Alaska officials have held opening discussions with several New York investment banking firms about funding construction of a major pipeline to transport North Slope natural gas to U.S. continental markets, according to the office of state Gov. Frank Murkowski.

Alaska Department of Revenue officials met with Merrill Lynch, Goldman Sachs, UBS Financial Services, J.P. Morgan, CitiGroup and First Southwest last week, said a press statement issued Tuesday. Follow-up meetings were scheduled with the financial institutions, and talks with other investment banking firms will take place throughout the summer, it noted.

There was “substantial interest” on the part of the financial institutions in exploring financing for the long-line pipeline system, Murkowski’s office said. “It is important to examine all options available to the state…how we capitalize the transportation systems will impact Alaskans and the U.S. energy future for the next 50 years.”

“The size and complexity of the project may require multiple firms to participate in any financing package,” the statement noted, adding that eventual financing could include fixed and variable rate, and taxable and tax-exempt series.

The Alaska pipeline project, which was first envisioned in the late 1970s, has elicited support from a few companies in recent months. Canada’s Enbridge Inc. has expressed interest in building the 750-mile in-state portion of the Alaska Highway Pipeline Project from Prudhoe Bay to the Alaska/Yukon border (see Daily GPI, April 2). Canadian transporter TransCanada PipeLines Ltd. indicated earlier this month that it was trying to build a coalition that would have the political and financial clout to revive the dormant Alaska pipeline project (see Daily GPI, May 3). And Alaska producers BP, ConocoPhillips and ExxonMobil have long had their eye on building an Alaska line.

In addition, a group led by Berkshire Hathaway’s MidAmerican Energy Holdings Co. sought favorable tax treatment from the state in January to build the Alaska portion of the pipeline, but it backed out two months later when Alaska purportedly failed to meet its terms (see Daily GPI, March 26).

What’s holding up construction of the pipeline? For one, it would be a massive undertaking. Experts estimate it would cost anywhere from $10 billion to $20 billion to build. It also would take as much as a decade to construct, causing some — particularly Alaska producers — to worry about whether natural gas prices will be at a sufficient level 10 years from now to justify the cost of the mammoth project.

The energy bill in Congress supports the construction of an Alaskan pipeline, and would offer the eventual builder or builders a loan guarantee for 80% of the construction costs of the line. But the legislation has been stuck in the Senate for months, and many are pessimistic that an energy bill will emerge from Congress this year.

While analysts generally support an Alaska pipeline to bridge a looming U.S. gas supply gap in the years ahead, they don’t believe actual planning and construction will start until there is more clarity and certainty on the incentives such as tax breaks and loan guarantees contained in the stalled energy bill, The Wall Street Journal reported.

The Alaska pipeline would deliver 4.5 Bcf/d of gas from the North Slope of Alaska to the Lower 48 states. It’s estimated that the North Slope holds recoverable reserves of up to 38 Tcf, and potential resources averaging 63.5 Tcf.

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