Lawmakers weigh in on gas pipeline

PHOTO/Rob Stapleton/AJOC

State legislators in Juneau are making their first moves to influence decisions on a planned $10 billion North Slope natural gas pipeline.

Rep. Scott Ogan, R-Palmer, who chairs the House Special Oil and Gas Committee, introduced a bill Jan. 19 that would require developers of a gas pipeline to ensure their project would meet a "reasonably foreseeable in-state demand" for gas.

Gov. Tony Knowles and Rep. Joe Green, R-Anchorage, have introduced bills that amend the state’s Stranded Gas Act, a law that allows a developer to negotiate special tax arrangements to include gas pipelines and gas-to-liquids projects. But Ogan’s bill is the first to tackle the controversial question of which route the gas pipeline would follow.

Ogan stops short of mandating a "southern," or Interior Alaska, route for a pipeline, but that route would meet the requirements set out in Ogan’s bill. An alternative "northern" route being considered by North Slope producers for a pipeline directly east from Prudhoe Bay to Canada would be unlikely to meet Ogan’s requirements.

Meanwhile, a prominent member of the Legislature’s Democratic minority, Rep. John Davies, D-Fairbanks, said the state should consider owning part or all of a proposed natural gas pipeline from the North Slope to ensure the line is built with enough capacity to put Alaska gas in several markets.

"Having an equity interest in the project is the only way we can really control how the project is built and to ensure our citizens receive indirect benefits like jobs and a supply of natural gas," Davies told Juneau Democrats at a lunch meeting Jan. 18.

Davies thinks it would be in Alaska’s interest to have a system that can deliver gas both to domestic markets in the Lower 48 via a gas pipeline through Canada and to have a spur line to southern Alaska to ship liquefied natural gas to markets in Asia.

"We shouldn’t have all of our eggs in one basket," in terms of markets, he said. A burst of new gas exploration activity in the Lower 48 will inevitably bring new supplies into the market, Davies said.

There’s also talk in the incoming Bush administration and Congress about reversing previous federal decisions on a moratorium on offshore drilling. Geologists estimate areas of the federal Outer Continental Shelf where exploration is now banned could hold up to 200 trillion cubic feet of gas.

"That could swamp the domestic market," Davies warned. "Our best friends could be the environmental groups working to keep those areas closed. It would also serve our interest in keeping that gas out of the market."

A spur line to southern Alaska would not only bring North Slope gas to communities there but would allow exports of LNG to Asia, creating more diverse markets for Alaska’s gas.

"I wouldn’t rule out shipping LNG to California either," Davies said. Under current law, the state’ principal mechanism for negotiating with the producers is the state Stranded Gas Act, which allows builders of a gas project to renegotiate state and local taxes on a project.

The state would be in a stronger position if it had an equity interest in the project, Davies said.

The idea isn’t new. In 1971 former Gov. William Egan proposed that the state finance and build the trans-Alaska pipeline system. Others have proposed the state own a portion of the pipeline equal to its one-eighth share of royalty oil not only to ship its own oil, as the other producers do, but to be able to influence pipeline decisions as an owner.

In the early 1980s British Petroleum offered to sell a share of the oil pipeline to the state, but former Gov. Jay Hammond was cool to the idea.

HEAD:Lawmakers weigh in on gas pipeline

BYLINE1:By Tim Bradner

BYLINE2:Journal Reporter

State legislators in Juneau are making their first moves to influence decisions on a planned $10 billion North Slope natural gas pipeline.

Rep. Scott Ogan, R-Palmer, who chairs the House Special Oil and Gas Committee, introduced a bill Jan. 19 that would require developers of a gas pipeline to ensure their project would meet a "reasonably foreseeable in-state demand" for gas.

Gov. Tony Knowles and Rep. Joe Green, R-Anchorage, have introduced bills that amend the state’s Stranded Gas Act, a law that allows a developer to negotiate special tax arrangements to include gas pipelines and gas-to-liquids projects. But Ogan’s bill is the first to tackle the controversial question of which route the gas pipeline would follow.

Ogan stops short of mandating a "southern," or Interior Alaska, route for a pipeline, but that route would meet the requirements set out in Ogan’s bill. An alternative "northern" route being considered by North Slope producers for a pipeline directly east from Prudhoe Bay to Canada would be unlikely to meet Ogan’s requirements.

Meanwhile, a prominent member of the Legislature’s Democratic minority, Rep. John Davies, D-Fairbanks, said the state should consider owning part or all of a proposed natural gas pipeline from the North Slope to ensure the line is built with enough capacity to put Alaska gas in several markets.

"Having an equity interest in the project is the only way we can really control how the project is built and to ensure our citizens receive indirect benefits like jobs and a supply of natural gas," Davies told Juneau Democrats at a lunch meeting Jan. 18.

Davies thinks it would be in Alaska’s interest to have a system that can deliver gas both to domestic markets in the Lower 48 via a gas pipeline through Canada and to have a spur line to southern Alaska to ship liquefied natural gas to markets in Asia.

"We shouldn’t have all of our eggs in one basket," in terms of markets, he said. A burst of new gas exploration activity in the Lower 48 will inevitably bring new supplies into the market, Davies said.

There’s also talk in the incoming Bush administration and Congress about reversing previous federal decisions on a moratorium on offshore drilling. Geologists estimate areas of the federal Outer Continental Shelf where exploration is now banned could hold up to 200 trillion cubic feet of gas.

"That could swamp the domestic market," Davies warned. "Our best friends could be the environmental groups working to keep those areas closed. It would also serve our interest in keeping that gas out of the market."

A spur line to southern Alaska would not only bring North Slope gas to communities there but would allow exports of LNG to Asia, creating more diverse markets for Alaska’s gas.

"I wouldn’t rule out shipping LNG to California either," Davies said. Under current law, the state’ principal mechanism for negotiating with the producers is the state Stranded Gas Act, which allows builders of a gas project to renegotiate state and local taxes on a project.

The state would be in a stronger position if it had an equity interest in the project, Davies said.

The idea isn’t new. In 1971 former Gov. William Egan proposed that the state finance and build the trans-Alaska pipeline system. Others have proposed the state own a portion of the pipeline equal to its one-eighth share of royalty oil not only to ship its own oil, as the other producers do, but to be able to influence pipeline decisions as an owner.

In the early 1980s British Petroleum offered to sell a share of the oil pipeline to the state, but former Gov. Jay Hammond was cool to the idea.

 

Updated: 
12/13/2016 - 9:52am

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