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Alaska lawmakers want gas line progress -- or else

Patti Epler

House GOP leaders say the state should bail on the proposed Alaska natural gas line project by mid-July if pipeline backers can't prove that it is economically viable.

House Bill 142, introduced Friday by House Speaker Mike Chenault and four other key Republicans, seeks a way out of the contractual agreement put in place between the state and TransCanada under the Alaska Gasline Inducement Act. AGIA obligates the state to reimburse TransCanada up to $500 million for pre-construction studies and other work on the project, which envisions a large-diameter pipeline from the North Slope to either Valdez or Canada or possibly both.

But lawmakers are growing increasingly disenchanted with the pipeline's prospects and are not inclined to spend much more of the state's money on something that may never get built. Earlier this week, a new state report said the state has already spent about $36 million to reimburse TransCanada for work and state officials have said another $100 million has been committed. Gov. Sean Parnell has asked for $160 million in his fiscal year 2012 budget for the project.

The state is contractually bound to reimburse TransCanada unless it can demonstrate the project is not economically viable, according to the abandonment section of the law.

HB 142 adds a deadline to the abandonment provisions -- July 15. The bill would allow the state to presume the project is uneconomic if TransCanada fails to reveal by July 15 "firm transportation commitments ... sufficient to support construction of the project."

State officials would then have until Aug. 1 to report to the Legislature that the commitments were there and that the project was economically viable. The state would have to refute the presumption that the project has failed, under the bill.

The House members behind the legislation -- Chenault and Reps. Mike Hawker, Craig Johnson, Kurt Olson and Eric Feige -- were not willing to talk about the bill on Friday, and will discuss it at a press conference on Monday.

TransCanada said in July it had received significant bids for substantial volumes of gas during an "open season" which allowed customers interested in shipping gas through the pipeline to tell TransCanada how much gas they would ship and under what conditions. Those conditions are widely viewed to be potential deal breakers, because the cost of natural gas is generally considered to be low enough elsewhere to make North Slope gas economically unfeasible. Shippers would need tax breaks and other considerations from the state that experts say the state likely wouldn't go along with.

TransCanada has refused to release the bids, saying they are proprietary. But the company hoped to have "precedent agreements" in place by January that could be revealed.

More recently that time frame has slipped and Parnell has said he hopes to see precedent agreements by spring.

Since the beginning of the legislative session last month, a growing number of lawmakers have expressed their frustration with AGIA and the cost to the state for what appears to be little action.

Contact Patti Epler at patti(at)alaskadispatch.com