• Forecast
  • News Tip
  • Categories
Temperature Precipitation
Estimated read time
6m 16s

Natural gas legislation cruises towards Senate vote

By Rhonda McBride 5:33 AM March 18, 2014

Critics warn SB 138 is moving too fast; new reports raise doubts about LNG megaproject

JUNEAU – So far, Gov. Sean Parnell’s natural gas legislation has been on a steady march to passage, with a vote in the Senate expected Tuesday.

The measure would enable the state to proceed in a partnership with three oil companies — ExxonMobile, BP and ConocoPhillips — as well as TransCanada, a pipeline company.

Democrats have tried to put up some red flags. They say Senate Bill 138 is moving too quickly through the Legislature. They point to two recent reports, which raise some serious questions about whether state ownership in a liquefied natural gas project makes sense.

The first report — written by Roger Marks, a consultant for the state — was submitted on Feb. 18, but did not come up for discussion in the Senate Finance Committee, where the bill has been heard for about a month.

Another report — written by Rick Harper, a consultant who has worked as an advisor to the administrations of former governors Sarah Palin and Frank Murkowski — was just completed for the Legislature.

Both reports urge the state to proceed with caution.

“We should hear from the experts before we vote,” said Sen. Bill Wielechowski, who believes the bill should go back to committee to discuss some of the potential flaws identified by the consultants.

“They are very well regarded experts, and they were hired by the Legislature for the purpose of helping us figure out whether this extremely complex deal was a good deal for the state,” Wielechowski said. “Both experts came back and expressed serious, serious concern about the way forward, and it’s troubling we haven’t had these experts before us in legislative committee.”

Sen. Anna Fairclough is chairwoman of the Legislative Budget and Audit Committee, as well as vice chairwoman of the Senate Finance Committee.

Although Democrats say they’ve only recently discovered the existence of Marks’ report, Fairclough said it’s been posted on the committee’s website since Feb. 18.

The research was requested by Sen. Kevin Meyer, who said he read it and passed it on to certain colleagues. He said he also used it as a basis for formulating questions for Parnell administration officials and other consultants during recent Senate Finance Committee hearings.

Meyer said he saw no need to have Marks testify before the committee because he covered a lot of the same ground as other consultants.

Meyer also said he’s surprised Democrats want to hear from Marks, because they didn’t agree with him last year when the Legislature used him as a consultant for SB 21, the oil tax legislation that passed last year.

In his latest report, Marks warns the Legislature, “It is far from certain that the project will happen.”

He wrote about the growth and increasing competition in the Asian LNG market, which would be the primary customer for Alaska gas.

“There will be twice as much supply chasing the Asian market as there will be demand in 2030,” Marks wrote.

He also had this warning:

“Given this will be a 50-year project (or more) worth several billion dollars to the state, it is important to structure it carefully. The state has time to figure out what is in its best interests without being hurried.”

Fairclough and other lawmakers in support of SB 138 believe the opposite; that time is of the essence because contracts for gas are long-term and the state has a narrow window to lock in customers.

Marks is also critical of the governor’s plan for the state to partner with TransCanada and have the company finance a share of the state’s equity in the pipeline.

Marks warns that the state will be on the hook for TransCanada’s costs if the LNG project falls through.

“Should this occur, the state is responsible for TC’s costs even if the state does not exercise the ownership option,” Marks wrote.

The report from Rick Harper, who was recently engaged as a consultant for the Senate minority, warns that the partnership will lead to a “misalignment of interests” between the state and North Slope producers. He also said the state would be a minority owner and would not have the leverage it currently does as a regulator.

Harper also questioned whether it was wise for the state to take its royalty gas and taxes in gas rather than cash payments; that it should be careful to avoid transportation costs.

Harper also said the proposed legislation does not protect the state from having to offer more concessions to oil companies in the future.

Some other cautions: Doing business with LNG producers carries a high risk for entanglement in lawsuits. Also, expansion of the project to other producers could be difficult under the proposed setup.

Senate Finance Committee members say most of the issues raised in the Harper and Marks reports have been covered in committee hearings thus far.

Natural Resources Commissioner Joe Balash, who has been one of the point people for the governor on LNG legislation, said a lot of the criticisms in the report have already been part of the discussion.

“Certainly if there’s a question that hasn’t been asked and answered to date, we’d be happy to,” Balash said. “My brief review of the reports, however, suggests we have answered the questions.”

Balash also points out that SB 138 is just a starting point for exploring whether a $45-65 billion LNG project can attract investors and customers.

“Let’s take a couple of steps. Get as many questions answered as we can, come back to the public, back to the Legislature and take the next step – which, by the way, won’t be the final step,” Balash said.

SB 138 calls for less than $100 million in state spending for the exploratory phase of the project.

When it comes down to it, Fairclough said, megaprojects are inherently risky.

“I think there are a lot more conversations to be had about all this,” Fairclough said. “But really most of the questions being raised are the downfalls of megaprojects. I think we all need to pause. All megaprojects have risk. It just depends on our tolerance for that risk.”

Fairclough said the bill has been in the Senate long enough and needs to move to the House.

“It’s a team effort in politics. We have two different bodies,” Fairclough said. “We have 90 days to get the people’s business done. The House needs the opportunity to crack this nut.”

Democrats are expected to push for a number of amendments when the bill comes up for a vote on the Senate floor Tuesday.

“Alaskans desperately want a pipeline, and it appears that we’re taking some shortcuts here,” Wielechowski said. “At least to look to the public like we’re making progress, when we may be hurting ourselves more than we’re helping ourselves.”

Click here to view the full Roger Marks report.

Click here to view the full Rick Harper report.

 

Latest Stories

  • News

    Southeast Anchorage voters question mayoral candidates

    by Shannon Ballard on Mar 05, 6:55

    Who will replace outgoing Anchorage Mayor Dan Sullivan? The people who want his job talked directly to voters Wednesday night. More than 100 people attended the first candidate forum held in Southeast Anchorage and all but one of the 11 mayoral candidates showed up to participate. They were split into two groups to answer residents’ questions. […]

  • News

    CSI: Cyber Alaska?: Foreign threats keep FBI Cyber Squad busy

    by Kate McPherson on Mar 04, 23:38

    FBI Special Agent Betsy Bartko doesn’t know how many times a day computers are hacked in Alaska, or across the country, but she says it’s more than she could guess. “We are constantly battling those nation states that are attacking our interests here,” said Bartko, who is part of the Cyber Squad based in Anchorage. […]

  • News

    Alaska watches as Russia plans to build its Arctic military presence

    by Hope Miller, Bonney Bowman on Mar 04, 23:04

    During an Armed Services Committee hearing Tuesday, Secretary of Defense Ashton Carter said the world is watching — allies and enemies — to see if our country continues to invest in its own defense, especially in the Arctic. Some of the people responsible for that defense are in Alaska. At Anchorage’s Joint Base Elmendorf-Richardson, dozens of […]

  • News

    Wood bison set to return to the wilds of Alaska

    by Lauren Maxwell on Mar 04, 22:13

    The Alaska Department of Fish and Game is getting set to return a wood bison herd to the wilds of Alaska. Wood bison were native to the state up until about 100 years ago when over-hunting took its toll. In 2003, the Alaska Wildlife Conservation Center in Portage received about a dozen of the animals […]

  • Politics

    Medicaid expansion event brings out Alaska lawmakers, health commissioner

    by Associated Press on Mar 04, 21:54

    Legislators, aides and others heard an alternate viewpoint on Medicaid expansion from a senior fellow with an organization that has referred to the “dangers” expansion poses in states that opt for it. Christie Herrera, with the Foundation for Government Accountability, spoke to problems that she said some states have experienced. Herrera spoke during an informal […]

  • Sports

    DeeDee Jonrowe

    by John Thain on Mar 04, 19:18

    DeeDee Jonrowe has many dogs to care for, but it’s a labor of love — which works both ways. She remembers her first years in Alaska, working and living in the small community of Bethel. “The weather was cold, but the culture was wonderful,” Jonrowe said. Part of that culture was dog mushing. She starting running […]

  • News

    ​U.S. ambassador to South Korea hospitalized after attack

    by CBS News/Associated Press on Mar 04, 17:37

    U.S. Ambassador Mark Lippert was hospitalized after being attacked while giving a speech Thursday morning in Seoul, the State Department said. South Korea’s Yonhap news agency said the attack took place around 7:40 a.m. at the Sejong Cultural Center during an event called “The peace and unification of the Korean peninsula, and the future of […]

  • News

    Man dies after falling through ice at Hidden Lake

    by KTVA CBS 11 News on Mar 04, 16:58

    An ice fishing trip to Hidden Lake ended badly for three men, one of whom died after apparently falling through the ice, according to Alaska State Troopers. At 7:19 a.m. Wednesday, authorities responded to a call for help from two men at Hidden Lake on the Kenai Peninsula. The men reported that a third man, […]