GOVERNMENT RELATIONS MEETING...

GOVERNMENT RELATIONS MEETING AGENDA Tuesday, October 27, 2015 | 8:00AM

Chamber Office

I. Call to Order / Establish Quorum – Derek Miller, Chair II. Call for Conflict of Interest Disclosures – Derek Miller, Chair

III. Approval of the Agenda

IV. Approval of Minutes

A. September 15, 2015 Minutes

V. Presentation A. Criminal Justice Reform - Jordan Shilling

VI. New Business

A. Criminal Justice Reform Priority (draft included in packet) B. Review 2015 priorities for relevancy C. Review proposed 2016 priorities D. Discuss special session advocacy plan

VII. Unfinished Business

A. None

II. Other Communication A. Committee Attendance Report B. Committee Calendar C. Staff Report D. Committee Chair Report E. Committee Member Comments F. Guest Comments

III. Next Committee Meeting – November 2, 2015

Government Relations Committee Meeting Minutes Tuesday, September 15, 2015 | 8:00AM

Chamber Office

Call to Order: The regular meeting of the Government Relations Committee was called to order on Tuesday September 15, 2015 at 7:31AM by Derek Miller, Chair. Conflict of Interest Disclosure: Sarah Lefebvre disclosed that she serves on the Workers’ Compensation Board of Directors. Committee Members Present: Anna Atchison, Jennifer Bump, Sarah Lefebvre, Jenny Mahlen, Derek Miller, Sarah Obed and Tiffany Van Horn. Quorum was established. Committee Members Absent: Jeff Cook, Tammy Randolph, John Ringstad, Lorna Shaw and Rick Solie. Guests Present: None Staff Present: Lisa Herbert, Liz Wolfe and Elena Sudduth. Agenda: Hearing no objections, the agenda was approved as presented. Minutes of Previous Meeting: The minutes of the September 8, 2015 meeting had Sarah Lefebvre listed as absent. She was in attendance via telephone. Staff will make the correction to reflect her presence at the meeting. The Minutes were approved as amended. Presentation: None New Business: None Unfinished Business: The Federal issues survey summarized results need to be finalized and sent to the general membership by Friday. Staff will verify the numbers before sending it to the membership. Staff provided the committee with an updated version of the UAS priority, edited by ACUASI. Staff will email both the existing and proposed version to the committee. The Chair will speak with Mike Sfraga from the University for feedback on the UAF research priority as well as continue to work with him on a draft Alaska & the Arctic policy. The committee looked at the Worker’s Compensation priority and felt that the first bullet needs to be reworded, as the numbers make it sound confusing. Aside from that, the priority is current. The committee discussed how priorities are "ranked". The committee also discussed changing to an advocacy plan format in a effort to simplify our advocacy process. There has been some discussion with the committee chairs and so-far the conversation has been well received. Other Communication: The Executive Director reported that Ian Scott from the Association of Chamber of Commerce Executives is coming for the Alaska Chamber Conference and will have roundtable with the Executive Directors on the Horizon 2025 initiative. Pew Charitable Trust is also sending their chief staffer to speak during the Alaska Chamber and the Executive Director will try to schedule both of them for a BOD/Committee meeting on Monday at 8AM instead of our regular Tuesday meeting, to talk about criminal justice reform. Invite to be extended to Jordan Shilling and Senator Coghill to attend as well. Today is the deadline of the 7 Habits of Highly Effective people early bird pricing. Also the Health Fair is next Wednesday and American Red Cross Grand Opening on Thursday. The Chair reported that he, the Executive Director, the Board Chair and staff will attend the Alaska's Fiscal Future Conference on Saturday in Anchorage. Derek to forward an email that he received from Chad Hutchison with information on the gasline. A special session does not look likely at this time. If the Governor were to call a special session, he would have to act soon.

Next Meeting: The Chair reported that the committee will not meet next week. The next regular meeting of the

Government Relations Committee will be on Tuesday, September 29 at 8:00AM at the Chamber’s office.

Adjournment: The Chair adjourned the meeting at 7:56AM. Respectfully Submitted, Liz Wolfe Committee Coordinator

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Support for Criminal Justice Reform for the State of Alaska The Greater Fairbanks Chamber of Commerce encourages the Alaska State Legislature, the Administration and state leaders to continue to address the growing need for prison reform in Alaska. The Fairbanks Chamber is prepared to join State leaders in the call for criminal justice reform, and support data driven changes that result in a more cost-effective criminal justice system for the State of AlaskaDe.

Support for the position Alaska’s prison population has grown 27 percent over the last decade, roughly three times faster than the state resident population has grown. The State spends over $300 million on corrections each year, the vast majority of which goes to brick-and mortar prisons and personnel. This spending has increased 60 percent over the last twenty years. Despite this increased spending, Alaska still has one of the highest recidivism rates in the country with two out of every three offenders released from prison returning within three years. The State Legislature funded the 1,500-bed Goose Creek facility, which opened in 2012, at a cost of $250 million to build, and $50 million annually to operate. Since then, Alaska’s corrections system is at 101% maximum capacity. Absent reforms, Alaska’s prison population is poised to grow by another 1,400 beds over the next decade. With this projected amount of growth we will soon need to build a new prison, start shipping prisoners out of state ($169 million over a decade), or invest in reforms that curb Alaska’s prison growth. Similar smart justice measures have been passed in states such as Texas, Georgia, South Carolina, and Utah. Business leaders in these states have supported criminal justice reforms noting that every dollar spent on new prisons is a dollar that might otherwise be spent on education, infrastructure, and economic development. Some possible benefits of successful criminal justice system reform include long-term reductions in operating budget costs, lower rate of crime and recidivism and building our workforce by improving re-entry success. Opposition for the position None identified at this time. Action Required of the Administration or Legislature Governor Walker, Senate President Meyer, Speaker Chenault, and the chairs of House and Senate Finance and Judiciary Committees have called for criminal justice reforms that curb corrections growth and spending, while protecting public safety and holding offenders accountable. They have directed the Alaska Criminal Justice Commission to develop recommendations for statutory and budgetary reforms for introduction during the 2016 session. The Commission is focusing on reforms in three main areas: pre-trial, sentencing, and community supervision. To guide this process, staff from The Pew Charitable Trusts are providing non-partisan data analysis and technical assistance. The Criminal Justice Commission will issue its report and recommendations with estimated fiscal impacts on December 10th. The Governor and legislative leaders will also consider investing some portion of the projected savings into treatment and programming that strengthen community supervision and support victims of crime. Fiscal Impact of the Position In September, President Meyer, Speaker Chenault, and House and Senate Finance Co-chairs tasked the Alaska Criminal Justice Commission with developing recommendations that avert all of the state’s future prison growth and reduce the prison population by up to 25%. The Criminal Justice Commission’s December 10th report will include a ten-year projection of the impact the recommendations will have on prison beds and estimates of costs avoided and net savings that would be achieved. A more exact estimate of these savings will be included in their Dec. 10th report.

Interior Alaska – The “Place” To Do Business 100 Cushman Street, Suite 102 | Fairbanks, AK 99701

Ph: (907) 452-1105 | www.FairbanksChamber.org

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Economic Impact of the Position Not identified at this time. Position Sponsor Information Greater Fairbanks Chamber of Commerce

GREEN = Okay as written RED = Recommend removal BLUE = Recommend update ORANGE = Recommended co

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2015 Greater Fairbanks Chamber of Commerce Legislative Priorities Adopted November 10, 2014 by the Board of Directors

Guiding Principles: A thriving economy depends on robust opportunities for business. The best thing that the Chamber can do for our members is to work to create a pro-business environment that encourages private sector investment and job creation. We are focused on the betterment of all of our members by working with local, state and federal government officials. For this reason, the Fairbanks Chamber will advocate and support public policies that are in alignment with the following guiding principles:

Support strong public and private education and workforce development opportunities

Support a sustainable state operating budget and strategic investments through the capital budget

Support a regulatory climate that encourages economic development

Support predictability in healthcare & workers’ compensation costs

Incentivize responsible development of Alaska’s natural resources

Encourage economic competitiveness

Top Priority: Reduce the High Cost of Energy

Support the Interior Energy Project: Construction, Expansion and Conversion

Support for a Natural Gas Pipeline

Support Affordable Energy for Rural Alaska

Additionally Supported Priorities:

Strengthen the Military Presence in Alaska

Support Worker’s Compensation Reform

Support Funding for the University of Alaska

Support the In-State Oil Refining Industry

Reinstate Funding for the Fairbanks Metropolitan Area Transportation System (FMATS)

Support Investment for Critical Maintenance & Facilities needs at Educational Institutions, K- 12

Support for the Alaska State Council on the Arts Funding Request

Increase Responsible Resource Development through the Permitting Process

Support Renewable Resource Development and Management (Forestry & Agriculture / Biomass)

Support Active Fish & Wildlife Management

Support Urban Rural Connection: Manley Hot Springs to Tanana Road

Support the Unmanned Aircraft Systems Industry

Support Creation of an Alaska Transportation Infrastructure Funding Program

Expanded position statements for above priorities are included on the pages 2-4.




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TOP PRIORITY: Reduce the High Cost of Energy

(GRC member: Rick; deadline for updates COB 10/8) The Greater Fairbanks Chamber of Commerce continues to support short-term, mid-term, and long-term projects to address the high cost of energy throughout the state. A significant amount of work has occurred in the Alaska Legislature, much of it related to energy. While a significant investment from the State was made during the 28th Legislature for a LNG trucking project, continued progress must be made to achieve affordable energy for Alaska’s residents and businesses.

Support for Interior Energy Project: Construction, Expansion and Conversion The Greater Fairbanks Chamber of Commerce continues to support the stated goals of the Interior Energy Project to bring affordable natural gas to the greatest number of Interior residents and businesses as rapidly as possible. The Chamber encourages AIDEA and AEA to finalize construction of an appropriately sized and configured LNG facility on the North Slope of Alaska, facilitate the expansion of natural gas distribution infrastructure in Fairbanks and encourage conversion of homes and businesses to a natural gas-based energy supply.

NOTE:

Fiscal impact to the state treasury is $________.

Support for Natural Gas Pipeline The Greater Fairbanks Chamber supports efforts on both natural gas pipeline projects from the North Slope to South Central Alaska: the State owned Alaska Gasline Development Corp project for in-state use and the ExxonMobil/BP/ Conoco-Phillips /TransCanada project to export gas to Asia. NOTE:

Fiscal impact to the state treasury is $________.

Support for Affordable Energy for Rural Alaska The Greater Fairbanks Chamber of Commerce encourages the Alaska State Legislature and Administration to support and expand efforts to reduce energy costs in our State’s Rural Communities by continuing to fund and support programs such as Power Cost Equalization (PCE), Emerging Energy Technology Fund and Renewable Energy Grant Fund programs. NOTE: The committee recommends adding a bullet under “support for the positon”

Affordable renewable energy options and practices would increase rural community health resulting in health related cost savings and improved productivity.

Fiscal impact to the state treasury is about $80M.


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ADDITIONAL PRIORITIES:

Strengthen the Military Presence in Alaska The Greater Fairbanks Chamber of Commerce encourages the Alaska State Legislature and the Administration to work with the United States military to not only maintain current military investment and force structure in Alaska, but to increase military missions, staffing, activity, and investment at Interior installations. NOTE: Military affairs committee does not recommend changes to the position statement for 2016. However, they have made a recommendation to add a bullet in support of UAS under action required. The UAS bullet reads:

Encourage the Alaska Legislature and the Governor’s administration to urge the DOD and USCG to

bring unmanned aerial systems (UAS) to Alaska and to coordinate with the Federal Aviation

Administration and the University of Alaska-Fairbanks UAS Test Site to safely integrate UAS into the

National Airspace System in Alaska.

Fiscal impact to the state treasury is $0.

Support Workers’ Compensation Reform The Greater Fairbanks Chamber of Commerce encourages the Alaska State Legislature and the Administration to enact reform to the Workers’ Compensation Statutes to improve the balance between providing quick, efficient and fair compensation to injured workers at a reasonable cost to employers. The current system is delivering benefits at exorbitantly high costs to employers, and ineffectively administers the claims of injured workers. NOTE: Fiscal impact to the state treasury is $0. Support Funding for the University of Alaska

(GRC member: Derek; deadline for updates COB 10/8) The Greater Fairbanks Chamber of Commerce encourages the Alaska State Legislature and the Administration to maintain strong support and funding for the University of Alaska. A healthy university is vital for the education of our citizenry, the development of a highly trained workforce, and the research and development endeavors necessary to address the state’s critical challenges. Specific support includes:

Funding necessary to complete the UAF Engineering Building

Research & development endeavors

Deferred maintenance

NOTE: Fiscal impact to the state treasury is $______.

Support the In-State Oil Refining Industry


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In-state refining adds important diversification and value added processing to our Alaska economy. The in-state refining industry is currently challenged with high energy costs, terms of the State royalty oil sales contracts, quality bank provisions and environmental and operational regulations. The Greater Fairbanks Chamber of Commerce encourages the Alaska State Legislature and the Administration to develop and implement a comprehensive action plan to mitigate these impediments, thereby allowing for the preservation and expansion of in-state refining. NOTE: Natural resources committee recommends removal of this priority because the position was taken in 2014 when Flint Hills was looking at closing their North Pole refinery. The intent of the position was to keep the refinery open and supplying products for the Interior. It has now been closed and no efforts are being made to reopen it. Additionally, there are no plans currently being worked to expand other In-State refineries or build a new refinery in the Interior. Fiscal impact to the state treasury is $0. Reinstate Funding for the Fairbanks Metropolitan Area Transportation System (FMATS)

(GRC member: Sarah L.; deadline for updates COB 10/8) The Greater Fairbanks Chamber of Commerce encourages the Alaska State Legislature and the Administration to reinstate funding for the Fairbanks/North Pole Metropolitan Area Transportation System (FMATS), vital to positioning the area for successful economic development. Economic growth requires a good local transportation infrastructure to support new and continuing development. NOTE: Fiscal impact to the state treasury is $______. Support Investment for Critical Maintenance & Facilities needs at Educational Institutions, K – 12

(GRC member: TBD; deadline for updates COB 10/8) The Greater Fairbanks Chamber of Commerce encourages the Alaska State Legislature and the Administration to support a major investment in the substantial backlog in critical maintenance needs at K-12 school district facilities. Serving the needs of students throughout Alaska, from urban centers to rural villages, requires a wide variety of facilities. The School Districts are responsible for the annual maintenance and repair of facilities, but budgets have been squeezed in recent years due in part to the rising cost of energy. NOTE: Fiscal impact to the state treasury is $_______. Support for the Alaska State Council on the Arts Funding Request

The Greater Fairbanks Chamber of Commerce encourages the Alaska State Legislature and Administration to support continued funding for the Alaska State Council on the Arts. NOTE: Business & the arts committee does not recommend changes to the position statement for 2016. Fiscal impact to the state treasury is $800,000.


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Increase Responsible Resource Development through the Permitting Process

UPDATE: The Greater Fairbanks Chamber of Commerce supports a significant increase in responsible natural resource development and encourages the Alaska State Legislature and Administration to uphold Alaska’s strong regulatory and permitting laws and policies that will facilitate additional exploration, site development, employment, infrastructure, research, and natural resource production in Alaska. The Alaska State Legislature should work with the Alaska Congressional Delegation to address the multitudes of Federal laws that adversely impact natural resource development in Alaska and elsewhere. PROPOSED CHANGE: The Greater Fairbanks Chamber of Commerce supports responsible natural resource development and encourages the Alaska State Legislature and Administration to uphold Alaska’s strong regulatory and permitting laws and policies that will facilitate additional exploration, site development, value-added services and products, employment, infrastructure, research, and natural resource production in Alaska. The Alaska State Legislature should work with the Alaska Congressional Delegation to establish permitting efficiencies within Federal laws that incorporate measures to lessen environmental consequences and that support sustainable natural resource development in Alaska. NOTE: The Natural Resources Committee recommends the position language be updated to focus more heavily on improving efficiencies for the permitting process that will encourage resource development. Fiscal impact to the state treasury is $0. Support Active Fish & Wildlife Management

(GRC member: John; deadline for updates COB 10/8) UPDATE: The Greater Fairbanks Chamber of Commerce encourages the Alaska State Legislature and the Administration to advocate for the wise management of Alaska’s fish and wildlife resources. Alaska must responsibly balance subsistence, commercial, personal use, sport, and other recreational uses to maximize long-term social and economic benefit. Proactive management actions should be used to provide fish and wildlife population abundances necessary for long-term and maximum use under the sustained yield principle. Finally, the Alaska State Legislature and State Administration should work with the Alaska Department of Fish and Game to monitor and advocate for the special provisions of the Alaska National Interest Lands Conservation Act (ANILCA) that are unique to Alaska and to insure that state interests and public access to fish and wildlife resources are adequately considered. NOTE: The Natural Resources committee recommends that this position be simplified and combined with their existing priority titled “Support Renewable Resource Development and Management” Fiscal impact to the state treasury is $________. Support Renewable Resource Development and Management

(GRC member: John; deadline for updates COB 10/8) UPDATE: The Greater Fairbanks Chamber of Commerce encourages the Alaska State Legislature and the Administration to proactively support and encourage the development and sound management of our forest and agricultural resources. Progressive economic access to local agriculture and forest resources will play an increasing role in the viability and lifestyles of Alaska’s growing population.


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NOTE: The committee recommends that this position be simplified and combined with their existing position titled “Increase Responsible Resource Development through the Permitting Process”, keeping the current title. Fiscal impact to the state treasury is $0. PROPOSED CHANGE: The Greater Fairbanks Chamber of Commerce encourages the Alaska State Legislature and the Administration to advocate for sustainability and sound stewardship for future generations when pursuing the development and balanced management of our State’s renewable resources including agriculture, forestry, and fish and game. Fiscal impact to the state treasury is $0. Support Urban Rural Connection: Manley Hot Springs to Tanana Road

(GRC member: TBD; deadline for updates COB 10/8) UPDATE: The Greater Fairbanks Chamber of Commerce encourages the Alaska State Legislature and the Administration to support the development of an infrastructure corridor from the Interior to the community of Tanana. This infrastructure corridor would greatly enhance the connectivity, economic viability and well-being for the communities of Tanana, Manley Hot Springs, Minto and numerous rural communities along the Yukon River corridor. PROPOSED CHANGE: The Greater Fairbanks Chamber of Commerce encourages the Alaska State Legislature and the Administration to support the continued development of the infrastructure corridor from the Interior to the community of Tanana. This infrastructure corridor will greatly enhance the connectivity, economic viability and well-being for the communities of Tanana, Manley Hot Springs, Minto and numerous rural communities along the Yukon River corridor. NOTE: The committee recommends some language changes to the position statement. Fiscal impact to the state treasury is $10 million. Support the Unmanned Aircraft Systems Industry

(GRC member: Derek; deadline for updates COB 10/8) The Greater Fairbanks Chamber of Commerce recognizes the importance of the Unmanned Aircraft Systems (UAS) Industry and encourages the Alaska State Legislature and the Administration to continue to support efforts that foster industry growth. The UAS industry will aide in the diversification of our economy, strengthen technology programs with the University and create jobs that can transform Alaska. NOTE: Fiscal impact to the state treasury is $________.

Support Creation of an Alaska Transportation Infrastructure Funding Program

(GRC member: Sarah L.; deadline for updates COB 10/8) The Greater Fairbanks Chamber of Commerce encourages the Alaska State Legislature and the Administration to create a State funded program for capital improvements to our transportation systems. The program should cover renewal, replacement and development, to enhance Alaska’s land, water and air transportation systems. This infrastructure is pivotal to the State’s economy, providing access to markets, supplies and resources.


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Improving and investing in the transportation system will improve the competitiveness of businesses and economic opportunities for Alaskans. NOTE: Fiscal impact to the state treasury is $________.

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2016 Greater Fairbanks Chamber of Commerce Proposed Legislative Priorities

Support a comprehensive, long-term sustainable fiscal plan for the State of Alaska The Greater Fairbanks Chamber of Commerce encourages the Alaska State Legislature, the Administration and state leaders to ensure the effective use of state resources by delivering essential programs as efficiently as possible and to make strategic investments that promote long-term economic growth. Further, the Chamber encourages government leaders to build a fiscally responsible budget that aligns revenues with expenses. While reductions have already been made to the state capital and operating budgets, a consistent and predictable fiscal policy is integral to an overall plan and vision for business development and job growth in Alaska. Adopted August 24, 2015 by the Board of Directors -------------------------------------------------------------------------------------------------------------------------------- --

Sustain and increase, as necessary, transportation revenue that will support maintenance, enhancements and efficiencies to Alaska's transportation infrastructure. The Greater Fairbanks Chamber of Commerce encourages the State to leverage existing and future state funding sources to the maximum extent possible, while pursuing alternative funding sources and mechanisms that will ensure the greatest possible benefit to Alaska’s infrastructure. Maximizing repairs and upgrades with available funding, and leveraging other funding sources, should be a priority approach given the severe budget restrictions facing Alaska. The Fairbanks Chamber also encourages the state to evaluate its transportation funding, design, construction and maintenance practices to identify and adopt the most efficient and the most cost-effective methods available. Support for the position This is a broad based issue affecting Alaskan residents and businesses in many ways. The cost of disregarding infrastructure needs should not be ignored and will only continue to increase over time. The position is specifically supported by the contracting community, heavy users of transportation systems, such as trucking companies, organized labor, and by businesses that intimately rely on transportation to function on a daily basis. The State has few redundant transportation corridors, and the condition of each is crucial to the movement of goods and services, in addition to the traveling public. Each community, whether urban or rural, is dependent upon some combination of highway, aviation, rail and marine infrastructure for access to the remainder of the State. As Alaska’s infrastructure ages, it is imperative that the backlog of necessary maintenance and repair work not increase. This financially impacts every resident of the state, now through delays and damage, and in the future through higher costs and reduced access. Enhancements to Alaska’s transportation infrastructure facilitate continued economic growth and access to resources. The data is concerning:

1. 49% of Alaska's roads are in poor or mediocre condition 2. driving on roads in need of repair costs Alaska's motorists $181 million per year in extra

vehicle repairs and operating costs, averaging $389 per motorist



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3. 290 of the 1,196 bridges in Alaska are considered structurally deficient or functionally obsolete

4. rural airports produced $4.9 million in revenues, mostly from lease fees, against costs of $23.2 million

The Fairbanks Chamber understands and supports the need to sustain and increase funding for maintenance and operation of Alaska's highway, aviation, rail and marine infrastructure, as well as the need to fund enhancements to infrastructure to further stimulate existing commerce and foster economic growth. Opposition for the position None identified at this time. Action Required of the Administration or Legislature The Fairbanks Chamber encourages the Alaska State Administration and Legislature to make available and/or increase sufficient funding to maintain existing transportation infrastructure at an acceptable level that will continue to expand and improve Alaska’s infrastructure to accommodate and promote economic growth and development. Fiscal Impact of the Position Not identified at this time. Economic Impact of the Position Not identified at this time. Position Sponsor Information Fairbanks Chamber Transportation Committee

Summary Report on the Review of the AKLNG Project Process Page 1

Summary Report on the Review of the

Alaska LNG Project Process

Office of the Governor

State of Alaska

September 24, 2015

The following report summarizes the results of a review of the process established for the

proposed liquefied natural gas (“LNG”) project currently being worked on by the State of

Alaska, TransCanada, ExxonMobil, BP, and ConocoPhillips under the negotiating framework

most recently enacted in 2014 by Senate Bill 138: the Alaska Liquefied Natural Gas Project

(“AKLNG Project,” “AKLNG,” or “Project”). The majority of challenges are structural and

commercial in nature rather than technical. The report will first discuss the history of prior

Alaska gas pipeline development efforts, and then the commercial difficulties faced by the

AKLNG Project.

I. HISTORY OF EFFORTS TO COMMERCIALIZE NORTH SLOPE GAS

The current configuration of the AKLNG Project is the latest in numerous efforts to export North

Slope natural gas dating back to the 1970s. This section of the report discusses those efforts in

context of the current AKLNG Project and what can be learned from those prior unsuccessful

attempts.

A. Early Projects

Prior to the mid-1980s, there were efforts to advance several different Alaska gas pipeline

projects, including those by Prudhoe Bay leaseholders BP, Atlantic Richfield and ExxonMobil

(together with successor companies, the “Producers”), and separately by El Paso and Foothills (a

predecessor to TransCanada). These attempts reflected, among other issues, the two competing

themes consistently present in North Slope gas commercialization efforts.

First was the ongoing debate about whether a project should be a North American project

through Canada or an LNG project to tidewater in South Central Alaska. For instance, in 1977,

the Carter Administration determined a project should go through Canada, and Congress enacted

the Alaska Natural Gas Transportation Act to enable the same. Competing national priorities –

based largely on ever-fluctuating Lower 48 gas prices and estimated gas supply – saw seesawing

support of a Canadian and LNG project. The Reagan and George H.W. Bush Administrations

supported the Yukon Pacific Corporation (“YPC”) LNG export effort (discussed below),

including a presidential finding in 1988 that North Slope gas could be exported to Asia as well as

cooperation in that almost decade long permitting effort. In 2004, the Alaska Natural Gas

Pipeline Act was enacted, which was aimed at inter alia supporting rapid permitting of a


Canadian project. However the Act also provided support for an LNG project by extending

federal loan guarantees to a project that exported gas to the Lower 48.

High natural gas prices and advances in drilling technology led to the “shale gas revolution” and

a major market shift in the 2007 to 2010 timeframe, which saw increases in Lower 48 natural gas

reserves and production, and decreases in current and projected North American gas prices. This

once again confirms that the primary markets for Alaska gas are global (primarily Asian) and not

domestic, and thus support an LNG as opposed to a Canadian project.

The second reoccurring theme running through various project development efforts remains

whether the project should be developed by the Producer companies or by an independent

corporate or governmental effort. Multiple starts and stops have reflected this contentious three-

decade plus dynamic.

B. Yukon Pacific Corporation

In 1983, former governors Wally Hickel and Bill Egan, following the suggestion by Governor

Hammond, formed YPC, which was a proposed LNG project to export to Japan, South Korea,

Taiwan and possibly the U.S. West Coast, but not exclusively the West Coast as El Paso’s earlier

proposed project had planned. In 1986, a deep pocket became part owner with YPC: Texas Gas

Transmission Inc., a subsidiary of Lower 48 railroad and shipping giant CSX Corp. Through the

1990s, YPC expended approximately $100 million to engineer and permit a LNG project from

the North Slope to Valdez, to run parallel to the Trans Alaska Oil Pipeline (“TAPS”). This effort

advanced further than any North Slope gas commercialization effort before or since, including,

with the issuance of a Final Environmental Impact Statement by the Federal Energy Regulatory

Commission in 1995, securing the senior federal and state permits necessary to construct a

project. This was the most aggressive effort of a non-Producer project sponsor to follow the

“permit it and they will come” strategy. But like other independent efforts, YPC was unable to

secure access to the gas resource from the Producers or support from the State administration.

Different justifications have been offered regarding why the Producers would not commit gas,

including the economic environment, the need to continue re-injecting gas at Prudhoe Bay to

maximize oil production, and a view that the Producers simply refused to deal with an

independent company. Without gas to ship, YPC began slowly winding up its efforts and all

permits and rights-of-way lapsed by 2011.

C. Stranded Gas Development Act

Since at least the late-1990s timeframe the Producers have followed a strategy that is still being

followed today. This approach requires the State of Alaska to provide “fiscal certainty” before

the Producers will build or allow to be built a North Slope natural gas pipeline. Although the

scope of fiscal certainty has varied over the years, it has retained the constant hallmark of

requiring the State of Alaska to adopt royalty and tax terms on oil and gas acceptable to the

Producers, and for those terms to be locked in and unchangeable by the State for a prolonged

period.


In 1998, the Alaska legislature adopted the Stranded Gas Development Act (“SGDA”) as a

specific legislative framework for the State to negotiate a proposed gas pipeline deal including

fiscal certainty. Although SGDA negotiations theoretically allowed proposals by independent

pipeline companies, and several large companies like TransCanada, Mid-America, and Sempra

Energy did attempt to participate, during this era the State focused almost exclusively on a deal

with the Producers for a project through Canada. Under this iteration the Producers held off on

substantial permitting and engineering work until a fiscal deal with the State was finalized and

approved by the legislature. Thus the State was in the position of not seeing work on a gas

pipeline project advance until each Producer was satisfied with fiscal terms. Like the current

S.B. 138 process, the State had little to no leverage and found itself negotiating to the least

common denominator on each issue, and on the project schedule, with three different companies.

As the party that most desired the project, and desired it on the most rapid timeline, the State

made drastic concessions to achieve an agreement. The SGDA process resulted in significant

turnover and resignation in the Department of Natural Resources (“DNR”), including an estimate

the SGDA contract would have cost Alaska $13.5 billion including concessions on oil

While a contract with the Producers was negotiated and finalized by the State’s executive branch

in the spring of 2006, the terms of the contract were not perceived as acceptable to Alaskans.

The unacceptability of the contract, in conjunction with the political corruption accompanying

the companion deal negotiated by the State with the Producers on the overhaul of state

production taxes on oil, meant the contract was neither seriously considered nor approved by the

legislature. It was abandoned when Governor Palin took office.

D. Alaska Gasline Inducement Act

In response to the perceived failings of SGDA, the Palin administration pushed for and the

legislature passed in 2007 the Alaska Gasline Inducement Act (“AGIA”). This process solicited

bids from companies interested in state financial subsidies to permit and potentially build a

pipeline. In 2008, TransCanada’s bid to obtain the required permits along the route to Canada

(with a secondary option to permit to Valdez for LNG export) was selected. Pursuant to the

terms of AGIA, the State subsidized 50% of TransCanada’s qualified expenditures incurred

before the end of the first binding open season in June 2010, and 90% of TransCanada’s

qualified expenditures thereafter.

Frustrated by the stranglehold the Producers had during the prior SGDA process, and the State’s

lack of leverage in the same, the State attempted with AGIA to independently advance a project

with a YPC-like “permit it and they will come” concept. For a number of reasons the effort

failed. Within days of the award of the contract to TransCanada, TransCanada let it be known

they expected Producer participation, and ExxonMobil was later brought in as a project partner.

Thus the “independent” pipeline project was now controlled by a Producer company. Over the

next few years, after the 2010 open season failed, it became clear the gas markets had changed

several years prior and a project through Canada was no longer viable. However, rather than

TransCanada and ExxonMobil pursuing an LNG project as allowed under the AGIA bid, the

AGIA process morphed into an SGDA-like process for an LNG project controlled by the

Producers. This is notwithstanding the strong expression of interest from Asian buyers in

purchasing LNG from an AGIA project in response to the 2012 AGIA solicitation of interest.


Neither company responded to any of the Asian market’s written expression of interest in LNG

from the AGIA process.

E. Denali Pipeline

At the same time that AGIA was launching, BP and ConocoPhillips began a pipeline project to

Canada along the same approximate route as AGIA. Whereas ExxonMobil chose to join the

AGIA process, BP and ConocoPhillips opted to develop their own project as an alternative to

having to participate in the AGIA effort. This project was ultimately abandoned due to impacts

caused by the development of shale gas on the North American gas market, and BP and

ConocoPhillips joined ExxonMobil and TransCanada in the post-AGIA LNG project effort.

F. Alaska Sponsored Projects

In addition to the SGDA, AGIA and now S.B. 138 processes directed by the executive branch,

there have been three other significant governmental project efforts.

1. Alaska Gasline Port Authority (“AGPA”): AGPA was formed in 1999 by the

North Slope Borough, Fairbanks North Star Borough and the City of Valdez to

progress an LNG project. The original purpose of AGPA was to obtain an IRS

ruling stating that an AGPA owned project would be exempt from federal taxation.

AGPA did receive such a ruling from the IRS, but the Producers declined that tax-

exempt structure. After that AGPA project efforts largely included partnering with

energy companies (Mitsubishi Corporation, Sempra LNG, Bechtel Corporation,

Williams Pipeline) to either build an independent project or, after issuance of the

AGIA license, attract buyers interested in the AGIA option to Valdez. Although

AGPA had initial success in bringing on project partners, similar to YPC, its

inability to engage with the State executive branch or the North Slope producers

resulted in those efforts failing.

2. Alaska Natural Gas Development Authority (“ANGDA”): In 2002, Alaska voters

formed ANGDA by ballot initiative to build an LNG project at tidewater. ANGDA

was almost immediately marginalized due to lack of support for that project scope

by various state administrations. Residing within the executive branch, it was

tasked with various non-core assignments such as the Y-line from Delta to South

Central for a Canadian project, working on a pipeline from Anchorage to

Fairbanks, and looking at various other in-state energy projects. Never particularly

popular with the executive branch or legislature, it was ultimately terminated by

the legislature in 2013 through House Bill 4.

3. Alaska Gasline Development Corporation (“AGDC”): After the award of the

AGIA license, the legislature began to support a state-sponsored effort for a

smaller bullet line project from the North Slope to tidewater. Initially at the

direction of the legislature through House Bill 369 (2010) this effort was worked

by the Alaska Housing Finance Corporation. In 2013, AGDC was created and

funded with approximately $355 million to advance the Alaska Stand Alone


Pipeline Project (“ASAP”) at state expense. ASAP focused on a small project less

than 500 million cubic feet per day. AGDC followed the “permit it and they will

come” approach, including completing substantial engineering and permitting

work. ASAP currently has a class 3 engineering estimate and the pipeline right-of-

way permits on state land. Although ASAP has progressed engineering and

permitting on gas conditioning and pipeline facilities to Big Lake, it has not

substantially engaged Producer or third party project participation, including

securing gas supply or commitments for gas purchase if supply were available,

identifying or working on a liquefaction site, or securing contribution by project

partners of external capital. Additionally, in 2014, S.B. 138 tasked AGDC with

holding the State’s interest in the AKLNG liquefaction plant, and in the gas

conditioning plant and pipeline if TransCanada does not fulfill that role for the

State. AGDC currently participates in AKLNG by owning 25% of the LNG

facilities. The workflow and funding for the ASAP and AKLNG efforts within

AGDC is also separated.

G. The AKLNG Project

On March 20, 2012, the chief executives of ExxonMobil, ConocoPhillips and BP informed then-

Governor Parnell that their companies had started working with TransCanada to assess whether a

project to export LNG from Alaska to Asia made more sense than a pipeline to serve North

America. With a Canadian project no longer economic, the effort focused on a project to

tidewater in south central Alaska. After settlement of the Point Thomson litigation between the

State and Producers in 2012, the completion of a concept selection effort that led to adoption of a

liquefaction site at Nikiski in 2013, and passage of favorable oil and gas production tax

legislation in the form of S.B. 21 in 2013, the parties entered into a Heads of Agreement

(“HOA”) in January of 2014 to jointly advance the AKLNG Project.

The effort resulted in passage of S.B. 138 in 2014, and termination of AGIA shortly thereafter.

Under the HOA, S.B. 138, and the subsequently executed preliminary front-end engineering and

design (“Pre-FEED”) Joint Venture Agreement, the State is again focused almost exclusively on

a Producer project (the ASAP effort is largely on hold). Like the failed SGDA process before it,

the AKLNG process requires the State to negotiate project terms and schedules that are

acceptable to every Producer.

One distinction between the SGDA and the AKLNG Project, in addition to the latter being an

LNG project, is that negotiation of the fiscal deal is being progressed concurrently with initial

technical work. Thus, although Pre-FEED work is occurring, each party reserves and expects to

exercise its right to not do additional technical work – including entering into FEED – unless the

fiscal and commercial contracts are satisfactory and the Project otherwise meets internal

corporate priorities to move forward.


II. COMMERCIAL CHALLENGES SPECIFIC TO THE AKLNG FRAMEWORK

The remainder of this report analyzes the major commercial challenges presented by the

AKLNG framework from the State’s perspective.

A. There is no alignment on when the AKLNG Project should begin FEED or

construction, and time delays kill many projects.

The AKLNG Project and S.B. 138 were based on an assumption that all three Producers were as

motivated as the State was to bring an LNG project to fruition as soon as reasonably possible.

There was a basic failure to realize that each Producer has their own individual economic and

strategic concerns that will dictate their view of when the AKLNG Project should proceed. Until

there is alignment into a single view, individual participants within the AKLNG process are not

incentivized to agree to finish the commercial agreements necessary to advance AKLNG. The

divergence of views appears exacerbated by the prolonged depression of oil prices and its impact

on the ability of each company to make capital expenditures of the magnitude required by the

Project.1 Part of the lack of alignment derives from some Producers having other LNG projects

that are competing with AKLNG, both in terms of markets and access to corporate capital. An

unfortunate consequence of this process is the AKLNG Project will only proceed on a pace set

by the schedule of the Producer who is most reluctant to proceed.

This results in all parties negotiating to the least common denominator (again). Because all

AKLNG parties must agree on every issue of every commercial agreement, the party that most

wants a project is pressured to make the most concessions to advance the Project. As the party

with the strongest interest in an Alaska project progressing, the State is the party with the

strongest incentive to make concessions to progress the Project. At the end of the day, however,

external events relating to one or more Producers may dictate that no project goes forward under

the SB 138 process no matter what concessions are made.

To mitigate the issues presented by the requirement that all AKLNG participants align in order to

progress the Project, the State must attempt to achieve the following:

1. The State must have the ability to prevent any AKLNG partner from causing

unreasonable delay to the Project schedule, or to proceed without an AKLNG

partner who unreasonably delays; and

2. If one or more Producers withdraw at any point from the Project, the State must

have the ability to acquire that party’s interest in the Project and get a reasonable

commitment from the withdrawing party (or parties) to toll gas through the gas

pipeline and liquefaction facilities, or sell its gas to the State so that the State can

proceed with moving forward without delay.

The State is currently in the process of negotiating a withdrawal agreement and milestones to

deal with these points. However, it is unclear if the State will be able to successfully negotiate a

1 Goldman Sachs states oil could go as low as $20. See Exhibit 1


reasonable agreement that will ensure the State will have the gas commitment and engineering

data to proceed without having to duplicate the work already performed on AKLNG.

B. A 42” pipeline is unlikely to incentivize future exploration and development by

third parties.

Early on in the AKLNG Project, it was recognized that there was a fundamental difference

between the State of Alaska’s primary design criteria and the Producers’ preferences on sizing

the AKLNG pipeline. Each Producer was focused on the lowest cost transportation capacity

needed to monetize their own Prudhoe Bay Unit (“PBU”) and Point Thompson Unit (“PTU”)

resources. Under this design basis, the 42 inch diameter pipe is the best option, even though it

does not easily accommodate entrance of new gas into the Project until after PBU and PTU come

off plateau and begin to decline. The State of Alaska is more broadly focused on encouraging

opening up the North Slope’s gas resources to development and exploration beyond PBU and

PTU, as anchor fields for AKLNG, and the capability to serve greater in-state needs. Without

question, the best way to put more oil into TAPS is to have a gasline that allows new companies

who explore for oil to ship their newly found gas to market while exploring for oil. The 48 inch

pipe is a much better option to meet these requirements. The State’s modeling indicates that the

additional cost to build the 48 inch pipe will be repaid due to the lower operating costs resulting

from the larger volume, more efficient pipeline after the first 14 years of operating. Nonetheless

there is resistance to allow easy access and low cost expansion to third parties.

The pipeline sizing debate is a key decision that the State considers as a Project priority, because

it is the State that has the highest interest in encouraging exploration and making sure other gas,

if discovered, has access to the system. When attempting to determine the optimum pipeline

diameter, there are many factors that influence the final selection. The importance of each factor

varies with the perspective of the decision-makers. Some of the main factors are described

below:

1. Capital Costs: For the base case throughput, the 42 inch pipe is the lowest

cost option. The 48 inch pipe, transporting an equal amount of gas, will cost

more. But the incremental cost of purchasing and installing the larger, heavier

pipe is largely offset by the fact that the 48 inch pipeline only requires 4 or 5

compression stations in comparison to 8 for the 42 inch.

2. Operating Costs: Again, at the base case throughput, the 42 inch has a lower

cost of service than the 48 inch largely because of the lower initial capital

cost. But because the 48 inch pipeline burns less fuel (there are fewer

compression stations), and needs less maintenance, the larger pipe over time

begins to overtake the smaller, less efficient pipe. If one assumes a cost for

fuel of $4 per thousand cubic feet (“mcf”), then the additional investment in

the 48 inch pipe will be recouped after 14 years of production.

3. Expansion: The 42 inch pipeline can be expanded by up to 1 billion cubic feet

per day (“bcf/d”). The 48 inch pipeline can be expanded by up to 2.3 bcf/d.

The incremental cost of expanding the 42 inch pipeline is double what it costs

for the same 1 bcf/d additional capacity with the 48 inch pipeline.


Furthermore, since expansion requires 10 additional compression stations on

the 42 inch pipeline compared to 4 on the 48 inch pipeline, operating costs for

an expansion are far less for the larger, more efficient pipe, which will be

almost 15% less expensive to operate if fuel gas is assumed to be $4/mcf.

4. Delay: A change in pipe size from 42 inch to 48 inch at this point could add

6-8 months to the pre-FEED deliverables but should not cause a significant

delay of a final investment decision (“FID”).

A significant amount of analysis regarding the risks and benefits associated with the 42 inch and

48 inch pipe sizes has been done and will be provided in a supplemental report to the legislature.

C. The ownership interests in PBU and PTU are significantly different among the

three Producers, and the two fields are at very different stages of development.

The current ownership interests in PBU and PTU are depicted below:

PBU PTU

EM 36% 62%

CP 36% 5%

BP 26% 32%

PBU is a mature field with a great deal of knowledge about the gas resource and length of

plateau. PTU is a less mature field with much less knowledge of its gas resources and length of

plateau. ExxonMobil with 62% of PTU and BP to a lesser extent with 32% of PTU have

tremendous economic incentive to be able to overlift their gas from PBU to provide security for

LNG sales contracts on PTU gas that may stretch the bounds of current knowledge of PTU

resources. ConocoPhillips has approximately 40 times as much gas at PBU as it has at PTU.

Consequently, ConocoPhillips has no interest in taking any risk with respect to potential effects

from overlifting at PBU to support PTU. ConocoPhillips is incented to either minimize or

eliminate any potential for long term risks associated with having PBU support problems or a

shorter plateau at PTU, or to be currently compensated for any support it will provide.

The problems associated with disparate ownership in the two fields among Producers can be

alleviated by a gas balancing agreement with specific constraints on (or cash compensation for)

the use of PBU gas to support PTU. Unfortunately, because the State is not an upstream owner,

there is little the State can do as a negotiating party in this situation except encourage the parties

to act in a reasonable manner to resolve the current impasse. It may be that this issue will not get

resolved until there is alignment by all parties to proceed as soon as reasonably possible.


D. There is uncertainty regarding the role of TransCanada.

Currently, TransCanada owns 25% of the gas treatment plant (“GTP”) and 25% of the pipeline

portion of AKLNG. AGDC currently owns 25% of the LNG facilities; if the State terminates the

TransCanada relationship, AGDC will own 25% of the entire Project. A decision on

TransCanada’s role in the equity of the AKLNG Project has not yet been made, but the State has

prepared an analysis of the risks and benefits associated with buying out TransCanada’s

ownership in the midstream.2 Having a third-party be responsible for part of the Project

development costs and the equity commitment is advantageous in that it reduces the pre-

operation capital requirements for the State. However, the State’s analysis indicates that

TransCanada’s participation in the Project is very expensive and reduces alignment between the

State and the Producers. The analysis indicates that the State’s revenue from the Project could

be increased by an average of about $400 million per year during the first 20 years of operation if

AGDC takes on TransCanada’s portion of the pipeline and GTP. Additionally, if TransCanada is

in the Project, the State cannot act as a full partner with the Producers, and the State’s

information and control over the entire Project is reduced.

The termination of TransCanada must occur prior to the end of 2015. DNR will owe

TransCanada shortly after it issues a Notice of Termination a payment equal to roughly $80

million depending on the date of termination. Funding that would have been available for such

an acquisition of TransCanada’s interest was removed from AGDC’s budget last session.

Therefore, to proceed, an appropriation request of the legislature will need to be made this fall.

In addition, an appropriation request by AGDC will be needed to cover future expenditures

related to the 25% interest in the GTP and pipeline that TransCanada would be transferring to

AGDC. If the State exercises its option to terminate TransCanada’s participation in the Project,

failure by DNR or AGDC to obtain appropriations to reimburse TransCanada and fund AGDC’s

participation in the midstream portion of the Project will substantially impair the ability of all

AKLNG parties to move the process forward. It is therefore essential that members of the

legislature review the attached study and understand the benefits associated with the buyout of

TransCanada, as well as any associated risks.

E. The Commissioner of DNR cannot make the RIK/RIV determination without

fully-termed project-enabling agreements.

The Commissioner of DNR is required to make a statutory finding that taking either royalty gas

in kind or in value is in the best interest of the state when deciding how to dispose of the State’s

gas. The DNR Commissioner must analyze the difference in benefits to Alaska between taking

royalty in kind (“RIK”) and taking royalty in value (“RIV”). Pursuant to S.B. 138, the

Commissioner is authorized to make lease amendments locking in either RIK or RIV during the

Initial Project Term (expected to be 25 years) to provide certainty on the gas volumes that the

State and the Producers will each have available for long-term gas sales contracts. Under typical

lease terms, DNR can switch back and forth from RIK to RIV, and vice versa, on 90 days’

notice. Pursuant to Section 8 of the HOA entered in to by all AKLNG parties, the

2 DNR retained Black & Veatch (“BV”) to do a study of the pros and cons of terminating

TransCanada’s status in the Project.


Commissioner’s royalty election – giving up the State’s right to switch between taking RIK and

RIV, and deciding on one or the other for a period up to 25 years – is subject to the execution of

project-enabling agreements that include “satisfactory arrangements for disposition of the State’s

share of LNG.” The DNR Commissioner therefore cannot make a RIK election until the parties

have agreed to project-enabling contracts that include satisfactory arrangements for disposition

of the State’s LNG. Although Commissioner Myers has begun the royalty election

determination process, the Producers’ unwillingness to finalize any of the project-enabling

agreements has prevented Commissioner Myers from completing that analysis.

Without fully-termed commercial agreements that establish how the State will receive and

dispose of its royalty gas share, Commissioner Myers cannot confirm that taking royalty in kind

is in fact in the state’s best interest, nor can he determine that taking royalty in value would

instead be in the best interest of the state, as contemplated by AS 38.05.182. This problem

therefore requires that the parties reach alignment on fully-termed project-enabling agreements.

F. The parties are not aligned on whether the State should pay Field Cost

Allowances.

The 1980 Prudhoe Bay Unit Royalty Settlement Agreement requires the State to pay field costs

for gas royalty produced from DL-1 leases associated with a major gas project (like AKLNG),

whether the State takes the gas RIK or RIV. The State’s position is that no field costs should be

paid to the Producers, even for PBU gas covered under the 1980 PBU Royalty Settlement

Agreement, because the Producers can deduct such field costs as leasehold expenditures against

their oil production tax, and also because the State is investing in 25 percent of the AKLNG

Project. There is not alignment on this issue.

G. The Producers are unwilling to move forward without more fiscal certainty than

the State is willing to provide.

The Producers have made clear that fiscal certainty is a threshold issue that is required to move

forward on any North Slope natural gas project. The State has entertained requests from the

Producers that it provide certainty on AKLNG property taxes and gas production taxes for 25

years, and that it agree to not impose a gas reserves tax during the construction period. However,

certain Producers have indicated an expectation for greater fiscal certainty on unrelated taxes and

it has not been confirmed that all Producers will proceed without fiscal certainty on oil.

The State has consistently messaged to Producers that the State is unwilling to provide fiscal

certainty on oil for this Project. It is the Administration’s belief that the people of Alaska will

not support a constitutional amendment that authorizes fiscal certainty on oil and unrelated taxes,

and the economics of the Project do not require it. The State is concerned that offers made

during past gas project negotiations, such as the SGDA, established Producer expectations that

are unrealistic.


H. The parties disagree on the form of dispute resolution.

The State has consistently messaged to Producers that the State will follow its standard

administrative and procedural processes and resolve disputes in Alaska under the State of

Alaska’s sovereign systems and under Alaska law. The State is unwilling to change the way

disputes are resolved in Alaska, and agreements to which the State is a party should provide for

the standard process for dispute resolution. It is also unacceptable to the State to surrender

application of Alaska law to the Project as a general proposition. Although there has been little

dialogue on this issue so far, the State has made it clear that it will not progress agreements to

final form without resolution on dispute resolution mechanics and agreement that Alaska law

will govern this Project. Unless each Producer agrees to respect the Alaska’s laws and

administrative and judicial processes, the parties will be unable to reach agreement on

commercial contracts. Simply put, the State will no more agree to cut the judicial branch of

government out of this process than it would agree to remove the legislative or executive

branches.

I. The Project as currently structured will make project financing more difficult.

The current AKLNG ownership model being put forward by the Producers is both untested and

raises a number of complexities that would need to be addressed, particularly given the scale of

the AKLNG financing requirement. The structure differs from the more integrated “buy/sell” or

tolling based common financings that have been customary models for LNG liquefaction

projects. Because each member (or its affiliate) will separately market its LNG entitlement

under an “equity lifting” mode (although there is scope for the State to market jointly with one or

more of the Producers or their affiliates), the LLC will not have any independent revenue stream;

the LLC will not buy or sell LNG, nor will a toll be paid by the members for use of the

midstream or downstream assets. Thus, the LLC itself will not have any capacity to raise

financing under a common project financing of the sort that has been the feature of most, if not

all, precedent LNG project financings. The State believes that the current Project structure must

be revisited in order for the Project to be successful.

In conclusion, the project process adopted by S.B. 138 poses serious challenges that make

AKLNG very difficult to progress in a manner, and on a timeline, that can maximize benefits to

Alaskans. A fundamental issue is the underlying assumption that governed the drafting of S.B.

138: that all parties would be equally motivated to get a project done in a reasonable time. This

assumption has been proved by history, and within the current process, to be invalid.

Additionally, a significant challenge to the State in advancing a project process under S.B. 138 is

that the framework gives little to no negotiating leverage to the State.

Cohesion between the Administration and the legislature regarding how the State can gain better

leverage to pressure development of a project is essential. As the “owner” of this resource, we

must work together to successfully identify a meaningful resolution to the current difficulties.

9/15/15Total # of

Meetings

QUORUM = 7 Meeting Held: Yes / No Yes 27

NAME ORGANIZATION % Attend % Absent

1 Atchison, Anna Kinross Fort Knox Mine x 15 56% 44%

2 Bump, Jennifer Wells Fargo Bank Alaska x 23 85% 15%

3 Cook, Jeff Flint Hills Resources 15 56% 44%

4 Lefebvre, Sarah Exclusive Paving x 14 52% 48%

5 Mahlen, Jenny First National Bank Alaska x 21 78% 22%

6 Miller, Derek (CHAIR) UAF x 27 100% 0%

7 Obed, Sarah Doyon, Limited x 16 80% 41%

8 Randolph, Tammy State Farm Insurance 18 67% 33%

9 Ringstad, John BP 20 74% 26%

10 Shaw, Lorna Pogo Mine 15 68% 32%

11 Solie, Rick Tower Hill Mines - Livengood Project 17 63% 37%

12 Van Horn, Tiffany Golden Heart Utilities x 12 44% 56%

Quorum Established: Yes / No Yes 27

Committees members are expected to attend at least 75% of regularly scheduled meeings.

Currently, 4 of 12 members are meeting the attendance expectations

Government Relations Committee 2015 Member Attendance

2015 Government Relations Important Dates

(events, comment periods, etc.)

October 12-14 Alaska Chamber Policy Forum at Westmark Hotel

23 Worker’s Compensation Fee Schedule Online Comment Deadline https://aws.state.ak.us/onlinepublicnotices/notices/view.aspx?id=178337

28 Transforming Business with IOS 1:00pm-4:30pm 29 Worker’s Compensation Fee Schedule Hearing (Anchorage) 10:30am

November

3 Fish On! Marketing & Selling Naked Seminar 8:00-11:30am Carlson Center http://business.fairbankschamber.org/events/details/fish-on-marketing-

selling-naked-seminar-13039 4 IEP Town Hall Meeting 5:30pm-8:30pm Pioneer Park Civic Center 17 Hilcorp / BOEM comment deadline

http://www.boem.gov/uploadedFiles/BOEM/About_BOEM/BOEM_Regions/Alaska_Region/Leasing_and_Plans/Plans/2015-09-18-LibertyDPP.pdf

https://aws.state.ak.us/onlinepublicnotices/notices/view.aspx?id=178337

http://business.fairbankschamber.org/events/details/fish-on-marketing-selling-naked-seminar-13039

http://business.fairbankschamber.org/events/details/fish-on-marketing-selling-naked-seminar-13039



September 1: Alaska Bankers Association by Steve LundgrenSeptember 8: University of Alaska System by President Jim Johnsen

September 15: Unmanned Aircraft Systems by Ro Bailey

September 22: United Way Campaign Kick-Off by Bill & Meadow Bailey

September 29: Fairbanks North Star Borough Mayoral Candidate Forum and debate *Location - Pioneer Park Civic CenterOctober 6: State of the Fairbanks North Star Borough School District by Dr. Karen Gaborik

October 13: Joint luncheon with Alaska Chamber featuring Alaska Arlines

CEO Brad Tilden *Location - Westmark Hotel Gold Room

CREDIT CARD ONLY; RESERVATIONS REQUIRED

October 20: Energy Efficiency: An investment opportunity you can’t afford to delayOctober 27: Doing Business with BP

November 3: Excellence in the Workplace by Pat McGaughey

November 10: Education’s trajectory by Commissioner Mike Hanley

November 17: U.S. Chamber of Commerce: Environment, Technology & Regulatory Affairs Division by Bill Kovacs

December 1: In Progress

December 8: Annual Membership Meeting last meeting of 2015 Register now on Fairbanks Chamber’s event calendar

$20/person for members, $25/person for general public *includes lunch buffet $160/table of 8 *includes lunch buffet $5 program fee *includes coffee and water service only

GOVERNMENT RELATIONS MEETING...

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