Proposal to drop gas pipeline support stalls in Legislature

LEGISLATURE: Only weeks left; no hearing has been held.

March 14, 2011 

JUNEAU-- A proposal to ditch a state-sanctioned effort to build a natural gas pipeline in Alaska without proof that it's economically viable could fall by the wayside this session as debates over spending and whether to cut oil production taxes take center stage.

Despite the sense of urgency bill sponsors displayed when the proposal was made last month, the measure has yet to come up for a hearing. Less than five weeks remain in the legislative session.

One of the sponsors, Rep. Craig Johnson, R-Anchorage, said the bill will probably be heard before the Legislature adjourns but just how far it gets is unclear.

The bill was cast as an effort to get answers about whether the major natural gas pipeline project being pursued under the Alaska Gasline Inducement Act is feasible -- and whether the state money going toward it is money well spent. Under the act, championed by then-Gov. Sarah Palin, TransCanada received an exclusive license to advance a line. It is moving ahead with a promise from the state of up to $500 million in reimbursable costs.

While negotiations with possible shippers are continuing, the fact that the company missed a self-imposed target for securing precedent agreements with shippers at the end of last year left some lawmakers wondering if this is the best route to go in seeking a line.

The bill would presume the project is uneconomic for purposes of triggering an abandonment clause in the law if TransCanada cannot prove by mid-July that it has received firm shipping commitments. The clause allows for the project to be abandoned if the company and Gov. Sean Parnell's administration agree it is not economical. If the parties disagreed, the issue would go to arbitration.

The measure also puts pressure on the administration to refute the presumption that the project has failed and sets an Aug. 15 deadline for a report.

Parnell has called for seeing the current process through.

While Johnson said he and other lawmakers feel strongly about the issue, Johnson said this session has been about setting priorities for the House's Republican majority. A potential budget battle is brewing, and Johnson said the gas line bill won't be pushed at the expense of addressing "the more immediate problem" of the state's oil tax scheme.

He said he thinks the most important issue that lawmakers can address this session is the tax structure, formally known as Alaska's Clear and Equitable Share, or ACES.

Parnell has proposed cutting taxes as a way to help boost now-declining oil production and create jobs, an idea endorsed by several leading House Republicans. House Majority Leader Alan Austerman believes there are enough votes in the House to pass the bill, despite reservations from some within the Republican-led caucus about whether this is the avenue to take.

Oil provides nearly 90 percent of Alaska's unrestricted revenue, but if the current trend of declining production continues and is steep enough, some warn the trans-Alaska pipeline system runs the risk of shutting down within the next decade.

There's little debate within the state Capitol that oil is king and keeping it flowing is important to the state's economic future.

But Parnell's bill faces stiff opposition from House Democrats, who see it as little more than a corporate giveaway, and concerns, if not downright skepticism, from members of the Senate -- raising doubts about its passage and the specter of Parnell calling lawmakers back to deal with the issue in a special session.

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