Knowles proposes bill for pipeline

Governor's plan is effort to make project profitable for Alaska

Posted: Friday, August 31, 2001

ANCHORAGE Gov. Tony Knowles is proposing what he calls national interest legislation to make development of an Alaska natural gas pipeline economical.

The proposed federal legislation mandates the Alaska Highway route for a gas pipeline and calls for federal tax incentives for companies that bring North Slope gas to market.

Knowles outlined his 10-point proposal in a speech Thursday before the Resource Development Council of Alaska.

"The time is right for Congress to enact an Alaska National Interest Natural Gas Act," Knowles said.

BP, Phillips Alaska and ExxonMobil are studying construction of a natural gas pipeline to the Lower 48. The cost of the project is estimated at $15 billion to $20 billion, and gas producers have said they have not yet come up with a project that is economically feasible.

Curtis Thayer, spokesman for the Alaska Gas Producers Pipeline Team, said Knowles' insistence that a gas pipeline follow the Alaska Highway could threaten development of a gas line.

"Putting mandates on us jeopardizes the project," Thayer said. "The fact is, if routes are chosen before the study is complete, there's a chance that the pipeline might not be built."

The oil companies also are studying building the line under the Beaufort Sea to Canada's Mackenzie River valley. But Knowles said that route poses environmental and legal hurdles and would not make natural gas available to Alaskans.

In addition to mandating an Alaska Highway route and providing gas for Alaska communities, Knowles' proposal requires that a pipeline project must:

* Provide access for new gas discoveries.

* Allow participation in the project by other gas pipeline companies and major Alaska companies, in addition to BP, Phillips and ExxonMobil. The state also would consider the possibility of taking an equity interest in the gasline.

* Include a provision for hiring Alaskans and Alaska Natives.

* Use Alaska businesses.

* Include worker training and a project labor agreement for construction, operation and maintenance of the pipeline.

* Give priority to American and Canadian steel companies for construction of the 2,000 miles of steel pipe needed.

* Find that the Alaska Highway gas pipeline is in the national interest.

* And include economic incentives, including accelerated depreciation and an investment tax credit.

The legislation is based, in part, on the work of the Alaska Highway Natural Gas Policy Council, which has been analyzing gasline development.

The gas producers have submitted their own proposed legislation, which seeks to streamline the permitting process for a gasline project, calls for an accelerated depreciation schedule and would leave selection of a route to the gas producers.

Congressional leaders are putting together energy packages that likely will come together this fall after Congress returns from its August break. Knowles said he plans to travel to Washington, D.C., next month to push his plan.

Knowles' proposal drew fire from Jim Sykes, who heads the industry watchdog group Oilwatch Alaska. Sykes is among those who favor a pipeline that would carry North Slope gas to Valdez where it would be liquefied and loaded on ships for export.

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