There's a lot of talk about the bullet line in Juneau these days. Now we even have a bullet line czar that Gov. Sarah Palin has designated to ramrod the project -- Harry Noah, a veteran and capable state official.

"Bullet line" is the euphemism for a 20-inch or 24-inch pipeline that would carry natural gas from the North Slope to Southcentral Alaska. Our gas fields in the region are being depleted and there are worries we may run short. That's not good, because we depend on gas for space-heating and power generation. Without gas, we'd be back to fuel oil, coal, or even wood.

There is a plan to get North Slope gas from a spur line off the big gas pipeline planned to be built through Interior Alaska to the Lower 48. That, however, is dependent on the success of the larger project, and now there are worries that the big pipe may get delayed if the world economy stays sour.

Even in the best of worlds, if this goes forward, it won't be in operation until 2018 or 2020. Enstar Natural Gas, our regional utility, says we could run out of gas long before that, by 2015 or so.

This gives rise to the idea of having our own pipeline built now. Enstar is already working on a plan for a bullet line and now the governor has stepped in to give the project a shove.

All this sounds good on the surface, but there are some things we need to think about.

Before we build a possible $4 billion-plus bullet line to the Slope, we need to look at whether more gas can be found in Cook Inlet. Geologists say the Inlet is actually under-explored. There are companies that have recently found more gas -- Armstrong Oil and Gas on the Kenai Peninsula, for example -- but that need to find a buyer.

We have a conundrum. Enstar says it is short of gas and Armstrong has gas and is worried about finding a buyer. We need to understand why this is so before committing Alaska consumers to the cost of a bullet line.

There's a reason why Enstar is having trouble getting gas despite offers from several companies. It has to do with the Regulatory Commission of Alaska's reluctance to accept the price terms (the RCA must approve Enstar's purchases). However, it costs a lot to find and develop new gas in the Inlet. If we need gas, we need to realize it will cost more. A lot of gas can probably be found, but it won't be cheap.

Will gas brought from the North Slope be cheaper? No one knows, and one of Harry Noah's first tasks is to figure that out. First, we must pay the producers on the North Slope for the gas. Second, we pay for the $4 billion pipeline through the tariffs, or transportation charges, for the gas. People smarter than I will calculate what this will cost, hopefully soon, but intuitively I don't think it will be cheap.

A problem, however, is that we also need a large industrial customer or two because our demand is only about half of the 500 million cubic feet of gas per day that is considered the minimum this pipeline needs to move.

Could we supply gas to the liquefied natural gas plant near Kenai? Possibly. Harry Noah has to find out if the owners of the plant think this is workable. People also talk about restarting the Agrium fertilizer plant, also near Kenai. This is possible too, but the plant has been closed for some time. When one combines not-so-cheap gas with the cost to restart the plant, it doesn't sound like a good prospect to me.

Another possibility is that if natural gas liquids like ethane and propane are moved through the bullet line along with the methane, or gas, those liquids could be sold for higher prices, perhaps to some new manufacturer. This could help keep prices for the gas lower for the utilities. But we don't know who would buy these liquids.

So, we don't know what we have to pay for the North Slope gas or whom we will sell it to, aside from the utilities. A lot of unknowns.

Which brings me back to Cook Inlet. We know a lot more about the Inlet, the most important thing being that we can find more gas there and there might be solutions to the problems that now impede finding it.

The governor has asked Harry Noah to figure all this out. Let's wish him well. The alternative? Put the oil tank back into the house. Or the coal bin.

Tim Bradner writes for an Alaska economic reporting service. He also consults for private clients and writes for business publications.

ADVERTISEMENT