Alaska Gov. Frank Murkowski announced late Friday that he has reached an agreement with ConocoPhillips on the base fiscal contract terms of a proposed agreement for a gas pipeline that would bring gas from the North Slope to gas markets in the Lower 48 states.

Murkowski said the deal is basically one leg of a three-legged stool — the other two legs being agreements that must be worked out with BP and ExxonMobil for the pipeline contract to move forward.

“This is a significant milestone, and there are other positive signs on the horizon,” said Murkowski. “Additional work remains.”

Jim Bowles, president of ConocoPhillips Alaska Inc., also said this agreement is only the beginning. “The journey has just started,” he said. “We’re now one step closer to making an Alaska natural gas pipeline a reality.”

The governor reiterated that any contract proposal must meet his six principles: That Alaskans deserve a fair share of revenues from a gas pipeline project; that Alaskans need the opportunity to access the gas; future explorers must have access to the gas pipeline; the pipeline must be expandable; the state should share in the wealth by owning a share of the pipeline; and that Alaskans deserve Alaska Gas Pipeline jobs.

“Until we have reached agreement with all three producer companies, I cannot discuss the details of the contract due to confidentiality,” said Murkowski. “But I can assure Alaskans that this agreement provides the maximum benefit for Alaskans — for state revenues, for the Permanent Fund and for Alaska hire.

“We have a contract that makes good sense for the state and good sense for the producers.”

BP Alaska spokeman Daren Beaudo said his company has ironed out a majority of the issues with the state but there are still some that have to be resolved. He indicated it was rather odd that ConocoPhillips chose to announce a preliminary deal with the state when all three producers have to sign on the dotted line of a single final agreement. “We don’t think it’s a good time to announce portions of an agreement or that we’re almost there,” said Beaudo. “We’re going to talk about what we have when there is a signed and sealed agreement. I can’t speak on what ConocoPhillips agreed to. In the end there will be a single contract endorsed by the sponsor group, which consists of all [three production companies]. There will be just one agreement. Everyone knows that there are still issues to resolve.”

In a related announcement on Monday, Dallas-based investment bank Challenger Capital Group Ltd. said that it was chosen, along with Credit Suisse First Boston and UBS, to serve as financial advisors for the State of Alaska’s participation in the construction of the gas pipeline. In the announcement, Challenger Capital said the pipeline could go to either existing pipelines in Alberta, Canada, for further transportation to the Lower 48 states, or to a gas liquefaction plant in Valdez, AK, for shipment via tanker to the western United States. The Alaska Gas Line Port Authority has proposed the latter method of gas delivery, but so far the governor has negotiated solely with the three major producers to the exclusion of all other proposals.

Challenger said that its advisory services will include collaboration with other state advisors in developing recommendations on structuring and funding state equity participation in, as well as analysis of overall project financing of, the construction of a stranded gas pipeline to transport gas from the North Slope to end use markets. The assignment may also include providing assistance to the state in comparative financial analysis of certain aspects of the pipeline development proposals.

The cost of the project is estimated to be between $13 billion and $20 billion, and will bring to market proven gas reserves of 30 Tcf and additional probable reserves estimated at 100 Tcf, Challenger said. Upon completion, the project will represent one of the largest pipeline undertakings in the world.

Challenger and the other two investment banks have been hired for a two-year engagement to act on behalf of the state.

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