A Citizen’s Guide

Buoyed by Sarah Palin’s win in Tuesday’s Republican primary and by a favorable new study, representatives from the Alaska Gasline Port Authority continued their pitch to lawmakers Thursday during a Senate committee meeting at the Carlson Center in Fairbanks.

Port authority chairman and Fairbanks North Star Borough Mayor Jim Whitaker urged members of the Senate Special Committee on Natural Gas Development and other lawmakers to stop work on the natural gas pipeline proposal put forward by Gov. Frank Murkowski and his administration.

“We think it would be a mistake to continue with a contract that has some basic flaws,” he said.

Lawmakers and administration officials at the meeting challenged the findings of the new study, an economic analysis done by a legislative consultant, and had mixed reactions about the effect of Tuesday’s vote.

While port authority officials said Palin’s victory Tuesday over Murkowski would not change how they approached their project, they expressed optimism at the changing of the guard in Juneau.

“We have good reason to be optimistic that we will have a good working relationship with the next administration,” said project manager Bill Walker.

He said the difference between an administration that is “hostile” to the project and one that embraces it will be significant both in acquiring gas from the oil companies and attracting partners to the project.

“It sends a message to potential participants,” he said.

While Murkowski has consistently described the port authority proposal as uneconomic and unfeasible, Palin has called an “all-Alaska” line her “preferred” line and said she would review all pipeline proposals. Former Gov. Tony Knowles, the Democratic candidate for governor, has said the state should consider all viable proposals.

Murkowski, whose term ends in December, is pushing a proposal to build a pipeline to the Lower 48 with BP, ConocoPhillips and Exxon Mobil. He said Monday he would call lawmakers back to Juneau in September to work on the contract.

Lawmakers largely turned down Whitaker’s plea to stop work on the administration’s proposal, though most said they were unwilling to act on the proposal as it stands now.

“It doesn’t affect how I approach it,” said Sen. Ralph Seekins, R-Fairbanks, of Murkowski’s loss in the primary. “I’m just grinding forward and trying to ignore the political side of it.”

Sen. Gene Therriault, R-North Pole, said he had earned a reputation as a “nitpicker” and would continue to question the proposed contract. He said having a new governor could help the port authority project, but he questioned Knowles’ track record of standing up to the oil companies.

Rep. Ralph Samuels, R-Anchorage, said he would consider proposals based on their merits and not who was presenting them.

“It doesn’t matter who the next administration is,” he said.

Other lawmakers played up the results of Tuesday’s vote.

“We have to at least include that in the discussion,” said House Majority Leader John Coghill, R-North Pole.

Coghill said Murkowski shouldn’t expect much help from lawmakers on the contract unless he at least sits down with Palin to discuss the gas pipeline.

Rep. Mike Kelly, R-Fairbanks, backed the port authority’s claim that the state didn’t need to make the concessions in the proposed contract, which relies on a determination that the gas is uneconomic to develop, or stranded.

Kelly said the recent rise in gas prices convinced him it was time to hit the “reset button” and assume that developing the gas was economic.

The port authority was also boosted by the new study, which supported its claims about the profitability of its project.

Anthony Finizza, a consultant with Econ One Research, told the committee that under certain circumstances, the port authority’s “all-Alaska” pipeline would be at least as profitable for both the state and the oil companies as a pipeline through Canada.

The port authority is proposing to pipe gas to Valdez, liquefy it, and ship it by tanker to the West Coast. Its project could later be expanded to include a pipeline into Canada, according to port authority officials.

Finizza agreed with the group’s claim that the proposal would add value if it could be built sooner than a pipeline into Canada. Specifically, he found that shipping 1.2 billion cubic feet to Valdez starting in 2013 and another 3.1 bcf to Canada in 2016 would be slightly more profitable than shipping 4.3 bcf to Canada starting in 2016, as the oil companies propose. The increased cost of the branching pipeline would be offset by the ability to earn revenues sooner.

Lawmakers and administration officials questioned the findings.

Roger Marks, an economist with the Department of Revenue, challenged the assumption, which Finizza accepted, that the port authority’s project could begin three years before a pipeline along the highway into Canada. He argued that regulatory requirements and project financing would block the timing advantage.

Samuels argued that by going forward with the smaller port authority project first, the state could inhibit a larger and more profitable pipeline from being built later.

“That would really be a huge mistake,” he said later.

If the port authority project takes gas away from a highway line, that project could become uneconomic, he said. If the project relies on additional gas, then it would probably be better to ship all the gas through Canada rather than splitting it.

Seekins questioned the group’s claim of exemption from federal regulation.

The meeting continued a review of the project that began earlier this month during a special Legislative session in Juneau.

Seekins, who chairs the Senate committee, said he thought the back and forth between the port authority, administration, oil companies and consultants provided an opportunity to see the ups and downs of the project.

“We’re getting into some real eyeball to eyeball discussion,” he said.

The committee will continue its talks today.

Staff writer Stefan Milkowski can be reached at smilkowski@newsminer.com or 459-7577.