Homer Alaska - Business

Story last updated at 3:50 PM on Tuesday, November 20, 2012

Chenault: Getting gas to Southcentral top priority in next legislative session



By Brian Smith
Morris News Service - Alaska

State Rep. Mike Chenault said getting North Slope natural gas to market across Alaska remains his top priority heading into another political season.

"In my mind I put it above oil taxes because oil taxes will get worked out," Chenault said. "My concern is that in-state gas gets put on the back burner somewhere waiting on something else and something else never shows up.

"It is important to me, but we'll see in the upcoming legislative session how important in-state gas is to the rest of the state."

The Nikiski Republican who recently was re-elected and picked again to serve a third straight term as House Speaker -- the longest consecutive tenure in the position in state history -- plans to reintroduce his vision of how Alaska can get that gas.

Chenault was the prime sponsor of House Bill 9 -- a bill he said would have allowed the Alaska Gasline Development Corporation the tools to usher to open season a 24-inch, 500 mcf per day gasline from Prudehoe Bay to Point Mackenzie to benefit Southcentral communities, developments and utilities.

"I think it'll be reintroduced, just exactly what form it is going to take and what it looks like we're working on that right now," he said. "Those issues haven't (gone) away -- confidentiality and other issues in order to move that project forward because the Senate refused to take it up."

Last year, the legislation passed the House 27-12 but wasn't considered by the Senate during regular session or in a brief special session called by Gov. Sean Parnell.

Leslye Langla, AGDC director of public affairs, said HB9 would have allowed AGDC to determine an ownership model for the pipeline, negotiate agreements and secure funding to advance a pipe through the design and engineering work to an open season, which, loosely defined, is when gas producers and shippers determine market interest.

The line it would seek would not violate the conditions of the Alaska Gasline Inducement Act.

The route for the 737-mile pipeline is already determined and is included in an Environmental Impact Statement that was published in the federal register on Oct. 26. Langla said AGDC expects a decision on that document from the Army Corps of Engineers by the end of the month or the first part of December.

Langla said AGDC supports Chenault's efforts on HB9 and has identified four specific priorities the legislation needs to have when it is reintroduced this session.

The first is to secure multi-year funding to get the project to sanction. So far the group has about $65 million in pocket, but Langla said AGDC needs $335 million from the state to advance the $7.52 billion pipe. In the 2011 Legislature, Langla said a $200 million fund was created, but not appropriated.

"We as a pipeline project always said that we need roughly $400 million from the state to get the project to sanction and that's where we turn it over to a builder-operator," she said.

Langla said AGDC wants the Legislature to decide how the pipe would be owned and operated, but AGDC submitted a project plan in July 2011 that recommended the pipe be a state-owned project.

"We are not advocating for the state to operate and manage it -- a builder-manager is recommended to operate and manage the pipeline for the life of the project," she said.

AGDC also wants contract-carrier status on the pipeline to allow the group to enter into and negotiate long-term contracts for gas delivery.

Lastly, AGDC wants confidentiality -- specifically that much of its work would be off the record. As a state agency, Langla said, without the ability to enter into confidentiality agreements, "we're not able to hold discussions that would be at that level of business."

"(Producers and consumers) consider this information to have a monetary value and it to be very competitively sensitive information and they don't want to share this information with everybody," she said. "So, we want to be able to have more than watercooler discussions with them."

If the state were to own the pipeline, HB9 would have also allowed AGDC the option to sell the bonds for its construction, Langla said.

"The builder may be an owner, and there may be other owners, the state may be an owner, but it gives the state the flexibility to have an ownership interest," said Daryl Kleppin, AGDC commercial manager.

Simply put, Chenault said he wants to make sure AGDC can work on "the only pipeline moving forward in the state."

"Everybody else is talking, these guys are actually out there trying to get a pipeline going," he said.

The House Speaker said many Senators didn't have their priorities straight when considering last year's legislation.

"To not allow it to go through a committee was very frustrating, especially when you talk to each one of them and all of them think that natural gas for in-state use is important," he said. "But naturally everyone has their own ideas on what is going to go forward. Some didn't want this project to go forward because that ... would mean that AGIA was a failure and a number of them voted for AGIA."

If Chenault's bill again passes the House it may find a Senate more eager to consider it, considering the newly formed Republican leadership in that body.

"Whether it passes or not, that's a whole different ballgame," he said. "But I know that some of those that are on the Senate side that are now the committee chairs and in other leadership positions have been some of the strong supporters of it."

State Senator-elect Peter Micciche said HB9 was likely the best option on the table to advance a pipeline project and said AGDC should be encouraged to continue planning to bring interest together for open season.

Micciche stopped short of saying he'd vote for the re-introduced bill -- the devils are in the details, he said, and he'd have to see what the new version of the bill contains before agreeing to it.

"But, I certainly support the concept," he said. "They are looking at an AGIA-compliant line and unfortunately we are still stuck with AGIA. But with that half a billion cubic feet a day that this process is talking about ... I think it is probably the best opportunity for Alaskans, and utilities and industrial users to have access to North Slope gas supplies."

Micciche said Alaskans can't afford to wait any longer for a readily accessible supply of gas.

"I like the idea of new discoveries of natural gas in Cook Inlet, but to date we have not seen any," he said. "Not planning for adequate gas supply in Fairbanks and Cook Inlet in the future would be a disaster for three quarters of Alaskans that live in the Railbelt and Southcentral."

Brian Smith can be reached at brian.smith@peninsulaclarion.com.

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