OPEN LETTER TO GOV. MURKOWSKI

Bill Walker, Co-Chairman
Gov. Wally Hickel, Co-chairman
Backbone
Anchorage, AK
Dec. 22, 2003

Governor Frank Murkowski
VIA FAX: 1-907-465-3532
State of Alaska
P. O. Box 11001
Mail Stop 00001
Juneau, AK 99811-0001

Dear Governor Murkowski,

As we agreed during our meeting with you on October 22, 2003, we would all wait to see what would happen with the Energy Bill until we drew further conclusions on gasline development options for Alaska. In our view, it is questionable if an Energy Bill will pass at all in an election year, and it is certainly clear that price support provisions will not be made available to a trans-Canada pipeline project. Accordingly, at least two of the major North Slope producers (Exxon and ConocoPhillips) have announced that the project is uneconomic and they are not interested in pursuing it.

We appreciate the even-handed approach to supporting both a Canadian and an All-Alaskan project in your recent speeches and we publicly recognized this in our latest Backbone II Bulletin. However, we still feel it would be important for us to hear your views on the specific issues we raised with you in our letter following up on our meeting with you.

In addition, we would have the following question for you. At our most recent meeting, we discussed the possibility of one or more of the producers filing an application under the Stranded Gas Act. After their public statements at the highest level declaring that the project would not go forward without price floor guarantees, and their similar statements following the failure to include these provisions in the Energy Bill, and most importantly, their statements to Senator Domenici that even if they received the price guarantees, they would not commit to building the project, how can you possibly take their application seriously?

The worst possible outcome would be if an application was used to further delay the expeditious development of the All-Alaskan project which was overwhelmingly endorsed by voters in the last election. This is all the more important since the producers are actively trying to displace Alaska in US West Coast markets with foreign LNG. As you recall, in June of this year Sempra offered Alaska 1 billion cubic feet of Sempra’s LNG capacity at their recently permitted LNG receiving terminal in Baja, Mexico. We now read with great disappointment the press release by North Slope producer BP that they have signed up for .5 bcf/d from Indonesia into that same Sempra facility and Shell just announced they would supply the remaining .5 bcf/d, most likely from Sakhalin II in Russia.

Backbone will soon be launching our website which should be a good source of information for Alaskans on Alaska gasline developments. We will continue to be active in our public relations work and will also be taking our case to the Alaska legislature and the Alaska public during this next legislative session.

We look forward to hearing your reply to our letter and to working together with you and your administration on moving Alaska’s future forward with responsible development of Alaska’s oil and gas resources.

Sincerely,

Bill Walker, Co-Chairman
Gov. Wally Hickel, Co-chairman