Senate Republican Caucus Concerned with Massive Overspending on Capital Budget; Questions Propriety of Ignoring 90-day Session Limit

Juneau – Noting that the Senate majority leadership may have overstepped its bounds by violating the 90-day session limit when it continued to conduct business beyond midnight of April 18, Sen. Con Bunde, R-Anchorage, today questioned whether legislation passed after the deadline might be found illegal by a court.

“It’s an odd phenomenon, that we encourage the average Alaskan to do his or her civic duty and get involved with their government, yet, when they do that, and pass an initiative that limits our sessions to 90 days, the majority has no qualms about ignoring that limit,” Bunde said. “This is simply the predictable result of poor management of the first 89 days of the session.”

“I note that several of the majority’s top priority bills, such as the bloated capital budget and the bill to de-couple gas taxes from oil taxes, passed after the deadline. The leadership of the 26th Legislature may not have broken the law, but has certainly broken new ground by ignoring the limit set by the initiative. Does this signal that the Legislature will extend itself as a matter of course in future years?”

Bunde repeated his concern about the size of the capital budget, which spends a total of more than $3 billion. “We have spent far too much now, and will rue the day when realize we have spent our future security to satisfy our current wants, well beyond our needs,” Bunde said.

Sen. Tom Wagoner said he was disappointed that the capital bill included $75 million for a new crime lab in Anchorage, a project he has been fighting all session. “Two former directors of the crime lab have made it clear that this project is way bigger and much more costly than the State of Alaska needs,” Wagoner said.

Sen. Fred Dyson said he supported the process in the capital budget when it left the Senate. “The House added 28 pages and we had four minutes to look at it,” said Dyson. “I cannot approve that amount of spending without some time for analysis.”

Bill Includes “Cook Inlet Stampede” Tax Credits to Incentivize Jack-Up Drill Rig Exploration of Cook Inlet

Juneau – Sen. Tom Wagoner, R-Kenai, today said the inclusion in SB 309 of incentives for deep level exploration of the Cook Inlet basin will trigger a stampede to bring a jack-up drill rig into the area. Amendments made in the Senate Finance committee incorporate the incentives from Wagoner’s SB 290. Wagoner worked with Sen. Lesil McGuire, R-Anchorage, to put the language in SB 309, and with House Speaker Mike Chenault, R-Nikiski, who introduced a companion bill in the House of Representatives.

“The only way we are ever going to offset the declining oil and gas production in Cook Inlet is to get down to the Jurassic zone and start producing the hydrocarbons in those reservoirs,” Wagoner said. “Cook Inlet is an underexplored basin, and there has not been a jack-up drill rig operating there since the early 1990s. I believe the way these credits are structured will cause a stampede by independents to the Inlet.”

“At a time when natural gas production and supply in the Cook Inlet is declining and demand continues to grow, this legislation will strongly encourage companies to invest additional capital in exploring for new gas reserves,” said Senator McGuire. “This will be another step that will help provide energy for South Central Alaska.”

The tax credits will apply to the first three unaffiliated explorers to drill down to the pre-Tertiary, or into the Jurassic zone, and are structured as follows:

• First explorer is credited 100 percent of costs, or up to $25 million;
• Second explorer is credited 90 percent, or up to $22.5 million;
• Third explorer is credited 80 percent, or up to $20 million.

If the exploration results in sustained oil and/or gas production from a reservoir discovered by the drilling, then 50 percent of the credits awarded would be repaid to the state.

A jack-up drill rig is a mobile drilling platform that uses extendable legs that reach the ocean floor for support and stability.

SB 309 passed the House of Representatives by a vote of 37-2 and passed the Senate unanimously last week.

Senate Republican Caucus Responds to Governor’s Goals in Supplemental Budget

Juneau – Members of the Senate Republican Caucus today expressed their support for many of the goals contained within Governor Sean Parnell’s FY2010 supplemental budget released today while recognizing room for increased savings and encouraging a more long-term view of state budget surpluses.

Among other spending requests, the supplemental budget bill would finish repaying the Constitutional Budget Reserve, forward-fund K-12 education for FY2011, and, in a separate bill, ask for an additional $100 million for deferred maintenance projects.

“While I recognize the importance of addressing some of the pressing needs outlined in the Governor’s supplemental budget, I strongly encourage that any spending proposals based on using a budget surplus, in this or any other year, look at that ’surplus’ in the context of a three- or five-year spending plan,” said Sen. Con Bunde, R-Anchorage. “I think the question of whether or not it is truly a ‘surplus’ – if it is sandwiched between two or four years of deficit or even flat spending – is one we should be asking ourselves more often.”

Sen. Fred Dyson, R-Eagle River, said he is concerned about the rising cost of formula-driven spending. “I recognize that programs such as Medicaid are expanding in numbers of users, and that is reflected in the $44 million requested for formula programs. I note that the Governor did not request funding for an increase in eligibility for Denali KidCare because the bill to do so has not passed. While he and I disagree on expanding the program from 175 to 200 percent of poverty level, he may be amenable to making such an increase contingent on having a budget surplus.”

Sen. Tom Wagoner, R-Kenai, said he would support the deferred maintenance bill and expects the projects included in it to be in the public’s interest. “It makes a lot of sense to get funding approved for projects that can go to contract this spring. At the same time, the Governor needs to take another look at his $75 million request for a new crime lab, which we don’t need. That project should be on the deferred maintenance list, and the existing crime lab should be remodeled and expanded at a much lower cost, not the current $75 million projected for a new lab.”

Sen. John Coghill, R-North Pole, agreed that the Governor’s first priority should be saving surplus dollars. “I support the Governor’s request to return the $402 million to the CBR that we have borrowed over the lean years. That is what the CBR is there for. I also support any efforts to park more of the surplus in the statutory budget reserve. While that reserve is accessible with only a majority vote, it shows good faith and statesmanship on the part of legislators and the Governor to set the surplus aside. We anticipate more lean years for Alaska, with the Trans Alaska Pipeline dropping in through-put by six percent or more a year. Alaska’s leaders have done a good job in the past of saving for future generations – through the Permanent Fund, the CBR, and other set-asides – and I think we need to continue with that attitude.”

Therriault and Wagoner to Attend Legislative Energy Horizon Institute

Juneau – Sen. Gene Therriault, R-North Pole, and Sen. Tom Wagoner, R-Kenai, have been selected among 32 legislators from both the US and Canada to attend a comprehensive series of energy forums, the Legislative Energy Horizon Institute, which will examine the full spectrum of energy generation, infrastructure, regulation and government oversight. The objective of the Institute, which is sponsored in part by the University of Idaho with the support of the US Department of Energy, is to examine the complexity and policy questions surrounding current North American energy generation and distribution issues.

“It is an honor to be selected to attend the Energy Horizon Institute, which has the goal to keep a core group of policy makers up to date on the multitude of energy issues states will be wrestling with over the coming years,” Therriault said. “Energy, whether it is oil and gas, coal, electricity, or biomass, is vital to Alaska’s future, as an exporter of energy as well as for our own consumers. I look forward to putting the knowledge I gain at the Institute to work for Alaskans.”

“Maintaining a continuity of knowledgeable members in a legislative body, who are intimately familiar with the complex details you find with all energy issues, is really crucial to crafting productive, appropriate energy policy,” Wagoner said. “This is important to protecting the interests of Alaskans in these energy debates.”

Attendance at all sessions is mandatory for participants, who will receive a University of Idaho certificate at the conclusion of the program.  The first session of the program will be held in Boise, ID from July 12-16, and will include overviews of electric generation and transmission, natural gas, petroleum and strategic leadership. The program curriculum extends over a period of 18 months and will include seminar training as well as monthly “webinars” and other training materials.

“By accepting the invitation to participate in the Legislative Energy Horizon Institute, I look forward to not only bringing information back to Alaska, but also taking information about Alaska’s role in the global energy markets for members from other jurisdictions to consider” said Therriault.

Senate Republicans: TC Alaska/ExxonMobil Agreement
Positive For Alaska and Gas Pipeline

NORTH POLE – The Senate Republican Caucus provided the following comments on today’s announcement by TC Alaska and ExxonMobil regarding their agreement on the Alaska North Slope Gas Pipeline project.

“Certainly today’s announcement is very positive for Alaska and the country.  While it appears that this agreement honors the terms of AGIA while advancing an Alaska Gasline project, we will be very interested to look more closely at all the details, to be assured that the state’s “must haves” in AGIA will be protected.  I appreciate that their announcement continues to acknowledge the possibility of an LNG option that includes a liquefaction facility in Valdez,” said Sen. Gene Therriault, R – North Pole.

While several key aspects of the announcement are worthy of highlighting, such as TC-Alaska remaining the licensee under AGIA, and the open season timeline continues on schedule, Therriault noted, “This agreement marks a serious breakthrough for the gas pipeline project in that ExxonMobil’s partnering acknowledges that TransCanada’s ability to advance a project using the Northern Pipeline Act (NPA) is a significant advantage compared to the National Energy Board (NEB) process in Canada.  For years legislators were told by some that there was no advantage to using the NPA rather than the standard approval process of the NEB.”

“Throughout this process we always predicted that TransCanada and the companies would come together and negotiate an agreement.  This announcement today between TC-Alaska and Exxon goes a long way towards a commitment to see this project through,” said Sen. Tom Wagoner, R-Kenai.

“I am hopeful that today’s announcement will quiet those who appear to have been hoping for failure of the AGIA process,” said Sen. Con Bunde, R-Anchorage.

“We look forward to the continued development of solid construction cost data which the state and other interested parties will need as we approach an open season in 2010,” said Sen. Fred Dyson, R-Eagle River. “Construction of the pipeline is still not assured; however, this agreement is a real step forward.”