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Senators trim gas line money Committee OKs $1 million for state gas authority, pipeline negotiations Larry Persily Petroleum News Government Affairs Editor
Senate Finance Committee members balked at approving the administration’s request for $3 million in immediate funding for consultants to help negotiate a state fiscal contract for a proposed North Slope natural gas pipeline and to move forward with a state-owned gas project.
The committee March 10 trimmed the appropriation to $1 million, with the administration to share the money between its contract negotiations and the Alaska Natural Gas Development Authority.
“I’m in agreement that there is an immediate need for the $1 million,” said committee member Sen. Ben Stevens, R-Anchorage. Anything beyond that amount, he said, should be part of the normal budget process later in the session.
The administration said it needs at least $1 million to cover the next few months, with the rest targeted for spending in Fiscal 2005 that starts July 1. The Legislature is still working on putting together the Fiscal 2005 budget.
Stevens gained support from Sen. Lyman Hoffman, D-Bethel, who said he wanted to see more details for the full spending request than just the one page handed out at the committee meeting. Senator questions immediate need for money Stevens also noted that almost $1 million of the administration’s $3 million request is for consulting work dependent on events that may not even happen: passage of the federal energy bill currently stalled in the U.S. Senate, and whether the state accepts the Alaska Gasline Port Authority’s application to negotiate a pipeline fiscal contract.
Senate Bill 241 started in January as a $2.15 million request from the Alaska Natural Gas Development Authority to continue its work toward building a state-owned pipeline and liquefied natural gas shipping terminal at Valdez.
The administration, however, later changed it into a single request for all work “related to bringing natural gas from the North Slope to market.” That included the authority’s own effort and the administration’s negotiations with applicants under Alaska’s Stranded Gas Development Act for a long-term state fiscal contract in lieu of state and municipal taxes on a North Slope pipeline.
The committee’s version of the bill does not specify how the $1 million is to be shared. State gas authority could get $450,000 “We realize that not all of the monies are designated in our name as we might like,” said Harold Heinze, chief executive officer of the state gas authority.
The administration’s spending plan, presented to Senate Finance, allocated $450,000 to the state gas authority, with the rest targeted for two Stranded Gas Act negotiations with North Slope producers and MidAmerican Energy Holdings Co., possibly a third set of contract talks with the Alaska Gasline Port Authority, and also the state’s response if Congress passes an energy bill with gas line incentives.
Almost half the money the Revenue Department said it needs immediately is to cover the state’s costs of negotiating a fiscal contract with MidAmerican, which as of March 10 had declined to sign a reimbursement agreement to cover the state’s expenses. North Slope producers last month signed a reimbursement agreement with the state for their own negotiations.
Stranded Gas Act expenses include hiring tariff and legal experts to assist the state in the negotiations. No decision on port authority application While talks are ongoing with MidAmerican and the producers, the administration has not yet decided if the port authority meets the requirements of the Stranded Gas Act, said Steve Porter, deputy commissioner at Revenue. The port authority, comprised of the North Slope Borough, Fairbanks North Star Borough and Valdez, wants to sell bonds and take out bank loans to build a pipeline into Canada to feed North American markets and also a line to Valdez for LNG shipments.
Meanwhile, the state gas authority, created by a voter initiative in 2002, is out of funds for any further studies and has been asking for more money since late last summer. The authority has said it needs more money to study its possible exemption from federal corporate income taxes, LNG marketing and financing options. Similar to the municipal authority, the state authority believes it could raise money for its $12 billion project by selling bonds to investors.
The state authority, while not abandoning its goal of building an LNG plant at Valdez, has said it is looking at how it could work with the producers or MidAmerican to add in-state benefits to a project if either goes ahead and builds a line from the North Slope into Canada.
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