Anchorage Daily News

In pursuing a North Slope gas line, the state wants a critically important term that isn't guaranteed by federal law. It's known by the technical term "rolled-in rates." That's just a way of saying that, when a gas line is expanded, any increase or decrease in shipping rates is spread equally across all shippers.

Here's why rolled-in rates are important to Alaska.

Say the North Slope oil companies end up owning the gas line. Say they don't want to expand to let another company ship newly discovered gas on the producer-controlled line. Their gas is going to market, they're making good money and they see no reason to let their competitors in on the action.

Federal pipeline regulators can compel the gas line owners to expand -- there's no doubt that federal law provides for that.

But what price will the new shipper have to pay? Will it be so high that it is prohibitive and newly discovered gas stays locked in the ground?

Federal law doesn't offer protection in this situation.

Here's why, according to the state's legal expert, Ken Minesinger of the Washington, D.C., law firm Greenberg Traurig. When the feds order an expansion, Minesinger says, federal law allows the rates for the new shippers to be higher than what the existing shippers pay. The state's deal with TransCanada requires the company to propose "rolled-in rates," which spread any shipping cost changes among all shippers.

With rolled-in rates, it's much more likely that new gas discoveries can afford to use the pipeline. Those affordable rates for new shippers are probably the single most important thing the state is after. Affordable rates for new shippers ensure that a distant and expensive basin that's full of natural gas, like the North Slope, will grow for decades to come, instead of being locked up by the first companies in the game.

It's true, federal regulators could reject this favorable rate structure even if the state and TransCanada ask for it. One or more of the Big Three North Slope gas holders might raise a ruckus and ask the feds to give it lower rates than the newcomer has to pay.

In that case, you'd have an epic battle of lawyers and experts.

And when that kind of fight breaks out, it has to help if you have a multibillion dollar pipeline company on your side, one that makes its money from shipping more and more gas through an Alaska line.

That's one more reason for the state to sign onto the deal with TransCanada.

BOTTOM LINE: Federal law doesn't guarantee the gas line rate structure the state needs to maximize North Slope gas development.

Healy coal

Mothballed clean coal plant could help with power crunch

The state's $300 million electricity plant in Healy, south of Fairbanks, has so far proved to be one of Alaska's more expensive boondoggles.

And it isn't looking any better as it ages.

It was an experiment in the late 1990s that was backed by the U.S. Department of Energy, as well as the state. The idea was to burn coal from the nearby Usibelli Mine in a way that is clean.

Nothing wrong with the plan itself -- in fact, it makes more sense than ever now, as oil and gas costs rise into the stratosphere.

But the Healy clean coal power plant has been mothballed for years.

A long-running legal dispute between the plant's owner, the Alaska Industrial Development and Export Authority (which is the state), and Golden Valley Electric Association is keeping the Healy plant closed.

The main problem: The state owns the plant, but Golden Valley, the power supplier for the Fairbanks area, owns the land it sits on.

The development authority and Golden Valley started the project in partnership. The state would help finance the plant, and Golden Valley agreed to run it.

But after the plant was tested, the partnership quickly fell apart. Golden Valley decided it was too expensive and risky. The company walked away.

Homer Electric Association, which is looking for a new source of power, then signed a deal with the state to operate the plant.

But Homer Electric hasn't gotten anywhere either, because of the lawsuit, and because Golden Valley won't allow access across its land to operate the plant.

GVEA and the state spent the past two years in mediation sessions. They reached agreement on major points of dispute.

But then the Golden Valley board declined to act on it.

A big point of dispute is that Golden Valley has another coal plant that is operating at Healy, and its systems are tied in with the state plant.

"They want to split the two plants. It's going to cost millions of dollars," said Brian Newton, GVEA president.

The state recently re-activated the lawsuit. It's not even due to go to trial until a year from now.

Meantime, Fairbanks residents are screaming about high electrical costs, reported by the Fairbanks News-Miner to be about one and a half times what Chugach Electric customers pay.

And Southcentral residents are looking at a dwindling supply of natural gas from Cook Inlet.

What a mess. How about some higher level diplomacy?

BOTTOM LINE: Surely there's a way out of this madness, where a perfectly good electrical plant is left idle.

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