Pushing for pipeline decision

Oil companies say research on gas line is costing lots of money

Posted: Thursday, July 19, 2001

ANCHORAGE - Phillips Alaska and BP Exploration (Alaska) want some important economic issues concerning the North Slope natural gas pipeline project settled before the next legislative session.

The Joint Committee on Natural Gas Pipelines heard Wednesday from Joseph Marushack, vice president of Alaska North Slope gas commercialization for Phillips Alaska, and Ken Konrad, BP Exploration's leader of gas efforts in Alaska.

Marushack said the oil companies are working hard, and spending a lot of money, to determine whether a 3,500-mile pipeline to deliver Alaska natural gas to the Lower 48 is economically viable.

Konrad estimated the cost of the project at between $15 billion and $20 billion. "Risk is a key problem for us. ... No one has spent this kind of money on a nonsanctioned project," he said.

Marushack told legislators the oil companies want clarification on what role the state would likely take, and issues concerning royalties, taxes and pricing.

The committee was told the oil companies are conducting 13 technical studies, including the use of high-strength steel to lower pipeline costs and building deep trenches in the permafrost without blasting.

The technical work should be completed by the end of the year, and at that point the companies should know whether the project is worth pursuing, Konrad said.

While legislators and Gov. Tony Knowles favor the southern pipeline route along the trans-Alaska oil pipeline and down the Alaska Highway because it would provide more Alaska jobs, the northern route from Prudhoe Bay to the Canadian Arctic would be more cost-effective, Konrad said.

He told the committee the oil companies would like to see more discussion on the "facts" concerning both routes.

Lawmakers in May passed a bill prohibiting the state from issuing any licenses for a pipeline along the northern route.

Konrad said the companies probably won't make a decision on their preferred route until the end of the year. He said a sonar survey was to be conducted this weekend of the ocean bottom along the northern route.

If the project goes forward, a big concern is finding enough skilled workers, especially if Canada's Mackenzie River Delta natural gas project was to happen at the same time. Konrad said that would require the Alaska project to "dovetail" with the Canadian project.

"It is an enormous project," he said. "There are more jobs than skilled folks, regardless of route."

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