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Alaska Legislature approves $400 million for another pipedream

Pat Forgey
Sen. Peter Micciche, R-Soldotna, asked to be excused because of his conflict of interest as a ConocoPhillips employee. But Senate Majority Leader John Coghill, R-North Pole, and other senators objected, and under Senate rules he was required to vote. Sen. Kevin Meyer, R-Anchorage, also a Conoco employee, made a similar request to similar response.

The Alaska Legislature has approved spending $400 million to continue preliminary work on one more natural gas pipeline effort, giving new powers and new money to a state agency it hopes will finally bring North Slope natural gas to the state's population centers.

The vote late Friday in the Senate was 15-5 in favor of House Bill 4, with mostly Republicans in support and Democrats opposed. The House of Representatives Saturday gave its approval to changes to the bill made in the Senate. It will now go to Gov. Sean Parnell for his signature.

While its Republican supporters, including House Speaker Mike Chenault, R-Nikiski, said the line could be the only option to bring North Slope gas to the Anchorage area, Democratic opponents warned that it could commit those residents to paying high prices for natural gas for years.

Sen. Lesil McGuire, R-Anchorage, carried the bill during the debate Friday. She said House Bill 4 "paves the way to the long-held dream Alaskans have of delivering gas to them, to Alaskans," but Democrats said Anchorage residents already have gas from Cook Inlet.

Sen. Hollis French, D-Anchorage, said the price of gas brought by House Bill 4 could be "through the roof" and likened its small size to a "garden hose of a pipeline" when the state needs a big, efficient line.

That smaller capacity pipeline would be vying with a larger line already being supported by the state. That project, begun under the Alaska Gasline Inducement Act (AGIA) created by former Gov. Sarah Palin, has TransCanada Corp. and three oil producers working toward an export line to Valdez.

That line's economies of scale means that with a branch to Southcentral it could provide the lowest cost gas of any pipeline, if ever built.

The smaller line approved Friday is dubbed "ASAP" by its proponents, and would be 36 inches in diameter at an estimated cost of $5.4 to $10 billion. It would be developed by the Alaska Gasline Development Corp., a subsidiary of the state-owned Alaska Housing Finance Corp. It would take until 2019 to first produce gas.

The larger pipeline would cost up to $65 billion or more, its supporters has said, but would also carry much more gas than the smaller line.

French warned the line proposed by Chenault could commit Alaskans to years of high-cost gas, and that House Bill 4 was written to eliminate existing protections for ratepayers and the state that are now in state law.

That's a mistake that happened with the trans-Alaska oil pipeline, he said, and overcharges on tariffs cost the state $13.5 billion in 1997 dollars.

"Our history in Alaska with oil pipeline tariffs is something awful to behold," he said.

He and Democratic allies offered several amendments to strengthen consumer protections, Alaska hire provisions and the regulatory process they said would protect the state, but all were defeated.

McGuire disputed the need for any of the amendments, saying that AGDC was already governed by a board appointed by the governor and containing two of his commissioners.

That means House Bill 4 already has "unprecedented kinds of safeguards built into it," she said.

French provided a history of abuses of monopoly power in the United States stretching from the trans-Alaska pipeline to early days of monopoly railroads.

"The railroad possessed an awesome power, and they systematically abused it," he said. House Bill 4 exempts the ASAP line from current laws, mandating "just and reasonable" shipping rates, he said.

The ASAP line would bring natural gas from Alaska's abundant supplies on the North Slope to Southcentral, where it would feed into the Anchorage area's natural gas pipeline system, including ConocoPhillips' Nikiski LNG export plant.

French said that without additional consumer protections, the state-supported ASAP line could wind up being sold to a natural gas producer such as ConocoPhillips, which would ship Conoco gas to Conoco's LNG export plant.

That could leave Anchorage utilities paying unfairly high prices, he said.

But McGuire said everyone who wanted to use the pipeline would have access to a "recourse" tariff, a rate based on actual costs that would protect consumers.

She called House Bill 4 "a good bill that will protect Alaskans and get us gas."

She rejected charges that it might undermine the AGIA pipeline. "This is compatible and not competitive with the AGIA-led line," McGuire said. If the TransCanada line goes forward, the ASAP line could connect to it.

While the sponsors of House Bill 4 were early opponents of AIGA, some Senate supporters were split on its prospects. Sen. Peter Micciche, R-Soldotna, called it a failure, while Sen. Bert Stedman, R-Sitka, said it was still the state's best hope for a natural gas pipeline project.

Micciche, who works as superintendent of ConocoPhillips' Nikiski LNG plant when the Legislature is not in session, said it was time for Alaska to act. He fears the state has lost its courage to do big things, citing as an example Hoover Dam, which was built before it was needed but provided power to help a region grow.

"If you think like a business, you'll succeed like one," he said.

Micciche asked to be excused because of his conflict of interest. But senators including McGuire and Senate Majority Leader John Coghill, R-North Pole, objected, and under Senate rules he was required to vote. Sen. Kevin Meyer, R-Anchorage, also a Conoco employee, made a similar request to similar response.

In addition to the new powers House Bill 4 gives AGDC for the ASAP line, it also includes a $320 million appropriation and other funding to bring state investment to $400 million.

Under the AGIA process, TransCanada and partners are eligible for up to $500 million in state support to begin developing that line.

Contact Pat Forgey at pat(at)alaskadispatch.com