April 05, 2004 --- Vol. 10, No. 37April 2004

State asks funding to acquire right of way for natural gas pipeline

Gov. Frank Murkowski is asking the Alaska Legislature to appropriate almost $10 million for the state’s efforts to get a North Slope natural gas line built. The request includes a proposal that the state obtain the pipeline rights of way even before a developer steps forward to build the project.

The idea is that the state could speed up development if it has all of the necessary rights of way ready for whenever a company or group of companies steps up to build the line for moving North Slope gas to market.

“The state would actually permit its own right of way,” Mark Myers, director of the Oil and Gas Division, told the Senate Finance Committee.

The Oil and Gas Division is asking for $3.9 million to pay for the right-of-way work. The request is part of the governor’s supplemental appropriations measure, Senate Bill 313, which received its first hearing April 2 in Senate Finance. The committee took no action on the bill.

Myers explained the proposal is that the state would acquire the rights of way for the pipeline’s entire route through Alaska, assign the permits to a state corporation to hold and then later transfer to the actual project developer. He did not name any specific state corporation to hold the rights-of-way permits.

The $3.9 million appropriation, if approved by lawmakers, would be available immediately. The work schedule calls for the Department of Natural Resources to finish its work on the permits by June 2005.

In addition to the right-of-way funding, the administration’s request also includes $1.58 million for a risk analysis study to determine if the state could help get the project built if it was willing to share in some of the financial risk.

Gov. Frank Murkowski said late last month the state may need to step in and share some of the risk if it is to convince private companies and investors to go ahead with the 2,000-mile pipeline from the North Slope to the North American distribution grid in Alberta.

Sen. Murkowski backs adding gas line incentives to federal tax bill

Rather than pinning all of Alaska’s hopes on the stalled energy bill, Senate Republican leadership today announced it will try adding North Slope natural gas line incentives — along with other energy tax provisions — to an international tax measure that could come up for its first vote this week.

Senate Majority Leader Bill Frist, R-Tenn., introduced his revised legislation Monday to settle tax and trade disputes with the European Union, along with amendments to add energy bill provisions to the legislation.

Among those provisions are three intended to encourage development of the Alaska gas line:

* A tax credit for the gas treatment plant that would be built on the North Slope.

* Accelerated depreciation for the pipeline.

* A provision that would guarantee producers a federal tax credit of up to 52 cents per thousand cubic feet if the wellhead value of North Slope gas ever drops below $1.35 per mcf.

Frist said he hopes to bring up the bill for a procedural vote Wednesday.

“This is an attempt to speed the process along,” rather than wait for House and Senate leaders to break the stalemate on the energy bill, said Chuck Kleeschulte, spokesman for Sen. Lisa Murkowski.

The Alaska Republican isn’t giving up on the total energy bill, which also includes a federal loan guarantee for the gas line project, Kleeschulte said. But if the bill isn’t moving, the senator will try getting the same benefits for Alaska piece by piece in other legislation, he said.

ANWR strat well permitting moves forward

This morning the Alaska Division of Oil and Gas awarded ASRC Energy Services E&P Technology Inc. a contract to initiate permitting for the proposed stratigraphic test well offshore the 1002 area of the Arctic National Wildlife Refuge. This will allow drilling during the upcoming winter drilling season, should a drilling consortium be formed, division geologist Jim Cowan told Petroleum News.

“Several permit approvals have to be in hand by the end of July or so in order to undertake several pre-mobilization and mobilization activities during the short open-water season in the area,” Cowan said. “Hopefully, knowledge that these permit applications are being initiated will encourage participation in the project. As per last week’s amendment to the original award, interested parties now have until May 31 to join the program as original participants.” (See related article in the April 4 issue of Petroleum News.)

Alaska Gov. Frank Murkowski has said he would like the test well drilled this coming winter.

The initial permitting work will not be site-specific in nature, Cowan said.

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