Official says pipeline initiative's goals could cost millions

JUNEAU (AP) -- It could cost up to $250 million to carry out the goals of a gas pipeline initiative that's set to appear on the November ballot, a state official said Thursday.

Department of Revenue Commissioner Wilson Condon gave those numbers Thursday to the House Oil and Gas Committee, which is considering a bill that is nearly identical to the initiative.

If the bill passes the Legislature, the initiative would not appear on the ballot.

Condon was testifying on the bill, but he said after the meeting, the department would project the same costs for the initiative to meet its goal of having a pipeline built by 2007.

However, a ballot measure itself would not cause money to be spent. The Legislature would have to approve any spending to implement the initiative's goals.

The chief sponsor of the initiative, Scott Heyworth of Anchorage, disputed the Revenue Department estimates.

''This is not a state project where the state's building the pipeline,'' Heyworth said.

Heyworth's proposal calls for the state to set up a public corporation that could build and operate a natural gas pipeline from the North Slope to Valdez.

Heyworth said the state wouldn't have to spend its own money building the pipeline. The public corporation would sell bonds to be repaid with revenues from selling the gas. The state would not be liable for the debt, he said.

Heyworth said the project has many benefits. Besides providing revenue to state government, Alaskans could tap some of the gas for in-state use on its way to markets in Asia and the Lower 48.

But Condon said the risks to the state are significant.

He estimated the state might need to spend $175 million to $250 million just to get a project ready to take to bond markets. That includes costs for engineering, acquiring permits and setting up contracts with producers and purchasers.

Some of those costs could be recouped once bonds are sold.

But Condon said the state also could spend the money and find nobody's willing to buy bonds to finance it. He believes that's likely.

''We think the economics of the kind of project people are talking about aren't there,'' Condon said.

''Obviously, Mr. Heyworth sees a very different world out there than we do, and maybe he's right,'' Condon said. ''But our job is to tell you what we think.''

Rep. Vic Kohring, R-Wasilla, expressed reluctance for the government to get involved where the private sector has not.

''For my mind if there's a market out there, the oil companies are going to try to meet that demand,'' Kohring said. ''I really think the private sector knows best. If they have not stepped to the plate, I'm really nervous about government getting involved.''

Heyworth said relying on the private sector to develop the gas has not worked. He believes there is a market for Alaska liquefied natural gas shipped from Valdez if the oil companies that own North Slope natural gas would agree to sell it.

''The Asian and Japanese markets are hungry and would love to buy our gas,'' Heyworth said.

But Condon said Revenue Department analysis indicates there is too much other gas available elsewhere in the world that can be delivered to those markets more cheaply than Alaska liquefied natural gas.

Just before the hearing on the bill, a representative of Yukon Pacific Corp., a company that has secured permits to build a pipeline from the North Slope to Valdez, presented a revised version of its proposed project.

Lobbyist Paul Fuhs said Yukon Pacific is now looking at a smaller scale project, which will make it easier to enter the market. The economics look promising, although the company is still verifying its premises, he said

Yukon Pacific has been trying to get a pipeline to Valdez built for 20 years, but has been unable to convince oil companies that own the North Slope gas to make it available for the project.

Committee Chairman Scott Ogan, R-Palmer, said he will leave it up to the committee to decide whether to move the bill. The panel took no action Thursday.

''I felt we should at least get a hearing on it and get the issue on the table,'' Ogan said. ''It's a huge policy call.''

Heyworth told the committee he has polls showing 65 percent of Alaskans would vote for the initiative.

Ogan said if the initiative is going to pass, the Legislature might be better off passing a law of its own.

If a law passes by initiative, the Legislature cannot make substantial changes for two years. But if the Legislature makes the law itself, it can come back the next year and change it.