Has the Palin administration hurt prospects for a gas line by taking a tough stand against extending state oil and gas leases at Point Thomson?
Yes, say the oil companies that have held leases there for more than 30 years. "Without Point Thomson gas, a gas line may be unnecessarily delayed, stalled or downsized," Chevron told state legislators in a letter this week. Palin administration critics echo that complaint.
They're wrong. Here's why.
It's true that Point Thomson holds a major chunk of the gas that would eventually flow through a North Slope gas pipeline. If the state takes back the Point Thomson leases, bringing the field into production would be made more complicated. To start with, we can count on years of litigation over who holds the rights to oil and gas in the field. And once that's settled, Point Thomson is a geologically complex reservoir that will be challenging and expensive to develop.
But a pipeline won't require Point Thomson gas from Day 1.
Chevron, a major leaseholder there, admits as much. In its letter to legislators, the company indicates the alternative to Point Thomson gas is to draw more gas from Prudhoe Bay. Chevron says that's a bad option, contending "Alaska will lose valuable oil revenues if gas from Prudhoe Bay is prematurely diverted into a pipeline."
The key word there is "prematurely."
Prudhoe Bay has been producing oil for 30 years. Any gas pipeline won't start operating for another 10 years. That means Prudhoe Bay will have at least 40 years where gas production took a back seat to oil production.
Here's what an independent expert, state oil and gas commissioner Cathy Foerster, said on the subject, in a recent e-mail to Deputy Natural Resources Commissioner Marty Rutherford:
"The trends indicate that (gas) offtake from Prudhoe Bay can adequately supply either of the two gas pipeline projects currently under consideration."
Foerster cautioned that changes in current oil production trends at Prudhoe could affect how much gas is available, and measures to mitigate the loss of oil as gas is produced would have to be put in place.
TransCanada isn't deterred by the complicated status of Point Thomson. The company's Alaska vice president, Tony Palmer, told the Daily News on Wednesday, "We are confident (the North Slope) is a prolific basin ... It has an unusually high volume of proven gas reserves."
When TransCanada is developing a pipeline, Palmer said, the touchstone is whether the basin has 10 years of proven reserves to feed the project. With that level, the company and gas drillers can be confident they'll find enough to fill the line in question.
At 4.5 billion cubic feet a day, TransCanada's preferred initial project size, 10 years of reserves would be 16.5 trillion cubic feet. Prudhoe Bay alone has 24 trillion -- a cushion almost 50 percent over the norm.
Plus, there's more gas at Alpine, Kuparuk and other smaller North Slope fields. And it would be hard to find a geologist who thinks drillers won't find even more gas on the North Slope, once it makes economic sense to go looking for it.
An Alaska gas pipeline faces a lot of uncertainties, but having enough gas is not one of them.
BOTTOM LINE: Experienced pipeline builder TransCanada says the North Slope basin looks like a great prospect for a gas line.