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Fight Looms over Alaska's Natural Gas Reserves

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Fight Looms over Alaska's Natural Gas Reserves

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Fight Looms over Alaska's Natural Gas Reserves

Fight Looms over Alaska's Natural Gas Reserves

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Alaska's large untapped natural gas reserves may soon be in high demand. But state and local officials can't agree on a plan for access. The state wants to work with big producers to build a pipeline. As Sarah Neal of member station KUAC reports, local officials say the pipeline will take too long to build.

SCOTT SIMON, host:

This is WEEKEND EDITION from NPR News. I'm Scott Simon.

Coming up, a story for Christmas Eve.

But first, natural gas prices across the country are soaring, and Alaska Governor Frank Murkowski says that tapping his state's huge reserves can help. He's trying to convince energy companies to build a gas line from Prudhoe Bay to Chicago. But a growing number of Alaskans, including members of Mr. Murkowski's own Cabinet, contend that he's bargaining away too much of the state's future. And as Sarah Neal reports from KUAC in Fairbanks, Alaska, the political bickering has seriously jeopardized the project.

SARAH NEAL reporting:

Alaska's governor, Frank Murkowski, says he's a third of the way to a natural gas pipeline contract that will benefit the nation. He signed one of three natural gas lease holders, ConocoPhillips, and is now working on the other two. He says he's doing this for the country as well as the state. And, he says, he has support from President Bush.

Governor FRANK MURKOWSKI (Republican, Alaska): We had a little opportunity to talk a little bit about the gas line. He asked me how it was coming. I said, well, we so far reached an accord with ConocoPhillips and we're still working with BP and Exxon, and his general comment was if it was good enough for ConocoPhillips it ought to be good enough for the other two, and I said amen.

NEAL: But Murkowski's race to a contract may be interrupted. A memo written by Murkowski's handpicked Department of Natural Resources commissioner, Tom Irwin, suggested the governor's negotiations are breaking the law by offering tax breaks to the energy companies. Murkowski was outraged and Irwin was fired because, Murkowski says, Irwin just wasn't being a team player.

Gov. MURKOWSKI: You know, a governor's Cabinet team is kind of called together to achieve a goal and an objective. Within my Cabinet team it's my job to be more or less a quarterback and to make the policy calls that I believe are in the best interests of our state of Alaska.

NEAL: But in the memo, Irwin questioned those policy calls. Irwin believes Alaska law prohibits tax breaks to energy companies when natural gas prices are high, as they are today. Irwin is not giving interviews, but wrote a letter to the public saying Murkowski is, quote, "surrendering billions of dollars in revenue that we are entitled to receive," unquote. Economist Greg Erickson is well-known in Alaska for his knowledge of both the state budget and the oil industry. Erickson says Irwin's point is that today's high natural gas prices make the project economic for the energy companies without the financial incentives and that the state would order those companies to produce or lose their leases.

Mr. GREG ERICKSON (Economist): I think there's a good argument the state would be successful. You know, how you measure success, though, may be an issue here because suppose you're successful in court and 10 years from now you get your leases back, you still don't have a gas pipeline, which is probably the objective that everybody wants before that.

NEAL: Erickson adds it's possible both sides are right. Murkowski's tax breaks might be both illegal and the fastest way to get an Alaska gas line. But industry analyst and editorial page editor for the Anchorage Daily News Larry Persily says the debate may now be irrelevant. Persily says Murkowski's lost support in the state Legislature, which he needs to approve the deal.

Mr. LARRY PERSILY (Anchorage Daily News): Murkowski's put them in a bad position. Even if it's a good deal, many of the public and many of the critics will portray it as a bad deal, so do you vote to get a gas line and get criticized for a giveaway, or do you vote against the giveaway but get criticized for not building a gas line? He's put many of them in the classic no-win situation and they are not happy about it.

NEAL: Persily predicts the Legislature will vote the deal down. Such a vote would leave the state looking for another way to get its nearly 40 trillion cubic feet of natural gas out of the ground. That would be good news for a competing gas line group, the Alaska Gasline Port Authority. This public group represents a number of municipalities around the state, including Fairbanks and the port of Valdez. They want the state to build and operate the pipeline itself without the energy companies, and they would like to see the governor's plan fail. To that end, this week the group sued two of three energy companies the governor is negotiating with. The suit claims BP and Exxon are sitting on Alaska's huge natural gas reserves, refusing to bring it to market.

For NPR News, in Fairbanks, I'm Sarah Neal.

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