Alaska editorial: Speculation now laid to rest with gas line

Posted: Wednesday, April 30, 2008

April 8 was truly a momentous and potentially historic day in the history of Alaska. As this related to the economy it may be second only to the announcement of the discovery of oil on the North Slope.

This was the day that years and even decades of speculation has been laid to rest once and for all. The endless speculation, supposition and conjecture regarding the North Slope gas producer companies and their willingness or lack thereof to proceed with an Alaska gas pipeline are found wanting in light of the unbelievable commitment made on the part of BP and ConocoPhillips. They have combined to form a new entity: "Denali-The Alaska Gas Pipeline Project."

It was on this day that a project was launched. Not just any project, but what would be the single largest private construction project in the history of North America. These folks have made a commitment to the people of this state to begin the process of building this most fabled of all gas pipelines, in the form of $600 million in field work, cumulating in tens of billions of dollars within the next five years.

Rest assured this is unlike the false starts of the past. Oh, to be sure, there are many hurdles to be overcome with innovative forethought, but we have begun this journey with a bang. These two powerhouses in the energy sector, with a combined market capitalization of over $300 billion, have put their money where their mouth is and are beginning the assessment to determine the ultimate viability of the Alaska Gasline.

These folks have the expertise and the fiduciary wherewithal to pull off this proposal, but more importantly they have the resolve. In the words of ConocoPhillips chief Jim Bowles, "this is the real deal."

Teams have been formed and field work is to begin immediately on the project to move 4 billion cubic feet per day of gas in a large-diameter high-pressure pipeline through Alaska and on to Alberta, and possibly beyond to America's Midwest. A successful open season would be held by the end of 2010 if everything goes well, with an expectation of a FERC certificate shortly after. This means we could have gas flowing in 10 years.

Naysayers beware. It is unbelievable these companies would agree to a commitment of this magnitude unless they were confident it would result in a pipeline. Undoubtedly, an agreeable tax scheme is paramount to the success of an open season. Without fiscal terms, gas would not be committed at the open season and without those contracts in place, the FERC would not issue a certificate.

The companies are taking a huge risk in spending this money before fiscal terms have been settled. They are presupposing a great confidence in our legislators and our governor.

Let us hope the state can rise to the occasion. The producers have not only committed $600 million to assess the cost and development of this pipeline, they have also put themselves in a position of pledging over $100 billion in a world-class resource. During the news conference, when discussing fiscal terms, Jim Bowles from ConocoPhillips said they are "not asking for anything" in terms of the immediate $600 million commitment, but said later that the key word in the deliberation of fiscal terms is "predictability."

In other words, while the tax rate is important, it is really the stability and predictability of taxes for a period after the pipeline is built that is crucial.

It was odd to see the governor so glum on a day that she should have been leading a dance down Juneau's Franklin Street. Do people understand what this means to the state and its people? A smile was in order.

Now is the time for true leadership, the kind that requires a statesman or stateswoman with the quality so desperately needed to pull off a project of epic proportions. While we don't expect a slam-dunk, the ball is squarely in the state's court. It is an opportunity for Gov. Sarah Palin to act on what she has been preaching for months, to put aside petty political bias and partisanship, to unite our people and move this project not only forward, but to its long awaited conclusion.

Gov. Palin, our eyes and our hopes turn to you.



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