January 29, 2004
Murkowski last fall in the comprehensive national energy bill won approval for a federal loan guarantee for a southern gas line through Alaska and Canada to the Lower 48. In the Omnibus Appropriations bill, signed by the President over the weekend, the Senator succeeded in providing the same loan guarantee to an all-Alaska gas line liquefication project. The loan guarantee for the all-Alaska route, however, only goes into effect if the financial incentive for the overland pipeline route takes effect. The other tax advantages for either project contained in the energy bill, accelerated tax deprecation for the cost of Alaska segments of the pipelines and for the cost of a North Slope gas conditioning plant, also take effect only if they are approved in final energy legislation.
"It is great that we have succeeded in getting an all-Alaska LNG project to be treated equally compared with a pipeline all the way to the Lower 48 States. Now both projects are on an equal footing as far as gaining federal financial incentives. Neither project has an artificial advantage over the other. Now the key is that we finish passage of the gas line provisions in the energy bill so that any project gets the important assistance that it needs to bring gas to America and to produce over 1 million jobs and associated economic benefits for this country," said Murkowski, in urging Senate approval of the language contained in the energy bill.
"Everyone's goal is to get a system in place to move Alaska's huge reserves of natural gas to market in the Lower 48. Most all parties have agreed that it is appropriate for the government to offer loan guarantees to reduce the financing costs of these expensive projects. We have gotten the provisions included in the energy bill, won passage for them in the House and won final passage of them in the Omnibus bill. Now we have to finish the job in the Senate," said Murkowski.
The loan guarantee, if the Energy Bill's provisions are approved, guarantees 80 percent of the first $18 billion of cost of up to a 3,500-mile pipeline from Alaska's North Slope to the Midwest. The language in the recently signed Omnibus bill extends the same guarantee should gas producers, an Alaska gas line authority or some other qualified entity, proceed not with the overland "southern" pipeline route, but with a LNG project to move gas from tidewater to the Lower 48 States.
The guarantee is for the same amount and would cover financing of the 800-mile pipeline in Alaska, along with the additionally needed liquefication plant to convert the gas to a liquid for shipment and LNG tankers to transport the LNG to the Lower 48. The guarantee would not cover the cost of regasification plants in the Lower 48.
Murkowski said the loan guarantee for the all-Alaska project was justified because the project is required to use more expensive Jones Act-compliant tankers. She noted that the federal incentives will be available to only one of the two types of projects to be determined by the Secretary of Energy based on a determination of the financial feasibility of the competing projects.
Murkowski noted the guarantee for the overland route would cover either a project by the gas producers: Conoco-Phillips, BP and Exxon submitted last Friday to the state for benefits under the state's Stranded Gas Act, or a project by gas pipeline companies headed by Mid-American Energy, which includes CIRI and Pacific Star Energy, a consortium of other Alaska Native corporations, submitted last Thursday to the state for its review.
She added it is imperative for the overall energy legislation to pass since all parties interested in moving Alaska gas to market have indicated that the incentives and regulatory changes in the energy bill are vital for them to proceed. The regulatory changes include expedited permitting and environmental review, job training assistance, route provisions, and guarantees that gas will be available for Alaska Railbelt use and that future gas producers will be able to ship their gas through any line that proceeds.
Murkowski said an Alaska gas line project is vital for the nation for a host of reasons. Its 4.5 billion cubic feet of gas daily will help meet the nation's prospective deficit within the next decade of between 10 and 20 bccf a day. Gas line construction will provide in excess of $5 billion in worker payroll, while a recent study by the National Defense Council Foundation found that a gas pipeline would fuel 1.14 million jobs nationwide, about 160,000 of them in California and 72,000 in Washington State alone the nation's largest prospective individual job generator.
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