Port Authority pitches all-Alaska gas line proposal

Posted: Friday, August 04, 2006

Architects of a North-Slope-to-Valdez natural gas pipeline proposal spent Thursday trying to convince legislators that theirs is the best choice for Alaska, but lawmakers tried to blow holes in the project.

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Executives from the Alaska Gasline Port Authority presented the latest version of the project to the Senate Special Committee for Natural Gas Development.

Their idea is to get started now on an 800-mile pipeline that would parallel the Trans-Alaskan Pipeline System to Valdez, where the natural gas would be liquefied and shipped to the West Coast.

But Gov. Frank Murkowski said last year, and several times since, that the Port Authority's proposal wasn't viable. He instead focused solely on negotiations for a pipeline project to Canada with the state's three largest oil producers. The result is a draft contract now before the Legislature.

On Thursday, Port Authority officials said both pipelines are possible. Their proposal would accommodate, and even encourage, development of the pipeline to Canada and Midwest markets.

To accomplish both, the pipeline from the North Slope to Delta Junction would be expandable to move 5.5 billion cubic feet of gas per day, or whatever amount is needed for the Canada line.

The North Slope-to-Valdez line would require just 1.2 billion cubic feet, meaning a smaller line from Delta Junction to Valdez.

But even if the Alaska-to-Canada pipeline never appears, the all-Alaska route would still pay for itself, would bring more wealth to the state and be operational four years sooner than the producers' proposed pipeline, said Port Authority Executive Director Jim Whitaker.

"We have no higher goal than to keep as much of that wealth as possible in the state," he said.

Legislators, however, pointed out numerous problems, uncertainties and inconsistencies with the project proposal.

One senator, Con Bunde, R-Anchorage, did not hide his scorn for the proposal. He called the Port Authority's project a "pipe dream." He apologized for being late to the meeting, saying he had been on a tour of the Kensington gold mine north of Juneau, "a project that actually has a future."

Rep. Ralph Samuels, R-Anchorage, said rather than encourage an Alaska-to-Canada pipeline, the Port Authority proposal may actually have the opposite affect. Officials from TransCanada Corp. earlier this year told the Legislature that anything less than 3.5 billion cubic feet of gas per day moving through the Canada route would make the project too expensive.

If 1.2 billion cubic feet per day is being shipped to Valdez, and not enough gas is found to meet that 3.5 billion cubic feet per day minimum to Canada, that could mean the Alaska-to-Canada line would never be built, Samuels said.

"You could get stuck holding the bag in every way," Samuels said.

Bill Walker, an attorney for the Port Authority, said he did not think it was realistic to say exploration companies would not find the gas needed to fill the pipeline.

Radoslav Shipkoff, a consultant for the Port Authority, said the producers' pipeline proposal is not guaranteed, and if it never happens, at least the all-Alaska line has improved the state's revenues.

Questioning by Sen. Fred Dyson, R-Eagle River, revealed that the Port Authority's financing for pipeline construction would be dependent upon receiving commitments from gas shippers, but Port Authority officials have not gotten to that point yet.

Dyson also asked whether liquefied natural gas from Alaska, which has relatively higher transportation costs, would be able to compete with imported LNG from Qatar, where the shipping costs are much lower.

Shipkoff said upstream costs in Alaska should be lower than imported LNG, which would lower the overall costs, but later acknowledged that it is "possibly, yes, a riskier project, (but) versus nothing" if no pipeline is built at all.

Committee Chairman Ralph Seekins, R-Fairbanks, said the Port Authority's plan may not resolve potential problems of access to gas facilities that independent oil and gas companies have pointed out.

Also, Samuels pointed out that the estimated cost of moving gas through the Port Authority's pipeline would be much higher than the producers'.

It may be higher, but it would still be profitable, Shipkoff said. And if the producers' pipeline is added, even more so, he said.

The Port Authority received an endorsement from former Gov. Wally Hickel, who took over the chairman's spot to deliver a short speech and pass out hats that read "Alaska First."

Hickel told legislators that he is a longtime believer in the all-Alaska pipeline.

"I'm not trying to convince anybody, but that is exactly the one that belongs to the owner state," he said. "God bless you for looking at what's best for Alaska."

Hickel left with this advice for legislators: "If it's good for Alaska, do it. If it's bad for Alaska, screw it."

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