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Dear Neighbors, Special Session has started! I’ll be here in Juneau for parts of June and July, eating bad food (would the Moose’s Tooth please open a restaurant down here?), missing my wife Kelly and fishing season in Anchorage (in that order!), and overall leading a pretty boring life. But I also want to be here. This is Alaska’s best chance to promote a gasline that’s needed for the state’s economy. I’d like to provide you with a brief summary of what’s been going on here with AGIA and below you’ll see a compass piece about the gasline I wrote with Representative Scott Kawaski (D-Fairbanks) for publication. There are a few legislators who’ve openly said they’re working to defeat this pipeline proposal, including Rep. Jay Ramras, a Fairbanks Republican who’s referred to himself as one of the “twelve apostles” for his position against this proposal. The gasline, and AGIA, is a complex subject that doesn’t fit into a sound bite. We have a few principles to guide us. Premature decisions to oppose this gasline deal don’t readily meet any of them. After roughly 2 weeks of hearings I am leaning in favor of the TransCanada (TC-Alaska) proposal before us, but I still have questions and I want to hear from the public at hearings in Anchorage June 16 - 20. I also want to hear more about the prospects for a potentially competing all-Alaska gasline to Valdez, though no formal proposal for that project has been seen yet. Short of that, the best shot for Alaska gas seems to be a project like the TC-Alaska proposal with branch (“spur”) lines to Alaska’s communities and potentially to an LNG facility in Valdez. If British Petroleum and Conoco put together a formal proposal I would also like to look at that. However, bids for a gasline were requested by last November and I am disappointed that we still haven’t seen the details of their proposal beyond a press release and short PowerPoint presentation those companies offered. Here are guiding principles I will look to:
Based on the testimony I am encouraged that the TC-Alaska proposal might serve those needs but I also want to hear testimony to see if there’s any realistic possibility for an all Alaska gas line. Under AGIA, the gasline law we passed last year, the TC-Alaska proposal was required to meet a number of conditions to protect the public interest. So far it seems to have met those conditions. First, the law requires this proposal to provide for off-take points so that we can ship gas to communities inside Alaska. It wouldn’t protect our interests to just send gas to Canada and the lower 48. Second, a major difference between the TC-Alaska proposal and what the major oil companies have demanded is TC-Alaska’s compliance with the legal requirement that we keep long term gas shipping rates down. It’s in the state’s interest to encourage new development by independent explorers on the North Slope and to do that we need to keep the shipping rates down for independent explorers. We do that through a “rolled in rate” provision in the law. The major oil companies, on the other hand, have objected to this provision and would seek to charge new shippers and developers a higher transportation rate. That could hurt development on the North Slope in the long term. Finally, according to Goldman Sachs and the state’s other advisors, TransCanada, which has built more pipeline in North America than any other company, appears to have the financial ability to build this project. There are a number of other points that area important but too complex to explain in a short newsletter; you should feel free to give me a call if you would like to discuss them. Another Consideration: The In-State Bullet Line, Other Ways To Meet Our Energy Needs. Some people are arguing that we should block progress on a large pipeline in favor of a small bullet line that will bring gas to Alaska communities. I disagree that these are mutually exclusive projects. We should work for gas to our communities as quickly as possible. But a line like that will produce very little long term state revenue. We also need to work for a large diameter pipeline to bring economic prosperity to this state. Impeding the development of a large diameter pipeline isn’t the answer. Promoting a large pipeline, alternative energy (wind farm technology is making that source of power very economic), and natural gas for our communities in the meantime is the best approach. Gas can come to our communities in a number of ways. We can build a smaller pipeline from the North Slope. We can work to cancel the export license that sends roughly half of our Cook Inlet natural gas to Asia. We can subsidize the import of natural gas to keep costs down for consumers. Or we can subsidize a small diameter pipeline, recognizing that doing so will cost us lost tax revenue and will require that we do something equally fair to benefit residents around the state who wouldn’t benefit from that gasline and who also have pressing energy needs. Looking ahead, we need to do more to encourage alternative energy like wind farms and responsible hydro-electric projects. Some planning in this regard now will not only be good for our economy but it will protect the environment by limiting our greenhouse gases emissions. Conclusion: I hope you’ll let us hear your thoughts. And I hope you’ll come to the June hearings in Anchorage next week. The location for the hearings is still unknown but we’ll let you know as soon as we do. If you can’t make it or you have questions, please let me know. I hope you’re enjoying your summer. Best regards, The following is an opinion piece I recently wrote with Rep. Scott Kawasaki (D-Fairbanks). I hope you find it helpful. Alaska and the nation have a pressing energy demand. Gas prices are painfully high. Yet Alaskans are still searching for the way to a gas pipeline. If that doesn’t make sense to you, it’s because you’ve only recently begun to hear of a major roadblock to a gas pipeline – something the public needs to discuss during this summer’s gasline special session if Alaska is going to assert its sovereignty and succeed at promoting this needed project. As expert Spencer Hosie stated at gasline hearings in Anchorage last week, one way British Petroleum and Conoco have tried to de-rail this summer’s gasline special session is by sending signals that they won’t sell their North Slope gas to any company seeking to build a gasline. No company will build a $20 - $35 billion gasline unless BP. Conoco and Exxon, Alaska’s largest lease holders of land with gas reserves at Prudhoe Bay, put their natural gas into a pipeline. To help move a gasline project forward, we, and ten other Democratic legislators, have asked Exxon, Conoco and BP to remove this roadblock, and make a good faith commitment that they will produce Alaska’s Prudhoe Bay gas once an economic pipeline is constructed. British Petroleum and Conoco, who have been the most vocal opponents of an independently owned gasline, have not responded. Exxon, somewhat surprisingly, has stated – in a letter that gives them some wiggle room – that they’ll likely sell gas to a viable gasline. As Mr. Hosie most recently explained to legislators, Exxon, BP and Conoco’s Prudhoe Bay leases impose a “duty to produce” natural gas if production would be profitable. This legal right is the hammer that will, in the long run, convince the major oil companies to help with a gasline project. Why does this matter? Because, the major oil companies have an understandable economic interest to demand costly tax and financial concessions from the state. They’ll say a gasline can’t move forward without their permission, and without major tax and other costly concessions. Legislators need to negotiate just as aggressively for our shareholders - the public. Just as these companies have a duty to try to extract concessions and increase shareholder profits, they also know they risk losing valuable leases if they don’t ultimately sell gas into a pipeline project. You will hear British Petroleum and Conoco say we should give up on an independently owned gas pipeline – one by TransCanada or a line to Valdez – and just trust them to build a line for us, under terms and concessions they haven’t yet committed to. That would be a mistake, at least as long as we don’t know the details a “proposal” that’s been aired through a press release, but not any proposed or binding contract. AGIA, the law we wrote to attract gasline proposals, includes important requirements for in-state gas delivery for our communities, and contains requirements to keep down the price of transporting gas so that development by small, independent companies will be encouraged, not deterred. During this special session we’re charged to study the economics of TransCanada’s AGIA line, the comparative value of an in-state line to Valdez, and determine what’s in the best interest of all Alaskans. Exxon, BP and Conoco didn’t submit a bid that complied with AGIA. Conoco and BP are pushing legislators to oppose an independently owned gasline and accept the promise that they’ll provide details under a plan they say they’ll piece together in the future. They’ve also stated they oppose AGIA’s provisions on keeping down pipeline transportation costs for independent gas producers, and they’ve objected to AGIA’s requirements for in-state gas delivery to our communities. We’re in Juneau to listen & learn. We know we’ll have to negotiate with as much sophistication, and as resolutely on behalf of our “shareholders”, as our friends in the oil industry will negotiate for theirs. And, of course, we’d like to hear from you. |
