Companies say they should operate pipeline

Critics say proposal would create antitrust, fair access problems

Posted: Friday, February 16, 2007

The state's three largest oil companies have told lawmakers that producers should own and operate the state's prospective natural gas pipeline.

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Exxon Mobil Corp., BP and ConocoPhillips told the House Resources Committee an independent owner would have no incentive to rein in costs, which get passed on to producers.

Critics, however, are concerned that a producer-owned pipeline would create antitrust problems and not enable others fair access.

"The producers are best qualified to undertake this massive endeavor," said David Van Tuyl, BP's gas commercializing manager.

"Producers are also commercially motivated to maximize the value of our gas - the state's gas - and to deliver a low-cost project," he said. "The state has the same motivation."

And while these companies touted the value of a producer-owned pipeline, Gov. Sarah Palin separately pledged Wednesday to unveil her gas pipeline plan to lawmakers in "roughly two weeks."

Lawmakers have been awaiting Palin's bill to re-establish project criteria which energy companies must meet in exchange for inducement incentives from the state. The big three oil companies were selected last year by the former governor to lead the project, but the deal was never approved by the legislature.

Palin has reopened negotiations, and calls her bill the Alaska Gasline Inducement Act, or AGIA, which essentially will replace the state's Stranded Gas Act.

For now, members of the Senate and House Resources committees listened to big oil's argument for a producer-owned pipeline during separate meetings; the Senate meeting was last Friday, and the House committee met Wednesday.

The stakes are a multibillion project designed to deliver Alaska's 35 trillion cubic feet of proven natural gas reserves to a nation watching reliance on imports grow.

Proponents say the three major producers have the largest stake and won't jeopardize that by letting cost overruns go unchecked.

"It only makes sense that the parties taking the risk need to be able to manage those risks, especially on something the scope of this project," Exxon Mobil's Marty Massey told the Senate committee last week.

But critics are worried that letting the three producers operate the pipeline would not enable the state to maximize all its resources, not just those in the North Slope.

"I still believe in the best protections long-term for state and citizens come if we have an independently owned and operated pipeline," said Sen. Gene Therriault, R-North Pole.

"That doesn't preclude producer participation," he added. "It's whether producers have outright control."

The companies also implored lawmakers to see the urgency in getting a fiscal resources contract with the producers and set aside differences from last year's failed effort.

Former Gov. Frank Murkowski reached an agreement with BP, Exxon Mobil and ConocoPhillips to build a $25 billion pipeline from the North Slope through Canada and into the Midwest.

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

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