Alaska News

How much is state paying Exxon to advance gas pipeline? Nobody's saying.

Exxon Mobil Corp. is receiving state reimbursement for its role in the proposed natural gas pipeline project through its partnership with TransCanada Corp. But no one will say how much money Exxon has received or for what, citing confidentiality agreements.

The Alaska Gasline Inducement Act, passed by the Legislature in 2007, put in place a licensing agreement with TransCanada that envisioned construction of a large-diameter pipeline from the North Slope to Canada or Valdez, or perhaps both, depending on what markets potential gas shippers might be focusing on.

AGIA includes a provision that the state reimburse TransCanada for up to $500 million that it spends on pre-construction work and to prepare an application with the Federal Energy Regulatory Commission, due in 2012.

Much of the political debate at the time was over Exxon's role in the project, primarily because Exxon is the major natural gas producer on the North Slope. Concerns were raised over whether it was fair that the state pay Exxon to do what it would do anyway -- produce and sell natural gas into a pipeline.

Exxon has never signed on to the license agreement between TransCanada and the state, but within days after the agreement was finalized TransCanada officials made it clear that Exxon was a vital partner in the project.

According to testimony before the Alaska Legislature earlier this month, as of the end of June, the state will either have paid or will owe TransCanada about $125 million. Gov. Sean Parnell has asked for another $160 million for fiscal year 2012, which begins July 1.

TransCanada spokesman Shawn Howard said last week that TransCanada, as the AGIA licensee, seeks the reimbursement and then receives it from the state. The company then "shares the reimbursement with Exxon Mobil," he said.

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Howard said TransCanada won't reveal how much state money it has passed on to Exxon, citing confidentiality agreements. He did not respond to a request for information about what work Exxon has specifically done on the project so far.

Exxon also did not return a call for comment on this story.

The state produces an annual report to the Legislature at the beginning of every session that summarizes reimbursement information. But, the Jan. 11 reports says, "for purposes of confidentiality under AGIA, disbursements are summarized at the cost category level." It does note that TransCanada fell behind in submitting reimbursement expenditures in part "due to the addition of Exxon Mobil to the existing complex reimbursement process."

In 2009, when Exxon officially joined the project under AGIA, state revenue officials said the oil company's participation would be as a subcontractor and that it would take the lead on designing and engineering the gas treatment plant, a vital facility expected to cost about $12 billion.

The most recent state report to the Legislature, which covered reimbursements only through 2010, listed more than $10.5 million being reimbursed for work on a North Slope gas treatment plant. That amounted to about a third of the reimbursements paid to TransCanada through the end of the year.

This week, the Office of the Federal Coordinator, which is working to help facilitate a natural gas pipeline project in Alaska, published a new report on the gas treatment plant.

"The plant's cost has been estimated at $12 billion, compared with a total project cost of $32 billion to $41 billion," researcher Bill White wrote in the report. "It would be the most expensive complex of buildings ever assembled in Alaska."

But some state lawmakers -- particularly key House Republicans -- have become frustrated with TransCanada and Exxon's unwillingness to say whether the project is financially feasible or not. They do not want to spend more state money on reimbursements if the pipeline is not going to be built as planned. They believe the economics have changed since AGIA was passed a few years ago because new and plentiful supplies of shale gas in the Lower 48 are keeping gas prices too low to justify building the Alaska gas line.

Lawmakers were hoping by now to have learned the results of an "open season" held in July when TransCanada solicited bids from potential gas shippers. The company initially said it hoped to announce solid agreements by January then said it didn't know when it would have anything new to report. TransCanada officials told the House Finance Committee earlier this month that they were still negotiating conditions with potential shippers.

House Bill 142, pushed by GOP leaders, would have required state officials to determine whether the pipeline was economically viable by mid-July. But the measure died in committee on Sunday when the Legislature adjourned amid a budget stalemate. The bill is not part of the agenda for the special session, currently under way.

Alaska Rep. Mike Hawker, one of the most vocal critics of AGIA, noted that there were questions raised early on about Exxon getting money for the gas treatment plant that would be needed if it was to get its gas off the North Slope. He said there is just no way to tell what sort of financial deal Exxon has for the cost of the plant.

"We bought part and parcel into AGIA," he said. "We signed away our sovereignty. We have no rights."

Contact Patti Epler at patti(at)alaskadispatch.com.

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