Conoco joins in rejection of gas plan

Oil company snubs incentive, lack of tax guarantees

Posted: Tuesday, May 01, 2007

One of Alaska's major oil companies told a Senate committee Monday that it won't be participating in Gov. Sarah Palin's competitive gas pipeline process.

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ConocoPhillips Co. said it preferred a process similar to last year's, which was conducted under the administration of Gov. Frank Murkowski.

"We very much want to develop our (Alaska North Slope) gas resources," said Brian Wenzel, ConocoPhillips' vice president for Alaska North Slope energy development.

Palin's Alaska Gasline Inducement Act , or AGIA, opens up the process for bids to build the gas pipeline but sets out state requirements for applications, which it calls "must haves."

Wenzel said his company finds those requirements too tough to meet. He said ConocoPhillips wants to be free to negotiate the best deal possible with the state.

Wenzel is the highest ranking ConocoPhillips executive so far to testify on AGIA.

He suggested that creative proposals outside the requirements of AGIA might offer the state a better deal than prescribed by the governor's plan.

"AGIA does not provide that flexibility," he said.

Sen. Kim Elton, D-Juneau, told Wenzel that when he heard the term "flexibility" from producers, he was hearing a request from last year, when the previous governor chose to negotiate only with producers.

That resulted in an agreement which was never finalized and did not have public or legislative support.

ConocoPhillips' testimony followed that of Exxon Mobil Corp. and BP, all of whom said they don't intend to bid under AGIA as written.

The producers say they don't like AGIA's lack of a guarantee of low enough taxes for a long enough period.

The companies are concerned about Alaska's dependence on oil and gas taxes, Wenzel said. If the state runs short on money, it might turn to higher petroleum taxes to bail itself out, he said.

Senate Finance Committee co-Chairman Bert Stedman, R-Sitka, asked Wenzel for specific suggestions on how to improve the governor's plan.

"It's easy to tear things apart. It's harder to build them," Stedman said. Wenzel, without going into specifics, alluded to suggestions that had come up previously in committee.

In an interview with reporters, House Majority Leader Ralph Samuels, R-Anchorage, said some in the Capitol believe the producers are bluffing about not participating in the AGIA process, but he warned that might not be the case.

"We can't sit back and say everybody's blowing smoke, and they're going to show up," he said.

ConocoPhillips and the other producers have also opposed one of the key inducements, an offer of $500 million in state money to get the gas pipeline ready for certification by the Federal Energy Regulatory Commission.

That money might help a third-party pipeline developer, but wouldn't likely be needed by one of the big oil companies, or a consortium of all three.

"It is not in the best interest of Alaska, or indeed necessary, to offer that inducement," Wenzel said.

• Pat Forgey can be reached at

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