Congress has passed and sent to the president bills which contain Alaska gas pipeline enabling provisions, loan guarantees for up to 80 percent of the cost of the project, a seven-year pipeline depreciation tax credit and an enhanced oil recovery tax credit.
The provisions were included in bills which passed the Senate Oct. 11.
“After working for more than 20 years to make this pipeline project a reality, we have finally taken steps to make the Alaska natural gas pipeline happen,” Sen. Ted Stevens, R-Alaska, said in a statement.
Rep. Don Young, R-Alaska, credited Stevens and Sen. Lisa Murkowski, R-Alaska, when the provisions passed the House Oct. 9.
The military construction conference report passed by the Senate Oct. 11, and now on its way to the president, includes provisions which direct the Federal Energy Regulatory Commission to quickly permit the pipeline once certain requirements have been met; designate FERC as the lead agency for the National Environmental Policy Act process; create a federal coordinator within the executive branch to coordinate federal agencies; require a single environmental impact study, expedite judicial review; and allow for future pipeline expansions.
The bill also provides a loan guarantee authorizing the secretary of Energy to enter into agreements with holders of FERC certificates of convenience and necessity for payment on project loans. The amount of the loans would not exceed 80 percent of the total capital costs or $18 billion.
Provisions included in the jobs bill include the enhanced oil recovery tax credit and the seven-year pipeline depreciation tax credit. The accelerated depreciation allows pipeline owners to claim construction costs on their taxes over seven years instead of 15 years. A proposed North Slope gas conditioning plant is eligible for a tax credit worth $295 million over the same period.
BP: ‘one step closer’
BP Exploration (Alaska) gas pipeline spokesman Dave MacDowell said passage of the gas pipeline provisions is “a positive development” and applauded the state’s Congressional delegation “for their hard work and leadership on this effort.”
“Passage of these provisions will get us one step closer to the next phase of permitting and engineering, and that’s the billion-dollar phase,” he said.
Negotiations with the state of Alaska for a fiscal contract are under way, MacDowell noted, and he said BP hopes “that delivery of the U.S. federal legislation will help encourage development of an efficient Canadian regulatory process.”
He said work continues on project costs, and said the companies “continue to make progress on technology-led cost reduction efforts” such as high-strength steel, automated welding and bigger, more efficient trenching machines.
ExxonMobil: ‘another positive step’
ExxonMobil spokesman Bob Davis said ExxonMobil sees passage of the federal legislation “as another positive step for the project.
“Certainly we have said for quite a while that the enabling legislation is of paramount importance to us” because it addresses “a fast-tracking of the permitting process and also it lays out a process for dispute resolution … important for a project of that magnitude because any delay would negatively affect the economic” of a project of this size.
He noted that fiscal negotiations continue with the state of Alaska, and said the companies are “looking at reduction of the cost, things we can apply from a technology standpoint” to reduce the overall cost.
The “other critical component is regulatory certainty in Canada, because so much of the line would come through Canada,” Davis said.
ConocoPhillips may revisit natural gas price floor
“ConocoPhillips is pleased with the success the Alaska delegation had in getting the pipeline provision package passed before Congress adjourned,” a spokesman told Petroleum News via email Oct. 12.
“We think that this strong show of delegation teamwork will play a significant role in advancing this project,” he said.
“We also look forward to successfully completing negotiations with the state of Alaska on the state fiscal terms that will also be needed to advance the project.”
The federal legislation did not include a tax credit if natural gas falls below a floor level, something ConocoPhillips has said it would require to go forward. ConocoPhillips Alaska Vice President Joe Marushack said Oct. 14 that since the federal legislation has passed, the company will focus on Stranded Gas Development Act negotiations with the state of Alaska, and may revisit the need for the federal tax credit depending on results of negotiations with the state.
State: ‘delegation has delivered’
“Our congressional delegation has delivered on federal legislation that removes a large roadblock to our efforts to make progress in the commercialization of our gas resources,” Alaska Gov. Frank Murkowski said in a statement.
“They have helped orchestrate an unprecedented federal response to what is regarded as the largest private sector construction project ever undertaken. If we’re successful, it will mean jobs for Alaska families and a reliable source of energy for the American people.”
The state is in negotiation with the major oil producers and TransCanada, and is beginning negotiations with Enbridge, in addition to working with the Alaska Natural Gas Development Authority and the Alaska Gasline Port Authority.
