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Commission Watch

Alaskan Gas Development
Fortnightly Magazine - February 2005

the state's department of revenue), "Alaska has had a long history of resources being shipped out of the state. The state does not think of [itself] as a province just for extraction."

In fact, the act also gives the state of Alaska the specific right to request a hearing at FERC to guarantee reasonable access to transportation services for "royalty" gas that the state itself owns. (.) The law was actually enacted as a part of H.R. 4837, the "Military Construction Appropriations and Emergency Hurricane Supplemental Appropriations Act, 2005.")

The idea that the state could interrupt the certification process clearly caught FERC Chairman Wood by surprise at the December conference.

Wood: We just heard here from Commissioner [Bill] Corbus [Alaska Dept. of Revenue] about [section] 103(h). Bill, let me just ask you on that one. You said that the State may ask during the pendency of an open season to basically trigger this provision. Is that what you said?

Corbus: Yes.

Wood: What would happen as a result of that? … Tell me what this would do. I'm just trying to conceptualize how that would work."

Consider that Enstar Natural Gas Co. serves as the retail gas distribution utility for the Anchorage area, relying on nearby gas production from wells in the Cook Inlet, but experts predict that the Cook reserves will run out at least by 2013, with severe shortages looming even sooner. Enstar President Tony Izzo said in December at the Anchorage conference that without additional exploration in the Cook Inlet, "in 2009 we will not have enough gas in this region for power generation or home heating."

Open Season and Bidding

An open season is a delicate, chicken-and-egg thing. Project sponsors need customers to commit to buy capacity to attract financing. But customers don't want to commit until they see the parameters: route, size, pressure, configuration, delivery and receipt points, minimum gas quality standards, fuel retention percentages (for compression), projected in-service date, rates, and so forth. Yet the sponsors will often say that they cannot specify such information without at least some input from actual capacity bids.

To solve the problem, some projects will line up a core group of customers (called "anchor shippers") in a private pre-subscription that precedes the actual open-season bidding. In fact, FERC's proposed regulations, slated to become final in early February after any required tinkering, state in the preamble that two open seasons might be required for the Alaskan project-one exploratory and tentative, the other binding. Most parties commenting on the problem have supported the section in the proposed rules that listed some 16 different categories of data that must be disclosed to capacity bidders as part of any open-season process. But many others have objected to any catchall rule that would force sponsors to disclose any other presumably relevant data. ()

In prior pipeline projects, FERC has endorsed a private pre-subscription for anchor shippers where the project was being built to serve specific producers, or where construction risk is extreme, such as for a pipeline traversing the OCS. ()

In the case of