The Federal Energy Regulatory Commission (FERC) yesterday issued a proposed ruling which would provide a financial boost to the proposed $12 billion Alaskan natural gas pipeline.
The decision would require the oil companies selling natural gas from the Prudhoe Bay fields to pay the estimated $2.1 billion cost of processing the gas before it is shipped through the proposed 4,800 mile pipeline to the lower 48 states.
"The selling producers should have the responsibility of production related costs," the FERC said in a brief statement.
Major oil companies operating on the North Slope, including Atlantic Richfield, Exxon, British Petroleum and Standard Oil Co. of Ohio, had argued that the cost of treating the gas after it is produced should be borne by the consortium that is seeking financing to construct the pipeline.
FERC Commissioner DonSmith issued the proposed rule which said that the cost of treating the gas has been estimated at 30 cents or more per thousand cubic feet. Under the Natural Gas Policy Act of 1978, Alaskan gas sold to the pipeline operators could not exceed $1.45 per thousand cubic feet, adjusted for inflation. Even under the terms of the FERC decision, which awaits public comment and more consideration by the five-member commission, the producers can expect to earn billions of dollars if they are able to sell the estimated 24 trillion cubic feet of gas on the North Slope.
Helen Burke, a spokeswoman for Northwest Alaskan Pipeline Co. said yesterday that the FERC decision "is favorable, in that it would not increase the overall cost of the pipeline."
Northwest Pipeline, however, only has been able to attract five pipeline companies to join its consortium, and has several regulatory hurdles to clear before it can win unequivocal support for private financing for the project.
Two weeks ago, Energy Secretary James R. Schlesinger, told Congress that the government may have to provide $2 to $3 billion in federal loan guarantees to get the project moving. Schlesinger and President Carter both have argued publicly that national interest is served best by high-cost Alaskan gas rather than importing Mexican natural gas, or gas from other foreign sources.