BP, COP won't participate in Alaska governor's pipeline proposal

Juneau, Alaska (Platts)--1May2007

BP and ConocoPhillips, two of the three major producers on Alaska's North
Slope, say they will not submit proposals for an Alaska natural gas pipeline
under Governor Sarah Palin's proposed Alaska Gasline Inducement Act.

BP also said it will not be able to sign a capacity agreement to
transport gas with an independent pipeline licensed under Palin's bill. The
third major producer, ExxonMobil, is expected to take a similar position later
Tuesday in a presentation to a state legislative committee considering the
governor's bill.

Palin's bill calls for proposals to build a pipeline and for the state to
pick the winning project by next January. Brian Wenzel, ConocoPhillips' vice
president for North Slope gas development, said Monday that his company's
concerns include lack of flexibility for applicants, rigid deadlines, and
requirements that a license holder accept even a conditional US Federal
Energy Regulatory Commission certificate.

"But for us, the heart of the issue is the inadequate resource terms" on
upstream tax and royalty issues, Wenzel said. "That prevents ConocoPhillips
from participating in AGIA," he told the Senate Finance Committee in Juneau.

In testimoney to the committee on Saturday, Dave Van Tuyl, BP's Alaska
gas commercialization manager, said his company "won't be able to submit a bid
that conforms to the requirements of AGIA. I also want to be very clear about
the implications the current version of AGIA holds for BP participating in an
open season," he added.

"As currently drafted, BP will not be able to make a firm transportation
agreement to the licensed project under AGIA in an initial open season," he
said, "because BP believes the terms of AGIA put unreasonable commercial risk
on initial shippers."

The producers' positions are a blow to Palin's hopes that at least one
major owner of North Slope gas reserves will participate in the pipeline. It
also has raised fears among legislators that the pool of qualified applicants
will be narrowed to one or two independent companies. "Our big worry is that
we could wind up with only one qualified proposal and no idea as to who will
show up with gas during an open season," said state House Majority Leader
Ralph Samuels. "That could put us in a very difficult situation because the
license could be tied up for as long as 11 years and, under damages provision
in the governor's legislation the state could be liable for up to $1 billion
in penalty if it tries to get out of a bad deal," he added.