Proposal: Pipeline companies pay $1.5B

Plan forces Big Oil to commit to constructing natural gas project

Posted: Friday, August 04, 2006

A Senate committee heard a new idea Thursday meant to make the state's three largest oil producers move quickly in planning a natural gas pipeline to Canada.

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The proposal would require BP, ConocoPhillips and Exxon Mobil Corp. to "show us the money," said Senate President Ben Stevens, R-Anchorage.

The three companies would be required to spend at least $1.5 billion on the planning and permitting for the pipeline project before Jan. 1, 2011.

They would have to establish an escrow account or a letter of credit, so that if the state determines the companies failed to live up to their commitment, the balance of the $1.5 billion would go to the state.

Stevens introduced the proposal as an amendment to a bill that would change the Stranded Gas Development Act and legitimize the fiscal contract Gov. Frank Murkowski negotiated with the three companies, a key step toward building the pipeline.

But legislators have been loathe to approve the changes and grant the governor authority to negotiate the deal. Among their concerns is what they say is a lack of firm work commitments in Murkowski's contract.

The contract does not guarantee a pipeline would be built, and Stevens said this proposal would address that concern.

Stevens wanted the Senate Special Committee for Natural Gas Development to quickly adopt the amendment, but Sen. Fred Dyson, R-Eagle River, said the committee should delay its vote to hear from the oil companies it would affect.

"I know what the response of the producers is going to be. It's going to be 'No,"' Stevens replied.

The committee set the amendment aside, to be taken up later Thursday night.

Also Thursday, Stevens reintroduced his proposal to put Murkowski's contract to a statewide vote. Stevens said he had to fix problems with the original plan, which was introduced last week.

The amendment would put the decision of whether to approve Murkowski's gas deal to Alaska voters. If they vote yes, the need for legislative action on the contract would be repealed.

Sens. Hollis French, D-Anchorage, and Donny Olson, D-Nome, requested a legal opinion on Stevens' original proposal. In his response, legislative attorney Dennis Bailey wrote the statewide vote may be unconstitutional.

"I think it likely that the courts would hold that neither the governor nor the Legislature is authorized to submit an act to the popular vote for binding effect," Bailey wrote.

Stevens said his revised proposal makes the opinion meaningless, and he has requested Bailey update it.

The new legal opinion was not available by Thursday evening.

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