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Alaska gas authority gets federal funding Legislators OK $200,000; work to include in-state benefits study Larry Persily Petroleum News Juneau Correspondent
Legislators have approved a governor’s office request to use $200,000 in one-time federal funding for the Alaska Natural Gas Development Authority to hire consultants as it tries to answer whether the state should build and own an estimated $12 billion liquefied natural gas project.
The Legislative Budget and Audit Committee approved the spending request Oct. 29, along with six other items totaling almost $7 million of federal funding under the Jobs and Growth Tax Relief Reconciliation Act of 2003.
“These are monies that Congress intended to be fiscal relief for the states,” explained Cheryl Frasca, director of the governor’s budget office. “They are unrestricted. We have wide latitude in terms of the public purpose they are used for.”
Alaska received $50 million in two installments under the federal aid-to-states program, with about $18 million still undesignated, Frasca said. The Legislative Budget and Audit Committee, comprised of five members each from the House and Senate, has authority to spend such unanticipated federal money when the full Legislature is not in session. Natural Resources Department will help The committee approved $200,000 for the state gas authority without objection, plus an additional $50,000 from the same federal pot for the Alaska Department of Natural Resources so that it could assist the authority in its work.
The authority is operating under a $150,000 budget this fiscal year and has been telling legislators and the governor’s office the past three months that it needs more money if it is to answer all of the questions assigned to it by voters last year.
Senate President Gene Therriault, R-North Pole and vice chairman of the legislative committee, encouraged his colleagues to approve the $200,000 request. In-state benefits analysis on work list The authority intends to use some of the money to contract for an analysis of the in-state benefits of an LNG project, and Therriault said he believes the information would be especially useful to legislators as they evaluate the potential state-owned project or if they are later asked to consider tax breaks for the major North Slope producers if they decide to build their own pipeline.
Separate from the state’s possible LNG project, the producers are looking at building a pipeline from the North Slope through Alaska and into Canada to connect with the North America natural gas distribution grid. The future of that project depends in great part on the federal energy bill under debate in Congress, which could include significant federal tax incentives to encourage private construction of the $20 billion line.
Alaskans approved creation of the state gas authority by a better than 2-to-1 margin in the November 2002 general election. The authority is to present to the Legislature by next summer a project development plan, including construction cost estimates, state revenue estimates, cost of buying natural gas from the North Slope producers and a marketing plan to sell the gas as LNG, and a plan for delivering gas along the pipeline route and also a spur line to feed Southcentral Alaska’s energy needs. $200,000 is enough to start Although the authority had asked for up to $2.5 million for consultant studies, the $200,000 appropriation will let it start work on the most important business questions, said Harold Heinze, the authority’s chief executive officer and only full-time staffer.
Those include researching whether the authority would be exempt from federal corporate income taxes on any profit it might make, whether the authority could issue tax-exempt bonds to finance the project, how much cash the state might need to put up and how much it could borrow, and whether the authority would be required under federal law to use U.S.-built and U.S.-crewed LNG tankers to ship gas to the California market.
The seven-member board of directors is scheduled to meet Nov. 17 in Anchorage, and Heinze said he expects to present recommendations for which contracts to fund with the money and a plan to solicit proposals and award the contracts as quickly as possible. Authority will need more money next year Much of the other work on the authority’s task list will have to wait for additional funding when lawmakers reconvene in January, he said. “Come January, from the authority’s point of view, we’re still looking at a big number.”
The $50,000 to the Department of Natural Resources will allow the agency to help the gas authority answer “the where, when, why and how of getting the gas,” Heinze said. The state would need to reach a deal with North Slope producers to buy enough gas to supply its LNG project. The availability and cost of that gas is a key issue in the authority’s business plan.
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