Gov. Murkowski predicts pipeline contracts by fall

Posted: Tuesday, June 07, 2005

One or two contracts to extract and transport natural gas from the North Slope are expected by fall, Gov. Frank Murkowski said Monday at a Fairbanks news conference.

But when asked by reporters to name an example of progress, Murkowski did not respond directly.

"These are aggressive negotiations that involve a certain level of confidentiality and an awful lot of detail," he said. Confidentiality agreements prevent negotiators from revealing what is being discussed.

The state is reviewing two proposals, one from TransCanada and one from a consortium of the three largest oil producers in the North Slope: Exxon Mobil, ConocoPhillips and BP.

Murkowski said it is possible the two proposals could be made into one contract.

The negotiations to develop natural gas in the North Slope and transfer it by pipeline through Canada and into the Midwest were earlier expected to conclude during the last legislative session. In April, lawmakers were briefed that a deal would surface this summer.

Murkowski said he now expects a contract by fall, which will be open for public review during a 30-day comment period. A special session will be called for legislators to review the contract.

"Nobody can afford to make a mistake," said Rep. Ralph Samuels, considering the contract to develop the $20 billion pipeline will affect future generations of Alaskans.

In previous news conferences, the governor said he did not want to rush the negotiations.

Some Alaskans believe the contracts should be wrapped up by now.

"I think we should be turning dirt," said House Minority Leader Ethan Berkowitz, D-Anchorage.

Berkowitz said delays have come from the administration being indecisive over the state's role in ownership of the pipeline, and whether it wants to run the gas through Canada or solely through an all-Alaska pipeline ending at Valdez for shipping.

All the while, the global economy is looking for other places to develop natural gas, from China to South America, Berkowitz said.

"The market waits for no man," he said. "Not even Murkowski."

If a contract is signed this year, gas could be flowing through the pipeline between 2012 and 2014, Murkowski said in an earlier briefing.

While searching for oil, producers discovered 35 trillion cubic feet of natural gas seeping beneath the North Slope. They suspect another 250 trillion lie in untapped areas.

"There is movement in both camps," Samuels said. He estimated several thousand man-hours have been invested in negotiations.

TransCanada Chief Executive Officer Hal Kvisle said it remains in question whether TransCanada will partner with the private producers or the producers will do the project alone.

"We don't know what producers would like to have as the final outcome at the end of the day," Kvisle said.

Two producers have lobbied in Ottawa to revoke TransCanada's right to build the pipeline through Canada, said Kvisle. To do this, legislation would have to be passed in the Canadian government.

TransCanada said it has several billion dollars invested in the pre-building of the Canadian portion already.

"We can deliver the gas through Canada more predictably at a lower cost by expanding our existing system than any other formulation," Kvisle said.

The plan to construct a line to Valdez and liquefy the gas for shipping was dealt a setback last week when a subsidiary of San Diego-based Sempra Energy Co. pulled out of a signed agreement.

Sempra Alaska cited "protracted political wrestling" and doubts about North Slope producers' cooperation as reasons for backing out of the deal.

"We want to make sure that you understand the Sempra pullout has nothing to do with access to the market in California," Murkowski said, adding that there are other "routes" and "mechanisms."

Kvisle said another option would be to send the gas through existing pipelines in Canada to reach the West Coast.

The North Slope producers have not announced whether they will help with the Alaska Port Authority's proposal.

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