State official lays out in-state gas plan

Noah: Bullet line could cost about $4 billion and bring gas as early as 2015

Posted: Wednesday, March 04, 2009

JUNEAU - A state official charged with helping develop a small diameter natural gas pipeline from the North Slope to Cook Inlet said Tuesday the so-called bullet line could cost about $4 billion and bring gas to Alaska homes and businesses as early as 2015.

Michael Penn / Juneau Empire
Michael Penn / Juneau Empire

Harry Noah, recently appointed project manager of an in-state gas line by Gov. Sarah Palin, outlined the schedule with Palin at a news conference.

"This schedule is very ambitious. A lot of things can affect it but when you are trying to develop a project, it's always easy to go slower, but if you stretch it out, it's very hard to contract it later on," Noah said.

Noah said he would build on work done by Anchorage natural gas company, Enstar, and the Alaska Natural Gas Development Authority to determine if the state should sanction a gas line that could provide a low cost energy alternative to the state's Interior region and replenish dwindling gas supplies from Cook Inlet gas fields.

The most viable project identified so far is an 800-mile, 24-inch diameter pipe between the North Slope and Cook Inlet that would have two compressor stations and provide about 500 million cubic feet of natural gas per day, he said.

The bullet line would compliment a much larger proposal being planned for a nearly $40 billion dollar natural gas pipeline linking North Slope gas reserves to markets in the Lower 48.

Noah detailed some of the main tasks ahead, which he said could be completed by June 2011: guaranteeing a supply of natural gas; obtaining commitments from purchasers; establishing the tariffs, which is the cost of sending gas down the line; obtaining permits; and turning the project over to a builder-operator of the line.

"The role of the state would be to help reduce the risk of such a project and to hopefully take some of the roadblocks away from it and to facilitate discussion between gas owners and gas purchasers," Noah said. "But the intent is to have this be a privately owned and operated pipeline project."

Providing natural gas to homes would not be enough to make the project viable, he warned. Commitments from Railbelt utilities, the now mothballed Agrium fertilizer plant in Nikiski, and perhaps the Kenai Liquefied Natural Gas facility would be needed as well. Noah also mentioned potential mines in western Alaska as likely users of the gas.

"We will continue to seek out large users of gas to make this project viable," he said.

Such commitments should be nailed down before proceeding any further because the next phase, which includes completing engineering studies and ordering building supplies in advance, could cost as much as $900 million, Noah said.

As far as gas suppliers, Noah said discussions would have to include North Slope oil and gas producers. The governor has also asked the Department of Natural Resources to gather more information on the untapped gas reserves in Cook Inlet.

Many say the most promising source would be the Gubik gas field on the foothills of the Brooks Range, which Anadarko Petroleum Corp. expects to develop by 2016.

"I don't think anyone cares where the gas comes from just as long as there's a long term reasonably priced supply for the state," Noah said.

Enstar spokesman Curtis Thayer said his company - a likely builder-operator of the line - would continue planning and dovetail its efforts with the state.

"This is a huge project. It would be the largest in the state's history. And with that there will be many players involved and many different phases, so working with the state on this and the administration is a good thing," Thayer said.

"There's a looming shortfall in Cook Inlet and the fastest that we believe the line can be built is 2015 - and that's a perfect world."

Palin introduced legislation last week that sets up a legal framework for development of the line.

Senate Resource Committee co-Chairman Bill Wielechowski, D-Anchorage, said he wants assurance that the administration would not be duplicating work that ANGDA is already doing. And he was concerned about a "timeline disconnect" that puts completion of the pipeline ahead of development of the Gubik field.

Another issue he said he wants addressed is that 40 percent to 50 percent of Cook Inlet gas currently is being shipped to Asia.

"We have over one trillion cubic feet left, which if we were not shipping it to Japan, would last for 20 years," Wielechowski said.

Wielechowski said he also was concerned that a bullet line would be obsolete if the larger gas pipeline to the Lower 48 is built soon after, with spur lines supplying in-state needs.

Thayer said the two projects are meant to be complementary and, besides, the larger gas line is much less certain.

"We know we need gas in 2015 and we can see a start and finish to this line. But with a larger line there are just so many variables, such as the Lower 48 markets," Thayer said.

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