December 05, 2007
Wednesday AM

A major Midwest energy company cites Alaska's political corruption scandal for its unexpected decision not to submit a natural gas pipeline application.

In a recent letter to Gov. Sarah Palin, the chief executive of MidAmerican Energy Holdings Co. suggests that criminal investigations, performance lapses by one major North Slope oil producer and other factors stand in the way of a gas line.

"As you are painfully aware the ongoing corruption investigations coupled with previous indictments, guilty pleas and convictions draw into question virtually every major Alaskan project participant and governmental levels from State to Federal," says the letter from MidAmerican CEO David Sokol. "Obviously your administration had no involvement in these previous shenanigans nor did we; however, you and we alone cannot develop the pipeline project through AGIA's expected process."

MidAmerican was expected to be among the companies applying by Friday's deadline for a package of financial and other pipeline incentives under Palin's Alaska Gasline Inducement Act.

Palin is the latest in a string of governors to try to spur construction of a multibillion-dollar gas line.

Such a project would be a tax and jobs boon to Alaska, but the cost and risk of laying pipe as far as Chicago have for decades sidelined the project. Three oil companies, BP, Conoco Phillips and Exxon Mobil, hold the rights to most of the Slope's enormous gas reserves.

The state received five pipeline bids, plus a proposal from Conoco that didn't meet minimum application requirements.

The bids came amid a federal investigation that has resulted in criminal charges against four former state legislators, two of whom have been convicted of taking bribes from executives of oil field services firm Veco Corp. who were trying to influence last year's debate on raising oil taxes. Other state and federal lawmakers have been named but not charged in the probe.

State taxation rates factor heavily into political efforts to encourage either the oil companies or an independent pipeline company to build a gas line.

In his letter, Sokol said that while gas demand makes a pipeline costing up to $30 billion a compelling project, MidAmerican declined to bid due to problems in Alaska.

Aside from ongoing criminal investigations, Sokol cites the "performance issues" of one major oil company -- an apparent reference to BP, which last week pleaded guilty in Anchorage to a federal environmental crime for allowing oil to spill last year from a neglected pipeline in the giant Prudhoe Bay oil field.

Sokol also mentions a legal battle in which the state is trying to take away leases in the rich Point Thomson oil and gas field for lack of development by Exxon and others.

MidAmerican, based in Des Moines, Iowa, is a subsidiary of billionaire investor Warren Buffett's Berkshire Hathaway Inc. MidAmerican runs gas and electric power utilities, and says its pipelines carried about 8 percent of the natural gas consumed in the United States in 2006.

This isn't the first time Sokol has pointedly withdrawn from Alaska's stumble-prone gas pipeline derby.

In 2004, after Palin's predecessor, former Gov. Frank Murkowski, refused to grant MidAmerican exclusive rights for five years to pursue a gas line, Sokol openly criticized Murkowski and declared his company was withdrawing from negotiations.

"On one hand your leadership and that of your administration has been outstanding and your integrity and transparent style are a breath of fresh air in what has proven to be a rather shady and smoke filled past in regard to energy issues in Alaska," Sokol wrote Palin.

"On the other hand the deepening and ongoing investigations into political and corporate corruption in Alaska make a thorough and thoughtful proposal in compliance with AGIA an unrealistic exercise for our organization. For a project of this magnitude to proceed, integrity must be the foundation upon which all project elements are based."

Sokol suggested the Alaska and U.S. governments will need to team with "a proven and nonconflicted project development partner" to deliver Alaska gas to the nation.

The five pipeline bids received came from TransCanada Corp., Chinese energy giant Sinopec, a little-known California firm called AEnergia, the Alaska Gasline Port Authority and the Alaska Natural Gas Development Authority.

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