RDC’s 24th Annual Conference Presentations
Senator Lisa Murkowski
Energy Bill handout distributed for Senator Murkowski at the Conference
Good afternoon. I wish I could be with you in person, but this session of Congress is running longer than anticipated and my duties require me to remain in Washington. More importantly, I would like to thank you for the opportunity to speak with you today.
I understand that the theme of your 24th annual conference this year is “New Frontiers, Expanding Opportunities.” Earlier this week a comprehensive energy bill agreement was completed by the House and Senate conference committee that will do just that for Alaska – it will open new frontiers and expand opportunities in Alaska.
While a majority of Alaskans have been following the fate of ANWR and the natural gas pipeline in the energy bill, I believe that it is important to stress the other Alaska initiatives and projects that are contained in the final bill, including nearly $1 billion dollars for rural energy projects. This additional funding will be a giant benefit to Alaska in the future. Best of all, it is automatic, not subject to future acts of Congress.
It is also important to note that the energy bill compromise was reached after exhaustive talks about the series of financial incentives we sought in order to help spur construction of a gas pipeline to move Alaska North Slope natural gas to market. The gas line tax provisions were revised to cover both construction of a pipeline along the existing oil line and Alaska Highway through Canada to the Lower 48, or construction of a trans-Alaska gas line to tidewater where the gas would be liquefied for shipment to the Lower 48. The language in the energy bill helps to facilitate construction of an Alaska gas pipeline to proceed in the future.
The bill won’t produce as much new oil production as a bill with ANWR would produce, but it does provide more opportunities to produce oil and gas in NPRA and the Outer Continental Shelf. It is a balanced energy bill. Not getting ANWR in the energy bill is a disappointment, but the continued threat of Democratic filibusters kept ANWR out of the bill. I guarantee that your Alaska Delegation will never give up on winning the few more votes that we need to overcome a filibuster and get ANWR opened. ANWR is never finished until we win.
We worked hard to include the tax and regulatory provisions necessary to get badly needed Alaska natural gas to market. America will need our natural gas to deal with our gas shortages expected in the next decade. This legislation should allow Alaska’s 35 trillion cubic feet of gas to flow to the lower 48.
The gas line language in the energy bill gives an 80% federal loan guarantee of up to $18 billion dollars and accelerated depreciation that allows the pipeline builders to depreciate sections of the pipeline built in Alaska for tax purposes over 7 years, instead of the current 15 years allowed under federal law. And to qualify for accelerated depreciation a pipeline must be 42 inches or bigger. The bill also includes an enhanced recovery tax that will allow pipeline and gas owners to gain a tax credit for the cost of the needed natural gas conditioning plant that will be built on the North Slope to prepare gas for shipment. This tax provision alone could save producers about $400 million dollars.
My goal all along was to resolve the regulatory hurdles that could slow pipeline construction, while getting federal financial assistance to cut financing costs and reduce the project’s cost. We’ve done that. Now is the time for all interested parties and the state to negotiate state fiscal terms and finalize a deal for this project. If the state provides some assistance there should be no good reason why the companies couldn’t afford to bring Alaska gas to market. The gas line should bring thousands of direct construction jobs, tens of thousands of indirect jobs to the state, and anywhere from $450 million dollars to $1 billion dollars a year in added revenue to the state, once the line is operational.
For those of you following discussions about the proposed LNG project, I sought an amendment in the conference committee to allow the loan guarantees to be applied to that project. Unfortunately, that amendment was defeated by Democrats and a few Republicans in the House who were trying to protect some parochial interests.
The truth is it is very difficult to convince members of Congress, both Republicans and Democrats, that an Alaska gas pipeline and ANWR should be enacted in the same year. They begin to see Alaska as asking for to much. Well, we all know that is not true, but sometimes perception becomes reality in Washington. With federal work complete on the gas pipeline, this should strengthen our negotiating position for ANWR in future talks.
The gas pipeline is important, and we have taken the positive first steps to move it forward – more than anyone thought we would get when this debate started. Now the State must act, and I urge that action to take place soon.
Besides language for the gas pipeline, I would also like to highlight a new provision in the bill to provide Alaska at least $50 million a year for the next decade to fund rural energy developments. The federal funding will go directly to the Denali Commission to fund energy generation and development in Alaska, including fuel cells, renewable energy projects, alternative energy projects, energy transmission lines and interties, fuel tank replacement or fuel transportation network development. The money will come from the federal government’s share of oil development in the National Petroleum Reserve, Alaska, and federal royalties from offshore development in the lower 48. This could help fund power improvements, such as my proposal to bring power to the Kuskokwim Region and other various intertie projects. This language alone means that Alaska has the possibility of nearly $1 billion dollars in rural Alaska investments.
And, if NPRA is producing in the future to the point where funding will be directed into this effort, it will mean Alaska will be closer to receiving the 90/10 split promised to us in Statehood from NPRA production until 2024. The state’s share of revenue from NPRA will remain untouched.
This rural energy effort will be the biggest single investment in rural power projects for Alaska since Statehood. The federal government brought electricity to the South through the creation of the Tennessee Valley Authority; it electrified the Pacific Northwest through the creation of the Bonneville Power Administration; and it brought power to the Arizona and California valleys. Alaska’s rural needs are no different, and with this investment rural Alaska will be brought in to the 21st century when it comes to power needs.
The energy legislation also includes my proposal for additional rural energy aid that will provide up to a $35 million dollar grant, $5 million per year for seven years to Alaska to help fund its Rural Power Cost Equalization program which subsidizes the high cost of electricity in rural Alaska. The aid will contribute to the state endowment to fund the PCE program, likely guaranteeing full power cost assistance to rural residents, even in the face of state budget woes.
Plus, the bill will make grants and loans available to Alaska Native corporations for the construction of power projects statewide. It provides $200 million for grants for additional energy development on rural lands and $2 billion to guarantee loans for energy developments on Native lands – Alaska Native corporations being eligible for the money, as are village councils. The bill includes a preference for Alaska Native or village corporations to gain the loans for businesses that sell electricity, energy products and byproducts to federal agencies at prevailing market prices.
For those of you interested in Alaska’s coal industry, the bill authorizes the Department of Energy to make a loan of up to $125 million to retrofit the Healy clean coal plant with new equipment so it can produce power economically without causing air pollution problems. The loan should make the plant economical, provide vitally needed power to the Fairbanks area at reasonable cost and aid the Usibelli coal mine and its workers.
The legislation also includes another provision to finally give Alaska a share of Outer Continental Shelf oil and gas lease revenues, and to allow the Secretary of Interior to provide royalty relief to make more OCS development cost effective. Under the provision, Alaska will receive about $5 million a year at present – more if OCS oil is produced in Alaska waters – half going to the state and half to local governments affected by offshore development.
Don’t listen to the negative press reports about this bill. There are great things in this bill for Alaska, for the University of Alaska, for research and development in Alaska. Rarely do newspapers make money by reporting happy news. They focus on the negative.
The history of Alaska is based on pioneering men and women who developed our precious natural resources. The future of Alaska is much the same, but we will utilize amazing science and technology to go further and farther than anyone ever imagined in developing our natural resources in an environmentally responsible manner, for the benefit of Alaska and the U.S as a whole. Together we can make this bright future a reality for Alaska, if we all work to open new frontiers and expand opportunities in our state.
Thanks again for the opportunity to speak with you today and a special thanks to all of you for your tireless efforts on behalf of Alaskan resource development. Your hard work and dedication make it possible to create good jobs in Alaska that help sustain our economy. Best wishes for a productive and successful conference.
