Legislature returns today

Oil industry officials scheduled to have first say this week

Posted: Wednesday, July 09, 2008

The Alaska Legislature will convene in Juneau today for its second special session of the year, continuing discussion of the state's plans to bring a natural gas pipeline to the North Slope.

Brian Wallace / Juneau Empire
Brian Wallace / Juneau Empire

During this session, the Legislature will for the first time hear from the state's North Slope oil producers, who hold leases on vast supplies of natural gas but have been reluctant to build the pipeline needed to commercialize it.

Finally developing those gas resources could come at a crucial time for Alaska, as flow through the trans-Alaska pipeline has declined from its 2 million barrels a day in the 1980s to about 700,000.

The Legislature is considering issuing a license to TransCanada Corp., of Calgary, Alberta, to build a pipeline. That license would require TransCanada to structure its pipeline so as to spur more exploration and development of the North Slope, and provide $500 million in state money to help with initial permitting.

At the same time, two of the state's big producers, BP and ConocoPhillips Co. are racing forward with their own proposal, called "Denali - the Alaska Gas Pipeline LLC."

Industry allies in the Legislature are urging their colleagues to reject the TransCanada license and let the producers build the line.

The two companies are heavily promoting their pipeline plans in the media, but have provided few details about how their project would be structured.

Bud Fackrell, heading up the Denali project, which has already begun survey work out of a field office in Tok, will testify at the invitation of the Legislature about the project Thursday, while Exxon Mobil will testify Friday.

Rep. Beth Kerttula, D-Juneau, said she was looking forward to hearing what the companies have to say.

"Let them tell us why they haven't produced so far, and built their own line," she said.

Kerttula said Gov. Sarah Palin's Alaska Gasline Inducement Act, which produced the TransCanada proposal, is likely what is prompting BP and ConocoPhillips to start on their own pipeline proposal.

Last week two Democratic senators, members of the majority coalition that governs the Senate, called for more information about the project as well, saying they haven't been able to give it serious consideration because so far the companies have provided only "scant" information about their proposal.

Sens. Bill Wielechowski and Hollis French, both of Anchorage, said TransCanada provided the state with great detail on how it would structure its deal to meet Alaska's development needs.

"We have yet to hear an equally detailed description from ConocoPhillips or (BP) about how your proposal would meet the needs of Alaskans," a letter the two recently sent to Fackrell reads.

The AGIA requires proposals seeking a $500 million state subsidy meet a series of "must haves," such as tariff structure and debt to equity ratios, to ensure the pipeline will be profitable for both the state and the owners.

Palin energy advisor Joe Balash said he's curious to find out what's being proposed by the producers as well.

"Are they willing to pursue Federal Energy Regulatory Commission certification, regardless of open season results in 2010?" he asked. "Are they prepared to pursue a project labor agreement?"

Fackrell will provide an overview of the Denali project at the request of the Legislature, said ConocoPhillips spokesperson Natalie Lowman. She said she did not yet have details of his presentation.

Also scheduled for this week is a presentation by the Consensus Building Institute, requested by Sen. Lesil McGuire, R-Anchorage, also a member of the majority coalition but more aligned with the oil producers.

She credited AGIA with moving the state toward a gas pipeline, but said both sides need to be brought together by a mediator to bring the state and the natural gas leaseholders together.

"How do we get North Slope gas producers to commit to putting gas into a TransCanada line when they have every intention to building their own?" McGuire asked in a letter to legislative leaders.

The Legislature resumes meeting today, and under the provision of AGIA has until Aug. 2 to approve the TransCanada license.

• Contact reporter Pat Forgey at 523-2250 or e-mail patrick.forgey@juneauempire.com.

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