Energy Council provides entry to D.C.

Alaska legislators visit White House, FERC, Interior, Congress while in Washington; push gas line issues, hear concerns

Kristen Nelson

Petroleum News

Alaska legislators were in Washington, D.C., the first week of March for Energy Council — and for an opportunity to lobby elected officials and regulators about Alaska’s energy issues, particularly the gas line.

Since the new administration is Democratic, Democrats scored big: A meeting with Senior Advisor Pete Rouse in the White House.

Rep. Les Gara, D-Anchorage, said in his constituent e-mail that he and Anchorage Sens. Hollis French and Bill Wielechowski, both Anchorage Democrats, arranged the meeting to talk about the Alaska gas pipeline.

“It’s a major part of President Obama’s long-term energy plan,” Gara said. “It’s not clear that the state can make this project happen on our own,” because the North Slope producers can block the project by refusing to sell their gas into a pipeline. The state has tools to fight back, he said, but pressure from the federal level would help.

“Pete Rouse sounded fascinated, his comments were thoughtful, and he appeared to appreciate the Alaska insight. I really like it when I get to see bright people running the country,” Gara said.

French and Wielechowski described the meeting in a March 6 Senate Bipartisan Majority Coalition press call from D.C.

“President Obama has spoken about the natural gas pipeline on the campaign trail; he’s spoken about it since then; it’s on their radar,” French said, and they were able to spend half an hour “down the hall from the Oval Office talking about the gas pipeline and how important it is to our economic future.”

Wielechowski said the Obama administration hasn’t decided “exactly what specific steps they can take in Congress to try to make the gas pipeline more viable, or happen sooner or happen ... more on our timeline than the producers’ timeline.”

But it was “extremely encouraging to be able to speak to someone, to bring him up to speed on some of the hearings that happened last summer” and on some of the details on rates of return and tariffs.

“This project is our lifeline; this is what we need to keep our state viable in the next 20 years and it was just thrilling to be able to discuss it with someone who has the ear of the president,” Wielechowski said.

Notes from the FERC

Sen. Lesil McGuire, R-Anchorage, said that when meeting with FERC commissioners the group learned that FERC felt they have exclusive jurisdiction over the Kenai liquefied natural gas plant (see story in Feb. 1 issue of Petroleum News).

McGuire said legislators had heard rumors and found out when visiting FERC that the regulator had sent a letter earlier in the year “letting the Kenai plant know that they intended under the 2005 Energy (Policy) Act to assert control over LNG, over that LNG plant.”

There is a section in the Energy Policy Act talking “about pipes leading into and feeding LNG facilities also being under their jurisdiction,” she said, so there is an open question of whether an in-state gas pipeline selling to an LNG plant could also be under FERC regulation, rather than under the Regulatory Commission of Alaska.

She said the Legislature is going to ask FERC for an advisory opinion on whether FERC would assert control over an in-state gas pipeline which also provided gas to an LNG facility.

A public works project?

Rep. John Coghill, R-North Pole, said at a House majority press availability March 9 that he was not encouraged about the prospects for an Alaska gas line after the trip to Washington for the Energy Council.

He said because of the amount of natural gas that gas shales will be supplying to the Lower 48 the price is expected to stay low, so financing for the line will be under stress. Information presented on Lower 48 gas shale production included a need for more pipelines to move that gas to market and the tricky part for Alaska is how economically those lines can be built, Coghill said.

While the Alaska gas pipeline is a priority for the new administration, Coghill said he was worried that the federal government would be tempted to turn it into a public works project.

Asked about possible federalization at a March 10 Senate Bipartisan Majority Coalition, senators were quick to say they had not heard any suggestion of that while in Washington.

Wielechowski said that the Alaska Natural Gas Transportation Act allows the federal government to step in and build the line if the state and producers don’t get it built. He said he didn’t hear any discussion of that happening, but said based on evidence from last year’s special session “the project is clearly economic and I do think that if gas is not committed to the project that I certainly wouldn’t rule out the federal government stepping in and facilitating the building of a project.”

Sen. Bert Stedman, R-Sitka, said both projects, Denali and TransCanada, are on schedule to hold open seasons.

“We’ll know in probably 18 months where we stand. The federal government is not just going to get up one day and federalize that gas line,” he said.

Stedman said he was fairly confident that one of the proponents would have a successful open season “and then we’ll have the discussion on when we’re going to have first gas and what kind of infrastructure improvements the state really needs to get done and when.”

But with gas at less than four dollars and a tariff around that range, and with Lower 48 markets potentially being flooded with shale gas and LNG, “we need to keep our eye on the project at 15 and 20 years out and not get wrapped up in the moment,” Stedman said.

Watch the FERC

McGuire said to keep an eye out for the appointment the White House makes to FERC, noting that there are now three Republicans and two Democrats and there will soon be three Democrats and two Republicans.

Names being circulated indicated that the appointment would be an administration insider, she said, so the new commissioner will likely be “somebody who ... has the ear of the president of the United States.”

McGuire said they were told it was unusual for a FERC appointment to come directly from the president.

Another rumor that was circulating, she said, was that a federal reserve tax on gas in the ground is being considered, “that this administration may try to incentivize development of gas in the ground on the federal land holdings that it has by implementing a reserves tax.”