newsminer.com

Exxon Mobil might have sounded like a willing pipeline partner in recent months, publicly committing to ship its North Slope gas down a TransCanada or producer-owned pipeline.

But the company offered a caveat then -- it would need “commercially reasonable” terms -- and on Thursday, a top executive suggested what those terms might be.

Exxon’s U.S. joint interest manager, Marty Massey, said his company would want to own a chunk of the pipeline, for one.

“Our requirement is we need to own equal to our throughput,” he said. (If Exxon commits 40 percent of the gas, it wants to own 40 percent of the line.)

Exxon would also want more certainty on fiscal terms. Massey didn’t say whether the current gas production tax rate was OK, or how long he would want it locked in, but said the 10-year statutory lock-in offered in AGIA didn’t offer “any fiscal predictability.” (It’s not contractual.)

Massey surprised me (and I think others) in the boldness of his demands. At one point, he spoke from the perspective of a pipeline builder -- he said Exxon would aim for an 80-20 debt-equity ratio -- despite not being involved at this point in any pipeline project.

At another, he recommended going back to open negotiations -- What are your needs? What are my needs? Can we find creative solutions? Massey suggested things like royalty-in-kind and tax-in-kind (a relic from the SGDA contract) should be back on the table.

Sen. Hollis French, D-Anchorage, responded that he at least wasn’t ready to give more than lawmakers agreed to give last year under AGIA.

“At least from my perspective, that’s sort of our last, best offer,” he said. “If that’s not enough, I think we need to know before we get to open season.”

Massey acknowledged there would be a “hurdle to overcome” if the other producers also wanted to own a share in TransCanada’s line equal to their throughput (TransCanada would end up with nothing) and argued that alignment between the state and producers was critical for making a gas line go.

But he didn’t offer a specific recommendation on the AGIA vote, and said Exxon was still trying to figure out which project -- TransCanada under AGIA or Denali outside it -- was more likely to lead to alignment among parties and, ultimately, a successful project.

“The question . . . is does AGIA help align the parties to achieve a successful project?” he said. “. . . I don’t think we have the answer today to know which way to go.”

Somewhat more predictably, Massey also said the state should back Exxon’s current Point Thomson project and approve its plan of development. He added that Point Thomson gas was critical for a pipeline project, and that Exxon’s plan was the fastest way to make it available.