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Railroad bonds back for gas financing Two railroad bonding bills, one for local gas, one for $17 billion Kristen Nelson Petroleum News Editor-in-Chief
Remember Alaska Railroad bonding for North Slope natural gas development, introduced by the Knowles administration last year? It died in the Alaska Legislature, but is now back, with proposals in the Alaska House authorizing the railroad to issue bonds for slope gas development and for local gas utilities.
House Bill 235, introduced April 2 by Rep. Bruce Weyhrauch, R-Juneau, would authorize use of railroad bonds to finance community gas lines, allowing the Alaska Railroad to “provide financing for and operation of facilities for the transportation and distribution of natural gas, propane air, and manufactured gas.”
The bill authorizes bonds to provide gas public utility service in Southeast and Southcentral Alaska: Juneau, Sitka, Haines, Ketchikan, Kodiak, Yakutat, Angoon, Cordova, Craig, Kake, Klawock, Petersburg, Skagway, Valdez, Wrangell, Klukwan and Metlakatla.
House Bill 267, introduced April 15 by Rep. Vic Kohring, R-Wasilla, and cosponsored by Rep. Harry Crawford, D-Anchorage, revives Alaska Railroad bond financing for a North Slope gas project, authorizing the Alaska Railroad to issue up to $17 billion in bonds “to finance the construction of a natural gas pipeline and related facilities for the transportation of natural gas recovered from the North Slope of this state.”
As former Gov. Tony Knowles explained in February 2002, the state has U.S. Sen. Ted Stevens, R-Alaska, to thank because when the U.S. Congress transferred the Alaska Railroad to the state in 1983, Stevens had included in that transfer a special exemption to the railroad to issue tax-exempt bonds to finance industrial development.
HB 267 provides that the bonds could finance facilities “within and outside the state without regard to whether the facilities are or will be owned in whole or part by the corporation or located on land owned by the corporation.”
Both bills have been referred to the House Special Committee on Oil and Gas. Other bills moving House Bill 11, limiting revenues to the Alaska permanent fund to 25 percent of royalties, passed the House April 15 and moved to the Senate, where it was referred to Senate Finance. The bill, sponsored by Rep. Norm Rokeberg, R-Anchorage, sets all royalty contributions to the fund at the constitutionally mandated 25 percent. Department of Revenue fiscal notes say deposits to the general fund would be increased by some $40-$55 million annually; royalty deposits to the permanent fund would be reduced by the same amount, and permanent fund dividends would be reduced by amounts estimated at $1 per dividend in 2005 to $20 per dividend in 2012.
House Bill 57, royalty gas contracts, passed the House April 16 and moved on to the Senate. Sponsored by Rep. Mike Chenault, R-Nikiski, the bill gives the commissioner of the Department of Natural Resources authority to negotiate royalty contracts on natural gas and includes manufacturers in the negotiating process.
“The state has always negotiated with natural gas producers, but not with the manufacturers,” Chenault said in a statement. “The manufacturers also incur costs for state royalties; therefore, they should participate in royalty negotiations.”
A fiscal note from Mark Myers, director of the Division of Oil and Gas, says the bill requires “DNR to enter into agreements with lessees to use the price for gas established in contract(s) entered into on or after the effective date between the lessee and a manufacturer of agricultural chemicals as the value of the state’s royalty share.”
The Agrium fertilizer plant is the beneficiary of this bill, estimated to cost the state $11.5 million for the fiscal years 2004-09.
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