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Hawker offers to work with CRA on HB 9 Sponsors of in-state gas line bill testify to problems in Senate committee version; Olson cites concerns around SGDA, gravel use Kristen Nelson Petroleum News
When he pulled the plug on his oil tax bill April 25, Alaska Gov. Sean Parnell asked the Senate to move on in-state gas line legislation. House Bill 9 has been in the Senate Community and Regional Affairs Committee since late March. The committee heard the bill April 5, with sponsor House Speaker Mike Chenault, R-Nikiski, introducing the bill, which he described as implementing legislation to allow the Alaska Gasline Development Corp., established by House Bill 369 in 2010, to get to an open season.
Tom Wright, staff to Chenault, said HB 9 sets the framework for AGDC to serve as the state’s pipeline entity and allows it to move forward working on the in-state line described in HB 369, while also allowing AGDC to participate in the aligned North Slope to tidewater liquefied natural gas project which the North Slope producers and TransCanada are considering.
On April 13 the committee presented a substitute, described by Olson staffer David Scott as paring the bill down “to the bare minimums that AGDC needs to get to open season,” and allowing AGDC to create a fund so they can spend the money the Legislature appropriated in 2011.
Chenault told the committee “what this CS does is basically gut AGDC’s ability to move forward on an in-state gas pipeline project” by eliminating AGDC’s ability to move forward with a pipeline and “requiring sanctioning by the Legislature through another law.” He told Olson that the sponsors had not participated in drafting the CS.
On governor’s call HB 9 remained in Senate CRA through the end of the regular session and was included on the governor’s April 16 call for a special session.
The committee heard the bill again April 19, hearing from bill co-sponsor, Rep. Mike Hawker, R-Anchorage.
Committee Chair Donny Olson, D-Golovin, said he wanted the gas pipeline to come back to the Legislature for sanctioning because of what happened under the Stranded Gas Development Act in the administration of Gov. Frank Murkowski.
Hawker told the committee that the SGDA was very different, allowing the administration to hold confidential negotiations which the Legislature would then have to approve. He said SGDA failed because of the way it was structured and because the gas market changed.
HB 9 took a different approach, Hawker said, that of creating and empowering a public corporation which would work “as openly as possible in the marketplace” under direction from the Legislature provided in the bill.
AHFC AGDA is under the Alaska Housing Finance Corp. board of directors, which includes three state commissioners. Hawker said Alaska Housing Finance is an entity “that has worked well for all Alaskans and under all political regimes.”
AHFC “is essentially the state’s investment bank and we’ve created really a pipeline development group within” AHFC, he said, adding that HB 9 “struck a delicate balance” in that “AGDC is operating, as much as it can, as an open public corporation.”
Unlike the SGDA, where the executive made a decision and the Legislature was asked to validate that decision, “it’s us vesting our trust and confidence in an agency of the state to move forward with a project.”
Hawker said the great concern with requiring the Legislature to sanction a project before it could move forward is “we’re 60 legislators” with “provincial interests to represent,” whereas AHFC is an agency with a “broader mission to serve all the state of Alaska, and we really believe that can serve to insulate proper economic best business practice management decisions from the inevitable politics of this building where we, by very definition, are obligated to be provincial and argue for the best of our individual districts.”
Contract carriage The CS also eliminated the provision of HB 9 that allows AGDC to offer contract transportation service, Hawker staffer Rena Delbridge told the committee, leaving the line operating as a common carrier. Like the issue of sanctioning by the Legislature, this would make it difficult for AGDC to secure commitments in an open season. AGDC needs to be able to provide firm transportation service, Delbridge said, noting that the state’s contract with TransCanada under the Alaska Gasline Inducement Act allows contracts for firm transportation. She said AGDC has been advised by potential open season participants and by financiers that without firm contracts, “there may not be the necessary underpinnings to finance a pipeline.”
Among other concerns that Olson expressed was over the routing of the line from the North Slope to Southcentral, especially with jack-up rigs drilling in Cook Inlet.
Hawker said that the bill’s sponsors hope work in Cook Inlet is successful, but “we’re not willing to bet our communities on” that success.
He said that recognizing the possibility of large Cook Inlet discoveries, the sponsors were prepared to bring forward an amendment to the legislation that if gas is found in Cook Inlet to meet long-term needs in Southcentral and in Fairbanks, “that AGDC would be directed then to specifically pursue a south-to-north line” to take some of that gas to Fairbanks.
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