What's next for Alaska gasline projects?

ldemer@adn.comApril 15, 2013 

Just two days after a new framework for a long-sought Alaska natural gas pipeline cleared its final legislative hurdle, prominent Alaska insiders with differing views on the best prospect for a pipeline continued the debate Monday before a big Anchorage Chamber of Commerce crowd.

With the passage Saturday of House Bill 4, the state is investing heavily both in the controversial small-diameter pipeline set in motion by the new legislation and the separate but slow-moving and much larger project led by TransCanada that was begun during the Palin administration.

So what happens now? The big pipeline, which could cost more than $65 billion, isn't dead, and the $8 billion small pipeline isn't certain, so in terms of developing North Slope natural gas, anything can happen and nothing may happen.

On that much, former Gov. Bill Sheffield, former Republican gubernatorial candidate Bill Walker, federal pipeline coordinator Larry Persily and business journalist Tim Bradner seemed to agree at Monday's forum, called "The Politics of Alaska's Gas Pipeline."

Anchorage Chamber President Andrew Halcro, himself a former governor candidate, asked the four to address whether a gas pipeline will bring cheap energy to all Alaskans.

"It depends on what size it is," said Walker, a proponent of a big, all-Alaska pipeline that would deliver gas from the North Slope to an export terminal in Southcentral Alaska. A pipeline only big enough to ship what Southcentral Alaska now consumes would double natural gas prices here, he said. But a big one that could transport North Slope gas for commercial export to Asian markets would bring the price down through economies of scale.

"There is no more cheap gas," Persily said. "People have got to get over that."

But like Walker, he said a big pipeline means cheaper gas for Alaska consumers than a small one.

With huge liquefied natural gas projects already in development around the world, Sheffield said the state may be too late for a big 48-inch commercial line like the one being pushed by the Parnell administration.

In talks around the state this year, Sheffield promoted the smaller 36-inch line, which got a push with passage of the bill sponsored by House Speaker Mike Chenault, R-Nikiski, and Rep. Mike Hawker, R-Anchorage.

"I don't give a hoot if we sell any gas to Asia," Sheffield said. "This is gas for Alaskans ... up and down the rivers and across this state."

He said one way to bring down the cost of the gas is for the state to pay for the pipeline itself, so that shippers wouldn't have to cover construction costs through shipping fees, or tariffs.

"If I had my way about it, we'd just take $7.7 billion out of the treasury ... pay for it, and then get the tariff down, so there is no tariff," Sheffield said.

The state already is putting $330 million into the project, to be run by the Alaska Gasline Development Corp., which under the new legislation has authority to finance and design the pipeline, obtain rights of way and material, and negotiate agreements with companies that want to move gas. The construction is expected to be paid for with bonds, but if fees charged to shippers don't generate enough money, the state would have to step up.

At the same time, the state is paying up to $500 million toward TransCanada's big pipeline. Parnell has set various benchmarks for TransCanada and the three major North Slope oil producers to work together on that pipeline.

The governor is "jawboning" the oil company executives by setting milestones," Bradner said. "It's been a bit of a token response."

With the new legislation pushing a smaller pipeline, the governor could essentially threaten the North Slope producers that if they don't make a deal with utilities to buy the gas, the state will make its own deal.

"That would certainly get things moving a little bit faster," Bradner said.

Walker, an oil and gas lawyer with a construction background, said it's misguided for the state to switch its attention to the smaller pipeline rather than push harder on the big pipeline, which is being developed through the Alaska Gasline Inducement Act, or AGIA.

"In AGIA, we framed up a house. We got to a certain point and ran into a problem. Rather than fix that engineering problem, we decided to frame another house," said Walker, a former Valdez mayor and its current city attorney.

The city of Valdez, which supports a big pipeline, spent at least $800,000 in a campaign against the House bill. John Hozey, Valdez city manager, said Monday in an interview that only one gas pipeline will be built in Alaska, and it should be the big one, to bring the most benefit.

Supporters of the smaller pipeline say it's a backup in case the big line never gets built.

Hozey said things are backward.

"This backup plan is going first," he said.

 

Reach Lisa Demer at ldemer@adn.com or 257-4390.

 

 

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