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Peninsula lawmakers split on AGIA: Seaton votes up; Chenault, Olson dissent

Posted: Thursday, July 24, 2008

Republican Rep. Paul Seaton, of Homer, joined a bipartisan majority of 24 Alaska House members and voted to approve a license for TransCanada Corp., which proposes to build a natural gas pipeline connecting the North Slope to Alberta.

But his party colleagues from the central Kenai Peninsula, Reps. Mike Chenault, R-Nikiski, and Kurt Olson, R-Soldotna, opposed the decision on House Bill 3001, which includes handing TransCanada $500 million in state money.

It is now up to the Alaska Senate to decide if TransCanada wins the Alaska Gasline Inducement Act (AGIA) sweepstakes. Sen. Tom Wagoner said Wednesday he does not expect the bill to hit the Senate floor before Monday.

Even then, a go-ahead nod from the Legislature only allows the Calgary-based firm to move forward with attempts to plan a pipeline and secure promises of gas from producers that would lead to its construction.

Seaton said Wednesday morning that much of opposition in the House had to do with discomfort over some of the provisions of AGIA -- provisions House and Senate lawmakers agreed to last year when they passed the act by a 58-1 margin, after intense and detailed scrutiny and debate.

"We have had two years, basically -- all that time on AGIA -- and developed the 20 'must-haves' that would make a good project for the state," Seaton said. "In other words, if they were part of a contract, we would be satisfied."

TransCanada agreed to those provisions and met the criteria necessary under AGIA, he said.

Seeking a pipeline deal through direct negotiations with producers -- attempted prior to AGIA -- failed. AGIA has produced the desired result, he said.

Chenault said that while TransCanada is a good company, the state was giving up its ability and right to negotiate gas contracts under the AGIA procedure.

"I realize why we partnered with a pipeline company (TransCanada) to go out and do that for us, but I don't feel comfortable with them negotiating all aspects of a contract with producers," he said.

The $500 million TransCanada would get also makes him uncomfortable, Chenault said.

"That's a lot of money to go forward with a paper project, which while they have parameters, doesn't guarantee a pipeline," he said.

Olson voted no, he said, because the deal might cut out a possible bullet line from the Foothills to Cook Inlet, which needs gas, and soon.

Olson said he voted yes on four unsuccessful amendments. One would have prohibited reimbursement of qualified expenditures to TransCanada until it was clear Point Thompson gas would be available. Another would have required that TransCanada executives reside in Alaska during pipeline construction. A third would have required TransCanada to reveal details of its proposal made in 2004 under the administration of former Gov. Frank Murkowski.

Olson said he could live without those, but one amendment was especially problematic.

Under AGIA, TransCanada would be assured of exclusivity and thus eligible for treble reimbursement from the state if the state, prior to commercial operation of TransCanada's line, were to provide incentives or pay another company to pursue a competing pipeline. AGIA defines a competing pipeline as one designed to carry in excess of 500 billion cubic feet of gas per day.

An amendment rejected by the majority would have allowed a pipeline meant to deliver gas for in-state use or for export by sea to be built without triggering treble reimbursement, even if demand forced gas delivery to exceed the 500 billion cubic feet mark, as might happen, say, to a bullet line to Cook Inlet if it needed ramping up to deliver gas to a reopened Agrium plant, Olson said.

That amendment's failure and concerns about the $500 million were enough to cause him to vote no on the bill, Olson said.

Licensing TransCanada to proceed -- provided the Senate agrees -- does not preclude the company from linking up with producers such as ConocoPhillips and BP, which have their own pipe dreams outside AGIA. But if they do, any partners would have to accept all the must-haves within the inducement act, Seaton said.

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



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