Energy fund projects veto defended

July 21, 2006

SPECTRUM/Frank Murkowski

It may have come as a surprise to some Alaskans that I line-item vetoed $73.5 million in Railbelt energy funds when I signed the Fiscal Year 2007 capital budget on June 30.

That sentiment has certainly been expressed to me by some who work for the utilities that stood to benefit from the appropriations.

But I stand by the action I took. Here's why:

The $73.5 million was the last remaining piece of the appropriations made in the early- to mid-1980s to fund the Susitna dam project. This two-dam project would have been built on the Susitna River at an estimated cost of $5 billion, but it would have generated 1,620 megawatts of power for the Railbelt.

After its opponents hammered the final nail in the Susitna dam's coffin, ensuring it would not be built using the first flush of money from the oil pipeline, the Legislature slowly, over the years, parceled out those funds to other projects it could agree fit certain criteria. The late Rep. Ramona Barnes and others created the Railbelt Energy Fund in 1986 with approximately $285 million in remaining Susitna project appropriations.

If we fast-forward to today, I think it is important that we look at the uses proposed for those dollars in the FY2007 capital budget and compare them to the purpose for which the funds originally were intended: to increase power generation capacity to serve the Railbelt.

The projects I vetoed included funding for infrastructure for Chugach Electric, Anchorage Municipal Light & Power, Matanuska Electric and Homer Electric, and several other projects.

While these various projects benefit each of those utilities, they do not contribute to the overall goal of increasing generating capacity for the Railbelt as a whole.

Up to a point, I was willing to support the utilities in their proposed use of the funds, so long as they were responsive to my request to them that they work cooperatively to expand the generating capacity to meet the projected demand of the Railbelt.

That point was breached when it became apparent that some believed the generation problem would be resolved if either or both of the big industrial users of natural gas on the Kenai - the Agrium fertilizer plant and the Conoco-Phillips LNG plant at Nikiski - were to cease operating. That, they reasoned, would free up enough natural gas from Cook Inlet to satisfy the growing need for the gas for electrical generation.

This was simply unacceptable.

The fertilizer plant and the LNG plant are major, industrial employers on the Kenai, and are vital to that area's economy. They employ, directly or indirectly, hundreds of Alaskans, and I am doing everything I can to continue to support their operation and the hundreds of jobs at risk.

There is something especially morbid about looking forward to an industrial plant closing so another industry can pick up the pieces.

My view of the world is more optimistic. For one thing, we expect to gain approval of an Alaska Highway gas pipeline, to move 4.5 billion cubic feet of North Slope gas to market daily. Our contract allows off-take points in the system to accommodate in-state use. The proposed parallel line from Fairbanks to Mat-Su, Anchorage and the Kenai depends on the continued operation of the two large industrial customers to make it economical.

Although I vetoed $73.5 million, I let stand an appropriation of $800,000 from the Railbelt energy funds. I expect those funds to be used to get the Railbelt utilities coordinated in an effort to identify and move forward power generating projects that will benefit everyone in the Railbelt, from Homer to Fairbanks.

The state of Alaska has a crucial role to play in the effort to bring affordable, dependable energy to Alaska residences, business and industry.

Through this current effort, my expectation is that we can coordinate a comprehensive effort with the individual

utilities for the benefit of all ratepayers.

Gov. Frank Murkowski is a Republican who was elected in 2003 after serving in the U.S. Senate.