The trio of producers hoping to develop a pipeline to deliver Alaska natural gas to Canada and the Lower 48 could very well be negotiating the deal with a new governor since Gov. Frank Murkowski was soundly defeated in his bid for re-election in the state’s Republican primary Tuesday.

However, Murkowski vowed Wednesday to push forward with his contract for the fiscal terms of the mammoth $20 billion-plus project, what he calls “the only game in town.” Unless Murkowski can nail down a final deal with producers and the legislature before he leaves office Dec. 4, his successor will pick up the gasline torch. And that could mean big changes in the way producers and their gasline plans are handled by the state.

BP, ExxonMobil and ConocoPhillips, which had negotiated a controversial draft contract outlining financial and ownership terms of the gasline with Murkowski (see Daily GPI, Aug. 7), would be sitting across the table next year from either Republican nominee Sarah Palin or Democratic nominee Tony Knowles if they want to continue negotiating with the state. Other producers could join negotiations and other options could be considered as well.

Murkowski said Monday he will call lawmakers back for another special session for gasline contract-related legislation. Whether the lame duck governor is able to preserve at least 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 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 Daily GPI, 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 Daily GPI, Dec. 21, 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 Daily GPI, June 1). 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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