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Alaska LNG backers see hope in project Group wants to build support with elected officials; hires ad agency Larry Persily Petroleum News Juneau Correspondent
Backers of an Alaska natural gas pipeline to Valdez say they, too, could benefit from two of the financial provisions in the federal energy bill aimed at helping to build a producer-led gas pipeline from Alaska to mid-America.
But the tax benefits would be hard to achieve for a smaller line to Valdez, where the gas would be liquefied and shipped aboard tankers to buyers around the Pacific Rim. And not all of the financial incentives in the stalled energy bill would apply to the proposed liquefied natural gas projects, especially if the state builds and owns the pipeline and LNG export terminal.
Still, that hasn’t stopped a small, 2-month-old group of Alaska LNG supporters — calling itself Backbone II — from proclaiming a victory of sorts in the energy bill debate.
Although Sen. Lisa Murkowski, R-Alaska, was unsuccessful in her effort to amend the bill to explicitly include an LNG project under the most attractive of the Alaska gas line incentives — a federal loan guarantee for the project — just her attempt and subsequent statements are verification of their cause, said LNG supporters.
The senator’s recent press release on the energy bill said the provisions for accelerated depreciation and some tax credits could be used for either a pipeline to mid-America or an LNG project. Group wants public support “This is essentially the position that Backbone II has promoted with Alaska political leadership,” the group said in a Nov. 20 statement addressed to the Alaska Legislature, governor and congressional delegation.
“We want them to at least equally support the voter-mandated route to Valdez and the benefits to Alaska that come from public ownership of the line.”
Backbone II came to life in September in support of the 20-plus-year-old vision to build an Alaska LNG project at Valdez. Its members include businessmen associated with Yukon Pacific Corp., which has tried, unsuccessfully, the past two decades to put together an LNG project. The Valdez city manager and city attorney also are part of the group.
Lead Backbone II organizer Bill Walker is city attorney for Valdez, though Walker and the city manager said they are acting as individuals and do not officially represent the city.
Also among the organizers of Backbone II is lobbyist Paul Fuhs, who was paid $96,000 last year by Yukon Pacific and its parent company. Several LNG hopefuls in line In addition to Yukon Pacific’s attempts, the Alaska Gasline Port Authority — comprised of Valdez, the Fairbanks North Star Borough and the North Slope Borough — has been working since 1999 to put together financing to build an LNG project. Then last year, Alaska voters added the Alaska Natural Gas Development Authority to the list of LNG project hopefuls.
The state authority, created by a citizens’ initiative, is charged with presenting a development plan to the Legislature by June 2004.
In addition to citing Sen. Murkowski’s statement as supportive of an LNG project, Backbone II’s letter also pointed to remarks by Alaska Gov. Frank Murkowski at a natural gas conference Nov. 19 in Houston. The governor said the state is looking at both options — LNG and a pipeline to mid-America — for moving gas out of state.
“We applaud the governor’s statements in front of such an important group,” Backbone II said.
The governor, however, has not replied to the group’s Oct. 31 letter asking for his “enthusiastic” support for an LNG project. Backbone II to raise money Backbone II wants to build its membership, raise money for advertising and keep pushing elected officials to support an Alaska LNG project, and plans to set up a web site and accept credit card contributions via the Internet. It also has contracted with an Anchorage advertising and public relations agency.
Although the federal loan guarantee in the energy bill is restricted to a pipeline to Canada and mid-America, the energy bill’s tax incentives of accelerated depreciation for the pipeline and tax credits for a North Slope gas treatment plant are available for an LNG project.
However, those two provisions are limited to a project with at least a 42-inch-diameter pipeline. All of the Alaska LNG projects, as currently proposed, would use 36-inch pipe or smaller.
That is a problem, Walker said.
The other problem is that the state gas authority and the municipal port authority both want to qualify for federal tax-exempt status, which, if successful, would render the energy bill tax incentives useless to them.
“However, if the (state) authority were looking for a joint-venture partner who could provide equity investment into the project … the accelerated depreciation could be significant to them,” Backbone II said in its letter.
“The bottom line is that none of these provisions will make or break Alaska’s LNG project. They could just make a good project better.”
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