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Before I came down here, I assumed gas line talk was going to heat up at the end of the session. Wrong. It’s pretty much the big item down here already. Here’s my take on a few of the issues floating around.

1. When to fix the gas tax. Senate Resources chair Charlie Huggins is leading the charge to set the gas production tax — he brought it up a news conference, at the Senate Resources Committee hearing yesterday, and in a letter to the administration. Lead, follow, or get out of the way is how he put it at resources. Revenue Commissioner Pat Galvin admitted he has little or no confidence in the number that’s set now and hasn’t really studied what an appropriate tax would be. But he says the time to set the tax is later, once the pipeline project is moving and the state has a better sense of what it will cost, what the tariff will be, etc. Then and only then will the state really know what kind of tax rate it will need to entice leaseholders to ship their gas.

(CORRECTION: From Pat Galvin: In the hearing yesterday, I said that a year ago when we were bringing forward AGIA I had told them that we were focused on gasline issues, and that we had not yet spent much time on tax issues. At that time, I had told them that my confidence level in the gas tax rate was not high, because we had not yet looked at it. The tax rate was not critical because AGIA locked in the rate that would be in place at the time of the initial open season, giving us time to make any necessary changes. I went on to say that since AGIA passed, we have spent a great deal of time looking at tax issues, mostly focused on oil. However we have looked at some gas comparisons, and much of that information was presented to them a few weeks ago by Marcia Davis. What Marcia showed them was that in the other jurisdictions that have oil and gas taxes based on net-profits, the same rate was applied to each. I also told them that we did not have the same level of economic models for North Slope gas projects as we did for oil projects because we do not yet have sufficient data on transportation costs. Based on the information we current have, I did not see any reason to change the tax rate on gas. Finally, I reiterated what I said during the ACES special session, that we would look at the gas tax again when we knew more about the economics of a gas pipeline, and if a change is warranted, we would address it then.)

I think Huggins’ argument is that the sooner the companies know the rate, the better prepared they’ll be for that open season. Presumably Huggins and Galvin both want companies to commit their gas to the pipe, so I’m not really sure why they disagree on approach. Galvin also says he has no reason at this point to think the current rate won’t work, and hasn’t heard anything from the companies to that effect. He also pointed out in a letter to Huggins last year that tweaking the gas tax wouldn’t be easy because gas and oil expenses are intertwined in a net profits tax.

1. When to issue the intent to award a license. Huggins and Galvin again. At the start of the session, Huggins said he was dead set on finishing everything in 90 days — regular business and a vote on a gas line. Galvin said yesterday reviewing the TransCanada application was a massive undertaking. After public comments are all in on March 6, the administration and its hired help will need time to review them and the application and put their findings on paper. Depending on the issues identified, he told resources, it could be “anywhere from, I’d say, three weeks to three months” before the administration submits its recommendation to the Legislature. Three weeks would get the application to lawmakers before adjournment — by about three weeks. Three months would not. Huggins responded a little later by pointing to the huge stakes involved and saying he always thought the more time to review things, the better. “If you don’t get it to us till Christmas, that’s OK,” he said. I couldn’t tell if he was joking or not.

2. Reviewing an LNG project. Galvin and Natural Resources Commissioner Tom Irwin took criticism yesterday for announcing they were turning down the AGPA proposal but would still evaluate the LNG pipeline option. The criticisms were that they were reviewing an idea outside of the AGIA process (Rep. Ralph Samuels) and that they were essentially reviewing AGPA’s proposal but not ConocoPhillips’ (no one really came out and said it). Galvin and Irwin defended the decision by saying they were comparing TransCanada’s plan in particular against an imagined, ideal LNG project — not AGPA’s specifically — as part of the process of determining whether the TransCanada proposal sufficiently maximized the state’s interest (as required in AGIA). The way I understand it, under AGIA, they will essentially be comparing the TransCanada proposal with an imagined, ideal highway line and, therefore, the ideal highway line against the ideal LNG line. (But not the airship idea, I imagine because there’s some belief that the LNG option is an option — AGPA might have had a complete application if it finished a few weeks earlier.)

3. Mixing the upstream and midstream. This is just my take, but it seems like both Conoco and the administration are blurring the upstream and downstream issues when it serves them. When Conoco made its pitch to Senate resources, its main argument was that the upstream issues weren’t taken care of. But its push is not for lawmakers to address the upstream issues (taxes and royalties) but to include Conoco in the midstream (the pipeline). Galvin blurred the midstream and upstream yesterday when he compared AGIA’s $500 million contribution (to the pipeline builder) with the billions Frank Murkowski’s deal would have reportedly cost the state (for the pipeline AND the upstream). If I remember right, the administration has not yet quantified the monetary value of the existing and expected upstream incentives.

4. Gov. Sarah Palin. The governor came to the House majority meeting last night, spoke for a few minutes, then sat in the House Finance Committee room for the next two hours. Apparently that’s not really normal for a governor. Her comments were also interesting. She commended lawmakers for questioning her team, but also urged them to question the critics — “those who say this project can’t be done.”

5. Doing the homework. Irwin has said numerous times this week that if people just read the information out there, they’d understand (and, presumably, support the AGIA process). The gov said last week she’d erred in assuming lawmakers would read the info on her Web site. Huggins yesterday challenged the administration for not being more proactive. He asked specifically for a gas line liaison from her office, and to be fed information from the administration. Information can be found at the AGIA Web site, the Legislative Budget and Audit Web site, and ConocoPhillips’ gas line Web site.

6. Where people stand. If there are lawmakers who’ve already made up their minds about which project they want, they haven’t come out and said it. Most of the criticism and support expressed at this point has been targeted at the AGIA process rather than the individual projects. That is, except for Rep. Jay Ramras, who announced last night during the House majority’s hearing that he was a Port Authority man. The Fairbanks area is at a tipping point, he said, where residents are seeing their quality of life sinking toward what it was like in the Soviet Union. Ramras said he liked the AGPA plan because it would get gas to Fairbanks faster.