Alaska editorial: Pipeline legislation changed for the better

Posted: Friday, April 13, 2007

This editorial appeared in the Anchorage Daily News:

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Lawmakers are trying to fix several of the shortcomings in the governor's gas line bill. It's a start; now keep working to improve other provisions in the legislation.

It's doubtful the governor's Alaska Gasline Inducement Act as introduced will succeed at getting a North Slope natural gas line built. It focuses too much on pipeline ownership, which is relatively low risk, and not enough on two costlier risks. It doesn't do enough to address production taxes and royalties over the years ahead. And it doesn't deal with the high-risk but essential financial guarantee that someone will have to agree to ship gas down the line, regardless of market prices at the other end. It worries too much about promoting unknown future gas production at the expense of getting the line built for known gas reserves.

Gov. Sarah Palin says she is willing to work with lawmakers on changes to the bill. Toward that goal, the House Oil and Gas Committee and Senate Resources Committee did some good work last week. The committees each deleted a provision from the governor's bill that could have blocked current North Slope oil and gas producers from ever appealing higher shipping costs for moving their gas to market. If left intact, the provision could have required the first shippers in the line to subsidize higher costs of later expanding the line to move new discoveries down the pipe.

The administration doesn't like the change, arguing that ensuring lower shipping rates for future production is more important than protecting the rates charged to original users of the line.

Deputy Commissioner of Natural Resources Marty Rutherford says companies might not invest in gas exploration if shipping costs look too high. But no current producer is going to sign up to use the line if its future shipping costs could rise, cutting into its profits, just to benefit competitors. The Legislature has a better idea, allowing companies to at least challenge future shipping rates to ensure fairness.

The committees also added a requirement that the Palin administration rank pipeline license applicants by specific financial factors. Lawmakers had complained the governor's bill lacked a specific enough system for selecting the winning applicant.

And the committees amended the bills to give lawmakers more time to consider the administration's award of an exclusive license for building the line. The committees also want to require legislative confirmation of the license decision; Gov. Palin proposed approval by default if the Legislature fails to reject a deal within 30 days.

The administration doesn't care for those changes.

Revenue Commissioner Patrick Galvin said the Senate committee's decision to allow 60 days for legislative OK of a gas line license - instead of the 30 days the governor wants - could delay the project. The administration wants to grant the license next spring, after reviewing bids this fall and winter, so that field work could begin in the summer. Allowing too long for legislative approval could hurt the schedule envisioned by the governor, the commissioner said.

Alaska has been waiting for a North Slope gas line for almost 40 years. If legislators want an additional 30 days to make sure the state has picked the best developer, so be it.

The governor's gas line bill still needs work, but legislators are making progress. With five weeks left before adjournment, the administration should accept the good changes and move on to the next items.

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