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House Resources hearing AGDC bill Parnell says he can’t support bill as filed; committee gets answers to questions, including contract vs. common carriage issue Kristen Nelson Petroleum News
House Bill 4, establishing the Alaska Gasline Development Corp. as a separate entity and authorizing it to move forward toward an open season for an in-state gas pipeline project, has had three hearings in House Resources and was scheduled for a fourth on Feb. 15 after Petroleum News went to press.
Committee members had a lot of questions on the bill. The bill’s prime sponsor, committee member Rep. Mike Hawker, R-Anchorage, responded in writing to a number of questions, as did Legislative Counsel Donald Bullock and the Department of Natural Resources.
Gov. Sean Parnell has concerns and said at a Feb. 6 press availability he couldn’t support the bill as originally filed. He said the sponsors know that and “are working with our office and with every legislator in the building who’s interested in that topic to boost AGDC’s ability to get Alaska’s gas to Alaskans.”
Parnell has been pushing a large liquefied natural gas export project for North Slope natural gas and has given the partners in the Alaska Pipeline Project until Feb. 15 to select a concept for an all-Alaska project, the LNG project he proposed in 2011, including details such as pipe size, daily volume and location of facilities.
The APP partners, TransCanada which holds the state’s license under the Alaska Gasline Inducement Act and ExxonMobil, have been working with BP and ConocoPhillips, and in October met an earlier benchmark set by the governor, hardening numbers on the project, with an estimate of $45-$65 billion.
The governor said at the time that they had also met another benchmark, completing discussions with the AGDC on the potential to consolidate the work of the two projects.
Now is the time House Speaker Mike Chenault, R-Nikiski, a prime sponsor of the bill and of its predecessor, HB 9, which failed in the Senate in the last legislative session, said at the Feb. 4 hearing that the in-state line is a project the sponsors believe “has the best opportunity to bring gas to Alaskans any time in the near future.”
The AGDC project would bring natural gas to Fairbanks, lowering utility costs there, bring a long-term energy supply to Cook Inlet and could help rural Alaska along the way by providing propane, he said.
The process began with HB 369, passed by the Legislature in 2010, which established AGDC.
Chenault said AGDC has done what the Legislature asked in HB 369, but needs tools to continue “to get Alaska to an open season to see if there really is a market out there ... to sell our gas.”
He said it’s time for a choice.
AGDC developed the plan the Legislature called for in HB 369, and “now we need to give AGDC its next direction and the tools that it needs to carry out their mission or we need to pull the plug. There’s no half way unless we’re OK with driving up the cost to Alaskans who’ll eventually pay for gas. And ... every time we wait, it just costs us more. I think it’s time now to deliver ... the promise to Alaskans that we have gas through the Railbelt system. ...
Answers for committee DNR responded to a question on its administration of right-of-way leases, specifically concerns expressed that an oil pipeline could switch from common carrier to contract carrier under the provisions of HB 4.
The trans-Alaska oil pipeline is a common carrier line and under the provisions of common carriage space must be made available for new oil offered for shipment — and in the event the line is full, volumes from existing shippers would be prorated to make room for the new volumes. While that isn’t a problem with the trans-Alaska oil pipeline since it is running well below capacity, it would be a problem for a natural gas pipeline where the volumes are going to utilities which count on receiving those volumes to keep heat and light on for consumers.
DNR said in a Feb. 12 response to the committee that under the HB 4 proposal, “A lease with contract carrier covenants rather than common carrier covenants may be issued only to an applicant eligible to be regulated” under the statutory provisions in HB 4, and since those provisions are “limited to in-state natural gas pipelines, no oil pipeline can become a contract carrier.”
Other natural gas pipelines could apply under the proposed statute to become contract carriers, but DNR that that would require public notice and a determination by the DNR commissioner that the applicant can perform the transportation and that it would be in the public interest. A change from common carriage to contract carriage by an existing natural gas pipeline would require the same finding the commissioner makes in granting the original lease, the department said.
Concerns answered by Hawker included: exemption of AGDC from the state procurement code; amount of board compensation; exemption from the State Personnel Act; exemption of AGDC from the Executive Budget Act; and provision for AGDC to retain independent legal counsel.
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