Alaska editorial: News-Miner presents four 'must-haves' to a gas line

Posted: Monday, May 14, 2007

This editorial appeared in the Fairbanks Daily News-Miner:

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Natural Resources Commissioner Tom Irwin is right when he says regarding Gov. Sarah Palin's plan to bring about the North Slope natural gas pipeline, "Anyone else have an idea?" He adds, to emphasize the importance the administration places on its plan, that construction hasn't yet started on the gas line despite the fact that the major oil companies have held leases to the North Slope's gas for a few decades.

The cumulative effect of those points, however, is to suggest that the leaseholders - ConocoPhillips, BP and Exxon Mobil - could have brought that gas to market at any time during the long decades since those leases were signed. That simply isn't accurate. The price of natural gas, by Mr. Irwin's own statement while visiting Fairbanks last week, only reached the tipping point somewhere in the early part of this decade to make the gas line, in the state's view, profitable.

Yet, even with the rising price of gas, the project at times seems as distant as ever.

The governor, through her Alaska Gasline Inducement Act and in her words, has adopted an unhelpful us-versus-them approach to the oil companies. She insists that any company or group submitting a proposal under her plan, on which the Legislature has been holding hearings and which the governor wants to see passed before lawmakers adjourn on May 16, must agree to several of the state's "must haves." Well, logic says, however, that if the state can have some "must haves," then so can the leaseholders.

The governor needs to be flexible. Her plan might not work, given that executives with ConocoPhillips, BP and Exxon Mobil recently testified in Juneau that their companies won't provide the gas under the legislation that Gov. Palin's team has assembled. There's evidence that the companies want to revert to the draft contract that was negotiated, but not completed, during the Murkowski administration.

The governor may not be so willing to bend, however, if she and her team have already decided that they prefer the pipeline to be built by a group other than the oil companies. Such thinking would be in line with the administration's stated desire to avoid giving ConocoPhillips, BP and Exxon Mobil control on the North Slope basin by awarding them the pipeline license. There's good indication that this is the intent of the Palin team. If this is the case, the team is making a calculated decision that, in the end, the companies will commit to ship gas through the line. That's a helluva gamble with Alaska's future.

So where are Alaskans left? Trusting the oil executives, who say their companies want to build the line but that the governor's plan won't work, is difficult for many people to do. Trusting Gov. Palin and her team would be an act mostly of faith since the administration itself has taken an approach that, when all is done, relies on hope that the incentives built into their plan will entice BP, Exxon Mobil and ConocoPhillips to provide the gas. Going to court to force the companies to provide the gas is a time-consuming route that few want to head down.

Each of the parties - the major oil companies, the state, the third-party pipeline builders - involved in the gas line effort has different needs that they say must be met before Alaska can have the energy project that it and the nation needs and wants. Alaska's leaders should want to compare all proposals, side by side, in order to make a selection that, as its primary goal, gets construction under way the fastest and, as a secondary goal, brings the greatest benefit to the state. These two goals must be in this order, for what good is it for the state to insist on an economic benefit that is so good for the state but unpalatable to the oil companies that it makes a gas line less likely to be built?

Four things are needed in the coming weeks:

• The Legislature should pass a version of the Alaska Gasline Inducement Act that doesn't disallow a proposal that doesn't meet the state's list of "must haves."

• The administration should make it clear that it will accept a proposal outside of the Alaska Gasline Inducement Act, that it will fairly review that proposal and issue a detailed public report of that review, and will make that proposal available to the Legislature for its review. It must be willing to review such an outside proposal even while reviewing a rival proposal submitted under the act.

• The Legislature should amend the Stranded Gas Development Act, the law under which the draft contract of the Murkowski administration was submitted, to allow for new proposals under that legal framework to be reviewed concurrently with any proposal being considered under the Alaska Gasline Inducement Act.

• Exxon Mobil, BP and ConocoPhillips, if they really want to build the line as a group, should put forward a new proposal - whether under a modified Alaska Gasline Inducement Act, a renewed Stranded Gas Development Act, or some other approach. The companies need to be forthright and complete with the public, the Legislature and the administration in detailing their needs and be as clear as possible in giving Alaskans a date for the beginning of construction.

Alaska doesn't have much time to get this done. All a person needs to do to understand this is to look at the revenue chart put together by Fairbanks Sen. Gary Wilken. Alaska faces a deep and enduring revenue canyon within the next two years, and the state's revenue stream will remain as a trickle at the base of that canyon for the foreseeable future without the gas line. The oil executives can understand the implications of that chart as well as anyone, and the state's position with the companies only weakens as time progresses.

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