Senate kills bill to ramrod gas line
adn.com
[This went nowhere as I expected. It was totally UFB to see a bunch of Republican legislators advocating a communistic state-controlled economy. -Snow]
HOUSE: Measure would have let state determine profitability, force drillers to build pipeline.
By LARRY PERSILY
Anchorage Daily News
Published: May 6th, 2005
Last Modified: May 6th, 2005 at 04:31 AM
JUNEAU -- A Senate committee has stopped House legislation that could have made it easier for the state to tell North Slope oil and gas producers to either sign up for a natural gas pipeline, pay penalties to the state or give back the leases.
The legislation would have set up a system for the state to predict the companies' profits on the line. The state would decide when the project would be profitable enough to demand that the companies build the line or sell their gas to someone else who will.
The oil and gas industry was unanimous is its testimony against the bill, arguing it would be wrong for government to decide when a company has to spend billions of dollars.
"It would make government the all-powerful decision-maker regarding project development, determining what level of profitability is 'acceptable,' regardless of the risks involved," BP Exploration (Alaska) said in written testimony Monday.
It's not surprising that the Senate Resources Committee on Wednesday blocked the House action. What's unusual is that the oil and gas industry finds itself on the defensive with elected officials who are usually on their side -- a Republican governor and Republican-dominated Legislature.
In addition to the gas line tactic coming out of the House, the industry this year has seen Gov. Frank Murkowski raise oil production taxes on almost half the oil flow from the North Slope. The governor also proposed legislation to take away a federal tax break on oil companies' state corporate income tax returns.
"It's probably not what the public would expect," said Rep. Mike Chenault, R-Nikiski, who voted against the House gas line provision when it was added to an industry-supported exploration tax credit bill last week.
The so-called "duty to produce" provision in House Bill 71 is just one of several measures this year that reflect, in part, the growing frustration that the North Slope producers are not committing fast enough to spending billions of dollars on a gas pipeline.
The House provision was adopted as a floor amendment without any committee hearing or public testimony. It would have allowed the state to measure its predicted profitability of the gas line against a sample of other projects worldwide. If the state determined the gas line was "reasonably profitable," the producers would have seven years to build it, sell their gas or perhaps face a lawsuit.
"The seven-year clock, when and if used, is intended to assure not just the promise of a pipeline ... but the pipeline itself, at the earliest possible date, bringing jobs to Alaskans, affordable energy to Alaskans and Americans, and billions of dollars to the state and its municipalities before declining oil revenues diminish our northern way of life," legislative consultant Bonnie Robson testified Monday at Senate Resources.
Robson, a former state oil and gas official, lives in Mexico and commutes to Alaska to advise lawmakers on gas line issues under a two-year, $475,000 contract.
"But I will not, as I sit here today, guarantee you that the Alaska Supreme Court will find this legislation constitutional," Robson said.
The state would be allowed to base its decision on its own estimate of future natural gas prices and construction costs for the project. But what if the state was wrong and gas prices were less or construction costs higher, and the project didn't earn as much money for investors as the state expected? Would the state make up the difference, BP asked in its testimony.
"That's an extremely valid point," said Rep. Ralph Samuels, who sponsored the House amendment.
But would the companies pay the state if they didn't build the line and history proved the state's numbers were right, the Anchorage Republican said.
"I would not have done this if I had not thought it was in the best interest of moving the gas line forward," Samuels said Wednesday at Senate Resources.
The governor's negotiating teams have been working since last spring to put together a gas line deal with the North Slope producers or with Canadian pipeline company TransCanada.
"No doubt there is frustration," said Larry Houle, Alaska Support Industry Alliance general manager. He called the House bill "ill-advised legislation" that would make it harder to attract investment, he told Senate Resources on Monday.
The industry was especially frustrated that the House not only added the provision to the bill without a public hearing, but did so in less than 10 minutes of debate, said Tadd Owens, Resource Development Council executive director.
Meanwhile, a third gas line possibility is the Fairbanks- and Valdez-led Alaska Gasline Port Authority, which a week ago started a statewide advertising and lobbying campaign to win support for its plan to buy the gas from the producers and build the project itself.
The municipalities have been trying since 1999 to put together a deal to build a pipeline to Valdez, where it would liquefy the gas and ship it aboard tankers to West Coast markets.
The group is using some of its $5 million development money from partner San Diego-based Sempra Energy to pay for radio, television and newspaper ads.
Reporter Larry Persily can be contacted at lpersily@adn.com, or in Juneau at 523-9306. |
