Murkowski urges state to resolve gas pipeline issues or risk losing market

Two Alaska senators say comments could divide the state

Posted: Tuesday, March 03, 2009

Alaska officals had better act to bring people together on a large natural gas pipeline or risk losing the U.S. gas markets to shale gas producers and liquefied natural gas importers, U.S. Sen. Lisa Murkowski warned state lawmakers in her annual message to the Legislature in Juneau Feb. 19.

Two Democratic state senators pushed back, however, telling Murkowski in a letter that her comments could actually divide, not unify, the state.

Alaska has already chosen its champion on the gas pipeline and it is TransCanada Corp., state Sens. Hollis French and Bill Wielechowski, both of Anchorage, told Murkowski in a letter sent Feb. 20.

In her speech, Murkowski issued a warning that both she and former-Sen. Ted Stevens had repeated to the Legislature for the past several years: America won't wait forever for Alaska's gas.

"Shale gas production is growing by leaps and bounds," she said. "America will purchase its gas from sources that are ready to deliver it. If that's not Alaska, America will buy elsewhere. That will really strand our gas and it may do so for an awfully long time."

The senator was referring to the two competing pipeline development initiatives unde way. One is the Denali project, being led by North Slope producers BP and ConocoPhillips. The other is an initiative by TransCanada Corp., an independent pipeline company.

The state has awarded TransCanada a license that entitles it to $500 million in state grants in return for meeting certain goals the state has put forth.

But both groups say the state must enact special tax terms for gas production committed to either project.

Murkowski said the North Slope producers need to sit with the state and the federal government to resolve unsettled questions of fiscal terms.

"This is one case where we cannot blame the federal government for delays in a major Alaska capital project," the senator said.

French and Wielechowski bristled at Murkowski's remarks, interpreting her comments as critical of the state's strategy of supporting TransCanada's initiative over that of the North Slope producers.

"We are concerned that your comments may be detrimental to moving this project forward," the two senators said in their letter.

Alaskans are now united on the gas pipeline the two senators said.

"We made a deal with TC Alaska (TransCanada) and it would seem like a step backward to try to undo that deal now," they wrote.

French and Wielechowski also discount competition from other gas.

"Everything we learned during 60 days of hearings last summer suggests that once Alaskan gas flows to those markets, it will be able to compete very well against other sources of energy, including shale gas, given the latter's higher production costs," the two senators wrote. "Shale gas requires more complex drilling methods and comes with a far higher risk to the environment. We believe that there will be a place for Alaska's gas in Lower 48 markets for the foreseeable future."

In her speech, Murkowski also underscored the urgency of resolving natural gas issues in Southcentral Alaska and endorsed the bullet line proposal by Enstar Natural Gas Co. as a long-term solution to the region's gas needs.

Warning of impending shortfalls in its gas supply, Enstar is pushing for a 20-inch pipeline between Southcentral and the North Slope that could bring gas to Southcentral Alaska by 2016, several years before a large pipeline can be constructed.

"As we think about our energy challenges, it's not the (large) gas line or the bullet line. It's the gas line and the bullet line," Murkowski said. "Both need to move forward with all deliberate speed. If additional federal legislation is necessary to push this project (the bullet line) across the finish line, I stand ready to press for it."

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