Oil producers' leases give them edge in gas line talks

Others would have to sue to obtain the gas

Posted: Thursday, November 17, 2005

Gov. Frank Murkowski on Wednesday defended his preference for a natural gas pipeline proposal by three North Slope oil companies over two competing applications.

BP, ConocoPhillips and Exxon Mobil have the advantage because they hold the leases to the North Slope gas, Murkowski told an audience at the Resource Development Council of Alaska's annual conference in Anchorage.

Other would-be pipeline sponsors would have to sue the oil companies to get to the gas, putting the project in doubt and possibly delaying construction, he said.

The oil companies also have the cash needed to pay for the project, which is estimated to cost more than $20 billion, Murkowski said.

"The economics now and in the future appear to support the producers' proposal," Murkowski said. "A commercial contract with those who own the leases to the gas makes good sense."

Murkowski and his negotiators for the past few months have focused nearly exclusively on closing a long-term fiscal contract with the three oil companies, even though TransCanada and the Alaska Natural Gasline Port Authority have submitted applications.

Negotiations with the producers are continuing with no end in sight. Just ConocoPhillips has agreed to the base terms of the state's proposal.

Democratic legislators recently called on the governor to negotiate with all three groups and present multiple contracts to the Legislature.

"All gas pipeline options should be put on the table so we can make the best choice for Alaska," Senate Minority Leader Johnny Ellis, D-Anchorage, said in a press release.

State Sen. Gene Therriault, R-North Pole, said it was troubling to many lawmakers that the Murkowski administration appears to be focused on just one proposal.

"If I'm selling my house, I would like any perspective buyer to know there are other people interested in my house, too," Therriault said.

Former Natural Resources Commissioner Tom Irwin also brought up the point in the now-famous memo that criticized the state's negotiations with the oil companies and led to his and six staffers' departure from state government.

Irwin wrote that the state has a responsibility to provide a full disclosure and comparison of alternatives that allows the public to adequately evaluate any proposal.

In a speech to the Legislature in April, Murkowski himself said before he makes any recommendations "we will need to do an apples-to-apples comparison on the risk/reward profiles of all three proposals."

Spokeswoman Becky Hultberg said that comparison would be addressed in Revenue Commissioner Bill Corbus' fiscal interest finding, which will be released when a contract is signed and goes out to public review.

TransCanada's proposal, like the producers', calls for a pipeline route through Canada and to markets in the Midwest. The port authority's pipeline would run from the North Slope to Valdez.

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