Senate OKs $35 million for gas line

Posted: Thursday, March 15, 2007

The Alaska Senate unanimously passed a $35 million supplemental request Wednesday, largely to help Gov. Sarah Palin's efforts in getting a multibillion dollar gas line built.

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The bill, which next receives House review, includes $21.5 million to the Department of Law, $6.5 million for the Department of Natural Resources and $3 million for the Department of Revenue.

Sen. Lyman Hoffman, D-Bethel, said the bill passage shows commitment to the governor's Alaska Gasline Inducement Act, or AGIA, which came into review at its first Senate committee hearing later Wednesday.

"It does make a statement to the people of Alaska and to the people watching Alaska that want to get a gas line built," said Hoffman, who is co-chairman for the Senate Finance Committee. "It is going to make the statement that this is the highest priority for Alaska."

In a prepared statement, Palin approved of the Senate's progress.

"Passage of this bill makes a statement that the Alaska State Senate and I are working together to develop Alaska's oil and natural gas resources," Palin said.

The approval was preceded with a 20-minute debate over an amendment to provide an additional $4.5 million for Alaska Natural Gas Development Authority. The amendment, introduced by Sen. Tom Wagoner, R-Kenai, failed 13-6.

The authority has previously endorsed a trans-Alaska oil pipeline from Prudhoe Bay to Valdez and associated liquid natural gas facilities.

Senators opposing the amendment said it makes the authority a potential competitor vying for the rights to build the pipeline, and further review is needed to ensure these particular state funds are not used to unfairly subsidize one group's efforts.

"If you read the bill closely, it does not characterize what the (pipeline) route should be," said Sen. Charlie Huggins, R-Wasilla. "This will complicate our lives ... with potential competitors."

Amendment supporters on the Senate said the money clearly fell in line with the governor's mission of making provisions for in-state supplies of natural gas. The money would have been used for prep work and studies for a proposed spur off the main pipeline.

"There is nothing in this appropriation that provides funds for any of the gas line projects," said Sen. Fred Tyson, R-Eagle River.

"This is specific to one piece of pipe, a spur from whichever gas line goes forward, to bring gas to the Cook Inlet region, where more than half of the people of Alaska reside," he said.

Several hours after the Senate's floor session ended, the Senate Resources Committee held its first hearing on the governor's gas line bill.

The bill establishes project criteria, which energy companies must meet in exchange for inducement incentives from the state to build a pipeline. Companies will vie for rights to the project.

It affords tax incentives and royalty breaks for the first group of companies who commit to supplying the pipeline with natural gas, a process known as open season.

For now, the hot topic is the $500 million incentive the bill offers the company or group with the winning pipeline proposal.

Members of Palin's energy team from the Department of Natural Resources and Department of Revenue explained the value to the state.

That inducement, they said, would accelerate the timeline for a gas line, offset startup costs for the successful bidder, keep transportation costs down and encourages gas exploration.

Sen. Bill Wielechowski, D-Anchorage, said the administration will ultimately have to present a compelling argument.

"Before I agree to give $500 million to this or any project, I'm going to need to see some really rigorous analysis on your part as to why this will work," he said during the hearing. "I'm going to want to know that $500 million wasn't pulled out of the air. From my perspective, I'm looking at this from an open mind, but pretty skeptically."

Later outside the meeting, Wielechowski said he thought Department of Revenue Commissioner Pat Galvin did a good job, but he still wants to hear more when the committee meets again on Friday.

Huggins, the committee chairman, agreed, saying the first hearing represented a good start for the Senate.

Looking ahead to Friday's hearing, he asked the state for more risk analysis, details on the project's timeline and on the criteria to be considered by the state.

"We need to understand what the implications are, what the risk points are, and where we should be massaging things," he said.

The House Special Committee on Oil and Gas will pick up where it left off Tuesday with its second hearing Thursday afternoon.

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