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TC Alaska license reaches Senate floor Bill must be approved Aug. 2, or license fails; Bipartisan Working Group splits votes in ‘super committee’ vote to move bill Kristen Nelson Petroleum News
The TransCanada AGIA license edged out of the Alaska Senate Special Committee on Energy, the so-called super committee, by a vote of 7 to 5 the evening of July 30.
Senate floor debate was the next step; the Senate hadn’t gaveled in yet when Petroleum News wrapped up this issue midday July 31. The House passed the bill July 23 and the license fails if not approved by both House and Senate by midnight Aug. 2.
Amendments in the Senate are expected to include two offered and withdrawn in committee by Sen. Lesil McGuire, R-Anchorage.
Both amendments would delay implementation of the bill — which left the House stripped of an effective date — one for the commissioners of Natural Resources and Revenue to impose an appropriate indemnification for the State of Alaska against possible claims from withdrawn partners of the 1970s Alaska portion of the line, the other requiring mediation before the license can be issued.
McGuire, one of those voting against moving the bill, insisted the amendments were not meant as poison pills. Also voting against moving the bill were the committee’s chair, Charlie Huggins, R-Wasilla; its vice chair, Bert Stedman, R-Sitka; Senate President Lyda Green, R-Matanuska-Susitna; and Lyman Hoffman, D-Bethel, Stedman’s co-chair on the Finance Committee
The Senate special committee combines Senate Finance and Senate Resources, and brought 12 of the Senate’s 20 members to the table.
Members voting in favor of moving the bill were Sens. Fred Dyson, R-Eagle River; Kim Elton, D-Juneau; Donny Olson, D-Nome; Gary Stevens, R-Kodiak; Joe Thomas, D-Fairbanks; Tom Wagoner, R-Kenai; and Bill Wielechowski, D-Anchorage.
Dyson and Wagoner, both voting to move the bill, are in the five-member Senate Republican Minority. The 10 members of the 15-member Senate Bipartisan Working Group split their votes.
Former governors oppose AGIA The committee began the week with a rousing call from former Gov. Wally Hickel to reject colonialism and build an all-Alaska gas pipeline from Prudhoe Bay to Valdez.
“Don’t sell us out,” Hickel told the committee July 28.
He said Gov. Sarah Palin made the wrong decision in going with a line through Canada, but told legislators that if they reject the TransCanada Alaska AGIA license, he thinks Palin will re-embrace the all-Alaska line (Palin is a former supporter of the line to Valdez and liquefaction of gas for shipment).
Former Gov. Tony Knowles, a Democrat, also opposes AGIA, telling the committee he fears it would hinder — not promote — development of North Slope natural gas. The price of gas makes an Alaska gas pipeline commercially viable, Knowles said, and the state shouldn’t be giving an exclusive license, but should be stepping forward with a viable business plan.
He said AGIA is a “very wrong” decision for the State of Alaska and its “passage could snatch defeat from the jaws of victory.”
The state should put the AGIA license on the shelf and identify participants and areas of negotiation. The state has never been afraid to negotiate in 50 years of statehood, Knowles said, and shouldn’t be afraid to negotiate now.
Why not change The committee had a lot of questions July 29-30 for the administration and TransCanada.
Commissioner of Revenue Pat Galvin was asked by several members why AGIA couldn’t be changed.
Galvin said AGIA created a competitive process and if the terms of AGIA are changed now, the competitive process of the last nine months will be cast aside. He told the committee it would probably be cleaner just to vote no on the license and come back later and do a different one, although he said the administration doesn’t think that would be in the state’s best interest.
Don Bullock, an attorney with Legislative Legal Services, said legislators probably needed to compartmentalize things that were a problem with AGIA and things that were a problem with the applicant. If the applicant meets the requirements and doesn’t maximize benefits to the state, then maybe there is a problem with AGIA, he said.
Withdrawn partners an issue Some committee members were still concerned about the withdrawn partners’ liability, and whether the state should seek to be indemnified against such a liability. The withdrawn partners’ issue relates to the original proposal to build a line in the 1970s — and to the Alaska portion of the line only.
Galvin said there were two risk components — the risk the liability would be transferred into the tariff and the risk that a party joining TransCanada Alaska as a partner would become liable, if it were determined to be a real liability.
TransCanada has committed, he said, that if there is a liability they will not put it into the tariff.
Bonnie Harris, senior assistant Attorney General for oil and gas, said the legal perspective is consistent with Galvin’s explanation: Research hasn’t shown how issuing a license could create liability to withdrawn partners. And the state is protected on the tariff side by TransCanada’s commitment not to roll any withdrawn partners’ liability into the tariff, Harris said.
Galvin said if the state ever decided to become an equity partner with TransCanada, it would discuss the withdrawn partner liability with TransCanada again at that time.
Adding indemnification?
McGuire asked about amending AGIA to add indemnification for the withdrawn partner liability to the statute.
Galvin said adding indemnification would change the terms of AGIA invalidating the competitive process that produced the license.
Wielechowski asked what the harm would be if the AGIA must haves were amended to include a statement that anyone with a withdrawn partner liability must indemnify the state for that.
Galvin said he understood from both Bullock and Harris that by changing the must haves a requirement has been added to the state’s completeness review that TransCanada will not have met. The completeness review would be eliminated, he said, and would put the state back in a position of having to start the process over.
Commandeering gas Dyson asked TransCanada Vice President Tony Palmer to comment on a suggestion the committee had heard that gas would be commandeered in Canada. Dyson said it was his understanding that shippers put gas into the line and TransCanada would deliver it for them, and asked Palmer to talk about circumstances in which the government of Canada could commandeer Alaska gas.
Palmer responded that there is a treaty between the U.S. and Canada which protects gas in transit from one country into the other and back. He said some gas in TransCanada’s pipelines goes from Canada into the U.S. and back into Canada every day, so the treaty is applied to protect Canadian gas and would protect U.S. gas in the same way.
Palmer said he is not aware of how Canada could commandeer Alaska gas, and doesn’t know why it would want to as there is a surplus of gas in Canada which is being exported.
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