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Railbelt legislators hear pitch for in-state natural gas pipeline

State study says subsidy makes plan viable, other legislators skeptical

Posted: July 25, 2011 - 8:10pm  |  Updated: July 25, 2011 - 8:13pm

Legislative advocates of a $7.5 billion in-state natural gas pipeline, mostly from the Railbelt, heard a proposal for a state-subsidized small-diameter pipeline Monday in Anchorage.

Several members of the In-State Gas Caucus met in Anchorage and said the plan presented by Alaska Housing Finance Corporation at the Legislature’s request sounds like it could provide the dependable source of natural gas the Southcentral region needed, as well as providing gas to Fairbanks and the Interior.

Other legislators have expressed skepticism, however. The plan being pushed risked doing more harm than good, they say.

Dan Fauske, CEO of the Alaska Housing Finance Corp., said it was feasible, with a state subsidy, to deliver natural gas at or below what Anchorage residents are currently paying.

By using state funds to help with construction and the state’s credit rating to help hold down borrowing costs, ongoing costs would appear to be reasonable, he said.

“I don’t believe in ongoing subsidies, I believe in a one-time subsidy,” Fauske told legislators.

The project is called the Alaska Stand-Alone Pipeline, or ASAP, which caucus Co-chairwoman Lesil McGuire, R-Anchorage, said was modeled after former Gov. Sarah Palin’s successful acronyms-based legislative proposals.

Those included ACES, the Alaska’s Clean and Equitable Share oil tax and AGIA, the Alaska Gasline Inducement Act, designed to win a large-diameter pipeline to enable Alaska to export its big natural gas reserves.

McGuire called ACES and AGIA “trite terms,” but acknowledged Palin’s success at using them to push her agenda.

To make the project economically viable, Fauske said, it will have to find uses for all of the gas the line would ship.

While they ruled out using the gas for a value-added product such as fertilizer as not cost effective, and questioned the financial viability of liquefied natural gas exports, new mine projects could provide the demand needed, he said.

If even one of the four major mine projects under development in the region comes to fruition, the pipeline could ship enough gas to be viable, he said.

Fauske said while questions remain, he’s convinced an in-state line can work, and ensure gas supplies for the Railbelt.

“You can’t let the lights go out in your two largest cities,” he said.

Other legislators not at the caucus meeting Monday have expressed concerns about an in-state line in recent days, saying it could threaten the big export line they say the state needs and could leave Alaska residents facing high natural gas prices for years to come.

“The current proposal would require the state to pay a lot of money to lock Alaskans into comparatively high gas prices and would all but lock us out of better deals from the Slope or Cook Inlet,” Rep. Beth Kertulla, D-Juneau, said.

The state is already subsidizing exploration for more gas in the Cook Inlet area, and is seeing new drilling activity coming.

Sen. Bert Stedman, R-Sitka, said a small, in-state line wouldn’t benefit the state the way a large export line would.

“The value of a gas line would be to get more oil,” he said.

A large export gas pipeline would spur new exploration to fill it, finding valuable new oil reserves at the same time, he said. Alaska’s known gas reserves would fill a small-diameter line for the foreseeable future, without the need for finding new reserves, he said.

At the same time, he said he’d like to see the state develop its hydroelectric resources for local use, while exporting its oil and gas.

“I’d rather have us sell our hydrocarbons and utilize our renewable resources ourselves,” Stedman said.

Fauske said his analysis showed that both the big Susitna River hydroelectric project proposed by Gov. Sean Parnell and the in-state line would be needed, however.

Rep. Mark Neuman, R-Big Lake, said it will be up to legislators to go to Juneau and chose between multiple projects.

“As legislators we’re going to have to go down there and decide which of these projects we’ll be funding,” he said.

• Contact reporter Pat Forgey at 523-2250 or at patrick.forgey@juneauempire.com.

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