Crunch time for gas line in Juneau

Alaska legislative committees in end stretch for AGIA; North Slope producers ask for options in bidding on pipeline project

Kristen Nelson

Petroleum News

AGIA is in its final committees in the Alaska Legislature and with the finish line in sight the pressure is on legislators from both the administration and the North Slope producers.

The Alaska Gasline Inducement Act, the vehicle Gov. Sarah Palin plans to use to get a gas pipeline built to move Alaska North Slope gas to market, provides inducements to encourage competitive bids for a pipeline project.

The producers — BP, ConocoPhillips and ExxonMobil — were well on their way to cutting a contract deal with the previous administration, and do not want the procedure AGIA proposes, where fixed conditions must be met, favoring instead a more flexible approach in which each applicant could propose ways to meet the state’s requirements, rather than agreeing to meet the requirements the administration has laid out in AGIA.

The administration introduced the bill in early March and has worked with legislators on a number of changes, ranging from technical to substantive. Committee substitutes are now in Finance committees in both bodies.

Senate Finance hopes to have its work completed May 6. House Finance, which received the House version of the bill a few days behind the Senate committee, is targeting May 9 to complete its work.

The Legislature gavels out May 16.

House Speaker John Harris, R-Valdez, said April 30 that legislators are trying to avoid a conference committee to reconcile House and Senate versions of AGIA because of concern that would drive the Legislature into a special session.

There were three special sessions last summer and legislators do not seem anxious to spend another summer in Juneau.

House seeks flexibility as issue

As to the issue of whether the producers would — as they have said recently — not apply under AGIA, Samuels said it’s hard to know whether industry players are blowing smoke over AGIA or would participate.

Harris said that while there is some push to make AGIA as inviting as possible for as many people, he understands the administration’s view that it can’t be an open-ended process. One of the issues legislative leadership planned to discuss with the governor in an April 30 meeting was how much wiggle room there would be for requirements the administration wants to see in applications. If an application doesn’t meet each one of these to the letter of the law but is pretty darn close do you throw it out?

Samuels said he realized you couldn’t have complete flexibility, but would be interested in seeing how the AGIA process could be crafted to have more options without opening it wide open.

If the commissioners don’t want to choose an application, he said, they don’t have to.

Senate Finance wants more on table

Senate President Lyda Green, R-Wasilla, said she wasn’t sure that AGIA as written would attract anyone, but she said the meeting with the governor was productive and that the administration has heard areas of concern and was working on some of them.

Green said that some of the “must haves” in AGIA are “very, very dear to the administration” but that some legislators think that 100 percent of the items shouldn’t be required, although the more of those items an application has, the more favorably it would be received.

Sen. Charlie Huggins, R-Wasilla, chair of Senate Resource, the first Senate committee to work on AGIA, said Alaskans would like to have multiple applications.

“Does AGIA promote that? I don’t know the answer,” he said.

Sen. Bert Stedman, R-Sitka, co-chair of Senate Finance, now hearing the bill, said the committee is trying to explore the pros and cons and get more information on the table. He said he has asked companies coming to testify that they specify areas of the bill that they like and don’t like and provide language for changes they want to see.

He also said the Legislature has consultants coming onboard now and the committee will be working on fixes to problems it finds in the bill. The federal loan guarantee expires two years after a FERC certificate is issued, Stedman said, but the bill allows five years beyond issuance of a FERC certificate for a company to get financing. The five-year provision could collapse the financing, and he said the committee has brought the problem to the administration’s attention.

Administration strikes back

In their latest rounds of testimony before House and Senate Finance, in late April and early May, the companies have now told legislators that unless AGIA is changed to allow for flexible applications they will not apply.

AGIA is too prescriptive, they have told legislators, referring to the administration’s “must-have” list.

The administration answered criticism at a May 3 press conference, bringing out the experts who have helped it craft AGIA to answer questions.

Commissioner of Revenue Pat Galvin said the administration expects AGIA to pass the Legislature before the end of the session. As for changes, he said it would have been easier if the producers had brought forward specific changes they are requesting earlier. He said with the specifics on the table now there are some things that the administration can address and some things it disagrees on. He said he thinks changes can be made in the next few days.

Galvin said the producers are trying to view AGIA in an anti-producer manner and there are some language changes that could address some of those concerns.

But the administration is not considering major changes to allow flexibility in applications. Galvin said the administration has always been clear that it believes the general structure of AGIA is sound and has heard nothing in testimony or discussions to change that view.

As for the 20 “must haves” he said they are all reasonable and they need to be met for an application to be considered eligible for inducements. This is not a wish list, he said. Applicants have to do these things to be eligible.