Oil chief questions gas line contract

Posted: Thursday, November 03, 2005

ANCHORAGE - Gov. Frank Murkowski's proposed natural gas pipeline deal could throw up roadblocks for smaller, independent companies that want to explore for petroleum, according to the state's outgoing head of the Division of Oil and Gas.

"I believe the deal is bad for the state and bad for independent producers," Mark Myers said.

The governor's office on Tuesday declined to respond to Myers' statements.

Myers has been director of the state Division of Oil and Gas for five years. He is one of six top officials in the Alaska Department of Natural Resources who resigned Thursday after Murkowski announced he was getting rid of the department's commissioner, Tom Irwin. Irwin had written a memo saying the governor was giving up too much in the gas pipeline negotiations with the major oil companies.

Myers said independents are needed because they will take risks to explore for Alaska's oil and gas.

There are 35 trillion cubic feet of proven gas reserves, mostly at the Prudhoe Bay and Point Thomson fields controlled by the major oil companies. That's enough to keep a pipeline full for the first 15 years or so, Myers said.

More must be discovered to make the estimated $20 billion project pay off over the long term.

Murkowski has been negotiating for two years with the major companies, Conoco Phillips, BP and Exxon Mobil, over a contract setting out tax, ownership and other terms if the companies build the pipeline. Part of the governor's offer is for the state to invest about $4 billion to own 20 percent of the line.

The details of the governor's offer are being kept confidential until the deals are struck. Following a public comment period, the Legislature will decide whether to approve it.

Pedro Van Meurs, an international oil and gas consultant working for the governor's office, has said the deal offers world-class benefits to the state. Murkowski, in a written statement, said the deal will mean jobs, state revenue and increased exploration for oil and gas.

Murkowski has said future gas explorers must have access to the line. He also has said the pipeline must be expandable so new discoveries can get to market.

Myers said he would not discuss what is in the proposed contract while it remains confidential. But in his resignation letter, he said the negotiations have implications for all aspects of the state's oil and gas interests.

"I cannot continue as director and watch silently as the state's interests are undermined by creating barriers for the new oil and gas participants that are so vital to the economic future of our state," Myers said.

Speaking in general terms and not about specifics of the governor's contract, Myers this week said the independents need guaranteed access to the pipeline at a reasonable cost to justify exploration. They also need an idea of when the gas pipeline might be built, he said. Myers also noted that revision of oil taxes is part of the gas pipeline talks, which the governor made public.

Myers questioned whether making oil taxes part of the deal could "create an unbalanced playing field" that favors companies in the negotiations.

Anadarko Petroleum is worried about that, said Mark Hanley, public affairs manager for Alaska. Anadarko holds oil and gas leases in the Brooks Range foothills of the North Slope.

Hanley said the big three companies negotiating with the state "do not understand our interests and nor do they care." BP and Exxon are not even actively involved in Alaska oil exploration, Hanley said.

He agreed with Myers that access to the proposed gas pipeline is a huge issue for the independents. Hanley said he is worried, but his company is not at the table with the governor's negotiating team and he does not know what is in the deal.

"The problem of all this is that the devil is in the details and we haven't seen them," Hanley said.

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