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Gas authority drops lobbyist idea Board also decides against filing Alaska Stranded Gas Act application Larry Persily Petroleum News Government Affairs Editor
The Alaska Natural Gas Development Authority has dropped its plan to hire a lobbyist to help push for additional legislative funding, while also backing away from submitting a project application under the state’s Stranded Gas Development Act.
Meanwhile, the authority has approved a $50,000 contract for an economic benefits analysis of its proposal to build a $12 billion pipeline and liquefied natural gas shipping terminal in Alaska.
Board members did not explain how the Stranded Gas Act, which allows a project developer to negotiate a schedule of contractual payments to the state in lieu of all state and municipal taxes on the project, could benefit the authority that already is exempt from state and local taxes for its proposed LNG project.
“After looking at the work involved, it’s just too much work,” Chief Executive Officer Harold Heinze said of the stranded gas application process.
The authority, however, would want to participant in the contract negotiations if North Slope gas producers or other parties apply to the state for a stranded gas contract, Chairman Andy Warwick said at the board’s Jan. 12 meeting in Anchorage. Gas supply could be part of the deal Warwick suggested that perhaps in addition to financial terms, the state could insist that any contract for a gas pipeline project include a provision requiring producers to sell gas to the authority, which needs a supply for its LNG project.
The board had voted Dec. 15 to instruct Heinze to prepare a draft stranded gas application for what it calls the Alaska Big Capacity, or ABC Line, which the gas authority would build to carry 4.5 billion cubic feet per day of producer gas and 2 bcf per day for the authority’s own project. The line would end near Delta, southeast of Fairbanks, where the producers’ pipeline would continue to mid-America and the authority’s separate line would head south to tidewater at Valdez.
“It’s not an option that is totally off the table,” board member Scott Heyworth said Jan. 12. Instead of pursuing the combined ABC Line, Heinze and Heyworth said, the authority will simply send a letter to the governor, telling him, “We’ve got an idea.” Then, if the governor wants to hear more, he can contact the authority.
As for spreading their ideas among legislators, board members agreed to accept offers of assistance from two legislative leaders instead of spending money to hire a gas authority lobbyist. Legislators offer to help Senate President Gene Therriault, R-North Pole, and House Finance Co-Chairman John Harris, R-Valdez, have offered their staff to help monitor and support the authority’s funding request and other relevant legislation, Heinze said, alleviating the need to hire a lobbyist or liaison.
Although Heinze and the board at their December meeting talked exclusively of hiring a lobbyist to help push for more state funding, the CEO said at the Jan. 12 meeting that he had meant to use the word “liaison.”
Regardless of the name, some board members were skeptical that legislative staff could adequately represent the authority. “The problem is, are we going to get by with Therriault’s and Harris’ office? I hope so,” Heyworth said.
An additional reason for dropping plans to hire a lobbyist is that the authority is out of money, Heinze told the board. “The $350,000 is gone,” he said of this year’s state funding, although the board is seeking an additional $2.15 million for the last five months of the fiscal year.
Therriault has introduced legislation to appropriate the $2.15 million. Draft economics report due March 15 Heinze told board members Jan. 12 he had approved a $50,000 contract with Northern Economics, an Anchorage-based consulting firm, for an analysis of the economic benefits to the state and its residents of the proposed state-owned LNG project. A preliminary report is due March 15.
The CEO also said he has contracted with a Washington, D.C., law office — Morrison & Foerster — to advise the authority on what changes might be needed in state law to give it its best shot at winning an exemption from federal income taxes. The firm has previously assisted the state on oil and gas tax work.
If all the authority does is provide a pipeline for others to move gas, it’s likely tax exempt, Heinze said. But if the authority buys and sells gas, similar to a commercial operation, it probably will need changes in its statutes if it is to have a chance at qualifying for tax-exempt status with the Internal Revenue Service. The authority’s cost of service would be lower — and its competitiveness in the marketplace would be better — if it is exempt from federal taxes.
The law firm’s draft report is due March 15.
Natural Resources to help with gas supply issue The board also asked the Department of Natural Resources to assist the authority in “gas acquisition issues.” The authority does not own any gas, and would need to reach a deal with North Slope producers if it is going to have any gas to convert into LNG.
Lawmakers this fall gave $50,000 to the Department of Natural Resources so that it could help the gas authority in its effort to build a state-owned project.
Though board member John Kelsey of Valdez spoke in favor of considering state condemnation to take away gas from North Slope producers, Natural Resources Deputy Commissioner Marty Rutherford suggested a different approach: “Incentivize the gas out of the producers.”
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