Disaster Averted On Stranded Gas Pipeline Bill

Obscure Language In House Bill 290 Would Have Stripped
State's Oversight of Proposed LNG Marine Terminal

During the recently adjourned session of the Alaska State Legislature, one particular bill caught the attention of the Alaska Forum. House Bill 290, introduced by the Resources Committee, is titled, "Stranded Gas Pipeline Carriers." The bill ostensibly performs a bit of "house-cleaning" with regard to how the state regulates pipelines - specifically with regard to a natural gas pipeline, should one ever be built. But our research of the bill uncovered a slyly worded provision that would have accomplished much more than simple house-cleaning. The bill was written by the ANS Sponsor Group, the consortium of oil companies who have banded together to explore methods of bringing North Slope gas to market. This group was largely headed by the now-defunct Arco Alaska, Inc., with other participants including Phillips, Foothills, Marubeni, and most recently, BP Amoco. HB 290 is a bill without which, says the ANS Sponsor Group, a gas export project is impossible. The bill is largely non-environmental in nature, but one paragraph stood out as having potentially serious environmental consequences. Section 7, Paragraph 16 explicitly defines for the purposes of the bill the term "Stranded Gas Pipeline." It reads, in part: "all the facilities of a total system of pipe…for transportation of stranded gas" and so on. But then the term is further defined as "excluding marine terminal facilities." This seemingly innocuous language actually amends the so-called Pipeline Act (AS 42.06) which grants the state the authority to provide regulatory oversight of marine terminals. To put it another way, HB 290 would have negated the ability of such agencies as the Department of Environmental Conservation to oversee the operation of the gas pipeline's marine terminal, whether in Valdez or Nikiski. It is essentially carte blanche for the ANS Sponsor Group to operate their marine terminal without any pesky interference from the state (who might push for such burdensome regulation as maintaining air quality standards). When questioned on this point in the House Oil & Gas Committee, the representative from the ANS Sponsor Group, Michael Hurley, first claimed that the marine terminal exemption was an effort to reduce the transportation costs of the gas, thereby increasing the royalties the state would receive. Skeptics (such as the Alaska Forum) wondered why the oil industry was suddenly so deeply concerned with the state's share of gas revenue. Hurley's statement amounted to an admission that the oil industry would willingly fill the state's coffers at their own expense - a ludicrous proposition. Later, Hurley claimed that the state (via the Joint Pipeline Office) has always maintained regulatory authority over only pipelines, not other facilities, and so he wondered why that should change now. Once again, Hurley was being either intentionally disingenuous or woefully misinformed. Since the construction of the Valdez Marine Terminal in the 1970's, the state has maintained a continuous regulatory presence. An amendment in the House Oil & Gas Committee that would have eliminated the marine terminal exemption (restored regulatory authority) failed on a 5-4 vote. The Alaska Forum learned that an intense lobbying effort by the ANS Sponsor Group the previous evening scuttled that amendment. One legislator who voted against the amendment commented that there is already too much regulation and that government should be getting smaller, not larger. It seems that this legislator has more of an ideological ax to grind, as opposed to concerns about the gas pipeline itself. All was not lost, however, as a similar amendment passed in the following committee, Resources. During debate in that committee, Hurley offered yet a third explanation for the marine terminal exemption (probably hoping that sooner or later one of his explanations would hold water). He stated that the exemption was meant to exclude the marine terminal from being a common carrier. Essentially, the pipeline itself is a common carrier, as anyone along the line can purchase gas (i.e. a public utility); but the gas that reaches the terminal is dedicated solely for export and thus must be exempt from common carrier status. While this explanation is the most correct of the three offered by Hurley, the state was quick to point out that HB 290 could easily grant that common carrier exemption without canceling the regulatory authority of the Joint Pipeline Office. There's no reason to throw the baby out with the bathwater, as they say. The Resources Committee agreed and the state's authority to regulate marine terminals, as well as pipelines and all other facilities, was restored. The final version of HB 290 passed both the House and Senate with near unanimous support.

The Alaska Forum would like to thank some dedicated individuals who positively affected HB 290 and averted a potential environmental boondoggle: Bill Britt (JPO), Mike Barnhill (Attorney General's Office), Roger Marks (Department of Revenue), and lastly the House Resources Committee.

Back To Other Reports Archive