House passes amendments to Alaska Stranded Gas Development Act

Kristen Nelson, PNA editor-in-chief

The Alaska House unanimously passed House Bill 16 March 26, amending the Alaska Stranded Gas Development Act. The bill now goes to the Senate for consideration.

The stranded gas act allows the administration to negotiate with qualified project sponsors for “contracts for payments in lieu of taxes and for royalty adjustments that may be submitted for consideration…” A negotiated agreement would come to the Legislature for approval, but the Legislature could not change it.

The original act applied only to export liquefied natural gas projects and to applications received by June 30, 2001. The amendments expand the act to include gas pipeline and other projects commercializing natural gas and change a deadline for applications to March 31, 2005.

Qualified sponsor requirements changed

The act requires that in addition to owning an equity interest in a qualified project, owning gas or holding permits, one of five other requirements must be met. Qualifications for two of those requirements were reduced: A requirement of a net worth of 33 percent of the cost of constructing the project has been changed to 10 percent and the unused line of credit from 25 percent of construction cost to 15 percent of cost.

The bill’s sponsor, Rep. Hugh Fate, R-Fairbanks, told the House that the amendments would “allow any form of gas,” as well as extending the date for applications. He also said changes in the bill would increase the chance that “smaller companies, including Alaska companies, to be part of qualified sponsors in the project” by lowering the bar for participation from one-third to 10 percent of project cost.

“I think one of the biggest things … that we have in this bill as it’s resurrected here is the potential for negotiation, which is authorized by the piece of legislation, between the administration and the qualified sponsors,” Fate said. He also noted that the bill came out “as a clean bill,” with just changes needed to reauthorize the existing statute. “We hope to keep it clean,” he said.

Vic Kohring, R-Wasilla, the chair of the House Special Committee on Oil and Gas, spoke in support of the bill. “It’s very important for moving forward the construction of the gas pipeline … so we can get some gas to the Lower 48 markets,” he said. Both Fate and Kohring noted that federal legislation is also needed.