Some say the $38 billion Alaska Permanent Fund could - and should - be more than $50 billion, but the difference has gone into the pockets of oil companies.
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Now, those same companies, which built and control the 800-mile trans-Alaska oil pipeline, are making a bid to control a proposed gas pipeline.
Gov. Sarah Palin's Alaska Gasline Inducement Act, or AGIA, is intended to set up a public process that would let the existing oil producers or someone else build the pipeline.
State officials and other industry observers say letting the producers have unfettered control of the valuable pipeline could cost the state dearly, like it did with the earlier oil pipeline. State leaders are trying to learn lessons from the existing pipeline to avoid making mistakes on the next one.
One problem: The big three oil companies say the gas pipeline deal can't be done without them - and they're fighting to keep the lead position in developing a gas pipeline that they had under former Gov. Frank Murkowski.
Trans-Alaska pipeline owners
BP Pipelines (Alaska) 46.93%
ExxonMobil Pipeline Co. 20.34%
Unocal Pipeline Co. 1.36%
Koch Alaska Pipeline Co 3.08%
Source: Alyeaka Pipeline Service Co. Web site.
In testimony before the Legislature over the last few weeks, representatives of Exxon Mobil Corp., ConocoPhillips Corp. and BP are arguing that only those who hold proven gas reserves can economically develop the pipeline.
"A producer gas pipeline will result in the best value to the state, the producers and the nation," said Martin Massey, an Exxon Mobil executive testifying before the Legislature.
Some critics argue that producer control of the oil pipeline has cost the state billions, and an inadequately regulated gas pipeline will cost the state even more.
A history with an oil pipeline
Palin's transition team looking at the Department of Revenue said that already happened with the state's oil pipeline.
"Alaska has lost an amount of money greater than the current PERS/TRS deficit of $8.6 billion as a consequence" of the current system, its report said. PERS is the Public Employees Retirement System and TRS is the Teachers Retirement System.
Anchorage attorney Robin Brena, who has represented independent companies against the big producers, argues that the producers used their control of the trans-Alaska pipeline to overcharge the state billions of dollars.
"To date, the TAPS (Trans-Alaska Pipeline System) carriers have charged and collected transportation rates that are $12.5 billion over just and reasonable rates," Brena testified to the Legislature in 2004.
Brena argues the money the state lost went instead to the big oil companies that own the pipeline because the high shipping costs reduced the price the state got for its royalty oil at Prudhoe Bay. In addition, it reduced the price everyone got for their oil, lowering the state's tax collections as well.
Brena, a Skagway native, has represented Anadarko Petroleum Corp., an independent oil explorer, in battles over rates with the trans-Alaska pipeline owners.
Anadarko has urged the Legislature to maintain provisions in Palin's AGIA bill that would allow anyone else to bid along with the big producers to build the new gas pipeline, but also set up requirements to keep them or anyone else from exploiting monopoly control.
"If it is going to be a producer-owned pipe, there ought to be additional scrutiny. AGIA goes to some of those issues," said Mark Hanley, public affairs manager for Anadarko.
Exxon disputes the charges
The companies that own the pipeline dispute the claim there has been any overcharging.
"Exxon Mobil Pipeline Co. believes its tariffs are fair and reasonable and based upon tariff methodologies that were mutually negotiated with the state," said company spokesman Brian Dunphy.
"These methodologies have helped allow extensive benefit to the state and its citizens over the years in the way of revenues to the state and energy resources to the nation," he said.
Looming over the AGIA debate in the Legislature is the old battle over taxing North Slope oil that still hasn't been resolved. The first barrel of oil was shipped out of Valdez Aug. 1, 1977, on the Arco Juneau, and pipeline tariffs are still being battled over at the Federal Energy Regulatory Commission.
State Rep. Ralph Samuels, R-Anchorage, listed for fellow legislators at the start of the session the three most important factors for a successful gas pipeline.
"It's the tariff, the tariff and the tariff," he said. Samuels is House majority leader and is acknowledged as one of the body's leading experts on oil and gas issues.
The tariff for shipping oil on the trans-Alaska oil pipeline is now set at $5.10 per barrel by the Federal Energy Regulatory Commission. The federal agency's state equivalent, the Regulatory Commission of Alaska, says the tariff should instead be $1.98 a barrel.
"We're arguing right now that the tariff is $3 too high," said Mark Hanley, public affairs manager for Anadarko.
Independent explorer fights back
Anadarko is now fighting the federal tariff in court, arguing that the state's lower RCA rate is what the federal rate should be. The pipeline owners are arguing the opposite.
The state of Alaska is officially sitting on the sidelines, because the federal tariff is the result of a settlement agreement between the state and the owners years ago.
The state has a great interest in the outcome, because that extra $3 in federal tariff drives down the price of oil and reduces the amount the state gets in taxes and royalties.
That amount over the years, plus what it would have earned in the permanent fund, is what Brena, the Anchorage attorney who said the state is losing oil revenue, based his estimate on.
The battles over oil are ongoing, with the Legislature appropriating hundreds of thousands of dollars to continue the RCA litigation. At the same time, the Palin administration has notified the oil companies that it wants to end the settlement agreement and negotiate a new one.
Typically, federal regulators require tariffs to be set at "just and reasonable" rates, but the rates on the Alaska pipeline were agreed to by the state and big oil companies years ago, and until recently there have been no other shippers willing to challenge the rates.
At the same time, those involved in the negotiations over AGIA are looking back at what happened with oil as they try to get the best deal they can on natural gas.
Legislators study the history
"We do need to look at the past, and try to learn from it," said Sen. Gene Therriault, R-North Pole and leader of the Senate Republican Minority. That means protecting independent explorers so they can boost the state's economy.
The history with the trans-Alaska oil pipeline has shaped the state's approach to AGIA, said Antony Scott, commercial analyst with the Department of Natural Resources Oil and Gas Division.
"The key thing I think the state learned from its experience with TAPS is that producers who also own the pipeline can use, or have the potential to use, the pipeline's economics to affect their tax and royalty payments to the state, and to affect the economics of third parties in their effort to explore and develop the North Slope," he said.
In the 1990s, Scott said one of the pipeline owners used its monopoly on the pipeline to force an explorer without access to the pipeline to sell out to them.
"It's absolutely essential to our economic future that this monopoly infrastructure has just and reasonable cost-based rates," Anadarko's Hanley told the Legislature.
Oil producers who are also pipeline owners don't have the same interest in keeping the tariff low, Samuels said.
"They don't care what the tariff is if they are just paying themselves," he said.
Exxon's Massey said that his company and other producers would try to keep costs down on construction of the pipeline because they'd be the major shippers.
"The producers and the state have maximum incentive to control costs," he said.
Exxon Mobil is highly competent at bringing costs on time and under budget, he said, and that translates into lower tariffs.
Pat Forgey can be reached at email@example.com.