Talks on Alaska Pipeline Suspended, Expected to Resume Early 2006

Despite plans to hammer out a deal before the holidays, negotiations on the fiscal terms of an agreement to build a $20 billion gas pipeline to the Lower 48 states from Alaska's North Slope were suspended on Friday, but Alaska Gov. Frank Murkowski said the parties are not at an impasse and should resume discussions early next year.

The three major producers, ConocoPhillips, ExxonMobil and BP, want to complete negotiations on long-term tax and royalty issues before they agree to the next phase of planning the pipeline. ConocoPhillips already has agreed to some base fiscal terms for a deal with the state.

"Many of the key contract terms have been agreed on in principle," Murkowski said. "We have come to terms on the numbers; that basically means the cash.

"We are at what I would call a defining moment," the governor added. "All of the parties have reached agreement on fiscal terms that are very positive for the state. But there are other critical issues on the table that, for the state, are nonnegotiable."

He said among the items that are nonnegotiable are terms that would allow exploration by other companies on the assets in question, open access to the gas pipeline, and equal treatment for all North Slope participants, investors and explorers.

ConocoPhillips and the state announced in October that they had reached a contract agreement that includes the provisions the state is asking of ExxonMobil and BP. ConocoPhillips was the only producer represented at Murkowski's Friday news conference in Anchorage. Joe Marushack, vice president for ConocoPhillips' North Slope gas development unit, said the break in negotiations will allow participants to take a fresh look at the issues. "ConocoPhillips is committed to moving this project forward," he said. "We're anxious to finalize our contract with the state."

Murkowski expressed confidence that the other producers would come back and hammer out a deal quickly. "I am confident that BP and ExxonMobil will come back to the state after the holidays with satisfactory resolution to the items we have presented to them," Murkowski said. "I have invited the CEO's of the three companies to Juneau in early 2006.

"I have received the commitment from the CEO's of BP and ExxonMobil to resolve these negotiations expeditiously, and I look forward to their conclusion. The Alaska gas pipeline is about Alaska's future, but it is also critical to the nation. Alaska is America's pipeline to energy independence."

When the negotiations are completed, the deal will go through a public comment period and then will have to be approved by the legislature.

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