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Alaska astir over plan to tap its big 'tank' of natural gas

The terms of a proposal to develop and ship North Slope gas have Alaskans up in arms.

By Yereth RosenCorrespondent of The Christian Science Monitor / September 20, 2006



ANCHORAGE, ALASKA

When Gov. Frank Murkowski announced last spring he had struck a deal with three major oil companies on terms for building a huge natural-gas pipeline to the Midwest, he said it would fulfill Alaska's decades-long dream of commercializing the North Slope's vast natural-gas resources.

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"This is the greatest opportunity that has ever come by any of us to anchor in the economy of this state for the next 50 years," he said at a news conference, one of many he's held to rally support around the plan.

But now Alaska gas-pipeline politics has exploded.

Governor Murkowski was dumped from his job, finishing with 19 percent and in third place in the Aug. 22 Republican gubernatorial primary. Terms of his gas-pipeline contract led many voters to scorn the deal and the governor who proposed it.

Soon after the primary, FBI agents swarmed the offices of at least six state lawmakers, seizing papers and other evidence in a criminal probe related to oil and gas policy. Among those targeted is state Senate President Ben Stevens, son of Ted Stevens, Alaska's powerful US senator. The criminal investigation, according to search warrants issued for lawmakers' offices, appears to focus on possible oil-industry payouts for passage of the governor's gas deal and an oil-tax overhaul that is connected to it. In addition to the six lawmakers whose offices were searched, several others were interviewed by the FBI.

No charges have been filed.

Adding to the public's sour mood is the partial shutdown in August of the huge Prudhoe Bay oil field – stemming from pipeline leaks that BP Exploration (Alaska) Inc. is supposed to prevent. All together, the events are causing Alaskans to reevaluate their relationship to the oil companies that have long dominated the state's economy and politics.

Alaskans may be pro-development, but they seem fed up with what they perceive to be corporate control of their state, says Jim Sampson, president of the AFL-CIO of Alaska. "There's been a push-back here," he said at an AFL-CIO state convention Aug. 24, where delegates wore buttons demanding: "Show us the JOBS."

A lot of gas up there

Natural-gas potential has long been the subject of high hopes and crushed dreams in Alaska, a state heavily dependent on production from its dwindling oil reserves.

Within the oil fields on state-owned land on the North Slope, there are about 35 trillion cubic feet of proven natural-gas reserves – the nation's largest known but untapped conventional supply – that have been languishing since they were discovered decades ago. Geologists believe two to three times as much could be discovered if companies bothered exploring for natural gas rather than for oil.

Lack of a way to transport the gas has kept it stranded on the North Slope. There, 8 billion cubic feet a day – enough to supply California's or Great Britain's daily needs – is pumped up, in conjunction with the oil production, and then reinjected into the reservoir for storage and to build pressure to assist in future oil recovery.

Detailed plans to build a gas-pipeline system date back to the 1970s. They never moved off the drawing board because of prohibitive costs.

High energy prices and an impending shortage of natural gas have finally made the huge project feasible, according to state officials.

But even as Murkowski touted his gas-pipeline deal as a milestone achievement in state history, critics saw it as a sweetheart deal for the three major oil producers: BP, Exxon Mobil, and ConocoPhillips.

All three major gubernatorial candidates – Tony Knowles (D), Sarah Palin (R), and former state lawmaker Andrew Halcro, an independent – are critics of the Murkowski deal, with Mr. Knowles and Ms. Palin promising to solicit entirely new proposals.

Within Murkowski's draft contract are controversial provisions that would:

•Freeze oil and gas tax rates for decades, forbidding the imposition of any new taxes on the three oil companies' Alaska operations, either by the legislature or by citizen initiative. "That's impossible. It's not constitutional, and it's wrong for Alaska," says Knowles.

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