Did Alaska Gov. Sean Parnell channel his predecessor, Sarah Palin, Thursday? He did, after all, use a sports metaphor to break down complicated stuff: his effort to unite the state's big three oil companies around the idea of building a long-sought, multi-billion-dollar natural gas pipeline down the middle of Alaska.
Like many Americans, Parnell watched football on Jan. 2. And the lesson he learned was simple: You need players on the field who can get the job done. So Parnell called together the chief executives of some of the world's most powerful companies for an unusual high-level meeting in his downtown Anchorage office.
During that meeting, he encouraged Exxon Mobil Corp., BP, and ConocoPhillips to work together to consider the feasibility of a pipeline hundreds of miles long to deliver natural gas from the North Slope to Southcentral Alaska. There, perhaps in Valdez, Nikiski, or at Port Mackenzie in the Matanuska-Susitna Borough, a facility could be built to super-chill the gas, turn it into a liquid, and ship it in tankers to growing markets in countries like Japan, India and elsewhere in Asia.
As Parnell and the companies see it, all this would happen under the Alaska Gasline Inducement Act, which includes a $500 million state subsidy to help jump-start the massive project. For more than two years, pipeline builder TransCanada Corp. and Exxon Mobil have worked under that act, spending about $200 million to plan a gasline from the North Slope to Alberta, Canada, that would deliver gas to the Lower 48.
But in late October, Parnell switched gears and announced that a pipeline to deliver gas to the Lower 48 was no longer a good idea. Noting that the contiguous U.S. would be awash in natural gas because of new shale-extraction technology, he said he wanted to see the state's Big Three oil producers work together on a line that takes Alaska's gas west across the Pacific.
Route to Lower 48 not competitive
That's what Thursday's meeting -- followed by an invitation-only luncheon involving the CEOs, the governor and Alaska's movers and shakers -- was about. The issue's a massive one for Alaska, because oil production from the North Slope is dwindling, and the state needs another long-term resource revenue stream to replace it. Alaskans have tried to build a gasline since the 1970s, but proposal after proposal has failed -- in part because of the project's enormous costs. Because the North Slope is home to the largest conventional gas resource in North America, a pipeline could produce vast amounts of gas for decades.
But despite the issue's importance, media weren't invited to the governor's meeting or the luncheon, which was thrown by Exxon Mobil or all the oil companies, depending on which company you asked. It was billed as a meet-and-greet but included a speech from the governor and the three top oil chieftains, Rex Tillerson of Exxon Mobil, Bob Dudley of BP and Jim Mulva of ConocoPhillips, audience members said.
Some of the players that might be part of this team spoke with the media after the luncheon, and they seemed sincere about their interest in getting Alaska gas to market. They said the meeting with Parnell was productive, and that the three oil companies would try to work together as a team, studying the feasibility of selling liquefied Alaska gas in Asia and, at Parnell's request, creating timelines for such a project this year.
There was no opportunity for the media to speak with Tillerson, even though that company is considered the star player on "Team Parnell." Exxon Mobil owns the lease rights to most of the gas on the North Slope.
Surrounded by microphones and recorders, Jim Mulva, CEO of ConocoPhillips, echoed Parnell's comments about recent developments in global supply and demand. He called the Asian market the best option for Alaska's natural gas.
"It's certainly far better than the alternative of taking gas in the form of a pipeline to the Lower 48 states. That's just not going to be competitive," Mulva said.
But what about plans by some companies to build liquefaction plants on the West Coast and ship Lower 48 gas to Asia. How can Alaska compete with them if a pipeline is ultimately constructed, say, 10 years from now?
"We have to get our cost-structure right, get our technology right, get the infrastructure right. On the other hand, we see that natural gas is a superior product, not the bridge fuel, but a superior fuel for decades to come. And the Asian Pacific really needs it from a climate change point of view, from a cost point of view, from every perspective we can see."
Bob Dudley, chief executive at BP, said the Asian gasline option has "real potential" to become reality, but the companies must work together to study the feasibility of the project.
"Given what's happening with shale gas in the Lower 48 and the high price in Asia, it looks like that's the most economical option," he said.
'Normal part of business'
Exxon Mobil sent an email through a public affairs official who often stood outside the luncheon.
"The parties are in early discussions," wrote David Eglinton, Exxon Mobil's upstream media relations manager.
The company is considering both pipeline routes.
"On the table is an LNG export option and a pipeline option through Canada," he wrote.
And that was the end of Exxon Mobil's general response.
Why the tightly controlled access to the meeting? For example, event organizers shooed away members of the press looking at name badges that were handed out to scores of guests. The sponsors of the event didn't want media to see who was attending, one lady said.
"It's a normal part of business for senior management to meet with community leaders," wrote Eglinton. "We find it more conducive for discussions to take place in the absence of cameras and microphones."
Eglington said all three oil companies threw the luncheon. But Steve Rinehart, BP spokesman, said it was Exxon Mobil's event.
Oil taxes part of the deal?
Looming behind these new discussions is a session of the Alaska Legislature that's set to begin in less than two weeks, where a primary task will be considering Parnell's bill to cut oil taxes -- potentially by billions of dollars -- in the coming years.
He hopes to spur new development in Alaska's oil fields, but opponents say it's not needed and will cost Alaska too much.
Must legislators pass that tax break before this gasline can happen? Parnell was asked after the luncheon.
"That linkage was not made," said Parnell, speaking with a gaggle of reporters.
He said he let the oil companies know that he intended to continue fighting for his oil-production tax cut. But he said he put the effort in a broader context, noting that his effort to build remote roads to potential developments and his efforts to lower taxes and exploration costs are all part of a larger plan to create jobs in Alaska.
Oil companies "want to make progress, and I want to make progress for Alaskans," he said.
Rep. Charisse Millett, R-Anchorage, was an invited guest. She was upbeat as she left the luncheon.
Inside, each of the CEOs had said their companies needed stable tax schemes they could rely on, including for natural gas production. But it was nothing they hadn't said before, she said.
"They want fiscal certainty on oil and gas and they want to know the state's not going to change the rates as we've been doing for the last five years," she said.
She called the meeting with Parnell and the luncheon with Alaska business leaders and lawmakers "incredibly optimistic." It is "monumental" to see the oil companies talking about rallying behind a project to market natural gas.
Thursday was the first time these three oil executives had all met with a governor, Parnell said. Such a gathering sends a "strong signal" that the companies "are serious about getting alignment on commercializing Alaska's gas," he said.
Canada line still viable?
Of course, huge obstacles remain.
Legal issues involving Exxon Mobil, BP and the state of Alaska must be resolved before production begins at one of the major gas fields, Point Thomson. That hasn't happened. Parnell said he considers that field and Prudhoe Bay to be essential to an LNG line.
Discussions are under way to resolve that issue, BP's Dudley said.
And the fact remains that none of the three oil companies have ever committed to shipping their natural gas down a TransCanada Corp. line, if such a line is ever built.
TransCanada's open season started a year and a half ago, seeking such commitments for either the Canadian or LNG line. No buyers stepped forward, said Tony Palmer, vice president of Major Projects Development for TransCanada.
A line can't be built if there's nothing to ship in it, he said.
Still, the Canadian gas line company has moved ahead. It's ready to submit draft resource reports with the Federal Energy Regulatory Commission for the line to Canada, and it's planning to make its final filing for that line to FERC in October. The company still thinks the Alberta line is viable.
But TransCanada will switch gears and study the LNG option if that's what the state and the oil companies want, Palmer said.
"If there is alignment with the producers to go a different way, we'll have to have a discussion with the state about realigning (TransCanada's plans)," said Palmer.
TransCanada wasn't part of the meetings with the governor, but would still be on Team Parnell because it's the AGIA licensee.
But as important as regulatory approval, TransCanada needs the oil companies to agree to ship their natural gas down a line, he said. Without all three agreeing to do so, a TransCanada line may not happen.
It's been repeated, ad nauseum, in Alaska that the "best and fastest way to bring a line to fruition" is to have agreement from the Big Three companies.
But even with all three working together, it likely won't happen until at least 2020, Palmer said.
Contact Alex DeMarban at alex(at)alaskadispatch.com