- Associated Press - Tuesday, November 3, 2015

JUNEAU, Alaska (AP) - The Alaska Senate on Tuesday approved legislation that would give the state a greater share in a proposed liquefied natural gas project by buying out one of the project’s partners.

The vote was 16-3 and came 11 days into a special session called by Gov. Bill Walker to consider buying out TransCanada Corp. Voting no were Sens. Mike Dunleavy and Charlie Huggins, both Wasilla Republicans, and Sen. Bill Stoltze, R-Chugiak.

The bill next goes to the House, which has been holding hearings on the issue since the special session began. House Speaker Mike Chenault, R-Nikiski, said the bill could be brought to the House floor for a vote as early as Wednesday.

Legislators had been expecting a fall special session to deal with gas line issues, but they weren’t presented with contracts as once hoped because key agreements have yet to be reached between the state and its partners. It’s possible those contracts could be brought to legislators sometime next spring.

Instead, the focus was on Walker’s recommendation to buy out TransCanada, which the administration argues would increase the state’s voting rights and allow it to have a more direct say in the decision-making process for the project. Under an arrangement predating Walker’s administration, TransCanada would hold Alaska’s interest in the pipeline and gas treatment plant, while the state-sanctioned Alaska Gasline Development Corp., or AGDC, would hold Alaska’s interest in liquefaction facilities.

The state faced a year-end decision point on how or whether to continue its relationship with TransCanada.

TransCanada’s inclusion had been cast as a way for the state to not have to bear as much in upfront costs as it would without TransCanada. But it also was a way for the state and company to get out of a previous failed effort to advance a gas line without a potentially messy fight.

Under the arrangement, the state would be obligated to pay TransCanada for costs it has put into the project on the state’s behalf, plus about 7 percent interest, regardless of whether the project succeeds or fails, an administration consultant has said. The administration is betting it can get financing cheaper than TransCanada.

Vincent Lee, director of major projects development for TransCanada, has told lawmakers the Canadian pipeline company believes in the project, but it also agrees with Walker’s buyout recommendation. Lee said the company and administration are approaching the project from different angles. He called it a mutual dissolution.

The other project partners are BP, ConocoPhillips and Exxon Mobil Corp. If a buyout is approved, AGDC would acquire TransCanada’s interest in the project.

Senate Finance Committee co-chair Sen. Pete Kelly, R-Fairbanks, said he wasn’t in favor of a buyout when the session started. But he said a lot of information came out during hearings and he was convinced that severing ties with TransCanada is “a pretty good deal.”

Dunleavy, in an interview, said he agrees the relationship with TransCanada is over and supports further pursuing the project to see if it’s economical. But he has concerns with the level of organization of the state’s gas team. “This whole process has not left me extremely confident that we’re there yet on internal alignment,” he said.

The bill authorizes spending $157 million for buyout- and project-related costs, about $68 million of which will go to TransCanada. The rest would be for the remaining share of the state’s cost for the current phase and costs for state agencies involved in the project.

The project remains in an early stage, and there’s no guarantee that it will be built.

One of the next big dates is Dec. 4, when the project partners are to vote on a 2016 work plan and budget. The administration has targeted Dec. 1 as the closing date for the buyout if it’s approved.

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