My Turn: Alaskans have most to gain from an all-Alaska gas line

Posted: Wednesday, October 12, 2005

Oil industry aligned critics continue to lambast the all-Alaska gas line as proposed by the Alaska Gasline Port Authority using false information. Now, the facts:

• The Prudhoe to Valdez 48-inch line will carry 4.5 billion cubic feet of gas per day. A 125-mile spur line will serve Southcentral and the Kenai Peninsula. Construction begins in 2007 with completion in 2011. Gas liquefied in Valdez will be transported by tanker to one or more of the four West Coast regasification terminals that have either requested or entered into agreements with the port authority. The Kitimat, B.C., plant necessitates only two days of transport time from Valdez.

• Senior permits for the all-Alaska route are secured. The Kitimat Terminal receives its final permits in January 2006 and is on track to be the first terminal permitted north of Mexico. Compare this with producers' plan where permits have not even been applied for and which ultimately require consent of numerous Canadian regional organizations and the Canadian government. The port authority seeks the path of least resistance while the producers have chosen the path of greatest resistance and controversy.

• Gas from the authority project will be delivered to both the Midwest and west coast markets via existing North American gas transmission infrastructure. This wide distribution prevents market flooding or gas price depression.

• All LNG shipments will be in full compliance with the Jones Act.

• A state-retained consultant, Econ-One, recently concluded that the return on the gas line project would be 17 to 83 percent for a taxable entity. The port authority's application for tax-exempt status for gas delivered in and outside Alaska was approved in January 2000 pursuant to IRS Ruling No. 118656-99. This is a conclusive determination exempting the port authority from the estimated $50 billion federal tax liability over the project's life. Other economic comparisons are impossible due to the producers' demands for concessions, confidentiality and their failure to commit to project timelines.

• The port authority opposes any use of the Alaska Permanent Fund for gas line construction. The unprecedented $18 billion federal loan guarantee makes any discussion of Permanent Fund use nonsensical. Every indication from the Department of Energy is that the loan guarantee would apply whether the gas passes through Canada via pipeline or receiving terminal.

• Alaska LNG will be competitive with LNG from other sources where the gas is closer to tidewater. While a longer gas line is necessary, the tanker transport time of two days provides substantial savings over projects requiring 10 to 12 transport days. Additionally, Alaska's gas project requires little upstream development cost (Alaska's gas is reinjected into the ground daily) unlike foreign projects that require significant upstream costs.

• An all-Alaska project provides short-term construction jobs on the gas line and liquefaction facility now. Long-term operational jobs and the attendant economic benefits remain in Alaska for the benefit of this and future generations. Additionally, every municipality will benefit from generous revenue sharing.

• The port authority has submitted bona fide offers to purchase gas from the producers at a significant profit. The offers were rejected or largely ignored. The producers refuse to name a gas sales price or terms acceptable to them.

• Alaska's gas is competing with other North Slope producers' projects worldwide where the producers are required to use or lose their gas rights.

The all-Alaska gas line is overwhelmingly supported by Alaskans. The Alaska Constitution provides that Alaska's natural resources shall be used for the maximum benefit of all Alaskans. Of the proposed projects, only the all-Alaska gas line satisfies that mandate.

• Bill Walker is general counsel for the Alaska Gasline Port Authority.

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