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Is latest Alaska gasline commitment another dog-and-pony show?

Alex DeMarban
From left: BP CEO Robert Dudley, ConocoPhillips CEO Jim Mulva, Alaska Gov. Sean Parnell, and Exxon Mobil CEO Rex Tillerson. Photo courtesy Alaska Governor's Office

How does the governor of a backwater state like Alaska get the heads of global oil giants to precisely meet the deadlines he's laid out for them on a massive gas line project?

Could it be behind-the-scene orchestration, a partnership that makes Gov. Sean Parnell seem effective, while improving the tarnished image of oil producers as they're seeking massive tax breaks? Or is it instead that Parnell's demands are so simple they can be satisfied with a flow chart here and a letter from oil chieftains there?

The governor wasn't available to answer those questions on Friday, his spokeswoman said.

But one of Parnell's top men, involved in encouraging the oil companies to speed up the project, said there's no such coordination.

"We never know until the day of or close to it if the deadlines are going to be met," said Dan Sullivan, Alaska Natural Resources commissioner. "But these (timelines Parnell sets) are not shots in the dark, either. We think they're reasonable, with an element of us trying to accelerate the timeline."

Parnell didn’t have time for an interview because he was traveling after visiting Fairbanks, his spokeswoman said. In that chilly city, he'd announced that once again, BP, Exxon Mobil Corp., ConocoPhillips and pipeline-builder TransCanada Corp. had met another of his milestones to advance the state's long-sought dream of producing North Slope natural gas.

Decades of failure

Such ambitious proposals have sprung up and vanished for years, with these same companies sometimes involved, leaving many Alaskans jaded. 

On the table in Juneau is an oil tax cut proposed by Parnell that could be worth more than a $1 billion annually for the three producers, depending on oil prices. Also yet to be discussed are the natural-gas taxes the companies will pay if they ever tap the North Slope, one of North America's largest gas fields.

Already, Alaska has paid out $222 million in subsidies to help advance a gasline project, with little to show for it, under the Alaska Gasline Inducement Act, created in 2008 and championed by former Gov. Sarah Palin.

The ink on that agreement was barely dry when John McCain tapped Palin as his VP candidate. Not long after that is when Palin said Alaska had launched a massive pipeline project, a widely ridiculed statement because TransCanada had merely won the right to evaluate the concept.

The plan then called for shipping Alaska gas through Canada to the Lower 48. But that idea has been dropped.

Under the apparent direction of Parnell, ConocoPhillips and BP have joined forces with Exxon and TransCanada in the Alaska Pipeline Project. The team is considering a new pipeline route to ship North Slope gas to an Alaska port so it can be super-chilled and shipped overseas, as Parnell had urged.

Sullivan said only TransCanada, in charge of pipeline development for the team, will be eligible for additional reimbursement under AGIA, which proposed providing up to $500 million. 

'Historic' or not?

Parnell on Friday made it sound like the new plan is the one Alaskans have long been waiting for.

The milestone met by the companies on Friday -- laying out new details of the project -- shows "historic progress," Parnell said.

"Never before has a gasline project been so specifically aligned and described in detail by the companies that have the capacity to build, fill, and operate it," Parnell said in a press release.  

Larry Persily, federal pipeline coordinator, called Parnell's statement "hopeful." That's because the companies haven't said much about what the next phase of work will involve, and there's no indication when they'll begin seeking regulatory permits.

"Speaking for my office and other federal agencies, we look forward to the day when companies come in with permit applications and we deal with it at that level," said Persily.

But Persily, an outspoken warehouse of history on Alaska's failed pipeline projects, acknowledged that the companies seem a little more serious today than in 2001, when Alaska's major producers spent about $125 million studying a gasline to Chicago that was scrapped when gas prices dropped.

The companies also seem a little better aligned than they did then, and have spent at least $350 million of their own money, Persily said.     

"If spending money is a measure of seriousness, then they're more serious today," he said.

Always on time

The three oil firms and TransCanada met all of Parnell's deadlines last year, with impressive punctuality. That included an announcement March 30 that the three oil companies and TransCanada would align, meaning work together. Along with "alignment," the companies promised to refocus their efforts on the new pipeline route to an Alaska port.

On Oct. 1, the companies met another Parnell-imposed deadline, this one to provide "hardened" numbers on the cost of a pipeline and a project timeline.

With each deadline, including the latest on Friday, the companies have sent Parnell letters signed by company executives. Coincidentally, the third such letter arrived on Friday morning, just before Parnell got on the plane to address the Fairbanks Economic Development Corp., in a speech titled "Energy for Alaska."

Parnell's talk centered on that newly arrived letter that he held up for the audience to see. It briefly answered every detail Parnell had asked for just one month earlier in his state-of-the-state address.

A simple, one-page table laid out the specifics: A 42-inch, 800-mile mostly underground pipeline off the North Slope would cost $45 billion to $65 billion, not including inflation. Eight compressor stations would propel gas along, and the pipeline would transport 3 billion to 3.5 billion cubic feet daily.

A treatment plant will be built on the North Slope. No location was given for the liquefaction plant, but it would have a footprint of 400-600 acres and produce 15 to 18 million tons a year. Five offtake points, location also undetermined, could move gas to Alaska communities for local use.

Other details included two large tanks for storing liquefied natural gas, and a terminal at the unspecified port that included one loading jetty with two berths.

The short letter was signed by TransCanada CEO Tony Palmer, Janet Weiss, BP Alaska president, Trond—Erik Johansen, president of ConocoPhillips Alaska, and Randy Broiles, a vice president of ExxonMobil Production Co.

Their letter said more than 300 people have worked on the project. Additional work, including construction, could produce thousands of jobs, and provide decades of natural gas for Alaskans.

Of course, there's a catch. In each letter, the company heads have called for lower taxes.

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 markets," the letter sent on Friday said.

Time for 'decision points'

So what's next?

The letter on Friday said the concept-selection phase is over, and the companies are "working toward the next decision points."

What does that mean? If the companies move ahead, they'll work on such things as collecting technical data, gathering environmental information and developing a financing plan, according to a flow chart accompanying the Oct. 1 letter.

Instead of spending tens of millions of dollars as they have said they are doing, they'll now spend hundreds of millions of dollars, according to the flow chart.

How do Alaskans know that what's actually being spent? The state's Tax Division has refused to release such information, saying it's confidential.

Sullivan said Alaskans will have the chance to learn more when Exxon, the team lead, updates the Legislature Tuesday at a Lunch and Learn session in Juneau.

"We've been encouraging that luncheon to be very detailed," Sullivan said.

Sullivan said he appreciates that some Alaskans are skeptical, and said a healthy amount is good. But a key point Alaskans should remember is the progress the state has made in a year. 

Key changes are that the companies are aligned after working separately before, they've provided new concept details, the Alaska project has sparked interest by potential Asian buyers, and the state and Exxon has settled a dispute that held up development at the potentially gas-rich Point Thomson field. 

"It's good progress and we're trying to accelerate this as rapidly as possible to get gas to Alaskans and beyond," Sullivan said.

Contact Alex DeMarban at alex(at)alaskadispatch.com