It is time for TransCanada, Exxon and the state to lay their cards on the table; time to tell Alaskans whether their natural gas pipeline project is deader than Donald Trump's presidential campaign.
To almost nobody's surprise, BP and Conoco Phillips yanked the plug on their Denali gas line project, an effort to build a $35 billion, large-diameter natural gas pipeline from Alaska's North Slope to points south. Who could blame them? The companies said that after more than three years and $165 million they could not drum up enough binding "ship-or-pay" agreements to secure financing.
That leaves former Gov. Sarah Palin's gas line Frankenstein the only project still kicking, but even it is gasping for air, living out its days on the state's generous dole.
The history of this mess is painful. After former Gov. Frank Murkowski hammered out a pipeline deal with North Slope oil companies, the Legislature balked. Detractors said the agreement gave the industry much too much.
In the swirl and hubbub of a juicy legislative scandal, the lovely Sarah P. was elected governor and, determined to drive any lingering Murkowski pipeline ghosts out of Juneau, she conjured up the Alaska Gasline Inducement Act.
Trans-Canada was tapped under AGIA to obtain Federal Energy Regulatory Commission certification for a pipeline -- but not to build the pipeline, mind you -- as part of Palin's misguided, transparent gambit to block North Slope oil industry ownership of any gas line. Critics said the setup was almost certain death for such a project. They may be proved right.
TransCanada, later joined by Exxon, was to receive $500 million in state funds as reimbursement for its efforts to win FERC certification. (The irony of Alaska paying Exxon millions, even indirectly, is palpable.) AGIA requires that TransCanada push ahead with certification efforts, successful open season or not. The company's open season was last year, and TransCanada said it would release information by the end of the year. It did not -- and it has not.
Some in the Legislature increasingly are frustrated with the notion of throwing millions in state dough at TransCanada and Exxon, with no real, visible signs of progress on a gas line. Rep. Mike Hawker was among those earlier this year pushing legislation that would change AGIA language and could force the state to declare the project "not economically viable" and allow Alaska to bail out.
"It is legislation to create a sense of urgency about moving forward with the AGIA process," Hawker was quoted as saying at the time.
So here Alaska sits, its insane oil tax acting as a major detriment to drilling, exploration, production and investment on the North Slope; throughput in the trans-Alaska oil line drying up; and, no gas line, despite there being 35 trillion cubic feet of known natural gas reserves stranded on the Slope -- and that's only onshore.
Innovations in the accepted 60-year-old practice of hydraulically fracturing shale to unlock trapped natural gas are promising to leave the Lower 48 awash in gas for the next 100 years, despite growing environmental squishiness about the practice. It would appear that, because of increased supplies and attendant low prices, our gas line ship has sailed. But nobody here seems worried. Oil prices are high; high enough to support a $4 billion capital budget and relieve a lot of angst. That could change.
Alaskans need some idea about what the future holds. Another bust -- remember the mid-1980s? -- with lines of stuffed U-Hauls streaming out of the state? A slow spiral into a low-paying, service economy? Loss of jobs? A reduced standard of living? Drained state accounts? An income tax? The future could be bleak.
The governor must be the leader this state desperately needs right now. He should invite the heads of TransCanada and the three major North Slope oil companies to a meeting, lock the doors, order Chinese takeout, and ask them point-blank: "What can the state of Alaska do to help you build a gas line, if one can be built?" And then actually listen. Fiscal certainty? Sensible taxes? Final resolution of the Point Thomson mess? Party favors for everyone? Then, be straight with Alaskans while there still is time -- and money -- to change direction, if necessary. In-state gas line? LNG? What are the possibilities? What are the alternatives?
It is time we knew -- one way or the other.
Paul Jenkins is editor of the AnchorageDaily Planet.com.
PAUL JENKINS
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