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3 things to watch in Alaska: gas line, pay, oil

Posted: January 26, 2014 - 10:01pm

JUNEAU — The Alaska Legislature starts its first full week of work of this session Monday, with lawmakers set to dig into details of plans to advance a natural gas pipeline project and salary increases for top officials.

The fight over oil taxes also is expected to continue casting a shadow over discussion on issues such as state spending.

The scheduled 90-day session is set to end April 20, Easter Sunday. Senate President Charlie Huggins told reporters last week he’d like to be done before then — and Good Friday — if possible.

Here are three things to watch for this week:

At least seven hearings are scheduled this week related to the major gas line project that Gov. Sean Parnell’s administration is proposing the state take an equity stake in. That doesn’t include a consultants’ overview of the liquefied natural gas business scheduled for Tuesday.

The Senate Finance and House and Senate Resources committees are slated to hear presentations on the pipeline services agreement between the state and TransCanada Corp. and the commercial agreement involving them, BP, ConocoPhillips, ExxonMobil Corp., and the Alaska Gasline Development Corp.

The resources committees also plan to get an update on the project itself.

The companies have said the project being pursued, which includes a roughly 800-mile pipeline and would allow for overseas exports, could cost from $45 billion to more than $65 billion.

The agreement with TransCanada has been cast as providing a transition from terms of the Alaska Gasline Inducement Act, which Parnell has said is no longer a good fit. The commercial agreement has been billed as a statement of intent for how the parties will move through a phase that includes preliminary engineering and refinement of costs. It is contingent upon passage of enabling legislation introduced Friday. Parnell said the state’s share for that phase would be between $70 million and $90 million.

Parnell has promised a phased approach to the long hoped-for project, which he said would be more transparent than past efforts.

Senate Minority Leader Hollis French said Democrats’ approach to evaluating the proposal is simple: “Gas line, yes. Giveaway, no.”

French opposed the oil tax cut championed by Parnell last year, seeing it as a giveaway to industry, and said he viewed the gas line approach with some skepticism after that.

Senate Finance on Friday plans to hear a committee-sponsored bill that would reject proposed pay increases for top state officials.

The State Officers Compensation Commission last year proposed raising salaries for the governor, lieutenant governor and heads of the 14 main state departments.

Parnell in December said he would decline a pay raise for himself, in light of state budget constraints, but believed salary increases for agency heads were warranted.

The committee bill is one of several such bills pending. A final report by the commission was due by the end of this week.

For the raises to be rejected, a bill disapproving the recommendations would have to be enacted into law within 60 days after the recommendations are submitted, according to the director of the state Division of Personnel and Labor Relations.

Oil taxes aren’t on the Legislature’s docket this year, but that doesn’t mean the issue, and legislators’ position on the tax change, haven’t shaded discussions on things such as the budget and gas line. Expect more of the same, with voters slated to decide later this year whether to keep the new tax structure in place, and many legislators and the governor facing re-election.

On Wednesday, Huggins, R-Wasilla, blamed the former tax structure, known as ACES, for the expected $2 billion loss in unrestricted general fund revenues between last year and this year.

“That was the tax regime,” Huggins told reporters. “So, you know, we got less money, and if that’s the regime, you have to take responsibility for it. I didn’t vote for ACES, so I’m not a supporter of it, period.”

The Revenue Department has cited several factors for the decline, including lower-than-expected oil prices, declining production, residual effects of the outgoing tax system, such as the closeout of credits, and higher-than-expected deductible lease expenditures.

On Thursday, Sen. Bill Wielechowski, D-Anchorage, a critic of the oil tax cut passed last year, honed in on Revenue Commissioner Angela Rodell’s acknowledgment, in response to a question during a committee hearing, that she could not say if oil production would begin leveling off and increasing beyond fiscal year 2023.

Rodell said the department does not look that far into the future and could not say one way or the other, whether that would happen.

Wielechowski said people were promised 1 million barrels of oil a day if the state would “give up” billions of dollars for its oil resources, and promised billions more in profits. He said the administration contends the production estimates are conservative and that more oil than is projected is expected. But he said instead, “the best case scenario” projected is a continued decline.

The Parnell administration several years ago set a goal of 1 million barrels of oil a day over 10 years. The Department of Natural Resources in 2012 said over that period, that target could include sources like development of smaller pools of conventional oil, production from shale and heavy oil plays and production from the Arctic National Wildlife Refuge, which some state officials and members of the congressional delegation have been pushing to have opened to drilling but remains off limits.

Oil companies during the tax debate last year said they believed the tax cut would lead to more production, but it wasn’t clear just how much more, when.

Rodell said she sees “great upside” potential and noted a flurry of activity following the tax cut’s passage.

Legislative testimony over the last several years suggested that to eat into or reverse the long-standing trend of declining oil could require additional multibillion-dollar annual investments.



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