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Alaska moves ahead on natural gas issues Funding closer for state project, private development negotiations Larry Persily Petroleum News Government Affairs Editor
With less than seven weeks left in the session, Alaska lawmakers are moving toward funding — and expanding — the state’s efforts to get a natural gas pipeline built.
The Senate Finance Committee has approved a bill adding to the job of the Alaska Natural Gas Development Authority to include consideration of a state-owned gas line to Canada in addition to its original task of preparing a project plan for a line to Valdez and construction of a liquefied natural gas shipping terminal at that port city.
The bill’s sponsor, Sen. Scott Ogan, R-Palmer, said he favors expanding the state gas authority’s list of options because he does not believe a stand-alone LNG project is economically competitive against the strong supply of cheaper gas around the Pacific Rim. The only hope for an Alaska LNG project, the Palmer Republican said, would be as a cost-sharing branch of a larger gas line through Canada to Lower 48 markets.
“It is important that we expand (the gas authority’s job) … to allow them to look at building a line all the way to the border,” Ogan told Senate Finance, which passed his measure, Senate Bill 271, on March 23. The bill will go next to the full Senate for a vote, then to the House. Bill would give authority more time In addition to expanding the work assignment, the bill extends the due date for the gas authority’s project development plan from this summer to January 2005.
Meanwhile, later in the same day, the House Finance Committee agreed to a Senate-approved plan to appropriate $1 million for sharing between the state gas authority and the administration’s negotiations with two private ventures and possibly a municipal partnership that want to build a North Slope gas line to feed North American markets.
The full Senate approved the appropriation a week earlier, as Senate Bill 241, with action by the full House expected quickly. The money could be available by early April.
The administration has not said exactly how it would spend the $1 million or how much it would give to the state gas authority, which started the session in January with a request for $2.15 million for its own work. But the authority’s board supports the shared appropriation as the best way to get immediate funding for the consultants it wants to hire this spring.
“We would love to have the additional funds, but I seriously doubt it would get out of the Senate,” gas authority board member Bob Favretto of Kenai told the House Finance Committee on March 23. More money possible later in session The Senate Finance Committee on March 17 deleted the $2.15 million gas authority appropriation and replaced it with the $1 million shared appropriation to cover expenses this spring and early summer — with a statement that both the authority and the administration could request additional funding in next year’s budget being drafted by lawmakers.
“I’m disappointed that they are willing to settle,” House Finance member Rep. Eric Croft, D-Anchorage, said of the gas authority’s support for the lower, combined appropriation.
Croft tried unsuccessfully in committee to amend the measure to boost the total to $3 million, shared 50-50 between the gas authority and the administration, or even $1 million but with explicit language that the money must be split in half between the two needs.
In material handed out to the House Finance Committee, the gas authority said it needs funding for consultant contracts covering possible business structures and tax consequences for a state-owned gas line, estimates for building a spur line to serve Southcentral Alaska, construction estimates for building LNG tankers and a shipping terminal at Valdez, and market prices and forecasts for LNG sales around the Pacific Rim. Authority looks forward to additional funding Not all of the work needs to be done this spring, said Harold Heinze, chief executive officer of the gas authority, adding that the board looks forward to receiving additional state funding for the fiscal year that starts July 1.
The Department of Revenue told House Finance it needs money for its own consultants to study the possibilities for a petrochemical industry in Alaska, in-state uses and benefits from North Slope natural gas, social and economic effects on the state of a pipeline construction boom, and a risk analysis of a gas line project.
The administration is in negotiations with two applicants under Alaska’s Stranded Gas Development Act for a long-term fiscal contract in lieu of all state and municipal taxes on a gas line project. Although the law allows the state to charge the applicants for the cost of consultants hired to assist the state in the negotiations, not all of the expenses can be charged to the companies, said Deputy Revenue Commissioner Steve Power.
Another financial issue is that one applicant — the three major North Slope producers — has agreed to reimburse the state for much of its expenses, while the other private applicant — Iowa-based pipeline operator MidAmerican Energy Holdings Co. — has so far declined to sign a similar reimbursement agreement. Senator prefers private ownership Private construction and operation of a gas line is preferable to a state-owned project, Ogan told the Senate Finance Committee. “I don’t think that’s an appropriate role for government,” he said, adding, however, that state ownership is an option if that’s what it takes to get a project built.
The state also is considering a project application from the Alaska Gasline Port Authority, a partnership of the Fairbanks North Star Borough and city of Valdez. The two municipalities want to build and own the gas line, sharing the profits with the state and other municipalities.
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