A Citizen’s Guide

ConocoPhillips wants to start negotiating a natural gas contract with the state before the end of the year, company executives said Wednesday.

The negotiations would be the first step in what the company believes is the “fastest way to a pipeline,” according to Brian Wenzel, vice president of Alaska North Slope Gas Commercialization for ConocoPhillips Alaska. If ConocoPhillips received legislative approval during the upcoming regular session, the company believes it can start field work on a pipeline by next summer and finish pipeline construction by 2018.

But ConocoPhillips is competing against four other natural gas pipeline applications submitted through the process outlined in the Alaska Gasline Inducement Act, or AGIA, created by the same government officials with whom ConocoPhillips hopes to negotiate.

Gov. Sarah Palin and her gas pipeline team announced those applicants last week, and following a period of internal evaluation plan to release them for public review in the coming weeks.

While Gov. Sarah Palin did not reject the ConocoPhillips plan, she said she would not consider it as part of the AGIA process. Through that process, the administration will pick a winning proposal for the Legislature to approve.

That leaves ConocoPhillips to promote its plan on its own, which the company has already begun doing both in the state and in Washington D.C.

During a tour of Fairbanks on Wednesday, company executives set out details for a $30 billion plus project to run a pipeline from the North Slope into Canada and on to Lower 48 markets.

To complete construction, ConocoPhillips hopes to partner with a pipeline company, but feels it cannot complete a project without state help, according to Wendy King, manager of Alaska North Slope gas for ConocoPhillips Alaska.

“We think a project of this magnitude is going to require alignment and a partnership between the state and the sponsors of the project,” King told the News-Miner on Wednesday. “I just cannot see a project of this complexity going forward if we’re in a place where we’re not working together.”

The ConocoPhillips proposal conforms to many of the requirements under AGIA, including off take points for in state gas and local project headquarters, but the company also wants some major changes.

Most importantly, ConocoPhillips wants a different tax structure than the one provided for through the law. Wenzel said producers won’t commit gas to a pipeline unless taxes and tariffs remain set in stone for decades, a claim the Palin administration has repeatedly challenged.

“In our view, AGIA did not provide sufficient fiscal terms,” Wenzel told the natural resources committee of the Greater Fairbanks Chamber of Commerce on Wednesday.

ConocoPhillips did not lay out any fiscal terms in its proposal, but told the News-Miner it would want stability at least more than a decade. Wenzel said the company hopes to negotiate specific terms with the Palin administration after the current evaluation process ends.

ConocoPhillips also requested lower rates for adding capacity to the pipeline, known as “rolled-in rates,” than those provided for under AGIA.

Should the Palin administration decide to move ahead with the ConocoPhillips proposal, Wenzel believes it could do so without violating existing law, because AGIA does not require the state to pick a winner from the pool of eligible applicants.

Presenting the ConocoPhillips proposal to the legislature would allow the administration to “save face” if it felt unsatisfied with the current applicants, according to Andrew Halcro, who lost to Palin in the last gubernatorial election and has been one of her most consistent critics in the year since.

Speaking to the Alaska Support Industry Alliance in Fairbanks on Wednesday, Halcro praised the ConocoPhillips proposal as the only company with the assets and resources to finance and build a pipeline.

Contact staff writer Eric Lidji at 459-7504.