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Alaska lawmakers take issue with energy regulators' report

JUNEAU, Alaska - The prospects of Alaska getting a multibillion dollar natural gas pipeline built could hinge on the success of Gov. Sarah Palin's "fresh competitive approach," according to a report released this week by federal energy regulators.

But the report to Congress noted that the state has worked without success to get a pipeline plan in place and warns that the "schedule for an Alaska gas pipeline has slipped considerably."

The Federal Energy Regulatory Commission warning comes on the heels of Palin's pledge to soon disclose a plan that encourages an open, competitive process that would maximize the state's natural gas resources.

"Any reference to timeline slippage is simply not true," said Marty Rutherford, acting commissioner for the Department of Natural Resources.

"The governor has embarked on a new course to ensure that a viable contract, and hence an application, can be approved," she said. "There is absolutely no indication a timeline has slipped."

No one can argue that Palin isn't trying a different tack than her predecessor to get the pipeline built.

Last year, former Gov. Frank Murkowski struck an agreement with BP PLC, Exxon Mobil Corp. and ConocoPhillips to build a $25 billion pipeline from the North Slope through Canada and into the Midwest.

The line would ultimately have delivered 4.5 billion cubic feet of natural gas a day, which is about 7 percent of the current U.S. demand.

But lawmakers felt the deal gave too many considerations to the big firms, including locking in tax rates for several decades, and provided few key assurances for the state. No vote was ever taken on that before Murkowski left office in December.

And Murkowski's standing took a beating as the Legislature and public scorned him for secret dealings with the three big oil companies.

Palin promised a different approach and allowed everyone a seat at the table.

The day after she took office, she reopened negotiations with any group or company interested in delivering 35 trillion cubic feet of proved natural gas reserves in the North Slope. Twelve groups took her up on the offer.

Palin is expected to soon deliver her new proposal to the Legislature.

Even so, FERC's critical report says the prospects for a pipeline are "more remote than last year."

The report is the third by FERC, which reviews the state's progress every 180 days. In its conclusion, the agency offered this assessment:

"The federal government is ready to act. However, no pipeline application has been developed, and the prospects of an application are more remote than a year ago. Over the past year, the schedule for an Alaska gas pipeline has slipped considerably."

Lawmakers and Palin's energy team disagree, saying the report lacks some rationale.

Since Murkowski's proposed contract was never brought for a vote in either legislative chamber, the federal agency should not presume so much ground has been lost, lawmakers said.

Murkowski's plan my have failed or simply run out of time, but it did provide the necessary foundation moving forward, Rep. Beth Kerttula, D-Juneau, said.

Sen. Gene Therriault, R-North Pole, added, "There is serious concern of whether we would have ever gotten to closure and if we had whether the agreement itself would have resulted in a pipeline being built."

Kerttula said lawmakers are acting with a sense of urgency while awaiting Palin's proposal.

But FERC's report states that the pipeline's future still faces one clear hurdle.

"The main obstacle to progress on an Alaskan gas pipeline is the failure to resolve state issues necessary before a project sponsor will commit to go forward," the report said.

Rutherford said the governor's energy team and consultants understand the stakes.

"This needs to be done as expeditiously as possible for two reasons," Rutherford said. "It's in the best interest of Alaska and the best interest of the nation.

"We are much further ahead than the report suggests. The governor sees this as a critical component to our nation's energy strategy."

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