Oil company official expects pipeline deal with state

ConocoPhillips vice president stops short of revealing a specific timeline

Posted: Tuesday, September 27, 2005

ANCHORAGE - North Slope producers should reach an agreement with the state to build a natural gas pipeline in time to put the proposal before the Alaska Legislature in a special session this year, an official with one of the producers said Monday.

"We're making what I think is very, very good progress," said Joe Marushack, vice president of Alaska North Slope gas development for ConocoPhillips. "The state is doing everything it should be doing to negotiate a very difficult, tough deal."

But Marushack stopped short of giving a specific timeline in his comments to members of the Alaska Natural Gas Development Authority, or ANGDA. Afterward, he said timing should be addressed by Gov. Frank Murkowski's office, which referred the question to state negotiators.

Chuck Logsdon, a spokesman for the state negotiating team, would say only that an agreement would be reached shortly.

"A final decision has yet to be made," Logsdon said. "We'll know about that sometime soon. Whether it's by the end of the week, by next week, by tonight or tomorrow tonight, I just don't know."

Almost two weeks ago Murkowski announced the state had delivered its proposed terms for a 30-year contract and said he asked producers to respond within a week. The governor's office later backed off that expectation, saying Hurricane Rita temporarily disrupted work being done in producers' offices in Houston.

ConocoPhillips, Exxon Mobil and BP applied as a group early last year to negotiate fiscal arrangements to build a 2,100-mile pipeline from the North Slope, into Canada and connecting with markets in the Midwest. They're one of three separate entities that applied to build the line under Alaska's Stranded Gas Act.

The project is estimated to cost $20 billion, of which $4 billion would come from the state under the proposal being negotiated.

Some state legislators have said there isn't enough time to deal with issue this year, that it would take at least two months - including a public comment period - for a proposal to reach them for a vote after negotiations are complete.

House Minority Leader Ethan Berkowitz, D-Anchorage, said it may be better to tackle the issue when the regular session begins in early January.

"I'm concerned that if you rush to hold a special session, you'll be in the Thanksgiving, Christmas timeframe and the attention of legislators and the public will be split between the holidays and their families," Berkowitz said. "It's so close to the regular session that rushing to a special session looks more like political theater than anything that's done to analyze the merits of the proposal."

Reaching a financial agreement with Alaska is just one of four steps producers say is necessary to build the pipeline. Congress met one requirement last year by passing incentives such as loan guarantees and faster permitting. A regulatory process in Canada still must be defined and technology to reduce capital costs must be identified, potential operators have said.

The pipeline envisioned by producers would take a decade to build from the time an application is filed. The line initially would ship 4.5 billion cubic feet of gas per day.

Even if an Alaska deal is reached, more obstacles lie ahead in Canada. TransCanada, the Calgary company that filed its own stranded gas application with the state of Alaska, claims rights to any pipeline coming from Alaska under Canada's Northern Pipeline Act of the 1970s. That could raise legal challenges as the producers try for governmental approval to go through Canada.

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