Gas pipeline legislation progresses

Posted: Thursday, April 03, 2003

Action in Congress this week is helping to move along the development of a natural gas pipeline from Prudhoe Bay to the Lower 48, according to the governor, Alaska's congressional delegation and oil companies.

A financial incentive package for oil companies to build the pipeline is slated to be added to energy legislation being developed by the U.S. Senate Energy and Natural Resources committees, according to Chuck Kleeschulte, spokesman for U.S. Sen. Lisa Murkowski. The Senate Finance Committee approved the package Wednesday morning.

Alaska Gov. Frank Murkowski called the action a major development.

"Without this action, it would have been very difficult to proceed with just the state's participation in the process," Murkowski said.

The natural gas line has been a topic of discussion for years. The route being discussed by oil companies would run from Prudhoe Bay to Fairbanks in parallel with the trans-Alaska oil pipeline, and then veer off to follow the Alaska Highway down through Alberta, Canada, and end in Chicago, said BP spokesman Dave MacDowell.

The financial incentive package would provide a federal income tax credit to gas producers if the field price of gas dips below $1.35 per million British thermal units. The governor said the credit would not impact federal revenue because it is unlikely the price of natural gas would ever fall low enough to trigger it.

The incentive package also would accelerate the pipeline's depreciation from 15 years to seven years.

"That action (Wednesday) in the Senate Finance Committee was a very important first step regarding an Alaska gas project. (But) it's still early days and that legislation has a ways to go before becoming law," MacDowell said.

He said the tax credit and accelerated depreciation were two of the most important provisions oil companies need to go ahead with the pipeline.

MacDowell said the companies also want to be certain of the fiscal environment in which they will operate - they want to be sure laws regarding state gas royalties and other financial matters are stable and consistent.

State House Bill 16, a measure that would facilitate negotiations on fiscal matters between gas companies and the state, was approved unanimously by the House on March 26. The state Senate is expected to vote on it Friday, the governor said. He said he will sign the bill as soon as he gets it.

MacDowell lauded the legislation and said it was encouraging to see federal and state action moving together.

"The beauty of a fiscal contract is that it will be clear, it will be simple, it will be certain, and it will give the project investors the confidence they need to move a big, expensive, risky project like this forward," he said.

The executive director of the Alaska Center for the Environment said his group also supports a gas pipeline.

"We and I think a lot of people see that as a viable alternative for Alaska. That's a way to keep Alaska's economy humming along without moving into new wilderness areas," said Executive Director Randy Virgin.

Virgin was less pleased with another congressional action regarding the Arctic National Wildlife Refuge. The U.S. House Resources Committee voted 27-17 this week to retain a provision authorizing exploration and development of oil and gas in ANWR.

The provision is included in a package of energy proposals that could be considered by the House as early as next week. The U.S. Senate rejected an ANWR drilling provision in a budget measure by a 52-48 vote two weeks ago. The governor called the House action proof that "ANWR is still breathing."

"It's just frustrating because it's really been clear the last couple of years that the American people don't want to sacrifice pristine wilderness for six months of oil," Virgin said.

But Kim Duke, executive director of the pro-drilling lobbying group Arctic Power, said it's only a matter of time before drilling begins in ANWR.

Masha Herbst can be reached at

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