Anchorage (Platts)--9Jul2009

Governor Sarah Palin's departure as Alaska's governor later this month,
announced by her late last week, is likely to smooth relations between the
state and the petroleum industry but is not likely to shift the state's
policies on a natural gas pipeline and oil and gas taxes in the near term,
industry officials and legislators in Alaska said in interviews this week.

State Senator Bert Stedman, a Republican from Sitka, said the low-key
style of incoming Lieutenant Governor Sean Parnell, who will take Palin's
place, will make a big difference in relations with the industry as well as
the state legislature.

"There'll be a huge change in management style," Stedman said.

State Senator Bill Wielechowski, a Democrat from Anchorage who supports
Palin's gas pipeline and tax initiatives, said he expects Parnell will
continue along the path laid out by Palin.

"We now have every major producer in Alaska involved in building a
pipeline in some way. We're where we are because of the course the governor
has taken. I certainly don't think we'd have the competition we have without
that," Wielechowski said.

Stedman agreed, saying: "I would be surprised if there's any substantial
deviation in course from the Palin administration but I would expect [Parnell]
to be much more interested in the detail of what the legislation is when it is
written and in the interaction of the policy calls when that stuff is
created."

"He's going to be, from the management perspective, much easier to deal
with. As far as I know he has a lot better background than she does and he's
more interested in policy and policy details," Stedman said.

Industry officials are cautious.

"We'll know soon where he stands on industry issues. We knew where he was
a few years ago, but we don't know now," said Paul Laird, executive director
of the Alaska Support Industry Alliance, a petroleum contractor trade
association.

PALIN STAFF TO REMAIN

In a statement to local newspapers, Parnell said he intends to keep
Palin's administration intact, including the commissioners of natural
resources and revenue, who are in charge of petroleum tax and gas pipeline
issues.

Parnell is an attorney who previously practiced commercial law but also
has industry experience, having worked as deputy director of the state
Division of Oil and Gas for a period and then as a lobbyist for ConocoPhillips
before deciding to run for lieutenant governor. While in the Division of Oil
and Gas, Parnell was part of a state team negotiating with TransCanada in a
previous effort to get a gas pipeline built.

Last year, while lieutenant governor, Parnell ran for Alaska's lone seat
in the US House of Representatives, narrowing losing to Don Young, who has
held the seat for two decades.

But as a chief executive, Parnell is an unknown quantity for Alaskans,
said Judy Brady, a former state natural resources commissioner and director of
the Alaska Oil and Gas Association, an industry trade group. Little is known,
Brady said, of Parnell's stands on issues other than that he is a conservative
on fiscal and social issues.

"With most people in public office, you have a sense of their strengths
and weaknesses, but with Sean we don't. We know him as a really nice guy, but
that's all," she said.

Former state tax director Dan Dickinson said he thinks Parnell will move
soon to put his own imprint on gas pipeline and oil policy if he intends to
seek his own term as governor in a year and a half. Brady is not sure this
will happen, however, because Parnell has not been known to push aggressive
policy initiatives before.

Palin's policies have come under increasing criticism in Alaska,
particularly a decision last spring to turn down $28 million in federal
stimulus funds for energy projects. The state Legislature may overturn that
decision.

Palin's major oil and gas initiatives include the granting of a state
license, and financial incentives, to TransCanada in return for the company's
agreement to a set of state requirements on a natural gas pipeline under the
Alaska Gasline Inducement Act.

The terms mainly cover rolled-in tariffs on pipeline expansions and an
agreement to a set debt-equity ratio in financing that will be financially
advantageous to the state.

One issue Parnell will have to take on is a request from North Slope
producers for special state fiscal terms to feed the pipeline. These producers
include ExxonMobil, which recently joined TransCanada in its pipeline
initiative.

BP and ConocoPhillips, the other two big slope producers, have launched
their own Denali pipeline consortium, and also will request special fiscal
terms on gas production.

--Tim Bradner, newsdesk@platts.com