Alaska Gas Issues Ziff Energy Pacific Northwest Gas Strategies October 2, 2001 Roger Marks State of Alaska Department of Revenue

1
Alaska Gas IssuesZiff EnergyPacific
Northwest Gas StrategiesOctober 2, 2001Roger
MarksState of Alaska Department of Revenue
2
ALASKA
NORTH SLOPE
Kenai
3
The Prudhoe Bay Reservoir
BP
Arco/Exxon
Gas Cap
Oil Rim
4
Intrinsic Economics

• Transportation chews up gas value
• Geography generally puts Alaska near back of the
  line
• Need for big project
• Big project big risk

5
Options for Stranded North Slope Gas

• LNG to Asia
• Gas-to-Liquids through TAPS
• Long pipeline to the Lower 48

6
What has Changed

• High gas prices in Lower 48
• Reduced oil losses to aging reservoir
• Re-alignment of interests at Prudhoe Bay

7
Prudhoe Bay
Mackenzie Delta
Fairbanks
Alberta
Chicago
8
ANGTA

• 1976 - Authorizes government to select route and
  entity to build ANGTS
• Canada - Northern Pipeline Act
• Expedited processes and limited judicial review
• 1977 - Alaska Northwest Partnership proposal
  selected - ALCAN route - (Now Foothills)
• Exclusivity questioned now

9
The 4 Billion Meatball

• Preconstruction costs incurred over 20 years ago
  have been accumulating with interest
• Some portion may be part of tariff
• May be less

10
Federal Legislation

• Re-affirm ANGTS route
• Expedited processes
• Tax incentives
• Priority for American Canadian steel
• Alaska Native, Alaskan, and union hire
• Access to gas and pipeline capacity

11
Access to Capacity

• Parties who may have gas in the future but do not
  have gas now want assurances of access to
  capacity
• Similarly, incentives for gas exploration and
  leasing are reduced
• However, risk of overbuilding

12
Fiscal Issues

• Fiscal contract
• RIK commitments
• Transparent valuation based on realization
• Common value for taxes and royalties
• Agreement on tariffs
• Binding arbitration

13
Policy Council / Joint Legislative Committee

• Fiscal issues
• State ownership
• Environment
• Value-added industries
• In-state demand
• Alaska hire and training

14
Conclusion

• To be continued