The race is on — but how large the field is and who the runners are won’t be known until sometime in October, when applications under the Alaska Gasline Inducement Act are made public.
AGIA is Gov. Sarah Palin’s effort to get a gas pipeline built to move Alaska North Slope natural gas to market. AGIA is a competitive bid process, unlike the attempt by Gov. Frank Murkowski to negotiate with the North Slope producers for a gas pipeline, which failed in the Alaska Legislature last year.
Calling it the next step in moving an Alaska gas pipeline project along, Palin said July 3 that the administration is on schedule on the project, with the request for applications posted online the night of July 2.
The governor said the passage of AGIA in May was “an historic milestone towards achieving that goal of finally getting a gas line for Alaska,” and said she wanted “to make sure that Alaskans know where we are and that we are on time” in the process.
The administration’s goal was to start the 90-day application process as quickly as possible after AGIA passage so that the 60-day public review process and a decision by the commissioners of Revenue and Natural Resources could be made in time to get a licensee selected and to the Legislature in January 2008 for legislative approval. The administration wants to see a license awarded and the licensee working in the field next summer.
The question of who applies won’t be answered until after the Oct. 1 deadline for applications. The state won’t even know who’s working on applications as interactions between the state and parties interested in the RFA will take place online and will be anonymous — not even the state will have access to who is asking questions or downloading the RFA.
The AGIA documents Web site at www.dog.dnr.state.ak.us/agia provides access to both the RFA and AGIA documents, and to the RFA inquiries Web site.
Public comments on AGIA can be made on the governor’s AGIA Web site, www.gov.state.ak.us/agia.
The RFA inquiries Web site, www.rfainquiries.com, “provides a vehicle to anonymously ask both technical and procedural questions about the process set out in the RFA,” said Deputy Commissioner of Natural Resources Marty Rutherford.
Modifications can be requestedInterested parties have until July 23 to request modifications to the RFA, Rutherford said, using the RFA inquiries Web site. “We consider this a very important opportunity for all potential applicants and interested parties to provide recommendations on any problems they perceive with the RFA.” The July 23 cutoff date, she said, is to ensure applicants maximum time to work on applications.
The commissioners of Revenue and Natural Resources have discretion on issuing any modifications to the RFA. “That could occur at any time,” she said, but the state is asking for identification of any issues in the next three weeks “so we can respond in a very timely fashion to any perceived problems within the RFA itself.”
The same inquiries Web site provides “an ongoing opportunity for interested parties to identify for us any ambiguities or omissions” in the RFA, a process which would continue until 30 days before the Oct. 1 filing deadline.
The Web site also allows “interested parties to ask us on an ongoing basis throughout the RFA process — the next three months — to answer any questions they may have regarding what we intended by the RFA,” she said, an opportunity “to ask for clarifications or to ask us to provide any additional information they feel is necessary to put together a good application.”
In addition to changing the RFA, the commissioners also have the discretion whether or not to extend the deadline beyond Oct. 1.
Applications will be held until the deadline, she said, and opened simultaneously, and can be withdrawn until the deadline.
Producers have said no to AGIAThe North Slope producers — BP, ConocoPhillips and ExxonMobil — all said in legislative hearings before passage of AGIA in May that they would not be able to participate under the terms in AGIA. The companies told legislators that they needed more flexibility than AGIA allows and wanted to negotiate terms with the state.
Brian Wenzel, ConocoPhillips’ vice president of Alaska North Slope gas development, told the Associated Press in a prepared statement after release of the RFA: “The company agrees that development of Alaska’s North Slope gas resources is important to the state and the nation and we’re trying to find a best path forward to make that happen.”
BP spokesman Steve Rinehart told Petroleum News in June: “We are very disappointed that BP cannot submit a bit that conforms to the requirements of AGIA.”
Asked if BP would apply, Rinehart said: “We have not given up and will continue to seek ways to help make this project happen.”
ExxonMobil spokeswoman Susan Reeves told Petroleum News in June: “We are evaluating our options.”
Major pipeline companies — MidAmerican, TransCanada and Enbridge — participated in the legislative hearings.
MidAmerican was supportive of AGIA.
Enbridge said it believes the project requires producer participation and said it did not plan to make an AGIA application.
TransCanada objected to some of the provisions of AGIA, but told the Canadian Globe and Mail after release of the RFA that it has to consider the details of the Alaska situation. “We’ll review whether we want to bid,” TransCanada spokeswoman Shela Shapiro said.
“I think we’re going to see a sizable amount of interest,” Steven Paget, an analyst at First Energy Capital in Calgary, told the Globe and Mail.
Palin: Producers still consideringPalin said she has had communication with the CEOs of BP, ConocoPhillips and ExxonMobil and “their comment back to me is they are still considering what’s in AGIA.” She said the administration’s belief is “that the CEOs of these companies are reasonable commercial players; they’re competitors; they want to make sure that they … somehow participate in this project because I believe they do know how important it is for our nation and for their companies.”
However, the governor said: “That doesn’t necessarily mean that they would be responsive to this RFA in terms of bidding on building the project.”
Palin said she has had good conversations with BP’s Tony Hayward, ConocoPhillips’ Jim Mulva and ExxonMobil’s Rex Tillerson. She said she wanted to make sure, in her conversation with Tillerson, “that his people are communicating well with him. I think there may have been some messages or information received by him that maybe was based on a perception that perhaps Alaska wasn’t as enthused about them participating in the gas line as he would care for us to be.” Palin said part of her conversation with Tillerson was to make “sure that he’s receiving all the information, especially about AGIA, that he needs in order to make good decisions for his shareholders.”
Significant outreach effortRutherford said the administration has made “a very significant outreach effort” led by Lt. Gov. Sean Parnell and Deputy Revenue Commissioner Marcia Davis to advise companies — particularly gas pipeline companies — about AGIA. Davis said trips included visits to Williams, El Paso Corp., Spectra Energy, Kinder Morgan and Energy Transfer Partners, all of whom have natural gas pipeline operations, as well as Repsol YPF, a large international exploration and production company with extensive operations in Europe and South America.
The companies were interested in the opportunity that Alaska presented, Davis said, “and I think uniformly they are very interested in talking with one another as well as pursuing relationships with producers.” That is what the administration hoped would happen, “getting a buzz in the marketplace and letting industry do what it does best which is form strategic partnerships in finding ways to maximize each of their talents,” Davis said.
Rutherford said the administration hopes that the producers participate in AGIA. “It would be a very good thing.
“But the truth is that third-party pipelines can quite successfully move the project forward.”
She said the administration believes the producers “are reasonable commercial players; they understand the value of monetizing their gas; they understand the value of booking that gas — both of which they can do once they make shipping commitments.”
Once the project moves forward — whether with a producer or a third-party pipeline company or a combination — and there is more certainty about the rate structure and what returns would be, the administration believes that since the producers are reasonable “they will make firm transportation commitments,” Rutherford said.
Must haves are just thatCommissioner of Revenue Pat Galvin said one question that came up throughout the legislative process was “are these truly must-have provisions in these so-called must haves? And we made it clear: yes, we consider them to be must haves. If a proposal came in that did not include those, then under the terms of the legislation, under the terms of the RFA as well, the commissioners cannot consider them.”
Rutherford said not only would the administration “reject applications that are not responsive to the AGIA must haves, the 20 must haves … we would reject a proposal that is conditioned upon some other action beyond what was envisioned” such as a 35 years of fiscal certainty or stopping the Point Thomson litigation.
While Point Thomson gas is important to a gas pipeline project, “it doesn’t necessarily have to be the old unit owners that move that gas into a pipeline project,” Rutherford said.
“There are … a lot of E&P companies extremely interested in when the State of Alaska might re-lease the Point Thomson area,” she said.
Rutherford also said it isn’t known what the company thinking was on when gas from the various fields would go into a pipeline. “It could be that the Prudhoe Bay gas goes in first and Point Thomson gas goes in second or third.”
On gas offtake issues, Galvin said that as companies begin to move through the Alaska Oil and Gas Conservation Commission gas offtake process “to identify what the rates will be, that the amount of gas that’s allowed to be taken off may impact the potential capacity allowed for the pipeline.” It’s the one reason a licensee could change its approved plan even if that change doesn’t benefit the state.
On Point Thomson, Galvin noted that AOGCC could require “that the liquids must be produced first and that the gas would not be available for a number of years after that.”