Applications to the state of Alaska to build a North Slope natural gas pipeline by two separate industry groups have sent a shot of adrenaline through the state's oil support and construction industries.
"There's a lot of positive energy flowing in the right direction. People are excited," said Larry Houle, executive director of the Alaska Support Industry Alliance.
"The contracting community is realistic enough to know we won't break ground tomorrow on this project, but these are big steps in the right direction," he said.
The three major Alaska oil and gas producers and an independent pipeline consortium led by MidAmerica Energy Holdings Co. have filed separate applications with the state of Alaska to build a gas pipeline from Alaska's North Slope.
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MidAmerica and two Alaska partners filed applications under the state's Stranded Gas Act Jan. 22.
The producers' application was filed Jan. 13, but Alaska Gov. Frank Murkowski did not acknowledge it until Jan. 23, a day after he announced the MidAmerica application.
BP Exploration Alaska Inc. and ConocoPhillips Alaska Inc. initially filed the producers' application. Exxon Mobil Corp. joined the two other producers in an amendment to the application a few days later.
The stranded gas act allows the state to negotiate special tax and royalty terms with a pipeline consortium, and is seen as a signal that companies are serious about the project to commercialize 35 trillion cubic feet of gas now "stranded" on the North Slope.
The producers have said that a special fiscal contract with the state is necessary for their project to proceed, along with regulatory streamlining provisions in the federal energy bill still pending in Congress and agreements with Canada on regulatory streamlining.
The three companies plan to build the same project they jointly studied in a $125 million conceptual engineering study in 2001. It is a 52-inch new pipeline from the North Slope that would deliver 4.5 billion cubic feet of gas per day through Interior Alaska and Canada to the U.S. Midwest. It is a 3,000-mile project that would cost $20 billion.
MidAmerica is the nation's second largest natural gas transmission company. Based in Des Moines, Iowa, the company is a privately-held company with Warren Buffett and his Berkshire Hathaway Corp. as major owners.
"Mr. Buffett is very excited about this possibility," David Sokol, MidAmerica's chairman and CEO, said in a Jan. 22 press conference held in Fairbanks with Gov. Frank Murkowski.
MidAmerica has included two Alaska groups as partners in its proposal, Pacific Star Energy Co. and Cook Inlet Region Inc., both of Anchorage.
Pacific Star Energy is owned by 12 of the 13 Alaska Native regional corporations along with Pacific Rim Leadership, and is being led by Ken Thompson, a former Atlantic Richfield senior executive.
The company owns 9.8 percent of the MidAmerica project, Thompson said at the Fairbanks press conference.
Cook Inlet Region Inc. is the Alaska Native regional corporation for southcentral Alaska. CIRI holds a 9.9 percent interest in the consortium, and is also part of Pacific Star Energy, according to CIRI President Carl Marrs.
The MidAmerica group plans a 48-inch pipeline from the North Slope to the Canada border through Interior Alaska.
The pipeline would operate at a pressure of 2,500 lbs. per square inch and would move 4.5 billion cubic feet per day from the North Slope, Sokol said. This the same volume as the project proposed by the producers.
Sokol said he expects TransCanada Pipe Lines will build sections of new pipeline in Canada, from the Alaska border to its existing pipeline system in Alberta.
Marrs said at the Jan. 22 press conference that the Alaska pipeline sections in the pending federal energy bill are critically important to the project, particularly provisions for expedited federal permitting.
He also said that tax-free bonds issued by the state-owned Alaska Railroad Corp. will be important.
Sokol expressed confidence the energy bill will eventually pass. But if it doesn't, the Alaska gas provisions can be put into separate legislation, he said.
Murkowski agreed separate legislation might be needed.
Murkowski also issued what some are interpreting as a veiled threat to the producers at the Jan. 22 press conference.
"The application means this gas is no longer 'stranded.' This puts us in a more flexible position," Murkowski said.
He made the same statement at the conclusion of a press conference the next day with the producers in Anchorage, and his words were carefully chosen.
Some believe Murkowski was sending a message to the producers that the applications mean the gas might be sold commercially through a pipeline.
As long as there has been no formal proposal to buy gas, the state has had little authority to pressure the producers to make their gas available under the terms of the existing leases.
