Parnell's gas-to-Asia plan has lawmakers intrigued

CHANGE: Some see Pacific Rim markets as future boon to Alaska.

Anchorage Daily NewsOctober 29, 2011 

Alaska politicians are interested in Gov. Sean Parnell's push to try to export the state's natural gas to Asia rather than the Lower 48, with influential lawmakers saying the state should consider paying to help to make it happen.

The state has worked for years toward building a pipeline from the North Slope through Canada for North American markets. But Parnell said last week that the effort led by the pipeline firm TransCanada appears stalled, with commercial negotiations at an impasse.

So Parnell announced that he wants a pipeline from the North Slope to a Southcentral Alaska port where the gas would be liquefied and shipped overseas in tankers. Pacific Rim markets could hold more promise than North America for Alaska's gas, he said.

Alaska Sen. Lisa Murkowski said she welcomes Parnell's announcement and thinks the state should consider investing in a pipeline from the North Slope to Fairbanks, where the gas would flow whether headed overseas or to the Lower 48.

"The world is seeing massive changes in terms of natural gas supply and markets, and Alaskans must be able to adjust to those changes," said Murkowski, who is hosting a Senate hearing Nov. 8 on developing natural gas.

Parnell isn't ruling out the state helping to build a pipeline to Fairbanks. "The governor is open to considering all options to commercialize the state's gas reserves," said his spokeswoman Sharon Leighow when asked about Murkowski's suggestion.

State Sen. Lesil McGuire, an Anchorage Republican, said Parnell is correct and "the future for Alaska's gas lies in Asia."

State Sen. Hollis French, an Anchorage Democrat, described Parnell's announcement as interesting and timely: "I think he's right the market has fundamentally shifted in the Lower 48 and people want to see progress on a pipeline."

State Senate Majority Leader Kevin Meyer said he's intrigued. "I think everybody's come to the conclusion, and many people have a long time ago, that shipping our gas down to the Lower 48 isn't going to work. They don't need it down there."

Meyer, an Anchorage Republican, also said he was interested in the state being a part owner in the new pipeline.

But Meyer, a facilities support coordinator for Conoco Phillips, said he has no idea what the position of Conoco or any of the other major oil companies is going to be. Without the companies, which lease Alaska's gas, there is no pipeline. And none of the companies are rushing to embrace Parnell's declaration.

"Conoco Phillips has always believed that the market will determine the viability of any gas development project and we continue to search for commercially viable ways to get Alaska North Slope natural gas to new markets," said spokeswoman Natalie Lowman.

BP spokesman Steve Rinehart said his company wants to get gas to market and is looking at all options, including liquefied natural gas. Rinehart said if such a project for export to Asia is proposed, then "we'll look at it carefully."

"I think the governor described what anybody can see, which is demand expanding in the Pacific Rim and shale gas proliferating all across the Lower 48 market," Rinehart said.

Exxon Mobil, which holds the most Alaska natural gas of any of the companies, wouldn't answer questions about Parnell's announcement.

Company officials referred questions to TransCanada, which Exxon is working with on the pipeline project that Parnell said was stalled. A TransCanada spokesman said the company is continuing its efforts to get North Slope gas to market and that its conversations with the Parnell administration are held in confidence under the terms of its license.

The state gave TransCanada a license, and up to $500 million in reimbursements, to work toward pipeline construction under the Alaska Gasline Inducement Act (AGIA). That effort has focused on a possible gas line through Canada but included the possibility of a pipeline from the North Slope to Valdez for liquefaction and Asia export. As of this summer the state had reimbursed TransCanada $94 million, with the amount set to ratchet up.

TransCanada and Exxon continued Friday with their permitting, design and engineering work for the gas line through Canada. Parnell said the option of a such a project for the North American market remains alive, if frustrating.

The alternative of an "all-Alaska" gas line for export in tankers to the Pacific Rim is not new. It was championed by former Gov. Wally Hickel and by gubernatorial candidate Bill Walker in the 2010 election, among many others. But Alaska governors and oil companies have until recently argued that the North American market has more potential.

A pipeline through Canada that would serve Lower 48 consumers also enjoys federal support that a project for Asia export doesn't. That includes a $21 billion loan guarantee, tax breaks and other benefits passed by Congress seven years ago.

Larry Persily, federal coordinator for the gas line project, said North America is a bigger market for Alaska's gas but nothing is wrong with the oil companies taking another look at whether liquefied gas for export could work.

"I still believe the North American market offers better opportunities but, boy, if they get together on anything I'm just as happy as any other Alaskan," he said.


Reach Sean Cockerham at scockerham@adn.com or 257-4344. The Associated Press contributed to this story.

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