Posted on 08/23/2006 10:17:03 PM PDT by Ernest_at_the_Beach
CALGARY (MarketWatch) -- Alaska Gov. Frank Murkowski's defeat in the state's Republican primary early Wednesday likely scuppers any chance of his gas pipeline contract passing through the state legislature in 2006.
In addition, Murkowksi's deposal opens up the prospect that a new governor will consider other alternatives to the planned $20 billion pipeline, throwing open the entire question of how Alaska's stranded gas reserves will be brought to market, according to industry observers.
"I can't see much happening with the contract now until the general election," said John Devens, executive advisor of the Prince William Sound Regional Citizens' Advisory Council, an Alaskan oil monitoring group.
With regard to what might happen to the contract thereafter, "all bets are off," he added.
In February 2006, Murkowski reached an agreement with North Slope oil producers ExxonMobil Corp. (XOM), BP PLC (BP) and ConocoPhillips (COP) over terms for the proposed Alaska Gas Pipeline, which would transport 4.5 billion to 6 billion cubic feet a day of gas from Alaska into Alberta, Canada and then down to the lower 48 U.S. states.
Proponents have touted the project, which is expected to be built by 2014, as a way to lessen the nation's dependence on foreign energy sources and bring billions in royalties and taxes to Alaska.
However, Murkowski has been unable to get the changes necessary to the state's Stranded Gas Act approved by the state legislature. Critics say the deal is too favorable to the oil firms and doesn't tie them down to any commitment to build a pipeline.
While Murkowski has been a rather unpopular governor, and his position hasn't been helped by BP's embarrassing recent pipeline outage at Prudhoe Bay, his election defeat does seem partly linked to his failure to come up with a gasline contract acceptable to Alaska. In his campaign, Murkowski effectively sought to make the primary a referendum on his pipeline proposals.
"We think the election result sends a strong message that what was negotiated between the administration and the producers was not acceptable," said Bill Walker, attorney at Alaskan law firm Walker & Levesque.
Despite his loss, Murkowski has vowed to continue to push his natural gas pipeline contract through before he leaves office in December. However, it may prove impossible to push through already-unpopular measures under a lame-duck administration.
Last week, Alaska House Majority Leader John Coghill, R-North Pole, said that if a different Republican nominee emerges in the primary, "it will be very difficult to get (Murkowski's) contract moved forward."
ExxonMobil spokeswoman Susan Reeves said, "the contract that was agreed provides predictable and durable terms for oil and gas negotiations to advance the Gas Pipeline contract to the next stage," but she wouldn't comment on what might happen if the contract wasn't approved. BP and ConocoPhillips weren't available for comment.
Where To Now?
If Murkowski is unsuccessful, the future for the gasline appears uncertain. While the new Republican and Democrat nominees haven't said they won't support the pipeline, they both favor re-opening the floor to alternative proposals, potentially threatening the North Slope producers' plans.
Murkowski's victor and the new Republican nominee, Sarah Palin, the former chairman of Alaska's Oil and Gas Conservation Commission, has said she will consider all pipeline proposals, not just the gasline. She has also backed the idea of an "All Alaska" pipeline, whereby a pipeline would be constructed from Prudhoe Bay, on Alaska's North Slope, to a liquefied natural gas export facility at Valdez. She couldn't immediately be reached for comment.
Tony Knowles, the Democratic nominee, has also said that he wants to invite all interested parties to submit proposals for projects that meet Alaska's gas export needs.
"The result will be a pipeline agreement that offers much more to Alaskans than the one now on the table," Knowles says on his campaign Web site. He is willing to consider proposals from parties that have previously registered an interest in building a pipeline, such as the All Alaska group, the Mid-America Company, and Canadian pipeline firm TransCanada Corp. (TRP). He couldn't be immediately reached for comment.
Both Palin and Knowles back using Alaskan gas in-state for heating, using the local workforce to construct the gasline, and not tying oil taxes to any gas pipeline deal.
"We could end up starting the negotiating process all over again," said attorney Walker. "We don't know yet if they'll try and fix the current study, or if we'll look at a new project."
He said that it is too early to say whether such a process might delay the bringing of Alaskan gas to market, or if - because of how long pre-construction studies for the Alaska pipeline are expected to take - it could actually expedite it.
"It doesn't necessarily hold anything up," Walker said.
fyi
Any comments?
Yep. "Scuppers" are holes in the rail of a vessel, so that any water taken over the side can flow back out. I think the word this person was looking for is "scuttle," which is also a nautical term, and meant punching a hole in the bottom of a vessel in order to allow it to fill with water and sink. It was done to prevent capture by enemies. < /pedantry>
The Stranded Gas Act required negotiations to be kept confidential prior to reaching an agreement. That was not Frank's doing but rather Alaskan law.
without restrictive 40 year set-piece tax deals
The tax was not part of the gasline contract but the oil/gas tax bill that has been passed, although not at 40 year. It never made sense to me why a tax rate cannot be set for a long term. Alaska has a history of changing the tax structure after companies invest their capital. That is one of the main reasons so much money has been invested in Canada oil/gas industry and Alaska remains much smaller.
the oil companies have no real reason to build the pipeline, they use the gas now to recover oil.
This is NOT true. The majors ALL are pushing this line and have spent a lot of their own money doing so. Natural Gas is re-injected but this will not end the oil production. It likely will increase the use of Electric Submersible Pumps in Prudhoe Bay; they are used in many fields around Kuparuk.
Alaska gas will be the most expensive in the world to deliver to market
No, but using LNG will greatly increase the cost to deliver.
This is something that we should have pushed 4 or 5 years ago.
Agreed.
Start over.
Frost in Fairbanks again. Tony on the radio now. Natural Gas Pipeline dead. What's next? Pluto no longer a planet?
So how did Alaskans benefit by taking out Murkowski?
They want to keep the Oil and Gas for their own use?
Without a market to sell Alaskan North Slope Gas outside of Alaska, the demand for natural gas inside the state is too little to justify the expense of building a pipeline, gas treatment plant, gas production facility and gas liquids plant within Alaska. (and you cannot build one without all of them) What we will end up building if the gas pipeline stalls is an LNG plant importing Natural Gas to South-Central Alaska where the majority of the population is. The current source of gas for this area is in steep decline, it is questionable now if the gasline contract were approved this year production would be in time to meet existing demand. From my short-time perspective, far too many Alaskan's keep trying to strangle the golden goose.
Ha!
Who says they intended to benefit? There are factions in Alaska, factions in the R Party. Factionalism arises for reasons, usually having something to do with money. The $20 billion pipeline project is just the ticket for creating factionalism. Then there is considerable money coming from outside Alaska to support environmentalism. The Sierra Club (Seattle) considers Alaska as THEIRS. Lots of money if you oppose predator control. Lots of money if you oppose the Pebble Mine since it conflicts with a salmon stream. Alaska politics has a large component of Outside control. The Ds are hiring enviros out of Seattle for $300 a week to come up here and campaign for Tony. 11,000 voted the R primary ballot just to oppose Frank and aren't even Rs. How do Alaskans benefit?
Glad I asked!!
Where do these enviromentalists get their money?
Help needed....
I was born in Anchorage 55years ago....I haven't been back for 54 years....lol
Enviros have a lot of money. Many are rich people. I suspect European royalty.
Without ANWR and the like to campaign against and raise money, many democrats would not get elected.
Also, enviros form non-profits and get Federal funding.
The tax change was a major part of what the oil multinationals demanded.
The majors are pushing the line now - where were they 2 or 3 years ago? Too expensive, they said - IIRC
I really hope they get the line built, it means my grandchildren might have a chance at a job and be able to stay in Alaska.
But I am not holding my breath. If Tony gets elected, I believe you can kiss the gas line goodby.
The majors have been hiring companies like the one I work for for many years, comparing the options to determine the most economical method of bringing this gas to market.
The project description on ConocoPhillips Alaska's web site pushing this project is a couple years old.
ConocoPhillips and Alaska North Slope Gas (PDF 980 kB)
In 2001, evaluation of the gas pipeline’s potential intensified when the three North Slope producers began a detailed study of a gas pipeline system from Prudhoe Bay to Alberta, Canada and then to Chicago. The studies included the conceptual design of all elements of the system, as well as an extensive evaluation of the potential route attributes.
We have maps on the walls in my office from several studies years ago comparing routes. $20 Billion does not get spent on the first option discussed without a lot of evaluation.
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