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Gas line will put heat on session

Legislators may have to address done deal with yea or nay vote

Posted: Monday, December 27, 2004

The Alaska Legislature may make one of its most far-reaching decisions in decades in the coming session.

If all goes as Gov. Frank Murkowski plans, he will soon drop into the Legislature's lap a gas pipeline agreement with energy companies that could cost up to $20 billion and bring hundreds of millions in royalties to the state.

In the 30-day-period after Murkowski unveils a final fiscal package - likely littered with tax incentives for the state's major gas lease holders and some amount of state risk in the venture - the Legislature's often-fractious 60 members will have to decide yes or no.

They don't get to amend it or otherwise fiddle with it. They don't get to participate in the secret deal-making. They get just one vote.

It's enough to make some legislators a little anxious.

"Anytime you've got a 30-day deadline and it's an up or down vote, it's a bad situation," said a worried state Rep. Beth Kerttula, D-Juneau. "We haven't dealt with gas. It's the first pipeline in 25 years."

Quite a few legislators have found a constructive outlet for their difficult situation by collecting expert opinion on a major conundrum: How Alaska can balance public investment in a resource that could generate both windfall profits and massive financial risk.

"The tension is you don't want to give too much but you want to give enough," said Kim Elton, D-Juneau.

"I think you have to be very strong with the oil industry (which holds most of the gas leases). You have to be tough right back. I don't think they disagree. They know we are negotiating for our future," Kerttula said.

The governor so far has announced only one fiscal proposal for the proposed gas pipeline connecting the North Slope gas reserves to Canada to the Lower 48, provided jointly by BP, ConocoPhillips and ExxonMobil. The companies say they can begin operating a pipeline in 2014.

At least one alternate proposal is in the works, and there are rumors of another large company with a previous interest in Alaska gas taking a renewed look.

One strong proposal under development is an all-Alaska pipeline proposal, Fairbanks Mayor Jim Whitaker said.

The Alaska Gasline Port Authority recently signed a development agreement with Sempra Energy and acquired an option to purchase Yukon Pacific, which holds all the major permits and right-of-ways for an 800-mile pipeline to Valdez.

Whitaker says the all-Alaska project could be developed faster and cheaper than the major oil companies' proposal.

The proposal involves building a liquefaction plant in Valdez to convert the gas into a super-cooled liquid called LNG (liquid natural gas) that would likely be shipped to Baja California and distributed to Mexico and the Southwestern United States, said Doug Kline, a spokesman for Sempra Energy.

That plan would not entail the same political process as the major oil companies' proposal because the port authority isn't asking for tax breaks.

Whitaker said the all-Alaska proposal will soon be pitched to the North Slope's major and undeveloped gas lease holders. "It is forthcoming, quickly," he said.

Once the governor unveils his preferred proposal, the joint Legislative Budget and Audit Committee will take public comments and hold hearings.

All recommendations gathered from the public go back to the Murkowski administration for renegotiation and he sends it back to the Legislature for a number vote.

In anticipation of the upcoming activity, the Budget and Audit Committee hired several experts to tutor them on all things gas-pipeline-related. The committee sat through eight full days of "Gas 101-style" briefings during the summer. The committee plans to hire more experts later, mainly to do economic modeling of the governor's proposed deal.

"Our role basically is to educate ourselves on every aspect of it and then wait for the contract to land in our lap," said state Rep. Ralph Samuels, R-Anchorage, who co-chairs the committee.

Samuels and his committee co-chair, Sen. Gene Therriault, R-Fairbanks, will have a significant role in steering the gas pipeline proposal through the review process, their colleagues said.

But another duo of legislators wants to put the brakes on the heady rush to deal with the major oil companies on a trans-Canada route.

"It's a huge resource and it's not Alaskans deciding when and how it's going to be done. Three large companies are driving the whole train here," said Rep. Harry Crawford, D-Anchorage, who is working with fellow Democrat Eric Croft to devise a ballot initiative to charge the companies a reserves tax.

Crawford said he is worried that the companies won't develop the gas pipeline in a timely fashion and he wants an all-Alaska pipeline rather than a Canadian route.

State law requires the Legislature convene for a full session before an initiative is placed on the ballot, allowing legislators the opportunity to pass a substantially similar law instead.

Alluding to last year's failed attempt for a gas reserves tax, Crawford said "We don't have any illusions about passing (legislation) but we'll take it directly to the people and let them decide."

• Elizabeth Bluemink can be reached at elizabeth.bluemink@juneauempire.com.



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