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By NICK BOWMAN
Daily News Staff Writer
The just-begun special session has direct consequences, and could put hundreds of millions of dollars in energy construction on the table, for Southeast Alaska.
Lawmakers have gathered in Juneau on Saturday for a special session to debate the future of the $55 billion natural gas pipeline project.
They’ll also debate whether to buy out the stake of Canadian pipeline construction company — TransCanada — in the project, which would have a bill of between $110 million and $150 million.
Buying out TransCanada has the support of Gov. Bill Walker, Sen. Bert Stedman, R-Sitka, and Rep. Dan Ortiz, I-Ketchikan.
The politics of the pipeline feel far away for many in Southeast, as most residents will never lay eyes on the construction, production or exports involved.
But that doesn’t mean they won’t feel the consequences.
Robert Venables and Bob Bartholomew sit on the governor’s Municipal Advisory Gas Project Review Board. Venables works as Southeast Conference’s energy coordinator, and Bartholomew is the finance director for the City and Borough of Juneau.
On Thursday, the two laid out how the decisions in the coming days and months will affect Southeast.
Venables first discussed Senate Bill 138, signed into law two years ago by former Gov. Sean Parnell. The law created an energy capital fund for communities who wouldn’t directly benefit from the natural gas pipeline.
“It's estimated that could be more than $100 million a year that would go into this energy fund if that pipeline gets built,” Venables said in a telephone interview from Juneau.
Those dollars would fund construction of energy projects in Alaska, and Venables described the energy capital fund as a possible replacement for the declining renewable energy fund, which sources its payments from the state’s general fund.
Starting at $100 million in 2008, the renewable energy fund has been paying out less money each year since 2011. Venables said it “pumped a lot of money into Southeast — more into the Southeast region than any other region in the state.”
With the state’s budget crisis pinching the general fund, the natural gas pipeline could step in to benefit Southeast and rural Alaska through SB138.
It’s “one good reason for Southeasterners to get behind the natural gas project,” Venables said.
Bartholomew focused on payment in lieu of taxes, which could total $12 billion for statewide municipalities in the two decades after pipeline construction.
One of the tasks put to the advisory board was to come up with a system that would provide funding to communities affected by the pipeline while avoiding the “very contentious, litigious, time-consuming process” created by requiring oil producers to pay property taxes to municipalities along the Trans-Alaska Pipeline, Bartholomew said.
The details of the program will be approved by the Alaska Legislature, Bartholomew said, and are being negotiated by the Walker administration, oil producers and lawmakers.
What’s emerging from that process are payments in lieu of taxes that would address the wear-and-tear on communities — requiring spending on roads, public safety and services — from the pipeline and its construction.
The “vast majority” of the payments would go to municipalities touched by the pipeline, Venables noted.
“They're looking at direct impacts, but there can be direct impacts to communities not directly there,” Bartholomew said.
Southeast would likely feel the effects of the wage bubble created by huge demand during pipeline construction.
Alaska is far more developed as an economy than in the pipeline days and wouldn’t boom and bust to the same extent.
Still, average wages grew $20,000 from 1963 to 1973. The statewide average exploded from 1975 to 1977, jumping from an annual average of $57,000 to $82,000, according to the Alaska Department of Labor. The spike quickly fell, but statewide wages stayed above an average $50,000 for the next 20 years, including in Southeast.
“Back then, you couldn't hire a policeman, you couldn't hire a heavy equipment operator, without paying exorbitant wage increases because there was so much demand at the construction site,” Bartholomew said.
No decision on whether Southeast would be eligible for impact payments from wage inflation has been made, but it’s an example of “direct impact to us from construction of a line,” he said.
The case for any of that money going to Southeast and rural Alaska is that all Alaska residents own the resource, Venables said.
“Everybody is sharing some of the risk,” he said.
The advisory board will begin discussing how to allocate any payments at the next board meeting, the two said, which hasn’t been scheduled.
Sen. Stedman, speaking at the Daily News on Thursday, said he still supports spending the more than $100 million needed to get TransCanada out of the project.
While many in the state Republican party wonder where, in the middle of the budget crisis, that money should come from, Stedman says up-front that lawmakers should pull it out of the Constitutional Budget Reserve of the Alaska Permanent Fund’s earnings reserve.
Getting TransCanada out of the project would put the state in position to own 25 percent of every part of the project — the North Slope conditioning plant, the pipeline and the south coast liquefaction plant.
It would expose the state to more risk up front and throughout the life of the project but mean billions more in revenue.
“It'll make the business relationship between us and the three producers in our gas arena much more amenable on what and when we do things,” Stedman said.
Stedman not only supports a cash buyout of TransCanada, he said he wants the state to tap savings to fund its portion of the project and strongly opposes resorting to debt.
“It takes a lot of the risk out of the project,” he said. “Think of it like ... if you owned an eight-plex. If two renters moved out and you owed a big mortgage — your friendly banker, he doesn’t care ... the 15th of the month, your payment is due.”
“Do not bond it,” he continued. “Cash it out.”