January 22, 2004 --- Vol. 10, No. 6January 2004

Pipeline company submits gas line project application to state

MidAmerican Energy Holdings Co., a pipeline operator and gas and electrical service company controlled by Warren Buffet’s Berkshire Hathaway Inc., is the lead member of a North Slope natural gas pipeline application to the state.

The application, under Alaska’s Stranded Gas Development Act, allows a project developer and the state to negotiate a contractual set of payments for the life of the project in lieu of all state property taxes, corporate income taxes and production taxes, and municipal sales taxes and levies.

MidAmerican’s proposed project — at 4.5 billion cubic feet per day — does not include a gas conditioning plant on the North Slope, which the producers likely would have to build.

The application proposes a 745-mile, 48-inch-diameter pipeline that would stop at the Alaska/Canada border. The plan is to connect with a separate extension of the Canadian pipeline system to reach the North American distribution grid in Alberta, said David Sokol, chief executive officer of MidAmerican.

Gov. Frank Murkowski, who accepted the application from MidAmerican in Fairbanks on Thursday, Jan. 22, said he expects to negotiate a fiscal contract and get it to the Legislature for approval before the end of the session. Lawmakers have a May 12 adjournment deadline.

State and company officials have been discussing the possible application for several months, the governor said.

The fiscal structure of a contract with the state is one of several questions to settle before construction begins. Marketing price and demand projections, financing, gas supply and sales contracts and other issues still confront the project, which Alaskans have been waiting for the past three decades.

“There are many obstacles to overcome,” Murkowski said.

MidAmerican holds 80.1 percent of the new limited liability company established with Pacific Star LLC of Anchorage and Cook Inlet Region Inc., which hold options to take up to the remaining 19.9 percent. The new company is named MEHC Alaska Gas Transmission Co.

Pacific Star, founded by former Arco Alaska Inc. president Ken Thompson, is a consortium of Alaska Native regional corporations that came together to buy a stake in a natural gas project. CIRI, the regional corporation for Cook Inlet, is taking its own share in the MidAmerican venture.

“Man, I’m excited, and I hope you are too,” Thompson said at the Fairbanks event. “We’re going to own a piece of the pipe. ”MidAmerican Energy Holdings, based in Des Moines, Iowa, has $19 billion in assets and owns the Kern River Gas Transmission Co., which it bought from Williams Cos. in 2002. The line runs almost 1,700 miles from the gas fields of Wyoming to Bakersfield, Calif., carrying 1.7 bcf per day .Although not named in the pipeline company application, Calgary-based TransCanada has been talking with the MidAmerican venture and the state about joining the project to move the gas through Canada.

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