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Vol. 11, No. 35 Week of August 27, 2006
Providing coverage of Alaska and northern Canada's oil and gas industry

Palin, Knowles to consider competing North Slope gas pipeline proposals

Rutherford says TransCanada gas line contract could be finalized in as little as three months

By Kay Cashman

Petroleum News

Alaska’s Republican governor, Frank Murkowski, ousted in Aug. 22’s primary election, has vowed to continue to push his fiscal contract for a natural gas pipeline to Canada in the time he has left in office.

“It’s the only game in town,” he said of his deal with BP, ConocoPhillips and ExxonMobil.

Murkowski came in third in a hotly contested three-way race for the Republican nomination. Sarah Palin, a former Wasilla mayor, won the nomination with more than 50 percent of the vote.

Tony Knowles, a former two-term governor, won the race to be the Democratic nominee for governor in the Nov. 7 general election. He beat state Rep. Eric Croft.

Critics say the Murkowski administration’s proposed gas pipeline fiscal contract with the three North Slope oil producers and gas owners cedes too much to the companies in incentives without firm commitments to build the pipeline, leaving the timing up to producers’ corporate goals.

Murkowski said he will call the Legislature back into session once the pipeline deal has been revised and will ask lawmakers to approve it. He leaves office in December.

That prospect did not sit well with some legislators.

“With Frank Murkowski and Ben Stevens in charge, it’s like the Night of the Living Dead,” said state Sen. Hollis French, D-Anchorage. “We’re being guided by two people whose political careers are over.”

Stevens, a Republican from Anchorage and the son of U.S. Sen. Ted Stevens, R-Alaska, is Senate president and is not running for re-election. He is one of the few legislative supporters of Murkowski’s contract with the three North Slope oil producers and gas owners.

Prior to the election Alaska House Majority Leader John Coghill, R-North Pole, said if the governor loses in the primary, “it will be very difficult to get (Murkowski’s) contract moved forward.”

While the new Republican and Democrat nominees haven’t said they won’t support the pipeline contract negotiated by Murkowski with the producers, they both favor re-opening the floor to alternative proposals.

“The result will be a pipeline agreement that offers much more to Alaskans than the one now on the table,” Knowles said on his campaign Web site.

Alternative proposals would likely include the agreement the state has with Canadian pipeline firm TransCanada, which former Alaska Department of Natural Resources Deputy Commissioner Marty Rutherford has said could be completed in as little as three months.

In charge of the negotiations with TransCanada when the preliminary commercial contract was put together in the spring of 2005, Rutherford and five other DNR officials resigned from the Murkowski administration later that year in protest over the firing of DNR Commissioner Tom Irwin. All seven officials were unhappy with the concessions the administration was making in contract negotiations with the North Slope producers.

“Assuming everyone is still willing to move forward under those terms, it would take at least three months to paper the contract with TransCanada, but we could start the public outreach immediately because the commercial terms are fully developed,” Rutherford said. The agreement, she said, also allows for the North Slope producers to own part of the pipeline.

“It’s a much better deal for the state than the contract the administration has on the table now … it doesn’t have nearly the amount of concessions,” she said.

Port authority, Mid American proposals could be reconsidered

Two other proposals that have been rejected by the Murkowski administration would probably also be considered by Palin and Knowles. They were proposals from the Alaska Gasline Port Authority and MidAmerican Energy Holdings Co., a pipeline company and gas and electrical service provider controlled by Warren Buffets’ Berkshire Hathaway Inc.

Although Palin has said she will consider all pipeline proposals, she has strongly backed the port authority’s idea of an “all-Alaska” pipeline from Prudhoe Bay to a liquefied natural gas export facility at the port of Valdez, the terminus of the trans-Alaska oil pipeline, a project the North Slope producers say does not make as much economic sense as a natural gas pipeline from Alaska through Canada to the Lower 48.

On his campaign Web site Knowles said the result of reviewing competing proposals “will be a pipeline agreement that offers much more to Alaskans than the one now on the table.”

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