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Bill would allow state to partner on large gas pipeline

Posted: January 28, 2012 - 9:06pm

JUNEAU – Alaska’s Speaker of the House and other legislative leaders announced Jan. 24 they will introduce expanding powers of a state corporation now working on a 24-inch in-state gas pipeline to become an investor and partner in a larger gas pipeline built by North Slope producers.

The legislation would also allow the state-owned Alaska Gas Development Corp. to buy and sell natural gas and also buy capacity in a gas pipeline.

There is likely to be opposition to some parts of the bill, however. Municipalities will be unhappy over a provision that exempts a state-backed pipeline from local property taxes during construction because it leaves cities and boroughs dealing with the social impacts of construction without access to new tax revenues.

Part of the reason for the bill is to send a message, Chenault said.

“We want to send a message to the North Slope producers that the state of Alaska is ready to go on gas pipeline development, and that we want a seat at the table,” which a partnership arrangement would bring, Speaker Mike Chenault, R-Nikiksi, said at a press conference.

The AGDC is now doing planning and engineering for a 24-inch pipeline to be built from the North Slope to Southcentral Alaska to get gas to Alaska communities in the event a large project remains stalled.

Chenault said the state should be prepared to move ahead with its own pipeline because of the urgency of providing more affordable energy supplies cities such as Fairbanks, in the Interior, where most people heat with fuel oil. A record cold winter has brought extraordinary hardships in the community.

Gov. Sean Parnell met with the CEOS of North Slope producers BP, ConocoPhillips and ExxonMobil in Anchorage on Jan. 5 to urge the companies to work together on a large liquefied natural gas project as an alternative to an all-land pipeline built to Alberta, a project now being pursued by TransCanada Corp. and ExxonMobil.

Following the meeting with Parnell, BP Chairman Robert Dudley and ConocoPhillips Chairman James Mulva said they would initiate a joint review of North Slope gas options and that an LNG project built in south Alaska appears more viable than the all-land pipeline. In a statement, ExxonMobil said all options would be considered including LNG.

Parnell has asked the companies to reach an “alignment” among themselves by March 31 and to have a plan to integrate the state’s current efforts on its own gas project by June 30.

Chenault said the state should be prepared to move forward on its own if the three producers don’t reach agreement, but he think the companies will make a deal. At that point the ADGC could become a partner or it could build any spur line needed to reach Alaska communities with gas, he said.

“While the optimal project for Alaskans would be a large diameter export pipeline, I am unwilling to wait indefinitely for the various stakeholders to align,” Chenault said.

The new legislation includes a number of technical changes to ADGC’s enabling statute enacted by the Legislature two years ago, such as clarifying that the project can be a contract gas carrier rather than a common carrier, and would also exempt the project from regulation by the Regulatory Commission of Alaska and from state and local property taxes during construction.

The bill also establishes a fund for $200 million appropriated by the Legislature last year to pay for continued engineering and environmental permitting work on the 24-inch pipeline, and also merges another state corporation, the Alaska Natural Gas Development Corp., with the ADGC.

While the AGDC is empowered, so far, to be essentially a construction entity for a 24-inch pipeline, the other corporation, ANGDA, has statutory authority to purchase and sell gas and also to buy and own capacity in a pipeline.

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