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AGIA moving forward Clears first committees; Alaska legislators want approval rights, not just denial By Kristen Nelson Petroleum News
The governor’s Alaska Gasline Inducement Act has cleared its first committees in both the House and Senate. Senate Resources passed out a committee substitute for Senate Bill 104 April 1, followed closely by the House Special Committee on Oil and Gas which moved a committee substitute for House Bill 177 April 3.
Senate Judiciary began hearing SB 104 April 4, and will hear the bill daily beginning April 11 after legislators return from the Easter break. House Resources has scheduled daily hearings on HB 177 beginning April 10. Both bills also have referrals to Finance.
Both Senate President Lyda Green and House Speaker John Harris have said they want AGIA passed this session.
AGIA is the proposal of the administration of Alaska Gov. Sarah Palin to offer inducements to a pipeline builder to get a project started to take Alaska North Slope gas to market, combined with inducements to the North Slope producers to get them to commit their gas to a line in an initial open season.
The state is proposing to contribute matching funds of up to $500 million, money the administration has said the state will get back both in a quicker project and in reduced tariff rates.
The commissioners of Natural Resources and Revenue would review applications under AGIA, including public comments, and make a determination. All applications, minus confidential material, will be made public. Legislators will have access to the confidential information upon signing confidentiality agreements.
Legislators stake out positive approval Both committees worked the administration’s proposal intensely, and made changes proposed by committee members, the administration and legislative legal services.
House and Senate both disagreed with the administration’s proposal giving the Legislature 30 days to disapprove a license granted by the administration if legislators felt the wrong choice had been made. If the 30 days passed with no legislative action, the license would be final.
The Senate bill gives the Legislature 60 calendar days to approve the issuance of the license by resolution. The House version calls for a bill approving the license and gives no timeline for such a bill to be passed.
Administration officials presenting the bill, led by Commissioner of Revenue Pat Galvin, have expressed concern that depending on how much time the Legislature takes in its approval phase, a licensee could lose the summer field session of 2008, delaying the project by a year.
Both committees added a requirement that a licensee commit to negotiate a project labor agreement prior to the beginning of construction. Inclusion of a project labor agreement was the dominant change requested in the bills in public comment.
Evaluation criteria based on cash flows Both committees expressed concern over the administration’s original proposal for application evaluation criteria and while the House and Senate committee substitutes are not identical, they both base primary ranking of the projects on the cash value the state would receive from a proposed project. Other factors to be considered include such things as how quickly the applicant proposes to begin construction and how quickly the project will begin commercial operation.
In evaluating the project’s likelihood of success the commissioners are given a number of things to consider including reasonableness, specificity and feasibility of the work plan, the applicant’s plan to manage cost overruns and encourage shippers to participate in the first binding open season and the applicant’s financial resources, experience and record of performance.
Rolled-in rates an issue Both committee substitutes made changes in the requirement for defending rolled-in rates at the Federal Energy Regulatory Commission. Galvin said the administration symmetry in the requirements that both the licensee and the shipper — in exchange for inducements for committing gas to an initial open season — commit to defend rolled-in rates at the FERC up to an increase of 15 percent over initial rates. The FERC will actually make the decision on rolled-in rates, and has a rebuttable presumption in favor of rolled-in rates on tariffs for the Alaska gas pipeline.
Both committees changed this requirement.
Rep. Ralph Samuels, R-Anchorage, said in House Oil and Gas that he was trying to find a middle ground on rolled-in rates and since the midstream entity must testify at the FERC in favor of rolled-in rates to get inducements, and since the FERC currently has a rebuttable presumption in favor of rolled-in rates, it seemed reasonable that the shippers may argue their own case, as long as FERC as the rebuttable presumption of rolled-in rates. That way, Samuels, said, the FERC can hear both sides. He said he was reticent to locking the state into arguing for a policy, and cited the requirement under the TAPS settlement methodology that required the state to argue in favor of TSM and the state ended up defending positions it didn’t like.
Galvin said the administration had significant objections to the change, which was adopted. He said the administration is very committed to rolled-in rates and noted that the state was not bound to speak in favor of those rates, just those who get inducements from making an initial shipping commitment. And, he noted, if it were in the state’s favor, it could always waive the requirement and allow them to testify in opposition.
Revolving loan fund House Oil and Gas worked through a lot of amendments, a number of which were offered by Rep. Mike Doogan, D-Anchorage, who provided cleanup language for the committee substitute, as well as a number of substantive amendments, some of which were accepted and some — including a ban on all confidentiality for application materials and a repeal of the Stranded Gas Development Act — were not.
Rep. Jay Ramras, R-Fairbanks, proposed and won acceptance for an amendment creating the Gas Utility Revolving Loan Fund to be administered by the Alaska Energy Authority to provide state-approved loans to gas utility companies only for constructing or extending new gas service in the state.
Galvin said the administration didn’t object but had some concern about adding too much too AGIA. “We do want to focus on the primary goal” of the gas line, he said.
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