Officials praise pipeline progress

Posted: Thursday, August 16, 2007

Federal regulators on Wednesday praised Alaska's renewed attempts to get a natural gas pipeline built, a sharp contrast to a report earlier this year that said the process had "slipped considerably."

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The Federal Energy Regulatory Commission still plans to take a wait-and-see approach on efforts under the Alaska Gasline Inducement Act, the agency said in a report to Congress.

But developments the last six months earned the state high marks from FERC's Chairman Joseph T. Kelliher in a separate statement.

"I commend the progress the state of Alaska has made under the leadership of Governor Sarah Palin in recent months," Kelliher said. "I am hopeful the new state process will encourage the development of a natural gas pipeline project in Alaska."

Palin introduced the act in March to get a pipeline built, two months after the previous FERC report assessed the state's progress as lagging.

Her plan calls for state-backed, inducement-driven competition among producers and independent pipeline companies seeking to build the pipeline.

The state's hope is to tap into the North Slope's natural gas reserves - about 35 trillion cubic feet - and ship them to market.

Joe Balash, Palin's special assistant on the state's energy developments, said FERC's report simply reflects strong communication with federal regulators.

"There isn't anything new there, but we are gratified with the difference in tone compared to what we saw in January," Balash said. "It shows we as a state are moving forward."

FERC issues a report to Congress on the state's development on an Alaska gas line about twice a year.

The latest report highlighted several developments since January, including:

• State lawmakers passing Palin's plan in May and the administration issuing requests for applications in July.

• A favorable U.S. Court of Appeals ruling for open seasons, a time when companies would bid for capacity on the pipeline.

• The Labor Department awarding a $7.5 million grant to be spent over the next five years on skilled-labor training programs for pipeline maintenance and construction.

The report even took into consideration a recent application deadline extension Palin handed down a few weeks ago.

Companies have until Nov. 30 instead of the original deadline of Oct. 1, but the state still anticipates work starting on the pipeline next year. Already one company, MidAmerican Energy Holdings Co., publicly said it would submit an application.

"I was pleased the report took into consideration that the governor has granted an extension and even with that, the project sponsor could still begin working next year," said Sen. Gene Therriault, R-North Pole.

The last FERC report, issued in January, called prospects for an application more remote than the previous year.

It based the report on a proposed deal between former Gov. Frank Murkowski and North Slope producers BP, Exxon Mobil Corp. and ConocoPhillips that 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.

FERC's first report put the Palin administration on the defensive, but the governor eased concerns in Washington by having face-to-face meetings with Kelliher and other federal energy officials.

The report has identified one hurdle that could cause Alaska's efforts some problems: The Mackenzie Gas Project in Canada.

Canada is further along in a project that could be in operation within the next eight years and delivering 1.2 billion cubic feet of natural gas per day.

The reports states Canada's project does present "certain problems and risks to an Alaskan project," including a shortage of steel and skilled work force.

"The issues related to the Mackenzie project have been there and will continue to be there," Balash said. "It's a question of making sure we get the logistics and organizational kinks worked out."

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