SAN FRANCISCO - Alaska Gov. Sarah Palin has announced a new push to build a natural gas pipeline to allow the Anchorage area to connect with gas resources on the state's North Slope - an initiative that could involve the use of tax-exempt bonds.

Palin's announcement last week brought together two separate organizations that have been separately pursuing such a project - ENSTAR Natural Gas Co., the investor-owned gas utility serving the Anchorage area, and the state government's Alaska Natural Gas Development Authority, or ANGDA.

The public-private partnership, as Palin termed it, would be focused on ensuring a continued supply of natural gas for the Anchorage market. That market currently relies on gas fields in the Cook Inlet, near Anchorage, but the proven gas reserves there are dwindling.

But Palin also said that she believes a pipeline out of Anchorage could connect with the state's top development priority, a natural gas pipeline linking the gas reserves on the North Slope - which currently lack an outlet to market - to the North American market, through Canada.

In addition to securing Anchorage's fuel supply, such a connection could also spur natural gas exploration in the Cook Inlet, the governor said.

Palin's in-state pipeline announcement came in the midst of - and in the context of - a major debate over what strategy Alaska should use to promote the North Slope pipeline link to North American markets.

Lawmakers have been meeting since June 6 in a special session. The governor called lawmakers together to consider her recommendation that the state issue a license - and a $500 million subsidy - to pipeline operator TransCanada Corp. for the primary gas line from the North Slope to Canada via the Alaska Highway, a project estimated to cost $26 billion. Final votes are expected next week.

An Anchorage gas pipeline is a much smaller project - estimated at about $3 billion - but it would address a critical need for the state's largest urban area, Harold Heinze, chief executive officer of ANGDA, said Wednesday, because the Anchorage region will need a new natural gas source in the coming years.

In recent years, ANGDA and ENSTAR have been running on separate but parallel courses, planning gas pipeline projects along separate routes. Last week's announcement marks a sea change.

"The significance of the announcement is the state, in recognition of that [need], has asked that some partnering be done and a hard look be taken at how to put this together," Heinze said.

"It is time to bring together the tremendous resources we have in this state to build an in-state gas line that delivers an affordable and reliable supply of natural gas to south-central and interior Alaskans, targeting delivery within the next five years," Palin said at the announcement.

She added that ENSTAR, as an established utility operator, would likely take the lead in engineering, constructing, operating, and maintaining the pipeline.

But the new partnership would follow the route that ANGDA has been trying to develop. And "ANGDA can provide public financing," according to Palin's news release.

The authority was created by a vote of the people in 2002, with the initial aim of developing a full-bore natural gas line linking the North Slope with the port of Valdez, where the gas would have been liquefied for transport by ocean-going tankers.

As the Canada pipeline alternative gained traction, ANGDA refocused its efforts on connecting the Anchorage area to the planned natural gas line.

"Our basic function is to deal with anything we can do to get North Slope gas to market and do it in a way that benefits Alaskans," Heinze said. "We're authorized to do anything a business can do. We are also as part of the statute given bonding authority."

Everything about the partnership with ENSTAR is conceptual, so it's impossible to say exactly what ANGDA's financial role would be, he said, but tax-exempt bonds are one of the items in its toolkit.

For a specific project, "we may be ofgreat interest in terms of either tax-exempt or generally lower-interest, high-security financing," he said.

ANGDA's major focus is the delivery of natural gas to utilities in Alaska, such as ENSTAR, Heinze noted.

"One of the things we've looked at is as to whether we could use our bonding ability to help them make the long-term commitment to get gas delivered to this area," he said, referring to Anchorage.

"The focus of the announcement was on the in-state use of gas. In this case the ultimate consumers are the citizens of Alaska," Heinze said. "It's reasonable for the state to use whatever tools it has to lower tariffs, rates, charges, or interest rates. That lowers the bill for my heating and my light."

Palin has a prominent supporter for the plan in the person of veteran U.S. Sen. Ted Stevens.

The two Republicans haven't always gotten along, but after 40 years in office the senator appears to have real competition for re-election this year in the form of Anchorage Mayor Mark Begich, and he issued a statement backing up the popular Palin.

"The concept of a public-private partnership will get this project from the drawing board to construction quickly and efficiently," Stevens said.

Palin said her goal is to develop the details of the project during the fall, and to seek any necessary enabling legislation and-or appropriations during the next regular legislative session starting in January.

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