By way of qualification, I have been running a small boat (20- and 24-passenger), high-end, cruise business in Southeast Alaska since 1980. And dating back to the 1920s, my family owned and operated one of the largest commercial fishing companies in Alaska. Furthermore, I spent the first six to seven years of my working life employed by a family-owned, independent oil company drilling wells in West Texas and Oklahoma.
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Regarding the gas pipeline, if it was me, I would:
1. Negotiate as high a royalty as I could (20 percent?). Normal royalties run 12.5 to 16.6 percent with a nominal number of overrides.
2. Regarding pricing, I would probably want the price pegged month by month to an average of the Henry Hub (the pricing point for natural gas futures contracts traded on the New York Mercantile Exchange) in case there was an inclination by the companies to play with the price.
3. I'd offer to forego a quarter to one-half of my royalty income until the cost of the pipeline was recouped (details of what represents costs to be negotiated).
4. I'd offer to use the full force of the state government and its Congressional delegation to help cut through the bureaucratic morass of the permitting process to get full royalty income in my lifetime.
5. At all costs, I would avoid becoming involved in any scheme that tied what I was to receive to some formula that was tied to net income (a bonanza for accountants and lawyers).
Finally, I would keep any contract simple; there is less to litigate in a two-page versus 200-page document.
Michael A. McIntosh Sr.
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