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Senate coalition sets goals for session Giessel says that oil production tax reform, in-state gas line development and balancing the state budget will be primary targets Alan Bailey Petroleum News
With this year’s election bringing some significant change to the political makeup of the Alaska Legislature, the lawmakers who will be heading to Juneau for the rapidly approaching legislative session are lining up their strategies for what they hope to accomplish in the coming months.
On Dec. 4 at Law Seminars International’s Energy in Alaska conference Sen. Cathy Giessel, R-District N, said that a new Republican-led coalition in the Senate is chomping at the bit, with a “let’s get our sleeves rolled up” attitude towards addressing a number of Alaska policy issues. Giessel is the new chair of the Senate Resources Committee.
Three goals Giessel said that the coalition has agreed on three main goals that the senators believe to be doable, with measurable outcomes. Those goals consist of:
•increasing Alaska oil production and the flow of oil through the trans-Alaska pipeline
•delivering affordable energy to Alaskans in combination with the commercialization of Alaska’s natural gas
•developing a sustainable state budget for future generations
Other issues that the coalition plans to address include problems with Alaska salmon stocks and a need to improve the outcomes of education in the state, Giessel said. In addition, the Alaska Arctic Policy Commission, formed during the last legislative session, will look into security and resource development in the Arctic, she said.
Production tax The goal of putting the brakes on the decline in Alaska oil production, a policy area that Giessel characterized as “our number one goal,” focuses on revisiting the contentious issue of Alaska’s oil production tax structure.
“We want to increase our business opportunity here in Alaska,” Giessel said. “We know that the production tax makes us fourth or fifth in the world at high (oil) prices in government take.”
Giessel anticipates a new production tax bill in the upcoming session but said that she does not yet know whether the governor, the Senate or the House will introduce the bill. PFC Energy, the firm that worked for the Legislature last year, will again provide production tax consultancy services, she said. New senators are participating in instructional sessions, to gain an understanding of previous deliberations on the tax issue.
And the Legislature is forming a new “Throughput through TAPS” special committee.
Alberta oil? Giessel also commented that, when it comes to upping throughput in the trans-Alaska pipeline, it is worth keeping an eye on Alberta’s challenge over the export of oil from its oil sands. If the Keystone pipeline for exporting Alberta oil through the Lower 48 states does not come to fruition and if, as seems likely, British Columbia blocks the construction of a pipeline from Alberta to the Canadian coast, it might be possible to ship Alberta oil through Alaska if a railroad between Canada and Alaska is constructed. Alaska and the various Canadian territories involved have already completed phase 1 of a feasibility study for a Canada-Alaska railroad connection, and in the last legislative session the Alaska Legislature provided the University of Alaska Fairbanks with a little over $1 million to conduct phase 2 of the study, Giessel said.
In-state gas line For its goal of delivering affordable energy to Alaskans, the Senate coalition is particularly focusing on an in-state gas pipeline from the North Slope to Southcentral Alaska, the Alaska Stand Alone Gas Pipeline, or ASAP, being progressed by the Alaska Gasline Development Corp.
“That project got somewhat slowed by our last legislative session, when full funding was not provided,” Giessel said “We don’t want to see that happen again. We need to continue that.”
A new “Energy Production with Delivery to Alaskans” special committee will consider both the in-state gas line and renewable energy sources, such as the planned Susitna-Watana hydropower system.
An in-state gas line could lower energy costs in Fairbanks, Giessel said.
“All of us are aware that Fairbanks is dying from the high cost of energy,” she said.
However, an in-state pipeline needs to terminate at tidewater, so that gas exports can support the size of pipeline throughput needed to keep gas prices down to affordable levels for Alaskans.
“We’ve got to have that volume exporting to create an economic product,” Giessel said.
Gas to Nikiski? With her electoral district encompassing Nikiski on the Kenai Peninsula, Giessel expressed a preference for routing the North Slope gas to Nikiski, where there is an existing LNG export facility. Given enough gas, it would be possible to re-open the fertilizer plant at Nikiski, a plant that provided more than 300 jobs on the Kenai Peninsula before being closed because of gas shortages, Giessel said. And a boost to the gas supply would enable the Tesoro refinery at Nikiski to revert to fully using gas as a fuel — the tight gas supply situation in the Cook Inlet basin has caused the refinery to have to use expensive propane and oil to meet some of its fuel needs, she said.
Asked about the looming crisis in Cook Inlet gas supplies, Giessel said that, with previously enacted exploration incentives having a noticeable impact on activity in the region, she did not anticipate new legislative action to address the situation.
“We have a pretty favorable environment in Cook Inlet right now,” Giessel said. “We have a lot of explorers out there, new companies that can’t even find an adequate workforce on the Kenai (Peninsula). … So at this point I don’t see Cook Inlet actually coming up as a big topic.”
However, Giessel sees a need for state involvement in the in-state gas line project, although she also said that the lawmakers’ goal is to stay out of the way, enabling industry to be as fully involved as possible in the development.
“The state is going to have to provide some bonding or some kind of financial support, but I want to see the private sector do this as much as possible,” she said.
Sustainable future Referencing the importance of the future for her three Alaska grandchildren, Giessel said that the coalition’s third goal, the development of sustainable capital and operating budgets for current and future generations, provides her prime incentive for participating in state politics.
“Alaska needs to have a future and right now we’re dead-ending ourselves,” she said. “We’re not moving towards that future.”
Cautioning about a continuing fall in the quantity of federal dollars flowing into the state, Giessel argued for finding ways of enabling the state to fund its own road and airport infrastructure, for example, rather than depending on federal largesse.
“We’re going to have to stand up on our own,” she said.
At the same time, cutting the budget to balance the books is a challenging proposition, with cutting the capital budget being easier than cutting the operating budget.
“You’re cutting money to your districts and that’s tough,” she said, commenting that it will be necessary to cut some spending that, while seeming appealing, is really not necessary.
The governor has already said that the budget he will submit will be significantly smaller than in the past and Pete Kelly, one of the new Finance Committee chairs, is a fiscal conservative, Giessel said.
“I believe that our operating budget is going to get some pretty close scrutiny,” she said.
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