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Erika Bolstad covers Alaska issues, including the congressional delegation, from Washington, D.C., for McClatchy Newspapers. Before joining the bureau in 2007, she spent seven years as a reporter at the Miami Herald, where she covered politics, government and the state legislature. E-mail Erika at ebolstad@adn.com.

Sean Cockerham

Sean Cockerham writes about Alaska state politics. He spent three years based in Juneau for the ADN before joining the Tacoma News-Tribune to write about Washington state politics. He went to Iraq twice for the News Tribune, and previously wrote about Alaska government and politics for the Fairbanks Daily News-Miner. E-mail Sean at scockerham@adn.com

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Kyle Hopkins covers politics and other stories for the ADN. He covered the 2006 campaign for governor, has blogged extensively about Alaska politics, covered Anchorage city government and was a reporter based in the Mat-Su. He grew up in Southeast Alaska and previously was a reporter at the Fairbanks Daily News-Miner and Anchorage Press. E-mail Kyle at khopkins@adn.com

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AGIA special session

Posted by Alaska_Politics

Posted: May 15, 2008 - 12:29 pm

From Sean Cockerham in Anchorage --

It’s not easy to read the tea leaves on the upcoming gas pipeline special session.

Everyone assumes Palin will ask legislators to approve a license and $500 million subsidy for TransCanada to try and build the pipeline. And Palin usually seems to get what she wants (remember how many legislators were saying she was going to have a hard time getting her oil tax increase passed? So much for that.)

But there are a lot of legislators who question giving TransCanada the $500 million when BP and Conoco say they are working their gas pipeline project. And House Speaker John Harris, Rep. Jay Ramras, and Sen. Charlie Huggins just returned from a state-funded trip to Asia to gauge interest in Alaska’s gas there (former governor Wally Hickel was also there.) They met with Sinopec in Beijing and Harris came away particularly struck with what he saw as Chinese hunger to purchase Alaska’s gas.

That seems to be making Harris (a Valdez legislator) more excited about the possibility of an “All-Alaska” line from the North Slope to Valdez with export in tankers to Asia. The oil companies say that doesn’t pencil out and the route through Canada to the Lower 48 is the only way to go. The Alaska Congressional delegation has also made it pretty clear Congress won’t allow the gas to be exported to China. Harris, though, says “I’ve seen stranger things happen” than getting an export license.

Sounds like Charlie Huggins will be leading the Senate majority’s efforts during the special session. He’ll chair a joint resources-finance committee during the session, with Bert Stedman as co-chair. Huggins seems skeptical of giving TransCanada the $500 million when it’s BP and Conoco who hold gas leases. And he’s focused on using the special session to work on getting a smaller pipeline for in-state gas use.

“In the best case scenarios of doing a big pipe through Canada we’re talking about 10 to 12 years,” Huggins said. “Alaskans are not going to wait 10 to 12 years to get in state gas, and I agree with them.”

TransCanada will also have its champions in the Legislature. They’ll argue the firm’s proposal gives the state its “must-haves” and that the state can’t trust the big oil companies. There's also a lot of concern over what kind of state tax regime the oil companies are going to want in place for a pipeline.

Here’s how it’s going to work: Legislators will go to Juneau for the special session on June 3.

But they’ll likely only stay there for seven to 10 days before holding hearings elsewhere around the state for a couple weeks then heading back to Juneau.

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7 May 18, 2008 - 10:24am | rfn

Please, Governor Palin!

Schedule the special session on energy relief for October, rather than June!

In June the legislators are thinking only of getting away to fish and find it hard to focus on the needs of the average Alaska resident.

In October the bite of winter is already starting for many and there's clear, visible evidence of the needs.

Besides, they surely will understand that the people who will be hurt if they don't help will be sharply focused on who has helped in their time of need and who deserve to be sent on long vacations. Especially in a political fund-raising season when economics are much more understandable.

Nothing about this matter than cannot be thoroughly discussed and resolved before election eve if a start is made around October 15th!

~~rfn, DD

6 May 15, 2008 - 11:32pm | Stumpy1

The news media must do a better job

Some gasline 101 for reporters and bloggers:

The Alaska news media did a terrible job in that it did not cover the major environmental disaster that occurred in Canada in the tar sands two weeks ago. A whistleblower had to report to Environment Canada that 500 ducks landed in a vast oily syncrude lake and drowned, after being coated with oil. A front page story all over Canada, that. But nary a word here. Since TransCanada proposes sending Alaska's gas to that environmental nightmare, shouldn't Alaskans be better informed?

The Enstar bullet line will provide THE MOST EXPENSIVE NATURAL GAS IN THE USA. Why? Economics. A small pipe that moves relatively small amounts of gas will have a HUGE tariff. Early estimates show that a bullet line will have a cost of gas at 26 -27 dollars per mm/btu.
Why isn't the media covering that?

The most profitable gasline for Alaska would be the All Alaska Gasline from the North Slope to Valdez. AS ALASKA VOTERS HAVE MANDATED IN FOUR DIFFERENT ELECTIONS. If the numnuts in Juneau had listened nine years ago we'd have that gasline today- and no energy crisis.

John Harris gets it. An Alaska owned gasline would return a regulated rate of return to Alaska of 14%. Compare that rate of return to the Alaska Permanent Fund that only gets an inflation adjusted ROI of about 6%.

Why do Alaska reporters not cover the fact that anti-trust rules will make it virtually impossible for the multinational oil companies to get a FERC license? Tom Irwin has explained this quite well- Alaska reporters should begin to pay attention.

This is a serious issue.

Why do Alaska reporters not report on the numerous false promises the multinationals have made about building a pipeline? Over the last ten years we've heard dozens of promises from the "producers" that gas would be flowing by 2007.

Yes, that was not a typo. 2007. Last year.

Export licenses have already been issued for Alaska gas shipments to Japan, Taiwan, and Korea. (We've been shipping gas to our Japanese friends since 1968).

Why would we ever want to ship gas into Canada where we could get nowhere near the highest value for our gas? And no export license has ever been issued for shipping Alaska's gas to Canada (and the environmental disaster called the tar sands).

5 May 15, 2008 - 6:14pm | _Syrin

Thanks Charlie

Huggins seems skeptical giving TransCanada the $500 million when it’s BP and Conoco who hold gas leases.

4 May 15, 2008 - 3:21pm | truthseeker

Sean................

when did the oil companies EVER show any analysis that an all alaska gasline didn't pencil out? Especially since the wellhead value of gas sold to asia is 50% higher than in the US.

They have their own agendas that don't have anything to do with the economics of an all alaska gasline, including using our gas to contribute to the environmental nightmare known as the tar sands.

In that case, where is their export license to send that gas to Canada? Seems like you made a lot of assumptions in your post here that are essentially media myths promoted by the oil companies.

As for the $500 million, it may or may not be justified. But in any case it should be compared to the tax cuts the oil companies are going to extort out of us before they will build a gasline. I heard estimates that frank's deal with them would have had the state subsidizing them to the tune of $13.5 billion. They should be forced to fess up with their new tax plan before anyone just hands the project over to them over any other alternative.

I would suggest you dig a little deeper to find out what is actually going on.

May 15, 2008 - 4:44pm | JoeBagadonuts

they've said it over and over

Why else would they be proposing the overland route? it's the one thing they seem to agree on. It's far more complicated than simply looking at the price of gas on a few isolated contracts for LNG in Asia.

You have to look at the whole project. Then you'll see that, while LNG is a viable option if overland doesn't work, it's clearly not the economic ideal.

May 15, 2008 - 3:28pm | rfn

While I don't like the giveaway

and really don't want to see Alaskan natural gas "cooking mud" to make oil in Canada for Asia, there appears to be NO export license obstacle.

Remember NAFTA? You can pretty well export nuclear devices to Canada without any kind of export license. Well, maybe a small exaggeration but really not much of one. Information from an exports specialist who deals with this stuff five days a week.

Once the gas has left for Canada the U.S. government loses all control over how it's used and where the syn-oil it produces goes. Canada can get Alaska's gas on the cheap (transfer prices from one Big Oil subsidiary to another) and get a princely price for it anywhere in the world it chooses with not the slightest legitimate complaint. Not even about the pollution caused by the conversion process right across the border.

That's why any plan that doesn't get world price for Alaska's oil (so it's subject to normal Alaska taxation) must be brought to a screeching halt!

Just another little prize from the NAFTA CrackerJack box!

Thank You Slick Willie!

May 15, 2008 - 7:37pm | truthseeker

you better go back...............

and read transcanada's proposal. It says right in there that the producers will have to get the export licenses to participate in the project. And all to sell it at bargain basement prices to themselves to cook the tar sands which is already becoming known as one the the most serious developing environmental disasters in the world.

Good luck with that one.

May 15, 2008 - 8:38pm | JoeBagadonuts

it doesn't work that way and you know it Paul

The lease protects the state against selling oil or gas internally at a price not reflected by the market.

They don't pay us based upon what they get, they pay us based upon what the market price is.

stop this, it's undignified. you're looking to enrich yourself off of this stupid China gambit (do i need to post the pictures Heyworth has been sending around?) and in the process trying to kill the only real project we've ever had.

shame on you

May 15, 2008 - 10:09pm | truthseeker

well, you might be right on the price.......

is it based on a market basket of other prices? It would be interesting to know how all that works.

It will be refreshing to see everything comes out during this special session.

Maybe someone will write a book someday on the background of how all this turns out. An alaskan version of The Prize, which if you haven't read it is a good read on how the oil companies deal with sovereign governments. (it ain't pretty)

I do know one thing. I don't want the producers owning and controlling our gas transportation like they are controlling our oil transportation. They say their interest is in the lowest tarrif possible but that is a lie. On the oil line they want the highest tarrif possible because they can write it off against the wellhead price and also use the high tarrifs against other companies trying to compete with them on the North Slope.

There are many areas of agreement. We all need to keep our eyes wide open and try to do what is best for Alaska in both the short term and the long term.

May 16, 2008 - 6:59am | JoeBagadonuts

it IS interesting to know how it works

and i think it's irresponsible to chime in as though you've actually got the answer when you clearly haven't read the lease or any of the history of Alaska's resource development.

The Prize? Seriously dude, that's like 1000 pages. You haven't read it, you might own it, and it sits on your coffee table for show.

Start by reading the lease agreement. It's about 2 pages. Then move to "Crude Dreams", by a local author and former mayor about local issues.

Your LNG boondoggle to China is going to be exposed for what it was...an attempt to derail the AGIA process because you think you can't enrich yourself if TC builds the line. Truth is, "truthseeker", the fastest way to an LNG project is through the TC project.

stand by

May 16, 2008 - 1:31pm | truthseeker

It will be interesting to see...........

what the actual price transfer protection is. Can you share now?

I actually have read The Prize. Twice. And I would recommend it to anyone on any side of this issue. I have bought extra copies and given them to my friends.

While iti is outdated, the lessons are unmistakable. And although it is long, it is actually very interesting reading. Very much like a spy intrigue thriller. These companies did as much to screw each other as they did anyone else.

I have no way to enrich myself from any of these projects. Just hoping we can connect to the north slope in a way that gives us affordable energy.

May 16, 2008 - 10:47am | Stumpy1

Hilarious- donut hole

You post that the fastest way to an LNG project is the TC project?

Hilarious.

What weed are you smoking?

TC has those aboriginal land claims. No eminent domain for TC. No aboriginal settlement= NO project.

Have you even read the TC AGIA proposal? They are at least ten years away from first gas. They've said so in writing.

Other projects- particularly an Alaska- owned LNG project could be done YEARS faster.

And you should pay attention to the facts, donut hole. LNG can be shipped all over the world- US, Mexico, Japan, Korea- it does not need to go to China.

So stop posting here as if you know anything.

You clearly do not.

May 15, 2008 - 11:51pm | kwalters

excellent point(s)

The US has zero control over where that gas goes. Or, for that matter, the security of the line after it leaves US Soil. The line is 3 times longer than an all Alaska gas line and steel ain't getting any cheaper. Regarding the transfer pricing scheme-I wouldn't be surprised if it is similar to the fishing industry with regard to a nice little illegal accounting method known as abusive transfer pricing whereby the subsidiary avoids paying federal US Taxes.

3 May 15, 2008 - 1:26pm | aj

Legislators question $500 million subsidy

Who they gonna call? Ghostbusters? They passed AGIA so they should kick nobody's shins but theirs.

May 15, 2008 - 1:36pm | AK_Lady

What?

AGIA is the guvna's baby.

She should get rid of it like she did the dog she named AGIA.

May 15, 2008 - 4:46pm | JoeBagadonuts

58 to 1

that makes it the legislature's baby. they voted for it - BIG TIME! they should be embarassed if they go weak-in-the-knees now.

May 15, 2008 - 9:32pm | AK_Lady

Oh yeah...

It produced all sorts of competition, didn't it.

AGIA is a complete failure.

May 15, 2008 - 9:39pm | rfn

For once I must agree.

AGIA produced only one submission...and that to hijack Alaska's gas to a foreign land to manufacture oil for China. Gee, just like another one that cropped outside the AGIA process!

Time to scrap them all and get on with a bullet line to bring Alaskan gas to Alaskans....and a surplus to sell at world prices to the world market.

May 16, 2008 - 6:49am | JoeBagadonuts

how competititon works - a primer

the competition takes place the moment you announce there will be competitive bidding. Offers are prepared with the notion that others will also prepare offers and so interested parties sharpen their pencils and put their best foot forward.

All you have to do is listen to what TC has said about it: "We drew up our proposal thinking we'd be trying to out-bid others. It would not have been as rich an offer if we'd known we'd be the only one that passed muster"

May 15, 2008 - 2:27pm | rfn

Neighbor had a dog

named "Lady".

It killed chickens so she got rid of it with extreme prejudice.

Which is what the legislature should do with the Trans-Canada plan and any other plan that would sell Alaska's oil cheap so BOC (Big Oil, Canada) can make pseudo-oil to peddle on the world market. If Alaska's gas is to be used outside Alaska it needs to bring world prices!

Murkowski is gone and Alaska doesn't need ANY giveaway schemes.

May 15, 2008 - 2:31pm | AK_Lady

You think Palin dumped her dog because it was killing chickens?

May 15, 2008 - 2:33pm | rfn

I know that's confusing.

Apparently Ms. Palin's dog was named "AGIA".

My neighbor's dog was named "Lady". Strangely, it was male.

Or thought it was.

May 15, 2008 - 1:32pm | rfn

AGIA

has been given a chance....

They could elect to dump it.

The might also not pick up on any other giveaway plan and decide to do their best to keep Alaska's gas for Alaskans' use. Maybe to provide some jobs for Alaskans. Like reinvigorating the fertilizer plant or expanding the LNG plant with an eye toward barging fuel to Alaska's coastal and river villages. The gas would last a whole lot longer that way and could put the state in a very competitive position for other value-added industrial...perhaps industrial chemicals.

2 May 15, 2008 - 1:25pm | kwalters

Charlie Huggins and Bert Stedman

Peas and Carrots in a pod! Two of the biggest industry shills in Juneau doing the bidding for the producers instead of their constituents. Huggins ought to be banned from any chairman position after his efforts last session to undue all of the work of the previous special session. And Stedman...I hope the FBI is paying attention.

And, did I read that right? John Harris was SURPRISED at China's hunger for Alaska's gas? What rock have you been living under? Our state dollars paid for these idiots to go to China to come back with obvious foregone conclusions? Well, at least we can rest assured that they had some adult fun; Jay RamrASS went along! He probably came home with a 16 year old Asian bride!

Maybe Wally Hickel can still resurrect an all Alaska gas line! Alaska jobs first! Alaska gas for Alasakans first! It makes no sense to build a line through Canada when the right of way to Valdez already exists and the permits are in place.

May 15, 2008 - 2:54pm | Sitkaviewer

FBI needs their eye on posters like you

Suggest you find yourself a good libel attorney!

May 15, 2008 - 2:59pm | Lysander_Spooner

Suggest you find yourself a good dictionary

and learn the meaning of "libel".

May 15, 2008 - 5:08pm | kwalters

HA!

HA HA!

1 May 15, 2008 - 12:57pm | rfn

Two legislators I've spoken with

are seriously questioning the wisdom of any pipeline that wholesales Alaskan gas to Canada to make synthetic oil to ship to China. Especially when their constituents are asking about where home heating fuel is going to be coming from in a few years.

Who knows, maybe enough gas flowing to Alaskan cities could start folks looking at using compressed natural gas to fuel vehicles. It's happening in other parts of the world.

May 15, 2008 - 4:50pm | JoeBagadonuts

what does that even mean?

you don't "wholesale" gas to Canada. it's a commodity, the market sets the price. sheesh, there should be a competency test to enter this blog, some rudimentary understanding of whatever subject is being discussed.

i'm still waiting for my cheap gold. and my cheap molibdenum

May 15, 2008 - 5:21pm | rfn

Seriously....

you're missing an important point and the oil companies are counting on you to miss it!

If the gas were sold at normal commercial rates the only objection would be the use to create polluting synthetic petroleum.

Unfortunately, gas "sold" by one company to a subsidiary company is NOT sold at market prices. It's delivered at an artificially low "transfer price" to avoid or minimize taxation at the source.

That means Alaska would get little or no tax revenue from the exported natural gas. Yes, royalty (in kind) would be "normal". But not the tax.

No, I'm not going to make it easy for you by posting a link. Just enough so anyone sincerely interested can cut & paste:

http://en.wikipedia.org/wiki/Transfer_pricing

That also ensures that I won't be suckering anyone to any politician's website.

What this means to the oil companies is that minimal tax would be paid to Alaska for natural gas to "make" petroleum which then can be exported from Canada at Canad's nominal tax rates.

Only people who get shorted are the people of Alaska.

But if that's OK with you......

But it's not an entire loss. The legislature, if it is hell-bent on either of the Canadian-export plans, can make sure Alaska doesn't get the shaft. Simply write into any deal a clause that bases Alaska's tax on MARKET VALUE - prohibiting the use of any phony transfer price in calculating what's due. Hey, I couldn't care less if Big Oil sells their product to China or Timbuktu so long as Alaska doesn't get cheated (again).

May 15, 2008 - 6:29pm | JoeBagadonuts

everyone knows what a transfer price is

That's not exactly a secret.

The same rules that apply when they sell the crude apply when the sell the gas.

The leases contain something called the "higher of" provision. The guys that drafted the lease over 40 years ago anticipated the problem you're describing and built in a protection.

They have to pay the state the market price, regardless of what they actually received.

You're worried about something that CAN NOT happen.

May 15, 2008 - 6:26pm | JoeBagadonuts

everyone know's what a transfer price is

Get familiar with the lease terms though. The same rules that protect us from those types of shenanigans when our employees (Exxon, BP, Conoco, et.al) sell our crude oil apply when they sell the gas.

Even if they sell it internally (to theymselves or each other) they have to pay us the market rate.

What you're describing is already accounted for in our lease agreement. It's known as the "higher of" provision. The thing you're worried about CAN NOT happen.

May 15, 2008 - 11:50pm | Stumpy1

A hole in your donut...

Everyone (who has any experience in Alaska) knows that the multinationals hire accountants whose job it is to cheat Alaskans by cooking the books. They get away with it because their handmaidens in the legislature make it difficult for the DOR auditors to do their job.

First you have to make sure that efforts to offer a competitive salary for DOR auditors are defeated.

Then you ensure that the system of taxation in Alaska is based on a complicated net scheme.

Then you walk away from Alaska with billions and billions in illegitimate revenue. (Its been going on for decades).

May 16, 2008 - 6:52am | JoeBagadonuts

you still don't get it

we don't care what they tell us, the prices are posted publicly. doesn't matter what they RECEIVED for the sale of oil, only matters what they COULD HAVE RECEIVED if they's sold at the market.

It's called the "higher of" provision. Learn it, know it, love it.

May 16, 2008 - 9:45am | rfn

Let's say, for sake of discussion,

that safeguards are already in place to make sure the tar sands project doesn't allow manipulation/minimization of Alaska's rightful share through taxation.

That would, indeed, be very nice. And maybe it really is so. At least until some slick Big Oil accountant or lawyer figures out a way to get around it.

Now each morning most men put on their pants, button them and zip them up.

Then they put on a belt to be sure they stay up.

A few, the more cautious ones, also put on a pair of suspenders.

Is that somehow harmful?

May 15, 2008 - 6:39pm | rfn

Your faith

is overwhelming.

Hey, want to buy a really great used car?

May 15, 2008 - 7:44pm | tlhotwheels

You're getting OWNED rfn

Better stop while your behind.

May 15, 2008 - 8:12pm | _Syrin

yep... OWNED

by one as sharp as a donut

May 17, 2008 - 9:53pm | rfn

What IS

that new (_) underscore all about?

Choice or necessity?

Little bird says that when someone is banned their username no longer works and they have to come up with a new one or slightly modify the old one and re-register. Of course nobody reputable would do such a thing!

However.....

May 17, 2008 - 10:11pm | AK_Lady

Ha!

If 'lotsofpipe' hasn't been banned by now; no one else would be.

May 17, 2008 - 10:16pm | rfn

I have noticed

that he doesn't appear as " _ lotsopipe".....

Of course if someone were losing their memory and forgot their password and all that they might have to create a new username.

All kinds of possible explanations; each more amusing than the previous (that means "the one before).

May 17, 2008 - 10:30pm | AK_Lady

Ya know what....

the fact that you spend any amount of time wondering about Syrin's user name is proof that you spend waaaaay too much time here, dude.

Take a break. Seriously.

May 17, 2008 - 11:36pm | _Syrin

No doubt

It sounds like rfn has a very weak social calander. Perhaps now that it is summer, he'll get out from in front of his computer and do something positive.

May 18, 2008 - 8:08am | rfn

Something positive!

I shall spend at least three minutes this fine morning in prayer that birds of prey might find solace in their blind, irrational hatred of all that is good.

That they might find avgas they can buy with their supermarket discount cards and so might be encouraged to buy food for the starving Alsakans who can no longer afford it.

~~rfn, DD

May 18, 2008 - 9:18am | AK_Lady

"Starving Alaskans"

Boy, is that an oxymoron!

Have you looked around lately? Oh, that's right... you don't get out much. Lemme tell ya, there's a lot of people in Alaska that could stand to lay off food for awhile.

May 18, 2008 - 6:29pm | rfn

There may be truth

to that statement in some very wealthy suburbs. I do appreciate your understanding that your small sacrifice might help those less fortunate. So few people think that way these days.

Yes, there are Alaskans whose food stamps don't nearly address the needs of their families. Perhaps some overlooked recent articles in The Anchorage Daily News on the topic. Or perhaps felt it distasteful to read such things as they enjoyed their strawberry waffles, essential to a healthy breakfast!

The real crunch comes as parents are confronted by the choice of being able to put food on the table or get to work to earn a pittance beyond what it costs to get to work. People who already are denying themselves the medicines they need so their children might eat. Perhaps the oil tax surplus should be earmarked for demonstrated-need type programs; perhaps a targeted food distribution program. Definitely not any kind of token that might be taken by those who really don't need assistance that they might convert it to cash for wine or pricey salmon steaks.

True, not in the comfortable affluent areas where husbands toil mightly in winter darkness for weeks on end that their spouses might breakfast out and have excessive time upon their hands for dalliance. For them, it's easy to ignore the pain of others. Idle hands -- indeed The Devil's Playground!

I shall pray that they come to realize they should share their bounty with the less fortunate!

~~rfn, DD

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