A Citizen’s Guide

Four entities, including two companies little-known in Alaska, have applied for an exclusive state license to build a natural gas pipeline from the North Slope.

The Alaska Gasline Port Authority, TransCanada, AEnergia LLC, and Sinopec ZPEB all submitted applications under the Alaska Gasline Inducement Act, Gov. Sarah Palin announced Friday evening at a news conference in Anchorage.

A fifth entity, the Alaska Natural Gas Development Authority, submitted a proposal for a spur line connecting a main pipeline to the Anchorage area.

“Today’s progress under AGIA demonstrates to the world that Alaska is well on our way,” Palin said.

ConocoPhillips, one of Alaska’s three major North Slope producers, also submitted a pipeline proposal Friday, but not under AGIA.

Members of Palin’s gas line team described the competitive bidding process as a success.

“We got a ball game now,” said Revenue Commissioner Patrick Galvin. “[AGIA] was designed to set up a competition and that is what have — somewhat in spades.”

By filing applications, the five entities demonstrated their belief in the project and their willingness to meet the demands spelled out by the state in AGIA, said Deputy Resources Commissioner Marty Rutherford.

When asked whether there was concern over the lack of interest on the part of some major players, Rutherford said the administration was happy with the applications it got.

“It only takes one good application,” she said.

None of the three major producers in Alaska — BP, ConocoPhillips, and Exxon Mobil — applied under AGIA. Nor did the BG Group or MidAmerican Energy Holdings Co., which had said it was planning to apply.

Of the entities that did apply, TransCanada and the Alaska Gasline Port Authority are the best known. Both pushed pipeline proposals under former Gov. Frank Murkowski, who chose instead to negotiate with the three producers. That deal failed last year, clearing the way for the bidding process under AGIA.

AEnergia LLC and Sinopec ZPEB are less well known in Alaska. Galvin said all the information the gas line team had on the companies was “what we could glean in the last hour.”

Sinopec ZPEB is the second-largest energy company in China and has operations in Yemen, Sudan, and elsewhere, according to Rutherford.

The Alaska Natural Gas Development Authority did not submit a complete application for a pipeline from the North Slope. Instead, it offered an “addendum” application for a spur line that would connect Southcentral to a main pipeline running to Valdez or into Canada.

Rutherford said the administration would start reviewing the applications immediately, gather whatever additional information was needed, and then post the applications online for public comment.

A winner will be chosen based on the economic value of the project to the state and the project’s likelihood of success, she said.

Details of the pipeline proposals were not released Friday.

Regarding ConocoPhillips and its proposal, Palin said the administration was committed to working within the established process.

“We’ll hear them out, but they won’t be considered under this AGIA process,” she said.

ConocoPhillips spokeswoman Natalie Knox Lowman said her company’s proposal offered an “alternative path” for the state.

“We’re seeking a market-based solution that achieves a better balance of risk among the pipeline owners, producers, and shippers,” she said Friday.

ConocoPhillips posted a 115-page project description online at www.ansnaturalgaspipeline.com, along with a letter from ConocoPhillips chief executive officer Jim Mulva to Palin.

The company’s proposal describes a large-diameter pipeline running from the North Slope into Canada to the border of British Columbia and Alberta. From there, gas would be shipped to Chicago through existing or new pipelines.

The pipeline to the Alberta border would cost $19 to $32 billion, carry about 4 billion cubic feet of gas per day, and begin operations in 2018.

In his letter to Palin, Mulva stressed the need to develop a “fiscal framework” that would apply to companies agreeing to use the pipeline, and he argued that a pipeline project could not move forward without a partnership between industry and the state.

ConocoPhillips turned down the $500 million state subsidy offered as an incentive under AGIA. It did not commit to meeting the requirements spelled out in AGIA, which cover everything from project finance to Alaska hire, but did accommodate a number of state concerns.

The company promised to negotiate project labor agreements, provide for a number of in-state gas takeoff points, and solicit new interest in the pipeline every two years.

It also said it would work with the state to solicit other investors in the project.

“We think that as our pipeline goes forward, it will make sense for BP and Exxon to consider participating in the project,” said Lowman.

BP spokesman Steve Rinehart said his company would certainly consider the proposal.

“We’re looking it over very carefully,” he said. “We’d want to be part of a team that delivered a successful project.”

Exxon Mobil declined to comment on its plans, other than to say that it still believes Alaska natural gas “could play a key role in meeting North America energy supply needs in the coming decades.”

Sen. Gene Therriault, a Republican from North Pole, said he was encouraged by parts of the ConocoPhillips proposal showing a willingness to partner with an independent pipeline builder and have existing shippers share in the costs of pipeline expansions.

“There’s a lot of positive things in Conoco’s proposal, so far as one of the major producers ceding on a few of the points,” he said.

Therriault called the AGIA process a “success” in that it gave the state options to consider.

Rep. David Guttenberg, a Democrat from Fairbanks, said he also thought AGIA had worked, but added that it was too early to tell whether the process would result in a pipeline.

Contact staff writer Stefan Milkowski at 459-7577.