Alaska governor concerned with pipeline progress

Governor: Progress on pipeline but not as fast as Alaskans expect; companies miss a milestone

Associated Press

JUNEAU, Alaska (AP) -- Gov. Sean Parnell on Friday said the companies pursuing a major natural gas pipeline project in Alaska have not met all the benchmarks for progress that he has set.

While progress is being made, it's not moving as quickly as Alaskans expect, he said.

On Friday, Exxon Mobil Corp., BP, ConocoPhillips and TransCanada Corp. announced summer field work in connection with a massive proposed liquefied natural gas project that could exceed $65 billion. The companies said they expect to have spent up to $100 million toward the project by the end of this year. They said their field work and other activities will allow them to evaluate "major future engineering commitments."

"Towards this goal, a competitive, predictable and durable oil and gas fiscal environment will be required for a project of this unprecedented scale, complexity and cost to compete in global energy markets," the companies said in a release.

The Legislature in April passed an oil tax cut supported by the North Slope's three major players — BP, ConocoPhillips and Exxon — that could cost the state up to $4.6 billion through fiscal year 2019, depending on oil prices and production levels. Kim Jordan, a media adviser to Exxon Mobil, said in an email that passage of the bill was a "significant achievement," given a "healthy, long term oil business will be a key part of the foundation for this complex, world-scale project."

"We will need to work together with the state to ensure we have the right fiscal environment to support an LNG project," she said. LNG stands for liquefied natural gas.

In an effort to jumpstart progress on a line, Parnell urged the Big Three in 2011 to get behind a project that would allow for liquefied natural gas exports to the Pacific Rim if the market had truly shifted away from the Lower 48. The companies agreed, though it was understood that there was no guarantee a line would be built.

In 2012, Parnell used his State of the State address to set out a series of benchmarks for progress, all of which were met. He did the same in this year's speech. He asked the companies for more details on the project by Feb. 15, to finalize an agreement to move into a stage that would include preliminary engineering and a financing plan by this spring and to conduct a full summer of field work.

The second of those — which would trigger hundreds of millions of dollars in additional spending by the companies, according to their own work plan — was not met.

Parnell, in a statement, also said he was concerned the spending commitments announced by the companies did not go beyond 2013.

Alaskans have long hoped for a major line as a way to shore-up revenues as oil production declines, create jobs and provide energy for residents.

Jordan said the companies are working to answer key technical questions.

Larry Persily, federal coordinator of Alaska natural gas pipeline project, said companies ramp-up spending as they feel comfortable. The best outcome for Alaskans would be for the companies to commit to hundreds of millions of dollars next year because they feel strongly about the project's prospects, he said.

"They're making progress," he said. "This appears to be painfully slow to Alaskans, I understand that, but the fact is $40-, $50-, $60-billion energy projects are painfully slow."

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Follow Becky Bohrer at http://twitter.com/beckybohrerap.

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