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Alaska Producers Submit Proposal to Build North Slope Gas Pipeline

Alaska Producers Submit Proposal to Build North Slope Gas Pipeline

Alaska Gov. Frank Murkowski said Thursday that the state has received a proposal from Alaska's three top natural gas producers -- BP, ConocoPhillips and ExxonMobil -- to build a long-line gas pipeline from the prolific North Slope region to the Lower 48 states.

"The producers came back with a comprehensive, joint response to the state's proposal on Wednesday. We are particularly encouraged that their response was unified among the three producers," said Murkowski at a press briefing in Anchorage. He called it the "first-ever concrete, unified gasline proposal" from the producers.

The specific terms of the producers' response are confidential, according to a statement from the governor's office. But a negotiated contract would become public once it is submitted to the Alaska Legislature. The state expects to negotiate the specific terms of a Stranded Gas contract for Murkowski to present to the Legislature for ratification and approval in the upcoming legislative session.

The producers have presented a "comprehensive fiscal proposal" to Alaska for consideration, said Dave MacDowell, a spokesman for BP Alaska. "We're actively engaged in state fiscal negotiations," and "continue to make progress," he told NGI. MacDowell declined to discuss any of the aspects of the producers' proposal.

The pipeline project would add roughly 1,800 miles of pipe to already existing infrastructure for delivery of 4.5 Bcf/d of natural gas to U.S. markets in the West and Midwest. The overall length of the system, including the already constructed southern segments, would be about 3,500 miles. It's estimated that it would be 10 years before gas flows on an Alaska pipeline.

The three producers have been negotiating with Alaska for approximately one year over the mega-gas pipeline, which potentially would be the largest private construction project every undertaken in the United States. The cost of the project has been pegged at $20 billion.

The North Slope has up to 35 Tcf of known gas reserves, with potential resources of about 250 Tcf of natural gas, or enough to support all of the United States' current gas needs by itself for more than a decade, said a 2002 study by the American Gas Association.

The pipeline project has been more than 30 years in the making. It received a shot in the arm when lawmakers slipped an $18 billion loan guarantee and other authorizations for the pipeline into last-minute major appropriations and tax measures in October, which President Bush signed. A key measure authorized the Department of Energy to enter into agreements with builders of the long-line gas system to provide loan guarantees for up to 80% of the total capital costs of construction, to be capped at $18 billion.

Murkowski on Thursday said the state also was "pleased" with the progress being made in its negotiations with TransCanada Corp., which has filed a right-of-way and Stranded Gas Act application to build the Alaska pipeline.

"TransCanada has prepared a very responsible proposal which we expect to present to the Legislature this session" as well, he said. "We will have a lot of tough negotiating to do. But we are committed to negotiating a contract that is in the interest of the state and putting it before the Legislature this session."

Murkowski noted that to date only the state's three gas producers and TransCanada are in negotiations with Alaska's Stranded Gas team.

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