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Alaska governor wants to buy stake in oil pipeline
Anchorage Daily News


January 25, 2006
Wednesday AM

ANCHORAGE, Alaska - Gov. Frank Murkowski has been saying for months that the state should own a piece of the proposed natural gas pipeline.

Now he's touting another idea: buying a share of the 800-mile trans-Alaska oil pipeline.

It's a concept state political leaders have kicked around since before oil starting sliding down the nation's most famous pipeline in 1977.

Even though the pipe is nearly 30 years old, and Prudhoe Bay and other North Slope oil fields are wearing out after pumping more than 15 billion barrels, it still could be a smart move for the state to buy into the line, Murkowski said.




The governor mentioned the idea in his State of the Budget speech Jan. 12 and again at a meeting of oil industry contractors last Friday.

Murkowski and his aides say an ownership stake could save the state millions of dollars in payments to ship the state's share of North Slope oil through the pipeline, and it could end chronic legal fights between the state and the pipeline owners over pipeline transportation rates, which have a big bearing on how much oil revenue the state collects.

In the governor's view, "it makes good business sense" to evaluate a pipeline purchase, although he said the work won't begin in earnest until after state negotiators finish work toward a tax contract for possible construction of a $20 billion gas pipeline to carry the North Slope's prodigious gas reserves as far as the Midwest.

But buying into the oil pipeline presents difficulties.

First, one of the five oil companies that own the line would have to agree to sell. The state also would have to figure out where to get the money to make the purchase, and owning the pipeline could conflict with the state's role as a pipeline regulator.

Mike Menge, the state's natural resources commissioner, said no decision has been made on how big a share the state would pursue, or whether to use the state's recent budget surpluses or some other funding source to pay for it.

Murkowski, however, mentioned that the state might seek a pipeline piece equal to the state's share of oil pumped from beneath state-owned tundra. This royalty oil amounts to 12.5 percent of total North Slope production.

The pipeline, though aging, still has a lot of life left, the governor said. In 2002, regulators approved new 30-year right-of-way agreements for the pipeline across state and federal lands. And if a gas pipeline is ever built, that could spark a rush of exploratory drilling and new finds of oil to keep the pipeline busy, he said.

The pipeline currently carries close to 900,000 barrels of oil per day, about half what it once did but still about one-eighth of total U.S. production.

Chuck Logsdon, a Murkowski aide and the state's former chief oil economist, said the state pays about $230 million a year to have its oil shipped down the pipeline.

"If we owned the pipeline, we wouldn't save that entire amount," Logsdon said. That's because, as an owner, the state would have a share in the costs of operating the pipeline, he said.

But most likely, state ownership would result in substantial savings - plus a share of the pipeline's profits.

"How much we could save, that's going to take some analysis," Logsdon said.


Distributed to subscribers by Scripps-McClatchy Western Service,

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