Knowles pledges to redo Alaska gas line deal

Former governor enters gubernatorial race against incumbent, promising to scrap and redo fiscal contract with North Slope producers

Petroleum News

Former Alaska Gov. Tony Knowles says he will run for governor, challenging Republican incumbent Gov. Frank Murkowski who is serving his first four-year term. At the top of Knowles’ list of promises is a pledge to scrap and redo a $20 billion natural gas pipeline contract negotiated by Murkowski with the North Slope oil producers and currently before the Legislature and public for review.

“We just need to start from scratch,” Knowles, a Democrat and two-term governor from 1994 to 2002, was quoted as saying in a Reuters article following a late May press conference in Anchorage where he announced his candidacy. Murkowski, at 73 the nation’s oldest governor and a former U.S. senator, is a Republican and has served as Alaska’s governor since Knowles left office.

Knowles has pledged to “open negotiations up to all proposals,” including restarting discussions with the North Slope producers while working with other interested parties.

“If we want to speed up the probability of getting a pipeline, we should say that anyone who meets our terms should come forward with a proposal,” he said in a June 1 Fairbanks Daily News-Miner story.

Knowles said the governor should choose one proposal but send them all to the Legislature for review: “Why wouldn’t you want to know what other proposals are out there that could be advantageous to the state? … (The state needs) to open it up to all parties who express an interest, to lay out conditions under which we want to see it developed and take the best proposal.”

Other entities that have applied under the state’s Stranded Gas Development Act to construct a pipeline from the North Slope are TransCanada, the Alaska Gasline Port Authority and MidAmerican. Those proposals were rejected or put on hold by Murkowski in favor of pursuing a deal with the oil producers who control the mineral rights to the 35 trillion cubic feet of proven natural gas reserves on the North Slope.

Knowles said that the agreement negotiated by Murkowski with the producers provides no assurance that a gas pipeline will be built, freezes oil and gas taxes for a period of 45 years, and makes other major concessions involving both oil and gas development and production that are not in the state’s best interest.

“I think people are very disturbed that we would attempt to give away or lock in a set price so that we could induce somebody to build a gas pipeline,” said Knowles, who did not run for re-election in 2002 because state law does not allow a governor to serve more than two consecutive terms.

At Knowles’ side during the news conference was House Minority Leader Ethan Berkowitz, who until May 30 had been a Democratic gubernatorial candidate. Berkowitz filed paperwork to run instead for lieutenant governor and said he expects to be Knowles’ running mate.

If a third party built the gas line Knowles said it was unlikely the state would have to legally force the producers to sell their gas by threatening to pull leases. The producers, he said, would have a difficult time defending a decision not to sell their gas at the wellhead.

Murkowski, who has announced his intention to run for a second term, says major concessions are needed to give the producers incentive to move forward with what they see as a high-risk project.

Both Murkowski and Knowles must win crowded primary elections on Aug. 22 if they are to advance to the Nov. 7 general election. Former legislator and Fairbanks businessman John Binkley and former Wasilla Mayor Sarah Palin are challenging Murkowski in the Republican primary; Rep. Eric Croft of Anchorage is facing Knowles in the Democratic primary.

—The Associated Press contributed to this report