Anchorage Daily News

JUNEAU -- With fuel costs high in rural Alaska but the state in a budget crunch, a fight is brewing over whether to subsidize the high costs of fuel in the Bush. Bethel Democratic Sen. Lyman Hoffman plans to introduce a bill as soon as today to cap the cost of heating oil at $3 a gallon. The state would pick up the tab for any cost over that.

"What is it going to take for us to react? Is it going to take the next cold spell for a family to freeze before we react?" Hoffman said.

Fuel costs in rural Alaska have become a big political issue as the Legislature begins its 2009 session. News reports of villagers having to choose between fuel and food in places like Emmonak and Kotlik are getting attention from legislators, with disputes over whether existing state programs like "power cost equalization" to lower the cost of living in rural Alaska go far enough.

Hoffman has political juice as co-chairman of the budget-writing Senate Finance Committee. The other co-chairman, Sitka Republican Sen. Bert Stedman, said he'd work with Hoffman and "see if we can't develop something that works."

The idea passed the Senate last summer but died in the House, which preferred the governor's proposal to send every qualifying Alaskan a $1,200 "resource rebate." That was back when the state had a huge budget surplus from tax and royalty money coming in from the record price of oil. Now that oil prices have plummeted, the state is facing shortfalls that could force a draw on savings of over a billion dollars this year and even more next year.

That has top members of the House skeptical about Hoffman's proposal.

"In the situation that we are in I'm pretty concerned about increasing our entitlement spending in any area," said Chugiak Republican Rep. Bill Stoltze, who is co-chairman of the House Finance Committee.

The other House finance co-chairman, Anchorage Republican Rep. Mike Hawker, said a blanket fuel price cap sounds like a one-size-fits-all solution to him.

"Those tend not to be solutions," Hawker said.

Some lawmakers say it does nothing to encourage conservation, and a well-off person living in a high-cost area could get the same rebate from the state as a poor person.

The state last year said it would have a tough time estimating the cost of a program like Hoffman is talking about, but figured it could be about $170 million

Hoffman's new bill is drafted and his aides expect it to be introduced today. It calls for the state to make up the difference whenever someone has to pay more than $3 a gallon for residential heating fuel.

The rebate would apply to up to 600 gallons purchased per residence from September through March. The fuel would have to be purchased through an established vendor and the buyer would send receipts to the state to get reimbursed.

Anchorage Democratic Rep. Les Gara said he likes the idea and would also be interested in a cap on natural gas prices to help in Anchorage, as well as harder hit rural Alaska.

In rural Alaska villages off the road system, fuel has to be barged or flown in. Prices are always high there, generally more than the $3 cap. But it's particularly high in some remote villages, which had to make their fuel purchases this summer with prices at their peak.

Costs of around $8 per gallon are reported in places. Hoffman said the $1,200 given out by the state last fall wasn't enough for a single cold snap. He said he's hoping Gov. Sarah Palin's administration can help with a quick fix of the high-profile problems in Emmonak.

But the broader change of a price cap is also needed, he said.

"I think that the problem we are facing in Western Alaska is a combination of many things. But the biggest factor is the price of heating fuel," Hoffman said.

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