State awaits gas pipeline plans

BP-Alaska not filing an application with state

Posted: Thursday, November 29, 2007

For the last year, the big oil companies that hold leases on Alaska's North Slope gas have been saying Gov. Sarah Palin's plan to get the state a gas pipeline won't work.

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Palin came to office after former Gov. Frank Murkowski's proposal to build a gas pipeline foundered in the Legislature, and she pushed through her own plan, the Alaska Gasline Inducement Act.

Now, with the deadline for applications to build a pipeline looming, the oil companies are again saying the same thing.

"We're not filing an AGIA application," said Steve Rinehart, spokesman for BP-Alaska.

On Friday, any company seeking a role in finally commercializing the state's vast gas resources will have to show its hand, and its plans.

Palin's AGIA plan, passed by the Alaska Legislature last spring, sets out the minimum deal acceptable to Alaska. It lets companies seeking the act's "inducements," such as $500 million in state money and a temporary tax freeze, make the state an offer at or above the minimums.

The state will get at least one bid that meets the criteria the state established in the AGIA bill and outlined in the Request For Applications, or RFA, said Lori Backus, spokeswoman for the Alaska Gasline Port Authority.

"We will submit an application that we believe will comply with and/or exceed the requirements of the RFA," she said.

The port authority, a joint venture of three municipalities along the route of the trans-Alaska oil pipeline, has said publicly it wants to build a gas pipeline along the same route, and then export liquefied natural gas by ship from the southern end of the pipeline.

Murkowski and the oil producers publicly said they doubted the financial viability of that plan, and instead proposed shipping the gas across Canada to markets in the U.S. Midwest.

Palin spokeswoman Sharon Leighow said information about who had applied will be released after the close of business the day of the deadline.

"We are going to release the names of those companies that have applied on Friday," Leighow said.

All that will be released, however, is the names. That means it won't be known until the Departments of Revenue and Natural Resources review the applications whether they are complete and meet the criteria or not.

It will likely be "several weeks before the completeness review is done" and the applications can be released, she said.

The companies that hold leases on Alaska's gas all objected to AGIA, and are not saying whether they will submit a nonconforming application, if they cannot submit a conforming application.

"Developing Alaska's North Slope natural gas resources is important to ConocoPhillips, and we are exploring options to advance the project," said Natalie Knox, spokesperson for ConocoPhillips, the state's largest oil producer.

Sen. Gene Therriault, R-North Pole, said the big producers could play a role even without submitting an application.

"It's not like they are completely out of the mix," he said.

"Once the licensee is selected, they can deal directly with the licensee, and they are negotiating somewhat from a position of strength because they hold the leases," he said.

After the Palin administration announces the company it has selected, the Legislature will have 30 days in which it may reject the application, Leighow said.

Some legislators have speculated one of those holding the gas may submit an incomplete or nonconforming application, and then urge the Legislature to reject Palin's selection, saying its application was a better deal.

What isn't yet known is if an independent pipeline company will submit an application as well.

Backus would provide no other details about the port authority's application, which is likely to be submitted in conjunction with another company.

One application that will be submitted is from the Alaska Natural Gas Development Authority. The state-created agency said it will submit an application Thursday to build a spur pipeline from a larger pipeline to bring natural gas to Southcentral, as part of a plan to replace the declining Cook Inlet natural gas fields on which Anchorage now relies.

The authority's plan will include options for starting at Delta Junction, to tie in to a Midwest pipeline, or Glennallen to tie into a Valdez pipeline.

Backus said the port authority was taking the authority's plans into consideration.

"Our application will accommodate what ANGDA is planning to do," she said.

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