McGuire wants railroad to built gas line to Southcentral

Feb 28, 2010 — Alaska Journal of Commerce

Tim Bradner

Feb. 26, 2010 (McClatchy-Tribune Regional News delivered by Newstex) -- State Sen. Lesil McGuire has introduced legislation that would expedite development of a stand-alone gas pipeline from the North Slope to Southcentral Alaska by giving authority for the project to the state-owned Alaska Railroad Corp.

Railroad spokeswoman Stephanie Wheeler said the corporation has not had time to analyze McGuire's proposal. "We're still going through it," she said.

The bill expands the railroad's existing authority to engage in a North Slope natural gas pipeline project and directs the corporation to pursue the permitting, design and financing of a bullet line.

It also grants a conditional right-of-way to the railroad and waives the best-interest finding for the project, which McGuire called the "Alaska Stand Alone Project."

"The railroad is uniquely situated as a public corporation charged with promoting economic development to pursue this project," McGuire said in a statement. "In shipping coal and jet fuel, the railroad is already heavily involved in moving energy and, with its existing authorization to issue up to $17 billion in bonds for a gas pipeline, well equipped to move this project forward."

The state railroad corporation has the authority to issue tax-exempt industrial development bonds for private projects, a type of tax-exempt financing that the government ended years ago.

An exception was made for the Alaska Railroad, however, when the government transferred the rail line to state ownership. However, the railroad has never tested its ability to actually secure tax-exempt status on bonds issues for a non-railroad private project.

Some use of the tax-exempt authority was made in recent years when the railroad financed rail-related capital improvements. The railroad's board and the state Legislature did approve the railroad's plan to help Agrium Corp. finance a large coal gasification project at the company's fertilizer plant near Kenai, but the project was never built.

McGuire believes financing and building a pipeline is within the railroad's mandate as a public transportation company charged with encouraging economic development, and that the tax-exempt status of bonds issued to build an in-state pipeline would be approved by the Internal Revenue Service.

The senator recognized that North Slope producers and TransCanada Corp. (TSX:TCA.Y) (TSX:TCA.X) (NYSE:TRP) (TSX:TRP) are working on a possible large-diameter pipeline from the North Slope, but still sees a smaller pipeline to Southcentral Alaska as needed.

"AGIA is proceeding on its own path and Alaskans are hopeful that the AGIA project continues to make progress. Someday it may bring Alaska's gas to the Alberta," McGuire said. "But we cannot put all of our eggs in one basket. My goal is to move the bullet line away from a process driven by state agencies and toward a more take-charge, private-sector oriented effort that public corporations like the Alaska Railroad bring to the table."

McGuire's bill would sidestep an existing effort within the state administration to do planning and permitting for a bullet line. It also sidesteps efforts by another state corporation, the Alaska Natural Gas Development Authority, that have been focused on a spur pipeline that would bring gas to Southcentral from a large-diameter pipeline now planned to be built through Interior Alaska by private industry.

In addition to transferring responsibility for the Alaska Stand Alone Pipeline to the railroad, the bill points to the looming gas shortages in Cook Inlet and states that the in-state use of natural gas for economic development and the needs of Alaskans should be the state's priority.

Journal reporter Sean Manget contributed to this report.

Newstex ID: KRTB-0097-42432436