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Key lawmaker calls Alaska gas line deal flawed


July 27, 2006
Thursday AM

ANCHORAGE, Alaska -- A key state lawmaker who is chairman of a committee considering Gov. Frank Murkowski's proposed natural gas pipeline contract said this week that it needs a major overhaul before the Legislature should even consider endorsing it.

Sen. Gene Therriault, a North Pole Republican who heads the Legislative Budget and Audit Committee, in a 52-page letter laid out what he said are major flaws in the contract, which would set state tax, ownership and other terms if Alaska's big three producers build a pipeline for the North Slope's huge reserves of gas.

Murkowski and his top aides negotiated the contract in private with BP, Conoco Phillips and Exxon Mobil for more than two years. They unveiled the draft deal for public review and comment in May.




Therriault, whose committee is playing a key role in the Legislature's review of the proposed gas deal, was one of a handful of lawmakers the Murkowski administration briefed as the contract negotiations occurred.

He said he felt compelled to express his misgivings in writing before the public comment period ended Tuesday.

"Some of these concerns I've expressed to the administration over the past year and a half," Therriault said.

Therriault is not the only public figure who has big problems with the draft contract, which has become the dominant issue in an election season where the governor's office and 50 of the Legislature's 60 seats are on the ballot.

Echoing other criticism, Therriault argues in his letter that the deal would be generally tipped in the oil companies' favor.

Under the proposal, the state would freeze certain oil taxes for decades. The idea is to give the producers certainty about their tax bill before they commit to the $20 billion-plus pipeline investment.

But Therriault says the contract doesn't balance that provision with strong enough commitments from the producers to actually build a pipeline.

"It has no time limits or performance standards for completion of a pipeline, while effectively precluding the state from seeking alternative means to construct a pipeline if progress is not being made," he wrote.

Therriault recommends setting more definite work commitments, including project milestones that the producers must meet by specific dates.

His other recommendations include stripping oil taxes from the contract, giving state regulators jurisdiction over parts of the line and giving state officials more say in how the project is managed.

Will Vandergriff, a Murkowski spokesman, said the administration had received Therriault's letter but could not comment on it Tuesday.

The Legislature is meeting in a special session to continue working on oil tax changes and legislation related to the pipeline deal. The governor also has said he wants lawmakers to endorse the pipeline contract before they adjourn.

But the chances of that happening during this special session, or even by the end of this year, appear to be diminishing.

A growing cadre of lawmakers from both parties have expressed serious misgivings about the contract.

"I'm not supportive at all," said House Speaker John Harris, R-Valdez. As for other Republican House members, "there is marginal support," he said.

For its part, the House will concentrate on passing a new oil tax and is unlikely to get to a gas contract vote anytime soon, said Harris, who has endorsed John Binkley for the Republican nomination for governor in the Aug. 22 primary. Murkowski also is running in that primary.

"I'm not going to do anything as speaker to prohibit the will of the Legislature to take action, but I don't thing there is that will at this point," Harris said.

Therriault said in an interview Tuesday that it's possible the Legislature could ratify a gas pipeline contract this year, but only if the governor's pipeline team can persuade the oil companies to accept some major changes to the tentative accord.

"The ball is back in the administration's court," he said. "We need to see what modifications they'll request from producers and what they're willing to entertain to see if this contract has any chance."


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