Pipeline companies ask for halt in gas line permitting process

ANCHORAGE (AP) -- A group of pipeline builders has asked the state to stop the permitting process for a natural gas pipeline to the Lower 48, saying they cannot move ahead until producers of Alaska's vast gas reserves commit to the estimated $20 billion project.

Foothills Pipe Lines Alaska, which represents eight pipeline companies, asked the Alaska Gas Pipeline Office in Anchorage to stop processing an application to run the gas line across state land and along the Alaska Highway.

With no project to permit, some Gas Pipeline Office employees could face layoffs as the agency prepares to shut down this summer in reaction to the news, said Bill Britt, the agency coordinator.

The announcement Tuesday comes a month after three companies with rights to produce most of the North Slope's proven gas reserves of 35 trillion cubic feet concluded the project does not make financial sense at the moment.

Phillips, BP and Exxon Mobil are awaiting the outcome of federal legislation that could sweeten the project, including tax breaks and assurance the pipeline would not become bogged down in permitting delays.

Until the producers commit, Foothills and its partners do not have a pipeline to build.

John Ellwood, executive vice president of Foothills, spelled out the dilemma in a letter to the state last week.

''Given this and other uncertainties, our customers, the producers, are not likely to be in a position to make significant commercial decisions until the first half of 2003,'' he wrote.

The pipeline companies include energy giants Enron, Duke Energy and El Paso, as well as several other companies, Britt said. They have been trying to revive a 25-year-old dream to run a pipeline from Alaska's arctic oil fields to the Lower 48.

Phillips, BP and Exxon Mobil spent $125 million studying the cost of threading the line about 3,500 miles to Chicago along an Alaska Highway route through the state or under the Beaufort Sea and across the Canadian Arctic.

The highway route came in at an estimated $19.4 billion and the northern route at $18.6 billion, according to recently released final analysis.

The state set up a 14-person office last year to approve right-of-way permits for a highway pipeline.

''It was anticipated that there were would be up to 70 people in our office working on this, but it never got up to full speed,'' Britt said.

The energy bill approved recently by the U.S. Senate could reduce some of the financial risks, such as preventing permitting delays and giving pipeline operators a tax credit whenever gas prices fell below $3.25 per million BTU. The bill is in a House-Senate conference committee.

Foothills spokesman Rocco Ciancio said a favorable outcome could be crucial in deciding whether to resume permitting the pipeline route.

''The uncertainties with the energy bill could have an effect on the project,'' he said.