TRANS-ALASKA GAS LINE GETS NEW LOOK FROM LEGISLATORS

Bill McAllister
Submitted by Scott Heyworth
Anchorage, AK
Jan. 28, 2005

Juneau, Alaska - The concept of an all-Alaska gas pipeline has fresh currency in the Legislature. While the Murkowski administration and the North Slope oil producers negotiate in secret on a pipeline that would follow the Alaska Highway, members of the Alaska Gasline Port Authority have been openly walking the halls of the capitol, touting what they say is a better deal.

The port authority, created in 1999 by three municipalities, had not been on the front burner in the Legislature. But this week chairman Jim Whitaker, a former legislator who is now mayor of the Fairbanks North Star Borough, made an enthusiastic pitch to members of the House.

In short, Whitaker says the port authority's project to tidewater asks less of the state and would give more -- in dollars, gas and jobs.

“We think that the existing tax structure is appropriate. We're not asking for a tax reduction,” he said. “We think that there are revenues from pipeline ownership that can significantly be shared with the state, someplace in the range of $250 million per year.”

The North Slope oil producers are negotiating with the administration for a break on taxes -- an effort to guarantee the economics of the project. Whitaker says the port authority does not need any concessions from the state because it already has an exemption from federal taxes.

“We also don't have an 18 to 20 percent return hurdle rate that any private entity would insist upon,” Whitaker said.

Allowing for maximum in-state access to gas, the port authority recently signed a deal to sell the rest to San Francisco-based Sempra LNG.

In Valdez, the gas would be cooled to a liquid and shipped on special foreign-made tankers. For that, the port authority would need an exemption from the federal Jones Act, which requires that only American-made vessels be used to move commodities from port to port in the United States.

There apparently are no LNG tankers that have been built domestically, and an exemption would require congressional approval.

“I don't think anybody can pick a side on any of these things yet, in the public or in the Legislature, until we can determine whether or not we've actually got those hurdles jumped over,” said Rep. Ralph Samuels, R-Anchorage.

But there is growing concern about whether the administration can conclude a contract with the North Slope producers this year.

“The port authority concept -- that isn't asking for any fiscal contract, that isn't asking for any money, and that has its permits in hand -- their stock rises. They look better and better,” said Rep. Eric Croft, D-Anchorage.

Whitaker says the port authority could begin construction on the all-Alaska line by 2008 and could start shipping gas by 2011. But it remains to be seen whether the group has the right political timing.

The port authority faces fewer regulatory hurdles than other projects because it already holds most of the major permits, which were purchased from the company Yukon Pacific.

Meanwhile, the Canadian portion of the Alaska Highway gas pipeline depends upon settling claims with Natives.