Republican lawmakers in Alaska have introduced a bill intended to light a fire under efforts by TransCanada Corp. to construct a natural gas pipeline from the North Slope to serve Lower 48 markets. While the legislation’s backers are growing impatient, pipeline faithfuls claim that the measure could derail the project and signal that Alaska is closed for business. Meanwhile, gas-starved Alaskans in the state’s Southcentral region are eyeing their own options for an intrastate line from the North Slope.

HB 142 would create a rebuttable presumption that the TransCanada project, which was licensed under the Alaska Gasline Inducement Act (AGIA), is uneconomic because it failed to garner sufficient firm transportation commitments during its first open season, which ran from April 30 to July 30, 2010 (see NGI, Aug. 9, 2010).

In other words, it would give the state an out from its contract with TransCanada by triggering an abandonment clause in AGIA. Under the agreement the state is on the hook for up to $500 million in cost reimbursements for the first phases of the project (see NGI, Nov. 2, 2009).

The lawmakers said the legislation would “provide a date-certain timeline for information being made available to the legislature and public to allow a determination” on whether the project should move forward.

The bill creates a benchmark at which the legislature would expect to receive evidence of progress under the state’s $500 million financial commitment under AGIA. TransCanada would have until July 15 to disclose to the commissioners of the state Department of Revenue and Department of Natural Resources whether firm transportation commitments were made sufficient to support construction of the project.

If not, the presumption takes effect. The commissioners would have until Aug. 1 to notify the legislature whether the results of the first open season were disclosed by July 15, and whether those commitments are sufficient to support construction of the project licensed under AGIA. If the presumption is raised, the commissioners would have until Aug. 15 to rebut it to the legislature. The commissioners are not required to rebut the presumption if they believe the evidence is lacking.

If the presumption is not rebutted, the project would be considered uneconomic. AGIA includes provisions for dissolving the relationship between TransCanada and the state if the project becomes uneconomic. The arrangement could go to arbitration if TransCanada does not agree to the uneconomic status of the project.

“The public and the legislature have a right to know if we’re simply throwing good money after bad,” said state Rep. Mike Hawker, R-Anchorage, one of the legislation’s sponsors. He was joined by House Speaker Mike Chenault, R-Nikiski; Rules Chair Craig Johnson, R-Anchorage; and Labor & Commerce Chair Kurt Olson, R-Kenai.

However, Gov. Sean Parnell urged patience for the project and the AGIA terms. “I share Alaskans’ sense of urgency to get a pipeline project under way,” he said. “However, moving the goal posts and changing the game on a process established by law will lead to delays and ultimately end our opportunity to build this pipeline. This bill will have a chilling effect on businesses looking to invest in Alaska. Legislators ought to focus on creating opportunities rather than killing them off.”

AGIA was claimed to be the crowning achievement of former Gov. Sarah Palin; however, it has become almost as controversial as the former governor herself.

Arguing that deadlines make for progress, the sponsoring lawmakers said they are just trying to move things along.

“The bill simply adds something that was overlooked in the initial AGIA legislation — a deadline,” they said. “That’s something Alaskans have a right to expect. Let’s get this project started or get on with something else. If AGIA leads to a viable project, this bill assures work is launched quickly. If AGIA is not going to work, this bill sets a reasonable deadline for the administration to tell Alaskans.”

In an effort to keep options open for Southcentral Alaska, Sens. Lisa Murkowski (R-AK) and Mark Begich (D-AK) have reintroduced legislation designed to streamline development of an in-state natural gas pipeline by allowing its passage through a national park.

The Denali National Park and Preserve Natural Gas Pipeline Act would allow the Secretary of the Interior to authorize a right-of-way for construction of an in-state gas pipeline along the Parks Highway for the roughly seven miles the highway passes through Denali National Park. The legislation would remove a potential obstacle for proposals to construct a pipeline to deliver gas to Southcentral Alaska.

The proposed route for the 24-inch diameter “bullet” pipeline is the shortest and most logical route through or around the roughly 10-mile bottleneck of the Nenana River Canyon and Denali National Park and Preserve following the existing highway, and would be the least expensive to construct and operate, the lawmakers said. It would also allow for electricity generation from natural gas in the park facilities at Denali and would allow for reasonably priced compressed natural gas to be available to power park vehicles, they said.

Murkowski first introduced the legislation in 2009 (see NGI, April 6, 2009). The bill’s current language was passed unanimously out of the Senate Energy and Natural Resources Committee in 2009, Murkowski said.

“Southcentral needs natural gas and an in-state line provides an alternative solution to their future needs,” Murkowski said. “By eliminating the uncertainty of permitting and regulatory delays, the Parks Highway route will be able to compete on a level playing field with other proposed routes.”

A major factor contributing to the sense of urgency felt in Alaska over the gasline is the growth of gas supplies from shales in the Lower 48. The shifting economics of Lower 48 gas supply — read low prices — are thought by some to have made the Alaska gasline uneconomic. Denali, a project competing with TransCanada’s, is backed by BP plc and ConocoPhillips. Recently, ConocoPhillips CEO Jim Mulva expressed doubts about his company’s participation in Denali (see NGI, Oct. 4, 2010).

The long-murmuring chorus for developing additional liquefied natural gas (LNG) export capability to send Alaskan gas to Asian markets in the form of LNG is growing louder (see related story; NGI, Jan. 31). However, ConocoPhillips, 70% owner and operator of the Kenai LNG terminal, last week said it is mothballing the facility after more than 40 years of operation due to poor conditions in the Asian LNG market (see related story).

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