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Alaska gas authority wants more attention from governor
Larry Persily Petroleum News Government Affairs Editor
Several board members of the Alaska Natural Gas Development Authority say the governor and his administration are giving more attention to a municipally promoted gas line project than the state’s own effort to build a publicly owned pipeline from the North Slope. (See related story on page 19.)
“I’m not feeling the love,” said board member Scott Heyworth. “Once in a while it’d be nice to hear something from the governor about us.”
Board member John Kelsey also complained about the lack of recognition.
“Do you feel the heat, Steve?” Kelsey asked of Steve Porter, deputy commissioner at the Department of Revenue and the administration’s liaison to the state gas authority.
Alaska voters approved a citizens’ initiative in November 2002 to establish the state gas authority, with the job of presenting a project plan to the Legislature later this year for a state-owned line to Valdez for exporting liquefied natural gas to U.S. West Coast and Far East markets.
Board members at past meetings have discussed their frustration at the slow pace of funding for their effort; the initiative did not say how to pay for the authority’s work. Counting the money approved by the Legislature before its May 11 adjournment, lawmakers and the administration since last spring have earmarked $1.25 million for the authority’s planning and feasibility work — about half what the board requested. Press release prompted discussion What started the board discussion at its May 10 meeting in Anchorage was Gov. Frank Murkowski’s May 7 press release praising the work of the Alaska Gasline Port Authority, the consortium of the Fairbanks North Star Borough and city of Valdez created in 1999 to build a municipally owned gas line. The state and port authority this month signed an information-sharing protocol to assist the municipalities’ efforts in putting together a project for moving natural gas from the North Slope to Lower 48 and Far East markets.
The port authority signed the protocol in lieu of continuing formal negotiations under Alaska’s Stranded Gas Development Act, which allows project developers to bargain for a long-term fiscal contract with the state in lieu of any taxes on the pipeline.
The Stranded Gas Act, however, isn’t that relevant to the port authority because it is already exempt from state and municipal taxes, as is the state gas authority.
The Murkowski administration is trying to work with the port authority, the state gas authority, North Slope producers and Canadian pipeline companies Enbridge and TransCanada, all of which either want to build an Alaska gas line or at least have a stake in whatever deal is put together.
The port authority, however, “is sort of a stepchild,” said Heyworth, the main sponsor behind the ballot initiative that created the state gas authority. The state authority “is the first-born son, I know that to be the fact,” he said. Yet the port authority got a protocol and press release, Heyworth said.
Perhaps the state gas authority needs to go ahead and file a Stranded Gas Act application to attract the attention it deserves, said Kelsey, who serves on both the port authority and state gas authority boards. Board sees role in supplying Cook Inlet In further discussions, the board talked about its role in ensuring that any pipeline includes a spur to feed gas to Cook Inlet communities worried about possible supply shortages for residential and industrial needs by the end of the decade. Again, the Fairbanks-Valdez port authority came into the discussion.
“I don’t believe the Cook Inlet area is prepared to leave its fate in the hands of the city of Valdez and Fairbanks (borough),” said Harold Heinze, chief executive officer of the state gas authority. The state board’s membership includes six businessmen from Anchorage and Kenai and one from Fairbanks.
Board Chairman Andy Warwick directed his closing comment to Deputy Commissioner Porter: “Maybe you can get the governor to hug us occasionally.”
In other action May 10, the board discussed its worries that the federal Jones Act, which requires U.S.-built and U.S.-crewed ships for carrying cargoes between domestic ports, could hurt its price competitiveness for moving LNG to West Coast markets. Heinze’s own estimates show U.S.-built LNG tankers would cost twice as much as foreign vessels.
“It may be the deal killer,” Warwick said.
“We need to be figuring out, how do we deal with this Jones Act,” said board member David Cuddy. Federal shipbuilding subsidy a possibility Although the board discussed the option of seeking a congressional waiver from the Jones Act, Cuddy and Warwick suggested a federal shipbuilding subsidy might be a politically better way to go, especially by promoting the creation of U.S. shipyard jobs.
“Congress always goes for what costs more money and pleases the most people,” Cuddy said.
The board approved a work plan that includes about $25,000 for a consultant to assist in finding possible solutions to the Jones Act problem.
Heinze and Heyworth suggested one approach they said is worth looking into. Perhaps the hull and propulsion system could be built in U.S. shipyards, then move the unfinished tankers to lower-cost yards overseas for installation of the LNG tanks and other systems.
The state gas authority estimates it would need three tankers to serve the West Coast, though Heinze was clear in stating the authority would not own the ships. The state could contract for use of the tankers, or perhaps the buyers of the gas could put the ships under contract.
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