Anchorage Daily News

A host of financial and political risks kept a global natural gas company from bidding for a North Slope gas pipeline, an executive told Alaska legislators Saturday.

But the company, BG Group, based in Reading, England, still is bullish about the potential for a liquefied natural gas project in Alaska.

BG spent considerable time and money preparing a bid package to apply for a natural gas pipeline license by the Nov. 30 deadline set by the Alaska Gasline Inducement Act, said David Keane, the company's vice president for corporate and policy affairs.

BG claims a gas-export project from Alaska would make a pipeline to the Lower 48 more feasible in the future.

One of BG's specialties is LNG. It is one of the world's dominant liquefied natural gas suppliers.

The LNG idea would route North Slope gas down a pipeline to Valdez. There it would be superchilled, making the gas a liquid that can be shipped on tankers. This idea differs from the concept proposed by TransCanada, Conoco Phillips and others, which would pipe the gas to Canada and ultimately to the Lower 48.

The company has three exploratory wells on the North Slope and plans to spend $100 million over the next three years on drilling, and still is optimistic about Alaska's LNG potential. But, ultimately, the company decided not to submit a pipeline proposal, Keane said.

He said BG, the largest importer of natural gas in the United States, probably would not have been able to meet all of AGIA's criteria to win a state license to pursue a multibillion-dollar pipeline project.

Some of the missing elements: no project consortium, lack of BG board approval and lack of a guarantee that the pipeline would be federally regulated, Keane said.

A variety of risks prevented BG from submitting its proposal, he said. For example, BG lost its prospective partner for the North Slope project, a pipeline company he didn't name, prior to the deadline, and it was concerned about the project's possible cost increases. BG also was concerned because it has no natural gas reserves in Alaska, and it worried about whether it could get federal permission to export LNG to Asia, Keane said.

A proposal to export natural gas carries significant political risks, but according to Keane, shipping Alaska LNG only makes financial sense if it is exported to Asia, where it is more valuable. There are no West Coast terminals - nor are there likely to be any - and it would be cost-prohibitive to ship LNG to the Gulf Coast, Keane said.

After the hearing, Senate Resources Committee chair Charlie Huggins said he asked Keane about shipments to an LNG terminal in Baja, Mexico, near San Diego, and Huggins said BG considered that uneconomic as well.

The export problem will likely dog any company that wants to build an "all-Alaska" pipeline. It could be difficult to get federal permission to export natural gas overseas, Huggins said.

It was interesting to find out Saturday that BG didn't think it could submit an AGIA-compliant bid, Huggins said.

And Huggins said he was also piqued to learn BG is concerned about building an "all-Alaska" pipeline that would be regulated by the state, rather than the federal government, Huggins said.

During the hearing, Keane compared state regulation of the proposed pipeline to "the fox guarding the henhouse," alluding to the state's royalty stake in natural gas production. In other words, the state would have a possible conflict of interest - it could goose the value of its natural gas by lowering the pipeline shipping fees BG could charge.

The Resources Committee has already listened to several other companies that sought a state license to build a natural gas line, and will hear from the rest next week.

The president of Little Susitna Construction Co., an Anchorage company with backing from Sinopec, a huge Chinese energy firm, is scheduled to testify Monday.

Transcanada, the Canadian firm that the Palin administration said was the only applicant to meet AGIA's requirements, and was picked by Palin as the potential winner of a state license, is scheduled to testify Wednesday.

Find Elizabeth Bluemink online at adn.com/contact/ebluemink or call 257-4317.