April 2009 Vol. 236 No. 4

Editor's Notebook

Editor's Notebook: Alaska Pipeline--2010 The Year To Watch

This month I’m marking my 25th anniversary in the Energy Capital of the world.

Of course, the first thought I had was that if I can last another 25 years I might actually live (and work) to see that Alaskan natural gas pipeline built.

Why, you may wonder, am I so hopeful?

First, I’m an optimist by nature. Second, at our Pipeline Opportunities Conference March 11 we had several key players who insisted that things are headed in the right direction. Third, the project is backed by President Obama. Fourth – and this may be the most important factor – on March 18, Gov. Palin told reporters that she was willing to discuss the issue of tax abatements with the producers

I doubt Gov. Palin really wanted to make such an announcement but there is growing uneasiness among many that she’s been too eager to take credit for something that is a long, long way from completion. She is up for re-election in 2010, and apparently is no shoo-in. Indeed, if there is no deal in 2010 and TransCanada’s open season fails, so do her political aspirations.

What prompted the timing of the governor’s announcement is the upcoming publication of a critical article in Portfolio magazine entitled “Pipe Dreams,” leading off with “Forget ‘Drill, Baby, drill’.”

The article by famed journalist Joe McGinness states, “Sarah Palin says she’s building a $40 billion gas pipeline, which even President Obama wants. The only problem: it isn’t there. And it’s her fault.”

There is nothing new in the article. McGinness points out that Palin has tried to hardball the producers who own the gas – ConocoPhillips, BP and ExxonMobil – by setting up conditions that they could never accept. ConocoPhillips and BP set up their own company competing with TransCanada for the rights to build the pipeline, minus the $500M seed money TransCanada is to receive in its bid under the Alaskan Gas Inducement Act. Even Hal Kvisle, the astute CEO of TransCanada, is squirming uncomfortably without a deal with the producers. As he said about an Alaskan pipeline, “nothing goes ahead until Exxon is happy.”

So at her news conference, Palin said she has always planned to negotiate long-term taxes on the gas produced with the oil companies. That came as a surprise to state legislators, even her fellow Republicans.

It’s a touchy issue, one which cost former Gov. Frank Murkowski the 2006 election to Palin, whose populist stance against Big Oil swept her into office and likely into becoming John McCain’s running mate.

“The difference this go-around with gas rates that we’ll be discussing with lawmakers is this is going to be done of course with the doors open, in the light of day, with public hearings. Politicians’ votes are not going to be purchased this go-around,” Palin said.

The truth is that Palin has to get the producers on board – and fast – in order to keep the project on track. She has made her bet with TransCanada, a company the producers have openly said they did not prefer to deal with. Without a deal in place for TransCanada’s open season, Palin’s opponents will savage her for wasting $500M and using the pipeline as a political ploy.

This story is far from finished.

The other day as I watched the furor over the AIG bonuses, I had to stifle a chuckle. Back in 1994 – actually on Dec. 6, 1994 – I was interviewed for the position of Oil Editor with a prominent business news service. One of the questions dealt with derivatives. I had practically no idea what the term meant, so I wrote down anything that my creative mind could conjure up. They thought my answer was so good that they offered me the job which I turned even though I was subsisting on contract work.

Ah, but just the thought of those million-dollar bonuses makes me wonder “what if?”