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ConocoPhillips CEO lobbies for gas line Letter to Congress asks for price-support tax credits for proposed Alaska North Slope natural gas project Larry Persily Petroleum News Juneau Correspondent
As congressional negotiators debated the merits of federal tax incentives for an Alaska natural gas pipeline, ConocoPhillips’ chief executive officer wrote the lawmakers to express his disappointment over reports that the key price-support tax credit provision had been dropped from the energy bill.
CEO James Mulva’s Oct. 29 letter prompted a response from Alaska Sen. Lisa Murkowski’s chief of staff that if the key pipeline provision is left out of the final bill, supporters may have themselves partly to blame.
“If it ends up being dropped, I think it’s partly because people had a sense they weren’t being dealt with honestly,” Chief of Staff Justin Stiefel told the Fairbanks Daily News-Miner. Stiefel did not return a call to Petroleum News. LNG project announcements an issue Commenting that major oil producers have recently announced plans to bring large volumes of liquefied natural gas into the United States from several overseas suppliers, Stiefel said the timing of those announcements during the domestic energy bill discussion was unfortunate.
ConocoPhillips and BP Exploration (Alaska) have said throughout this latest push for federal support for the Alaska gas line that they need some form of price-support tax credits before they could justify taking a risk on the $20 billion project. The proposal is that if prices fell below a set point, federal corporate income tax credits would kick in to reduce the risk to the companies.
Meanwhile, both companies — and the other major North Slope producer, ExxonMobil — are proceeding with plans to bring imported LNG to U.S. markets on the West Coast and Gulf Coast, though none of the companies have said their LNG projects would be in place of an Alaska gas line.
In addition to the price-support tax credits, called the “commodity risk provision,” the energy bill reportedly includes a federal loan guarantee covering up to 80 percent of $18 billion in private financing for the Alaska gas line, tax credits for the gas treatment plant that would be needed on the North Slope, and accelerated depreciation to allow the producers to more quickly deduct the project’s capital costs from their federal taxes. Some ask if other incentives are enough Stiefel said “people on the Hill” had questioned why all of the other federal incentives in the bill are not sufficient for the producers to go ahead with the project.
Mulva raised the issue of the commodity-risk provision in his letter. Without it, he said, “the energy bill is void of any provisions that will meaningfully add the volumes of natural gas that consumers and the industrial sector expected to see from this effort.
“In essence, this energy bill is ‘natural gas lite,’” he said.
He denied accusations that the provision would give an unfair advantage to Alaska gas while hurting Lower 48 suppliers. “These charges are unfounded and only serve the needs of a handful of people who do not want Alaska gas flowing south under any condition.”
Mulva’s comment about Lower 48 opposition is similar to an opinion column on the Alaska gas line debate published Oct. 3 in The Washington Post. The column, by business writer Steven Pearlstein, said, “The House leadership and the Bush administration adamantly oppose anything that smacks of a price support, egged on by whining from ‘small’ gas producers that themselves enjoy a rich buffet of tax breaks and adjustable royalties.” Mulva says Alaska gas good for economy Contrary to opponents’ assertions that an Alaska project would hurt competitors, Mulva said the long-term supply of Alaska gas would reduce market price volatility and help the economy.
“To those who would dismiss this tremendous opportunity to deliver long-term domestic supplies of natural gas, we ask that you reconsider,” Mulva wrote in his letter.
A ConocoPhillips spokesman at corporate headquarters in Houston did not return a call to Petroleum News for this story.
BP spokesman Dave McDowell of Anchorage declined to comment on Stiefel’s statements, other than to note that North Slope gas, Canadian gas and increased LNG imports “could all be part” of new supplies needed to meet growing U.S. demand.
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