October 29, 2015 Voice Your Opinions! Letters to the editor make a difference. You can send a letter of up to 200 words (shorter letters are more likely to be accepted) to the Alaska Dispatch News by email (letters@alaskadispatch.com); or by fax or mail (call them at 257-4308). Send letters to the Anchorage Press via e-mail editor@anchoragepress.com or by mail to 540 E. Fifth Ave, Anchorage, 99501. Feel free to call us if you need factual information to help you write a letter. Contact the Governor. The Governor can be reached at 269-7450; or www.alaska.gov. Contact us. My office can be reached at: 716 W. 4th Ave, Anchorage, AK 99501; by phone: 269-0106; visit my website at http://gara.akdemocrats.org; or email: Rep.Les.Gara@akleg.gov

Dear Neighbors:

Sometimes politicians make easy questions look like rocket science. That’s bad, because we don’t have a lot of rocket scientists in the legislature. Last I checked, we had none.

After nearly a week of testimony, the simple question the Governor has asked us to decide has become easy. Let’s vote this week, and save the state money on a long, drawn out special session, and save the theater and unnecessary contention.

The Governor’s request makes the state substantial additional revenue if the project succeeds. Estimates of that additional Alaska revenue depend in part on future interest rates and financing arrangements. Over the first 20 years of the project, fair estimates are that we'd earn roughly $2 billion to $6 billion in additional revenue, and possibly more by purchasing TransCanada's share in the project.

Likewise, it saves the state money if this large gasline fails. It’s as close to a no-brainer as you get in politics.

The Governor’s bill proposes to buy out TransCanada’s 25% share in a gas pipeline and other infrastructure, so Alaska owns a share in that line. We do not currently have a right to ownership of any of the gas pipeline. Under Governor Parnell’s 2014 gasline bill, if we do not buy out TransCanada’s share in the project, by December 15, we have to let TransCanada front the costs, and repay TransCanada all those costs plus a very high 7% interest rate on top of those costs. It’s sort of a loser’s deal for the state to own none of the pipeline, but have to pay for it, with interest.

So what has the testimony been on this subject? It’s this: Taking TransCanada’s 25% share of this pipeline project, and other infrastructure, will earn Alaska hundreds of millions, and up to $9 billion more in revenue over 25 years of operation without TransCanada in the project. So we earn more revenue without TransCanada in the project. Let’s say you’re a skeptic about whether this project will succeed. The evidence is that removing TransCanada from the project will save the state money if the project at some point fails. That’s because under current law, if we do not buy out TransCanada under Governor Parnell’s gasline bill, and the project fails, we will, by statute, owe TransCanada all the costs they incurred plus 7% interest. That’s a bad deal, which I tried to change with an amendment when Governor Parnell’s gasline bill passed the Legislature.

How Else is the Public Purse Protected on This Project?

A large diameter gas pipeline has been something Alaska has pushed for, because it will deliver affordable energy to Alaskan communities, and will carry enough natural gas so we can export it to earn billions of dollars in needed revenue for a state that is in tough fiscal times. It will create more than 10,000 needed jobs in a time when Alaska is risking a recession, and over 1,000 jobs after the pipeline is built. I disagree with some who have said we should pull the plug on this Alaska gas pipeline project now. If a project becomes unfeasible, we’ll have to pull the plug or delay it. The testimony so far is that it is feasible.

And Alaska will not incur the major costs of this project unless a few things happen, which is why pipeline owners has been described by some as a license to make money. No one starts construction on a gas pipeline until three things happen.

1. We will need a commitment from producers to sell their gas.

2. We will need commitments from buyers to buy the gas.

3. The price agreed to and volume of natural gas will have to be high enough to make the state money, and deliver gas to Alaskans at a reasonable price.

The following is the testimony we received from Deepa Poduval, a well-respected gasline expert who has been hired on gasline issues for the last four Alaska Governors – who have been of different political stripes.

I’d encourage you to read it. As always, let us know if our office can help. I hope this special session ends soon, and believe we have received the information we need to have a vote this week.

My Best,

(Testimony from the House Finance Committee by Gasline Expert Deepa Poduval)

Day 2, Special Session 3, 10/25/15, House Finance Committee Testimony Excerpt, starting at 4:05pm

Rep. Gara: . . . .I have two concerns, and if the questions are cloudy, the answer on the bill becomes more cloudy for me. If the answers are clear, my view on the bill becomes much more clear.

Let’s first go to whether the state makes more money by getting rid of TransCanada. There has been an estimate that if this project succeeds the state will make up to $360 - $400 Million dollars per year if that’s 20 years that is somewhere between 3.5 and 8 billion dollars. That’s if we get rid of TransCanada, but is that extra $200 to 400 million dollars a year that we make, and you showed all of the scenarios, but if we make an extra $200-400 million/year. Is that what we make clear of our 7.1 billion dollar investment? What I’m asking is, we’ve invested 7.1 billion dollars, we get the $200 to 400 million dollars a year on top of that? Or does that 200 to 400 million dollars a year go back to pay for our $7.1B investment?

Poduval: Representative Gara, thank you for that question. It is a really good question. The 200 to 400 million dollars a year would be net of all of the State’s costs, and in your words, it would be on top of, it would be after the repayment of the original 7 billion dollar additional investment the State would have made. As I said, the State is expected to borrow that additional 7 billion dollars and would have a debt repayment obligation during the projects operation. The 200 to 400 million dollars a year of additional cash flows we are estimating are after those debt payments have been met. It’s beyond the original 7 billion dollar investment. It’s incremental.

Rep. Gara: Tell me if I’m wrong, and then I will ask my next question. So it seems that it’s clear that it’s 200 to 400 million dollars [a year], and we don’t have to subtract the original 7.1 billion dollars.

Poduval: That is correct Representative Gara

Rep. Gara: The state is filled with people who are optimists about a gas pipeline, and pessimists and people in between. Let’s say the project fails. If we ended this project today, I think that would be a mistake, and we pass this bill and we buy out TransCanada that doesn’t cost us any more money than if we don’t pass this bill. If we do this today regardless?

Poduval: Representative Gara, yes that is correct. The State has the obligation to pay back TransCanada regardless.

Gara: If one or two or three or four years down the road this project fails, does it save the State money to buy out TransCanada because we aren’t paying their 7% interest and their financing costs. So for the people who feel this project will fail, one, two, three, four, five, six, seven years down the road. Is it your opinion that we save money by buying out TransCanada, because we don’t have to pay that 7%, what I consider a penalty but is being called interest?

Poduval: Representative Gara, yes is the short answer. The State would be writing a smaller check for their participation up to that time without TransCanada than with TransCanada and that is because, as you pointed out, we are accruing a 7% interest on the FEED and PreFEED costs with TransCanada and we believe the State can finance cheaper than that based on the work that the finance team [has done].

Gara: If the project fails and we buy out TransCanada, if the project fails, we save more money, we lose less money. If the project succeeds we earn more money. It seems too easy, is that your opinion of what happens?

Poduval: Representative Gara, yes, assuming the State can finance cheaper than 7.1%