Palin rejects ConocoPhillips natural gas pipeline plan

Posted: Friday, January 11, 2008

JUNEAU - Gov. Sarah Palin has rejected a multibillion proposal by ConocoPhillips to build a natural gas pipeline linking the state's energy rich North Slope to Midwestern states, opting to stick with a plan by pipeline company TransCanada.

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ConocoPhillips's offering was billed as an alternative to the state's Alaska Gasline Inducement Act, or AGIA, a law that called for bidders to guarantee progress toward construction of a pipeline and is friendly toward new energy exploration.

Instead, ConocoPhillips, the North Slope's largest producer of oil, wanted to negotiate a long-term fiscal package covering taxes and royalties on natural gas production; this option failed under the previous state administration and prompted Palin to chart a new course.

This week, she turned down the proposal, saying such a deal could deprive the state of its regulatory powers.

ConocoPhillips could not immediately be reached for comment.

TransCanada's plan, which falls under the law's guidelines, emerged as the favorite last week.

Palin sent a letter to ConocoPhillips' Chief Executive Officer James J. Mulva, her office said Thursday. Palin wrote the CEO, "Your alternative does not give the state a reason to deviate from the AGIA process."

ConocoPhillips was one of six companies to submit a bid to the state by Nov. 30 last year. Other bidders included: TransCanada, the Alaska Gasline Port Authority, the Alaska Natural Gas Development Authority, China's Sinopec ZPEB, and AEnergia LLC.

About 35 trillion cubic feet of proved natural gas reserves are believed to lie beneath the North Slope permafrost, and energy analysts believe that figure will rise in the future.

At a projected cost of $26 billion, the proposal could become the largest, most expensive energy facility ever constructed, or simply the largest private-sector project ever undertaken, in North America.

TransCanada owns one of the largest natural gas pipeline networks in the world, tallying 36,500 miles of pipe that ferries nearly 30 billion cubic feet of gas each day. The company has long had an interest constructing an Alaska gas line.

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