newsminer.com

JUNEAU — State lawmakers wrapped up weeks of expert testimony on TransCanada’s gas pipeline proposal on Monday with a discussion of the role federal regulators would play in shaping the line.

To build a natural gas pipeline from the North Slope into Canada, TransCanada or any other pipeline builder would need a certificate from the Federal Energy Regulatory Commission. The FERC will also have the ultimate say in how the pipeline is financed, how shipping tolls are set, and who pays for future pipeline expansion.

The FERC’s broad authority has led some lawmakers to question whether commitments made by TransCanada under the Alaska Gasline Inducement Act have any real value. The commitments require TransCanada to propose a financing mechanism aimed at keeping shipping costs low and a system for pipeline expansions aimed at ensuring North Slope development.

On Monday, an official with the FERC testified that elements of the state license would be considered where applicable but wouldn’t have a direct bearing on whether or not TransCanada was granted a federal certificate.

Jeff Wright, deputy director of the FERC’s Office of Energy Projects, added that FERC guidelines and federal pipeline legislation would ultimately determine FERC’s treatment of the specific financial proposals TransCanada made under AGIA.

Regulatory lawyers working for Gov. Sarah Palin’s administration and TransCanada argued AGIA commitments would greatly improve the state’s chances of getting what it wanted from the FERC.

“It’s a huge advantage,” said Ken Minesinger, a lawyer advising Palin’s gas line team. “It’s tremendously valuable, and it puts the state in a much stronger position than it would be otherwise.”

Curt Moffatt, a lawyer representing TransCanada, argued that a project with state backing under AGIA would likely fare well before the FERC’s ruling commission.

“You have a very high probability ... that the commission will grant that application,” he said.

A lawyer working for the Legislature, Bill Mogel, challenged their optimism. He stressed that the FERC would have the final say on various issues, even if the state and TransCanada came in asking for the same thing.

“All we have right now with AGIA is a two-legged stool,” he said, referring to the positions of the state and TransCanada.

Much of the discussion Monday focused on how the pipeline would be financed, and whether a requirement to use a certain amount of debt financing would help the state. (Pipeline companies are allowed to charge higher shipping tolls if they invest more of their own money in the project.)

Mogel warned again that requiring TransCanada to propose a certain debt-equity ratio didn’t guarantee the FERC would agree to it, suggesting the state could get stuck with a lower ratio, and therefore higher tolls.

But Minesinger responded that the regulatory agency did not typically mandate financing that resulted in higher costs for users, adding that any battles were usually to lower costs.

The ratio proposed by TransCanada was about “as good as it gets,” he said.

Lawmakers also discussed the impact of the competing pipeline project pursued by North Slope producers ConocoPhillips and BP under the joint-venture Denali.

Wright, the FERC official, testified that the FERC could ultimately grant certificates to both builders. But he added that the FERC would not allow either entity to turn dirt until it had firm commitments from gas producers to use its pipeline.

Don Shepler, another lawyer working for the administration, used Mogel’s analogy of a two-legged stool to argue that a TransCanada pipeline under AGIA was more likely to secure terms in the state’s interest than a project outside AGIA, such as Denali.

“The alternative to awarding a license is you may find yourself looking at a one-legged stool,” he said, suggesting the state would be on its own before the FERC.

AGIA vote scheduled

House and Senate leaders met Monday to plan the timing of a vote on the AGIA license. Lawmakers have until Aug. 2 under the pipeline law, but many are already calling for a vote on the proposal.

House leadership agreed to shoot for a floor debate and vote on July 22.

The Senate did not announce a firm schedule, but Sen. Charlie Huggins, a Wasilla Republican and chair of the Senate committee reviewing the proposal, said he planned to hold a committee vote on the bill some time next week.