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House Finance advances gas line bill

Posted: April 20, 2014 - 12:11am

JUNEAU — The House Finance Committee on Friday advanced a bill setting the state’s participation in a major liquefied natural gas project, with members expressing a mix of both optimism and skepticism about whether the process would yield a long hoped-for gas line.

Co-chair Bill Stoltze, R-Chugiak, said he saw a lot of will and desire to get a project done but noted the process is still in its early stages. Rep. David Guttenberg, D-Fairbanks, said he wants a project to be successful because of the positive impact that could have on state revenue. But he said he worried about another “false start.”

SB138, from Gov. Sean Parnell, would set at about 25 percent state participation in the project also being pursued by the TransCanada Corp., the Alaska Gasline Development Corp., or AGDC, and the North Slope’s major players — BP, ConocoPhillips and ExxonMobil Corp. It also is aimed at moving the project — currently estimated to cost between $45 billion and more than $65 billion — into a phase of preliminary engineering and design and cost refinement.

It would allow the state to negotiate project-enabling contracts that would be brought back to lawmakers for consideration, with the expectation that lawmakers will receive confidential briefings along the way in an effort to avoid any surprises.

Amendments approved by the committee in its relatively light rewrite include having proposed contracts provide a way for allocating infrastructure costs between the state and project parties to ensure those costs are shared, not borne wholly by the state. Project agreements also would have to include a means by which gas would be made available should in-state demand increase but the state’s gas and producers’ gas is committed elsewhere. Proposed agreements also would not be able to change property taxes on existing oil and gas infrastructure, speaking to a concern of some municipalities and touching-up language added in the prior committee. Intent language was also added, calling for the hiring of qualified Alaska workers for engineering, construction, maintenance and other project-related jobs.

Provisions added in House Resources, which did a lot of the heavy lifting on the bill, would require negotiated contracts that need legislative approval be made public at least 90 days before their proposed effective date. It would require legislative briefings on progress at least every four months, accompanied by a written report on the amount of money the state may be obligated to pay TransCanada if a project were terminated before gas starts flowing. It also beefed up from 10 percent to 20 percent the amount of revenue from the state’s share of royalty gas in the project, after payment is made to the Alaska Permanent Fund, that would go into a new fund to help with energy projects in communities that won’t have direct access to a North Slope gas line.

That fund was a key selling point for some rural lawmakers when the bill passed the Senate last month.

Rep. Bryce Edgmon, D-Dillingham, said SB138 was probably the most rounded oil and gas bill of this heft that he’s been involved in.

The bill could be voted on in the House as early as Saturday; Sunday is the scheduled end of the 90-day session. Senate President Charlie Huggins has said he does not expect the bill to go to a conference committee.

As proposed, TransCanada would own the state’s interest in the gas treatment plant and pipeline, with the state having an option of buying back some of that equity share, a portion of the 25 percent. AGDC would hold the state’s interest in liquefaction facilities.

While TransCanada and the administration have repeatedly defended the proposed partnership, saying the company brings valuable expertise to the table, TransCanada’s involvement has continued to cause unease for some lawmakers, who question if this is the best deal for the state. Administration officials have cast the arrangement as a way for the state to not have to bear as much in upfront costs as it would without a partner. If the state went it alone, and the project was built as planned, the state could face investment costs of about $14 billion, according to the departments of Natural Resources and Revenue. The investment with TransCanada involved could range from $6.9 billion to $9.6 billion.

The partnership also has been billed as a transition from the Alaska Gasline Inducement Act, or AGIA, under which TransCanada pursued a project with Exxon for years with state support. Should SB138 pass, the state and TransCanada have laid out plans under which their relationship under the act could be formally terminated within months, seeking to assuage fears about ongoing commitments under that law.

Under a new agreement the state has signed with TransCanada, which is subject to the passage of SB138, the state faces paying TransCanada’s development costs plus 7.1 percent if the project is not sanctioned. Rep. Les Gara, D-Anchorage, proposed an amendment that would instead peg the interest rate more closely to the five-year treasury rate. Natural Resources Commissioner Joe Balash said that conflicted with the agreement — which some lawmakers have felt hamstrung by — and raised the question of whether the purpose of the proposal was to undo the agreement or cause a renegotiation.

Gara said he wasn’t trying to get rid of TransCanada. He just wanted to make sure the state got a fair deal.

On Friday, Gara said he wasn’t sure how he would vote.

Balash said in an interview that the administration was “thrilled” with the shape the bill was in. He said the administration also was cognizant of the lingering concerns.

“The most important thing is, make sure that we arrive at a point that the public and Legislature can support,” he said. “We hear a lot about durability and in order for anything to be truly durable, it has to be publicly accepted.”

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