Barbs fly in debate over gas line route
Jones Act exemption for Alaska route debated
Web posted Sunday, May 29, 2005
By Margaret Bauman
Alaska Journal of Commerce
alaskajournal.com
An oil company executive touting a gas pipeline through Canada to the Lower 48 took aim at proponents of an all-Alaska pipeline. The barbs were soon flying right back.
At stake is a fortune in natural gas revenues from stranded gas deposits beneath Alaska's North Slope, which are sorely needed in domestic markets and particularly in Southcentral Alaska.
Joe Marushack, vice president for North Slope gas development for ConocoPhillips Alaska Inc., fired the first volley.
Marushack on May 18 told guests at an oil industry luncheon in Anchorage, "We don't really comment on other people's projects, but I am going to set the record straight."
With that, Marushack pointed to a projection screen displaying a large advertisement from the Alaska Gasline Port Authority and labeled as "absolutely false" certain claims made in the ad.
The port authority - an agency led by the Fairbanks North Star Borough and the city of Valdez - proposes building a pipeline from the North Slope to Valdez, where the Slope's gas would be transformed into liquefied natural gas for transport aboard tankers to Outside markets.
In a competing proposal, ConocoPhillips along with the other major North Slope producers - BP Exploration (Alaska) Inc. and Exxon Mobil Corp. - want to build a gas pipeline from the Slope through Canada to markets in the Midwest.
By putting the pipeline through Canada to the Midwest, Marushack said issues with the Jones Act would be avoided.
The Jones Act requires all cargo moving between U.S. ports to be carried in ships that are owned, built and crewed by Americans.
Joe Geldorf, a Juneau attorney who serves as Alaskan counsel for the Marine Engineers' Beneficial Association, said the Jones Act issue pales in comparison to the issues faced by the proposed Canada route.
"The Jones Act is a minor inconvenience, compared to unresolved Native claims (in Canada), regulatory delays, dealing with a foreign government and the fantastic distances which require huge amounts of steel" for a pipeline through Canada, he said.
The union, which represents marine engineers and deck officers, supports an exemption for a foreign-built vessel that is flagged in America and has an all-American crew to transport LNG from an all-Alaska pipeline, Geldorf said.
"The Marine Engineers' Beneficial Association is committed to diligently lobbying for a limited, project-specific exemption to the Jones Act foreign build requirement," he said.
A major domestic marine shipping group opposes exemptions to the Jones Act, however. The Transportation Institute, a Seattle-based trade organization representing numerous domestic shippers, including Totem Ocean Trailer Express and Horizon Lines, supports retaining the status quo.
Executive director Rich Berkowitz said the companies he represents support all proposals for a gas pipeline, but the notion of specific exemptions of the Jones Act for the LNG project was like allowing "the camel's nose under the tent," setting the stage for a flood of other requests for exemptions.
The Transportation Institute believes that domestic U.S. shipping companies are capable of building the specialized tankers needed to transport LNG from an all-Alaska route, he said.
Berkowitz cited several examples supporting his claim: Kvaerner Shipyard in Philadelphia has contracted to build 10 new oil product tankers over the next five years; Northrup Grumman has built new oil tankers in Pascagoula, Miss., for Polar Tankers Inc., a subsidiary of Phillips Petroleum Co.; and the National Steel and Shipbuilding Co. in San Diego has built new oil tankers for BP.
"We are not writing off our capability in our country," Berkowitz said. "We believe as evidenced by recent and past activities that we can build tankers in this country. We want to make sure that Americans and Alaskans are on those vessels too. The Jones Act is nothing more than a national local hire law."
In Marushack's assessment of the port authority's ad, he said the major producers are best suited to build the natural gas pipeline because the major oil companies have experience with such huge projects all over the world.
"Who can deliver the project most efficiently? We have the long-term experience," he said.
Marushack said the major producers spent $125 million over an 18-month period to determine the feasibility of a pipeline and nobody else has spent that kind of money over a focused period of time.
Marushack took issue with a portion of the port authority's ad for saying an all-Alaska project would give 7,600 Alaskans jobs during construction, compared with 2,000 Alaskans under the producers' proposal.
"There are not enough Alaskans to fill all these jobs," although the project would create thousands of jobs in Alaska and thousands of opportunities for Alaskans, he said.
Marushack denied claims in the advertisement that say a pipeline built by the oil producers would result in less taxes and royalties for Alaska and that Alaskans would have to buy their gas at Chicago prices.
Marushack also said larger markets in the Midwest and East Coast were one reason why the Canada route was a better proposal.
"We are talking about 4.3 billion cubic feet a day of natural gas," he said. "From our pipeline (to the Midwest) you can go west, you can go south, you can go east."
His comments came on the heels of an announcement by ConocoPhillips that the company had entered in a joint development agreement with Mitsubishi Corp. for a terminal at Long Beach, Calif., that would received imported LNG. The terminal is expected to be completed in 2009, ConocoPhillips said in a news release.
Former Gov. Walter J. Hickel, a strong supporter of the all-Alaska route, scoffed at Marushack's criticism of the advertisements, in which Hickel appears.
"We have to do what is best for Alaska," Hickel said. "They have to do what is best for their stockholders. This reminds me of the territorial days before statehood. There were two kinds of exploitation: Take it and leave nothing, or take it and lock it up and do nothing.
"We are the owners. We will do what has to be done," Hickel said. "I don't care what they think the problem is. We can do it."
Jeff Lowenfels, former president of the Yukon Pacific Corp., which obtained all the federal and state permits needed to build an all-Alaska gas pipeline years ago, criticized Marushack and the proposed Canada route.
"They (ConocoPhillips) were telling us there was not a market for gas on the West Coast (for YPC's proposal) and then they signed with Mitsubishi," to import LNG, he said. ConocoPhillips has not identified the source of LNG that it would import into Long Beach.
Sempra Energy, a San Diego-based company that is competing to develop ports to handle LNG, has made an offer to buy and use all the gas pipeline permits that Yukon Pacific acquired, Lowenfels said.
"The bottom line is the oil companies have been jerking us around for 30 years," he said. "We need this gas here (in Southcentral Alaska) and if the gas doesn't come down the Alaska line, we are not going to get it.
"We are Alaskans. We fight for the things we need. If we need an exemption to the Jones Act, we will fight for it and we will get it. How long do we want to sit and listen to the oil companies tell us they don't want to do it?" Lowenfels said.
"We have groups ready to do the project without concessions. Go home Joe (Marushack)," he said. "You're still a Texan."
Margaret Bauman can be reached at margie.bauman@alaskajournal.com. |
