Palin extends deadline for gas pipeline

Companies given two more months to apply for contract

Posted: Wednesday, August 08, 2007

Gov. Sarah Palin has extended by two months the deadline for applications for companies interested in building a natural gas pipeline she believes will one day ship trillions of cubic feet of reserves to market.

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The deadline was pushed from Oct. 1 to Nov. 30, said Nan Thompson, a member of Palin's energy team.

Thompson said several two factors drove the governor's decision: More companies have begun to inquire about the project, and feedback on the state's Web gas line site calling for more time to prepare a complete application.

Applications were made available July 3, not long after Palin signed the Alaska Gasline Inducement Act into law. The prospects for an extension have recently as last week been noted by the administration.

"It's going to provide an opportunity for other interested parties to put together responsive bids," Thompson said. "The application asks for a lot of detail, and we wanted to give more applicants more time to do a better job."

Wasilla Republican Sen. Charlie Huggins, who serves as Senate Resources Committee chairman, said he hopes the extension is not buying the administration time because there's a lack of interest in the project.

"Normally this means you're not getting any or many responses under the provisions that are laid out," Huggins said. "The optimist in me says if the administration is doing this, they are doing it in the best interest of the state, so I have to assume they are doing the right thing."

Thompson also said the date changes accommodates the upcoming special session on the state's petroleum profits tax, which Palin said last week is not working and comes tainted by the corruption charges on three former lawmakers.

Majority Leader Ralph Samuels, R-Anchorage, said the priority should be the gas line project and a tax review can wait until regular session resumes in January.

"All the resources should be getting Alaska a gas line - all of them," he said. "If we are having to prioritize time, for Alaska, the gas line is it."

Palin has noted the high stakes associated with the project, which could one day be the economic life of the state much like oil production in the North Slope is today.

But a potential multibillion dollar pipeline also carries implications for North America's long-term energy supply and has been widely discussed by lawmakers, energy regulators and company executives throughout North America since Palin outlined her plans in March.

Those plans are AGIA, which after getting feedback from oil companies and independent pipeline companies, lawmakers passed as the legislative session came to a close in May.

But since then, Palin's administration has presented AGIA to companies that did not testify at legislative hearings, including three nationally owned energy companies from China and Houston-based El Paso Corp., one of the nation's largest natural gas pipeline operators.

China has been working to become a global player in the energy market, but usually want to invest in a project that will produce oil or gas for its country, already the second largest consumer of oil to the United States.

Amy Myers Jaffe, associate director for Rice University's energy program, said no one should balk at a state-owned company becoming an investor, but China's companies aren't likely to place a bid unless it's permitted to export the gas to China.

"Theoretically there should not be any problem with investors coming in to bring capital that is otherwise unavailable," she said. "But I don't see this as something that could be attractive to China."

Either way, oil and independent pipeline companies have until that late fall date to submit an application that must outline details such as the pipeline's route, the market it will serve and how it can build a pipeline and avoid cost overruns.

Palin has long warned that the state and the nation cannot afford to let the natural gas supplies - estimated at about 35 trillion cubic feet on the North Slope - sit untapped any longer.

Whether the extension produces more meaningful and competitive applications, only time will tell, but it's a question that won't die until lawmakers get their first chance to review applications a few weeks after the Nov. 30 deadline.

The administration had stressed an urgency to move forward with AGIA so work can begin by late summer or early fall of next year. Thompson said that schedule can still be met, even with the extension.

Samuels, who cast the lone vote against AGIA during the session, isn't so sure.

"We were told we had to pass this right away so we didn't lose the 2008 construction season, and now it's being delayed," Samuels said. "I'll be interested to see if any new players do come to the table."

Alaska has struggled for decades to get a deal either with North Slope producers or independent pipeline companies to build a line that could possibly run from the North Slope through Canada and into the Midwest.

A proposed deal between former Gov. Frank Murkowski and North Slope producers BP, Exxon Mobil and ConocoPhillips fell apart last year.

Murkowski had a deal with these companies that would have set tax and royalty terms should a pipeline get built but there was no guarantee it would.

Additionally, the Legislature did not like the terms and never voted on it, so Palin decided to start over with a more inclusive plan.

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