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Alaska Journal of Commerce - Session Clock Winds Down with Pressure on Budget, Energy

News Article

Location: Juneau, AK

By Tim Bradner

The clock is winding down in the capitol toward the Legislature's required adjournment April 15.

Oil taxes are at the top of the priority list, Senate President Gary Sevens says, but attention is now being pressed on other issues, including the state budget.

The House has passed its version of the operating budget to the Senate. The Senate is now reviewing it, and will pass its changes back to the House.

Sen. Lyman Hoffman, Senate Finance co-chair, said he doesn't expect the Senate operating budget to differ significantly from the House. Final differences will be worked out in a conference committee, most likely in the first two weeks of April.

A proposed Senate capital budget bill is expected to emerge the week of March 26, most likely in the middle of the week, sources in the Senate said. The governor's proposed a capital budget is before both the House and Senate Finance Committees but the Senate customarily takes the lead in producing a version with the Legislature's additions, then passing it to the House.

As with the operating budget, final differences are typically, but not always, worked out in a conference committee. If time is short, however, legislators in both bodies work informally to negotiate final changes to the Senate bill when it is in the House, avoiding a formal conference committee.

In a briefing March 20, Gov. Sean Parnell said he had told legislators he will accept a capital budget of $2.8 billion with an additional $150 million allowed for debt service, or a total of $2.95 billion. That is about the same as the capital budget approved for the current year, Parnell said.

An issue that has moved quickly to the top of the priority list for both Parnell and legislators is the soaring cost of fuel, particularly home heating oil for Fairbanks and rural communities. Anchorage, which is powered and heated with less expensive natural gas, is less affected.

One short-term solution, an "energy voucher" proposed in the Senate by Sen. Joe Thomas, D-Fairbanks, is being worked on in committee and is expected to be up for further hearings soon, Thomas said.

Thomas, as prime sponsor, is working out technical issues with Alaska Housing Finance Corp., which would administer the program. It would grant a payment for the purchase of 250 gallons of fuel or the natural gas or electricity equivalent to Permanent Fund dividend recipients.

Heating oil costs have become a matter of urgency. Prices have increased to $4.30 a gallon in Fairbanks, Rep. Bob Miller, D-Fairbanks said, and prices in rural villages are far higher, up to $10 a gallon in some remote communities.

Hoffman said it is unfair for state government to be sitting on huge revenue surpluses while citizens are hurting.

"People are spending 30 percent to 50 percent of their income for energy, and here in Juneau we're soon going to be pushing $20 billion in surpluses. We've got to make Alaska an affordable place to live," Hoffman said.

In his March 20 briefing Parnell said he got an earful about energy during a recent swing through Kotzebue, Nome and Fairbanks, and in recent days in meetings with Fairbanks legislators and rural lawmakers.

For Fairbanks, the governor said he is committed to promote getting natural gas to the community as quickly as possible, and the best short-term option is trucking liquefied natural gas, or LNG, from the North Slope.

This is a plan that Flint Hills Resources, operator of a refinery near Fairbanks, and Golden Valley Electric Assoc., the Interior electric cooperative, are already working on.

Parnell said he will seek legislation that would allow the Alaska Industrial Development and Export Authority, the state development corporation, to participate in financing and development of a gas liquefaction plant on the Slope for the project.

The Legislature is meanwhile working on another bill that would extend tax credits for development of LNG storage facilities for the project. Natural gas would not only ease high heating costs for Fairbanks but would improve local air quality.

As for rural energy, Parnell said he is wary of continued short-term solutions and is more supportive of long-term, larger solutions, although it is not yet clear what they might be.

"Rather than one-off solutions like renewable energy grants for a wind turbine, I think we need to think bigger," Parnell said in the March 20 briefing.

He cited the oil and natural gas potential in the Selawik Basin as a possible source of energy for the region, and said he would support other ideas such as a proposal by Sen. Lesil McGuire, R-Anchorage, to have AIDEA take on a larger role in financing other energy and oil and gas projects.

"In 20 years I'd like to see a rural Alaska not dependent on diesel. We need a shift in thinking," Parnell said.

Other ideas for in-state energy and natural gas are being advanced. Sens. Thomas and Joe Paskvan, D-Fairbanks, are also supporting the idea of the state's Alaska Gasline Development Corp. building a 20-inch or 24-inch gas pipeline from Southcentral Alaska to Interior Alaska to move Cook Inlet gas north.

ADGC is now at work on a 24-inch pipeline from the North Slope to the Interior and Southcentral. Thomas said the advantage of building the southern end of the pipeline first is that if there are significant new discoveries in Cook Inlet, which some believe will happen, it would allow Interior residents to tap that resource.

Also, because Cook Inlet gas is "dry" and without quantities of natural gas liquids that would have to be removed, unlike "wet" liquids-rich North Slope gas, the cost to Interior consumers would be less.

If the northern end of the pipeline is eventually built, or a large-diameter pipeline is built, the gas flow could simply be reversed, Thomas said.

"The good thing about a pipeline is that it can be made to flow either way," Senate President Stevens said in the Senate leadership briefing March 20.

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