Alaska editorial: What a good pipeline deal should look like

Posted: Thursday, August 25, 2005

This editorial first appeared in the Anchorage Daily News:

Gov. Frank Murkowski has repeatedly said he wants a gas pipeline contract with the North Slope's major oil producers this year. Alaska's negotiating team and the producers - Exxon Mobil, Conoco Phillips and BP Alaska - have been in talks for months. Loose deadlines for a deal - late July, first week of August - have come and gone.

What's going on? Alaskans don't know, because the talks are confidential. What Alaskans do know is that it's time - maybe past time - to move Alaska's North Slope gas to a hungry market. And the largest and most diversified market, for starters, is likely to be the Lower 48 via Canada.

Terms of any deal won't be confidential for long. The governor has said he wants a contract to present to the Legislature in special session this fall. Then the deal will get a full airing.

What should Alaskans look for?

• Specific dates to begin and complete the work - engineering, permitting, construction and gas to market. These could be ranges of dates to allow for the variables inevitable in such a huge project. But a deal should hold producers to performance dates that work for both sides, and not just the producers' preferred marketing timing, and allow the state to renegotiate or look for other options if the producers don't make good. This is similar to overseas deals common in the industry. Alaskans should not settle for a deal that kicks in only when producers decide the time is right.

• Access to the line in Alaska for new gas discoveries and new players. Companies that find and produce gas should have an affordable way to move that gas to market, whether in Alaska or Outside. The reality of a fair route to profitable markets will accelerate exploration and new competitors here.

• Access for Alaskans to natural gas supplies. Consumer prices have jumped in recent years, and power suppliers like Chugach Electric and Enstar have warned of more to come. Cheap power is essential to Alaska's prosperity. It must be part of the deal.

• Precise terms on Alaska's role - whether that's some state ownership of the line, in which case Alaska becomes a partner as well as one of the regulators of the producers, or just a clear definition of Alaska's royalty share of gas.

• Fair tax terms. This should be a progressive system whereby Alaska shares the gain when prices are high and shares the pain when prices are low.

• Clear terms on treatment, processing and the state's share of natural gas liquids (liquefied petroleum gas, ethane, propane, butane), a lucrative part of natural gas production.

• Clear definition and purpose of any state-owned gas corporation - who would run it? How would it work?

• Alaska hire and Alaska purchase - clear terms for Alaska workers and vendors to gain training, jobs and service and supply contracts.

These are the fundamentals Alaskans must keep in mind when our lawmakers begin to wrestle with the devil in the details, as the governor's team is doing now. The governor wants a deal and has promised one. Good - provided the deal is a good one.



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