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Governor Gives Details of Gas Pipeline Negotiations
To Joint Session of Legislature
Asks for Support for Fiscal Solution as "Bridge Financing"

February 05, 2004
Thursday - 1:00 am

Juneau - At the invitation of the President of the Senate and the Speaker of the House, Governor Frank Murkowski spoke Wednesday to a joint session of the Alaska Legislature, laying out his administration's efforts to negotiate acceptable draft contracts with two sponsor groups interested in building a pipeline to transport North Slope natural gas to markets in the Lower 48.

Murkowski listed five important considerations which any gas pipeline contract would have to attain:

  • Open access to the pipeline for other companies that may discover gas on the North Slope;
  • Alaskan participation through the opportunity to invest in the pipeline;
  • Access to the pipeline to allow a spur line to Anchorage, Valdez, and/or Kenai;
  • Access to the gas in the pipeline at Fairbanks; and
  • Protection for impacted communities and boroughs through which the pipeline will be built.

Murkowski used another chart to illustrate the five components that will be necessary for the sponsor group or groups to get to a "build/no-build" decision.

"Simply put, this matrix requires an acceptable wellhead price; state fiscal terms and conditions; a determination of the cost to construct and operate; the federal fiscal terms and conditions; and the market price for the gas," Murkowski said. "Each of these factors must be decided favorably before the decision to build will be made."

The Stranded Gas Development Act (SGDA) allows the state and the sponsor group to negotiate fiscal terms, such as taxes and royalty adjustments, as well as other terms, such as Alaska hire, gas off-take points from the gas pipeline, and access.

The state's negotiating team is led by Commissioner of Revenue Bill Corbus, Commissioner of Natural Resources Tom Irwin, and Attorney General Gregg Renkes.

They will be supported by staff from Revenue, Law, and DNR. The state is currently in a pre-negotiation phase with both sponsor groups that have applied under the SGDA, and expects to enter formal negotiations within 30 days. Murkowski said he would ideally like to have a draft contract to the Legislature for its consideration before it adjourns in May, but acknowledged that would be a tight timeline, and may take longer. The Legislature may approve or disapprove the contract, but may not amend it.

Murkowski also strongly urged the members of the Legislature to work with him to resolve the fiscal gap to provide funding for essential public services until new revenue from resource projects, such as the gas pipeline, starts flowing to the treasury after 2011. Using a chart to illustrate expected revenue sources, the Governor said the state expects significant revenue from new resource development beginning with about $539 million in 2011 and $959 million in 2012.

"We need a bridge between our immediate fiscal situation and the time when economic development generates new revenue for the state," Murkowski said. "We must be able to maintain essential public services in the meantime."

Murkowski said that, assuming the Conference of Alaskans proposes using a portion of the income of the Permanent Fund to maintain essential state services, the Legislature will bear the responsibility of putting it on the November ballot.

Murkowski told the Legislature, "Let's put politics aside and work together on this. It is our collective obligation to seek a solution now, so that Alaska can maintain essential public services like education, public health, public safety, and transportation prior to the gasline coming on line. Those who oppose using a portion of the Permanent Fund income to pay for essential public services have a responsibility of stepping forward with an alternative solution that Alaskans will accept.

"This time there is no dodging the fiscal bullet," he said. "I want to make it very clear that we must have a solution this session. Anything less would be abrogating our sworn oaths."



Source of News Release:

Office of the Governor
Web Site


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