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Complexity of gas line bill prompts some legislators to seek more advice

Richard Mauer

JUNEAU -- With the complexity of Gov. Sean Parnell's gas line proposal becoming increasingly apparent after its first week of legislative hearings, skeptics in the House and Senate say they need more independent consultants to help them wade through it.

If the oil tax legislation that tied up the citizen Legislature for three years was complicated, the gas line proposal goes much deeper.

It, too, has its own tax component. But the three parts of Parnell's proposal that have so far been made public -- the 35-page Heads of Agreement among the big three North Slope producers, pipeline company TransCanada and the state; the 29-page Memorandum of Understanding between the state and TransCanada; and 49 pages of enabling legislation -- involve much more than just state taxes:

• It calls on Alaska to invest billions of dollars in public funds in a more expensive project than the trans-Alaska pipeline with no clear information on the return on investment.

• It sets up the state to play an active role in the design and development of the project and in financing its portion.

• It puts the state in a business partnership with the big three North Slope producers and the Canadian company that would own a portion of the project even as the state continued its legal role as landlord, resource owner and regulator.

• It casts aside most of the complex legislation in the Palin-era Alaska Gasline Inducement Act, including policies that reduced the economic power of the three producers and promoted North Slope competition.

• It creates the possibility that the state would become the overseas salesman for a large part of North Slope gas production, directly entering markets of Asian gas buyers in which it has no experience.

• It commits to the export of North Slope gas when the gas might be more advantageously used to enhance production of petroleum, a far more valuable resource.

• It eliminates the ability of the state and local governments to collect property taxes on the project.

"The most important part for all concerned -- legislators, their staff, members of the press -- the Heads of Agreement and the Memorandum of Understanding, the associated enabling legislation, are very complicated documents, especially the MOU. There is a lot to be understood there," Rep. Eric Feige told reporters the other day.

"Until you understand exactly what those foundation documents say and mean, you're not going to make a good decision on the enabling legislation," said Feige, R-Chickaloon, the co-chairman of the House Resources Committee.

Feige's committee is the first stop for House Bill 277, the enabling legislation. The companion version, Senate Bill 138, is in Senate Resources. So far, legislators have only heard overview testimony from administration officials and two consultants.

"This is dramatically more challenging than oil taxes, more complex," said Sen. Bill Wielechowski, an Anchorage Democrat.

Wielechowski is leading the call for more consultants and more extensive vetting of the bill in the Senate than is now contemplated. In an interview in his fourth floor Capitol office last week, he spoke wistfully of the collegiality and informality that accompanied the two massive tax and gas line bills that passed with bipartisan support during his freshman term in 2007: Alaska's Clear and Equitable Share (ACES) and AGIA.

He and Rep. Les Gara, D-Anchorage, said they both originally opposed ACES because it was a tax on oil company profits. They wanted a tax on gross production because it was less subject to manipulation by the oil companies.

"So Democrats could've very easily tried to kill ACES and tried to stick to a position that we wanted a gross tax. But we had consultants who would meet with us at any time we wanted, who we could call on their cellphones," Wielechowski said. "During ACES and AGIA, I could call up any commissioner at any time and they would respond to me as quickly as possible."

Gara and Wielechowski said the consultants and officials gave them compelling reasons for a profits tax, and eventually the Democrats came around.

One of the special sessions during that period was a bit like college. Wielechowski was sharing a place with Gara, sleeping on the floor on an air mattress. A deputy revenue commissioner stopped over "and we wrote part of the bill in the kitchen," Wielechowski said.

Not any more. Starting with the oil tax cuts -- Senate Bill 21 last year -- administrative officials would take weeks to answer questions, if they did at all, Wielechowski said. Questions to consultants hired by the Legislature had to be addressed in writing through the chair of the joint Legislative Budget and Audit Committee, responsible for hiring them, he said. "And then we'd have to get in a queue and maybe two weeks later we'd get a response back."

The administration has changed its approach in other ways. Senators in the 27th Legislature, which ended in 2012, had a contentious relationship with Parnell's team pushing for oil tax reductions. The Senate then was run by a bipartisan coalition, and the critiques were bipartisan as well. Sen. Lesil McGuire, R-Anchorage, told then-Revenue Commissioner Bryan Butcher he was presenting a "half-baked bill" that the administration was unable to explain.

Now Butcher is back at his old agency, the Alaska Housing Finance Corp. The administration's two main representatives to the Legislature on the gas line proposal are both former legislative aides.

One is Natural Resources Commissioner Joe Balash, who worked for Sen. Gene Therriault, the Republican from North Pole who played a central role in derailing the gas pipeline proposal of then-Gov. Frank Murkowski in 2006. The other is Mike Pawlowski, McGuire's aide at the time she criticized Butcher in 2012. The Parnell administration promoted Pawlowski to deputy revenue commissioner three weeks before the current session began.

Perhaps the biggest change, though, is the makeup of the Senate. In 2012, it was tied 10-10, Republicans and Democrats, and the majority caucus running the chamber was bipartisan. The 2012 election returned so few Democrats that the Senate organized with a big Republican majority, and with Republican control of the House and governor's office, the state is effectively under one-party rule.

Wielechowski said despite all the hearings that Parnell's gas line proposal will get, he believes its passage is a "fait accompli."

"The impression I get is that we're just going through the motions and it's going to happen," he said. "When you look at Senate Bill 21, everyone knew that once redistricting occurred and they got a new Legislature, we were going to pass SB 21. Every legislator knew that, every lobbyist in the building knew that, every oil company executive knew that."

This year, the Legislature hired two Washington, D.C., consultants to review the gas line and liquefaction plant proposal, Janak Mayer and Nikos Tsafos, partners in a new company, Enalytica. The two men, both in their 30s, are making $250,000 each plus $13,000 apiece in expenses. They're supposed to live in Juneau and be on call every day of the 90-day session. Their contracts run through the year but they're not required to work past April 30.

Under legislative rules, consultants are hired by the joint Legislative Budget and Audit Committee. The rotating chair this year is Sen. Anna Fairclough, R-Eagle River. She said she hired Mayer and Tsafos because they had worked for a prior consulting company, PFC Energy, that had been retained by the Senate's bipartisan majority two years ago, and Mayer had become a familiar figure in Juneau.

Fairclough said she's imposed no restrictions on the questions that could be presented to Mayer and Tsafos but wants legislators to send requests by email to an aide who will review them to ensure they haven't been answered already. She also wants the aide to track the consultants' time.

Fairclough said she'd be open to hiring another consultant if one could be found at this late stage without a conflict of interest.

"We want to do the best we can for the people of Alaska," she said.

Anchorage Sen. Hollis French, the Democrats' minority leader, said he will present a recommendation to Fairclough next week.

French also asked the Senate leadership to refer the governor's gas line bill to the Judiciary Committee. So far, it's only going to be heard in the Resources and Finance committees.

Wielechowski, who sits in the Judiciary committee, said the project has serious legal questions that can best be resolved in Judiciary. When Therriault made his case against the Murkowski line in 2006, he cited a legal opinion (addressed to him, Balash and others) that said its ownership by the "Big 3" oil producers and the state would violate federal antitrust laws. Wielechowski said the current proposal has most of the same problems.

Wielechowski and French are both attorneys but the proposal is so complex that a legal specialist should be hired to review the documents, they said.

In urging the Legislature to move ahead with his pipeline proposal, Parnell said the current legislation only enabled the project to advance and was not the Legislature's last opportunity to vet the project. If new problems arose, the Legislature could address them in future legislation, he said.

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

 


By RICHARD MAUER
rmauer@adn.com
Contact Richard Mauer at or on