**Statement of**

**Drue Pearce,**

**Federal Coordinator**

**Office of the Federal Coordinator for Alaska Natural Gas
Transportation Projects**

**Senate Energy & Natural Resources Committee**

**Subcommittee on Energy**

**S. 1089, a Bill to Amend the Alaska Natural Gas Pipeline Act**

**May 22, 2007**

Thank you Mr. Chairman and Committee Members for this opportunity to
speak before the Subcommittee. The Legislation before the Committee has
not gone through the Administration's formal interagency policy review
process, and therefore I will be presenting the Administration's
preliminary views on the bill. However, there are several aspects of the
bill that will need technical correction or modification to conform to
policies that apply more generally elsewhere in the government and we
look forward to working with Committee to address those concerns.

For over thirty years there have been sustained efforts to bring Alaska
natural gas to the marketplace both in Alaska and the 48 contiguous
states. This effort is more important than ever to help assure adequate
natural gas supplies for the United States as the country develops a
comprehensive energy solution to take this great country through the
century. Technology and conservation will be an ever important part of
managing our energy needs. However, in the interim, certainty of supply
is critical. Marketizing the vast Alaskan North Slope natural gas
resources is an important step in assuring energy demand is met.

Recently, the State of Alaska has taken an important step in helping to
secure a pipeline to transport natural gas to the American people. The
State legislature enacted Governor Palin's legislation, the Alaska
Gasline Inducement Act (AGIA), providing inducements, including
financial contributions, for construction of the pipeline. This is an
important complement to the inducements provided by the United States in
ANGPA and previously in the Alaska Natural Gas Transportation Act of
1976 (ANGTA).

Despite the fact that efforts have been underway for thirty years to
encourage private sector construction of a pipeline project from Alaska
through Canada into upper Midwestern markets, timely permitting still
remains critical to the success of any project of this magnitude.
Estimates now place the cost of one potential project, a nearly 3,000
mile pipeline, at \$30 Billion. Regulatory delays or excessive
litigation can spell certain doom in the effort to bring this vast
natural gas reserve to domestic markets. First gas will not even be
shipped until ten years at the earliest after the initial private
investment. Congress recognized these concerns and took several steps to
facilitate the permitting process including expedited and streamlined
judicial review in the United States Circuit Court of Appeals for the
District of Columbia, required timelines for FERC's issuance of the
certificate of public convenience and establishment of the Office of the
Federal Coordinator.

The Office of the Federal Coordinator has a variety of responsibilities,
including coordination of federal participation with the expectation
that the federal regulatory process will be streamlined and delay
eliminated and, in coordination with the state of Alaska, responsibility
for monitoring and oversight of construction. The OFC also is vested
with authority for implementation of ANGTA authorities, for which a
right of way has been issued and is subject to renewal/expiration in
2010. Other federal agencies also have roles. It is anticipated that no
fewer than 18 federal agencies will participate in the decision process.
For instance, the Department of Energy is responsible for federal loan
guarantee implementation and the Federal Energy Regulatory Commission is
responsible for pipeline (National Environmental Protection Act (NEPA)
compliance and issuance of the certificate of public convenience.

The OFC currently is a small office permanently staffed only by the
Federal Coordinator. The Federal Coordinator has supplemented OFC staff
resources by personnel details from the Department of the Interior. The
OFC plans to remain a small office, with as few as five or six
professionals pending selection of a project by the state of Alaska. The
composition of the team necessary for proper functioning of the OFC is
highly dependent on the nature of the project selected by the state of
Alaska. Upon project selection, it is crucial that the OFC be able to
quickly hire personnel from the limited pool of individuals with the
qualifications necessary to efficiently carry out the functions of the
OFC. OFC staff will be concentrated in Washington D.C. and Alaska.

**Personnel Authorities**

This amendment provides the OFC authority to appoint and terminate
personnel without regard to the provisions of Title 5 of the United
States Code governing appointments in the competitive service. The OFC
is a temporary agency which sunsets one year after construction of a
project. The staffing levels and employee skill sets will vary depending
upon the project phases. For instance, the skill sets needed during the
permitting phase differ substantially from those necessary during the
construction phase. The office will maintain staffing at a core level
pending identification of a specific project for construction by the
state of Alaska. Not until a project is identified will it be prudent to
more fully staff the OFC. Project staff for a pipeline only project may
be very different from a project composed of a pipeline and liquefaction
facilities. In addition, there is a limited field of qualified
applicants available to assist the OFC given the specialized nature of
the potential projects and the OFC role. These limitations combined with
the need for timely efforts by the OFC make it useful to be able to hire
and terminate certain staff outside the regular federal hiring process
in order to remain responsive to project demands. The bill would address
those concerns with a blanket exemption from standard personnel hiring
procedures that apply to most other Federal agencies. While this type of
exemption would be advantageous for hiring of certain highly-qualified
staff, and is sometimes granted to agencies to fill positions with
special skills, it is rare for an exemption to extend to an entire
organization.

This authority is sometimes used for small agencies, especially those
with limited roles or fixed life spans. For instance, other agencies
with this authority include the Denali Commission and the Vietnam
Memorial Commission.

This amendment also gives the OFC authority to obtain the temporary or
intermittent services of experts or consultants pursuant to already
existing authority contained in 5 U.S.C. § 3109(b). This authority
allows for the hire of necessary staff resources on a temporary or
intermittent basis to deal with short term staffing, particularly with
regard to technical matters and short term needs. It is anticipated that
a variety of technical and professional services will be required on a
temporary or intermittent basis given the specialized nature of the
project to be constructed and the OFC functions.

Personnel hired pursuant to this authority may be compensated at a rate
not to exceed the maximum rate of basic pay authorized for senior-level
positions under 5 U.S.C. § 5376.

**Cost Reimbursement Authorities**

Given the regulatory coordination, monitoring and oversight role of the
OFC, it is appropriate to assess costs to the project proponent for
these services. This same approach has been adopted by the federal
government for other projects, such as with the Federal Land Policy and
Management Act of 1976 (FLPMA, 43 U.S.C. § 1734). Cost reimbursement
authority would provide supplemental funds to offset the cost to the
federal government of the OFC and reduce costs to the federal taxpayer.

We understand that the intention of the amendment is to grant the OFC
discretion to establish or change reasonable filing and service fees,
charges and commissions and to allow the OFC to require deposits of
payments and provide refunds in the same manner as currently is
authorized for the Secretary of the Interior under FLPMA.

We have concerns, however, that the language as drafted would not
provide such parallel authority to the OFC but would, in fact, result in
stripping the similar authority granted to the Secretary of the Interior
in FLPMA. We have developed amended language that will address this
issue and will provide it to the Committee. Because we do not want to
disrupt the Department of the Interior's land management program under
FLPMA, this issue must be addressed.

**Closing**

This concludes my remarks on the proposed amendments to ANGPA. To
summarize, the Administration has not completed its full review of the
bill and looks forward to further discussions with you and your staff.
The preceding comments represent the Administration's preliminary views
on the bill. The Office of the Federal Coordinator is open for business
and is excited about the prospects for the future of a natural gas
pipeline to deliver clean natural gas to domestic markets from Alaska
reserves. The Alaska state legislature has taken a big step in assisting
by passage of Governor Palin's Alaska Gasline Inducement Act. We
anticipate that the Governor will select a project in early 2008. The
Office of the Federal Coordinator will play an important role in
assuring a timely, safe and environmentally friendly project. Thank you
for your interest in this project so important to our Nation's energy
infrastructure.