Alaska Republican Sen. Frank Murkowski vowed to amend the Senate energy bill before the end of winter to better ensure that his fellow Alaskans get a fair shake in any gas pipeline deal that comes out of the legislation. Murkowski said he wanted to include a ban to prevent producers from pursuing an “over-the-top” pipeline route, which would bypass most of the state by crossing the Beaufort Sea and then heading down the Mackenzie River in the Northwest Territories to connect with the pipeline grid in Alberta.

The Democrat’s energy bill, drafted by Senate Energy and Natural Resources Committee Chairman Jeff Bingaman (D-NM), provides $10 billion in gas pipeline loan guarantees but does not specify a particular route for the project.

The state already has enacted laws prohibiting the Beaufort Sea route, which would be shorter and probably cheaper than a route along the Alaska Highway. Following a special meeting this week with state officials, Alaska producers and pipeline companies, Murkowski said that the over-the-top route should be banned for environmental reasons. But he also noted that an Alaska Highway route would provide 3,500 jobs for Alaskans and would mean about $22 billion in revenues for the state over the life of the project. The meeting was held to discuss the pending energy legislation.

“It is very clear after the meeting going into the debates about energy legislation in the Senate that there is more work to be done,” said Murkowski. “The existing Senate bill falls short of protecting the interests of Alaska and will certainly need to be amended. Everyone must remember that this gas lies beneath the state of Alaska and belongs to the people of Alaska.”

Murkowski also said he wants the bill to include a provision to ensure that there is fair and open access to North Slope land for all producers so that there is further exploration and development activity in the state.

Despite the apparent benefits to the state, however, the Alaska Department of Revenue recently warned state lawmakers of the tremendous risks and potential costs associated with state participation in a pipeline project. The report, which was prepared for the department by Petrie Parkman & Co., basically concludes that the state should steer clear of involvement because the risks are too great under just about any scenario.

It noted that the state is short on cash currently and would have to pass legislation to tap into special funds if it wanted to financially support the project with existing funds. Even if the state accomplished that, however, such an investment still might violate state law. The state probably shouldn’t fund the project with bonds either, the report said, because of the risks involved.

Loan guarantees also are out of the question. “The Alaska constitution prohibits the state from lending its credit directly to benefit a private entity,” the report stated. Regardless of the state’s ability to do so, it appears there is little or no interest among prospective private pipeline sponsors for the state’s participation in the project’s financing unless it could be tax-exempt.”

In fact, multiple factors probably would lead pipeline investors to recommend the state stay out of the $10 billion project anyway, the report concluded.

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