Gov. Bill Walker and the Alaska Legislature both see a natural gas pipeline from the North Slope as a way for the state to extricate itself from its dire fiscal position.
But Walker and legislative leaders have sharply divergent views on the best way to guarantee construction of the $55 billion project and on how to ensure the pipeline delivers the billions of dollars of revenues that lawmakers ultimately hope could help balance the state's budget.
The competing visions will be on display starting Saturday in Juneau, where Walker is convening lawmakers for their third special session of the year. He'll be asking them for about $150 million to buy out a partner in the project and to increase the state's ownership stake -- and its risk -- in the pipeline.
Walker will also be asking for approval of a tax on natural gas reserves still in the ground on the North Slope. He said the reserves tax would inflict financial pain on an oil company only if it delayed the project. The Republican-led Legislature has favored a more collaborative approach with pipeline partners BP, ExxonMobil, and ConocoPhillips. Lawmakers' disputes with Walker over the project spilled into public view during the regular legislative session earlier this year. The upcoming meetings in Juneau may be no different, especially with legislators testy about being uprooted from their homes and impatient to see a pair of proposed bills that Walker, a Republican-turned-independent, has not yet released.v "What if Eisenhower would have told all of his generals and colonels and the troops: 'Hey, we're invading Normandy tomorrow -- we'll give you a briefing at the beachhead?' " Sen. Bill Stoltze, R-Chugiak, said in a phone interview. "I personally like Gov. Walker and many of his commissioners. But I think the public has higher expectations of us than just to blindly follow a lead."
Walker, in a phone interview Monday, said he remained confident his proposals would get a "thorough vetting."
"This is a very sensitive project," he said. "Everybody wants to have it be accomplished and not everybody has the same road map for how to get there. But I think we'll be fine."
The session was scheduled to kick off with a presentation from the Walker administration at Centennial Hall, the Juneau convention center, where the governor promised coffee. But as a possible sign of the contention to come, the Legislature announced it was planning committee hearings at that time.
"We've already lost valuable time by not having an opportunity to review the legislation prior to special session, and we feel we can accomplish more by working through the legislative process and have committees start on day one," House Speaker Mike Chenault said in a prepared statement Wednesday. "It is our intention to hold committee meetings daily until the job is done."
At a news conference Wednesday, Walker said he learned that the leadership would be passing on the briefing in a voice mail message left by Senate President Kevin Meyer, who told him lawmakers weren't attending what was originally going to be a five-hour session because they were jumping right into committee hearings.
In a counter-move, Walker said he would hold a 2 1/2-hour briefing starting at 8 a.m., before the special session begins.
"Those that want to be briefed, we'll be happy to brief them," he said. "Those that choose not to, that's their choice."
Meanwhile, the forecast for the notoriously soggy capital city called for rain all week, and lawmakers were blunt about their lack of enthusiasm for the trip.
"Special session countdown. T-minus six days. Ugh," Rep. Scott Kawasaki, D-Fairbanks, tweeted Monday. He added a hashtag: #RainyJuneau.
The Walker administration will be pitching legislators on two ideas. The first is the $150 million required to buy pipeline company TransCanada's share in the project, which currently includes one fourth of the pipeline itself and of a gas treatment plant on the North Slope. The cost also includes money needed to pay for the state's share of the project's development leading up to engineering and design.
Buying out TransCanada would force the state to make more up-front payments to cover Alaska's share of the pipeline's design and construction. But the state could receive more revenue once the project is done, with the net benefit estimated at up to $1.2 billion over 20 years, according to a report prepared by a consultant to the Alaska Department of Natural Resources.
The question for legislators will be whether they want to take on more financial risk now in exchange for potentially higher returns in the future.
"We have to know what the risk is, what the reward is. And it's going to be up to the administration to lay that out for us in a way that we understand," Chenault, a Nikiski Republican, said in a phone interview.
"Sure, the rewards are in the billions if you can get this project put together and it goes according to plan and all that. But the risks are also large and probably billions. Depending on how deep we get into this project, we can potentially spend hundreds of millions of dollars more at a time when we don't have it."
The second item, the gas reserves tax, is more controversial.
Walker says it's needed to make sure that oil companies can't withhold their gas from the pipeline project if it moves forward without them. Even Democratic lawmakers, who have largely supported Walker's gas-line agenda, say they're skeptical.
The tax measure is viewed as being targeted at ExxonMobil, which Walker has suggested is more reticent to proceed with the pipeline because of its other investment opportunities around the world.
But Rep. Andy Josephson, D-Anchorage, said that if the state keeps ExxonMobil in the project and it ultimately gets built, "it's going to make money, because Exxon makes money."
Josephson said he doesn't yet have the information he needs to make an informed judgment about the tax proposal. But he added that he understands Republican lawmakers' strenuous objections to it.
"The Republican mantra that while we're in the midst of negotiating, using that reserves-tax stick isn't very collegial -- it has some merit," he said.
At his news conference Wednesday, Walker said his administration was still negotiating with the producers and may decide to not ask for a reserves tax, depending on how those talks go. The state wants the oil companies to guarantee they'd sell gas to the project from their state leases even if they decide to back out from the gas pipeline project.
The ongoing negotiations mean his proposed legislation on a gas-reserves tax wasn't prepared on Wednesday as some lawmakers had hoped, he said. "I know some will be disappointed the bill will not be out today, but we're working closely with our partners on this," he said. "They made a request for a few more days, and so we will certainly honor that request."
Josephson predicted that some of the Legislature's positioning on the state's fiscal crisis would spill over into the special session and affect lawmakers' interactions with Walker as they set up for what's expected to be an acrimonious regular session early next year.
"You're going to hear messaging from the majority that the governor is undermining the opportunity to rescue this budget, albeit 10 years from now, with a gas line," Josephson said. "People are getting ready to sort of set up the discussion of January."
One key to the pipeline's future is whether the debate between the two branches of government over the course of the special session, and afterwards, remains at a functional level or becomes "immobilizing," said Larry Persily, the former federal gas line coordinator who's now an advisor to Kenai Peninsula Borough Mayor Mike Navarre.
The relationship between Walker and the Legislature will shape future politicking on the pipeline project after this year's special session concludes, and Persily said lawmakers will ultimately be confronted with proposals even more contentious than the gas tax, or the TransCanada buyout.
"There's sniping -- it rains in Southeast in the fall. Yawn," Persily, a former Juneau resident, said in a phone interview. The question, he added, is: "Can they disagree but still leave and say, 'We got the job done?' "
Or, Persily said, the result could be: "We didn't get the job done, we're not talking and we're certainly not having holiday dinner together."
Alaska Dispatch News reporter Alex deMarban contributed to this report.
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