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In the land of make believe

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Posted: Sunday, September 23, 2012 12:21 am | Updated: 11:30 am, Mon Jan 21, 2013.

Community Perspective

All that was missing was the clang, clang, clang of the Neighborhood Trolley on Sunday to transport Alaska’s natural gas pipeline dreams to the land of make believe.

On Sept. 16, the final day of an liquefied natural gas summit in Valdez, proponents dusted off old and tired arguments to once again push the state into taking a harder line on Alaska’s oil and gas industry as it relates to building a natural gas pipeline.

Craig Richards, an attorney for the Alaska Gasline Port Authority, told a crowd that the state is taking the wrong approach in working toward a gas pipeline. The problem is that his legal arguments, with regard to what state government can do, are just as Gov. Sean Parnell said: “outdated.”

Let’s be honest, the only tools the state has when it comes to the North Slope producers are taxes and permitting. How much longer do we have to entertain such lofty and misleading rhetoric from Valdez LNG supporters that we have any other option besides waiting until the legal leaseholders deem the project economical?

According to KTUU news, Richards said the oil and gas industry is only a tenant up on the North Slope, and, as the landowner, the state should be exert it’s ownership to force the pipeline into being. And while Richards is right that the state is the landowner, more than four decades ago Alaska contractually assigned the right to develop the oil and gas resources to its tenants.

Richards speech was so filled with misinformation and skewed facts it’s hard to know where to begin.

First, the state has not been waiting 35 years for the oil and gas industry to build a natural gas pipeline. During the past three decades, that same gas has been used to extract billions of barrels of oil, which is far more valuable. In legislative testimony after testimony, the Alaska Oil and Gas Conservation Commission has testified that if the producers had constructed a gas pipeline in the 1980s, the state would be broke from the loss of oil revenues.

Second, his landlord and tenant analogy is extremely tortured. Richards compared the situation with a landlord who owns a three-story house and rents out the first two floors, then must ask permission from the tenants to rent out the third floor. That is just gibberish.

Closer to the truth, it would be as if a landlord owned a two-story house, leased it to the tenants and then came back and demanded they build another story, regardless of the economics, so the landlord could enjoy the revenue risk free.

While Richards makes it sound so easy by simply asserting state control and negotiating with the marketplace for gas commitments, it smacks of the Alaska Gasline Inducement Act, which was supposed to do exactly the same thing. AGIA, which was strongly supported by LNG advocates in the beginning, was advertised as finally giving the state control over our resources. So, what happened?

AGIA, like the port authority, is running head first into the fiscal and legal realities of what the state can and cannot do. The state can negotiate with as many utilities or countries as they like, but until it negotiates terms with the oil and gas industry, including a stable tax regime and fiscal certainty, it’s just another ride on the Neighborhood Trolley.

Clang, clang, clang.

Andrew Halcro of Anchorage served as a Republican in the Alaska House of Representatives for four years. This is a recent column he wrote for his blog at AndrewHalcro.com.

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