Five companies submitted proposals Feb. 1 seeking to purchase some or all of the royalty-in-kind natural gas that Alaska expects to receive if a 4 billion cubic feet per day natural gas pipeline from the North Slope to the Lower 48 becomes a reality.
Pat Pourchot, state Department of Natural Resources commissioner, announced that preliminary proposals were received from Alaska Power & Telephone Co., Chevron U.S.A. Inc., Williams Energy Cos. and a joint venture of Anadarko Petroleum Corp. and Alberta Energy Co. in a 10-minute bid-opening session.
Bids from Anadarko and Alberta Energy were expected because the two companies have been discussing a purchase of royalty gas for several months with state officials. The bid from Chevron, however, was a surprise.
Alaska would receive one-eighth of the natural gas that a North Slope pipeline would carry to the Lower 48. If the pipeline were to carry 4 billion cubic feet per day, the state's royalty share would be 500 million cubic feet per day. Department of Natural Resources officials decided to offer 70 percent of that amount, or roughly 350 million cubic feet per day, in the sale.
Petroleum markets specialist Kevin Banks said DNR's Division of Oil and Gas will now analyze the offers and decide how to proceed.
"We're going to look at each offer, and we may decide to start talking with each offeror and begin negotiations with them," Banks said.
Banks said the division will not release details of the bids until the analysis is complete and DNR makes a "best interest finding" on the sale results and seeks public comment. The department will then present its final finding to the Alaska Natural Gas Royalty Board, which will make a recommendation to the Alaska Legislature.
State lawmakers will have the final say on the sale, Banks said.
The current legislative session is scheduled to end in early May, which is the main reason DNR officials have moved forward with the sale process despite protests from Alaska's major gas producers.
The producers, Phillips Alaska Inc., BP Exploration (Alaska) Inc. and ExxonMobil Production Co., said the sale was premature because they have made no decision to develop a gas pipeline yet.
The producers also raised other objections to the royalty sale, but state officials decided to proceed with the sale because of scheduling limitations created by the state's four-month legislative session, Banks said.
The preliminary bidders for Alaska royalty gas appear to represent a wide range of interests and objectives.
Anadarko and Alberta Energy, which are exploring for natural gas reserves in the North Slope foothills, are eager to assure themselves of space on the proposed Alaska-Lower 48 gas pipeline.
Among the bidders was Alaska Power & Telephone, a small utility company in the Interior and Southeast Alaska. It is seeking a less expensive source of energy than diesel to generate electricity for Tok.
"We want to convert the generation station in Tok to burn natural gas," said AP&T President Robert Grimm. "We think it will result in a lot lower electricity costs for our 1,500 customers." Grimm said the idea took root because it appears that Tok may be on the route of the natural gas pipeline, and though few people have discussed possible in-state use of North Slope natural gas for small communities, "we are hoping to make that a reality."
Williams and Chevron did not return telephone calls by press time, but Williams has expressed interest in using ethane, a natural gas liquid in the natural gas, as a feedstock for a proposed petrochemicals plant in Fairbanks.
Journal reporter Tim Bradner contributed to this article.
