State offers gas line investment proposal
alaskajournal.com
By Tim Bradner
Alaska Journal of Commerce
Web posted Sunday, October 31, 2004
The state of Alaska planned to submit a proposal Oct. 29 to North Slope natural gas producers and TransCanada Corp. for the state to invest in a multi-billion-dollar gas pipeline from the North Slope to the Lower 48.
The producers, which include BP Exploration Alaska Inc., ConocoPhillips Alaska Inc. and Exxon Mobil Corp., have committed to a response to the state proposal within a week.
In an Oct. 25 briefing, administration officials said the proposal indicated a percentage of equity ownership the state will seek, as well as other information on possible state participation, but said details of the proposal must remain confidential for the time being.
Partial state ownership of the pipeline would help spread risk more widely among other participants and encourage the industry to commit to the project, according to Pedro van Meurs, a consultant to the state who is helping lead the negotiations.
A gas pipeline is of critical importance to the state's future economic growth, van Meurs said. "This will be a source of wealth and income for two generations of Alaskans," he said.
The state is negotiating a proposed contract on state fiscal terms with the producers and a separate fiscal contract with TransCanada, a major Canadian pipeline company.
A state offer to invest in the pipeline could be done if the producers decide to build a project or if TransCanada winds up building the pipeline, Deputy Natural Resources Commissioner Marty Rutherford said.
The state is considering an equity investment in the pipeline itself as well as in capacity in the pipeline, Rutherford said, so that the state can ship its own royalty gas to market.
Under the state Stranded Gas Act, special fiscal terms relating to royalty and taxes can be negotiated for a large gas project. The original intent of the state law was to allow for negotiation of more flexible fiscal terms that could replace the current structure of taxes and royalty, which tends to inhibit the economics of large, economically marginal projects.
The producers have said that such an agreement is critical to their decision to proceed with a pipeline, and that the deal must include definitions and terms for state tax and royalty administration, so that future misunderstandings and disputes can be minimized.
There must also be an agreement for the state and municipalities not to raise taxes on the project, the producers have said.
State Revenue Commissioner Bill Corbus, who is also helping direct the negotiations, said the state might soon be working on another fiscal contract with Enbridge, Inc. another Canadian pipeline company.
Under the state Stranded Gas Act, applications for special fiscal terms must sign an agreement to reimburse the state's costs up to $1.5 million. The producers and TransCanada have signed reimbursement agreements. Enbridge is close to signing a reimbursement agreement, which would mark the start of formal negotiations, Corbus said.
The administration hopes to have agreements on fiscal contracts with all parties completed in early 2005. A 30-day public review period is required before the deal is submitted to the state Legislature for approval. |
