White House officials and US legislators will meet with producers and pipeline companies next month to review regulatory obstacles that could delay or postpone a new arctic gas pipe- line, according to industry officials.
David Welch, BP PLC's president of Alaska-Canada gas, said in an interview that he expected the meeting to occur in early February.
Welch made the comments following a presentation on the pipeline at a North American energy conference at the Center for Strategic and International Studies.
Last month Sen. Frank Murkowski (R-Alas.) said he plans to host a stakeholders' meeting in Washington in late January to see where negotiations stand between pipeline companies and producers. Alaska Gov. Tony Knowles (D) was invited, he said (OGJ Online, Dec. 13, 2001).
A pending Senate energy bill includes an Alaskan gas pipeline proposal by Jeff Bingaman (D-NM), Committee on Energy and Natural Resources chairman.
The Democratic bill would provide federal loan guarantees of as much as $10 billion for an Alaska gas pipeline, provided the applications for permitting certificates are filed within 6 months after the bill is passed. Democrats do not endorse a specific route but call for expedited federal review if a pipeline application is filed.
Welch said that, under current economic conditions, the pipeline, which could cost $15-20 billion to build, will have a difficult time attracting capital. A more detailed picture will develop next month when the large North Slope producers-BP, ExxonMobil Corp., and Phillips Petroleum Co.-review a $100 million business plan for the project, Welch said.
Welch added that the producers still feel the project "should stand alone on its own economic merits, and we are not asking for incentives." However, he did not rule out accepting some kind of federal involvement if the Canadian or US governments want to step in.
"We are not going to be arrogant either," Welch said. If specific tax breaks are offered, he said, producers plan to factor any tax breaks into the projected cost of the line, with some risk weighted in the calculation in case the tax measures are rescinded.
Welch also downplayed the controversy over the route of the pipeline. BP is neutral regarding the route, he said. Company officials predict that wherever the line is built, it could take 8-10 years to plan and build and have a 50-year life of service.
The Alaskan government and the US House of Representatives are on record as favoring a more expensive southern route paralleling the oil pipeline to Fairbanks and then the Alaska Highway to British Columbia. Canadians favor a northern route from Prudhoe Bay field east across the Arctic Ocean to the Mackenzie Delta, and then south along the Mackenzie Valley. Welch also said plans by Canadian producers to proceed with their own pipeline from the Mackenzie Delta will not compromise plans for a line to move North Slope gas (see related stories, pp. 64, 67).
"For this to happen, all the parties will have to agree on at least one point," he said. "It's my personal belief that we can come to agreement and get this line built."
At the same meeting, Asst. Energy Sec. Vicky Bailey said the Bush administration supports a gas pipeline and would encourage expedited permitting. The administration has not endorsed the use of loan guarantees or tax incentives to encourage construction.
Bailey dismissed suggestions from some industry consultants that an Arctic gas line is not needed because too many pipelines are being considered for the US market.
"In my mind we're not there yet [on overbuilding]. It's a matter of getting infrastructure in place to get supplies available," she said, adding that the regulatory process takes a long time and market conditions could likely change again, making the line more attractive.
