Feds, state leaders disagree on delays in building gas pipeline

Posted: Friday, February 02, 2007

JUNEAU - Federal energy regulators say they are ready for Alaska to submit a plan for a multibillion dollar natural gas pipeline, but the state's schedule has "slipped considerably."

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In a periodic report submitted by the Federal Energy Regulatory Commission to Congress this week, the agency said the prospects for a pipeline are "more remote than last year."

The report is the third by FERC, which reviews the state's progress every 180 days. In its conclusion, the agency offered this assessment:

"The federal government is ready to act. However, no pipeline application has been developed, and the prospects of an application are more remote than a year ago. Over the past year, the schedule for an Alaska gas pipeline has slipped considerably."

Lawmakers and members of Gov. Sarah Palin's energy team disagree.

"Any reference to timeline slippage is simply not true," said Marty Rutherford, acting commissioner for the Department of Natural Resources.

"The governor has embarked on a new course to ensure that a viable contract, and hence an application, can be approved," she said. "There is absolutely no indication a timeline has slipped."

Last year, former Gov. Frank Murkowski struck an agreement with BP PLC, Exxon Mobil Corp. and ConocoPhillips to build a $25 billion pipeline from the North Slope through Canada and into the Midwest.

The line would ultimately have delivered 4.5 billion cubic feet of natural gas a day, which is about 7 percent of the current U.S. demand.

But lawmakers felt the deal gave too many considerations to the big firms, including locking in tax rates for several decades, and provided few key assurances for the state.

As a result no contract was ever brought before the House or the Senate for a vote. Therefore the federal report should not presume so much ground has been lost, lawmakers said.

"There is serious concern of whether we would have ever gotten to closure and if we had whether the agreement itself would have resulted in a pipeline being built," said Sen. Gene Therriault, R-North Pole.

Rep. Beth Kerttula, D-Juneau, says lawmakers are acting with a sense of urgency while awaiting a proposal from Palin. She has reopened negotiations with 12 entities interested in building the pipeline. She's also soon expected to deliver a new proposal to the legislature.

Murkowski's plan my have failed or simply run out of time, but it did provide the necessary foundation moving forward, Kerttula said.

Additionally new lawmakers received a two-hour industry briefing from Rep. Ralph Samuels, R-Anchorage, last week.

"Now, when things start to happen, they can happen more quickly because everybody understands things better," Kerttula said.

Moving forward, FERC's report states that the pipeline's future hinges on the merits of Palin's "fresh competitive approach."

Palin said recently she plans to present the Legislature with a bill that calls for a transparent and competitive process to bring the state's resources to the most viable market.

That could mean shipping gas to the Midwest markets through Canada or tapping into the energy industry's emergence of liquefied natural gas terminals.

"This needs to be done as expeditiously as possible for two reasons," Rutherford said. "It's in the best interest of Alaska and the best interest of the nation.

"We are much further ahead than the report suggests. The governor sees this as a critical component to our nation's energy strategy," Rutherford said.

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