Alaska Gov. Sarah Palin, who plans to introduce the Alaska Gasline Inducement Act (AGIA) to the state legislature Friday, wants the state to gift the pipeline builder with up to $500 million to begin the project. The gift would allow the state to shoulder some of the risk for the project, she said.

Palin outlined some details of the AGIA in January (see Daily GPI, Jan. 19), and again this week after meeting with federal officials in Washington, DC. Federal Energy Regulatory Chairman Joseph Kelliher on Monday said Palin's proposal was the "best hope" for the state to secure a gasline (see Daily GPI, Feb. 28).

According to the preliminary proposal, the gasline developer would have to match the amount of the state's gift, which could be used to cover engineering and environmental studies. Palin said the state's gift would likely be recouped through reduced shipping fees within 25 to 30 years.

"We need to progress this project because there are concrete markets ready for Alaska's natural gas, entities competing for the right to tap our resources," Palin told reporters. "There are consequences to no progress."

The AGIA legislation is expected to call for revisions to some of Alaska's oil and natural gas lease provisions in determining royalty rates. The state would own some of the gas production as a royalty share under the plan. Tax incentives also would be provided to producers that commit gas to the pipeline.

Under Palin's proposal, the pipeline would be built under a strict timetable. By May, Palin wants the state legislature to pass the AGIA before adjourning for the year. In July, the state would put out requests for applications. Oct. 1, applications would be due to the state. By the end of January 2008, Palin wants a builder to be announced, and by April 1, 2008, the state would issue the gas pipeline license. Pipeline development fieldwork would begin in the summer of 2008.

The state would not set construction deadlines or set the date for gas to begin flowing. Palin said the builders would state their time frames in their applications. However, within three years of naming the pipeline licensee, Palin said she wants to have an open season to allow shippers to bid for capacity. The builder must commit to hire Alaskans.

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