Pulling out from the pack?

Phillips Alaska President Kevin Meyers says his company will begin permitting gas pipeline if U.S. energy bill passes; BP, ExxonMobil say bill not enough

Kay Cashman

PNA Publisher

Kevin Meyers, president of Phillips Alaska Inc., told attendees at an Anchorage Chamber of Commerce-Alaska Oil and Gas Association luncheon July 15 that Phillips is prepared to begin permitting the southern route of the North Slope gas pipeline if the energy legislation pending in Congress passes with two critical components that are in the current Senate energy bill.

That bill, which is under consideration by a joint committee of the Senate and the House, contains “certainty and expediency” for the regulatory and permitting process. It also contains a financial incentive which allows gas producers to get a tax credit when gas prices fall below $3.25 per thousand cubic feet for gas being shipped from Alaska.

Meyers said the tax mechanism, which was introduced by Sen. Frank Murkowski, “mitigates the substantial risk for fluctuations in future natural gas prices and potential cost overruns.”

When asked if Phillips was prepared to move forward with permitting the southern route without the participation of the other two North Slope gas owners, BP and ExxonMobil, Phillips Alaska spokeswoman Dawn Patience told PNA that Phillips was not prepared to comment on that at this time.

ExxonMobil Corp. spokesman Bob Davis told PNA July 15 that passage of a federal energy bill would not make a gasline from the North Slope commercial. “We have not changed our position relative to route flexibility, number one,” he said, referring to the provisions in the House and Senate versions of the energy bill which prohibit construction of a pipeline along the northern route across the Beaufort Sea.

Davis said ExxonMobil also remains “opposed to government subsidies related to the gasline, including a gas price floor.”

When PNA asked Dave Van Tuyl, a commercial adviser in BP Exploration (Alaska) Inc.’s Alaska Gas Group, to comment on Meyers’ statement, he said, “Regarding going forward with the pipeline project assuming that the federal enabling legislation passes: as BP has previously stated, governments collectively are going to continue to play a key role in moving the project forward and while the proposed U.S. federal enabling legislation is one vital requirement there are still three other elements required to justify moving forward with the project. And those other elements include further clarity and efficiency of the Canadian regulatory process, assurance of fiscal certainty here in Alaska, and, of course, confirmation that the project itself is commercially viable. That’s where we still stand on the issue.”

His boss, Ken Konrad, head of the gas group, concurred: “All four pieces come into play. Then the next step is to pull together a team to go to the next stage of engineering and permitting the line. That’s a multi-hundred million dollar step, so it’s important all the segments are in place.”

Foothills Pipe Lines Alaska Inc. spokesman Rocco Ciancio told PNA July 16 that the consortium of U.S. and Canadian pipeline companies which Foothills represents “share their (Phillips) optimism for the project.”

“Where we left off this spring is … the producers were not willing to go any further until the legislation was completed in Washington. Whatever the final content of the legislation is, it’s going to have a considerable impact on the project,” he said.

“We had a couple of meetings in the spring with the producers and we did discuss the proposal we’d put together (to build a North Slope gas pipeline) but it was evident at that point that we wouldn’t be moving forward until the federal legislative agenda was completed,” Ciancio said.