Alaska Gov. Frank H. Murkowski told a legislative committee that he supports the state taking an equity position in the construction of a massive natural gas pipeline from the North Slope to the Lower 48 states. He also said Alaska’s three natural gas producers back the state having an equity stake in the line.

“Whether we are talking about an independently operated gas line or a producer-built and operated gas line, it has become clear to me that the most likely path for starting construction soon will require the state to take an ownership position in the project and bear a certain amount of shippers’ risk,” he said during a hearing earlier this month before the Alaska Legislature’s Legislative Budget & Audit Committee.

The governor called on state lawmakers to express their views on Alaska owning part of the proposed gas pipeline. “I do not want our administration’s team to spend months negotiating a contract with equity and shippers risks…only to have you suggest to me that this concept is a complete non-starter,” he said.

This issue has been thrust into the spotlight, given that President Bush earlier in the month approved legislation that provides an $18 billion federal loan guarantee and authorizations for the mega-gas pipeline from Alaska (see NGI, Oct. 18). The president on Friday also passed tax incentives for the Alaska line, along with other energy tax initiatives.

A similar response by Alaska during the construction of the trans-Alaska Oil Pipeline could have resulted in billions more for state coffers, Murkowski noted. “We may have missed the boat when the trans-Alaska Pipeline was built, and we have stood on the sidelines for nearly 30 years watching a lot of revenue flow to those who were willing to take the risk.”

Pedro van Muers, the state’s natural gas project consultant, told the panel that every other nation that has sought to ship its stranded gas to market has adopted some form of equity share or shippers risk.

Without the state of Alaska’s investment, there is a good chance the oil and gas producers won’t build the pipeline, sources told The Wall Street Journal in last Monday’s edition.

Murkowski said negotiations with interested parties have progressed to a point that the state must now address the issue of how much risk it is willing to consider in a pipeline project that is estimated to cost between $14 billion and $20 billion.

Alaska administration officials currently are negotiating with the state’s three major oil and gas producers (ExxonMobil Corp., BP and ConocoPhillips), as well as TransCanada Corp. over separate proposals to complete the construction of a 3,500-mile pipeline from the North Slope to the Lower 48.

Murkowski met with officials of the producer companies last week in Texas, during which he said they expressed support for Alaska taking an equity position in the proposed pipeline. The state has set a target date of Oct. 28 to submit a proposal to the producers, he noted. The producers indicated they would try to respond within one week.

As for the next step, Murkowski said the state’s Stranded Gas team and the producers would work together to develop a final proposal to submit to the state legislature early in the coming session. If state lawmakers adopt the plan, it would set the stage for an expenditure in the range of $1 billion for engineering, planning and permitting for the Alaska gas line, he noted.

Murkowski said he also discussed the Alaska pipeline with President Bush at a recent GOP rally in Las Vegas, NV. The president said he looked forward to signing bills so that the project could advance, he noted.

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