Lucky number: 13

Pacific Star Energy’s list of potential Alaska gasline investors growing

Larry Persily

Petroleum News Juneau Correspondent

Ken Thompson says he is moving closer to signing up all 13 regional Alaska Native corporations to join his effort to buy into the proposed Alaska natural gas pipeline, and by year-end will be adding village Native corporations, non-Native corporations and individual Alaskans to the list.

The goal is to own 10 percent of the project, retaining a share of the pipeline profits in Alaska and using the cash flow for potential in-state investments in spur lines, natural gas liquids distribution, electrical generation and even possibly a petrochemical industry in Alaska, Thompson said.

The only two regional Native corporations not to sign up yet are Ahtna Inc. and Calista Corp., Thompson said Aug. 19, though he expects answers from both by the end of the month.

Members of the limited liability company set up by Thompson, called Pacific Star Energy, are committing to almost $50,000 each this year and an additional investment up to $50,000 next year, he said. That “seed money,” as Thompson called it, will carry the operation through to mid-2005, by which time he expects the three major North Slope producers will have made a decision whether to proceed with the gas pipeline.

Goal: invest in Alaska

“We want to diversify our holdings. Secondly, we want to invest in Alaska,” said Albert Kookesh, chairman of the board of Sealaska Corp., the regional Native corporation for Southeast. “The $50,000 is to get our foot in the door.”

Sealaska’s board of directors voted the first week of August to join Pacific Star Energy.

“We’ve always billed ourselves as a natural resources company,” Kookesh said. Sealaska remains active in timber harvesting, though it no longer owns a seafood processing business and its mining operations are shut down.

The next phase of Thompson’s push to line up investors will include non-Native Alaska companies, not necessarily limited to those in the natural resource industry. “They can be in any industry,” he said.

Thompson, a former president of ARCO Alaska Inc., said he has talked with securities attorneys about setting up a method for individual Alaskans to invest in Pacific Star Energy, but plans to hold off on signing up individuals until construction begins on the gas line.

Because there is more risk in putting money into a project that is not yet under way, Thompson said he is limiting early participation to corporations and individuals of high net worth.

Eventually, he wants to call the business Pacific Star Energy/Alaskans’ Natural Gas Consortium.

When the time comes that the major North Slope producers decide to proceed with the project, the consortium’s members will need to start paying their share of engineering, permit and design costs, then actual construction expenses.

Those commitments will be “future decision points,” Thompson acknowledged, with each Native corporation and other members needing to decide at that time how much they can afford and want to invest.

Cash needed: $330 million

This year’s $50,000 investments and next year’s money will pay for the consortium to develop a financial plan and to investigate potential in-state business opportunities to use the gas, including spur pipelines to Fairbanks, Kenai and Valdez. Pulling the propane and butane out of the gas and distributing it to Interior villages also is a possibility, Thompson said.

“We are also doing a thorough socio-economic study to illustrate the benefits of 10 percent of the revenues and profits from the major gas pipeline being left within the state vs. being expatriated to Houston and London.”

Pacific Star Energy has just one person other than Thompson on the job, though he expects to add three or four more employees or contractors by the fall.