Alaska gas authority prepares bid for Denali gas

Posted: Monday, September 13, 2010

ANCHORAGE - Alaska Railbelt power companies are positioning themselves to make electricity from North Slope gas some day.

The Anchorage Daily News reports the Alaska Natural Gas Development Authority on behalf of the utilities is getting ready to bid for gas in the BP and Conoco Phillips Denali pipeline project's "open season."

Open season is designed to obtain commitments from shippers to make a $41-billion pipeline appear viable to bankers, bondholders and others who can finance a line. Denali's open season ends in three weeks.

The state gas authority has already bid for gas for TransCanada Corp.'s proposed pipeline, a rival project.

The Railbelt covers most of Alaska's population and stretches from the Kenai Peninsula to Fairbanks. The Alaska utilities would take a tiny fraction of the 4.5 trillion cubic feet of gas a major pipeline would carry.

Bids made by the authority are conditional and none of the utilities are making an immediate commitments. The gas authority, however, says it needs to bid during the open season to secure a 30 percent discount on the cost of shipping the gas. Purchasing North Slope gas later would be a lot more expensive, said Harold Heinze, the authority's chief executive.

"Any one of these (utilities) on their own probably can't do as good as we can all together," he said.

Most of the power companies in the Railbelt support the gas authority's bidding on their behalf during the two pipeline open seasons. The main companies involved are Chugach Electric Association and Municipal Light & Power, both in Anchorage, Golden Valley Electric Association in Fairbanks, Homer Electric Association and Matanuska Electric Association in Palmer.

Last year, the gas authority formed the Natural Gas Supply Co., a cooperative that could buy North Slope gas on behalf of the utilities. The entity was modeled on a cooperative of 200 electrical utilities in the Southeast United States.

"The cooperative form allows (utilities) to chose how much they want to participate," Heinze said.

Chugach Electric, for example, is not committed to buying North Slope gas but is interested in "keeping all of our options open," said company spokesman Phil Steyer.

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