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House lawmakers begin debating 24-inch Alaska gas pipeline

Amanda CoyneThe New York Times
Aaron Jansen illustration

Key Alaska House lawmakers on Tuesday ramped up efforts to create an in-state pipeline that delivers some of the state's vast natural gas reserves to Alaskans. Debate on a marked-up version of House Bill 9 began in House Resources Committee that would wed two state gasline authorities under one umbrella, provide funding for one of the groups, and remove regulatory and political hurdles from the project.

The proposed legislation is sponsored by House Speaker Mike Chenault, R-Nikiski, and Rep. Mike Hawker, R-Anchorage. Both say this bill needs to pass in to get gas to energy-starved Alaskans.

Preliminary plans for the line were published in July and call for a 24-inch-diameter line snaking some 700 miles from the North Slope to Southcentral Alaska. The current price tag for such a line is estimated at $7.5 billion.

$400 million before 'open season'

All told, the cost to get to an "open season" -- where buyers would bid on gas coming down the line --could be as much as $400 million, which will be paid for by the state. If open season is successful, North Slope gas could be flowing to Alaska communities as soon as 2019. In any case, producers Exxon Mobil Corp., BP and ConocoPhillips have to agree to sell the gas, which has been a point of contention for decades.

The group receiving that money and charged with getting the line built is the Alaska Gasline Development Corp., a subsidiary of Alaska Housing Finance Corp. It was chosen partly because AHFC has the ability to issue revenue bonds necessary to pay for building the line.

The AGDC would ultimately decide who builds and owns the line.

Thus far, AGDC has spent about $23 million. This bill would authorize it to spend $200 million more.

Side-by-side gas agencies

The measure is not without controversy. It allows the project to be exempt from the Regulatory Commission of Alaska -- the organization that sets tariff rates. It allows AHFC to negotiate in private with companies, and allows it to keep much of the other information it receives from the public. It folds the voter-created Alaska Natural Gas Development Authority, or ANGDA, under Alaska Gasline Development Corp. management.

ANGDA and AGDC have long had practically identical missions, except the voter-created gasline development agency has been oft-ignored. Their offices have existed just down the hall from each other in the yellow Sunshine Plaza in downtown Anchorage.

Some legislators also wonder if shipping gas down from the North Slope would depress gas exploration in Cook Inlet.

In a hearing Tuesday, Rep. Les Gara asked why this project and why now. "It will be the most expensive gas we’ve ever seen in the state of Alaska," he said, adding it would also bind consumers to buy gas from those producers for up to 30 years. If in the meantime a big line project begins, Alaskans will be paying those high prices, when lower-priced gas is flowing right past.

Rena Delbridge, an aide to Rep. Mike Hawker and former reporter at this publication, stressed that the project is flexible to allow a merger of projects. Delbridge also said the project has potential to raise the value of Cook Inlet gas.

Fairbanks prices would drop

Contrary to what Gara said, AGDC estimates that the cost of gas under the instate plan to Fairbanks is expected to be considerably less than what customers are paying now -- from $23 per thousand cubic feet to somewhere between $10-$13. Anchorage consumers would pay more -- a little over $1 more per thousand cubic feet than it is paying now. The current price that customers pay is expected to rise in the future.   

Supporters of the bill say that the small line should be seen not as a competitor to another state-subsidized proposal, the large-diameter, 48-inch gasline that TransCanada Corp. and Exxon Mobil are studying. Draft resource reports for a line from the North Slope to Canada that could ultimately deliver gas to the Lower 48 were recently filed with federal regulators. That line is supported by the Alaska Gasline Inducement Act (AGIA), which provides $500 million in state funding for the work being done by Exxon Mobil and the Canadian pipeline company.  

The smaller line is constrained in size by the terms of AGIA. It's meant to complement a larger line, perhaps serving as a spur that would tie into the larger line and deliver gas within Alaska, the lawmakers said. If the larger line is never built, the smaller line could replace the larger line.

"Why HB 9?" Hawker asked at a meeting about the line Tuesday night. "Why power AGDC at this time? The Alaska public is tired of us screwing around. The Alaska public wants a gasline project," he said.  

Contact Amanda Coyne at amanda@alaskadispatch.com  

Correction: The original article said that Fairbanks customers would be paying "$23 per million cubic feet to somewhere between $10-$13. Anchorage consumers would pay more -- a little over $1 more per million cubic feet than it is paying now." It should have read thousand cubic feet in both cases. We regret the error.