Alaska OKs Bill For Gas Pipeline Bidding

Reps. Kevin Meyer, R-Anchorage, right, and Mike Chenault, R-Nikiski, left, co-chairs of the House Finance Committee, listen to testimony by Department of Revenue Commissioner Pat Galvin on the Alaska Gasline Inducement Act in Juneau, Alaska, Thursday, May 10, 2007.
Snubbing major oil companies, both houses of the Alaska Legislature on Friday approved a bill outlining the process under which companies will vie for the right to build a multibillion dollar natural gas project.

The bill, called the Alaska Gasline Inducement Act or AGIA, will now go to a committee to work out differences in versions passed by the Senate and House.

Under AGIA, producers and independent pipeline companies can vie for rights to build the pipeline that lawmakers hope will ship trillions of cubic feet of North Slope natural gas to market.

The bill is designed to stimulate competition through inducements, but also stipulates requirements, the administration calls "must haves."

However, BP PLC, Exxon Mobil Corp. and ConocoPhillips had warned they would not submit a bid unless stringent requirements were removed.

Palin held firm, saying this week if lawmakers watered down her bill, she'd veto it.

"This bill represents the direction the new governor wants to take in moving a natural gas pipeline forward," said Rep. Mike Chenault, who served as co-chair of the House Finance Committee.

Lawmakers understand the next move belongs to oil and pipeline companies and whether they will submit a proposal.

"There is risk in the project," said Sen. Charlie Huggins. "It is a risk worth taking."

Palin has long warned that the state and the nation can't afford to let those supplies — estimated at about 35 trillion cubic feet on the North Slope — sit untapped any longer.

The bill continues to put distance between Palin's ideas and a failed attempt to negotiate a deal with the North Slope producers by former Gov. Frank Murkowski.

Murkowski reached an agreement in principle with BP PLC, Exxon Mobil Corp. and ConocoPhillips on fiscal terms for producing North Slope gas.

It did not guarantee a pipeline would get built, but the hope was it would enable producers to move forward with a pipeline from the North Slope through Canada and into the Midwest.

The line would ultimately have delivered 4.5 billion cubic feet of natural gas a day, which is about 7 percent of the current U.S. demand.

But state lawmakers felt the deal gave too many considerations to the big firms, including locking in tax rates for several decades. The Legislature never voted on the deal.

The multibillion dollar pipeline has implications for North America's long-term energy supply for heating homes and businesses. It also is considered to be a potential boon to the state's economy, not unlike that of Prudhoe Bay's oil production at its peak.