As part of the continuing struggle to find a way to finance the proposal $20 billion Alaskan gas pipeline, officials of the consortium that hopes to built it will meet face to face today for the first time with representatives of the oil companies that own the gas.
The meeting will take place in the office' of energy Secretary Charles Duncan, who is trying to get the two sides to agree on a private financing plan without resort to federal Iran guarantees
Last month Duncan asked the gas producers -- Exxon, Arco and Sohio -- to comment on a proposal drafted by DOE's special counsel on pipeline financing Martin Lipton, that called for direct federal involvement in management of the pipeline during construction on exchange for such loan guarantees.
The producers were hardly enthusiastic and later, after meeting with Duncan, Sen. Henry Jackson (D-Wash.) and Sen. Ted Stevens (R-Alaska) issued a press release saying they had been assured the DOE doesn't favor any federal financial involvement.
The problem is that the gas pipeline companies in the Northwest consortium, headed by John McMillian, do not have the resources to finance construction themselves. Assistance is needed either from the oil companies, which under the 1977 law cannot have an ownership or management role in the finished pipeline, or federal guarantees.
So far, the oil companies have not sought removal of those restrictions, but have made proposals that generally assumed some sort of federal guarantees, too. "The company attitude seems to be, if they are going to finance the thing, who needs McMillian and his companies," explained one source close to the negotiations.
The oil companies have an estimated 26 trillion cubic feet of gas in the Prudhoe Bay oil field. Gas produced along with the oil is being reinjected into the producing formations, a process experts say cannot continue indefinitely.
Meanwhile, the construction schedule for the pipeline keeps slipping. Most recently the consortium had hoped to have detailed engineering and cost estimates ready by the end of June, something several officials now believe is impossible even if the oil companies agree to provide a large part of the $500 million needed to complete that job.