Alaska Gov. Frank Murkowski Wednesday introduced into the ongoing special legislative session three bills intended to advance ratification of a draft contract he negotiated with a trio of producers for development of the Alaska Natural Gas Pipeline (see Daily GPI, May 26).
The bills propose changes to Alaska’s Stranded Gas Development Act (SGDA) to align it with the terms of the pipeline contract; clarify that legal challenges to the contract would go directly to the Alaska Supreme Court; and establish a state corporation, the Alaska Natural Gas Pipeline Corp., to finance, own and manage the state’s 20% interest in the gas pipeline system.
While Murkowski is anxious to get the contract with producers ConocoPhillips, BP and ExxonMobil through the Legislature, not everyone thinks that is going to be a slam-dunk. In a commentary in last Sunday’s Anchorage Daily News, economist and regular columnist David Reaume found much fault with the amount of information on the contract disseminated to date.
“Special session presentations and online postings of questions and answers are a good start, but they are only a start,” Reaume wrote. “It is one thing to have Murkowski administration officials give short answers to complex questions. It is quite another thing to verify the accuracy of those answers to the level of satisfaction needed to comfortably vote for or against the contract.”
Specifically, Reaume wrote that the state’s website (https://www.gov.state.ak.us/gasline/) provides misleading information about regulatory jurisdiction over the pipeline where it says in a Q&A section that the pipeline will be under state regulatory and legislative oversight.
“In fact,” wrote Reaume, “the state will not be regulating the pipeline if the draft contract is approved. Sections 8.1 through 8.3 require that the Federal Energy Regulatory Commission and the Canadian Energy Board have sole regulatory jurisdiction over the project.” Reaume asserts that the state’s regulatory oversight would be ceded away by the contract. “Point being — the state’s Q&A approach cannot even be depended on for accuracy, let alone completeness.”
He said that “there is no way that the Legislature can responsibly act on the contract before next year.”
Murkowski is pressing on, though. “The bills I am introducing today will take the gas pipeline contract three steps closer toward construction…”
One of the bills introduced by Murkowski would broaden the scope of subjects that may be negotiated under the SGDA, Murkowski wrote in his letter accompanying the House and Senate bills. “These new subjects include equity ownership, payment of obligations in gas rather than money, and changes in existing leases and other agreements with the state regarding oil and gas properties.”
Additionally, Murkowski’s bill would expand the types of terms that may be included in a contract under the SGDA. “The authority granted would cover terms in the fiscal contract now under review by the Legislature and the public. These terms include ‘netting-out’ provisions, payment of interest on obligations, ability to provide fiscal terms to others, confidentiality of payment-in-lieu records, state acquisition of pipeline capacity, indemnity given by the state, exemption from a reserves or resource tax, Regulatory Commission of Alaska jurisdiction, audits, and limits on damages.”
Murkowski wrote to House and Senate leaders that provisions in his bill to establish the Alaska Natural Gas Pipeline Corp. are similar those relating to other public corporations, including the Alaska Permanent Fund Corp. and the Alaska Railroad Corp. “However, other provisions are tailored to the unique role Alaska Pipe is expected to play in facilitating this truly historic project.”
The governor proposes that Alaska Pipe’s board of directors be composed of the commissioners of the state’s Department of Revenue and the Department of Transportation and Public Facilities. Five public members would have to have sufficient backgrounds in finance, investments, business management or the oil and gas industries.
Alaska Pipe would be allowed to incorporate subsidiaries, and at least one of these is expected to be a Canadian company to oversee the pipeline’s operations in Canada. Murkowski estimated that the state would need to contribute about $1 billion to Alaska Pipe and associated companies. The money would be raised from direct and indirect appropriations to Alaska Pipe and the issuance of revenue bonds by Alaska Pipe. For tax reasons, it is possible that loans to any Alaska Pipe Canadian subsidiary would be made directly by the state rather than by Alaska Pipe.
Alaska Pipe would be subject to the Public Records Act, but it would have broad exemptions from disclosures relating to proprietary and other commercial information. “These broader exemptions from public disclosure are modeled upon similar provisions in the Alaska Stranded Gas Development Act. The open meetings laws of the state do not apply to the corporation. However, the corporation is required to conduct at least one meeting a year in public.”
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