Over the past several months there has been a sea change of support and acknowledgment that the best option for Alaska's natural gas is in the form of LNG at tidewater, sold into the premium Asian markets on long-term contracts.
We have now heard this from Gov. Parnell, Exxon Mobil CEO Rex Tillerson, Conoco Phillips CEO Jim Mulva and BP CEO Bob Dudley. They join the chorus of the 138,000 Alaskans who said the same thing at the polls in 2002 and in nearly every opinion poll taken since.
And last November, the Alaska Municipal League, after reviewing all proposed gas line projects and hearing from their proponents, overwhelmingly passed a resolution supporting the building of the all-Alaska gas line from Prudhoe Bay to Valdez for LNG shipment to the Asian market. The Alaska Gasline Port Authority has recently released the results of several studies. The "Alaskan LNG Exports Competitiveness Study," conducted by world energy experts Wood Mackenzie, concluded:
• LNG from Alaska could be delivered into the Japanese market for $8.50 per thousand cubic feet (mcf) while other projects being developed elsewhere around the world and in the Lower 48 had much higher delivered cost to Japan, as high as $12.17/mcf.
• Revenues to Alaska from the sale of LNG to the Asian market would be very significant and could generate between $220 billion and $419 billion for Alaska over a 30-year period; plus there is enough gas in Alaska for this project to continue to operate for well over 100 years.
• Given Alaska's proximity to Asia, our LNG shipping costs are 80 percent cheaper than other LNG projects' shipping costs.
The second study was performed by the PDC Harris Group to determine the magnitude of the reduction of cost of energy in Alaska from a large volume pipeline to Valdez with an export of excess gas not needed in Alaska. That study found, for example:
• From the economy of scale of this large project, the cost of energy in Fairbanks would be reduced by 80 percent. The predicted total value of the fuel savings in the Fairbanks area is $2.4 billion over a 30-year period.
• The cost of energy in Bethel would be reduced by as much as 65 percent by using LNG shipped out of Valdez. The fuel savings in Bethel would range from $229 million to $886 million over a 30-year period.
The third study, "Comparison of Current Alaska Gas Pipeline Proposals" by the McDowell Group, found that when the benefits to Alaskans from the small volume bullet line versus the all-Alaska gas line/LNG project to Valdez were compared, these findings resulted:
• Pipeline tariff to Fairbanks:
Bullet line = $7.75
All-Alaska line = $1.15
Bullet line = 5,400 during construction
All-Alaska line = 21,000 during construction
• Revenue to state:
Bullet line = $3.75 billion to $4.57 billion over 20 years
All-Alaska line = $75 billion to $419 billion over 30 years
So there it is. This is the evidence needed to know which project brings the most to the most Alaskans. The all-Alaska gas line is by far the superior of all the options.
While it is encouraging to see all the parties lining up giving verbal acknowledgement of the best option, unless Alaska steps forward and takes control of this project through ownership of the infrastructure, nothing will change and we will continue to expend precious money and time chasing inferior projects. Around the globe, inferior large-scale projects will be advanced while we continue to argue and study, which will only ensure that our massive reserves of high-grade gas remain stranded.
And like fools, residents and businesses of energy-rich Alaska will continue to pay exorbitantly high energy prices.
Bill Walker ran for governor in the 2010 Republican primary. He is the owner of an Anchorage law firm with an oil and gas and municipal law practice and serves as general counsel for the Alaska Gasline Port Authority.