Wednesday, March 18, 2009

AK Rep. Les Gara (d): "Opposing Palin on gasline is a mistake"

Les Gara, an Alaska Representative who is also a democrat wrote an article for the Alaska Dispatch blasting Palin critics simply because they don't like her. It's a great article and he tells it like it is. He says they should focus on the issues themselves instead of letting personal vendettas get in the way of what's good for Alaska and the pipeline.

One of the points he makes I believe is key. He said the oil companies are the major players who are against the pipeline. Big Oil - they have been holding Alaska hostage for years. They are so powerful that they've exploited Alaska's resources uninterrupted until Palin got elected. They threatened to pull out of projects if they weren't involved and Palin let them. I would guess that they're behind some of the Palin smear campaigns in MSM and from Democrats. I wonder how much money they've paid to journalists and legislators to get what they want.

But Les Gara's article is awesome. He sounds like a lifelong Alaskan who has wanted this pipeline for years. He knows Palin's been doing great things to get it done. I hope he can bring everyone's focus back to it instead of them flinging lies about her. It's great to get support from a Democrat. This is how democracy works.

Opposing Palin on gasline is a mistake
Rep. Les Gara
March 17, 2009

There's a disturbing thing going on in Alaska politics, and it threatens to kill our chances to build an Alaska gas pipeline. Any casual observer of Alaska politics has seen that Gov. Palin's created a growing list of detractors across the political spectrum. A growing number of people are starting to take the opposite position from the governor on nearly everything. If she's for it, they're against it. Alaska's politics now float in treacherous waters.

Some of Gov. Palin's detractors see things the way the major oil companies see them. They've willingly joined the oil company cause to stop the TransCanada pipeline - Alaska's best chance at a gas pipeline project - in its tracks. Others have joined their cause unwittingly. There are growing numbers of Republicans and Democrats who are predisposed to agree with anyone on the other side of the governor. Gov. Palin's become a lightning rod, and many Alaskans have chosen to be "with her" or "against her" - all the time, no matter what. That's unhealthy. If we keep playing this sport, we won't have a gas line at all. Or we'll get one built only on Exxon, Conoco and British Petroleum's very unfavorable terms.

I can't play this game. The stakes are too high. When I disagree with the governor, I'll say so. But when I see a chance for common ground, and a path to the most important development project on Alaska's horizon, I'll work to find it. Some of my supporters are rigging up the guillotine right now.

The truth is the governor and I have some great disagreements, and some substantial areas of common ground. In both cases, I've said so. No one's ever accused me of being shy about my opinions. Finding common ground may not be exciting politics. But I have an obligation to get things done when I can, and to call things honestly instead of politically. Throwing bombs for the sake of it doesn't lead to a very long or happy career.

So, those who oppose "Everything Sarah" are making a mistake on the gasline.

For decades Alaskans have been right to join in a common goal to build a atural gas pipeline. We need it for local energy. And we need it because as oil production declines, we'll need a job and tax base. Without oil or natural gas revenue every Alaskan worker would have to pony up roughly $15,000 in sales or income tax payments, maybe their PFD, and then property taxes on top of that. That's a recipe for pain, bad roads, bad schools, and no progress on our greatest problems.

So, why is the TransCanada license we agreed to sign so important?

1. The major oil companies likely oppose a gasline.

Why isn't clear, and until we get access to their Board minutes, we won't know for sure. There is evidence that Exxon, Conoco and British Petroleum may want to delay a project because sending Alaska gas to the Lower 48 will reduce the price they get for the natural gas there. Or they may not want a gasline until later because that's what fits their business plans. They may want to keep using their natural gas as long as possible to pressurize oil out of their North Slope oil fields, even if delay kills a gasline project forever.

2. The TransCanada project places pressure on the oil companies to move forward.

Remember what we had before TransCanada? The Frank Murkowski proposal with Conoco, Exxon and BP? The one that would have, by contract, prohibited us from fixing the flawed oil tax law he signed, and that's put the FBI on overtime? The one that included billions of dollars in tax concessions, and great financial risk for the state?

That's closer to what you'd get if you only negotiated with the oil companies to build a gasline.

Where do the oil companies get their leverage? Well, they hold the leases to the major known reserves of natural gas on the North Slope. If they know we are relying on them to build a gasline, they can withhold their cooperation until they get the tax breaks they want, and the terms they want. If they're the only game in town, they won't build a gasline until we say "Uncle." The terms they demand won't be in our favor.

Today, with TransCanada moving ahead, the oil companies have quickly created their own pipeline company, Denali. To date we don't know whether the major oil companies have any real intent of building a Denali line, or whether they have done this for show, to get the public to fall out of love with the TransCanada project. My belief is that if we stopped moving ahead with the TransCanada project, the Denali project would disappear, or remain only if we promised the billions in tax and other concessions the oil companies will demand.

3. What other terms will the oil companies demand?

Our experts call what the major oil companies want "Basin Control." What's that? They don't want other companies to make money off North Slope natural gas. If there's a gas pipeline, the major oil producers want as many North Slope leases as possible for themselves. How can they make sure they get their way? Well, if a pipeline is built, the initial one will be sized to fit the gas reserves the major oil companies hold. In an ideal world, independent companies will then look for gas, hire workers, and produce gas that produces more state revenue. But it's not that easy.

New production will likely require an expansion of the original gas pipeline. If the pipeline is owned by the major producers, they'd want the independent companies to pay for the full cost of the expansion, through what's called "incremental rates" - transportation rates that charge the new producers for the cost of expanding the pipeline. That could make production by new producers cost-prohibitive.

Here's the fair way to price natural gas transportation. Natural gas is a public Alaska resource. As Alaskans we want to encourage production, and under Alaska law - and the TransCanada license - we have required the pipeline owner to agree to what's called "rolled in rates," and to argue for rolled in rates before the Federal Energy Regulator Commission. What are rolled in rates? Those rates would charge all gas shippers, including the major producers, the cost of expanding the line. That would make gas production more economic for new producers, would likely spur new production, and is not to the advantage of the major producers. This is one of the rules the major oil companies have vocally opposed. The Denali line will not abide by the requirements on rolled in rates that TransCanada has agreed to.

4. Where Can We Stumble?

Next year TransCanada is required to hold an "open season." This is where the battle for Alaska's gasline future will be waged next. In an open season the major oil companies will state whether they'll agree to sell their gas into the TransCanada line. It is expected they will say "no," and try to cause TransCanada to fold. No one can build a gasline if they don't have a promise that there will be gas they can charge to ship.

5. The $500 Million Question.

The critics of the current proposal have focused on the $500 million contribution the state has promised. Though, by the way, we'll get much of that back if a gasline is built. By law, the rates TransCanada charges, and that come out of state taxes, can't include this $500 million contribution - that is, the $500 million state contribution will lower the transportation charge allowed by FERC on this line.

So, why did we have to contribute $500 million? Well, it's pretty disingenuous of the major producers to complain about this provision in the law. The state had to provide it to help TransCanada through the delay and uncertainty in this gasline that will likely be caused with the oil companies don't show up at open season. That is, we all know the major oil companies may try to slow this project down, and possibly kill it. To get independent companies to bid on the gasline, we had to provide a financial contribution to help them through the uncertainty.

At that point we may have to threaten to sue to require the major producers to sell their gas (they likely have a legal obligation to sell gas into a pipeline if the pipeline charges a rate that makes gas production economic).

Alaska's gasline future is in our hands.

We shouldn't play politics with it. In this case, joining the chorus against the TransCanada project is joining Exxon. It's joining British Petroleum. It's joining those who want you to give up your state's sovereignty.

In politics it's rare that your political opponents are always wrong. And it's rare that those you support are always right. I hope you'll keep that in mind when you hear, next year, that the major oil companies haven't shown up at open season. That should be call for us to stand together with resolve, not to celebrate the failure of the TransCanada proposal. It should be a call for us to stand together in our effort to move the TransCanada project forward.

Les Gara, is a Democratic state representive for Anchorage's 23rd District.

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