State of the State: Parnell lays out 2012 benchmarks for LNG deal

AP Photo/Chris Miller

In his annual State of the State address, Alaska Gov. Sean Parnell laid out benchmarks he hopes North Slope producers will reach in 2012 on a possible deal to build a natural gas pipeline and liquefied natural gas project.

Parnell spoke to a combined audience of the state House and Senate in the state capitol in Juneau Wednesday night.

If the companies meet the benchmarks, Parnell committed to introduce a needed agreement on natural gas production taxes to the 2013 state legislative session. The companies say a deal on fiscal terms including taxes and royalties are needed before a major gas project can be pursued.

Parnell had met with the CEOs of the three major slope producers in Anchorage Jan. 5 and urged them to work together on a large LNG project in lieu of an all-land pipeline now being pursued by TransCanada Corp. and ExxonMobil Corp.

BP's Robert Dudley, ConocoPhillips' James Mulva and ExxonMobil's Rex Tillerson met with Parnell.

In his speech to legislators Parnell said he hoped to see the three companies come together in an agreement to pursue an LNG project by March 31, on a plan to integrate work the state has done with a 24-inch in-state pipeline from the Slope, and by Sept. 30 a schedule for a new, large gas project.

An LNG project, aimed to serve export markets, would involve a large-diameter pipeline from the Slope to a southern Alaska port, either Valdez, the present terminus of the Trans-Alaska oil pipeline, or the Kenai Peninsula, near Anchorage, where ConocoPhillips now operates a small LNG plant supplied by Cook Inlet gas fields.

Parnell said he is also pushing for quick resolution to a lawsuit over state leases at Point Thomson, east of Prudhoe Bay on the slope, which all parties agree must be resolved before a major gas deal can move forward.

Point Thomson holds an estimated 8 trillion cubic feet of gas, a sizeable portion of the 35 tcf of gas reserves identified on the Slope that would support a gas pipeline.

“In the last 24 hours I spoke with the CEOs of all three producing companies to ask if there has been progress on reaching agreement on Point Thomson, and I was told there was not,” Parnell told legislators in his speech.

If agreement does not come in the next two weeks Parnell said the state would  “vigorously” argue the state's position in the dispute in a hearing planned Feb. 8 by the Alaska Supreme Court.

The case involves a claim by the state that Point Thomson lease-owners, which include ExxonMobil, BP, Chevron and CononoPhillips, did not abide by work commitments. Based on the claim the state moved in 2007 to terminate the Point Thomson Unit.

The lease-owners sued and the case has been winding its way through the state courts since, and is now before the state's high court.

The state has negotiated a possible settlement with ExxonMobil, the operator of the unit, but BP, Chevron and ConocoPhillis, the other major leaseowners, have not agreed to the deal.

Alaska Senate President Gary Stevens says many of Parnell's priorities fit with those of his bipartisan coalition.

Stevens says Parnell is right that this will be an important legislative session, particularly as it pertains to oil and gas and trying to find meaningful solutions to spur production. But he says there are problems with Parnell's oil tax-cut plan and says he'd like the Senate to craft its own tax bill.

House Minority Leader Beth Kerttula says her Democratic caucus wants to ensure Alaska gets its fair share from a tax regime and will stand against giving away the state's resources.

The Associated Press contributed to this story.

11/11/2016 - 6:29pm