Governor delivers gas line terms
By R.A. DILLON, Staff Writer
Article Published: Thursday, September 15, 2005
news-miner.com
Gov. Frank Murkowski gave major oil producers on the North Slope a week to respond to a state contract proposal for building a natural gas pipeline.
The governor sent a comprehensive proposal for a 30-year contract--potentially worth as much as $3 billion a year to the state--to the producers Tuesday.
"Each side has made its position on the issues clear during the months of negotiations," Murkowski said. "I have delivered a fair contract proposal to the producers. Now is the time for a decision."
The governor's office has been negotiating for about a year with the three major oil companies--BP Exploration (Alaska) Inc., ConocoPhillips and Exxon Mobil Corp.--to develop Alaska's 35 trillion cubic feet of known natural gas reserves on the North Slope.
"The negotiations have reached a point where he felt it was time to present a fair contract proposal and see how the producers respond to it," said Chuck Logsdon, spokesman on the gas line negotiations for Murkowski's administration.
The governor said the state is dedicated to reaching a deal that moves the most gas to market at the lowest tariff and guarantees the most revenue for the state.
The governor said any deal must include guarantees to provide a fair share of revenues to the state, in-state use of the gas, access to the pipeline for future development, a design that allows for expansion, including possible spur lines to Southcentral and Valdez, state ownership in the pipeline and jobs for Alaska residents.
Details of the proposal remain confidential under the state's secret negotiations with the producers.
The announcement was an attempt by the state to get some forward motion started on negotiations with the producers, said Fairbanks Republican Sen. Gene Therriault, chairman of the Senate Budget and Audit Committee.
"It asks the producers if they're on board or not," he said. "At the very least, it gets the state to the point where it's clear that it's not going to reach an agreement with the producers and that it needs to focus on one of the other two proposals."
The three producers hold leases for 95 percent of the state's natural gas reserves. So far, negotiations have focused on reaching a deal with the producers, who have proposed building a pipeline from the North Slope through Canada to markets in the Midwest.
Murkowski said Wednesday that the state could consider other options for bringing the gas to market if the producers don't respond favorably by the deadline.
"I believe this contract proposal is good for Alaska, good for the nation and good for the producers," he said. "If they do not agree with my assessment then I have an obligation to pursue other opportunities for marketing our gas."
While the governor has the authority to cancel leases held by the producers, such a move would likely result in years of bitter court battles that would further delay development.
"The economics of this project are good enough that we shouldn't have to involve litigation," Logsdon said. "We would like to do something short of getting involved in litigation that would only delay this gas line further."
TransCanada and the Alaska Gasline Port Authority have competing proposals submitted under the state's Stranded Gas Development Act, but the governor's negotiating team has been focused on reaching a deal with the producers group.
"Any gas project is going to include getting gas from the producers because they hold the leases," Logsdon said.
Alaska Gasline Port Authority Chairman Jim Whitaker called it appropriate that the state should set a timeline for negotiations with the producers. The public consortium would continue to pursue development of an all-Alaska gas line route, regardless of the state's other negotiations, because it was in the best interest of the state, he said.
The producers long argued that it was uneconomical to develop Alaska's gas reserves, but high gas prices and federal tax incentives and loan guarantees for 80 percent of a pipeline's projected $20 billion cost have made the project feasible.
"Alaska's gas has been stranded because the economics weren't there to support development," Murkowski said. "But now that's changed."
BP spokesman Daren Beaudo said the producers remained committed to reaching a fair fiscal agreement with the state, but declined to comment on how BP would respond to the governor's proposal.
"This is a very large and risky project," he said. "What we want is something we can count on through the longevity of the project."
The producers want to avoid the years of legal wrangling over royalties and tax levels that followed the building of the trans-Alaska oil pipeline, Beaudo said.
"There have been many proposals passed back and forth and that's continuing," he said. "The important thing is to get the right deal the first time."
The governor has repeatedly told the public he wants to present a contract for approval to the Legislature before next year's regular session starts in January.
To call a special session, the administration must allow for a minimum of 30 days to collect public comment, making a special session unlikely if it's not called soon. Lawmakers have said they are not keen on returning to Juneau during the Thanksgiving and Christmas holidays.
While the governor may be in a rush to reach a deal before the end of the year, the pace of the negotiations is not uncommon for a deal of this magnitude, Beaudo said.
Staff writer R.A. Dillon can be reached at 459-7503 or rdillon@newsminer.com . |
