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More money for Alaska natural gas line Legislature likely to OK additional $9 million for studies, right of way Larry Persily Petroleum News Government Affairs Editor
The Alaska Legislature is close to approving an additional $9.08 million for the state’s efforts to promote construction of a North Slope natural gas pipeline, bringing the appropriations total since last spring to more than $11.3 million.
“It’s very popular because a lot of Alaskans are hanging their hats on the silver bullet of an Alaska gas line,” said Sen. Con Bunde, R-Anchorage.
The latest appropriation would go toward funding several efforts under way or soon to begin, including fiscal contract negotiations with firms that say they want to build the pipeline, processing state rights of way for the line, a risk analysis of the state signing up for a stake in a privately owned project, and continued review of a wholly state-owned pipeline.
The funding is included in a supplemental appropriations bill for several state departments, usually among the last measures to pass before adjournment. The Senate Finance Committee moved Senate Bill 313 out of committee April 29, with a vote by the full chamber and House action expected before the May 11 adjournment deadline.
In addition to the $9.08 million, legislators in early April approved $1.65 million for the state’s gas line efforts. And last year legislators approved $239,000 for negotiations with private firms under Alaska’s Stranded Gas Development Act and $350,000 for feasibility work by the Alaska Natural Gas Development Authority, which is advocating a state-owned project.
The Legislature in late March also committed $100,000 of its own operating funds for a contract with former state Oil and Gas Division Deputy Director Bonnie Robson to advise lawmakers on stranded gas act negotiations and other gas line issues. Several offices to share $9.08 million In the pending supplemental spending bill, the departments of Revenue and Natural Resources, and the state gas authority, would share the $9.08 million, as they did with the $1.65 million, which will be used to purchase price forecasts, help the state better understand downstream markets, and cover some of the state’s expenses under the stranded gas act.
The act allows project applicants and the state to negotiate a long-term contract for payments in lieu of all state and municipal taxes on a gas line project. Although applicants are supposed to reimburse the state for much of its negotiating costs, the departments of Revenue, Natural Resources and Law have been covering some of the expenses out of their own budgets.
The state needs the funds quickly, said Steve Porter, deputy commissioner at Revenue and the Murkowski administration’s spokesman on gas line budget issues. The administration expects to sign contracts for about $6 million of the spending by June 30, he told Finance Committee members April 28. Funding to cover MidAmerican expenses The state needs $200,000 of the money to cover its costs for the unsuccessful negotiations with MidAmerican Energy Holdings Co., Porter said. The Iowa-based pipeline company walked away from negotiations when the state refused MidAmerican’s ultimatum for exclusive rights to the gas line project.
Bunde, who did not oppose the measure when Senate Finance approved the appropriations bill, cautioned that the state “not bet these large sums of money on wishful thinking.”
The potential benefits of a multibillion-dollar pipeline to move North Slope gas to market are worth the risk, but there is no guarantee the funding will result in project, Porter said. “We may expend $9 million and not get a contract.”
The committee’s original version of the spending bill, offered April 28, did not include any money for gas line studies or consultants. After hearing Porter present the administration’s request for $9.08 million, Committee Co-Chair Lyda Green, R-Wasilla, on April 29 offered the amendment for full funding. Gas line spending plans The administration’s plan for spending the pending $9.08 million legislative appropriation for Alaska’s natural gas pipeline efforts includes:
• $3.9 million to Natural Resources to process rights of way on state lands along the proposed pipeline corridor. The administration wants to help move the project along by approving rights of way before it has an actual developer for the pipeline, with the intent of turning over the permits to a project developer at a later date.
• $1.58 million to Natural Resources to analyze the risk — and potential benefits — of the state taking a financial stake in a private project. The intent, according to the governor, is to see if the state could help entice a developer to build the project if Alaska were willing to share in the financial risk that low market prices and/or a high tariff could jeopardize the rate of return.
• $1.1 million for stranded gas act negotiations with the three major North Slope producers that have submitted a joint application for a gas line reaching from the slope across Canada to feed upper Midwest and other North America markets. The producers already have agreed to reimburse the state for $1.5 million of the administration’s negotiating expenses — the maximum reimbursement allowed under the law. The $1.1 million in state funds would be in addition to the $1.5 million.
• $700,000 to negotiate something less than a stranded gas act contract with the municipally owned Alaska Gasline Port Authority that wants to build its own project. The port authority, which already is exempt from state and municipal taxes, may seek some sort of a protocol with the state instead of a full contract for payments in lieu of taxes.
• $550,000 for studies of potential in-state gas use and benefits from a gas line project.
• $450,000 to cover the state’s estimated non-reimbursable stranded gas act negotiating expenses with Calgary-based Enbridge, which submitted its application April 30.
• $300,000 for state support of congressional efforts to approve federal tax incentives, a loan guarantee and fast-track permit review for the Alaska gas line. The money also would pay for the state’s involvement in tariff-setting and licensing work before the Federal Energy Regulatory Commission.
• $250,000 for the Alaska Natural Gas Development Authority to continue its feasibility studies of a state-owned gas line project. The authority would add the money to the $650,000 it received from last month’s appropriation and the $350,000 it received last year.
• $250,000 for working on regulatory and political issues between the state and the provincial government of Alberta, where the new gas line would connect with existing pipe for moving Alaska gas throughout North America.
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