Legislature OKs Palin's gas line act

AGIA bill prevails despite opposition from oil companies

Posted: Sunday, May 13, 2007

Both houses of the Alaska Legislature worked through the weekend, finalizing legislation to adopt the Alaska Gasline Inducement Act after nearly unanimous votes Friday in the Senate and House of Representatives in favor of the bill designed to bring a natural gas pipeline to Alaska.

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The AGIA bill will now go to the Senate Finance Committee to work out slight differences in versions passed by the Senate and House. The bill landed in the Senate committee because the House passed its version first.

Gov. Sarah Palin met with key legislative leaders in a celebratory news conference Friday afternoon. Legislative opposition to the bill faded during the past week, following the indictments of three current and former legislators on accusation of taking oil company bribes.

"It's a great day for Alaska," said Palin. "It signals a new era for Alaska."

Under AGIA, producers and independent pipeline companies can vie for rights to build the pipeline that lawmakers hope will ship trillions of cubic feet of North Slope natural gas to market.

The bill, introduced by the first-year Republican governor is designed to stimulate competition through inducements, but also stipulates requirements that BP PLC, Exxon Mobil Corp. and ConocoPhillips opposed.

This led to some tense moments for Palin and her energy team, especially after the three major oil companies had warned they would not submit a bid unless such stringent requirements were loosened. But she held firm, warning lawmakers not to water down her bill or risk a veto.

Big oil companies were relentless in their push, even taking out full-page newspaper advertisements criticizing AGIA. Then, on May 4, one current and two former state representatives were arrested on bribery and extortion charges, related in part to last year's efforts by the former administration to secure a gas pipeline.

"That night, I was thinking I just didn't want it to paralyze lawmakers and give them an excuse to back off on any substantial work," Palin said. "It was all the reason to move forward. I think in the end, the tide shifted."

House Democratic Leader Beth Kerttula, D-Juneau, appeared with Palin at the press conference, and praised her leadership.

"This is going to lead us forward into the future," she said.

Palin understands that getting lawmakers' approval is just a first step, for gas won't likely be moving from the North Slope for another 10 years. A license won't be issued to the winning bid until next spring.

"There is still a sense of relief, but there now it's a sense of, 'OK, let's get to work,"' Palin said. "That's what we need to do."

Sen. Kim Elton, D-Juneau, said he was surprised how quickly the bill began moving forward after the indictments.

Elton warned that the state was still years away from a pipeline, and said he expected the oil companies that now control North Slope gas have said Palin's plan excludes them and will fight hard to avoid losing that control.

"Some of the people who say they are afraid of being locked out (of the pipeline competition) have not come foreword with a plan for the last couple of decades," he said.

The state anticipates opening the bidding process on July 1.

BP has not decided whether it will submit a bid, spokesman Steve Rinehart said Friday. And even if they do, it won't fit the bill's parameters.

"We will not be able to submit a bid that conforms with AGIA," he said.

In an e-mail, Exxon Mobil spokeswoman Susan Reeves reiterated the company's long-held stance that AGIA does "not encourage competitive proposals."

ConocoPhillips did not immediately return calls for comment.

Palin has long warned that the state and the nation can't afford to let the natural gas supplies - estimated at about 35 trillion cubic feet of known reserves and likely much more - sit untapped any longer.

For now, the bill continues to put distance between Palin's ideas and a failed attempt last year to negotiate a deal with the North Slope producers by former Gov. Frank Murkowski.

Murkowski settled in principle with BP, Exxon Mobil and ConocoPhillips on fiscal terms for producing North Slope gas.

It did not guarantee a pipeline would get built, but the hope was it would enable producers to move forward with a pipeline from the North Slope through Canada and into the Midwest.

The line would ultimately have delivered 4.5 billion cubic feet of natural gas a day, which is about 7 percent of the current U.S. demand.

But state lawmakers felt the deal had too many giveaways for big firms, including locking in tax rates for several decades. The Legislature never voted on the deal.

It left some lawmakers frustrated with the process and looking for another way to revitalize the prospects of a pipeline.

"If you had told me I'd be standing here a year ago, I'd say you were crazy," said Sen. Hollis French, D-Anchorage, at the news conference with Palin.

"I hope today is the day we are driving the first spike; it's time to bring that gas to market, said French, a staunch opponent of Murkowski's plan. "It's been a long struggle."

The tough part is hardly over. Next the state must wait to see how many companies or consortiums bring a proposal for the legislature's review.

One of the concerns some lawmakers have had is that the bill won't generate enough bids because it is too rigid.

It was troublesome enough for Rep. Ralph Samuels, R-Anchorage, to be the lone dissenter the House's 37-1 vote.

"I hope the process works and we get the competition that the governor wants," said Samuels, considered to be the lawmaker most knowledgeable about oil and gas issues. "The fear is we do not and we pick that sole applicant and we pick the wrong applicant."

The multibillion dollar pipeline may have implications for North America's long-term energy supply for heating homes and businesses.

But it also is considered to be a potential boon to the state's economy, not unlike that of Prudhoe Bay's oil production at its peak.

Production, however, is declining, a troublesome reality for a state which relies on oil development for more than 85 percent of its revenue.

"There is risk in the project," said Sen. Charlie Huggins, a Wasilla Republican who sat in all three Senate committees that reviewed the bill. "It is a risk worth taking."

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