Palin unveils gas line plan

Governor says state can no longer afford to let supply sit idle

Posted: Sunday, March 04, 2007

JUNEAU - Alaska can no longer idly sit on its massive reserves of North Slope natural gas and watch as the nation imports energy supplies, Gov. Sarah Palin said Friday.

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"Americans should not rely on foreign imports to fuel our homes and our businesses," she said after introducing natural gas pipeline legislation, which would be the first step in ultimately delivering trillions of cubic feet of Alaska reserves to market.

Palin warned that the state and the nation can't afford to let those supplies - for now about 35 trillion cubic feet in the North Slope - sit untapped any longer.

"Alaska can and must help," she said. "Alaska has got the energy, and we are ready to reduce Americans' dependence on foreign sources."

The multibillion dollar pipeline has implications for North America's long-term energy supply for heating homes and businesses. But a gas line is also considered to be a potential boon to the state's economy, not unlike that of Prudhoe Bay's oil production at its peak.

The plan already is being widely discussed by lawmakers, energy regulators and oil company executives from Juneau to Washington, D.C.

"Let me tell you the nation is watching our actions," Palin said.

If - and given past attempts to build a pipeline, it's a big 'if' - the plan gets legislative approval, Palin said she would like engineering work to begin as early as the fall of 2008. But she offered no projections on when the gas would reach designated markets.

Federal energy regulators and lawmakers had been concerned that the state was not progressing fast enough with the project's development.

But the state is not lagging just yet, said Ed Kelly, Houston-based analyst with energy consultant Wood Mackenzie.

"I wouldn't characterize it as behind the curve," said Kelly who said there is still time to meet his firm's deadline of 2019 for the project to be competitive. "If we don't get a firm pipeline announcement in a couple of years, that would be different."

By presenting Alaska's lawmakers with the proposed Alaska Gasline Inducements Act, also known as AGIA, Palin formally sets aside failed efforts to build a pipeline by her predecessor, Frank Murkowski.

It also means Exxon Mobil Corp., BP PLC and ConocoPhillips, who had an agreement in principal with Murkowski, must start over, but this time compete on a larger playing field. At least 12 groups or companies have expressed an interest in the project.

Representatives from several of those companies watched Palin's announcement via teleconference. Afterward, their comments were brief, mostly pledging general support to moving forward with a pipeline plan.

Many lawmakers did not like last year's deal because negotiations were held behind closed doors and they believed the deal favored the companies, so no legislative vote was taken.

Friday's announcement represents a new start, but it's just that - a start, said Rep. Beth Kerttula, D-Juneau.

"It's not like it's a done deal. We are looking forward to seeing the details and studying it," Kerttula said.

Once Palin took office in December, she charted a new course, pledging an open and competitive process among any company or group interested in building a pipeline.

She also said the process would not limit consideration for pipeline routes to a single option such as last year's failed effort for a line through Canada and into Midwestern markets.

Palin has fulfilled her promises, lawmakers said.

"There was nothing that came as a surprise to me and I think that bodes well for wanting to be open with the Legislature," said Sen. Gene Therriault, R-North Pole.

Palin's bill sets project criteria which energy companies must meet in exchange for inducement incentives from the state to build a pipeline.

The bill affords tax incentives and royalty breaks for the first group of companies who commit to supplying the pipeline with natural gas, a process known as open season.

Among the pipeline inducements is one calling for the state provide up to $500 million to offset startup costs for the company or group of companies selected to build the pipeline.

The state will match the successful bidder's financial commitment up to $500 million needed to collect engineering data, and apply for state and federal permits.

Those seeking to build the pipeline must spell out how they will meet certain criteria: cost overrun management; the company's financial capability, and the project's likelihood of success.

Rep. Ralph Samuels, R-Anchorage, said the bill seems to be both company and pipeline route neutral thus far, but he still wants to know how the criteria will be judged and how will the winner be picked.

"The devil will be in the details," Samuels said.

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