Potential suitors to build gas pipeline are playing it coy -
DEADLINE NOV. 30: Big 3 are lying low; others aren't rushing to tip their hands.
adn.com
By WESLEY LOY
Published: November 12, 2007
Last Modified: November 12, 2007 at 12:24 AM
With the deadline looming for companies to submit natural gas pipeline applications to the state, most contenders are clinging to strategies best described with one word -- cagey.
One says yes, it intends to apply. One says no, count us out.
But most are saying, in so many words, maybe we will and maybe we won't.
One thing is for sure: State officials led by Gov. Sarah Palin are investing enormous hopes that some solid applications come in by the Nov. 30 deadline.
If all goes according to Palin's plan, state officials and a cadre of expert consultants will review the applications, rank them, license a winner and then see field work by next summer or soon thereafter.
The goal -- long the fondest but most frustrated of Alaska's economic development dreams -- is construction of a second large, multibillion-dollar pipeline across the state, and maybe across much of Canada, to carry North Slope natural gas to market.
The state license doesn't mean construction actually will happen. Rather, it would award state incentives to a company or partnership that, in turn, would be obliged to try hard to deliver the project.
Major oil companies Exxon Mobil, Conoco Phillips and BP have held rights to most of the tremendous gas reserves since the 1970s, but the enormous cost of a long pipeline -- estimates consistently top $20 billion -- has prevented development.
In recent years, higher natural gas prices have lit new enthusiasm for a pipeline, and Palin -- like her predecessor Frank Murkowski -- is inviting project applications. The package of state incentives includes $500 million toward the cost of a gas project.
One of the most anticipated questions swirling around Palin's competition is whether the major oil companies will submit bids either individually or as partners under terms of AGIA, or the Alaska Gasline Inducement Act.
If they don't and another company wins the state license, the next question is whether the oil companies would pledge to ship their gas through someone else's pipe. Or, perhaps, whether they might later submit a competing project proposal to federal pipeline regulators.
Oil company spokesmen were -- we warned you -- cagey when asked about whether they'll apply.
"We're considering our options," Exxon spokeswoman Margaret Ross said in an e-mail.
"Developing Alaska's North Slope natural gas resources is important to Conoco Phillips, and in this regard, we are exploring a number of options," said Conoco's Natalie Knox Lowman.
"We cannot file a conforming bid under AGIA," said BP's Daren Beaudo.
Pay special attention to that word "conforming."
Gas line pundits suggest the oil companies, who decry the state's application requirements as too rigid, might submit a "nonconforming" bid setting out their own requirements for a gas pipeline. One demand might be for the state's pledge to hold tax rates steady.
RANGE OF CONTENDERS
The Palin administration has said only conforming bids stand a chance of winning the state license.
Several other companies -- many of them big players in the North American pipeline business -- have been mentioned as potential applicants.
Here's a rundown of what they were saying late last week:
• TransCanada Corp. spokeswoman Shela Shapiro said the board of the Calgary-based energy company "has not yet made that decision" on whether to apply.
• Another big Calgary pipeline company, Enbridge Inc., will not submit an application, spokeswoman Jennifer Varey said.
She provided a recent statement from company president Pat Daniel, who said AGIA won't work because it lacks the support of the major oil companies controlling the gas.
• A spokesman for MidAmerican Energy Holdings Co. of Des Moines, Iowa, wouldn't say if the Lower 48 pipeline power -- part of Warren Buffett's vast financial portfolio -- will apply.
However, the local trade journal Petroleum News in August quoted MidAmerican chief executive David Sokol as saying his company and partners aimed to submit an application.
• England-based BG Group, a global natural gas player, has made noises recently about what it considers good prospects for exporting LNG, or liquefied natural gas, from Alaska to Asia.
David Keane, the company's Houston-based vice president for corporate and policy affairs, made those comments during an Anchorage energy conference last month.
He wouldn't say last week whether BG will apply.
"I have said, however, that we have supported the governor and AGIA," Keane said.
BG and its partners have leased more than 2 millions acres on the North Slope, mainly with an eye toward exploring for gas.
• A homegrown organization, the Alaska Gasline Port Authority, will submit an application, said Jim Whitaker, the group's chairman.
The port authority, a joint project of the Fairbanks North Star Borough, the city of Valdez and the North Slope Borough, favors an LNG project through Valdez rather than a gas pipeline running across Canada.
Will the port authority have a partner on its application?
"Maybe," said Whitaker, declining to elaborate.
BIDDING STRATEGIES
One very interested observer is Drue Pearce, a former Alaska state senator and now federal coordinator for Alaska natural gas transportation projects in Washington, D.C.
She said she doesn't expect a lot of applicants. A big reason is the cost of pulling together a highly technical bid, one that obligates the winner to take even more expensive steps toward planning for a pipeline.
The big intrigue is what Exxon, Conoco and BP will do, she said.
"We are all waiting to see what the strategy of the producers is," she said. "If they put something on the table, what will it look like and what will they ask for?"
Dale Nesbitt, an energy consultant in Los Altos, Calif., said oil company heads have a world of choices these days, with oil paying close to $100 a barrel. They can direct their dollars and focus on many regions without the bother of Alaska pipeline politics.
"I want to be in the game, but I don't want to spend any serious money," he said. "If it was me and I was the CEO of an oil company, I'd put in a stalking-horse bid and then I'd wait."
Nesbitt added he believes gas markets and future demand are strong enough to support construction of an Alaska gas pipeline.
Marty Rutherford, Alaska's deputy natural resources commissioner and head of the state's gas pipeline team, said companies that apply will be identified immediately after the Nov. 30 deadline but no other information will be released then.
The state team and financial, engineering and legal consultants will spend some months ranking the field, and state spending could reach $13.5 million on the AGIA process, she said.
Who will apply is anybody's guess, Rutherford told a breakfast meeting of oil-field contractors last week.
"We have scrupulously not asked anyone whether they intend to submit an application," she said. "We just felt that was inappropriate." |
