Galvin: Don't get 'cute' with AGIA

Posted: Sunday, June 29, 2008

The governor's commissioner of revenue told legislators Thursday not to get "cute" about the possibility of issuing a natural gas pipeline license to TransCanada, then trying to support a competing project.

"You did not pass (the Alaska Gasline Inducement Act) to bring somebody in, and then get cute," Commissioner Pat Galvin told the 20 lawmakers present for Thursday's hearing at the Soldotna Sports Center. "... The point is, we're not going to advance another project. Don't go there."

Galvin was scheduled to present the administration's findings and determinations with regard to TransCanada Corp.'s application to build a natural gas pipeline from the North Slope to a hub in Alberta, Canada, under AGIA. Galvin didn't get very far into his presentation, however, as legislators threw hypothetical after hypothetical at him on how far they could go in considering a competing pipeline project, like ConocoPhillips' and BP's Denali project, should they approve a license for TransCanada.

Under AGIA, the state cannot take actions to advance a competing project. Any action viewed as advancing a competing project, such as offering a favorable tax treatment, would open the state to treble damage liability.

"The ultimate question is whether we accept tying ourselves to the licensee with the understanding that if we try to get out of it, we'll be liable for treble damages," Galvin said.

Galvin said an important aspect of TransCanada's application was what he called "true open access" to the pipeline. Measures to guarantee regular open seasons, during which customers can commit gas to the pipeline, and rolled-in rates, which spread the cost of pipeline expansion equally among all shippers, would give explorers the confidence to drill new wells, Galvin said.

"They have to know they can get gas into the line at a reasonable rate and in a reasonable amount of time," Galvin said.

AGIA provides that certainty to explorers, Galvin said. Other AGIA provisions are designed to keep tariffs low, thereby increasing the value of gas at the wellhead.

Under AGIA, the state still can support other pipeline projects, such as a bullet line from the North Slope to Southcentral Alaska, provided the project is designed to ship less that 500 million cubic feet of gas per day.

The adminstration has determined that TransCanada's application provides the best chance for the state to get a gas pipeline, and the best opportunity for both short- and long-term development. It would maximize state revenue and increase affordable energy options for Alaskans.

The adminstration has said the TransCanada project is a better option than liquified natural gas proposals and the Denali project.

Will Morrow can be reached at will.morrow@peninsulaclarion.com.



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