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New Energy Infrastructure

Written by Luke Burgess
Posted October 10, 2005

Dear Wealth Daily reader:

Despite the zeal of the environmentalist left, there's a possibly that the U.S will allow energy companies to build new oil refineries.

On Friday the House of Representatives approved a bill that encourages building new refineries.

Backers of the bill say that the recent back-to-back hurricanes stressed the serious need for new refineries.

The bill passed 212-210. Not surprisingly, not a single democrat voted for the legislation.

The bill takes a laissez-faire attitude toward the complex permits required for expanding or building refineries and allows the president to single out federal land where a refinery may be built.

And while this legislation will assist in lowering oil prices, it fails to tackle the rising cost of natural gas or deal with high prices motorists are paying at the pump.

What the bill does do, however, is allow oil companies to dodge overly strict environmental regulations.

The need for more refineries is not a new issue. However, the problem is intensified in the wake of hurricanes Katrina and Rita that shut down a dozen refineries and disrupted a fifth of the country's gasoline supplies

Prospects of the bill in the Senate are uncertain. But one representative who baked the bill said construction of a new U.S. refinery could begin within a year.

North To Alaska

State officials in Alaska are currently considering building a new major pipeline.

The state offered a contract to the three major North Slope producers, ConocoPhillips (NYSE:COP), BP (NYSE:BP) and Exxon Mobil (NYSE:XOM), to build and operate a 3,400-mile pipeline that would transport the region's vast natural gas supplies to the lower 48 states

The project would be massive. According to state and oil industry estimates, the proposed pipeline would cost at least $20 billion. It would run though western parts of Canada to the Midwest and deliver about 4 billion cubic feet per day. At current natural gas prices of close to $13/Mcf that's $52 million daily!

State officials expect the line would be in operation for decades and deliver the 35 trillion cubic feet of natural gas known to lie within the North Slope oil fields.

Alaskan officials have tried for three decades to persuade someone to buy the natural gas. High infrastructure expenses hindered the pipeline until now.

But that has changed because of the recent soaring natural gas prices.

The details of the state's contract were not disclosed. But some general terms were outlined.

They include state investment as an equity partner, provisions to expand the line so that it can deliver any new reserves of natural gas that might be discovered in the future, guaranteed access to other energy companies to ship North Slope natural gas, commitments for in-state use of the gas and commitments for in-state hiring.

If the proposition is endorsed by the companies, the contract would be subject to a public comment period of more than 30 days and would then be submitted to the legislature for approval.

- Luke Burgess
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