Senate Resources Committee

Starts to meet some of the kind of the broader needs that we've talked about, that beyond those jurisdictions that have oil and gas property, there will be impacts. So that's what this structure suggests, is that there needs to be a way to additionally meet the needs of cities outside of those boroughs, cities within those boroughs who might not receive that tax directly, and to ensure that there's maximum benefit beyond the borders of our boundaries of the pipeline. So I think this gets in the right direction. I don't know what the right structure is or again what the right numbers are, but it speaks to, I think, the legislature's commitment and the state's obligation to spread the benefits evenly across the state. And certainly that happens through the state take and the appropriations of this body.

But I think the structure, at least starts to frame benefit differently than the original. And I do, I was hoping you wouldn't ask me questions about do we support the CS or not, right? 'Cause it gets technical and beyond.

My capacity at some level. But I do think of it as a sliding scale. And if the original version went too far potentially to restrict municipal revenue authority, and this version has corrected for a lot of that, there's probably a sweet spot in the middle that gets to a project that is economic and ensures some benefit to Alaskans.

Follow-up, Senator Wilkowski? Senator Myers. Yeah, thank you, Madam Chair. So first of all, I just wanted— just a thought that 50% to Kenai, 50% to the North Slope Borough, and 50% to the state's 150%. We'll take that.

Thanks, Mr. Andreasen, for being here. So I got a few questions for you. I'm wondering, as you've been having discussions with your members along the proposed pipeline corridor, talking about the pipeline coming through, if you've also had any.

And the tax implications, if you've also had some discussions with them about what it means to those communities to have a stable local gas supply as well. Local as in not imported from outside the state, at least. Kenai versus Prudhoe, you can make an argument about what's local.

Senator Myers, through the chair, I think we've been talking about energy security in Southcentral and across Alaska for a long time. And I know that there's been a mayor's energy security working group within South Central that have advocated for trying to address this issue quickly. We have heard that that's important to them, and this project would help toward that end. I think it's— and this is where my technical knowledge starts to fail me, but it's felt differently in different communities along the pipeline. And, you know, one of the things that I noted from a conversation.

Conversation with Mayor Noel in Denali borough is we don't have any infrastructure within the borough to actually access that gas. So I, I think it's, it's differently felt. They, they experience that, I think, through the GVEA's benefit, but it's also— there's some discussion of how that actually gets there. Anyways, there's, there's multiple areas where, um, uh, yes, to the extent that there's a benefit, uh, we have heard from communities that they're supportive of that, and that's generally good. Is it enough to overcome the cost that they bear in the meantime or the revenues that they give up?

I think that's— it's that trade-off question. So yes, it's important. Is it as important as all the other things that they're responsible for? Without knowing the kind of all the numbers involved, I think that's what they're struggling with. Gotcha.

Follow-up, Senator Myers. Yeah. Did you happen to talk with any of them about Some of the, the instead of.

Of increased revenue in terms of property tax, some of the lower costs they might face because some of their utility costs have gone down. What's going through my head immediately is Fairbanks— City of Fairbanks was talking to me a few years ago about the boiler in City Hall that's about ready to explode on them. And if they converted that to gas because they now have a stable gas supply, that their costs could potentially lower. You mentioned GVA. We've had our costs going up.

A significant portion, not the only, but a significant portion of that's because we lost our access to low-cost gas or low-cost electricity created from burning Cook Inlet gas, and potentially we could lower our electricity costs. That's going to help municipalities pay their own bills, you know, because their bills have gone down a little bit, you know, school districts, the whole nine yards. Has that factored into some of that conversation? Senator Myers, through the chair. I think that's definitely one of the considerations that they have in mind, and one of the reasons we've all been hopeful for a.

Natural gas pipeline for so long is that it could bring down those costs that not just the private sector experiences, but the public sector experiences as well.

I think that what I've heard is the need for more— if the numbers have been presented, I haven't seen them as robustly portrayed or developed as local governments are hoping for. Ultimately, what costs will— what will the end cost look like for electricity or other types of energy costs that they need? More modeling or some kind of assurance of what those final numbers look like. And I think what I've heard is at least some doubt in what has been presented. And I just want to make sure there's— I mean, ultimately, I think what they have to tell their taxpayers and their voters is we've done our due diligence to make sure at the end of the day this project will result in those kinds of benefits.

And, and that needs to be available then to not just the boroughs impacted, but community.

Communities along the way. Follow-up, Senator Myers. Yeah, um, along those lines, we're talking about low energy costs. You know, we've had a few discussions in here at least about what lower energy costs can also mean to the broader economy. Have your members done some estimates of potential economic impact, and then what that means as far as if business can expand, if you get a few more residents and they, you know, start building homes, what that means as far as increase, um, property tax or other local tax revenue brought in later on after, you know, either during the project construction or after the project's completed and some of the other effects start rippling outward?

Senator Myers, through the chair, I think what I would say is not modeling maybe from exactly how, from your perspective, but we recognize that energy is a building block for economic development and community development. I think that's a starting point.

It's not the only starting point. It's not the only component of economic development. So we think of it in relation to high transportation costs, and transportation costs will still be high. We think about it in terms of high food costs, and food costs will still be high. There's still the tyranny of distance and geography within Alaska that energy costs solve some portion of, and not completely.

And again, then you have to kind of weigh to the extent that there's a benefit, is it offset all the other kinds of things that they're experiencing? And right now, I think that's what they're trying to figure out. Yeah. And then one final one. Yes.

Follow-up, Senator Myers. Yeah. Thank you. So then with all these things that we've talked about, you know, lower utility costs, either for residents or within the municipality themselves, having a stable local gas supply, other potential property taxes or other taxes, tax revenue in the future. Should all of— when we're talking maximum benefit according to the Constitution,.

Should all of that factor in or should the only factor be what's the maximum revenue, tax revenue that we're getting off of this project whether at a state or local level? [Speaker] Yeah, Senator Myers through the chair. I think we're looking at a combined value so that it's not just revenue in my opinion. And AML doesn't have a stated opinion or position on what is maximum benefit. I've had DNR commissioners before ask me what is maximum benefit.

Mean from our perspective. You've had a Senator ask too, so. Yeah, this is something we struggle with as a state. For as simple and beautiful as our Constitution is, it leaves a lot to interpretation. And those are the kinds of things that legislatures wrestle with.

I do think when, from a community perspective, no local government is looking at things only from a revenue perspective. They're looking at, does it keep communities whole, right? Do families prosper? Do businesses prosper?

Does it lower costs for those who need it? We look at vulnerability and risk. So it's really a combined approach to maximum— what I would say is maximum benefit that the local governments and the state is probably looking for. Very good. Senator Wilkowski.

Yeah, thank you. And before you, I want to interject that Senator Rosier joined us several minutes ago. Thank you.

I guess I would just note, because I know a lot of people are watching these hearings, that in Anchorage we have roughly $10 to $12 gas. That's roughly where it is, maybe $13 for some contracts.

What we've been told by Glenfarn is that, you know, I know there's this thought out there that when this goes through, we're going to have $4.50 gas. And that is not the case. Maybe down the road, when Phase 2 is done. But in phase 1, we're looking at $16 to $18 gas with this project.

And so if we're paying 10 and we're going to 16 or 18, you're looking at a 60 to 80% increase in gas costs with this project. Now, we all want Phase 2 to happen, and that's assuming everything goes right. That's assuming that, you know, cost overruns are controlled and everything. If Phase 2 doesn't happen, Worst case scenario. And that if Phase 2 doesn't happen, you got inflation factors.

You have South Central locked in to, to gas with inflation factors. You're, you're looking at potentially in 30 years $50 gas with inflation factors. And so, uh, just for the people at home who are watching this and, and consumers at home, uh, we have an obligation to protect the consumers the people of Alaska, my constituents, all of our constituents. And I don't want us to get locked in. And so we're.

We're doing our due diligence here. I don't want us to get locked into a situation where utilities commit to agreements and they end up paying 80% more for gas in phase 1 and 5 times the price of gas within 30 years. So this is, for the people watching at home, this is, this, you know, this isn't about stopping a gas line. This is about protecting the people of Alaska from paying exorbitant gas prices for generations to come. That's what, from my perspective, is.

And so that is a part of the maximum benefit discussion that we're having here. That's number one. Number two, I want to point out, what, what is the cost for the average homeowner in Fairbanks? Do you have any idea? To install natural gas in their house, do you have any idea how much that's going to cost?

Because I'm told it's around $25,000 per house. Does that sound about right? Oh, not sure. Okay. And then what, what sort of commitment does IGU have with, uh, do you know, with Hilcorp to, to bring down LNG?

I think, Senator Bielekowski, through the chair, these are questions that I don't have the answer to, but they're the questions that we should all be asking, right, and working toward answers. I think the development of guardrails or safeguards with any legislation is sensible, right? And I think mayors, local government officials have the same kinds of responsibilities and questions to make sure that their residents on the other side of this benefit, and at the very least do not have this result in a worst-case scenario. So I don't know what the right numbers are or how much cost will be, but I, I think you, you probably do need some certainty, or at least plausible plausibility, when it comes to the numbers that, that are provided. And, and that can help with some of the, the benefits.

Because my understanding is it's like a 20-year gas contract for $25 gas, and I don't know how they get out of that.

And, and ultimately, what is that return on investment that, that we're looking at if we're, if we're being.

Being asked to give up $200 million or whatever that number is, what's the guarantee or at least reasonableness of the cost on the other side?

Further questions? Senator Myers. Yeah, thank you. So to answer Senator Wielechowski's question, conveniently, I just converted my home to natural gas last year. So depending on your house, you're looking at somewhere in the neighborhood of $10,000 to $15,000.

The borough has some targeted airshed grants thanks to some federal money of up to $9,000 for your home for conversion. So still a hefty chunk of change. You do have to pay out of your own pocket and then get it reimbursed from the borough, but, you know, it helps some.

Mr. Andreessen, I'm wondering— Senator Wielechowski is talking about what could happen if.

If we build Phase 1 and we don't build Phase 2 and what happens to gas prices over the course of the next 20 or 30 years.

I was wondering if you had, as you said you've got a, I can't remember the name of it, you said an energy security group or something you've been talking about for the last few years, if you had looked at the cost of imports going out potentially over the next few years. You know, we just saw the— with the Iran War, we just saw the spot price of gas overnight go from about $10 in the Pacific Basin up to $20. And I think it's come down a little bit since then, but not much.

And, you know, that's not counting in, you know, the regasification costs, et cetera. I was— and I don't remember what— I don't know offhand what NSTAR, you know, tacks on to that to the end user, to the home. So I was wondering if.

I'm wondering if you guys have done any modeling. Are we talking about in 20 or 30 years $50 gas from imports as well, potentially? Senator Myers, through the chair, I can follow up with the committee with more information on that group. It is comprised, I think, of some of the Kenai mayors, not just the borough, but cities as well. Anchorage, I want to say Matsu, and others.

So they're all looking at a lights-out scenario and how to avoid that. And I do think there's actually been quite a bit of research done on import— to import or not. Provide the committee with that information. Appreciate it. Thank you.

Senator Clayman. Thank you for coming today. I know that you don't want to take a position about the current version of the bill, but let's go back to the version the governor introduced. Does your organization support that version of the bill? And if not, why not?

Yeah, Senator Clayman, through the chair, I think, um, again, I'm, I'm following directions, uh, from the.

Resolution that our members passed in December. And the original version of the bill is not consistent with the resolution that members passed. It doesn't— I mean, one, our resolution says don't touch oil and gas property taxes. So there are things like that in there that are inconsistent. So we have to work through how do we get to yes with this project.

That current— that early version included a provision that that would have taken away all taxing authority on any kind of project component for any community forever. That was too much, the Title 29 provision in there. And I think that's been removed in this CS. So that was of probably paramount concern because that would have had long or far-reaching impacts. I think when it comes to— and the rest of it boils down to—.

Can communities negotiate individually with the project proponent. And that original legislation treated all project components the same and disallowed kind of that individual negotiation that I think they are looking for. So that would maximize local control. That would be consistent with what AML members have told us in the past. And that initial version didn't include— and I think the other element, and again, kind of coming back to local control, but also impact, is, is it sufficient to meet the impacts that communities experience?

And I think what we heard across the board from our members, minus one, is that it didn't. That they would experience impacts during construction and potentially post for some portions or some project components where the return wasn't— didn't compensate them effectively. So this CS.

Goes in the other direction. But again, it's finding that sweet spot. Very good. Follow-up, Senator Clayman. Thank you, Madam Chair.

The other thing you testified to was saying there is time to figure this out. And in the legislative world, it's less than 30 days. And so I would like your perspective on behalf of your organization. Is your organization's view that we should try to get something passed this legislative session, or is your perspective that it's too complicated, we need more information we're unlikely to get in the next less than 30 days, and that we should actually look at this as a project that would carry on and continue on the next regular legislative session. Senator Clayman, through the chair, I think there's time right now to engage municipal governments in the way that our AML resolution suggests.

I think that there is time for that. Local governments have said we want to be at the table, we want to be working directly.

Directly with Glenfarm and the project proponent, AGDC. We want to be able to negotiate effectively in the interests of our community. I do think there's— it's important to— I don't have guidance from members to say legislation has to be passed right now. So I feel incomplete in being able to answer that.

If there were— but it's also true that local governments can't negotiate individually without legislation under current law. It does suggest that there's a greater imperative to pass something sooner. Even if not everything is included or not everything is right, some of those elements could be passed without some of the broader implications that are currently being considered. Okay. Thank you.

Senator Rosier. Thank you, Madam Chair. My question is for Senator Myers. I'm sorry? My question is for Senator Myers.

I was trying to understand what he was saying earlier.

Your $10,000 to $15,000, is that just for the hookup or does that include a hookup and a year's gas? I was just trying to understand what you were saying there. Oh, sorry. Um, yes, no, that, that was for, for, um, installing a furnace and— or installing the boiler and removing the old one. Um, so the way that IGU has it set up is, um, they will provide the hookup at the first 100 feet of line to your house, um, so long as you agree that you're going to start using gas within 6 months.

Of the hookup being installed. And that does not include any prepurchase of gas. But the folks that I was looking at in Fairbanks, asking around, you're looking at— depending on your house and its needs, you're looking at $10,000 to $15,000-ish for the boiler. I appreciate the qualification. Thank you.

Mr. Andreessen, you talked about the community sharing, and that is a key piece that this committee is very concerned about, that that it goes beyond just the pipeline corridor and the two large industrial pieces at either end. So we have a piece in the bill.

It's actually on page 30 of the bill, but of course you don't have it before you. It's the allocation of community impact fee. And one of the things we heard from local mayors inside the boroughs— so these were small, smaller towns, Kenai, Soldotna— was that that was a ponderous process going through DCCED, which is what we have outlined in the bill was lengthy, time-consuming. What would you suggest for a more efficient distribution of that kind of impact money? Hmm.

Yeah, Cherokee. So I think DCRA does a good— Division of Community Regional Affairs does a good job of administering a multitude of grants, I think in the billions of dollars, right? I recognize, recognize their expertise in, in this area.

Also, it's a lot— what communities have experience with is things like community assistance, where there is a multi-step process to submit information, submit your application, follow up with more information, press go in the portal, wait, and then follow up. So it can be ponderous. Is that the word you used? I think they would agree with that. You know, part of— The challenge there is that it also requires other departments to weigh in on some of the final numbers.

And so that's where things can slow down in the distribution of community assistance. I also think that when it comes to something like community assistance, we've added lots of layers and requirements for— as kind of the state's due diligence in administering those funds and distributing them. That adds to the overall complexity of the program. So to the extent that you can reduce those layers, reduce the complexity, make it really straightforward.

Only include DCRA in that distribution. I think there's ways to make it effective. There's also, I mean, the other avenue that we've suggested in the past is through something like Denali Commission, which is a state-federal partnership. You've got a state co-chair alongside the federal co-chair, grant-making ability. That's another opportunity potentially to manage impact.

And they're dedicated to some of the infrastructure resilience, hazard mitigation, that I think are kind of at the heart of that concept. Gotcha. Thank you. Any other questions? Senator Myers.

Yeah, thank you. Just a couple more. So first of all, to Senator Clayman's point, we could pass it this year, we could pass it next year. There's always the third option where we all get to see each other in August too, which I don't think— I'm guessing none of us really want, but it's always on the table. Mr. Andresen, you talked about.

Wanting to have each municipality negotiate with Glenfarn or AGDC or what have you. There are, you know, what each party thinks is fair and so on. And my concern there is there is a lot of— that is a lot of admin. You mentioned the ponderous nature potentially of DCCED. That sounds like another ponderous way of doing things.

You know, there is what, 20-something communities, at least incorporated communities, not to mention the unincorporated ones along the way. You know, we tried to talk to a bunch of the mayors recently. I had it pointed out to me we missed the mayor of Anderson, and they've got the pipe going within just a few miles of the town.

I guess my concern is if we're going to talk about, you know, writing something into the bill that would require Glenfarn and AGDC to negotiate.

Negotiate with every single community, would that make it faster or slower to getting to the ultimate goal, which is getting the project done and getting gas to Alaskans? Yeah. Senator Myers, for the chair, I think in terms of— there's two layers of negotiations, um, that, you know, that, that I see as part of this process. So there's one where you have the five boroughs with an oil and gas property where that applies. And even that's something that was just— but you've got those.

So those are where adding that current Title 29 optional exemption into the oil and gas property tax statute would allow them to negotiate directly. That's 4 to 5 negotiations. I think separately there's the concept of a payment in lieu of taxes, which is something that most project proponents are used to, and it could happen along the pipeline corridor and beyond anywhere there's There's impact from the project, the project proponent would negotiate that. You don't need law to do that right now.

Right now. It should be expected of any large project proponent. And some of those conversations have started and just need to keep happening, I think. I think there's been a lot of attention on this legislation, and there's other conversations that could happen along the way. But to negotiate a PILT or some other kind of impact aid agreement can happen pretty quickly.

It doesn't have to be complicated or take long. Follow-up, Senator Myers. Yeah, you made a comment that that doesn't take law. Now, it might not take law with a borough, but with the state, I'm pretty sure that would take law because we can't negotiate, as has been pointed out in the committee a couple of times, you can't negotiate away the taxing authority. So that's going to take a law, isn't it?

Sorry, Senator Myers, I was just referring— through the chair— I was just referring to the ability of local governments to negotiate with the project proponent for something like a PILT on their own. Okay.

Independent of what the state might do. Gotcha. Good. Senator Wilkowski. And just correct me if I'm wrong, but my understanding of how local property taxes work, the local communities could have a mill rate up to 20 mills.

Whatever they tax below 20, the state gets the remainder.

If the local communities negotiate a PILT, does the state still get the remainder? Of the— up to the max mill rate? Senator Melichowski, through the chair, that would have to be outlined in the statutory change. So that is if there were an amendment to the current oil and gas property tax statute that said local governments can negotiate on their own, you would have to include something that says here's what happens to the remainder. So it could be that the state continues.

Its collection be, you know, the difference between the current property tax and that amount, or you could come up with something different.

All right, any further questions? Not seeing any. Thank you very much, Mr. Andresen, for joining us. Thank you. Happy Friday.

Constitution Day, 70 years old today.

The next item on our agenda was the presentation from the Regulatory Commission of Alaska. We had questions that we had for them. About 30 minutes before the meeting convened, they had a scheduling conflict arise. So we have written response to the questions. And so I'm asking our majority counsel, Ms. Sonja Kawasaki, to come forward and walk through some of the questions with us.

She helped compile these questions.

Clearly we can't go through every one because obviously that level of expertise rests with the RCA. But we do have some written answers. The other— while she's preparing, the other individual that we had invited who was unable to testify the other day was Rebecca Logan from the Support Alaska Alliance.

She is unable to schedule any of the opportunities to testify before the committee, so she has submitted her testimony in writing, which again has been submitted to committee members. You all have it in your email, and it is going to be posted online if it's not already. So just following up on that particular piece. All right, Ms. Kawasaki, thank you for joining us. Thank you, Madam Chair.

Good afternoon, members of the committee. For the record, Sonya Kawasaki, Senate Majority Legal Counsel.

I apologize that I didn't have a whole lot of time to review the responses from the RCA, but I can give you some background on to why we asked— as to why we asked the questions. Basically, in the current CS of the bill, we had a couple of duties that we added to the corporation, AGDC, to ensure that cost overruns were not shared— recoup costs against the customers in Alaska, and that, um, the utility— a utility in the state may not charge more than $12 before the LNG plant is in operation and $5 beyond when the operation of the LNG plant is online, because at that point we would be selling to the foreign markets, and so presumably it would reduce the gas prices to our in-state customers, and we based those numbers off of.

Recent comments from the governor on what the expected price that the administration has for prices for in-state gas for Alaskans. And so we believe that we need to add a piece to the bill that would have the RCA have oversight authority on the overrun piece and the cost maximums. And so we were asking questions on how to formulate that. In particular, I was a little bit concerned about how the interplay with the confidentiality agreements would occur because this committee and the body has been told that they can't be privy to a lot of information because of protection from confidentiality agreements. And my thought or concern was that perhaps the overruns would be related to documents that would be covered by confidentiality.

Agreements, as in, in my mind, if we start with a project that is saying we will have X cubic yards of borrow, and then, you know, the contractor has to place like 10 times as much of that or something, and then the 10— the, um, the extra amount becomes overruns, and we didn't want that passed on to in-state customers. But how would the RCA be able to ensure that that happened as we have tried to place inside the bill. So the RCA in items 1 through 5 were sort of answering our questions as to structuring our bill language so that RCA would have authority over those items. And so those have mostly to do with how the RCA presently considers its dockets and how it would be able to relate our.

What we put into law so that we can assure that our customers in-state don't get passed on costs that we would not want them to, given that the project has a lot of risks for overruns.

And then I just did want to go over a little more in detail, but I also have reviewed this issue earlier in the session, so I'm a little fuzzy on a lot of the— a lot of sort of the issues around this particular concern. But we have been advised from Alaska's Attorney General that FERC had authority over approval of the project. And the approval came through authorization.

In 2020 from FERC, and the approval was for the Alaska LNG project. Um, at that time, the project was not being considered in this phased approach that the pipeline would be online prior to the LNG export facility. Now, under the Commerce Clause, um, the Federal Commerce Clause, which is Article I, Section 8, Clause 3, um, Congress has jurisdiction over foreign and interstate commerce. And FERC has been established as the regulatory body for interstate, um, and foreign, um, gas regulation. So There are two provisions in federal code in the national— the Federal Natural Gas Act.

Section 3, which covers import and export facilities, and Section 7, which covers pipelines that are interstate. Now, export and import facilities are obviously already interstate or foreign because they talk about— those have to do with the commodity leaving the border of the state. So, I— Basically, we questioned Glenn Farn in a private meeting. We questioned the Alaska LNG— the CEO of 8Star Alaska, and we asked him if the pipeline were to be constructed and operational prior to the LNG plant, which is the plan because the pipeline is expected to be phase 1, and They desire to have the LNG plant online in 3 years later.

Um, but there's a concern that it might take longer than that, or there's a concern that the LNG plant may never be constructed, in which case, did FERC really have authority to approve of the pipeline that is an intrastate pipeline? It is— will be only used for in-state, um, gas delivery. So, um, we had posed that question to, um, Adam Prestige with Glenfarn. And around that time, maybe a few days before, a few days after, the Attorney General of the state had submitted basically a memo that was sort of a conclusory statement that FERC approved the project under Section 3, which is the import-export facility area of FERC authority. So today, to RCA, we had posed a question.

A question about whether FERC really had jurisdiction over the operation of the in-state pipeline that will function as only in-state delivery of gas for who knows how many years. And RCA did return a response to us basically saying that they can't opine whether or not they would have had they would have— FERC had jurisdiction, and that is unclear from our knowledge of existing jurisdictional determinations. And I will say from my reading of the case law, there hasn't been a case covering this particular situation. It's, you know, Alaska is a very— this is a very unique project. It's a unique circumstance.

We don't border any other states. And we're basically running an in-state pipeline from the North Slope to.

Initially Anchorage, which is 600— 767 miles of the pipeline that will operate for a time before the rest of the project— before the rest of the pipeline is built and the LNG plant is built. And what FERC approved in 2020 was, in essence, an 807-mile pipeline that feeds, um, an export facility in Nakiski. So I just think there's a— probably a legal question outstanding on that, and we were hoping to get some clarity from the RCA. I will say too, generally speaking, the RCA would have had authority to approve the physical infrastructure of a pipeline A sponsor would have had to seek, um, the certificate of convenience and necessity, and there are a lot of policy reasons for that because.

Is on the front end, um, the regulatory body would want to make sure that the pipeline is necessary, um, if it's sited correctly, if there are construction concerns, um, that are addressed by the sponsor. And, um, furthermore, I mean, I always go back to thinking about monopoly situations, and if in our situation, if Glenfarm owns the pipeline, will they allow other carriers to use it in the future, or is it just their own sole proprietary pipeline. And so those are sort of the concerns surrounding FERC versus RCA and the in-state pipeline. Thank you. Senator Myers?

Yeah, so Ms. Kawasaki, you've talked a lot about FERC having control over international commerce, effectively, when it comes to natural gas lease. Mm-hmm. Does FERC control of international commerce and having.

Exclusive authority according to federal law, prevent legislative approval of foreign sales contracts?

Through the Chair, Senator Myers, I— you are entering a realm that I am not probably— shouldn't— I wouldn't be familiar enough to opine in. Generally speaking, states have, um, limited jurisdiction over things like foreign sales, foreign contracts, um, because Congress is, um, the authority over foreign commerce for various reasons, including wanting to ensure that there is sort of, um, uniformity among, um, how other nations are treated. In respect to commerce. And so states do have limitations to what they can— what their purview is.

Is over rates and taxation and things related to financial aspects of relationships with foreign nations. Senator Myers, you know, our question to FERC— excuse me, to RCA— didn't have to do with the contracts or sales. Mm-hmm. The question had to do with the jurisdiction of approving all the components of the pipeline. They applied to FERC, and, and we can certainly send you that EIS from 2020, right?

It's interesting read. It's over 1,000 pages. Um, and, and there's no question that an export facility is covered by FERC. The siting, the construction, all of that. There's no question.

What we're wondering about, what the question to RCA was, is what if only Phase 1 is built? And the answer I thought that we received from the RCMP.

CA today, it's the last 2 pages, pages 3 and 4 of their written responses, is actually pretty informative. That if it crosses a nation's border, crosses a state line, that it's— that's interstate, or excuse me, that it's FERC regulated. But it also goes on to say that the FERC had not considered the scenario. Of just Phase 1. But the third— the fourth page is very interesting.

It says interstate pipeline runs to the border and connects to an international pipeline. FERC has Section 3 jurisdiction, but FERC may cede its authority over the intrastate portion of the pipeline to the state regulator. They cite a case. In practice, FERC has almost invariably done so, generally ceding jurisdiction over all but a.

Within 1,000 feet or so of border crossing pipeline to state regulators. That's very interesting. So I think it's something we should follow up with the RCA about. It's an interesting question. Senator Myers?

Yeah, Madam Chair, so to that point, it is an interesting point in what happens versus, you know, in Phase 1 versus Phase 2 if Phase 2 does not get built. But as Ms. Kawasaki was invoking, FERC and its jurisdiction, and then we've talked a little bit about how FERC's jurisdiction interacts with the RCA's jurisdiction. I'm seeing a scenario here that is addressed in the bill in front of us, in the CS in front of us, of what is the jurisdictional line between FERC and the legislature, because we've got a piece in the bill that says the legislature has to approve a contract to a foreign buyer, as I brought up in our last meeting, And so the question is if FERC or even Congress has exclusive domain over intr— over.

International commerce, does that then preclude us from having any sort of say over approving that contract? Ah, I think I'm following you, Senator Myers. So, um, I, I think you may be asking about the section where if the, uh, project proposal, uh, the company proposing this project were to sell their interest in it to a foreign entity. I think that's what you may be confusing with sales. I don't recall there's anything in the bill— you could cite it, please— where we say we have jurisdiction over the sale contract to a foreign entity.

Well, Madam Chair, I'd have to take a little bit to go find the section of the bill, but in the last meeting, I explicitly asked Ms. Kawasaki if the section over approval.

Approval of sale of, of contracts with foreign entities, which if memory serves applied to producer, developer, or final customer sale, if that applied to a sale to a customer in say Japan, Taiwan, what have you, and she answered in the affirmative. And so that's where my, that's where my question is coming from here. And I'm, it, I'm concerned that we, given what she's just been saying about FERC or even Congress, that we might be overstepping and trying to have authority and jurisdiction over an area that we're prevented from having by federal law? It's a good question. Ms. Kawasaki?

Sure. Ms. Kawasaki? Yeah, thank you, Madam Chair. I would like to state that Senator Myers is correct that when he did ask me in one of the prior hearings whether the legislative approval of relationship with foreign entities included the approval of a gas purchase agreement, and if you look on page 16 of the.

The CS. Line 10, it says may not enter into a legal relationship with a foreign entity, and then without, you know, legislative approval. And then on line 28, we did include gas purchase agreement. Now, the interaction between that and the regulatory authority of Congress would be sort of a different question, and I would say if that provision is not lawful, it would just be severed from application. Was there a legal memo related to that, Madam Chair?

There was not, Madam Chair, but these are pretty complex areas of law when we start getting into our authority versus federal government. So, but I will say that I myself requested the gas purchase agreement to be put into the bill. So the legal relationship.

Partnership formation with the foreign entity that must be scrutinized by the legislature, I included the gas purchase agreement along with the partnership, joint venture, joint ownership agreements, mergers, and so on and so forth. But so, Madam Chair, Senator Myers is correct that that is part of our bill and it is something that we should probably ponder a little bit more. Thank you. Senator Rauscher, did you have your hand up? Well, Frank is on the line.

Would Frank know a little bit more about this? I don't think Frank had anything to do with the drafting of the bill, so—. I thought he'd understand a little about how FERC is involved in it. Mr. Richards, do you wish to comment on the questions?

Madam Chair, can you hear me? Yes, very clearly. Thank you. Thank you, Madam Chair. For the record, Frank Richards.

In regards to the question about FERC, I will go back to, again, The original application to.

FERC was for Section 3 authorization. And why this is important is because this, um, Velasca LNG project, uh, was put forward specifically to FERC as an integrated project. And what I mean by that is that it was not just the LNG facility that was going to be exporting liquefied natural gas, but it was going to be inclusive of the pipeline and the gas treatment plant. So it was ring-fenced essentially from that initial processing plant or front-end unit that other LNG plants have. But in our case, we have an 807-mile connector between the two plants.

So FERC accepted this, this application, recognizing that it was unusual to have truly a significant long transmission line between the significant plants that we have required for this project. But they, they accepted that, and that's what they.

Addressed in their environmental impact statement and ultimately in regards to the authorization. So that was, that was key in that the construction of the integrated project was going to be done in phases. And why I say that is because for the gas plant on the North Slope, there was going to be the need for, um, uh, SeaWest to be able to bring in the modules for that plant. And so that was going to be done over a period of 5 to 6 years And that's really the long lead item for this project because of the ice conditions and the need to be able to wait for the summer delivery. The pipeline itself was going to be done in probably 3 years, so it was going to be the shortest segment of the construction.

And then the LNG plant was going to be 3 to 4 years again with modules, but through an ice— an ice-free— not ice-free, but a not a solid ice condition in Cook Inlet.

Which would allow for essentially year-round delivery to the main offload facilities and delivery of the modules for the liquefaction facility. The reason I say that is because FERC knew that the construction execution was going to be done in various phases based on the components. And so they recognized that. And in our discussions leading up to our design, or I would say the implementation of a phased approach specifically for the pipeline, we actually engaged with FERC about moving forward with authorizations and what they call implementation plans for a phased approach, in particular for the need to be able to provide gas to Alaskans because of the Cook Inlet energy crisis. So we talked to them about delivering or asking for an implementation plan specific to Phase 1 of the pipeline, in that if they would authorize the construction initially of the pipeline just for in-state gas deliveries, knowing that the— with the commitment that the project would then continue on ultimately to.

To execute Phase 2, which would be completion of the pipeline to Nekiski and the development of the plants, knowing that those plants were going to then be constructed in the execution timeline that— it's going to take longer, but it would allow for the gas pipeline to deliver gas to Alaskans to meet our needs. So it is important to recognize that FERC considered this. FERC has taken this under consideration and is now actually with the implementation plan application in front of them right now, about ready to be able to provide the authorization for the phase construction, or phase 1, to begin for the interstate portion of the pipeline. Thank you very much, Mr.— excuse me, Senator Wielekowski. Thank you for— Mr. Richards, thank you for that explanation.

I'm curious if at some point It is possible, or it seems to me.

It seems to me at some point, let's say Phase 2 doesn't happen, and we all hope it does, but let's say, I don't know, the bottom drops out in the spot market and Phase 2 doesn't happen. At some point, does it convert? And at what point would that be where it would no longer be FERC and it would just, 'cause it's solely in-state at that point. I mean, at what point does it convert to RCA having regulatory authority over this project?

Through the Chair, Senator Wilkowski, again, I'm not aware of what would be that trigger date and what would be the ultimate consequence of that occurring. It's a hypothetical and I don't have an answer for that.

Ms. Kawasaki, you had a comment? Yes, Madam Chair, I just wanted to comment on Senator Wilkowski's question. The approval of the pipeline is a pre-approval that we're discussing here, what FERC approved, was a pre-approval.

Approval, and then the, um, sort of commensurate notion would have been that, um, the state would have had some sort of approval authority over the pipeline pre-construction. So the other aspect of regulatory authority comes on the RCA side with the public utility, and we do understand that, um, the RCA is engaging with our public utilities, NSTAR especially, to ensure that the customers get just and reasonable rates. But the aspect that we're talking about here with FERC versus RCA authority or in-state regulatory authority would have been pre-construction of the pipeline. Thank you. Senator Myers.

Yeah, thank you. Since we've got Mr. Richards on the line, so Mr. Richards, I don't know if you heard or recall enough of the A conversation that the chair and I and Ms. Kawasaki were having about.

FERC and congressional control over international trade. Um, but I'm, uh, what Ms. Kawasaki effectively said was that there's a possibility of some severability of, of the law, um, with regard to potential legislative approval of sales contracts to foreign customers. Uh, I am wondering if, in your opinion, if we leave that portion in the bill if that potentially opens us up to a lawsuit if the legislature attempts to exert that authority of approval over the contract, if that opens us up to a lawsuit from either Glenfarm or the potential foreign buyer.

You're asking— Chair, Senator Myers, can you hear me? Sorry. Yes.

Okay, good, Chair, Senator Myers. So again, Frank Richards, for the record, I am, I am not an expert at all in terms of the international contract.

Contracting. But I do believe that the Natural Gas Act, or NGA, does grant that FERC has authority to essentially authorize the export for— of gas to foreign countries, whether they be free trade or non-free trade countries. And that's what we received in terms of our authorization. I would defer to our Department of Law to be able to help in providing an answer specifically to that question. Because I'm not sure of the different constitutional issues between the state and federal government.

Thank you. We will consult the Department of Law at some point. Okay. Thank you. Well, unfortunately, we wish the RCA had joined us today.

Are there further questions related to their written response? Senator Myers? Well, I did have a question that Ms. Kawasaki prompted that Mr. Richards might be interested in opining on.

Mr. Richards, Ms. Kawasaki mentioned the price controls that we have in the current CS before us for the bill. And she mentioned that the $5 for the, you know, once the export portion was done and the $12 price control for while it was just in-state had come from, I think, some press releases or a couple of other public statements. And I think it's pretty close to what the Wood-MacArthur Wood Mackey Report, uh, that we went over last year said. But of course, the Wood Mackey Report also mentioned different pieces that could impact that price, whether it's the property tax or the, the cost of gas from the producers, and a few others. I'm wondering if, in your opinion, if putting that price control in there based on some public statements which were supposed to be estimates creates an.

Adverse environment to information sharing between Glenfarn and the state, given that we have been talking a lot about, well, we need more information from Glenfarn. Do you think, in, in your opinion, do you think that the, that that makes it less likely that Glenfarn will want to share more information with us? From the chair, Senator Myers, for the record, Frank Richards. Again, I'm, I I can't speak for our partner, Glenfarm, and how they would view that. Again, reading the bill and seeing that there are price structures in place, it doesn't allow them for the market really to be able to respond.

It was, as you said, the work that we had done with McKinsey that really looked at what was the art of the achievable and what were the levers that could help in reducing the overall price for Alaskans. And that had to deal with not only the The cost of.

Of the project in totality, but also in terms of the impacts of the property taxes. And then, uh, in addition, was the ability to utilize the federal loan guarantees, which was one of the largest levers to be able to help underpin the debt financing and lower the overall cost of the project. So the question, uh, regarding Glenfarm's, uh, opinion, I will defer to Glenfarm when they're able to respond. Okay, thank you. All right, with that, it brings us to the end of our agenda for today.

We will continue the discussion of Senate Bill 280 at our next meeting, which will be Monday, April 27th, at 3:30 PM. At that time, the Department of Revenue will be speaking with us. So at this time, the meeting will stand adjourned. Let the record reflect the time is 4:45 PM.