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Prospects for small gas line alive but fading

Richard Mauer

JUNEAU -- The Senate on Friday took apart a House bill that would promote construction of a small-diameter gas line from the North Slope, leaving prospects for the line alive but distant and adding a new ripple of drama in the Capitol as the Legislature lurched into its last weekend.

The substitute to House Bill 9 took place at a morning meeting of the Senate's Community and Regional Affairs Committee under the unhappy gaze of the bill's principal authors -- none other than the speaker of the House, Mike Chenault, and one of his trusted lieutenants, Rep. Mike Hawker.

The House bill had been at the top of their priority list. It was also on the governor's.

But after the new version was read into the record, the two big men sat shoulder to shoulder at the narrow witness table, facing chairman Donny Olson, and complained they didn't recognize their bill.

"Where we had a pipeline group working for the citizens of Alaska, moving a pipeline forward -- that is the only pipeline project in this state that is moving forward at this time -- we have just neutered it, Mr. Chairman," Chenault, a Republican from Nikiski, told Olson, a Nome Democrat. "I don't support the CS (committee substitute) that's been proposed."

With the Legislature due to shut down Sunday, its 90th day, the gas line debate pitched into the bubbling pot from which a final adjournment package will be drawn -- or perhaps the agenda list of a special session.

The other big undecided big measure -- the Senate's oil-tax reform bill -- continued to bedevil its bipartisan majority Friday. In and out of caucus all day, the senators couldn't reach agreement on tax cuts that would be acceptable to both Democrats and Republicans and pass by a significant majority on the floor.

Observing from the House, minority leader Beth Kerttula, D-Juneau, said she thought the gas line could end up as a bargaining chip in negotiations between the chamber's leaders.

"It's obvious that you've got the two big bills out there -- you've got the oil tax bill and you've got House Bill 9," she said "In some way, shape or form, those are part of the end game for this session."

While dozens of other measures are stuck in various limbos, none have been promoted as hard by the governor, the House Republican majority and many senators as oil tax cuts. They say that cutting oil taxes would promote investment in Alaska by industry and reverse the decline in oil production.

But how much to cut? How to target the cuts to encourage new production without rewarding companies for doing what they would do anyway? That's where the Senate is sticking.

Racing up the Capitol steps from one meeting to another, Sen. Hollis French, an Anchorage Democrat and one of the leading voices for a minimal tax cut, said he remained hopeful that a compromise could be reached. A few minutes later, Senate President Gary Stevens, a Kodiak Republican who has been hosting the closed-door caucuses, said virtually the same thing.

The Senate's tax bill, 192, has evolved after months of hearings into a measure that has different formulas for new fields, transition fields and old fields, each with carrots to reward increased production.

Most of the Senate appears comfortable with the parts of the bill that encourage new development, and the bill got a strong endorsement the other day from one of the independent companies looking for oil on the North Slope.

But the bill's treatment of old but still huge fields like Prudhoe and Kuparuk has not been well received by industry, including some of the state's most powerful companies -- BP, Conoco Phillips and Exxon. Even at that, some senators said the bill gives too much tax relief to those companies.

Walking into a Senate Finance Committee meeting Friday afternoon, Sen. Bert Stedman, the committee's co-chair and principal author of 192, said he thought the bill was dead.

Not oil tax reform, he hastened to add -- just Senate Bill 192, which had become laden with all the baggage associated with contentious debate, and maybe tried to do too much. There could be another bill, already existing, he said, but he declined to elaborate beyond that.

Later, some legislative staffers were discussing how they had been searching for other bills that had already been introduced, sitting in committees capable of quick action, but were otherwise dead. The least controversial parts of 192, such as breaks for new fields, could be grafted into the other measure, quickly run through committee, rushed to the floor and be passed by the Senate before adjournment -- maybe even with enough time for the House to act.

Someone suggested using the appropriately titled "Stand Your Ground" bill, the self-defense measure stuck in Senate Finance. No, said a staffer, that wouldn't work. The Alaska Constitution would require that it be a bill with at least some reference to oil taxes. Even with that limitation, there would still be a few to choose from if it came to that.

Gov. Sean Parnell has said that oil taxes would be grounds for calling the Legislature back into session -- but only if a measure had passed the Senate and didn't have enough time to get through the House.

The gas line bill would be another cause. His spokeswoman, Sharon Leighow, said the original House bill would meet Parnell's objectives. Friday's Senate version would not, Leighow said in an email. "The current (committee substitute) will delay a gas line for a year," she wrote.

The House version passed after a late-night session March 28. It would give the state-owned Alaska Gasline Development Corp. authority to build a $7.5 billion "bullet" pipeline from the North built to Southcentral Alaska or to become a partner in a bigger line or spur. The bill arose in the middle of a mixed economic and political environment: a long frustration in the state's inability to market the huge North Slope gas reserves matched against low domestic gas prices that impose challenging financial questions for an expensive line. And there's another factor: the growing potential of new gas discoveries in Cook Inlet that might prove more than enough for local consumption for years to come.

Against that backdrop, House Democrats had offered more than a dozen amendments to the House bill to slow the project and make its operations more transparent. Each amendment failed, usually 12 to 27, mainly along party lines.

Kerttula, the House minority leader, said the new Senate version looks a lot like what House Democrats would have wanted to pass. It would allow the Gasline Development Corp. to continue work and spend up to $200 million toward developing a line. But it would require the corporation to come back to the Legislature for approval for construction.

That's a problem, said Hawker, the bill's supporter and an Anchorage Republican. Requiring the Gasline Development Corp. to go back to the Legislature for approval would cripple efforts to find customers and financing. It would create too many unknowns, he said in an interview.

"This (committee substitute) totally and completely eviscerates the integrity of the bill," he said. While the Senate version doesn't eliminate the development corporation, "it kept it barely on life support" and unable to maintain itself as a "vibrant, dynamic entity."

Reach Richard Mauer at rmauer@adn.com or (907) 500-7388.


By RICHARD MAUER
Anchorage Daily News
Contact Richard Mauer at or on