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JUNEAU — Gov. Sarah Palin on Thursday defended her refusal to negotiate with North Slope producer ConocoPhillips and said she was encouraged by the company’s promise to keep working on its natural gas pipeline project.

“We have a fair, open process,” she said at a news conference. “It would be unfair to go outside of this process and start negotiating ... with Conoco or anyone else.”

ConocoPhillips announced this week that it was reassessing its approach to developing a gas pipeline from the North Slope because of a “lack of engagement” on the part of Palin’s administration.

The company asked the administration to negotiate fiscal terms for gas leaseholders as the first step toward developing its project. ConocoPhillips submitted its proposal outside of the Alaska Gasline Inducement Act and presented it as an alternative way forward.

Palin said Thursday her administration is still committed to the AGIA process and is hopeful that the one pipeline application deemed complete under AGIA will meet the state’s needs. That application, which was submitted by pipeline company TransCanada, is up for public review.

ConocoPhillips Alaska vice president Brian Wenzel said Thursday that negotiations with the administration would not necessarily have blocked the state from moving forward with AGIA. Palin said in a written statement that doing so would not have allowed a “good faith” review of the TransCanada proposal.

At the news conference, Palin said the AGIA process has resulted in more progress toward a gas line in the last few months than the state has ever seen, and she credited the competitive bidding process for ConocoPhillips’ promise to advance its own project.

“It’s encouraging to hear that Conoco is saying, ‘We’re going to forge ahead anyway,’” she said. “That’s encouraging, and that proves that competition does work.”

ConocoPhillips Alaska president Jim Bowles said Wednesday the company would undertake up to $40 million in initial project work this summer, but he said the decision to move forward was driven more by Palin’s refusal to negotiate than by competition with TransCanada.

Palin and Joe Balash, a member of her gas line team, said the state is not willing to lock in the state’s tax system for a period of decades, as ConocoPhillips has asked, but is not opposed to making changes to the state’s gas taxes if project economics show they’re needed.

While ConocoPhillips has asked to settle those terms now, Balash said the state would be in a much better position to consider tax rates later, once it has a better sense of pipeline transportation costs and natural gas prices.

State lawmakers on Thursday also said they were encouraged by ConocoPhillips’ decision to move forward without negotiated fiscal terms.

“It shows a lot of interest,” said Sen. Joe Thomas, a Fairbanks Democrat. “They’re indicating that it’s certainly economical now.”

Sen. Tom Wagoner, a Republican from Kenai, said he found it “intriguing” that the company was proceeding without the fiscal framework it said was needed to make the project happen.

And Sen. Gene Therriault, a Republican from North Pole, said if ConocoPhillips ultimately chose to pursue a pipeline project outside of AGIA, it wouldn’t be a bad thing for the state.

On Wednesday, ConocoPhillips’ Wenzel maintained that long-term stability on fiscal terms was needed for a successful pipeline project.

House Speaker John Harris, a Republican from Valdez, took ConocoPhillips at its word.

He said Thursday he didn’t think ConocoPhillips or the state’s two other major producers, BP and Exxon Mobil, would commit their gas to a pipeline project without long-term fiscal stability. But he added that he didn’t think state lawmakers or the public were willing to offer that stability.

Harris instead suggested the state should look into using its royalty gas for a smaller in-state pipeline that could be built quickly and expanded later as major producers agree to use the line.

He said he didn’t want to stop the AGIA process, but wanted to address the needs of state residents by getting a project moving quickly.

“I just want it to get off the dime,” he said.

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