The governor's decision, announced March 19, was initially that almost 50 percent would be rejected but it wasn't realized at the time of the announcement that this included a large amount of money for an increase in Medicaid. When this was corrected, and that it was clarified that the Medicaid money would be accepted, the amount dropped to about a third. Gov. Palin said she will accept money for capital projects (which includes money for surface transportation and airports) but not for operating, the argument being that many of these funds have strings attached which require the service to be maintained after federal funding ends.

This debate will continue until the Legislature adjourns. The Legislature can accept funds the governor declines, and resolutions have been introduced in both the House and Senate to formally accept all funds available. Actually, some legislators share the Gov. Palin's concerns about continuing commitments but want more time to weigh the issue (the money can still be returned even after being accepted). More important, legislators want to make the decision themselves rather than leaving it to the governor. There could still be drama attached to this: If legislators accept money the governor rejects, they must still put it into an appropriations bill that Gov. Palin can veto (she has mentioned this). In the end lawmakers can override the veto, of course, but it takes 40 of 60 legislators. That could happen, given the strains between the Legislature and the governor on other issues.

All this could easily be reconciled. The governor says she wants to cooperate with lawmakers.

Another tempest developed last week over a resolution by two legislators, Reps. Jay Ramras and Craig Johnson, asking the governor to take a fresh look at her AGIA contract with TransCanada and whether the $500 million state subsidy is still in the public interest given increasing shale gas and LNG supplies, and a sour economy as the 2010 open season approaches.

Our opinion on this is that Reps Ramras and Johnson introduced the resolution to liven up an otherwise dull session (the budget, after all, isn't so exciting). HCR-12 certainly achieved its purpose. We were surprised at the sharp reaction of the governor. She called an hour-and-a-half press conference with her gas team attending to reinforce her belief that the AGIA agreement is working as intended. Our belief is that there was real concern in the administration about this resolution becoming active in the Legislature, sending a signal to TransCanada that Alaska may be wavering in its support of the AGIA contract.

Meanwhile, there was a lively hearing on the resolution in the House Energy Committee March 19 in which administration officials went through the background work they did on the TransCanada contract which included scenarios of low gas prices, shale gas and LNG. There in nothing in the current situation that changes things, Revenue Commissioner Pat Galvin and Resources Commissioner Tom Irwin told the committee.

It was obvious to us that legislators on the committee were not convinced, however. Ramras and Johnson are known critics of AGIA, but we were surprised at the critical tone of questions being asked by lawmakers like Rep. Bryce Edgmon, co-chair of the committee, who previously supported AGIA. What is weighing on lawmakers' minds is the $500 million state grant to TransCanada in a time when the state is running huge deficits. HCR-12 itself will be softened, however, to require the administration to make quarterly progress reports to the Legislature.

Lawmakers were busy with several other bills last week. An important bill to watch is Senate Bill 54, "price gouging" legislation, that is now in the Senate Resources Committee. The committee is considering a change that would extend it to cover fuel retailers and distributors as well as refiners. A problem in the legislation is that what constitutes "price gouging" is unclear. It covers both diesel and gasoline. Flint Hills, operator of the refinery near Fairbanks, is very concerned about added uncertainties this legislation would create for them if it passes. The refinery already faces serious challenges from declining sales of jet fuel at Anchorage's international airport and premiums the state charges for sales of state royalty oil, among other issues. The concern is that SB-54 could be the final "nail in the coffin" for the refinery. Public anger over high gasoline prices, and the difference between Alaska and Seattle prices, is what has fueled the push for this legislation.

The Senate Energy Committee began working on the governor's railbelt electrical utility legislation last week, although action to approve the proposal is unlikely in the 2009 session. Administration officials said they are still working to get support from all of the six railbelt utilities on the proposal, which would be form a jointly owned entity to manage power generation assets and build new generation capacity. Chugach Electric Association strongly supports the proposal, but Golden Valley Electric Association of Fairbanks and some of the other utilities have some concerns.

Other bills that are active, and worth watching, includes legislation on cruise ship discharges (House Bill 134) in the House Resources Committee, and coastal zone management bills, SB-4 and HB-74, which are in the Resources Committees of the House and Senate.

Mike and Tim Bradner publish Bradners' Alaska Legislative Digest, a weekly legislative reporting service. For information, email: timbradner@pobox.alaska.net