Viable gas contract key to state's future

June 16, 2006

SPECTRUM/Sarah Palin

Alaska is poised to enter its finest hour. Markets demand our valuable resources, and entities are competing to tap them. Thanks to the courageous and innovative founders of Alaska's Constitution, we are blessed with a magnificent blueprint to pen an agreement that will fund our economy generously, while maintaining the flexibility to adjust to a volatile global economy.

I'm neither opposed to, nor dominated by, &#8220big oil.” Despite campaign mendacity you may hear, Alaskans aren't anti-industry.

My husband joins thousands of Alaskans making a living as &#8220Slopers.” As a former mayor, president of Alaska's Conference of Mayors, and chair of Alaska's Oil and Gas Conservation Commission, I appreciate industry and, more importantly, understand its economics and motivations.

Alaskans recognize that oil executives seeking maximum revenue for their shareholders are simply doing their job. More power to them. Industry should not be criticized for fulfilling fiduciary duties, providing Alaskans jobs and revenue in the process.

But it takes an equally intelligent administration to ensure that Alaskans are neither taken advantage of nor denied our fair share. Alaska's &#8220CEO” must possess the same savvy and steely nerves to use constitutional leverage to bring Alaska and the oil companies together into a mutually beneficial agreement to tap and market our resources.

Recently, a superb team of top DNR officials left Gov. Murkowski's administration after they inquired, confidentially, into the legality of aspects of ongoing gas line negotiations. That these valuable Alaskans were lost is shameful. They should be ushered back to state service so we might again benefit from their expertise and integrity. I'd hire them.

This experienced team walked away from the gas line negotiations and the Murkowski administration, believing the &#8220deal” was not in Alaska's best interest. Their concerns include the following.

First, the proposed contract doesn't guarantee a gas line. It's a one-way deal that binds the state and merely lays out terms of an agreement to study whether Exxon Mobil, British Petroleum and ConocoPhillips may build a line together, someday. It's premised upon the fragile assumption that these companies, already fierce competitors, will remain allied on the project in perpetuity.

Second, the contract locks tax rates for these three companies for 30-45 years without requiring construction timelines or jobs for Alaskans. Up-front tax structures are fine, but must be adjustable with fluctuating market conditions.

Third, the contract surrenders Alaska's well-established executive, legislative and judicial review powers (including voter initiative powers should Alaskans desire changes). The constitutionality of such provisions is questionable, as we'd be surrendering our sovereignty.

Fourth, we shouldn't settle for any agreement that doesn't guarantee gas for in-state use on reasonable terms. As Cook Inlet supplies diminish, the concept of importing natural gas while ours goes through Canada is abhorrent.

Fifth, it seems that if gas prices dropped to certain levels, we'd actually pay oil companies for the privilege of producing our gas. We assume major costs and risks, including contributing seven-eighths of our gas to make the project happen. All told, our concessions could nearly equal the cost of the entire project, yet we'd only own 20 percent of it.

Sixth, the contract forces us to ship and market our gas, competing against the world's most skilled marketers where they dominate.

Seventh, administrators have been less than open in disclosing details of alternatives like TransCanada, MidAmerican, and the Alaska Gasline Port Authority.

Eighth, the deal isn't legal. The administration was forced to propose sweeping legislation to amend the Stranded Gas Act to retroactively legalize their deal. Ironically, at least one other alternative was hypocritically rejected for &#8220not being legal under the Act.”

Like other Alaskans, I crave a profitable gas line agreement. But it must pass constitutional muster and be derived through a competitive process where all viable proposals are fairly and openly considered.

My preferred alternative will first provide gas for energizing Alaska's homes and businesses, employ Alaskans and reduce rural energy costs. These are all things I find worth defending.

We'll finally know which alternative is most beneficial when we unlock this process, allow all viable entities to compete for the right to tap our resources and progress this project sensibly and legally.

Republican candidate for governor Sarah Palin is a former Wasilla mayor and former chair of the Alaska Oil and Gas Conservation Commission.