Anchorage Daily News - Parnell Eyeing Ways to Further Advance Gas Line

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By Becky Bohrer

Alaska Gov. Sean Parnell said Thursday that an all-encompassing fiscal package for a major natural gas pipeline project won't happen next year.

The governor said earlier this year that the 2013 Legislature could take up gas tax legislation if TransCanada Corp. and the North Slope's major players - Exxon Mobil Corp., BP and ConocoPhillips - met a number of milestones in 2012. All of those benchmarks have been met, including cost estimates and a rough timeline for a potential project.

But in an interview with The Associated Press on Thursday, Parnell said there wouldn't be an overall fiscal package unless the companies were ready to make a final investment decision on the project, which is estimated to cost between $45 billion and more than $65 billion.

The companies have said that such a decision is at least a few years away and would require such things as a competitive oil tax regime from the state and predictable and "durable" fiscal terms for the liquefied natural gas project.

Oil and gas are taxed together under Alaska's current system. Parnell said it's possible that legislators next year could take up a first phase of gas tax legislation, which could involve separating oil and gas production for tax purposes but not setting a new gas tax rate.

The governor said his focus during the upcoming session will be on increasing oil production, which he considers a nearer-term issue and critical for the state. Parnell has so far been unsuccessful in getting an oil-tax cut through the Legislature.

"If we have healthy oil production and a healthy oil industry, we can get a gas line," he said.

The two issues are linked, because oil and gas come from the same well, he said.

Parnell wasn't sure whether he would set new benchmarks for progress on a gas line. He has said his first series of benchmarks came from frustration with the lack of progress on a line.

The goal is to ensure that the companies continue investing in the gas line project, he said, adding that the state would take "commensurate and proportionate" steps to do the same.

The early stages of the companies' timeline calls for investments of tens of millions of dollars during the concept selection phase, which involves looking at project specifics and potential routes, and building to hundreds of millions in the next phase and eventually billions.

Parnell said the state has already "put at risk" up to $500 million in reimbursable costs under the Alaska Gasline Inducement Act, the law meant to advance a gas line project.

"When the producers have put that much at risk in what they're doing, then we'll talk about, what are the next steps," he said.

The AGIA contract is only between the state and TransCanada - and doesn't involve the three producers, a fact the governor readily acknowledged.

Parnell, who recently returned from a trip to Japan and South Korea to promote Alaska natural gas, said he will continue to push the companies, with the end goal being commercialization of North Slope gas. But he said it will take time for the companies to complete a project of this size.

The companies have said the project will be "of unprecedented scale and challenge."

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