Oil industry oversight money restored

Posted: Wednesday, March 05, 2008

State House lawmakers voted Tuesday to reinstate a $523,000 increase in funding to an office established last year that coordinates the state's oil and gas oversight and compliance functions with other agencies.

The amendment increases funding to the Petroleum Systems Integrity Office, part of the Division of Oil and Gas, to more than $1.49 million. The increase will pay for four additional investigators.

Late last month during a House Finance subcommittee meeting, Rep. Mike Kelly, R-Fairbanks, pulled the increase from Gov. Sarah Palin's budget. In an interview Monday, Kelly said he was seeking to hold spending for the PSIO at the level of the current budget, $867,600, in an effort to trim the growth of the FY 2009 Operating Budget.

Palin quickly responded, urging the full House Finance Committee to restore the increase. The money, she said, would fund personnel needed to investigate breaches of pipeline system integrity and implementation of a statewide quality assurance program.

"Facing the prospect of the largest construction project in North America, a natural gas pipeline, we must demonstrate to Alaskans and the nation that we provide sound oversight of the systems that are needed to develop our resources," she said.

While the full committee did not take that action, Department of Natural Resources Commissioner Tom Irwin met with Kelly and justified the increase that will fund four new positions. Initially, Irwin had considered asking for more.

"He said he had had to cut back significantly from his initial request," Kelly said, and "that he needed the four positions."

Kelly said Irwin had told him there were currently more than 30 complaints to investigate.

"I remain concerned about the growth in the budget, but I said I would recommend sticking the increase back in," Kelly said.

The budget, he noted, still includes sizeable increases in spending that the state may not be able to sustain long-term.

Palin created the PSIO early last year, replacing the more costly Lease Monitoring and Engineering Integrity Coordinator's Office created, but never staffed, by former Gov. Frank Murkowski. Murkowski took that action in the wake of spills on the North Slope that led to the costly shutdown of the trans-Alaska pipeline.

Last week, the Clarion received an e-mail implying that Finance Co-Chair Mike Chenault, R-Nikiski, had been behind pulling the PSIO increase from the budget. Chenault, who is not a member of the House Subcommittee on Natural Resources chaired by Kelly, said he had nothing to do with it, a fact confirmed by Kelly.

Chenault did sign on as a co-sponsor of Kelly's amendment reinstating the $523,000 increase, which passed unanimously Tuesday morning.

Shortly thereafter, the House adopted the FY 2009 Operating Budget Bill, HB 310.

The measure, which now moves to the Senate, would spend $4.9 billion from general funds, and $5.8 billion from federal and other state funds, for a total of $9.976 billion.

The House also passed HB 312, making appropriations for both the operating and capital budgets for state mental health programs.

Chenault said passing the operating budget on the truncated session's 50th day was remarkable. He also noted that the budget struck a balance between meeting growing needs and holding down spending.

"The cost of everything related to the budget is going up, and while we are in a time of historically high revenue, it would simply not be prudent to pass an operating budget we cannot sustain in the future," he said in a prepared statement.

The new budget includes $309 million for state employee negotiated salary increases, $50 million in revenue sharing for municipalities and communities, and $175 million for oil and gas tax credits.

Hal Spence can be reached at hspence@ptialaska.net.

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