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Vol. 12, No. 20 Week of May 20, 2007
Providing coverage of Alaska and northern Canada's oil and gas industry

Governor gets AGIA

More than 2 months of work culminate in Alaska Legislature’s approval

Kristen Nelson

Petroleum News

The administration and legislators celebrated May 11 after House and Senate passed separate versions of Gov. Sarah Palin’s Alaska Gasline Inducement Act.

AGIA offers inducements in exchange for gas pipeline proposals which meet the state’s requirements. A request for applications will be issued this summer and the administration hopes to have a licensee selected and approved by the Legislature so that field work for a gas pipeline from the North Slope to market can begin next summer.

Final passage, of a Senate Finance substitute for the House version, occurred May 15 in the Senate and May 16 in the House.

The administration had worked since introduction of the bills in early March to keep House and Senate versions as similar as possible, thus avoiding a conference committee to resolve differences between the bills.

Last year it took three tries — in the regular session and two special sessions — before conference committees could sufficiently resolve differences between the big oil and gas bill at the time, the petroleum profits tax, such that both bodies could agree to accept it.

A Senate Finance substitute for a House bill worked out the differences between the Senate and House bills and both bodies approved the Senate substitute for House Bill 177, the Senate the day before the session ended and the House about 10:40 p.m. on the final day.

Sen. Bert Stedman, R-Sitka, co-chair of Senate Finance, said on the Senate floor that most of the issues where the House version was chosen involved wordsmithing.

On more substantive issues the Senate version was selected, Stedman said. Qualified expenditures of the $500 million state matching monies was expanded to include “pursuing firm transportation commitments in a binding open season, to securing financing for the project.” The House version said the money could be used to obtain a certificate from the Federal Energy Regulatory Commission or the Regulatory Commission of Alaska. Stedman said the change would allow an AGIA licensee that didn’t obtain sufficient firm transportation commitments at an initial binding season to spend more time trying to hold a successful open season while pursuing a FERC certificate. Another Senate change excluded lobbying costs from qualified expenditures which the state would match.

Finance Co-Chair Mike Chenault, R-Nikiski, said on the House floor May 16 that the final bill contained 16 items from the House version and six from the Senate, including making all applications — incomplete as well as complete — available to the public. Chenault said this was in the interest of “transparency and openness and fairness to all applicants.”

“I think that we’ve done our job,” he said. “I think we’ve put together a package that hopefully allows the governor and her people to go out and get a pipeline project.”

The Senate passed the bill 20 to 0; the House vote was 37 to 1.

PLA changed on House floor

In the May 11 floor votes approving the original bills, the House amended a section dealing with project labor agreements.

Public hearing comments on the bill were heavily in favor of requiring a project labor agreement as part of AGIA.

The goal is to maximize Alaska hire on the project, a goal which typically conflicts with federal law. Rep. Harry Crawford, D-Anchorage, argued in committee and on the floor that a PLA wasn’t enough, that only by requiring agreements with labor could local hire be maximized, both for union and non-union labor. That view won out in a House floor amendment with 23 sponsors, which passed 25 yeas to 13 nays.

The amended section requires a PLA and defines that as “a comprehensive collective bargaining agreement between the licensee or its agent and the appropriate labor representatives to ensure expedited construction with labor stability for the project by qualified residents of the state.”

‘A great day for Alaska’

“This is a great day for Alaska,” the governor said May 11 after the original bills passed the House and Senate. She thanked legislators for their work on the bill and said “this was the right way to progress this bill.”

Among legislators commenting at the May 11 press conference, Stedman called it “a historic day,” and said both House and Senate worked with the administration to move the bill forward.

Chenault, asked about concerns some legislators had expressed about the bill, said he thought some members were concerned that AGIA might not be an open enough process for all entities to participate. But, he said, “I don’t believe the votes were there to make any major changes.”

“I think what we have before us today is our best chance of moving forward on a gas line,” Chenault said.

On the issue of what’s next, Deputy Commissioner of Natural Resources Marty Rutherford said the administration would get right to work on a request for applications, and is shooting to have the RFA out July 1.

Commissioner of Revenue Pat Galvin said the administration’s goal was to have Alaska speak with one voice on how to move a gas line forward. Today, he said, “is the day when the state is speaking in one clear voice.”

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Governor looking at special session for PPT

An attempt to amend last year’s petroleum profits tax moved in both House and Senate, passing in the Senate, but never reached a final vote in the House.

The bills would have added costs resulting from improper maintenance or lack of maintenance to the list of items companies cannot claim as lease expenditures in calculating taxes due under PPT.

House Democrats called for a floor vote May 16 to move Senate Bill 80, the PPT amendment, out of House Finance. The vote failed on party lines, 16 yeas to 23 nays.

House Bill 128, which passed House Oil and Gas, Resources and Judiciary, is also in House Finance.

In the Senate, Tom Wagoner, R-Kenai, moved that the Legislature extend the session by 10 days to deal with remaining issues including PPT. Wagoner, the Senate sponsor of SB 80, is a member of the five-member Republican minority; the vote failed 5 yeas to 14 nays.

SB 80 cleared Senate Finance May 8 and passed the Senate 20 to 0 May 10. The bill was referred to House Finance May 11; a hearing scheduled for May 12 was postponed.

HB 128 was introduced Feb. 12, heard and passed out of Oil and Gas; it went to House Resources early in April where it was heard, held and finally assigned to a subcommittee. A vote to move the bill out of Resources failed in early May; then members agreed to move the bill if a Judiciary Committee referral was added. Judiciary heard the bill and moved it May 8; it has been in Finance since. No hearing has been held.

Special session likely this fall

Gov. Sarah Palin said May 17 that she thought SB 80 should have passed.

The subject will likely be taken up in a special session, the governor said.

“We need to revisit PPT. I think we shouldn’t have to ask for anymore evidence to surface that explains why we have to revisit oil taxes. Our oil tax formula was changed under a dark cloud of suspicion. We’re going to clear it up. And the FBI is already clearing some of it up for us.”

The best way to revisit PPT is a special session, the governor said. “It should be in the fall after we have time to fully evaluate the PPT rates … (and) we can present facts, figures, data to the lawmakers.”

Time is also needed to debate a gross tax vs. PPT, she said.

Palin said she’s been told fall is the best time for a special session, “after fishing season but before hunting season.”

—Kristen Nelson