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Dear Neighbors, Starting June 3rd, I am headed back to Juneau for a 60-day Special Session with the hope that we can turn 20 years of discussion about a natural gas pipeline into a real project. We have some unlikely foes, some unlikely allies, and a lot of homework to do. The following is an opinion piece Rep. Bob Buch (D-Anch.) and I have written, and that will run in local newspapers soon. I thought I’d share it with you here. I hope this spring finds you well. I’m off for a pre-Special Session vacation, but will be back in two weeks. If you need anything, let my staff know: 269-0106. Thanks!Best regards, |
Opinion Piece
There’s an elephant in the room, and it’s owned by Exxon, British Petroleum and ConocoPhillips. It’s one reason why, with natural gas at near record prices, and a pressing Alaska and national energy demand, Alaskans are still searching for the way to a gas pipeline. These companies have continuously refused to confirm whether they’ll sell their North Slope gas to anyone who’s approached them about building a gasline. No one will build a $20 - $30 billion gasline without knowing whether these companies will put the state’s largest known reserves of natural gas – from Prudhoe Bay - into that line.
We recently requested, with other Democratic legislators, that Exxon, ConocoPhillips, and BP commit to producing their Prudhoe Bay gas if an economic pipeline were constructed. They haven’t answered, again.
The natural gas at Prudhoe Bay is owned by Alaskans. While Exxon, Conoco and BP hold the gas leases, those leases also impose a “duty to produce” this gas when it’s economic to do so. The state has a right to sue under these leases, take them back, and bid them to companies that will produce gas needed for a gasline. That’s what we’ve done at Pt. Thomson. It’s not time for litigation at Prudhoe Bay. But that time will come if an economic pipeline proposal is blocked by a continued refusal to sell Alaska’s gas.
Starting June 3, the Legislature will assess a gasline bid from TransCanada, and the economics of a large-diameter in-state line to Valdez. The Governor and Department of Natural Resources Commissioner Tom Irwin are in the process of deciding whether these proposals are viable.
Here’s a preview of what you’ll hear this summer.
The TransCanada proposal appears to have complied with AGIA, the gasline law passed in 2007. AGIA includes requirements for in-state gas delivery for our communities, and contains requirements to keep down the price of transporting gas so that development by independent companies will be encouraged, not deterred.
The major producers didn’t submit a bid that complied with AGIA. Some believe they’d rather keep the transportation cost for competing independent developers high, and for their own gas low. And they objected to AGIA’s requirements aimed at providing for in-state gas delivery to our communities. BP and Conoco recently issued a press release that they’ll propose their own pipeline, dubbed the “Denali” project.
The major oil companies have opposed the AGIA process. They’ll stress that it requires a hefty $500 million state contribution. That tells half the story.
AGIA promised this contribution to help independent pipeline bidders deal with the delay and uncertainty we expect as BP, Exxon, and Conoco continue to resist selling Prudhoe Bay gas. The major oil companies’ recent “Denali” proposal doesn’t require a $500 million state contribution. However, their Denali proposal isn’t much more than a press release at this point, and we still don’t how much the tax and other concessions they’ll demand will cost us.
Their ads will likely stress that TransCanada is a “foreign” company. Their ads likely won’t mention that their companies are based in London and Houston, or that they, like TransCanada, propose a pipeline through Canada.
Then, some will try to block any TransCanada contract, or a large diameter line to Valdez, saying we should just build a small pipeline, one-quarter the size or smaller, for in-state gas use. We do need to move ahead with a plan for in-state gas delivery. But that doesn’t relieve us of the obligation to also move forward with a large diameter gasline. Alaska rightly offers significant tax breaks on gas used in Alaska. A large pipeline will be needed for any significant future revenue, and for the economic stimulus it will bring in terms of Alaska jobs.
Legislators should go to Juneau ready to study the proposals the Department of Natural Resources concludes are viable and meet AGIA’s requirements.
But it’s not time to give in to the oil companies’ suggestion that if we don’t agree to their terms and concessions, they won’t sell their Prudhoe Bay gas.
