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As session approaches end, Alaska Legislature signs off on gas pipeline plan

Dermot Cole

JUNEAU -- The Alaska Legislature endorsed Gov. Sean Parnell’s gas pipeline negotiations Sunday, approving plans to spend close to $100 million in the short term and agreeing to collect future taxes in the form of a share of the natural gas, instead of in cash.

The state House approved the bill 36-4 Sunday evening, while the Senate voted 16-4 at 10:30 p.m. to accept the House version and forward it to the governor.

Supporters said the legislation sets the stage for Alaska to become a partner with TransCanada and the oil companies, pursuing a project together. Opponents said the agreements reached last year by the administration with the companies and the governor's bill required concessions by the state that should not have been made.

The agreements reached by the Parnell administration with the major oil companies and TransCanada left little room for the Legislature to rewrite the terms, but House Resources Committee co-chair Eric Feige said the contracts to come will be monitored closely.

“It’s like we’re in the playoffs,” the Chickaloon Republican said. “It’s Alaska versus Kitimat, B.C. and the rest of the LNG projects under consideration worldwide. That’s who we’re competing against.

“We’re in the Red Zone. The question we have to ask is, 'Are we going to fumble the ball?' Or are we going to advance toward the goal line?”

“The prize for Alaska is worth the manageable risk that we take now,” said Feige. “Alaska is ready to go big, right here at home.”

Bethel Democrat Bob Herron chose a baseball analogy. “You cannot reach second base while keeping one foot on first base,” he said.

A 'gas age' for Alaska, or a discount on state resources?

Anchorage Democratic Rep. Les Gara voted for the project, but said the terms of the deal should be improved because they are not in Alaska’s favor.

He said the state share of revenue from the project would be “among the lowest in the world.”

“The sale prices for Alaska resources should not be the price they charge at Costco,” he said.

Anchorage Rep. Andy Josephson said he supports the bill because it is a real opportunity for cheap gas and a chance to replace declining oil revenue for decades.

“What I’m voting for is cheap gas and the potential for $4 billion in revenues every year,” he said.

The state has estimated that under certain conditions revenues could be $4 billion a year, but if construction costs are high and gas prices are low, annual state revenue could be 10 percent of that amount.

Eagle River Rep. Dan Saddler said the project would be the start of a “gas age in Alaska.”

“The legislative process has worked very well with this legislation,” said Saddler.

Anchorage Rep. Bob Lynn said the bill would move the gas pipeline forward after a long process and years of waiting.

“Alaska has been blessed with a humongous supply of natural gas beneath the surface of the earth since creation,” he said. “But that abundant gas will not heat our homes unless we get it out of the ground.”

Tempering expectations

Wasilla Rep. Mark Neuman said the project will diversify the economy and create jobs across the state. Other lawmakers said there are risks with the plan approved Sunday that should not go unnoticed.

Homer Rep. Paul Seaton said Alaskans should "temper our expectations" because only one out of every three or four projects to ship liquefied natural gas reaches the building stage.

As long as the oil industry could make more money on the North Slope by re-injecting the gas to produce more oil, a gas pipeline was not economic,said Kodiak Republican Alan Austerman.

“By taking our gas in lieu of taxes, we have stabilized that tax regime. And as long as we stick with that stabilization, I think the profitability then becomes stronger, the incentives become stronger for everybody to make this project work,” he said.

“Those of you that are still here in two years will have a really big decision to make in whether you want to step forward, in whether the thing really does work,” said Austerman, who is not running for office again. “But I’m optimistic that it will happen.”

The four ‘no’ votes in the House came from Democrats -- Fairbanks Reps. David Guttenberg and Scott Kawasaki, Anchorage Rep. Chris Tuck and Juneau Rep. Sam Kito III.

Kawasaki said the administration relied on “glamorous and slick” presentations that were too much like an ad campaign. He said the state risks in the deal are excessive.

“It’s simply a reckless way to go forward,” Kawasaki said.

In the Senate, the four opponents were Democrats Hollis French, Bill Wielechowski, Berta Gardner and Johnny Ellis.

"What it does get us is an 18-month study," Wielechowski said. "During that 18-month period we will be negotiating concession after concession after concession because we're telling our DNR commissioner with this bill, 'Go ahead, you have to negotiate with these companies. Come back to us in 18 months with a deal.'"

In the House, Guttenberg said what the governor presented the Legislature was an appropriation to hire people to keep negotiating and planning.

He said when state officials present plans to legislators, they are backed by various experts in the room, "dedicated public servants" who believe in what they are doing.

He said when the oil companies show up, they may have one person in Juneau, while there are buildings full of engineers, accountants, lawyers, economists and others in Denver, Houston or London who know the answers to questions when legislators don't even know the questions.

He predicted that when future agreements come before the Legislature, the message will be that the agreements can't be changed because they have already been negotiated.

"We can't see through the veil. I think we're going to have oil locked up, we're going to have gas locked up," he said. "I think we need to be more cynical on a daily basis than we have here, instead of being cheerleaders."