Palin's gas line a recipe for failure

To put $500 million into perspective, if the government instead divvied up the money among last year's 610,000 Permanent Fund dividend recipients, the check would amount to $819 each, give or take a few cents. Not bad.

Republican Reps. Jay Ramras and Craig Johnson say the mutating fiscal moonscape and the increasing availability of natural gas in the Lower 48 have changed the economic equation. With gas and oil prices in the tank and supplies increasing, the $500 million investment at this point, they say, is shaky. Then there's that pesky AGIA provision that would require Alaska to pay TransCanada an additional $1 billion-plus if the state were to assist a competing proposal.

Their HCR 12 calls for the lovely Sarah P. and the attorney general, whoever that is nowadays, to review the "license" Alaska awarded TransCanada and get back to them in six months.

The lawmakers are right. Things have changed. A lot. In midsummer last year, when oil prices were gushing upwards through the $140-a-barrel mark, gas skyrocketed to more than $14 per thousand cubic feet. Since then, oil and gas prices have been in a tailspin. In December, when Alaska gave its "license" to Trans-Canada and promised the $500 million, natural gas prices at the Henry Hub pricing point hovered at about $6.50 Mcf. A few days ago, the price was at $3.77 Mcf.

It is easy to understand why Ramras, Johnson and others think a second look at AGIA is in order, and they are right, but in politics being right is not the same as being the winner. AGIA -- simple codification of the Palin administration's war on the oil industry -- is a case in point. It was a loser from Day One, but it passed the Legislature anyway, even with guys like Wally Hickel and Tony Knowles urging its defeat. Lawmakers, skittish then about Palin's popularity, now are leery of asking for a do-over because they fear public embarrassment for themselves and Alaska, and potential problems for a gas line down the road.

"What this resolution wants us to do is welsh out on a contract to build the largest project in North America," Democratic Rep. Les Gara told the Associated Press. "You can't behave like that and be viewed as a serious gas line partner."

Despite Gara's assertion to the contrary, AGIA is in no way, shape or form a pact to "build the largest project in North America" and, ignoring his pointed slur aimed at the Welsh, you get his gist about potential future problems. He is not alone in being nervous. As one astute observer put it recently, lawmakers figure: We passed it; we're stupid, why ask for more trouble? Why not just wait until a year from now for the open season and see what happens?

That may be fun, what with ConocoPhillips and BP's Denali pipeline project also under way. Surely you remember them? AGIA was designed to allow the state's selection of an independent company to build a gas line while forcing the oil industry to foot the bill. As an added slap in the face, the companies would have nothing to say about the line's construction or attendant costs. No wonder they started their own project.

Mind you, these outfits have gas, money and expertise. They are veritable shoo-ins for a FERC license. All they do not have is the phony and unnecessary state "license" and $500 million in state dough. They do not need them.

In the end, nobody expects TransCanada to beg, buy or borrow enough gas to fill a line. Nobody expects it to cobble together financing. Nobody expects FERC to grant it a license. Understandably, that agency has never smiled on a company with no gas, no contracts and no financing. On the horizon, if you look hard, is a train wreck of monumental proportions.

Yet the Palin administration -- which also opposes any review of AGIA -- remains cheery; you have to wonder why. It is, however, growing increasingly prickly about criticism as Palin's national prominence grows. Seemingly only minutes after Joe McGinniss, writing in Conde Nast's Portfolio.com, posited that Palin is the single biggest roadblock to the gas line's success, she offered the revelation that she, by golly, always has been for talking to producers about improving the gas tax climate. Really? Always, she says. Imagine lawmakers' surprise. Her statement seems to run counter to just about everything from her administration on the subject until this point.

Looking at this and the other silliness of the past few years I wonder sometimes whether we have not misread the tea leaves; whether the governor actually wants to build a gas line. If a line finally gets under way, if the dragons are slain, wouldn't she then have to be governor, with all the grinding minutiae that entails? What would she use to fuel the populism she hopes will catapult her into national office? After all, no war, no enemies, no glory and no whipping boys is a poor recipe for her style of us-against-them populism.

It finally occurred to me. We may never see a gas line. Maybe we were not supposed to.

Independent journalist Paul Jenkins is a former columnist and editor with Voice of the Times.