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Legislature working in-state gas issue House, Senate bills alternately set up in-state gas team in governor’s office under AFHC, move in-state line to Alaska Railroad Kristen Nelson Petroleum News
With supplies of natural gas tightening in Southcentral Alaska — and Fairbanks in need of a more reasonably priced fuel than diesel — concern has been growing about how long it is likely to take a major North Slope gas pipeline project to materialize, and whether the state shouldn’t be doing something on its own to get gas to Alaskans.
In the summer of 2008 the Alaska Natural Gas Development Authority was tasked by former Gov. Sarah Palin with developing a standalone line from Cook Inlet to Fairbanks which would encourage additional drilling in Cook Inlet by expanding the market and also provide natural gas to Fairbanks. Once a main line was in place from the North Slope, the standalone line could be reversed to carry North Slope natural gas to Southcentral.
That project was in addition to ANGDA’s work designing a spur line into Southcentral, investigation into a bullet line, working with electric utilities in preparation for an open season on the main gas pipeline and a plan for a propane facility on the North Slope so that fuel would be available for Alaska communities which will not be reached by a gas pipeline.
In early 2009, then-Gov. Palin established an in-state gas pipeline project in the governor’s office, naming Harry Noah as project manager. The governor’s goal was to supply the Railbelt with natural gas within 5 years.
Multiple projects The Alaska Legislature has been worrying about management of multiple in-state gas pipeline projects, especially since last year when Noah, then the outgoing in-state gas pipeline project manager, told legislators there were too many plans in play.
“We are pulling this way and we’re pulling that way,” and while good people are involved on the different projects, “one side just wants to kill the other side,” he told a mid-December meeting of House Resources.
There’s a lot of energy, Noah said, “but we’re not actually moving forward.”
His most telling point probably came when he said: “And quite honestly, the Legislature’s funding most of these.”
Two bills are now moving in the Alaska Legislature — one passed the House March 24 and the other is in Senate Finance — which would consolidate in-state gas pipeline efforts.
Both initially targeted the Alaska Railroad to head up the effort, but after the railroad’s president and CEO, Pat Gamble, was named to head the University of Alaska system, the House bill was changed. It still includes the Alaska Railroad on the in-state gas pipeline team, but the team will now be headed by the Alaska Housing Finance Corp.
The Senate bill moves the entire standalone or bullet line project to the Alaska Railroad.
HB 369 team in governor’s office Work on in-state and spur gas pipelines is currently housed in the governor’s office (the in-state gas team) and in the Department of Revenue (ANGDA).
House Bill 369, whose prime sponsor is House Speaker Mike Chenault, R-Nikiski, establishes a joint in-state gas pipeline team in the governor’s office consisting of the Department of Transportation and Public Facilities; the Alaska Railroad Corp.; the Alaska Natural Gas Development authority; the in-state gas line project manager; and the Alaska Housing Finance Corp.
The CEO of AHFC is the chair of the development team, which “may hire staff, enter into contracts, and exercise other powers necessary to carry out its functions.”
Chenault said in a sponsor’s statement that the goal of the bill is “to expedite the process for an in-state natural gas pipeline” and to combine the two entities currently working on the project, ANGDA and the in-state gas pipeline coordinator.
The team is to present the Legislature with a development plan for an in-state gas pipeline by July 1, 2011, specifying and documenting how an in-state gas pipeline can be “designed, financed, constructed, and made operational” by Dec. 31, 2015.
A written monthly report to all legislators is required, including contracts with scope and amount; accounting of all funds spent; and a schedule of work to complete the in-state gas pipeline project plan.
The proposal calls for the plans, rights of way and permits to be turned over to a private entity.
$10.65 million The price tag on HB 369 is $10.65 million, with $6.81 million, an increase from $6.5 million in the current operating budget request “to include commercial analysis of downstream industrial opportunities,” public outreach and information and office space for seven staff during the first year.
Among the agencies funded is the Department of Revenue, where a $1 million item presumably covers ANGDA’s work, itemized as:
• Identify opportunities for delivering North Slope gas to rural and maritime Alaska;
• Identify and negotiate with potential gas suppliers and potential gas consumers;
• Develop pro-forma financials for the project;
• Develop a partnering agreement with a pipeline company;
• Provide a design, construction schedule and cost estimate for a liquefied natural gas plant; and
• Develop and execute a public information and outreach plan.
Other department breakouts include the Department of Environmental Conservation, the Department of Transportation and Public Facilities, with funds included for the Department of Natural Resources State Pipeline Coordinators Office for costs associated with the right-of-way permitting process and work by the commissioner’s office.
$34.22 million to railroad Senate Bill 287, which passed Senate Resources and March 23 and is now in Senate Finance, moves the authority for a standalone pipeline project to the Alaska Railroad, defining the project as a gas pipeline system to move natural gas from Prudhoe Bay or Gubik to markets in Anchorage and Kenai and to customers along the way. The route is described as along the Dalton Highway corridor and from Fairbanks either down the Parks Highway into Southcentral or via the Richardson and Glenn highways.
SB 287 says this project “is compatible but not competitive with the project described in and authorized by AS 41.41 or the project described in and authorized by AS 43.90. AS 41.41 is the ANGDA statute; AS 43.90 is the Alaska Gasline Inducement Act, the state’s bid to get a North Slope to market main line moving.
SB 287 directs the railroad to establish a subsidiary for the pipeline work, provide monthly reports and — in addition to working on the standalone pipeline project — “initiate a cost study for construction of a gas-to-liquids facility.” Sen. Lesil McGuire, R-Anchorage, co-chair of Senate Resources, the prime sponsor of the bill, has a strong interest in GTL.
A $34.22 million fiscal note from the Alaska Railroad notes that the standalone pipeline project “is well outside ARRC’s norms, both in type and size.” The note says the $34.22 million would be the “funding necessary for ARRC to bring the project through permitting and preliminary phases. Construction costs are not included at this junction. Also excluded from this analysis are estimated costs to be incurred by a pipeline company or other entity that would presumably complete design and build the project.”
The railroad’s unique bonding ability under Internal Revenue Service statute is a plus cited by legislators, since the tax-free bonds would reduce the cost, and hence the tariff, for a pipeline project.
The existing projects Gene Therriault, the governor’s senior energy policy adviser, told the ANGDA board March 19 that “the basic feeling in the administration is that we are in the process of doing the work that we were tasked with in the appropriation that was made last year and the direction that was given attached to that appropriation.”
“But if for whatever reason the Legislature feels like they need a different setup on the in-state work or the bullet line, we’re willing to enter into discussions with them.”
Therriault said the fact that the in-state gas pipeline project was housed out of the governor’s office “is certainly a little bit unusual,” as a project in which the state participates is generally housed in one of the departments working on the effort — the Department of Transportation for building roads or AHFC for gathering financing.
He said the governor has indicated to the sponsors of the various bills that he will work with them as they shape their legislation and “if a bill does pass the administration would like it to have realistic deadlines.”
Bob Swenson, named by Gov. Sean Parnell to replace Harry Noah as head of the in-state gas line project in late December, told the ANGDA board that while he wants to work with ANGDA, his budget lapsed Feb. 28 and so he has no ability to change existing contracts in favor of combining efforts on the permitting process.
Swenson will be walking the ANGDA board through the status of the standalone project’s permitting at a March 26 workshop.
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