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Legislators hear gas-line orientation

Lawmakers told vote on project could be biggest of their career

Posted: Wednesday, January 12, 2005

State Rep. Ralph Samuels told House members Tuesday that approving terms for a natural gas pipeline could be the biggest decision of their legislative careers, but they won't have much say in what goes on the table.

"Our role is not to negotiate this contract," said Samuels, R-Anchorage. But, he added, "you need to start learning now about what the process is."

Samuels and Sen. Gene Therriault, R-Fairbanks, gave a gas line primer to more than 30 House Republicans and Democrats in the chambers of House Speaker John Harris. Samuels and Therriault head the Legislative Budget and Audit Joint Committee and are the Legislature's point men on the project.

State negotiators and representatives with the three major oil companies - BP, Exxon Mobil and ConocoPhillips - are working on a contract proposal for fiscal terms with the state, a key step in making the pipeline project a reality. Those companies have proposed a pipeline route from the North Slope through Canada and to markets in the Midwest. The project has been estimated to cost $20 billion.

Veteran and freshman lawmakers alike listened and peppered Samuels and Therriault with questions about their roles in the approving the line, the state's investment in it and whether more than one line could be built.

Samuels said the main issues were the state's risk if it took partial ownership in a pipeline, what kind of access Alaska users would have to the line and the access explorers will have as they discover more reserves.

Alaska, like the companies who ultimately build the line, would stand to lose money as partial owners if gas prices fall below the cost of shipping the gas. If the price of gas does down, Samuels said, "we're in a world of hurt."

There is about 35 trillion cubic feet of known gas reserves in the North Slope, and there could be 250 trillion cubic feet undiscovered in the North Slope and the National Petroleum Reserve-Alaska, he said. By comparison, Anchorage uses about 160 million cubic feet of gas per day.

The gas line is envisioned to move 4.5 billion cubic feet per day, or almost $5.8 billion worth of gas a year.

If the administration and the major North Slope producers agree on a contract, it would be sent to the Legislature for a 30-day comment period. The state's revenue commissioner would provide an evaluation of the contract proposal, and if more than one proposal had been submitted, would point out the differences. The administration would not recommend one over another.

The Legislature would then return the proposal with comments, and the administration would go back to the producers to iron out the deal, Samuels said.

The Legislature would get the revised proposal back for a yes or no vote. Lawmakers would not be able to amend the contract, but could make their vote conditional, approving the deal if certain conditions are met, Samuels said.

Besides the major producers, the state is in talks with TransCanada for a stranded gas contract, but the state has not submitted a proposal for terms as it has with the major producers. The Alaska Gasline Port Authority also wants to build a gas pipeline, one that runs from the North Slope to Valdez.

All three groups are separate entities, and the benefits of each plan would have to be evaluated individually if they come before the Legislature, Samuels said. The port authority, a public organization approved by voters in the Fairbanks North Star Borough and the city of Valdez, does not need the Legislature's approval because it is not trying to change the tax structure, he said.

Asked if two gas pipelines through the state could work, Samuels said he believed it could, in the future. But, he added, he did not think there was enough gas already found to build two lines at once.

Rep. Jay Ramras, a Republican freshman from Fairbanks, said he has been studying the issues of the gas line, but its scope is very broad.

"It's a cocktail of the government and the private sector," he said. "If a bartender makes a cocktail, you know what goes into it." That's not necessarily the case here, he said.state's investment in it and whether more than one line could be built.

Samuels said the main issues were the state's risk if it took partial ownership in a pipeline, what kind of access Alaska users would have to the line and the access explorers will have as they discover more reserves.

Alaska, like the companies who ultimately build the line, would stand to lose money as partial owners if gas prices fall below the cost of shipping the gas. If the price of gas does down, Samuels said, "we're in a world of hurt."

There is about 35 trillion cubic feet of known gas reserves in the North Slope, and there could be 250 trillion cubic feet undiscovered in the North Slope and the National Petroleum Reserve-Alaska, he said. By comparison, Anchorage uses about 160 million cubic feet of gas per day.

The gas line is envisioned to move 4.5 billion cubic feet per day, or almost $5.8 billion worth of gas a year.

If the administration and the major North Slope producers agree on a contract, it would be sent to the Legislature for a 30-day comment period. The state's revenue commissioner would provide an evaluation of the contract proposal, and if more than one proposal had been submitted, would point out the differences. The administration would not recommend one over another.

The Legislature would then return the proposal with comments, and the administration would go back to the producers to iron out the deal, Samuels said.

The Legislature would get the revised proposal back for a yes or no vote. Lawmakers would not be able to amend the contract, but could make their vote conditional, approving the deal if certain conditions are met, Samuels said.

Besides the major producers, the state is in talks with TransCanada for a stranded gas contract, but the state has not submitted a proposal for terms as it has with the major producers. The Alaska Gasline Port Authority also wants to build a gas pipeline, one that runs from the North Slope to Valdez.

All three groups are separate entities, and the benefits of each plan would have to be evaluated individually if they come before the Legislature, Samuels said. The port authority, a public organization approved by voters in the Fairbanks North Star Borough and the city of Valdez, does not need the Legislature's approval because it is not trying to change the tax structure, he said.

Asked if two gas pipelines through the state could work, Samuels said he believed it could, in the future. But, he added, he did not think there was enough gas already found to build two lines at once.

Rep. Jay Ramras, a Republican freshman from Fairbanks, said he has been studying the issues of the gas line, but its scope is very broad.

"It's a cocktail of the government and the private sector," he said. "If a bartender makes a cocktail, you know what goes into it." That's not necessarily the case here, he said.



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