The House Resources Committee slapped new restrictions on the Walker administration's plan to get natural gas to Fairbanks on Wednesday, while the governor said the changes would guarantee additional delay.
Among the restrictions was a requirement that the natural gas project be forced to get legislative approval before it could advance.
"I'm very, very disappointed that we're putting, at a minimum, another year delay in bringing relief to Fairbanks," Gov. Bill Walker said after the committee voted Wednesday afternoon.
He said with 11 days left in the legislative session there is still time to revise the bill, calling the new additions unacceptable. Some legislators said they were unhappy that the plan has changed from using gas from the North Slope to using gas from Cook Inlet.
"If we have to come back to the Legislature every single step of the way, it will be session after session after session. We just need the flexibility to fix the problem," said Walker, who added that the administration will make its case next in the House Finance Committee.
Meanwhile, Fairbanks North Star Borough Mayor Luke Hopkins said he sees a new threat to the project in the latest version of the capital budget released Wednesday by the Senate Finance Committee. That proposed budget would reappropriate an estimated $45 million grant approved in 2013 for the Fairbanks project and possibly use it for other purposes.
"That grant makes distribution happen, so that is essential for our community," he said in a phone interview from Juneau. "What are they doing here? This is ridiculous."
Fairbanks leaders argue that since the state continues to spend hundreds of millions of dollars a year on Cook Inlet oil and gas tax credits, the Interior Energy Project is a step toward regional balance that is long overdue.
The bill advanced by the resources committee, House Bill 105, would allow a 2013 natural gas trucking plan from North Slope supplies to be redirected so that Cook Inlet is a potential gas source.
But the amendments, which would sharply limit the power of the Alaska Industrial Development and Export Authority, would cripple the effort, said Hopkins, the borough mayor.
One of the amendments would require the agency to gain future legislative approval before it moves forward with a natural gas project, while another would prohibit the agency from signing natural gas supply contracts. A third would require that the Fairbanks gas utility be regulated by the Regulatory Commission of Alaska, instead of allowing that decision to be made by the Fairbanks North Star Borough Assembly.
Anchorage Rep. Mike Hawker, who has clashed repeatedly with the administration over the Fairbanks energy plan and pushed the amendments, told fellow legislators he was not trying to micromanage "inside the box," but to set policy.
"This is defining the box. The box is that government should not be messing in the marketplace," he said.
"All it is saying is that we don't want the state negotiating those contracts on behalf of those utilities and unfairly advantaging them against other folks competing in the open market for that same gas," Hawker said of one amendment.
He said he doesn't want to make Fairbanks "a permanent protectorate" of the state and AIDEA.
Countering Hawker's view, Anchorage Democratic Rep. Geran Tarr said the committee caused a lot of damage to an effort the Legislature signed off on in 2013 and that it would be to the detriment of Fairbanks. She said that if she represented Fairbanks, the actions would make her sick.
Anchorage Rep. Andy Josephson said if he lived in Fairbanks he would be concerned that the state had just "essentially neutered the agency." Homer Republican Rep. Paul Seaton said the restrictions would stop the project from going forward.
Hopkins said the changes are excessive and unnecessary and that the agency already has clear rules established in law. "Let AIDEA do what they're supposed to do," he said.
He said he hopes the Interior delegation will band together and fight the revisions, as speeding up the project is critical for energy, air quality and the health of the local economy.
Rep. Dave Talerico, R-Healy, the co-chairman of the committee and the only legislator on the committee who represents a portion of the greater Fairbanks area, sided with Hawker on the amendments, not with the administration.
Fred Parady, the deputy commissioner of the Department of Commerce, Community and Economic Development, said the Hawker amendments would cause substantial delay and make it harder to deal with private industry. He also said the changes undermine the "statutory authority of the AIDEA board to make investment decisions based on AIDEA's well-established due diligence process and investment criteria."
"Make no mistake about it, the commitment that we all share to the Interior project is substantially delayed by this amendment. The Legislature assigned AIDEA this project and this amendment is going to handcuff us from completing the assignment that we were given."
In a phone interview, Walker said the mistake made by the state in 2013 was focusing only on a North Slope project to truck gas to Fairbanks. State officials had to start all over again when that proved uneconomic. He said the amendments are "absolutely micromanaging."