Gas line study group disbanding

The North Slope gas producers group, working on the feasibility of a gas pipeline, is winding up work and closing shop, at least for now, a state legislative committee was told Jan. 16.

Results of more than $100 million in engineering and environmental studies have been sent to the three companies sponsoring the effort, BP Exploration (Alaska) Inc., ExxonMobil Production Co. and Phillips Alaska Inc., and what happens next is up to them, Dave MacDowell, external affairs manager for the joint project team, told the House-Senate Natural Gas Committee in Juneau.

However, one of the producers, speaking separately, voiced continued optimism about prospects for a pipeline along a southern, or Alaska Highway, route.

"We believe a project along the southern route has the best chance of being developed in a timely fashion and will be the one most supported by the various stakeholders," Mike Hurley, a Phillips spokesmen, told the legislators.

MacDowell said that at the peak of the study last fall, the three-company effort employed as many as 800 contractor employees as well as 100 people assigned by the companies.

The effort is now down to about 200 contractor employees and 60 company staff and will be "close to zero" by February, he said.

One project that remains is a test of new permafrost trenching technology that will be conducted in early February near Deadhorse and in the Interior north of Fairbanks, MacDowell said. If the procedure works as expected there could be big cost savings.

Efforts will continue on federal legislation and initiatives with the state to get fiscal clarity and certainty for a gas project, he said, but these involve the individual companies, not the joint project group.

The major effort with federal legislation is a provision that streamlines regulatory review. Language doing this is now in proposed energy legislation in the U.S. Senate.

Alone among the three producers, Phillips supports a federal tax credit that would become effective if gas prices dropped. It would be a form of protection with a very high risk project, Phillips’ Hurley told the legislative committee.

On the state initiatives, Hurley said fiscal clarity refers to clearly defined rules and understanding on administration of state taxes and royalties and involves discussions with the state departments of Natural Resources, which administers royalty, and Revenue, which administers state taxes.

Fiscal certainty, however, means some understanding with the state that taxes on a gas project will not change over time, Hurley said. With a billion-dollar fiscal gap facing the state, this is a matter of some concern to the gas producers.

BP, ExxonMobil and Phillips are now analyzing the information, and the next step is up to the individual companies, MacDowell said.

01/27/2002 - 8:00pm