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Senator Wielechowski Calls on Marathon Oil to Honor Contract and ‘Meet Local Needs First’

ANCHORAGE-Senator Bill Wielechowski, D-Anchorage, sent a letter this week to the CEO of Marathon Oil, asking the company to honor its commitment to deliver 3.24 billion cubic feet of natural gas to a new natural gas storage facility in Cook Inlet.    With the help of generous state tax credits passed by the Legislature in 2010, Cook Inlet Natural Gas Storage Alaska (CINGSA) built the $180 million facility to ensure that residents of Anchorage and neighboring communities would have sufficient gas available during the coldest months of the winter.

However, several recent news reports indicate that Marathon may have decided to export natural gas from Cook Inlet to Japan, instead of fulfilling a contract it signed with CINGSA in March 2011 to provide the base gas needed for the facility.  As a result, officials at CINGSA have notified the Regulatory Commission of Alaska that they will not have the necessary 7 billion cubic feet of gas to adequately pressurize and operate the storage reservoir. 

“I am troubled and disappointed by these reports.  Over the last six years, the Alaska Legislature worked tirelessly to stimulate gas exploration and production in the Cook Inlet,” said Senator Wielechowski.   “We worked closely with representatives from Marathon Oil and other companies to create incentives to make production from the Inlet more attractive and profitable.” 

The Legislature created the framework for CINGSA back in 2010 when it passed the Cook Inlet Recovery Act.  The legislation, through tax credits and other measures, sparked a stampede on new exploration and development of Cook Inlet oil and gas.  One of the provisions of the landmark legislation provided tax incentives and regulatory assurances to attract the private investment necessary to develop storage facilities and help reduce the cost of storage to consumers.

“We put in place a tax rate that is among the lowest in the nation and tax credits that are among the most generous in the world.  These incentives were designed to benefit companies, like Marathon, and to ensure energy security for Alaskans, especially during the coldest days of the year,” said Senator Wielechowski.   “We also supported the extension of Marathon’s license to export natural gas from Cook Inlet with the understanding that local needs would be met first.  I believe our efforts have been compromised by Marathon’s actions this summer.”

To read the letter from Senator Wielechowski to Marathon Oil, click here.

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