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Vol. 12, No. 50 Week of December 16, 2007
Providing coverage of Alaska and northern Canada's oil and gas industry

Alaska delegation plans to block gas export

Erika Bolstad

Anchorage Daily News, Washington, D.C. office

Alaska’s proposed natural gas pipeline will not be used for exporting gas outside North America, the state’s congressional delegation vowed the week of Dec. 9.

Alaska’s senators and congressman said they would do everything in their power to keep the contract from going to Sinopec ZPEB, a joint venture of two oil-industry companies backed by the Chinese government. U.S. Sen. Ted Stevens, who sits on the China-U.S. Interparliamentary Conference, said he would pass on the message to his counterparts in Beijing.

“I will tell the Chinese they have no possible hope of getting gas from us,” Stevens said. “I don’t see it happening. With the shortage of natural gas in the United States, that gas is not going to be allowed to be exported.”

The Sinopec joint venture is one of five companies that filed applications at the end of November to build the pipeline under the Alaska Gasline Inducement Act.

Stevens, Sen. Lisa Murkowski and U.S. Rep. Don Young, all Republicans, came out swinging against the Chinese proposal, calling it a hard sell to Washington at a time when energy security is one of the hottest topics in the nation’s capital.

“It would be very problematic if the governor should conclude that this particular application is the application that goes forward,” Murkowski said.

“It’s problematic to us at this level. I think it would be very difficult to convince my colleagues that Alaska natural gas should be shipped overseas, at the point in time where our domestic needs Alaska’s gas.”

Young echoed Murkowski: “While it is the governor’s decision, it is an Alaskan pipeline, and I trust it will not become a Chinese pipeline,” he said. “We should not be exporting our gas. The need is too great here. It’s produced domestically, and it should be used domestically.”

A PR disaster

Stevens said there’s precedent for banning exports of Alaska’s natural resources. The original federal legislation for the trans-Alaska oil pipeline in the early 1970s had a 15-year prohibition that required all petroleum to be sent to U.S. refineries.

“I would fully expect to have the same provision apply to the natural gas pipeline,” Stevens said, adding that Cook Inlet natural gas — some of which is now exported — would be exempted. “We can look forward to an absolute prohibition of export of gas from the North Slope.”

Because the governor hasn’t yet disclosed details of the pipeline bids, it’s unclear that Sinopec ZPEB’s idea is to export the gas.

If that is the plan, it’s unlikely that the Chinese-backed firm will be chosen, said Leland Miller, a corporate attorney in New York who follows Chinese energy issues.

The first obstacle would be the obvious political one, Miller said. At a time when Congress is debating energy security issues, no one on Alaska’s congressional delegation would allow natural gas to be exported, especially in an election year.

Sinopec’s choice of previous business partners also make it an unlikely candidate for the Alaska pipeline project, Miller said.

“Their partnerships in foreign countries are a PR disaster,” Miller said. (See related story on page 1.) “In this past week, China signed a oil deal with Iran. A few weeks ago, they solidified something with Burma. They’re one of the top oil presences in Sudan. It’s basically a who’s who of rogue regimes, as far as the United States is concerned.”

The Sinopec application was filed by Little Susitna Construction Co., an Anchorage firm headed by Dominic Lee. Lee did not return a message left at Little Susitna’s offices.

Extra hoops for exports

The governor’s office would not comment on any of the five pending applications.

At this stage in the process, however, state regulators aren’t making their decision based on whether an applicant plans to export the natural gas. They do require that the applicants tell them how the gas would be processed — and where it would go — but it’s not part of the evaluation that determines whether the companies make it to the next stage.

Right now, the state is simply determining which companies have submitted complete enough applications to be finalists. The state is expected to release that list by the end of the month at the earliest. Then, there’s a public comment period before the state selects the winning bidder.

A company that wants to export natural gas would have to apply for an export permit from the U.S. Department of Energy. l

—Petroleum News contributed to this article.

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