The State of Alaska should concentrate its efforts on a liquefied natural gasline through Southcentral and it shouldn’t involve TransCanada, former Alaska Governor Frank Murkowski said during a Juneau Chamber of Commerce luncheon Thursday.
TransCanada is working with ExxonMobil, BP and ConocoPhillips on the large capacity gasline project created under the Alaska Gasline Inducement Act. TransCanada and ExxonMobil were the original partners under AGIA, which included $500 million in state funding to advance the pipeline originally planned to reach Alberta.
The other major North Slope producers have been brought in now that the plan has shifted with the goal to transport gas to Southcentral tidewater for export to Asian markets.
“I think we should take TransCanada out of the equity stream for this project,” Murkowski said. “This is an equity interest, which in my opinion, belongs solely to the State of Alaska.”
Gov. Sean Parnell questioned the original plan to reach Alberta in October 2011, more than three years after the state awarded TransCanada the license and began paying out the $500 million subsidy for the preliminary work on the gas line.
The gasline through Canada was no longer feasible because new shale-extraction technology would provide the Lower 48 with a less expensive and closer source of natural gas. Parnell said the gasline should instead be constructed to a port in Southcentral Alaska — likely Valdez or the ConocoPhillips terminal at Nikiski — to serve markets in China, Korea and Japan.
Murkowski said that without the gasline going through Canada, he didn’t see the need for TransCanada to be involved in the project.
“I can’t understand what TransCanada currently can bring to the table,” Murkowski said. “I think it’s in the state’s interest to come together with the principals, Exxon, ConocoPhillips, BP and TransCanada and say, ‘Hey, we went into this deal in good faith, it didn’t work out. We’ll all take our hit and back out instead of the state continuing to fund something that is not going anywhere.’
“I think it’s in the state’s interest to negotiate TransCanada out of the contract,” Murkowski said, adding that the state should focus its energy solely on the Southcentral project.
“I don’t think we should appropriate any more money on any projects except the main Alaska Southcentral LNG project until a decision is made whether to construct it or not,” Murkowski said. “I’m not suggesting stopping projects using money that has already been appropriated. They should proceed with the money appropriated to them.”
The advantage of constructing a gasline for export to Asia is that it wouldn’t require a state contribution, Murkowski said.
“If it’s economical and the market is there in Japan and the producers have the capacity to build it, well, then it will be built,” Murkowski said. “It will take the burden off the state, but the state can and should do certain things.”
Murkowski said the state should move forward with marketing, engineering and permitting to start developing a schedule and budget to build the gasline.
“I think also the state should negotiate the hard political issues with the producers and one that always comes up is fiscal certainty,” Murkowski said. “Fiscal certainty means that the companies and producers want to know what the tax burden is going to be on their development for the term of the anticipated life of the project.”
The former governor also talked about resource development on federal lands. He said the most promising prospects are on federal land, with the exception of Pebble.
“What resource development is taking place in this state on federal land that’s got any significant progress?” Murkowski said. “You look to the future and the resource potential is there, but how do you get there from here?”
The environmental opposition to the Keystone XL pipeline, Murkowski said, is an example of what Alaska is up against as it looks to develop its natural resources.
“It has a place and an application but at what expense? What do you do for alternatives? Those are things that I think disturb and should disturb and make our awareness heightened here in Alaska as we recognize our dependence on resources and how we can responsibly develop those resources using the best technology in the world,” Murkowski said. “Mankind needs the resources, there’s no question about it, and they’re going to get them from somewhere and Alaska has to play a major role in that effort.”