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Governor’s office: No new royalty gas sales Administration clarifies statement on Stranded Gas Act Larry Persily Petroleum News Juneau Correspondent
The governor’s office said there is no direct connection between Alaska’s Stranded Gas Development Act and sales contracts for royalty gas, and it is unfortunate if the governor’s recent reference to royalty sales was confusing.
Alaska Gov. Frank Murkowski said at a Dec. 4 press conference in Anchorage and in a Dec. 5 press release that the state was inviting companies to apply to purchase state royalty gas under the Stranded Gas Act. “The purchase of Alaska’s North Slope gas would be a key step in the construction of a natural gas pipeline,” the governor’s office press release stated.
But the act, which allows a natural gas pipeline sponsor to negotiate a contract with the state for regular payments in lieu of taxes, does not include any provisions for the sale of state royalty gas. Such royalty sales are covered under a separate law.
And the state already has a valid royalty gas purchase offer on hold from last year, waiting to see if anyone builds the pipeline.
“It was a bit of a confusing reference,” Mike Menge, the governor’s special assistant on natural resources issues said Dec. 10. Royalty gas moot without pipeline The governor used the royalty gas reference to point out the state’s interest in the Stranded Gas Act and what it may be able to accomplish, Menge said. “We understand there is no direct connection” between the act and royalty gas offers, he said.
The governor’s point, Menge said, was that the state’s proposed sale of its royalty gas is moot unless someone builds the multibillion-dollar pipeline to move the producers’ gas — and the state’s gas — to market.
Murkowski called the press conference to publicly invite qualified companies to submit an application under the Stranded Gas Development Act to begin negotiations with the state. Any contract for payments in lieu of state and municipal taxes on the project requires legislative approval, and the governor wants to put the issue before lawmakers early enough in next year’s session to win approval before the scheduled mid-May adjournment.
The Stranded Gas Act, designed to provide some level of long-term fiscal certainty for pipeline investors as opposed to the fear of fluctuating taxes, addresses royalty issues only to the extent that it allows negotiation of the timing of state decisions whether to take royalty gas in-kind or in-value and a valuation method for royalty gas. Anadarko, AEC contract on hold The state Division of Oil and Gas negotiated a royalty sales contract last year for a joint proposal submitted by Anadarko Petroleum Corp., AEC Oil & Gas Inc. and AEC Marketing Inc. (both now part of EnCana Corp.). The contract covers 70 percent of the state’s share of whatever is produced on the North Slope for the proposed gas pipeline.
The state later put the contract on hold, saying it would be better to wait for the federal energy bill and how that might affect the proposed pipeline project. The energy bill, with its Alaska gas line provisions, in on hold until the U.S. Senate returns to work toward the end of January.
Meanwhile, the state still has the $350,000 bonus bid paid by Anadarko and AEC, while the contract is on hold.
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