Alaska lawmakers put in-state gas line official on hot seat

Members of the Senate Resources Committee, joined by colleagues from a counterpart committee in the House, questioned whether North Slope gas would be as cheap, and construction financing as easy to come by, as suggested by a report from the Alaska Gasline Development Corp.

Dan Fauske, the head of the state-owned corporation, tried with his staff to answer the questions but acknowledged he couldn't immediately respond to all of them. His agency had only been working on the project for a year, he said.

"I appreciate the enthusiasm and the need to answer the questions, but you're not going to answer every question in one year," he said.

At the same time, there were plenty of questions to go around for all the big energy projects now competing for attention and money.

The special summer hearings in Anchorage by the Senate Resources Committee, continuing through Wednesday, are focusing on two gas line projects and on new state-subsidized gas exploration in Cook Inlet, with some discussion on the proposed Susitna River hydroelectric project.

Each of the big energy projects would affect the others in ways that still are only partially understood. Committee members received fewer answers than they had questions as their session began Monday with Fauske and his staff, and the same may hold true today, when they hear from Tony Palmer, vice president of Alaska development for TransCanada Corp.

Palmer said around this time last year that he hoped to announce by New Year's 2011 that TransCanada had agreements with shippers to put enough gas through the pipe to make construction feasible. That didn't happen, and the status and details of negotiations between TransCanada and potential shippers remain closely guarded trade secrets.

In a business flush with four-letter acronyms, the state corporation headed by Fauske was chartered by the Legislature to examine the Alaska Stand-Alone Gas Pipeline, or ASAP, once called the bullet line. Both names reflect the project's goal, a quick solution to getting North Slope gas to Anchorage by 2015 just as the declining Cook Inlet fields were expected to fail to meet local demand.

ASAP is now targeted for 2018, but Cook Inlet also could undergo a renaissance with a recent federal report projecting greater reserves than previously thought and new drilling activity by independent producers. Some committee members questioned whether there's even a need any more for the stand-alone pipeline, given the renewed potential of Cook Inlet.

Fauske had an answer for that: if Cook Inlet has excess gas, the pipeline can be run in reverse to feed energy-starved Fairbanks. The pipeline would be in place for the next time Cook Inlet begins to decline and North Slope gas once again is the only solution, he said.

Fauske, an official popular with lawmakers who also heads the Alaska Housing Finance Corp., was directed by the Legislature to report by July on the economics, design, permitting and finance of a 24-inch diameter line from the North Slope.

TransCanada has the state license under the Alaska Gasline Inducement Act -- AGIA -- to build a 48-inch diameter line from the North Slope to either Alberta and the Lower 48 or to Valdez.

The two projects combined would absorb nearly $1 billion in state money before construction even begins. The state is already committed under the TransCanada license with subsidizing the company's preliminary design and regulatory work up to $500 million. Fauske said he would need about $400 million to get to the same stage.

Lest anyone think that the 24-inch line is a small-scale project, Fauske's lieutenant, project manager Dave Haugen, sought to correct the record.

"This project is spoken flippantly, occasionally, as being the 'little-inch guys,' or a minor project," Haugen told the committee. "This is a huge project if the state were to move forward with this. This is $7.5 billion, probably the single largest project the state would ever attempt to try to do."

To prevent the state project from directly competing with TransCanada, the Alaska Gasline Inducement Act limits the state pipeline to carrying no more than 500 million cubic feet of gas a day, a fraction of what the larger line can transport. That's about twice the gas consumed for heating and electrical generation in Southcentral Alaska, leaving capacity for Fairbanks, some mines, and a potential export industry, according to Lieza Wilcox, another employee of Fauske's.

Back when there was plenty of Cook Inlet gas, about 600 million cubic feet a day was produced, she said, with the excess liquified for export or converted to fertilizer at the now-shuttered Agrium plant in Nikiski.

Fauske said he and TransCanada are sharing information so that state doesn't have to pay for some studies twice. If the TransCanada line is built, Fauske said, his work won't be wasted -- the 24-inch-line could be used as a spur from Fairbanks to Anchorage. And the stand-alone gas line would also be compatible with the proposed Susitna hydro-electric project, he said, though legislators were skeptical.

The state is moving ahead on designing and obtaining permits for the $4.5 billion Susitna-Watana dam, but it is a long way from construction.

Reach Richard Mauer at rmauer@adn.com or 257-4345.