FERC issues natural-gas pipeline rules

DAWN De BUSK/Frontiersman reporter

The voices of some Alaska lawmakers - demanding that the state benefit financially and maintain some power over a proposed natural-gas pipeline - have apparently been heard by federal regulators, who last week issued rules that should ensure fairness in competition for capacity when the 3,500-mile pipeline is built.

BP, ConocoPhillips Co. and Exxon Mobil Corp., the North Slope's major oil producers, want to construct the pipeline through Canada to Chicago. The companies recently delivered to the state a proposal to construct that pipeline.

Others favor an all-Alaska route that would funnel natural gas from the North Slope to Valdez, with a spur to Mat-Su through Glennallen.

The FERC rules establish requirements governing the conduct of open seasons for capacity on proposals for Alaska natural-gas pipeline projects, and fulfill the FERC's obligation, required by Congress, to create rules within 120 days of the Oct. 13, 2004 enactment of the Alaska Natural Gas Pipeline Act.

Open season refers to the time before pipeline construction commences when gas producers or consumers interested in using the line for transporting gas can bid for space in the pipe.

The rules also promote competition in the exploration, development and production of Alaskan natural gas, and provide opportunities for the transportation of natural gas from sources other than Prudhoe Bay or Point Thomson if the open seasons exceed the initial capacity of a pipeline project, according to the FERC's Web site.

And, the rules will require prospective applicants to use the results of an Alaska state gas study to design capacity needs for use within the state, and design in-state delivery points and in-state transportation rates as part of the open season. Bidding on in-state capacity must be done independent of out-of-state deliveries during a prospective applicant's open season, the Web site stated.

"[The Federal Energy Regulatory Commission] largely agreed with the provisions sought by the Alaskan congressional delegation and the state," U.S. Sen. Lisa Murkowski, R-Alaska, said in a press release. "My initial reaction is that the commission tried hard to meet Alaska's need to have gas available for in-state use, to have a pipeline designed so that a spur line to tidewater is possible, and to guarantee that everyone who explores for gas can get their gas to market. That is vital for Alaska's full gas potential to be fulfilled."

Gov. Frank Murkowski also enthusiastically welcomed FERC's rules, which he said followed his testimony during the commission's technical conference, held Dec. 3 in Anchorage.

"My administration sought assistance from federal regulators in getting the pipeline project underway as soon as possible, making sure the project serves Alaska's domestic needs and making sure it includes the proper access terms that allow explorers and pipeline owners to get their gas to markets," the governor said in a press release last week. "It appears that FERC has taken to heart our suggestions and it looks like the final rules are very favorable to Alaska."

Rep. Vic Kohring, R-District 14, said completion of negotiation of contracts between the state and oil industry could last several months.

"They are time-consuming," Kohring said. "The ball is in the court of the state."

Jim Sykes, a Palmer resident and recent Green Party candidate for the U.S. Senate, favors the all-Alaska route for a natural-gas pipeline.

"Up until five years ago, there was no need for (natural) gas on the West Coast," he said.

Sykes said the March issue of Alaska Business Monthly published a chart comparing the two possible pipeline routes.

"It's the senators' and representatives' responsibility to make sure Alaska will benefit from a natural-gas pipeline," Sykes said during a town meeting in Butte last weekend.

He said any negotiations should include provisions to promote hiring Alaskans, allow the state to receive royalties, provide the state with profits beyond transportation costs, prevent the market from being flooded and make natural gas accessible to state residents, not just as an export.

The final FERC rules will take effect 90 days after they are published in the "Federal Register."