Scandal, economics deter Alaska gas line bids

By Yereth Rosen

ANCHORAGE, Alaska, Dec 4 (Reuters) - Alaska's unfolding political-corruption scandal deterred one energy company from submitting a natural gas pipeline proposal to the state, while uncertain economics precluded the proposal of another.

MidAmerican Energy Holdings Co. (MDPWN.OB) and BG Group Plc (BG.L), companies that had been expected to bid for a state license to build a long-awaited natural gas pipeline project under the new Alaska Gasline Inducement Act, said they declined to participate because of an unfolding bribery scandal and shaky economics, respectively.

"For a project of this magnitude to proceed, integrity must be the foundation upon which all project elements are based," MidAmerican Chairman David Sokol said a letter sent Friday to Alaska Gov. Sarah Palin.

"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," he said.

Two executives from Alaska's largest oil-services company have pleaded guilty to a variety of bribery and corruption charges resulting from the wide-ranging federal investigation. Three former state legislators have been convicted in trials held so far, and a fourth trial is pending.

BG's Managing Director Martin Houston said in a Nov. 29 letter to Palin that the company still hopes to participate in whatever gas project emerges.

"However, given the number of moving parts around all aspects of the project, there was still too much uncertainty for us at this stage," Houston said.

Bids to build the project to get Alaska's rich gas reserves to market were submitted by five groups late Friday, the deadline for proposals seeking state sanction under the new law. The Palin administration will select one preferred project early next year and submit it to the legislature for approval, according to the law.

The bids came from the Alaska Gasline Port Authority, a consortium of municipal governments seeking to build a liquefied natural gas project; the Alaska Natural Gas Development Authority, a state agency seeking to build a spur line from whatever project is chosen; TransCanada Corp (TRP.TO) (TRP.N) in partnership with subsidiary Foothills Pipe Lines Ltd; China-based Sinopec ZPEB; and California's AEnergia LLC.

ConocoPhillips (COP.N) submitted a proposal outside the AGIA program to build and operate a natural gas pipeline.

Palin was disappointed that MidAmerican and BG did not apply for a license, said spokeswoman Sharon Leighow.

"Should the eventual AGIA licensee seek partners in this project, the governor hopes these companies will participate in some capacity. It is also the governor's hope that the State of Alaska will regain the trust of companies like Mid American," Leighow said in an email. (Reporting by Yereth Rosen; Editing by Marguerita Choy)