newsminer.com

JUNEAU — Alaska producers BP and ConocoPhillips announced Tuesday they are moving ahead with a major natural gas pipeline project from the North Slope into Canada.

“We are starting now — we’re off,” BP Alaska President Doug Suttles announced at a morning news conference in Anchorage. “We will begin work now.”

Suttles said BP and ConocoPhillips were forming a new company together, called Denali — The Alaska Gas Pipeline, hiring workers, and planning to spend up to $600 million during the next few years to get to an open season, hopefully by 2010.

Suttles said the company will be based in Anchorage and employ 150 or more people by the end of the year and 500 people within three years, along with thousands of contractors.

First gas could flow as early as 2018, he added.

Jim Bowles, president of ConocoPhillips Alaska, said the two companies were not asking the state for anything at this point but likely would ask for some kind of fiscal agreement with the state before soliciting commitments from lease holders to ship their gas on the line.

“The governor has said there needs to be more information before we can discuss fiscal certainty, so this is part of the process of gathering that information,” he said.

The state’s third major producer, Exxon Mobil, is not involved in the project at this point, but Bowles said the two companies see other players joining in as the project moves forward.

“Exxon is one of those companies we’d like to see join,” he said.

An Exxon spokeswoman said the company was committed to developing its North Slope gas, but still had to evaluate whether it was economically feasible.

At a news conference later in the morning, Gov. Sarah Palin said her administration was excited by the announcement.

“We look forward to the progress that they’ll be able to show us on the project,” she said, adding that she planned to meet with the producers today.

But Palin said she had no intention of changing course with the Alaska Gasline Inducement Act or the administration’s review of the TransCanada pipeline proposal, the only one submitted under AGIA that was deemed complete.

She said she still planned to announce a decision on the proposal during the week of May 19 and hold a special legislative session on the gas line starting June 3.

Palin also cautioned that little was known about the producers’ new proposal. It looks great because the companies aren’t asking for the $500 million inducement offered under AGIA, she said. “But we have to know, what’s the bigger picture here? ... Would it result in perhaps billions and billions of dollars at the end of the day?”

Palin read from a copy of the Alaska Constitution dictating that the state develop its natural resources “for maximum use consistent with the public interest” and said that was still the bottom line for her administration.

“Whichever project gets us there first — in Alaska’s best interest — is what we’ll be supporting,” she said.

Palin credited lawmakers and the AGIA process with spurring the new proposal.

Legislative leaders responded to the announcement with excitement and optimism.

“They bring pipe and they bring gas,” Sen. Charlie Huggins, R-Wasilla, said. “That is a victory for us.”

At a news conference with House and Senate leaders, Huggins and others pointed to the lack of demands placed on the state and the fact that the two companies control a good share of the known North Slope gas reserves.

Rep. Ralph Samuels, R-Anchorage, said getting another lease holder involved could only be seen as a good thing.

“It’s not a silver bullet that’s going to get us a gas pipeline, but it is for sure a step in the right direction,” he said.

Huggins, who chairs the Senate Resources Committee, said the announcement could change the dynamics of the AGIA process and the special session, which may include a legislative vote on whether or not to award TransCanada an exclusive state license.

“I think quite frankly some representatives from the Legislature, with the administration and other players, need to sit down a make a consideration about how to go forward,” he said.

Huggins added that the ideal situation would be to have TransCanada team up with the two producers.

TransCanada vice president Tony Palmer said his company was interested in aligning the interests of all three major producers with those of TransCanada and the state to get the project moving as fast as possible.

“We’ve sought alignment for years and will continue to do so,” he said. “I do think it is significant that two North Slope producers are prepared to advance this project.”

Local lawmakers offered differing views on the proposal.

Rep. Jay Ramras, R-Fairbanks, said he was elated.

“These are companies with capacity, gas, experience,” he said.

Ramras said he considered the plan a viable alternative to the TransCanada proposal and would probably be more reluctant now to give the Canadian company an exclusive license and cash inducements.

Rep. David Guttenberg, D-Fairbanks, said he was generally encouraged by the announcement but also skeptical.

A good approach might be to allow both projects to go forward and essentially compete all the way to an open season and permitting, he said. “I’m not going to take AGIA off the table simply because there’s a press release that came out from BP and Conoco.”

Sen. Gene Therriault, R-North Pole, noted that there wasn’t much information out yet about the companies’ plan.

“What are the expandability provisions?” he said. “What about the tariff structure?

“For anybody to say, ‘That’s it, game over, this is all we need,’” Therriault said, “I would hope their question would be, ‘Does this press release contain the detail that you need to make that decision?’"