New business and political realignments are creating momentum for a natural gas pipeline from the North Slope -- a multi-billion-dollar endeavor that would rival the trans-Alaska oil pipeline as a landmark project in North America.
But the complicated mix of players, proposed technologies and competing pipeline routes probably guarantees years of economic and regulatory maneuvering.
The region has ample natural gas reserves -- estimated to be at least 30 trillion cubic feet, far more than enough to handle current American consumption for an entire year. But the rosiest scenario envisions gas being sold in 2007.
``It is, at this point, quite open-ended,'' said state Revenue Commissioner Wilson Condon, past chairman of a state natural gas task force.
Globally, natural gas is being touted as the new frontier for energy.
A colorless, odorless fossil fuel made up mostly of methane, it is used for heating, cooling, electrical generation and manufacturing some products, such as pulp and paper.
With growing concern about global warming, natural gas is seen as an environmentally attractive alternative to other fossil fuels because it burns with fewer troublesome emissions.
In Alaska, the recent oil company shuffle on the North Slope, set off by the merger of BP Amoco and Atlantic Richfield Co., has apparently removed some roadblocks to development of the largely untapped resource.
The sale of Arco's Alaska assets to Phillips Petroleum to resolve anti-trust concerns -- and the subsequent drafting of a new operating agreement at the Prudhoe Bay oil and gas field -- have evened out the incentives to develop the resource, observers say. To date, most natural gas extracted on the North Slope has been reinjected into the ground to increase the flow of oil.
Phillips, which already is the operating partner in a liquefied natural gas (LNG) plant on the shore of Cook Inlet, has been seen as anxious to bring North Slope natural gas to market. And BP has substantially increased its reserves as a result of the merger.
Exxon Mobil, through brief litigation against BP, might also have strengthened its position for an eventual gas project, said Richard Fineberg, an independent industry analyst in Fairbanks.
But industry critics complain that the internationally active oil companies have ``warehoused'' Alaska gas for decades.
The Legislature has been taking a closer look, too.
``It is no longer a market question'' about whether natural gas will be commercialized, said House Oil and Gas Committee Chairman Jim Whitaker, a Fairbanks Republican. ``It is a political question'' about whether the oil companies can be persuaded to act in the state's best interest.
Although it went nowhere, Anchorage Democrat Rep. Eric Croft presented a ``play-or-pay'' bill this session that would have taxed natural gas reserves if leaseholders didn't meet a timetable for signing contracts for sale.
``They've been sitting on the gas for 30 years,'' he said.
Ken Konrad, manager of Alaska gas for BP, scoffed at that. He said the industry has invested $2 billion already in finding a way to commercialize the gas.
``I do not call that lack of trying,'' Konrad said. Rather, technological advances over the years gradually have made a natural gas project more feasible, he said.
Critics say progress has been stymied by a unique operating agreement at Prudhoe Bay. A geologic anomaly -- involving the mingling of the oil rim and the gas cap -- gave leaseholders varying percentages of oil and gas reserves, and the agreement didn't straighten out those differences to provide equal incentive to develop each resource.
Fortunately for the state, the merger and new operating agreement have eliminated opposing interests formerly created by unequal shares of oil and gas at Prudhoe Bay, say Croft and other observers.
Giving each of the three major players an equal share of oil and gas is ``very constructive for the state,'' Fineberg said.
Jim Sykes of the Alaska Public Interest Research Group said he still would like to see state regulation of the operating agreement.
``I think there is a movement to try and force the companies to move the gas,'' Sykes said from Anchorage. ``(But) the oil companies are so politically powerful, if it doesn't fit into their agenda, they can stall it forever.''
Royalties from natural gas won't come near the financial windfall that oil constituted for Alaska, in any case, say state officials.
State petroleum economist Roger Marks said that oil has five times the energy value of gas. So while the state now realizes about $1 billion a year in sustainable oil revenue (compared to $4 billion in the boom years), natural gas at best would yield a reliable $200 million annually, Marks said.
Rep. Croft is concerned that the industry will be looking for concessions.
``Being open for business doesn't mean giving away the merchandise,'' he said.
Juneau Empire ©2015. All Rights Reserved.