Energy companies, senators, state share visions for gas pipeline

ldemer@adn.comFebruary 26, 2014 

Tony Palmer of pipeline developer TransCanada talks to Sen. Anna Fairclough, R-Eagle River, on Wednesday, February 26, 2014 after a Senate Finance Committee hearing on the proposed $65 billion liquefied natural gas project.

LISA DEMER — Anchorage Daily News

JUNEAU -- With the Legislature considering investment in a liquefied natural gas project that could cost $65 billion, some senators on Wednesday pressed oil producers and a state official on what's in it for Alaskans.

Executives of Alaska's three major producers, pipeline company TransCanada and the Alaska Gasline Development Corp. -- the state's new corporation -- sat alongside lawmakers around the long wooden table that dominates the Senate Finance Committee's fifth floor hearing room. Their goal: one of biggest infrastructure projects ever in North America, with the state as their partner.

The complex and costly project is intended to bring the long-stranded North Slope natural gas to commercial markets. Gas would be treated at a North Slope plant to remove impurities, then travel down an 800-mile pipeline to Nikiski, where it would be liquefied and put on tankers for export to Asia.

Alaska is rich in energy resources yet residents are burdened by some of the highest energy costs in the nation, senators noted.

Even if the pipeline were built, getting gas from it to communities hundreds of miles away -- from Western Alaska to rural Interior to Southeast -- arises as another expensive engineering challenge.

Legislation proposed by Gov. Sean Parnell, Senate Bill 138, creates a framework for the project. Details would be filled in with contracts that would come back to the Legislature for approval.

Gas would be drawn off the big pipeline for Alaskans through five off-takes, under already signed guiding documents called "heads of agreement." Fairbanks would be ensured gas but the other locations haven't been decided. It also is not known what would happen from there.

"Basically those off-take points are a T in a line with a valve," Bill McMahon of ExxonMobil told the committee.

To get gas to Alaska buyers, the pressure would have to be reduced, and the heating content may need adjustment, McMahon said.

"That's what we have envisioned as far delivering gas to Alaska's customers," he said. "Our project is focused on the pipeline and the LNG plant."

McMahon said maybe the Alaska Gasline Development Corp. could take on the engineering for what he called "a step-down facility."

Pat Flood of ConocoPhillips and Dave Van Tuyl of BP said they agreed.

Sen. Lyman Hoffman, D-Bethel and one of the longest-serving state lawmakers, told the oil executives that he didn't want a natural gas pipeline to be like the water wells drilled years ago in rural Alaska. "Everybody in the community had to come to that point and pack their water to their home," Hoffman said. Those who lived too far away never got the benefit of well water.

"In this legislation Alaskans need to know that we are going to benefit from this gasline directly and not have to go from Quinhagak with a propane bottle to Fairbanks," the senator said. The Yup'ik village near the Bering Sea coast is hundreds of miles from Fairbanks.

If a big pipeline is built from the North Slope, but gas never reaches most Alaskans, "we've defeated our purpose," Hoffman said.

Exactly, said Sen. Mike Dunleavy, R-Wasilla, who joked that Hoffman had channeled his thought.

"This isn't really a rural vs. urban issue as much as much as it is a location-near-cheap-energy issue," Dunleavy said. "In the Mat-Su Valley, I have no gas. We heat with wood and we heat with oil."

Enstar Natural Gas Co. serves the populated areas around Wasilla and Palmer, but much of the Mat-Su has no natural gas distribution, a spokesman said.

"What does this pipeline do for us as residents?" Dunleavy asked. "If we don't provide cheap energy for our people, they are going to migrate."

Sen. Pete Kelly, R-Fairbanks and the committee co-chairman, said this year's legislation is intended to advance the multi-staged project, not answer the question.

"It gets us to the point where we can answer that question," Kelly said.

Dan Fauske, president of the Alaska Gasline Development Corp., said AGDC has been meeting with various communities hungry for cheap energy all along. The corporation is working to develop a smaller-diameter pipeline as a fallback in case the big project falters and will work with either project to get gas to Alaskans, he said.

For instance, the Donlin Gold mining project near Bethel has talked about building its own gas pipeline that would tap into the main line. That would get gas within 150 miles of Bethel, he said.

"I believe that the ability exists to get the resource closer and then entrepreneurs and others can start factoring out ways to get gas to our residents," Fauske told the senators.

"I've always stated that oil builds the treasury, gas gives us security." This project might do both, he said.

Sen. Donny Olson, D-Golovin, said it didn't matter if the gas is 800 miles away or 100 miles away -- it has to be brought to "the burner tip," using what's fast becoming legislative lingo for getting gas to the people.

Could Fauske come up with changes to the governor's bill to ensure that? he asked.

Fauske said the pipeline for moving gas has to be built first.

"Right now it's at Prudhoe, which is almost like saying it's on Mars," Fauske said later.

With a pipeline, many possibilities emerge, even extracting propane and shipping it from Valdez to Southeast, he said.

"They are worth exploring. Are they all doable? Probably not. But are they worth looking at? Absolutely."

 

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