Retro Blog: Palin-occhio?
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June 23, 2008: It's one thing if Governor Sarah Palin wants to advocate for her gas pipeline plan called AGIA, but it's completely another when she stoops to misleading the press and the public.
In raw footage of a press interview posted online by Kyle Hopkins of the Anchorage Daily News, Palin is speaking to the public through the media about how AGIA and TransCanada are critical to the best interest of Alaska.
"What Alaskans need to remember is that TransCanada builds independent pipelines where their motivation is to expand for more exploration and more development. That motivation is what Alaska needs for our future."
"Not a locked up, closed in pipeline that is solely controllable by those who hold the leases to oil & gas development, but an independent pipeline that is motivated to flow as much energy as possible, that's what Alaska needs."
A "locked up, closed in pipeline," what pipeline is Palin talking about?
Certainly not the Alaska Natural Gas Pipeline.
Maybe if the governor would spend less time attending ribbon cutting ceremonies and giving speeches normally reserved for the Lt. Governor, she might have the time to actually educate herself on the biggest issue facing Alaska's economic future.
If she had, she would have known that FERC has said since day one that "the law says this is an open access pipeline", which obviously means this is not going to be a "locked up, closed in pipeline" as she told the press.
She would have known that the 2004 Alaska Gas Pipeline Act gives unprecedented power to FERC to regulate both expansion and access for independent explorers and producers.
She would have known that FERC has significant tools like standards of conduct rules, affiliate protections and the power to levy fines if the producers try and unfairly keep competitors out. "We can fine them up to a million dollars a day", FERC testified last week.
She would have known that the reason why FERC has no anti-trust concerns if the pipeline is producer owned is because they have the ability to make sure anyone who wants to ship gas, can.
She would have known that even the Anchorage Daily News editorials on AGIA, which look like they were written by Marty Rutherford, said that FERC will consider all parties on all issues.
In addition, she would have also known that FERC's strong pipeline oversight is due to the fact that Congress recognized that the producers might just be the only ones who could actually afford to finance the project.
But shouldn't Governor Palin already know this?
After all, AGIA is her baby.
There are other things that Alaskans need to understand about AGIA, like the offsetting downside to the mindless mantra of rolled-in rates on expensive pipeline expansion capacity.
Ordinarily under FERC rules if there is a pipeline expansion, and the new capacity is more expensive on a per unit basis than the base capacity, the shippers on the additional capacity pay the difference. This makes perfect sense. Otherwise, the base shippers are subsidizing the expansion shippers.
AGIA requires rolled-in rates, which means the additional costs are spread among everyone. This is the Palin administration’s policy to help out exploration; by having the base shippers pay for new capacity, it will encourage exploration
Of course this is the reason why a pipeline company, like TransCanada, and not a producer, could easily abide by the AGIA terms. They won’t be subsidizing the expansion shippers, the producers will. TransCanada is just happily spending other peoples’ money.
However, since the base shippers will be subsidizing the expansion shippers, this is one reason why the current North Slope producers will never commit gas to an AGIA project, why it is virtually certain AGIA will have a failed open season, why TransCanada will subsequently fail to get a FERC certificate, and why AGIA will fail to result in the construction of the pipeline.
However, even for those who support AGIA and want the producers to subsidize explorers, there are some very important reasons why rolled-in rates should give Alaskans pause.
First, rolled-in rates will encourage explorers to postpone exploration, and to not commit gas at the first open season. Because their expansion capacity will be subsidized, they can afford to sit back and wait and see whether the pipeline has cost overruns, and how gas markets look down the road. If the pipeline turns out to be expensive, or gas markets falter, they can simply bow out of the project. But if things turn out good, they can explore and commit later knowing they won’t be penalized for waiting. In essence, the producers will be absorbing the explorers’ exploration risk, with the result being deferred exploration, and a smaller base pipeline with higher tariffs, which costs all Alaskans.
Second, by having producers subsidize explorers, there is a transfer of value from the producers to the explorers. Under the state’s production tax, the progressivity component is based on a company’s statewide net per BTU value. The subsidy will shift value from the higher tax companies to the lower tax companies, with a resulting reduction in state production tax.
Moreover, much of Alaska’s potential gas resources are on the federal outer continental shelf, for which Alaska receives no production tax. The transfer of value from Alaska gas to federal gas would induce a precipitous decline in production tax receipts.
Palin's untruthful comments about AGIA raise the question:
Is this a case of a governor who is uninformed about AGIA, or a governor who views the truth as whatever benefits AGIA?
Either way, it's just one more example why AGIA will not deliver Alaskans a gas pipeline.
To see the entire interview:
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