Lawmakers express frustration over AGIA AGIA: Parnell urges legislators to give agreement more time.

JUNEAU -- Top legislators are expressing frustration with continuing to give multi-million-dollar state subsidies to a natural gas pipeline project to the Lower 48 that they don't believe is going to work.

The pipeline company TransCanada, working with partner Exxon Mobil, has a state license to pursue the project under the 2007 Alaska Gasline Inducement Act. AGIA provides up to $500 million in state reimbursement for the company's costs.

"There is support here to just scrap the whole AGIA process," House Speaker Mike Chenault, a Republican from Nikiski, said on Thursday.

Senate Finance Committee co-chairman Bert Stedman made similar remarks after Gov. Sean Parnell's State of the State address Wednesday night.

"I think it's quickly approaching the time we look at cutting our losses and freeing the state from the shackles that are put on us under the AGIA agreement with TransCanada," the Sitka Republican said.

Legislators are not planning to take action to try and repeal AGIA during this year's 90-day legislative session. But some are frustrated about providing TransCanada with the agreed-upon state money.

The state has already paid TransCanada nearly $37 million and anticipates spending about another $100 million by July. The governor is asking the Legislature to set aside $160 million for 2012.

"I think we need to financially take a hard look at what we're doing with that amount of money. We can build schools, we can build roads, we can build long-term infrastructure versus just sending a check to TransCanada and Exxon for a project that most likely won't get built," Stedman said.

TransCanada had expressed optimism that it would have signed agreements with gas shippers by the end of 2010. That didn't happen. But the company says it's still working to complete the deals, called precedent agreements. The shippers would ultimately pay the construction cost of a pipeline through transportation fees, and precedent agreements usually require them to have good credit and customers for the natural gas.

The agreements can be conditional, such as asking the Legislature to change its taxes on natural gas.

TransCanada says it is also working on the documents it needs to apply to the Federal Energy Regulatory Commission for a certificate to build the line. AGIA requires the filing by October 2012.

Gov. Sean Parnell said Thursday that legislators should not be losing patience with the gas line process. "We kind of live in this fast food society where we think everything happens overnight. If I order a burger I get it now, and that's not the case with a $30 to $40 billion commercial project," he said.

Parnell said TransCanada is still within the timelines set out under the AGIA law passed by the Legislature.

"My urging to (legislators) is, as long as we're still within the time frame that AGIA contemplated, then let's let this private sector commercial process play out," he said.

House Speaker Chenault said Thursday that he expects TransCanada to come before the Legislature in the coming weeks. "And we'll see if there's information that we can garner ... any information they can give us back that would provide, in my mind, some ray of hope," Chenault said.

The Legislature also expects to hear from the Denali Project, a separate effort put together by BP and Conoco Phillips to potentially build a gas line.

Senate Resources Committee co-chairman Tom Wagoner said he doesn't think it's time to give up on AGIA.

"I think that's a little presumptuous to start talking about repealing," said the Kenai Republican.

Wagoner said he wants to hear results of the bid process held by TransCanada last year, in which the company sought bids from gas shippers. The bids are secret under state and federal law until precedent agreements with the shippers are signed.

Some legislators are suggesting that if TransCanada doesn't present signed agreements from gas shippers by July 1, lawmakers might decide to invest in a smaller in-state "bullet line" instead. That's the date a report is due on the feasibility of a bullet line, which would run from the North Slope through Fairbanks to Cook Inlet, delivering gas inside Alaska.
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