Intent of AGIA
The stated intent of the Alaska Gasline Inducement Act is to encourage expedited construction of a natural gas pipeline that
facilities commercialization of North Slope gas resources in the state;
promotes exploration and development of oil and gas resources on the North Slope in the state;
maximizes benefits to the people of the state from the development of oil and gas resources in the state; and
encourages oil and gas lessees and other persons to commit to ship natural gas from the North Slope to a gas pipeline system for transportation to markets in this state or elsewhere. (AS 43.90.010).
The Act meets this intent through provisions establishing an Alaska Gasline Inducement Act License and putting into law the state's requirements for maximizing benefits to the people of Alaska during and after pipeline construction. These terms include requiring an AGIA licensee commit to take specific actions to produce low tariffs (transportation costs) so that tariffs are not a barrier to continuing exploration, development and investment in Alaska's gas basin. Other required commitments include regular expansions of the pipeline, local hire, instate delivery service at reasonable costs and a firm timeline for development.
In exchange for meeting the state's requirements, the successful AGIA project applicant is entitled to certain inducements that will facilitate project development. An AGIA license entitles the licensee to up to $500 million in state matching funds to offset some of the initial risk borne by the project developer and to a project coordinator who will help facilitate and expedite project permitting requirements.
AGIA also addresses the "upstream" needs of the project. Upstream is where the gas resource is produced, gathered and processed for shipping in the pipeline for delivery to market (the pipeline is "downstream"). AGIA provides for "resource inducements" to encourage North Slope oil and gas producers to commit gas for shipment on the pipeline. An oil and gas leaseholder who commits to ship gas in the pipeline in the first binding open season will be entitled to favorable changes to the state's royalty valuation method and to a 10-year freeze on gas tax rates with the rate set at the start of the first binding open season and beginning at the commencement of commercial operations.
Finally, to encourage the participation of non-oil and gas leaseholders, AGIA provides for resource inducement vouchers.