Alaska talks tough on concessions

Juneau: Alaska could revoke leases for oil fields like Prudhoe Bay if top energy companies refuse to participate in a government natural gas pipe-line plan, Governor Sarah Palin said.

ExxonMobil Corp, BP Plc and ConocoPhillips together control more than 35 trillion cubic feet of known gas reserves on the Alaska North Slope.

But the companies declined to participate in a process backed by Palin to jump-start a long-delayed gas pipeline, arguing they needed a long-term tax deal from the state first.

Palin called the refusal "unconstitutional".

"When the conditions of these leases are not met, especially after decades, it is time to open them up and allow other companies to come in here and compete for the right to tap the resources," the Republican governor said.

The companies have said they are interested in dev-eloping the reserves, with ConocoPhillips studying a separate plan.

Palin's tough talk has the backing of many Alaskans, who are suspicious of the influence of the oil companies, as well as Democrats in the state legislature.

But cancelling the leases at Prudhoe Bay and other ageing North Slope fields would provoke a legal fire-storm, Democratic state Senator Hollis French acknowledged.

"If it's a court fight, or no gas line, I'll take the court fight," said French.

However, many members of her own party worry Palin's aggressive approach is alienating the producers, who will have to agree to long-term pipeline shipping deals if the $30 billion to $40 billion project is to secure financing.

Declining oil output is putting increasing pressure on Alaska to get its gas reserves into production to stave off a looming fiscal crisis.

Budget challenge

Officials believe the state budget could fall into a significant deficit by 2012, even if oil prices remain near current high levels. The most optimistic scen-arios for the gas pipeline put it in service by late 2018.

Alaska already moved to cancel the lease of the undeveloped North Slope gas and condensate field at Point Thomson, operated by ExxonMobil, in December 2006 and Palin believes the cancellation should act as a wake-up call to the majors. "We are saying, if you don't want to develop, if it is not economic according to your parameters, if Alaska's gas reserves are going to compete with your other projects around the world, if you can't abide by the provisions in the lease you signed up to 30 years ago, its time to let the lease go and bring in some competition," Palin said.

State courts have backed Alaska's move to cancel the Point Thomson leases and a March 6 deadline has been set to work out a compromise.

Exxon announced late on Tuesday that a new $1.3 billion development plan for Point Thomson that would have early condensate production begin by 2014, meeting a key state demand. "ExxonMobil remains committed to developing its North Slope gas resource and continues to evaluate its options for pursuing an Alaska gas pipe-line project," spokeswoman Margaret Ross said.

ConocoPhillips spokes-man Charlie Rowton stressed that his company was still advancing its own pipeline proposal.

No one from BP was available to comment.