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Executives hail project agreement as significant

Posted: February 5, 2014 - 10:49pm

JUNEAU — Executives from the North Slope’s major oil and gas companies on Wednesday hailed an agreement with the state as a major step forward in pursuing a major liquefied natural gas project.

While they made clear there is still a long way to go in determining whether a project will be successful, they said the effort has the support of senior managers and the parties are at a place they’ve never been before in efforts to commercialize Alaska gas.

They also said having the state as a partner would be significant, in terms of sharing risk and also in demonstrating the project has the government’s support.

Executives from BP Exploration Alaska, ConocoPhillips Alaska and ExxonMobil Production appeared Wednesday before the Senate Resources Committee, along with officials from TransCanada Corp. and the Alaska Gasline Development Corp.

The committee has been reviewing the agreement between those parties and the state that sets out a roadmap for advancing a project. The panel also has been discussing a separate agreement between the state and TransCanada outlining terms for pipeline services.

The committee on Friday is scheduled to begin delving into legislation proposed by Gov. Sean Parnell to advance the project through the preliminary engineering and design phase.

David Van Tuyl, regional manager for BP Exploration Alaska, said the commercial agreement among the parties showed they can work through tough problems.

Earlier in the hearing, when asked by Sen. Hollis French what kind of concessions the companies made in negotiations, Van Tuyl said the companies listened to one another and allowed their views to be shaped to accommodate the views of others. Among the issues he noted: how to allow for expansions, which the state sees as an important tenet.

Bill McMahon Jr., with ExxonMobil Production, said there were three key elements the companies wanted at this stage: state participation, having the Legislature set an overall state share in the project, and a process in which project-enabling contracts could be produced and brought to lawmakers for approval. All three are part of the legislation under consideration.

The way you get an agreement signed is by distilling it to the essence of what the parties need, he said. McMahon said there were other issues his company was interested in but chose to save them for later discussion.

Tony Palmer, with TransCanada, said some of the terms in the agreement between the state and TransCanada — like return on equity — are “more beneficial” for the state than those contained in the Alaska Gasline Inducement Act, the law under which TransCanada holds a license with the state to advance a pipeline project. The project and players have changed in the last few years, however, and Parnell has said terms of the law no longer fit for the situation.

The memorandum of understanding between the state and TransCanada has been billed as a transition away from the Gasline Inducement Act, though some lawmakers have questioned whether it’s the best choice or a way to avoid what otherwise could be a messy legal split.

Earlier in the day, minority Democrats sent Parnell a letter expressing concern that during gas line negotiations, BP PLC, ConocoPhillips and ExxonMobil Corp. would “press for and win significant concessions on oil taxes.”

The Legislature last year passed a cut in oil production taxes, which the companies spoke in favor of. Parnell said Wednesday that a healthy oil industry is needed to allow companies to make investments in a gas line. But he said he hasn’t heard anything further on oil taxes as being part of the current discussions on advancing the gas line project.

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