen Nelson Petroleum News
A committee substitute for House Bill 4, creating the Alaska Gasline Development Corp. as a separate entity and providing funding, cleared Senate Finance April 11.
The bill, sponsored by Rep. Mike Hawker, R-Anchorage, and House Speaker Mike Chenault, R-Nikiski, includes Regulatory Commission of Alaska statutes for regulation of contract carrier natural gas pipelines in the state.
HB 4 is an outgrowth of HB 9, which failed in the Senate last year.
The Senate Finance CS language makes it clear that all of Alaska will benefit, adding intent language to indicate that the AGDC board of directors commit to governing the corporation “so as to affect positively as many Alaskans as possible, including those in rural and coastal communities, and to extend opportunities for all Alaskans to benefit from the natural gas resources of the state, including propane and associated gas-related hydrocarbons other than oil.”
Also included is intent language that AGDC and its subsidiaries “shall wind up and dissolve when no bonds, notes, or other obligations are outstanding” and AGDC or a subsidiary “is no longer engaged in the development, financing, construction, or operation of an in-state natural gas pipeline.”
Under purposes of the corporation, language was added in the CS specifying that AGDC may plan, finance, construct, develop, acquire, maintain and operate not just a pipeline system but also “other transportation” offering commercially reasonable rates for shippers and access for shippers who produce natural gas.
Following an open season The CS also provides that following an open season, if AGDC determines that commitments received are not sufficient to allow it to move forward, it will report that to the Legislature within 30 days.
New language provides AGDC will “cooperate with and accommodate the developers of a large-diameter in-state natural gas pipeline by planning for the development and use of common pipeline facilities from the North Slope to the Livengood area or to another point from which a large-diameter in-state natural gas pipeline may be constructed south to tidewater in either Prince William Sound or Cook Inlet” without delaying development of an in-state natural gas pipeline and without the in-state natural gas pipeline being competitive with the Alaska Gasline Inducement Act, AGIA, line.
Language is also added that after a decision by AGDC to dissolve it shall provide a final report to the governor, the Legislature and the public summarizing the reasons for dissolution and including a statement by an outside independent auditor that no bonds, notes or other obligations are outstanding.
RCA duties RCA powers and duties are changed to provide that RCA may not investigate a dispute over an open season unless a formal complaint has been filed with the RCA within 60 days after the event giving rise to the complaint occurs, a provision intended to avoid disputes which could hold up work following an open season.
Among other RCA provisions, a ratepayer protection measure has been added, requiring that a contract with a public utility is not considered arm’s length if the transportation rate is greater than the recourse rate, requiring a heightened review standard from RCA, the same standard used for contracts between affiliated parties.
For the RCA review and notice period for initial records rates, the CS provides that the time for review and the notice period for the initial recourse rate run concurrently for 90 days; and the suspension period the RCA may initiate for the initial recourse rate to go into effect is set at 30 days, a reduction from 90 days in the House Finance CS.
In disputes related to open seasons, RCA must issue a final order within 60 days; otherwise the commission has 150 days to issue a final order after a formal complaint is filed.
The CS also includes a definition of affiliated and affiliated interest.
Fiscal note change The fiscal notes for the bill were redone to separate them by department and entity within department.
And the fiscal note includes the full $330 million requested by AGDC to take it through to project sanction, assuming the open season is successful.
The fiscal note was cut in House Finance with members wanting the project to come back to the Legislature again.
AGDC’s Frank Richards told Senate Finance April 10 that full funding is needed so that work can continue with the same consultants past a successful open season.
At that point, he said, AGDC will need to deal with requirements from shippers, which may result in component redesigns to meet those requirements. By having full funding, he told the committee, AGDC can continue to work through the open season so it doesn’t have to come back to the Legislature before taking the project out for sanction, creating an added burden and expense due to the delay.
Rena Delbridge, staff to Hawker, who has been working the bill, told the committee that the sponsors were very supportive of full funding because when AGDC goes before the private sector, having full funding would demonstrate that the state is committed to support AGDC through open season and to sanction.
Hawker told Senate Finance that full funding allows continuity of process and said disruption in the process increases uncertainty. He said the state’s money will be protected by governance provisions in the bill, and noted that the board includes two commissioners and requires annual reports and audits.
Chenault said that by fully funding it the Legislature gives AGDC the best opportunity to succeed.
If full funding is not provided, he said, the Legislature might have to call itself back into session to provide that funding or there would be a delay.
Concerns about big line Asked about concerns expressed that AGDC threatens a big line, Chenault said he doesn’t believe it stops any project moving forward, and noted that the governor is intent on AGIA and is still supporting AGDC.
The Legislature is living under constraints of legislation is passed earlier, he said, and sAGDC is a way to get gas to Alaskans.
Chenault also said the state doesn’t get to make a decision on the size of the pipeline — that decision will be made by buyers and sellers of the natural gas.
This proposal doesn’t have the state paying for a line, he said, it just allows buyers and sellers to contract to move the project forward.
And while there are been general expressions of interest in buying Alaska’s gas, there won’t be a commitment to a project whose cost is unknown. To get to the cost you have to go through the process of getting a project on the table, Chenault said.
“Until we get to an open season and see if we can put buyers and sellers together, it’s talk,” he said of other proposals.
Hawker said he believes the only other viable project is AGIA, and said AGDC is compliant with AGIA, and provides the state a role in AGIA should that project move forward.
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