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House takes the reins on LNG project bill

By Rhonda McBride 5:27 AM March 21, 2014

House majority leaders say they’re ready to ask tough questions about SB 138

JUNEAU - “There’s no greater task facing us this session,” said Rep. Dan Saddler, co-chairman of the House Resources Committee.

The task at hand: The House has less than a month to finish work on Senate Bill 138, which would get the wheels in motion for the Alaska Liquefied Natural Gas Project.

AKLNG, as envisioned now, would be a team effort between the state, three oil companies and a pipeline builder. SB 138 would allow the partners to move forward on a high-risk venture — to build massive infrastructure to move North Slope gas to markets all over the world.

The riskiness of AKLNG is the one thing everyone seems to agree upon, but how to manage that risk of a project estimated to cost as much as $65 billion is an entirely different matter.

Lawmakers have said SB 138 is probably one of the most complicated bills the Legislature has probably ever dealt with.

Sen. Peter Micciche said lawmakers usually learn about the imperfections of bills many years down the road. He’s hoping the House will prevent this from happening by improving upon the Senate’s work.

“And we should remain flexible to improve those processes as we move through this,” Micciche said.

Republican majority leaders signaled this is their goal at their weekly news conference on Thursday.

The first stop for the bill is House Resources.

“We will do our due diligence and try to delve as deeply into the bill as we can,” said Rep. Eric Feige, co-chairman of the House Resources Committee.

Feige rolled out the game plan, which includes boosting the number of hearings.

On the week of March 31, the committee will take public testimony.

“There’s certainly plenty of material for discussion,” said co-chairman Rep. Dan Saddler. “Watch the rather long schedule of accelerated meetings we’re going to have during the business hours of the day and after hours in the evenings to let the public watch.”

“And we do plan to take considerable time to let the public ask their questions and give us their comments on things,” Saddler said.

During the Senate process, there was mostly invited testimony — and most it from the governor’s executive branch and experts hired by the state.

A sore point for Democrats was the failure of the Senate to take testimony from two consultants, Roger Marks and Rick Harper, who have been critical of how the governor has structured the project. Both have written reports for the Legislative Budget and Audit Committee, advice that the Legislature paid for.

Feige said he would allow Roger Marks, a petroleum economist, to testify. Marks, who is critical about the state’s partnership with TransCanada, is scheduled to appear before the committee on Thursday, March 27.

But Feige said the resources committee does not plan on inviting Harper to appear before it.

Harper is a former president of ARCO Gas, with experience in LNG and pipeline projects all over the world.

Feige said he read Harper’s research paper but found it lacking.

In his report, Harper said the deal as it’s structured now would make it hard for new companies to get in on the project. The consultant also raised questions about the state’s status as a minority owner, and whether it should accept gas instead of cash in exchange for royalties and taxes.

Feige believes the bill will get a lot of scrutiny in the House.

“Because of the depth and the talent on the committee, you’re going to see a lot of in-depth, pointed questions, looking at a fairly high level of detail,” Feige said.

Feige promised the committee would go over the bill, line by line.

“We’ve spent a lot of time on background leading up to this point,” Feige said. “And now, for the next two weeks, we’ll be able to vote virtually 100 percent of our time just to this bill.”

Democrats are hopeful that the House will give the bill the attention it needs.

“There are a lot of unanswered questions,” said Rep. Scott Kawasaki, one of two Democrats on the nine-member Resources Committee.

“I think we have a lot of work to do here in the House, and I think the House Resources Committee will be that first committee to really ask those tough questions,” Kawasaki said.

“I feel confident we can do it. Again these are very, very complex questions,” Kawasaki said. “This is a multibillion-dollar, multiyear project.”

House Minority Leader Chris Tuck said one of the challenges is the state doesn’t have the expertise the oil industry does.

“A lot of the stuff that’s coming out right now, we’re not even sure we’re asking the right questions,” Tuck said. “We need to have time to evaluate this.”

A major concern of the Democrats is the state’s ownership in the pipeline.

Under the proposed deal, the state would share a 25 percent stake in the project with TransCanada, who would put up the cash for the initial investment and allow the state to buy back 40 percent of it. If you do the math, it means the state only winds up with a 10 percent stake in the pipeline.

Democrats argue this is not enough of a stake to keep from being walked over by oil companies. They believe the state should have a 51 percent majority ownership in the project.

House Speaker Mike Chenault said 51 percent ownership also means the state assumes more than half of the risk.

“I’ll just say all it takes is money,” Chenault said. “You can throw an amendment out there to do anything you want. Fifty-one percent of this project is 30-something billion dollars at the high end.”

“Like I say, all it takes is money. But in this game, that’s a lot of money,” Chenault said.

Republican leaders in the House are open to looking at other options beyond the ones outlined in SB 138, as well as the agreements reached with the oil companies and TransCanada before the bill was introduced.

But  Feige said there’s one change the Senate made the committee wants to keep — a provision in which a portion of gas revenues go to an energy infrastructure fund which would primarily be used to help remote communities pay for projects to ease high energy costs.

“This gas line is not just for the Railbelt, but it’s for all Alaskans,” Saddler said. “I think it does give some reassurances to Alaskans that this is a statewide project, that their interests are being considered — and we hope — addressed.”

Feige has set an aggressive timetable for moving the bill out of committee. The target date is now April 4 – leaving only 17 days left in the 90-day session for the bill to be vetted by two other committees, labor and commerce and finance.

If the bill passes the House, it’ll be sent back to the Senate to reconcile any differences.

But first, there’s that self-imposed April 4 deadline looming.

“I’m not going to make a prediction about whether we’ll hit that target,” Feige said.

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