Peggy's Corner of the House

Hello and welcome to week twelve of Peggy’s Corner of the House.

I am pleased to report that the House Resources Committee, of which I am vice-chair, unanimously moved SB 138 onto the next committee. SB 138 is the Governor’s bill that will authorize the administration to continue negotiations on firm contracts for the development of a natural gas pipeline.

Following almost a week of very detailed discussions on amendments, I believe a much better bill has moved forward. The House Finance Committee has now taken up the bill for further evaluation, debate and public comment.

SB 138 is the beginning of a series of steps over the course of the next several years. We are all optimistic that this will eventually result in a large-diameter pipeline from the North Slope to Nikiski.

There are many components to SB 138 and I hope I am able to explain some of those to you in a brief manner. The actual bill is 65 pages long so I am going to hit on a few of the highlights to condense into my newsletter.

In the current legislation, it is envisioned that the State of Alaska will be working with BP, ConocoPhillips, ExxonMobil and TransCanada to move the project forward. This is a huge project and when it is built will be the largest pipeline construction project ever in North America (including all components).

This is a long-term process and there are many, many steps and multiple contracts covering every aspect of the project. There are several stages at which the State of Alaska, (as well as every other partner) has the ability to withdraw from the project if it is not in our best interest to move forward.

First there are four components to the project. There is a gas treatment plant located on the North Slope, the pipeline, five in-state offtake points and a liquefaction plant. The treatment plant will separate the natural gas from the other products (such as carbon dioxide and nitrogen). Gas to Alaskans would be provided through the five offtake points along the pipeline route. The liquefaction plant is where the gas will be made into liquid for shipping overseas.

As SB 138 is currently written it anticipates the State of Alaska being a partial owner of the pipeline and gas treatment plant on the North Slope. This is through a combination of taxes and a royalty share of the gas. It would also allow the Department of Revenue to take gas in-kind as payment for production taxes. None of this has been finalized yet and will be decided during contract negotiations by the state and the other 4 partners in the next 18 months.

I was pleased to introduce and pass an amendment to the bill that increased the amount of money to be set aside in an Alaskan Affordable Energy Fund. This fund would be created specifically for energy infrastructure projects, in areas that are not expected to receive direct benefit from the proposed gas line. This of course would include SE Alaska.

Overall there are still many pieces of information we just don’t yet know for sure. First contracts need to be aligned to sell our gas in the world market. This would tell us the amount of possible increased revenues, so we would know if we could afford to build the pipeline. Although there is much to be worked out in the next several years, this project has the potential to lead to a stable supply of natural gas for Alaskans and a steady source of revenue for many years to come.

That’s all for now from Peggy’s Corner of the House – talk with you next week after the end of the session!