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Gov. Murkowski delivers gas terms to producers

Terms include state asking for $4 billion ownership of pipeline

Posted: Thursday, September 15, 2005

Gov. Frank Murkowski said Wednesday he delivered to North Slope producers the state's terms for a natural gas pipeline agreement and he expects a response by next week.

"If they don't agree with my assessment, then I have an obligation to pursue other opportunities for marketing our gas," Murkowski wrote in a statement.

In a speech delivered to business leaders in Valdez for the Alaska State Chamber of Commerce Convention and Trade Show, the governor outlined six of the terms sent to the producers.

These are the same principles the governor showed the Alaska Legislature in April and his position has not changed, Murkowski said.

"The first is the recognition that Alaska deserves a fair share of revenue from the gas line project," said Murkowski, at the convention.

The pipeline is estimated to cost $20 billion and if a contract is signed this year, gas could begin flowing between 2012 and 2014.

"States ordinarily don't take an equity position," said Murkowski, though Alaska will with a $4 billion commitment. About $1 billion would be paid in cash and the balance would be debt.

Depending on the price of gas, the state stands to earn $2 billion to $3 billion annually from its ownership; supply should last about 30 years.

The governor also wants Alaska communities to be able to tap the gas line from various points for their own supply. Fairbanks, Delta Junction, villages along the Yukon River, and the Anchorage-Kenai area could benefit, he said.

The state also wants future gas explorers to have the same access to send gas down the pipeline. Other oil companies are interested in developing gas, Murkowski said.

A consortium of the three largest producers with operations in Alaska - ConocoPhillips, ExxonMobil and BP Exploration - are vying for the access, as well as TransCanada, which is bidding to transport the gas through its country to markets near Chicago.

If the producers do not respond to the state's terms, then scrapping the negotiations is one alternative Murkowski may consider, said Chuck Logsdon, gas line adviser to the office of the governor.

A rival proposal from the municipalities of Valdez, Fairbanks North Star borough and the North Slope borough was submitted suggesting the state build an 800-mile pipeline to a liquid natural gas refinery in Valdez and the authority would sell shipments to Canada and the West Coast.

But Murkowski is focusing on the agreement with the producers, with options to expand the pipeline to Valdez, Logsdon said.

"It's an alternative that would be available in any contract commitment that is negotiated with the state," Murkowski said. Giving the spur the green light would depend on the economics of that project, he said.

Once an agreement is reached, the public will have 30 days to comment on the contract and then the Alaska Legislature will decide whether to approve it.

The governor did not say when he expects to have a contract ready for review.

"If they say yes (to the state's terms), that will be one giant step forward," Logsdon said.

• Andrew Petty can be reached at andrew.petty@juneauempire.com



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