Alaska Gov. Frank Murkowski, soundly defeated in his state’s Republican primary last week, said he will call the Legislature into special session one more time, possibly next month, in an attempt to turn his dream of commercializing Alaska natural gas from pipe dream to reality before he leaves office.

Regardless how far Murkowski gets, the trio of producers hoping to develop a pipeline to deliver Alaska natural gas to Canada and the Lower 48 will be working a long time with many others after Murkowski is gone from office.

Murkowski’s administration is revising some terms of his draft fiscal contract with BP plc, ExxonMobil and ConocoPhillips so it can be put before the Legislature again. The contract is not an agreement to build the pipeline, but it spells out the fiscal and ownership terms. While some have said it is too generous to the oil companies, Murkowski calls the deal “the only game in town,” but there have been a number of sticking points. For instance, the state would take a partial ownership in the pipeline and would accept royalties from the producers in kind rather than in value, putting Alaska in the gas marketing business. Many have objected to this and other provisions of the deal (see NGI, June 5).

Murkowski will leave office Dec. 4 and both his potential Democratic and Republican successors have said they would do things differently where negotiations for the $20 billion-plus gas pipeline negotiations are concerned. Generally, each has said he/she would consider other options and partners for commercializing North Slope gas.

BP, ExxonMobil and ConocoPhillips will be working with either Republican nominee Sarah Palin or Democratic nominee Tony Knowles. Other producers could join negotiations and other options could be considered as well. For now, though, the producers are sticking with the plans they have established with Murkowski.

“We continue to work with the administration on changes to the proposed gas pipeline fiscal contract, following the public comment period,” said Ken Konrad, BP Alaska vice president for gas, in a statement to the media. “We anticipate there will be a special session this fall to review the contract. This project will span decades. We will have to work with many governments and governors, and we would like to get started as soon as possible.”

An ExxonMobil spokeswoman told NGI last week that the company is still on board with the draft fiscal contract.

“ConocoPhillips’ interest in progressing the Alaska Natural Gas Pipeline is unchanged and we look forward to working with whoever is the new governor and his/her administration to make it a reality,” the company said in a statement.

Whether the lame duck governor is able to preserve something of his gas pipeline work will depend on his statesmanship. Harold Heinze, a former oil company executive and head of a state agency to promote gasline development, told the Anchorage Daily News: “If he becomes a statesman, backs the nominee and finds some common ground, the odds would greatly increase that they could work something out with the [oil] companies. If that doesn’t happen, then it’s a big mess.”

Palin, former mayor of the small town of Wasilla, defeated Murkowski in a three-way race with Fairbanks businessman John Binkley. Murkowski came in last and said he is endorsing Palin in the general election. Earlier in her career, Murkowski appointed Palin to the Alaska Oil and Gas Conservation Commission.

Knowles has served as Alaska’s governor for two terms and is eligible to serve again because of the break following his second term. In the primary, he handily beat state Rep. Eric Croft (D-Anchorage). Croft has been a strong critic of Murkowski and his dealings with producers and was behind a failed attempt to tax producers on reserves that remain undeveloped (see NGI, June 26).

Palin and Knowles both hold commercialization of Alaska’s vast natural gas reserves as a priority. But producers can look forward to an attitude different from Murkowski’s from the next governor.

Knowles spokeswoman Patty Ginsburg told NGI that the pipeline is unfinished business in the Democratic candidate’s view and that all proposals for commercializing Alaska’s gas have not been fully examined. “He [Knowles] would keep talking to the producers but would also want to look at the proposals from others, and there have been several interested parties out there.”

For instance, the proposal known as the “All-Alaska Gasline,” promoted by the Alaska Gasline Port Authority (AGPA), would include an LNG liquefaction plant at Valdez (see NGI, Dec. 26, 2005). Ginsburg said that while the All-Alaska proposal has been panned by some consultants, it still hasn’t gotten a fair review. Additionally, she said, Warren Buffett’s MidAmerican Energy approached the state about a pipeline a few years ago “and left kind of disgusted.” TransCanada also has expressed an interest in developing a gasline.

“What we need to do and what Tony wants to campaign on is not toss it [the Murkowski work] out, but continue talking to the producers…”

Remarks by Palin indicate she sees more work to be done on gasline negotiations.

“It’ll [the gas pipeline will] be a matter of working with the legislature to get the best project now,” Reuters quoted Palin as saying. “Not just allowing Exxon, British Petroleum and ConocoPhillips to tell us how our resources will be developed.”

Knowles also has strongly criticized Murkowski and his draft gasline contract for being soft on producers (see NGI, June 5). He told reporters that a change in the governor’s office will help to get the pipeline unstuck.

The general election is Nov. 7.

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