Bills aim to boost in-state gas line plans
| Feb 26, 2010
With a large-diameter gas pipeline uncertain and years out, some lawmakers want to put an in-state natural gas pipeline on the fast track by turning plans over to the Alaska Railroad.
While a huge pipeline such as TransCanada is proposing could link Alaska's natural gas with North American markets, flow is still a decade away, and only if major hurdles are overcome.
Natural gas is eyed as a rescue from high home heating and electricity prices, and from potential gas shortages in Southcentral. But gas also offers economic development potential through value-added industries, such as turning gas into liquid petroleum or petrochemicals.
Two proposals hit the table within the past week, and one has pushed its way past other bills for a committee hearing this week. They could gain in momentum with broad support for in-state gas from lawmakers across party lines -- and, new this year, a general realization in Southcentral that in-state gas could save the day.
The plans are timely. A Dave Dittman survey commissioned by the House Republican majority showed overwhelming support for a pipeline delivering gas for in-state use -- and indicated 51 percent of Alaskans polled want the gas for in-state heating, electricity generation and industrial use.
Sen. Lesil McGuire, R-Anchorage, filed Senate Bill 287 (.pdf), which calls on the railroad to shoulder responsibility for in-state gas plans. Her proposal also taps into the Alaska Housing Finance Corporation's bonding capacity. McGuire says her plan pivots on simplicity and on authority outside of state government and the Legislature. Rep. Craig Johnson, a Republican whose district makes up part of McGuire's, filed the identical House Bill 378 (.pdf).
In a separate proposal, House Speaker Mike Chenault, R-Nikiski, is putting his considerable political weight behind House Bill 369 (.pdf). That bill would place in-state gas under the jurisdiction of a four-member group, with guidance from a far-reaching steering committee. The core group would be headed by the Alaska Railroad, with members from the state's Department of Transportation; the Alaska Natural Gas Development Authority and an array of studies it holds; and the in-state gas coordinator, housed under the governor's office.
Chenault said the key to his proposal is involving several key parties, each bringing a critical element. The Alaska Railroad would head the core group, offering strong project management, leadership, rights-of-way expertise and funding. The state's Department of Transportation holds valuable rights-of-way along roads, which could cut pipeline costs and timelines. The Alaska Natural Gas Development Authority's assets include costly studies, already complete, on environmental and engineering issues along one possible route. Likewise, the in-state gas office has spent several million studying routes, engineering and design.
"We're interested in what project brings gas to Alaskans at the earliest possible convenience, with a reasonable price attached," Chenault said. "We think it's the way to go. It brings more stakeholders into the mix."
Sen. Charlie Huggins, R-Wasilla, and Reps. Mark Neuman, R-Mat-Su, and Jay Ramras, R-Fairbanks, joined McGuire at a press conference Thursday to show support for the plan. They're part of the 17-member in-state gas caucus that recently formed in the Legislature. Ramras said he supports all plans, and has signed on as a co-sponsor to both House proposals.
"We are so blessed as a state to have this resource," McGuire said. "We feel that for 34 years we've had a dream to get a pipeline ... But that really it's time for us in this caucus to focus on how we can look at both an in-state gas pipeline and then the opportunity to develop in other ways our in-state gas."
Ramras spoke passionately about the dire need for less costly energy in Fairbanks, and suggested in-state gas plans could move faster now that Southcentral lawmakers have a stake. Neuman pointed to the broad possibilities gas could fuel in developing new industries, such as a plant that turns gas into liquid petroleum for export and military use. Huggins said his constituents have pegged in-state gas as their top priority.
Advocates of both bills say the shift of authority would free an in-state gas pipeline from political pressures.
In-state gas has been a politically charged issue the past several years. Mired in contract problems with Cook Inlet producers and regulators, Southcentral natural gas distributor Enstar studied the economics behind a "bullet" line linking its customers with North Slope gas. As energy prices shot sky-high in 2008, communities throughout the Railbelt clamored for relief. Then-Gov. Sarah Palin stepped in with a plan for a public-private partnership between Enstar, the governor's office and ANGDA, which was working on a spur line off the proposed large-diameter line championed by Palin under the Alaska Gasline Inducement Act.
That same act capped the capacity of any line the state supported outside of AGIA at one-half billion cubic feet of gas per day. Studies indicated that may not be enough flow to put a project in the black. Plans seemed to slow until Palin stepped in again, naming Harry Noah as an in-state coordinator for the effort, working under her office.
Noah's appointment appeased some in-state advocates yearning for action, but he resigned late last year, ostensibly to spend more time at an Oregon cherry orchard. However, he left a harsh assessment of the status quo with lawmakers, warning the state could have something akin to a "civil war" on its hands if it didn't pull gas line funding and direction into a single project. Too many groups were working to fulfill missions at odds with overall success, he said. Leadership was lacking.
Administration support for the bills is pending. Chenault pitched his bill to Parnell on Thursday, and expected discussions to continue.
Press secretary Sharon Leighow provided this statement from Parnell:
"Developing in-state gas potential remains a high priority of my administration. We've made substantial progress evaluating a stand alone gas pipeline. The work plan, as approved by the Legislature, is on schedule with initial cost and transportation estimates scheduled for completion in July."
Lawmakers last year approved $8.3 million for the in-state gas office, now headed by Parnell appointee Bob Swenson. The office spent $2.2 million through January 15, and expects to run through the remainder by the end of June -- months after the funding expires Feb. 28. But, the bulk of that, $5.5 million, is destined to pay for contracts already forged with consultants and energy firms.
Contact Rena Delbridge at This e-mail address is being protected from spambots. You need JavaScript enabled to view it
Monopolies are not a good thing.
One needs to ask Jay Ramras why he, Charlie Huggins, Mark Neuman, Bill Stoltze, Lesile McGuire, and Ralph Samuels are so adamant about increasing energy costs in south central.
Yeah, Fairbanks will get a good deal, but the rest of us down here in the Mat-Su-Anchorage-Kenai Penn. gas service areas will pay through the nose. Not enough volume in the bullet line to deliver cheaper gas.
Just what we need is a higher gas bill.
Bill Walker is the only gubernatorial candidate that is talking sense and has a grasp of the reality of what benefit using our gas and gas liquids in-state can mean. His all-Alaska gas pipeline plan exploits the need to export gas for state revenue and uses gas and the gas liquids in-state to build industry and for fuels.
Who else is talking about other than raping Alaska's resources?
Only Bill is talking about what we can build with our gas resource.
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Bill Walker's LNG proposal developed through his work with Mitsubishi, Sempra and others, is to have a State owned line but to finance it using traditional project finance vehicles. That means the State and its partners will need to come up with about 20-25% of the roughly $30 billion project costs in equity (cash), and the rest can be financed with debt. Conservatively assuming no project partners, the State still has that amount on hand in the CBR and other non-PFD set aside accounts. And the State would get a 12-14% return on that equity just like other pipeline owners. So the State self-financing a large diameter pipe to Valdez is not only the way to break the log jam, it is a good investment.
But a bullet line, without subsidization, will not deliver gas to Alaskans at anything approaching gas prices South Central is used to because you still have to build a pipeline and GCP, but it's only to handle small volumes. We’d be allocating all the fixed costs of an ANS project over small volumes which makes the per unit economics expensive. This results in the State being on the horns of a dilemma when it comes to the bullet line. If the State uses project finance and only pays for a portion of the project out of pocket, and borrows the rest, ratepayers will be charged through the nose in the tariff so the State can pay back the debt. On the other hand, the State can reduce the cost to gas users by throwing in $5 billion or so (I use “or so” because there are no good cost estimates yet public for a bullet line) with no expectation of getting paid back. So either you have very expensive in-state gas, or the State blows its savings in a monster energy subsidy.
But here's what I don't get about the bullet line and those that support state subsidies for it. Why would the State write off $5 billion for a small diameter pipe that provides only de minimus tax and royalty revenues when we could use those funds to build a large diameter project to Valdez (and the State would get its money back in its investment in the LNG project through the tariff)?
As fair disclosure I practice law with gubernatorial candidate Bill Walker. Nonetheless these comments are strictly my own.
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What is it that is so hard for Boobus Alaskanus, Boobus Legislatorus and Governor Parnell to understand that you cannot construct a 2170 mile gasline to Alberta, where the Alberta gas is being shut in and being backed out from Eastern Canada because the gaslines that once served the US are being reversed to export US shale gas to Canada?
Why is that Boobus Alaskanus cannot grasp the fact that the US south 48 is the Saudi Arabia of gas with over 2000 tcf and growing, more gas than any other TWO nations in the world . Why is that Boobus Alaskanus cannot grasp that it makes no more sense to pursue a gasline to S48 than to demand that Alaska’s oil be ship to Saudi Arabia.
Why is that Boobus Alaskanus demands that Alaska must continue to pursue the grossly impossible gasline, any gasline, so that Alaska cannot focus on the many things Alaska can do?
Why is it that Boobus Pressus cannot grasp any the above and must continue to peddle a gasline, any gasline, as if it were a real possibility.
It is so sad when there are so many things Alaska could be doing with lots of jobs, long term jobs