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Alaska Lawmaker Eyes Oil Fund for In-State Gasline

February 1, 2010
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An Alaska lawmaker last week introduced legislation that would give residents the opportunity to vote on whether to tap earnings from the state's Permanent Fund to support construction of an in-state natural gas pipeline to deliver North Slope gas to the state's energy-short Southcentral region.

House Bill 312, introduced by Republican Rep. Charles Michael Chenault, places an advisory vote on either the primary or general election ballot on the question of using Permanent Fund earnings -- after dividends are paid and the fund is inflation-proofed -- to help offset the costs of an in-state natural gas pipeline, Chenault explains on his website.

"With all the discussion of energy needs throughout the state, it is time that the legislature and the administration begin to focus on one or two viable projects," he said. "It is my hope that we can focus state funding on one or two of these projects rather than taking a shotgun approach and partially fund a large number of concepts that may or may not bear fruit in the future."

Southcentral Alaska has struggled in recent years with dwindling supplies of natural gas, making supply procurement by natural gas and electric utilities in the region difficult.

Last year Chugach Electric Association and Enstar Natural Gas were among utilities that presented plans to an Alaska House energy committee to reduce their gas consumption in times of shortage (see NGI, Sept. 7, 2009). Chugach recently struck a seven-year gas supply contract with ConocoPhillips to head off a significant supply shortfall that had been expected by the utility (see NGI, May 18, 2009).

A report released last year by the Interior Issues Council: In-State Natural Gas Distribution Task Force of the Fairbanks Economic Development Corp. weighed several options for delivering more gas to the Southcentral region. The report found fault with each of the in-state gas distribution proposals reviewed (see NGI, Feb. 9, 2009). However, a more recent examination of the Southcentral region's gas reserves found that there is more supply than was previously thought (see NGI, Jan. 4), which suggests that constructing a new pipeline isn't such a desperate task.

The Permanent Fund was established in 1976 after oil began to flow on the Trans-Alaska Pipeline. The fund is a repository for a portion of the oil revenue the state receives, and it pays dividends to Alaska residents.

"This bill was drafted to ensure that dividends are paid and the Permanent Fund is inflation-proofed prior to the use of earnings. That part of the question needs to be particularly emphasized. I do not want Alaskans to believe or think that this advisory vote is a raid on the earnings of the Permanent Fund," Chenault said. "A positive vote would allow the state to use earnings from the Permanent Fund, which was initially developed from resource development within the state. I believe that future generations of Alaskans will benefit from making an energy investment now while still keeping their benefits from the Permanent Fund."

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