Hearing set for Kenai

Posted: Wednesday, June 14, 2006

Kenai folks who haven’t had a chance to voice their opinions on the natural gas pipeline the governor has negotiated with the three major petroleum companies, will get their chance Thursday.

Officials with Gov. Frank Murkowski’s administration will be at the Challenger Learning Center at 11 a.m. Public testimony will be taken following a presentation on aspects of the Alaska Stranded Gas Fiscal Contract.

The presentation and hearing are another in a round of public hearings and community forums held around the state meant to acquaint the public with the terms of the contract negotiated with BP, ConocoPhillips and ExxonMobil. They began May 19 and are scheduled to continue at least through June 20.

This week, the directors of the Alaska Support Industry Alliance sent members an e-mail urging them to participate in the hearing and put their opinions and those of their companies on the record.

The alliance currently is reviewing the terms of the proposed contract and expected to distribute its findings to members when that process is complete.

They have suggested members be prepared to comment on several points during testimony Thursday. Those points, on which the alliance has taken previous positions as individual priorities, were outlined in a press release Monday and include:

n The contract encourages the earliest possible construction of the project and promotes the use of Alaska contractors, suppliers and workers, the alliance noted. It also provides for in-state use of the gas, third-party access and capacity expandability.

n The Lower 48 is the logical market for the gas and the highway route the most competitive project.

n The highway route would present the lowest transportation costs and yield the state the highest revenue stream.

n A gas line would involve half the loss of product a liquefied natural gas (LNG) project would. (Some would be needed a fuel).

n The gas line project guarantees Alaska would begin reaping benefits of gas development “sooner rather than later.”

Those points are debatable, said Jomo Stewart, communications director for the Alaska Gasline Port Authority, AGPA, which is promoting a competing project that would build an all-Alaska line to Valdez, liquefy the gas, load it on still-to-be-built tankers for transport to West Coast ports.

“This has huge holes in it,” Stewart said, looking at the alliance’s contract talking points. Contrary to the contention that the contract encourages early construction, Stewart said the contract was more likely to “endorse or codify delay in the Alaskan project, not hasten its completion.”

Producers have indicated they would need as much as 70 trillion cubic feet of proven reserves to start a project, which would require “a Herculean” effort to find more gas, Steward said. The AGPA project needs only the 35 tcf known to exist to make a pipeline viable, he said.

Stewart also said a contract provision regarding the use of Alaska workers, contractors and suppliers isn’t as favorable as it might sound. A section of the contract cited by Stewart says Alaskans would be used to the extent they were competitive. That could put Alaskans into direct wage and service competition with workers and businesses not only from low-cost and low-wage regions in the Lower 48, but because the term “non-Alaska resident” is not well defined, could conceivably force them “into a race for the bottom” against foreign workers and foreign firms, Stewart said.

Then there is the in-state use of gas issue. Stewart said another contract section provides that parties may supply gas to Alaska purchasers, but “no party is required” to do that.

As for the highway route being the best cost- and revenue-wise, Stewart contends that to date there is no firm cost associated with building the line, only a floating range of $20 billion to $25 billion.

Bill Walker, project manager and general counsel for AGPA, said he recently compared the proposed Alaska gas line contract with a BP contract for the Caspian Sea pipeline. If benchmark dates are missed there, he said, producers lose their rights to the natural resource.

“That’s a little different than what we have here,” he said.

Walker said the proposed contract requires little of the major producers. The “deliverables,” he said amounted to a promise to plan a pipeline and provide yearly updates on that planning. In exchange, he said, they want a locked-in tax rates and other major concessions from Alaska with no guarantee any gas will ever get to market.

He also said the big producers were treating Alaska like a “Third World” country.

“We deserve a better moniker than that,” he said.

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