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Vol. 13, No. 26 Week of June 29, 2008
Providing coverage of Alaska and northern Canada's oil and gas industry

ANGDA renews open season statute debate

Provisions from 2000 law could complicate a future open season for in state use of natural gas, debates go back to summer 2004

Eric Lidji

Petroleum News

Dusting off a debate left unresolved with the demise of natural gas pipeline negotiations in the Murkowski administration, the Alaska Natural Gas Development Authority is once again asking state lawmakers to repeal a statute governing the distribution of North Slope natural gas to communities in Alaska.

Speaking before the Legislature on June 20 and before state regulators on June 25, Harold Heinze, chief executive officer of ANGDA, presented a draft bill that would repeal two provisions of a statute detailing how the state should regulate access to North Slope natural gas bound for in state markets.

State lawmakers created the statute in 2000 as a way to deal with the expansion of any future natural gas pipeline in Alaska. The statute sets up a procedure governing the open season process for gas in the pipeline directed for in-state use.

The potential pitfalls in the legislation didn’t become an issue until 2004, when former state Attorney General and Alaska Gasline Port Authority board member Charlie Cole spoke before the Legislative Budget and Audit Committee.

Cole said that the statute, by requiring potential in-state shippers of natural gas to sign three-year contracts, created a disincentive for buyers in communities like Fairbanks with limited natural gas distribution networks.

Currently, the 1,000 customers of Fairbanks Natural Gas are supplied with liquefied natural gas trucked up from a plant at Point MacKenzie. That network has grown considerably since 2004, but is still far from being the dominant fuel source in Fairbanks.

The worry was that local utilities would be forced to make to firm transportation commitments “without knowing what their future demands will be, without knowing what the future tariff rate will be or the methodology for gas valuation will be or from whom they will purchase gas or even if it will be available,” as Fairbanks North Star Borough Mayor Jim Whitaker, a long-time Alaska Gasline Port Authority board member, put it in a letter to then-Sen. Scott Ogan.

The provisions cover shippers that are not public utilities and those public utilities that ship more than 20 million cubic feet of natural gas per day.

Dying pipeline ended debate

State lawmakers never addressed Cole’s concerns at that time, and without a natural gas pipeline on the horizon the issue quickly became moot. As of today, the statute has still never been tested with a real-world application.

When debates began around the Stranded Gas Development Act in 2005, Heinze brought Cole’s concerns before the Regulatory Commission of Alaska.

“They concluded that their statute was in need of change,” Heinze said on June 20.

After examining the issue and holding a public hearing, then-RCA Chair Kate Giard sent a letter to then-Gov. Frank Murkowski asking him to include a revision to the statute in the package of Stranded Gas Development Act legislation before state lawmakers.

However, the failure of that bill to produce a pipeline and the failure of Murkowski to win re-election made in the issue moot again, until now.

Heinze wants lawmakers to repeal the provisions along with the larger decision of whether or not to give a state license to TransCanada under the Alaska Gasline Inducement Act.

“Absent this change, we don’t believe an in-state open season can be held,” Heinze told lawmakers during hearings in Anchorage over AGIA.

RCA also wants more funding

ANGDA plans to ask the Palin administration to make these changes, just as it asked the Murkowski administration several years ago, Heinze told the RCA on June 25.

Giard, now a regular commissioner, said she planned to use the opportunity to ask for additional funding and staff for the RCA to handle the additional workload associated with any natural gas pipeline, whether it be from TransCanada or from Denali, a competing plan backed by BP and ConocoPhillips.

“I think the reality is that the agency is going to be working on this pipeline long before we’re collecting RCCs,” Giard said, referring to the Regulatory Cost Charge the commission levies on utilities as a major source of income.

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