Pipeline talks suspended until January

Gov. Murkowski says negotiations with oil companies are not at an impasse

Posted: Monday, December 19, 2005

The state's team of negotiators will suspend talks with three oil companies regarding construction of a natural gas pipeline until January for a holiday break, said Gov. Frank Murkowski from his Anchorage office on Friday.

The governor said he wanted to deliver a contract to the Alaska Legislature for approval before it convenes on Jan. 9, but making that deadline is no longer possible, he said.

"We had high hopes that we may conclude something by the end of the week," Murkowski said.

Murkowski said the negotiations are stuck on a few points, one of them being the state insisting other producers have access to the pipeline, which would deliver gas from the North Slope through Canada to markets in the Lower 48.

"I don't think this communication is any indication of an impasse," Murkowski said.

Other issues of contention include how the state handles its debt to pay for a share of the pipeline; providing revenues for communities the pipeline runs through; and certain auditing procedures.

BP and Exxon Mobil officials would not elaborate on the sticking points in the talks.

"Everybody understands this project is going to be an open access project regulated by the Federal Energy Regulation Commission," said David MacDowell, spokesman for BP.

An Exxon Mobil spokeswoman did not say when her company expects to conclude the negotiations.

"We're focused on the fact that negotiations are well advanced," Susan Reeves said.

Details of the negotiations are confidential by state law.

The governor said earlier this year he expected a contract to be ready by fall. In his Friday speech, he said the negotiations would be resolved after the holidays but did not give a specific time frame.

"It's the same old story. There's nothing new," said Rep. Harry Crawford, D-Anchorage.

He and Rep. Eric Croft, D-Anchorage, are gathering signatures for a ballot initiative that would tax producers on the known reserves of gas on their leases until they develop it.

Croft said producers will not sign a contract until they have a financial incentive.

Only one producer, ConocoPhillips, has signed a contract, while the state is still talking with BP Alaska and Exxon Mobil.

A rival proposal submitted by a consortium of municipalities - Fairbanks North Star Borough, the North Slope Borough and the city of Valdez - proposes to build a shorter pipeline parallel to the trans-Alaska oil pipeline ending at a natural gas liquefaction plant in Valdez.

"Our fear is that nothing will happen, as in nothing will be built," if the governor pursues a contract with the producers, said Jomo Stewart, spokesman for the Alaska Gasline Port Authority.

If an agreement with the producers is reached, the public will have at least 45 days to comment on the contract. Then the Legislature will review the contract and possibly rewrite portions.

The governor said it was premature to say if the Legislature will review the contract during the regular session or in a special session after May.

"Each scenario creates a problem," said Rep. Ralph Samuels, R-Anchorage.

During the regular session, lawmakers could leverage their support for the pipeline in exchange for something for their districts, he said. And in the summer, legislators seeking reelection may make decisions on the contract for political reasons, he said.

Samuels said it would have been ideal to review the contract this fall, but he said the issue is too complex to rush through the negotiations.

The North Slope is estimated to have 35 trillion cubic feet of known natural gas reserves and another 145 trillion cubic feet that experts say has not been explored.

The pipeline will be completed between 2012 and 2014 if a contract is reached soon, Murkowski said.

The governor proposed on Thursday reserving $400 million of general fund surplus money next year as an initial payment for an equity share of the pipeline. The pipeline will cost at least $20 billion and the state is pushing for 20 percent ownership, the governor said.

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

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