The state should focus on filling a short-term gap in Cook Inlet gas supplies, rather than become too involved in efforts to build a bullet pipeline from the North Slope, according to a legislative consultant.
The two ongoing efforts to bring new gas supplies into Southcentral are complementary, according to consultant Steve Porter, who made the remarks in a letter this month to state Sen. Kevin Meyer, R-Anchorage, chair of the Legislative Budget and Audit Committee.
"They are independent and neither should wait for the other," Porter wrote.
Enstar Natural Gas Co., an Anchorage-based private utility, is looking into building a "bullet" line into Anchorage along the Parks Highway, or a spur along the same route. The Alaska Natural Gas Development Authority, a public corporation, is studying a spur line off of a main pipeline into Canada, running from Delta Junction to Anchorage along the Richardson and Glenn highways.
Harry Noah, appointed by Gov. Sarah Palin to manage in-state gas pipeline issues, has called the various efforts "uncoordinated," warning that without coordination the state could waste money by accidentally duplicating work being done by private industry.
Porter said the state should allow ANGDA and Enstar to work on their separate projects at the same time, for now, because each pipeline addresses a different contingency.
While a bullet line would be independent of a major natural gas pipeline into Canada, a spur line is by definition dependent on such a mainline.
Because of this, proponents of various spur line options have noted the advantage of being ready to have a spur line project well-defined before an open season on a mainline.
During an open season, potential customers make long-term commitments to ship gas through a pipeline. Spur line proponents want to hold a concurrent "in-state open season."
However, if a mainline gets delayed, a bullet line might be appropriate, Porter wrote.
"What is important at this time is to fully support the major gas line and encourage it to proceed, while not foreclosing other options," Porter wrote. "At least until the open seasons, all options should be encouraged to proceed."
The Palin administration last summer attempted unsuccessfully to merge the two projects by forming a public private partnership between Enstar and ANGDA. More recently, the state has taken a more active role through Noah's attempt to coordinate various efforts.
LETTING ECONOMICS DECIDE
Noah's first step will be comparing the routes on issues of cost, environmental impacts and population served. Porter called the work an "appropriate exercise," but added it "can and should be done without interfering with the progress of either project proposal."
He said economic realities would ultimately eliminate one or both of the projects.
"The state does not need to choose a winner at this point, nor does it need to interfere with either project moving forward," Porter wrote.
Porter estimated it would take "at least 10 years before either a bullet line or a major gas line will be able to deliver natural gas to Cook Inlet," during which time existing Cook Inlet gas production is expected to fall below growing demand in the Southcentral region.
"The best use of the state's time and resources is to work with the Cook Inlet explorers, producers and utilities to identify a dependable source of supply of natural gas for Cook Inlet while other public and private entities are developing projects to bring Alaska's North Slope gas to market," Porter wrote.
NO 'PREDETERMINED OUTCOME'
The Palin administration believes a mainline offers the best prospect for delivering natural gas to markets within Alaska, but initiated the bullet line effort as a backstop.
Considering the projected shortfalls of natural gas from Cook Inlet, and the uncertain timeline for when a large gas pipeline may come online, "if there is a need to fill the gap in the meantime, we need to know what our options are," Joe Balash, special assistant to Palin for oil and gas issues, told the Senate Energy Committee early this month.
Balash said the pipeline could come online as soon as 2018, but a range of regulatory, technical and logistical delays could easily push that startup date back to 2020 or 2021.
Balash said Noah's work doesn't have a "predetermined outcome," but considering the lead time for a bullet line, "if we don't start working on it now, it may be too late to consider that as an option in 2011 or 2012 when we know what our choices really are."
The Palin administration expects ANGDA to play a role in the newest in-state gas pipeline effort, even proposing legislation to expand the authority of the agency. The appointment of Noah, though, has prompted debates about what role ANGDA would or should have in the effort to bring northern natural gas to Fairbanks and Anchorage.
Following a debate during a meeting of the ANGDA board of directors on April 8 -- in which ANGDA agreed to cooperate with the state, but not to delay any of its ongoing efforts -- Noah and Heinze met to discuss the ways the two parties could collaborate.
During a special board meeting on April 13, Heinze said he and Noah agreed to separately request funding from the Legislature, promising not to advocate for or against each other. ANGDA is requesting $5.25 million, while Noah is asking for $9.35 million.
Heinze said Noah wants ANGDA and Enstar to study alternate routes.