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RCA votes 4-1 in favor of law changes ANGDA requested hearing on 2000 amendments to state’s pipeline act; commission will recommend repeal to administration Kristen Nelson Petroleum News Editor-in-Chief
The Regulatory Commission of Alaska voted 4-1 at a Nov. 4 public meeting to recommend to the Murkowski administration repeal of two 2000 amendments to the state’s pipeline act.
The Alaska Natural Gas Development Authority had asked the commission in August for assistance in securing repeal of AS 46.06.240(f) and AS 42.06.370(c). Harold Heinze, the authority’s chief executive officer, noted that at a September hearing commissioners requested a legislative history of the 2000 amendments, which the attorney general’s office assembled.
In reviewing the request at the hearing, Heinze said there are “changed circumstances” since the amendments were enacted. In 2000 the project being discussed was an intrastate pipeline to take North Slope natural gas to a liquefied natural gas plant at Valdez or Cook Inlet. Heinze said the two sections of the pipeline act the authority is asking to have repealed “are very overly restrictive” of the commission. “It is not our intent … to avoid regulation; it is to allow you to use your good judgment …,” he said.
He also said the state “should have more flexibility as the situation evolves to both develop open season and tariff regulations that relate to intrastate gas use off this interstate pipeline.” ANGDA: 2000 amendments ‘overly restrictive’ Section 240(f) regulates an in-state open season for a North Slope natural gas pipeline.
“We remain absolutely convinced that section (f) is a disaster waiting to happen,” Heinze said. Repeal of 240(f), he said, “is a major issue in the financing of intrastate pipelines.”
Heinze pointed out that this is not a situation created by the commission, but by the Legislature “in trying to deal with a project that is no longer around…,” the LNG project the North Slope producers sponsor group was working on in 2000. Heinze said Michael Hurley, then with ARCO Alaska, “was the major proponent of this legislation before the hearings,” and has described it as aimed at preventing projects that weren’t substantial from clouding capacity issues.
Since then the Federal Energy Regulatory Commission has established open season rules for an Alaska North Slope gas pipeline.
“Our observation has been that in particular section (f) is totally incompatible with the FERC-developed open-season process for the interstate gas pipeline,” Heinze said. Timing an issue Commissioner Mark Johnson noted the complexity of the current gas pipeline negotiations, and asked Heinze “why should the RCA wade into that political thicket,” rather than waiting to see if the matter needs to be addressed after a contract is approved?
Heinze said the authority believes a FERC open season “could occur very quickly following the enactment of a deal,” and it “has some very tight timelines.”
For an intrastate user to reserve capacity, for instance from Prudhoe Bay to Delta, “they have to participate in that (FERC) process.” An open season for ANGDA’s proposed spur line would have to begin right after the opening of the federal open season, “and we have to close ours before theirs closes. In other words we have to fit in the window…” Heinze said ANGDA doesn’t see how that would be possible under the conditions set out in section 240(f).
Because of that window for an intrastate open season, he said, “we don’t have the luxury of waiting for that open season at the federal level to open and then start to make the statutory changes.”
AS 42.06.370(c), the other section ANGDA wants to see repealed, deals with how the RCA sets tariffs for intrastate gas pipelines, requiring the tariff for intrastate service to “be designed as if that portion of the North Slope natural gas pipeline were a public utility” regulated under the state’s public utility act. ANGDA also believes that section is too restrictive, Heinze said. Request an approach to administration He said what ANGDA wants the commission to do is to approach the Legislature through the administration in conjunction with Stranded Gas Development Act legislation, if that is introduced along with a gas fiscal contract. If the stranded gas act isn’t a vehicle, Heinze said the authority would like to see repeal of the provisions introduced as one of the legislative priorities of the administration.
The commission was assured by Administrative Law Judge Janis Wilson and by its assistant state attorney general, Rob Royce, that if the sections were repealed, the state’s authority over pipelines would not be eroded.
Wilson told Johnson that 240(f) “has very specific requirements which limit our discretion a great deal.” Wilson said she agreed “completely that it was legislated in the context of a different gas pipeline than the one that’s now being discussed. And I also agree with the comment that it is in direct conflict with FERC’s open season regulations.” She also said that the pipeline act existed in its base form from 1973 until 2000, “without these provisions in it” and proponents of gas lines during that time didn’t see the need for change.
In response to a question from Commissioner Dave Harbour, Royce said 240(f) only applies to the North Slope gas project as it was envisioned in 2000. “If you repeal that you’re left with your remaining traditional regulatory powers over pipelines in the state.”
The commission voted 4-1 in favor of having Giard talk to the governor’s office about the repeal of both sections. Commissioner Jim Strandberg voted no to both motions, saying he did not believe the commission’s role should be one of advocacy. Commissioner Dave Harbour argued that having commission Chair Kate Giard recommend statutory changes on which the commission had held public hearings fell within its advisory role.
Giard said that while “it is unusual” for the commission to support statutory revisions, it is called upon to give its expert opinion to the Legislature “in the area of pipeline regulation.” She said that she believes “there is a sufficient record created by the process that we went through here” to take the matter to the governor’s office.
The commission had public noticed its review of ANGDA’s request for repeal of the sections, and taken both written and oral comment.
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