Alaska gas line project could exceed $65B

Heavy hitters send signed letter to governor's office in attempt to garner support.

Associated PressOctober 3, 2012 

A liquefied natural gas project in Alaska could cost more than $65 billion and would represent a mega-project of "unprecedented scale and challenge," officials behind the project told Gov. Sean Parnell.

In a letter to Parnell released by the governor's office late Wednesday, officials with TransCanada Corp. and the North Slope's three major players said good progress has been made in pursuing a project. But they said "significant environmental, regulatory, engineering and commercial work remains to reach upcoming decisions to bring North Slope gas to market."

They estimated the cost of a pipeline project could range from $45 billion to more than $65 billion, involve up to 1.7 million tons of steel and employ up to 15,000 people during peak construction and more than 1,000 in Alaska permanently. The project concept description lists capacity for a large-diameter line at 3 billion to 3.5 billion cubic feet of natural gas a day. It does not specify the terminus for any line, only that it would run from the North Slope about 800 miles to Southcentral Alaska.

"We will continue to keep you advised of our progress and stand committed to work with the state to responsibly develop its considerable resources," the officials said in their letter.

The letter was signed by Randy Broiles of Exxon Mobil Production Co., Trond-Erik Johansen of Conoco Phillips Alaska, John Minge of BP Exploration Alaska and Tony Palmer of TransCanada.

Parnell set expectations for progress on a major gas pipeline during his State of the State address in January. He has said the timeline was born of frustration with the seemingly stalled progress of the project.

The first benchmarks were to resolve disputed leases at the Point Thomson gas fields and get the CEOs of the North Slope's three major players -- Exxon Mobil Corp., BP and Conoco Phillips -- to coalesce behind plans for an LNG pipeline to get the region's resources to market. Both of those were met in March.

His third benchmark was for the companies to identify a project and work schedule and to have firmer numbers on a project by Sept. 30.

In a news release Wednesday, Parnell said he was encouraged by what he's seen.

This isn't a commitment to build; the documents released Wednesday shows there are several decision points along the way, including after the current concept selection phase. It's unclear when any decisions would be made.

The timelines are rough, and the officials said they could be extended by external factors such as lawsuits, permitting delays and resolution of fiscal terms with the state. The engineering, procurement and construction phase alone could take five to six years.

The energy companies have been vocal in their desire for what they've called "competitive and stable fiscal terms" -- meaning terms on taxes -- from the state, and the documents list a competitive, predictable oil tax environment as one of the important pieces in helping to advance any project.

Parnell had said that if the companies met his benchmarks, then the state could look at gas taxes next year. He has failed in his attempts this year and last to get an oil tax cut passed.

 

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