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Legislature down to wire on governor’s gas pipeline bill Alaska House, Senate Finance committees have substitutes with administration’s AGIA changes; amendment process next Kristen Nelson Petroleum News
The Alaska Gasline Inducement Act — Gov. Sarah Palin’s plan to get a North Slope gas pipeline project moving — was in its final committees as Petroleum News went to press May 10.
This session of the Alaska Legislature ends May 16 and the bills have to be approved by the House and Senate, and any differences in the final versions resolved.
Committee substitutes for AGIA were introduced in Senate Finance May 8 and in House Finance May 9 by Revenue Commissioner Pat Galvin and Deputy Revenue Commissioner Marcia Davis. The committees have heard testimony on the bills but still have to take up amendments.
AGIA would offer inducements to both a pipeline builder and resource owners to get a pipeline project built in exchange for a plan and a timeframe that meet the state’s requirements.
There has been a lot of work on AGIA by the Legislature and the administration since it was introduced in early March. It was obvious as Davis walked through the committee substitutes that the administration was responding to some of the specific issues raised by the North Slope producers, pipeline companies, legislators and by legislative consultant Dan Dickinson in recent testimony.
The changes included a different word to describe the nature of a plan description — thorough rather than detailed — because of producer concerns that detailed is the term used by the Federal Energy Regulatory Commission for plans required at the time of a FERC certification application. A FERC application requires information that wouldn’t be known until after an open season is held; that level of information would not be known at the time of an AGIA application.
Legislators have been concerned that all applicants are treated fairly. Davis said that because of that concern, the bill now states that all applications will be held, unopened, until after the AGIA application deadline, ensuring that there is no way information from a submitted application could reach others still preparing applications.
The administration also met a producer concern about confidentiality. Originally the bill said that all information from the winning applicant would be made public. Now information determined by the commissioners of Natural Resources and Revenue to be proprietary or trade secrets will not be made public.
Legislators were concerned about their access to information and the bills have been changed to provide that all applications — complete or not — will be available to the public.
Legislators and their contractors can sign confidentiality agreements and have access to confidential data.
Change in requirement to accept FERC certificate The bill had required the licensee to accept a FERC certificate after administrative appeal rights had expired.
The producers objected. FERC can add conditions to the certificate, and potentially could add conditions which made the project uneconomic. By limiting appeal rights to FERC — FERC decisions can otherwise be appealed to the courts — a certificate applicant would lose any leverage because FERC staff with whom such changes would typically be negotiated would know there was no appeal from the agency’s decision.
An applicant is now required to accept a FERC certificate once the certificate is no longer subject to judicial appeal, or earlier at the applicant’s discretion.
TransCanada already has a FERC certificate — dating back to the original project some 30 years ago — so changes have been made to recognize that: Project sanction is now required within a year of the effective date of a certificate or amended certificate.
If a project did not have a successful open season or lacked other credit support to continue, the original bill provided five years from the certificate for project sanction. Galvin told Senate Finance that the administration recognized that a licensee would start immediately after a failed open season to secure firm transportation commitments, so the five years now runs from the end of the initial open season. That also resolves the issue of the federal loan guarantee, which runs out two years after the issuance of a certificate.
Amendments to project plan The bill had previously been amended to allow changes necessary because of an order by the Alaska Oil and Gas Conservation Commission, which controls oil and gas offtake rates and has yet to rule on a current offtake rate for Prudhoe Bay.
The producers pointed out that other permits are also required, so “requirement of a regulatory agency with jurisdiction over the project” has been added to acceptable reasons for modification of an approved project.
Amendments to plans may not substantially diminish the value of the project to the state. That requirement formerly read may not diminish the net present value of the project, but Davis said the administration realized that the threshold originally set would allow no reduction in flexibility and didn’t recognize that there are values to the state that aren’t financial.
Fiscal certainty, flexibility still producer issues Those changes did not address the main concerns of the North Slope oil and gas producers — BP, ConocoPhillips and ExxonMobil — who object to the bill because they say it does not adequately address fiscal certainty and requires applicants for the AGIA license to meet a number of specific requirements.
Fiscal certainty was locked in for the term of the contract under the deal negotiated by the Murkowski administration under the Stranded Gas Development Act. When that contract was presented to the Legislature last year it raised sovereignty and constitutional issues.
The producers, who own the majority interests in leases containing known natural gas supplies at Prudhoe Bay, have been campaigning hard for what they describe as a more flexible bill where the state would give applicants an opportunity to say how they would respond to general goals, rather than requiring that applications meet specific requirements. Fiscal terms — covering the whole range of state take from the industry — would have to be negotiated.
Representatives of the producers told legislators in early May that they would not be able to make applications under AGIA as the bill stood at that time.
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