On the final day of their regular legislative session, Alaska lawmakers late Wednesday adopted Gov. Sarah Palin's Alaska Gasline Inducement Act (AGIA), which outlines plans for the state to seek proposals for a $30 billion-plus pipeline to bring Alaska natural gas to market. Projects that would meet state goals would be in line for tax and royalty incentives as well as a $500 million grant.
It remains to be seen what companies will step up with proposals since the state's major producers have balked at Palin's pipeline plan.
The state is now expected to issue requests for pipeline proposals by July 1 and receive responses from applicants by October, according to previous remarks by Marty Rutherford, deputy Alaska resources commissioner. Assuming acceptable proposals are received, Palin is to select a preferred plan by late January, according to Rutherford. Approval of the winning plan will fall to the Legislature in its 2008 session.
AGIA offers inducements to those that will build the pipeline itself, whether it turns out to be the three major oil producers, an independent pipeline company, a state or quasi-state entity, or a combination of entities joining forces. To get a chance to compete for the inducement package, the applicant must agree to certain bedrock, "must-have" requirements of the state, such as gas for Alaskans, jobs for Alaskans, and project benchmarks. AGIA requires terms that ensure competitive and long-term exploration and more development on the North Slope. The act also provides inducements to those who hold the leases and control the gas.
Palin's bill had been approved 37-1 in the Alaska House and 20-0 in the Senate on May 11. Wednesday's action was a reconciliation of the two versions of the bill.
"This is a great day for Alaska," Palin said after the House and Senate votes. "Today, a statement was made -- Alaskans own our natural resources and we will all work together to make sure those resources are developed for the maximum benefit of the people."
However, BP, ConocoPhillips and Exxon Mobil -- the three major North Slope producers -- have said they will not submit pipeline proposals under Palin's bill, and BP has said it would not sign take-or-pay contracts with a pipeline licensed under AGIA. TransCanada Corp. and MidAmerican Energy both have said they might submit proposals, but TransCanada has said provisions of the legislation might prevent it from bidding. Enbridge Inc. is on record as expressing interest in a pipeline project but not willing to go it alone, preferring to be part of a consortium.
Kirk Morgan, president of MidAmerican's Kern River Gas Transmission Co. told lawmakers earlier this month that the North Slope producers would be unlikely to withhold their gas reserves from a south-bound pipeline, lest they be accused of antitrust behavior (see Daily GPI, May 7).
ExxonMobil has criticized the Palin plan for underestimating the "world-scale undertaking" of the project. "Only a limited number of companies are capable of mega-projects," said Martin Massey, ExxonMobil joint interest manager (see Daily GPI, May 3).
On Thursday Palin said she will call the Legislature back for a special session this fall to review and maybe replace the state's recently adopted profits-based oil tax mechanism (see Daily GPI, Aug. 14, 2006). The new tax plan -- for which Palin predecessor Frank Murkowski pushed hard -- was the biggest rewrite of the state's oil and gas tax scheme in decades.
A federal bribery probe into the current tax scheme is under way. Two former lawmakers and one current legislator have been indicted, and two executives of Alaska's biggest oil services firm have entered guilty pleas (see Daily GPI, May 8).
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