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Alaska Senate Passes Gasline/LNG Bill

The Alaska Senate Tuesday passed on a split vote (15-5) a bill introduced by the governor to advance long-sought commercialization of North Slope gas reserves via liquefaction and export. More than a dozen amendments proposed by Democrats were defeated.

Gov. Sean Parnell introduced the bill (SB 138) last January. It included provisions for taxing gas production from 2022 and beyond at the rate 10.5% of annual gross value at the point of production (see Daily GPI, Jan. 27). However, the legislation was rewritten in the Senate Finance Committee to set the rate at 13% of the gross value at the point of production, starting in 2022.

The project, estimated to cost between $45 billion and $65 billion, would include a large-diameter pipeline from the North Slope and a liquefied natural gas (LNG) liquefaction and export terminal, as well as facilities to serve the natural gas needs of Alaskans (see Daily GPI, Oct. 8, 2013). Alaska would have a share in the project, and Parnell's legislation is intended to align the interests of the state with those of Alaska's major producers (BP plc, ConocoPhillips and ExxonMobil Corp.) and pipeline partner TransCanada Corp.

"Our legislation paves the way for Alaskans to become owners in the project and ensures an open, public process going forward," Parnell said in a statement in which he praised the Senate action.

Four Democrats and one Republican voted against the bill. They are Republican Bert Stedman and Democrats Hollis French, Bill Wielechowski, Johnny Ellis and Berta Gardner. Among amendments proposed by the minority Democrats was one by French that would have had the state become a 51% owner in any sanctioned LNG project. French had argued that the planned minority stake would provide little value to the state.

An amendment by Ellis called for no "payment in lieu of taxes" (PILT). "The PILT payments unfairly burden the local governments that provide essential services such as public safety, roads, and schools," Ellis said. "...[T]he governor's bill will pass on that burden to property taxpayers...We want and support a gasline, not another giveaway."

An amendment by Gardner sought to let the state off the hook for paying the development costs incurred by TransCanada should the project not go forward. An amendment by Wielechowski sought to prevent the the three producers, which would hold a majority stake in the gasline, from writing off pipeline construction costs on oil tax payments.

The bill now goes to the Alaska House.

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