Pipeline planning costs reach $25 million

Lawmakers spend $3 million on advice

Posted: Friday, June 23, 2006

ANCHORAGE - The state has spent more than $25 million buying advice on how best to bring about a proposed natural gas pipeline from the North Slope to Canada or the Lower 48 states.

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The administration of Gov. Frank Murkowski over the past three years has spent at least $22 million for outside help in negotiating the contract, according to figures the governor's office released this week.

To help them understand the complex oil tax and gas pipeline issues, lawmakers have spent nearly $3 million on consultants. That does not include the cost of the monthlong special session.

Murkowski last month released the proposed contract that he and top aides spent more than two years negotiating with the oil companies. The 460-page document sets tax and other state terms that would apply if the companies build a pipeline from the North Slope to the Lower 48 at an estimated cost of $21 billion.

That money went to more than two dozen contractors with expertise in areas such as engineering, economics, public policy, contract law, and oil and gas projects.

"It paid for investigating a project that, at today's prices, has the potential to bring $70 billion to the state of Alaska over the next 35 years," said Deputy Revenue Commissioner Tom Boutin.

The Murkowski administration's $22 million estimate includes only money spent on outside advice. It does not include costs such as printing hundreds of copies of the contract and its voluminous supporting materials.

In also does not include travel, salary and other expenses state officials have incurred while working on the contract. This week, for example, state workers and consultants traveled to Washington, D.C., to discuss possible changes.

A gas pipeline project has been a perennial Alaska dream since the discovery of vast reserves of North Slope gas more than 30 years ago. Murkowski's proposed contract could help advance the long-deferred project but it has a long way to go.

State lawmakers would first need to change a key oil tax, then amend the state's natural gas development law to make the proposed contract legal.

Lawmakers would then also have to approve the final contract.

They say money spent helping them understand the complex oil tax and gas pipeline issue has been well spent.

"This information is invaluable for legislators to make a decision," said Sen. Gene Therriault, R-North Pole, co-chairman of the Legislative Budget and Audit Committee.

"To have another opinion and to make sure what we're hearing (from the administration) is valid is very worthwhile because this project has such a big economic impact on the state," Therriault said.

The other committee co-chairman, Rep. Ralph Samuels, R-Anchorage, agreed.

"It's such a vast amount of money we're talking about in the long run that you can't be penny-wise and a pound foolish now," Samuels said.

Murkowski, who faces a re-election challenge in the August primary, is expected to call another special legislative session for another try at the oil tax and gas law changes.

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