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Official: Alaska eyeing equity stake in pipeline

November 18, 2013

JUNEAU, Alaska (AP) — An Alaska official said Monday the state is looking at taking a multibillion-dollar equity stake in a major natural gas pipeline project as a way to protect its interests and help make the long-hoped-for project a reality.

Natural Resources Commissioner Joe Balash said Gov. Sean Parnell’s administration views a potential equity stake of 20 percent to 30 percent favorably. But he said any level of participation would depend on legislative buy-in and the terms the companies pursuing the project are willing to accept.

Assuming the project costs $45 billion — a figure at the lower end of the range previously announced by the companies — the state would be looking at $9 billion to $13.5 billion for such a stake.

Balash said he’s hoping that range narrows significantly over time as the idea gets more scrutiny.

The option stems from a report commissioned by the state to see how Alaska could protect its royalty interest and ensure it receives the maximum value possible for its natural gas.

The North Slope’s three major players — Exxon Mobil Corp., BP and ConocoPhillips — are working with TransCanada Corp. to advance a liquefied natural gas project that would be capable of overseas exports.

The proposed line would run 800 miles (1,300 kilometers) from the slope to south-central Alaska and could cost from $45 billion to more than $65 billion, according to company estimates. The companies haven’t committed to building it and have repeatedly said they needed competitive, predictable and durable terms on oil and gas taxes and royalties.

Alaskans have long dreamed of a gas line as a way to create jobs, provide energy for residents and shore up revenues as oil production declines. While there have been fits and starts over the years, state officials believe the current project has momentum, and Balash said it’s reaching the point where the state needs to start making decisions about its terms.

Black & Veatch Corp., in its report for the state, found that changes to Alaska’s royalty and tax structure and to the project’s cost structure could improve the economics of the project and make it more competitive. Balash said the project economics seem “fairly good overall,” though he said levels of government take might be a little high and company returns a bit short of what they might expect in other places.

The state has already committed up to $500 million to TransCanada for reimbursable costs associated with advancing a project, and Parnell has said the state is willing to make commensurate, proportional steps with the companies to keep the project on track.