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Alaska House passes in-state natural gas pipeline bill

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Posted: Tuesday, April 2, 2013 1:30 pm | Updated: 1:41 pm, Tue Apr 2, 2013.

JUNEAU — In an evening vote, the House passed sweeping legislation to continue state work on an in-state natural gas pipeline.

House Bill 4 would grant the Alaska Gasline Development Corporation broad authority — including limited judicial review — that authors say is needed to develop, finance and operate an in-state natural gas pipeline from North Slope to Southcentral.

The legislation long has been a priority of House Speaker Mike Chenault, R-Nikiski, and Rep. Mike Hawker, R-Anchorage. If it passes the Senate, it also could be the last swing the Legislature gets on the small pipeline and, to Hawker, that’s a good thing.

“In my opinion, micromanaging ... and legislative efforts where we think we can outthink the market place have been the death knell of every project that has come before us,” Hawker said. “We should rely on the governance built into this bill to make sure any project is in the best interest of state of Alaska.”

The pipeline would pass outside Fairbanks and the preliminary design includes a 37-mile spur line to bring natural gas into the borough. The pipeline has a roughly $7.7 billion price tag, would have first gas flowing some time at the end of the decade and is limited to a relatively low volume of gas.

The decision to move forward with the project would lie in a market-driven approach of AGDC and determinations made through an open season to gauge the private and utility interest to buy and sell natural gas.

“You have buyers and sellers who will decide how big the pipeline is and where it goes,” said Chenault in a rare floor speech. “The market will decide it. That’s why we put this bill together;

it’s to bring the brightest and smartest people together to bring this project together. I’m not smart enough to do that and neither is anyone in this room.”

Estimates put the cost of delivering gas to the Interior, not including distribution, at between $8.25 to $10 per unit of gas, about a third of the price of an equivalent of heating oil.

The Interior Delegation supported the bill, saying it takes a strong step forward in bringing a long-term energy solution to a state that has seen decades of false starts.

“We can wait and wait and wait for a better idea and we’ll get nothing,” said Rep. Steve Thompson, R-Fairbanks. “Without doing this we can sit around for another 20 years and get nothing.”

Debate and attempts by Democrats to amend the 57-page piece of legislation, which had a title that took the House secretary more than a minute and a half to read, began at 7:30 p.m. and lasted about three and a half hours.

Democrat objections included lack of provisions for Alaska hire, an exemption from state procurement code and a tight limitation on the types of lawsuits and when they can be brought.

The main objection centered on provisions revolving around the setting of tariff rates to transport natural gas through the pipeline. Typically, most utility rates are closely monitored by the Regulatory Commission of Alaska to ensure consumers are protected.

The default “recourse” rate would be reviewed by the Regulatory Commission of Alaska and based on the cost of transport, but shippers and the pipeline also can negotiate a separate rate.

With negotiated rates under House Bill 4, the RCA would assume tariff rates are fair unless the commission finds some sort of illegal activity in the negotiation. Democrats felt that was too little.

Rep. Les Gara, D-Anchorage, was the most vocal opponent of the bill. He, along with others, said if some sort of protection could be added back in for consumers in negotiated rates, he would support it.

“This is the difference that provides just, fair and reasonable rates to Alaskans and companies seeking the highest profit possible, that’s the bill without this amendment,” he said.

Supporters of the bill argue that the default, recourse tariff will be carefully reviewed by the RCA and a negotiated rate would likely only be lower.

When the bill came to a vote, after the majority defeated all eight minority amendments, Gara said although he supported the state moving forward with the project, he couldn’t support it.

“I’m disappointed in the way this bill has proceeded, there are some good provisions,” he said, “but I can’t go back and say we took out the strongest provision to protect Alaskans.”

The bill passed 30-9. Reps. Scott Kawasaki, D-Fairbanks, and Max Gruenberg, D-Anchorage, voted “yes.” Majority members Reps. Eric Feige, R-Chickaloon, and Neal Foster, D-Nome, voted “no.”

The Senate is positioning itself to make quick work of the bill. There are 13 days remaining in the legislative session.

Contact staff writer Matt Buxton at 459-7544 and follow him on Twitter: @FDNMpolitics.

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