My turn: New act needed to realize gas line

Posted: Monday, February 12, 2007

I was encouraged to hear the Legislature's enthusiasm after I reiterated in my State of the State address that the primary focus of my long-term energy plan is the natural gas pipeline. Our gas line team is proud of progress made toward developing a smart, expedient vehicle to build our long-awaited gas line, which will drive our state economy for generations and our nation toward energy independence: the "Alaska Gasline Inducement Act."

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This act will allow for a competitive process to choose the best gas line project for Alaska. The act will provide inducements to would-be pipeline builders and to those who control Alaska's gas, and will contain requirements that any pipeline proposals must satisfy to even be considered. The act will articulate clear, competitive criteria by which we will judge the project that best meets the state's long-term goals.

Before delving into the particulars of the act - such as applicant requirements, offered incentives and our gas line team's process timeline - I must address a very basic question: Why is a new law needed? Why spend weeks on a new statute when a gas line law existed, called the Stranded Gas Development Act?

The answer is simple: The stranded gas act is not a viable option. For starters, no new gas line applications can be accepted under this act after March 31, 2005, so the law is effectually void. The stranded gas act may remain on the books, but, like many inapplicable statutes, will simply lay dormant. More importantly, its terms cannot legally be satisfied. The act does not foster competition by which Alaskans can be assured of the best gas line deal, and it fails to involve the Legislature and the public in the crucial process of defining the state's "must-have" requirements.

I'll elaborate:

First, the stranded gas act requires a finding that the gas is "stranded." Our gas is not stranded. For gas to be considered stranded, its value must be insufficient to support a free-market pipeline. Independent economists who have analyzed the issue agree that the current and expected value of the gas is sufficient. The Legislature's consultants concur. Even the previous administration's lead gas line economist, Pedro Van Meurs, agreed that the project is economically viable. The stranded gas act's concessions overly favored producers, hurt Alaska's future, and raised serious constitutional problems. We need a new, smarter legal vehicle than the obsolete act.

Second, this act did not allow for a competitive process. The stranded gas act permitted multiple applications, but not the side-by-side analysis that the new act contemplates. A competitive process, by definition, requires criteria on which to compete. The inducement act will contain specified criteria by which we can judge which proposal will best commercialize Alaska's gas. The old act did not.

Third, the stranded gas act provided no vehicle to establish the state's "must-haves." We need the inducement act for that critical element. The inability of the previous administration to insist on terms critical to Alaska's interest was due to their absence under the old act.

The inducement act is an unprecedented approach. But I have confidence in our gas line team's vision for this law, as well as our ability to effect that vision. Unlike the stranded gas act, the inducement act will launch a gas line project that not only passes legislative and public scrutiny, but also will receive excellent proposals from applicants excited to build this gas line.

My gas line team continues to meet with legal experts, pipeline experts, members of the financial community and consultants. Federal officials and I are discussing our gas line's significance to the nation, and ways in which the federal government could assist us in getting it built as quickly as possible. We will continue to meet with legislators, potential applicants and federal regulators as the new act is constructed

The stranded gas act was a millstone of which we are free. The new act will induce construction of the gas line without selling Alaska's sovereignty. The inducement act will offer a transparent, expedient, and compelling competitive process. Moreover, it will strike the right balance for the state, project proponents, gas producers and the nation. The time is right for a new approach and the inducement act is the best vehicle.

• Sarah Palin is the governor of Alaska.



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