Alaska House Approves Gas Pipeline Project

The Alaska State House of Representatives has approved a state license for a Canadian company to pursue a natural gas pipeline project that could unlock 4.5 billion cubic feet of North Slope gas reserves daily.

The House backed the plan on a 24-16 vote Tuesday. A reconsideration vote is planned Wednesday, but that's usually a formality. If approved then, the bill will go to the state Senate, which must approve or reject it before Aug. 2.

Lawmakers in Alaska's House voted to support Gov. Sarah Palin's proposal to award TransCanada Corp. an exclusive license to pursue federal certification for the 1,715-mile pipeline estimated to cost between $26 billion and $30 billion.

TransCanada Vice President Tony Palmer wasn't ready to celebrate just yet, nor would he make any predictions on how the Senate's vote will play out.

"I'm always uncertain until I see the votes," Palmer said. "I had no expectations as to how the votes would go until I saw the buttons pressed."

The license doesn't guarantee pipeline construction. It simply calls for TransCanada to embark on a costly process of pursuing a federal certificate, but also with up to $500 million in state seed money.

There's the rub, said Rep. Mike Hawker, an Anchorage Republican who spoke out against the Alaska Gasline Inducement Act, or AGIA, license before casting a dissenting vote.

"We have to make it very clear is that this AGIA license is not a commitment to do anything other than process a whole lot of paper," Hawker said. "There is no commitment to move a shovel full of dirt toward a pipeline project."

Rep. Les Gara, an Anchorage Democrat, backed Palin's endorsement of TransCanada with the same understanding as Hawker, but with a different outlook.

"I think this is going to put the state on a stable footing," Gara said. "There is no clear path to a gas line. This is the clearest path to a gas line that protects the state's interest. That's all it is."

Even if the Senate concurs, it will still be at least another 10 years before any market sees Arctic gas. And there is still a competing pipeline moving forward without the state's startup money.

That project is a joint venture between North Slope oil producers and gas leaseholders ConocoPhillips and BP PLC, who believed Palin's AGIA format was too restrictive.

In the end, Majority Leader Ralph Samuels said the it's not the government's role to pick a winner. The Anchorage Republican was the lone dissenting vote when the law as passed last year, but had more support this year.

"The government is ill equipped to pick a winner in the marketplace," Samuels said. "We've simply blessed a winner in AGIA here."

House Rules Chairman John Coghill, a North Pole Republican, disagreed before voting yes.

"We are not picking a winner here, because there is not gas going to market," Samuels said. "What we are picking here is somebody who will work with us under certain conditions.

"It gets us lined up with a pipeline builder who not only who knows how to do it, but we get to know how they do it both in cost and timeline."

The vote takes the state another step away from a contract unsuccessfully pushed by former Gov. Frank Murkowski.

He settled in principle with BP, Exxon Mobil Corp. and ConocoPhillips on fiscal terms - taxes and royalties - for producing the North Slope gas.

The deal would have frozen oil taxes for 30 years and gas taxes for up to 45 years for the three major oil companies, but it did not guarantee a pipeline would get built.

The Legislature would not vote on it because many lawmakers believed it was too much of a giveaway to the energy industry, about $10 billion over the lifetime of the deal.

This Legislature, however, acted under AGIA, a year-old law that established bid requirements for those interested in building a pipeline.

It was also a law had BP, ConocoPhillips and Exxon Mobil balking and refusing to submit plan under those guidelines last at the Nov. 30, 2007 deadline.

TransCanada's was one of five applications that applied and the only one deemed compliant under the AGIA guidelines. Meanwhile BP and ConocoPhillips weighed in three months ago their a pipeline project called Denali.

And the two companies have already filed paperwork for preliminary federal permitting and $40 million worth of field work is under way.

But Denali's 12- to 15-page plan is routinely criticized as sorely lacking details compared to TransCanada's itemized offering found in thick three-ring binders.

Some lawmakers believed turning back TransCanada would have left Alaska only with the Denali plan and would set the state back several years.

"I don't want to go back to where I was with the oil companies completely running the show," said Rep. Mike Kelly, a Republican.

"I do not wish to go return to a one-option scenario that has been sold to us with a power-point presentation," he said. "If we turn this down that would be a serious, serious mistake."