Benefits for Alaskans
Firm Timeline | Pipeline Access and Expansion | In-state Energy Needs
Jobs for Alaskans | Other | Project Construction Inducements
Maximum benefits for Alaskans from a natural gas pipeline include long-term instate jobs, solutions for the state's energy needs, and long-term financial security for Alaska's citizens and the state. AGIA establishes legally enforceable commitments by an AGIA licensee that will ensure these benefits are realized.
A. Firm Timeline for Project Development
AGIA requires the following licensee commitments for moving the gas line project forward in a timely fashion:
- For an interstate project, commit to conclude a binding open season within 36 months of license issuance and use Federal Energy Regulatory Commission (FERC) application procedures for a FERC certificate of public convenience and necessity. (AS 43.90.130(3)).
- For an intrastate project, commit to conclude a binding open season within 36 months of license issuance and use Regulatory Commission of Alaska (RCA) procedures for a certificate of public convenience and necessity. AS 43.90.130(4).
B. Pipeline Access and Expansion
Continuing exploration and development of North Slope gas resources requires ensuring that all gas producers, large and small, have access to the pipeline and that transportation costs are not a barrier to new explorers and developers. To that end, AGIA establishes the following licensee commitments:
- Assess market demand for additional pipeline capacity at least every two years. AS 43.90.130(5).
- Expand the project in reasonable engineering increments and on commercially reasonable terms that encourage exploration and development of gas resources in the state. AS 43.90.130(6).
- Propose and support rolled-in rates to cover expansion costs (up to 15% above the initial rates). AS 43.90.130(7). 1
- Propose and support rates for the proposed project and any North Slope gas treatment plant that the licensee may own that are based on a capital-structure of not less than 70 percent debt. AS 43.90.130(10).
- Manage and mitigate potential cost overruns. AS 43.90.130(11).
- Not include in the licensee's rate base the state reimbursement received, and that the reimbursement shall be used as a credit against licensee's cost of service. AS 43.90.130(18). 2
C. Meeting In-state Energy Needs
To help meet Alaska's energy needs, AGIA requires the licensee to make the following commitments:
- Provide a minimum of five instate delivery points of natural gas in the state. AS 43.90.130(12).
- Offer firm delivery service in the state as part of the tariff regardless of whether any shippers bid successfully in a binding open season for firm transportation service to delivery points in the state, and commit to offer distance-sensitive rates to delivery points in this state consistent with federal regulation. AS 43.90.130(13).
D. Jobs for Alaskans
To ensure the most jobs for Alaskans during pipeline development, construction and operation, AGIA requires the licensee commit to the following:
- An Alaska headquarters for the project. AS 43.90.130(14).
- Hire qualified residents from throughout the state for management, engineering, construction, operations, maintenance, and other positions on the proposed project to the maximum extent permitted by law; contract with businesses located in the state to the maximum extent permitted by law; establish hiring facilities or use existing hiring facilities in the state; use, as far as is practicable, the job centers and associated services operated by the Department of Labor and Workforce Development and an Internet-based labor exchange system operated by the state. AS 43.90.130(15).
- Negotiate, before construction, a project labor agreement to the maximum extent permitted by law. AS 43.90.130(17).
Other commitments required of the licensee to protect the state's interests are:
- File an application by the established deadline. AS 43.90.130(1).
- Provide a detailed description of the project, including the pipeline route, information regarding receipt and delivery points, an economic and technical viability analysis, an economically and technically viable work plan, timeline and budget. AS 43.90.130(2).
- Explain how the applicant will deal with a North Slope gas treatment plant. AS 43.90.130(8).
- Propose a percentage and total dollar amount for the state's matching contribution. AS 43.90.130(9).
- Waive the right to appeal the award of a license to another applicant. AS 43.90.130(16).
- Describe the applicant and participating entities. AS 43.90.130(19).
- Demonstrate that the applicant is ready and able to perform the project activities. AS 43.90.130(20).
F. Project Construction Inducements
AGIA recognizes the importance of protecting the state's long-term interests in a natural gas pipeline project. The Act protects those interests through terms established as commitments made by an AGIA licensee. In exchange for making those commitments and to encourage forward movement on development and construction of the pipeline, AGIA offers the following inducements to the licensee:
- A $500 million financial inducement to offset some of the risk assumed by the developer of a gas pipeline and to induce the construction of the pipeline. AS 43.90.110.
- A regulatory inducement in the form of a pipeline coordinator tasked with facilitating and expediting the permitting of a natural gas pipeline and limiting permit conditions to those required by law. AS 43.90.250 and .260.
1 "Rolled-in rates" pro-rate the costs of expansions among all shippers, both old and new. Rolled-in rates help ensure reasonable transportation costs so that cost does not become a barrier to new explorers and developers.
2 AS 43.90.130(10), (11) and (18) also help ensure the state receives a fair and consistent return on its gas resources through lower transportation costs (tariffs); transportation costs are deducted from the state's royalty share of its gas resource and the state's production tax.
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Alaska Pipeline Project