Alaska Lawmakers Propose Ditching Pipeline Plan
5th February 2011
Alaska lawmakers introduced legislation Friday Feb. 4, 2011 to abandon a centerpiece of former Gov. Sarah Palin's administration: a state-sanctioned effort to advance a major natural gas pipeline.
The measure sponsored by at least five Republican representatives underscored the impatience and skepticism that many lawmakers have expressed about the current process and a belief the state is no closer than it was several years ago to realizing the long-hoped-for line.
It sets up a potential political battle with House Democrats and Palin's successor, Republican Gov. Sean Parnell. Both have expressed support for seeing the process now under way through.
If the legislation succeeds, it was not clear how Alaska would commercialize its prodigious North Slope gas. The pipeline had been seen as a way to help shore up revenue amid declining oil production, create jobs and provide more reliable, affordable energy to Alaskans.
The measure Friday was the first such introduced by the Legislature. It was not immediately clear how lawmakers would vote.
Under the Alaska Gasline Inducement Act, championed by the Republican Palin, the state promised Canada-based TransCanada Corp. up to $500 million to advance a line. TransCanada won the exclusive license in 2008.
Alaska has reported that reimbursements to TransCanada so far have topped $36 million. More than $100 million remains set aside, and Parnell has requested $160 million more for next fiscal year.
TransCanada, which is working with Exxon Mobil Corp. on the project, has estimated the cost at $20 billion to $41 billion, depending on the route and the size of the line.
The company missed a self-imposed target for reaching precedent agreements with shippers at the end of last year but has cautioned against reading too much into that, noting that negotiations are complex but continuing.
Some lawmakers, though, are losing patience - and faith - that this process will succeed in getting a line built this decade as planned, if ever. The legislation Friday was sponsored by Republican Reps. Mike Chenault, Mike Hawker, Craig Johnson, Eric Feige, and Kurt Olson.
The bill would presume the project is uneconomic - for purposes of triggering an abandonment clause in the law - if TransCanada cannot show proof to Parnell's administration before July 15 that it has received firm shipping commitments.
That clause allows for the project to be abandoned if both parties agree it is not economical. If there's disagreement between the administration and TransCanada on the economic viability, the issue would go to arbitration.
The bill puts the onus on the administration to refute the presumption the project has failed. It sets an Aug. 15 deadline for a report doing that.
Absent proof that the project is economical, the administration would not to expect additional funding for the project. Parnell's office said it was reviewing the bill.
In a joint statement, Chenault, Johnson, Olson and Hawker said the bill adds something missing from the initial legislation: "a deadline. That's something Alaskans have a right to expect. Let's get this project started or get on with something else."
They said the public and the Legislature "have a right to know if we're simply throwing good money after bad."
A news conference was expected Monday. Feige said he signed on to the bill because he believes the issue needs to be discussed.
Rep. Scott Kawasaki, D-Fairbanks, said he is impatient, but a deal is a deal.
"If Alaska really wants to be known as a place to do business, we really should stick to the deals we've made," he said.
The world has changed since the passage of the law: The nation has undergone an economic slump, gas prices haven't been high -particularly relative to oil - and companies have to weigh the competitiveness of Alaska's gas against, say, the rise of North American shale.
A spokesman for the competing Denali pipeline project - a collaboration of BP PLC and ConocoPhillips - has stressed that proposal is market-driven.
Larry Persily, federal coordinator for Alaska gas pipeline projects, has urged lawmakers to be patient. While he doesn't consider a line "probable," he said it's "still possible and plausible" - reason enough for his office to continuing working with "anyone who wants to build a pipeline that serves Alaskans and the Lower 48."
Sen. Bert Stedman, the Republican co-chair of the powerful state Senate Finance Committee, said he looks forward to debate on the issue. He said that if the process isn't working, "the quicker we close it down, the better, not only for the cost to the treasury but so we can move on."
The bill was referred to just one committee on the House side, the Finance legislative panel. Kawasaki said he would seek to have it heard by another committee, to allow for a more thorough vetting.
Tony Palmer, vice president of major projects development for TransCanada, declined immediate comment on the bill. But he told The Associated Press that TransCanada has met its obligations under the act and is moving ahead with the project.
"The Legislature will do what it thinks is appropriate," he said.