An Alaska Gasline Inducement Act license issued to TransCanada Corp. would limit the state’s ability to change its oil and gas severance taxes or royalty administration terms in ways that could be interpreted as helping BP and ConocoPhillips’ competing Denali pipeline, revenue Commissioner Pat Galvin told legislators in a hearing on the proposed license in Kenai June 26. In responses to questions from Reps. Gabrielle LeDoux and Ralph Samuels, Galvin said that any special legislative action to establish a “fiscal stability” package for the Denali pipeline would subject the state to treble damages to TransCanada. LeDoux pursued the question further on whether a change of general tax laws covering all gas production would have similar effects. Galvin said it would. “Within the language of the AGIA statute it is very clear that if the state offers favorable tax terms to a competing project we are liable. If the state enacts a tax regime that helps the Denali project we must accept that risk,” Galvin said.  

“We are not going to try and help a competing project, “the Commissioner said. “We’re bringing TransCanada into this and we have to stick with them or pay treble damages. We’re accepting this relationship and if we want to get out of it we must pay the price.” The administration’s plan is to develop a set of fiscal terms for gas producers willing to commit to purchasing capacity in TransCanada’s pipeline. The acknowledgement Thursday followed Galvin’s statement Wednesday in a Senate Judiciary Committee meeting that state assistance to a spur or bullet pipeline that carried more than 500 million cubic feet of gas per day would also trigger treble damages because of the diversion of gas from TransCanada.

In the public testimony Thursday evening, Kenai Borough Mayor John Williams urged the Legislature to facilitate a bullet or spur line that would bring North Slope gas to Southcentral Alaska and Kenai. “We are currently staring at an eight to nine-year supply of gas (from gas fields in the region) for over 60 percent of (Alaska’s) population. I am here to tell you that we have to get gas to Southcentral and we want the jobs that come with getting that gas here,” Williams said. “Natural gas liquids processing and huge businesses not only in jobs but dollars to the state.” Williams was particularly critical of provisions in AGIA that would have TransCanada take natural gas liquids to Alberta for processing which could limit the ability of industries based on NGLs from being developed in Alaska. “TransCanada’s plan says two of the three plants in Alberta are ready to expand to handle Alaska’s NGLs. I want Alaskans to process those NGLs.”

COMING EVENTS:

Legislative “road shows” continue in Barrow July 1 and in Ketchikan July 8 after concluding in Anchorage. Fairbanks, Palmer and Soldotna.  Lawmakers reconvene in Juneau July 9 with a goal of taking final action on AGIA by July 16.

Bradners’ Legislative Digest is a private subscription service publishing reports on the Alaska Legislature and state government. This briefing is a special service, and is provided in cooperation with the Alaska Journal of Commerce.