It's easy to be confused by all the gas pipelines being worked on. There's a logic to the work being done, however. At this point it's all about developing options, which is prudent. However, we'd better take a really deep breath before we decide to actually build something, if it involves public dollars.
One project is the big 1,700-mile, 48-inch pipeline from the North Slope to Alberta, which is in an engineering phase. TransCanada Corp. and Exxon Mobil Corp. are involved, both large, competent companies that know what they're doing. However, with all the shale gas in the Lower 48, this project doesn't look very good for now. But who knows what things will look like in 20 to 30 years?
If this is built, a smaller "spur" pipeline could branch off at Delta to bring gas 300 miles to Southcentral Alaska via Glennallen. The Alaska Natural Gas Development Corp., or ANGDA, a state authority, has done work on this.
If the big pipeline doesn't go, engineering is under way on a fallback plan, a separate, stand-alone 24-inch pipeline from the slope to Southcentral Alaska, the so-called "bullet line." This is being pursued by another state corporation, the Alaska Gas Development Corp., or AGDC. The bullet line would be 737 miles in length and would cost about $7.5 billion.
The people working on this are getting good marks for the work they're doing. There is criticism that the political sideboards on the project, mainly a restriction on the amount of gas that can be shipped because of the state's contract with TransCanada, could cripple its economics.
Finally, there is a 800-mile pipeline from the slope to Valdez, parallel to the trans-Alaska oil pipeline, that could serve a possible natural gas liquefaction, or LNG, plant. This is promoted by the Alaska Gasline Port Authority, or AGPA. The port authority was formed by municipalities and is not a state corporation. Substantial sums have been spent on this by Yukon Pacific Corp. and others.
With LNG prices in Asia at high levels, it is getting more attention.
Of all these, the only project being led by the private sector is the large 48-inch pipeline by TransCanada Corp. and Exxon Mobil Corp.
The port authority has a relationship with Japan's Mitsubishi Corp. and Sempra Energy, a U.S. firm, both interested in LNG, but the nature of these relationships is confidential.
The state has financed work on three of the four initiatives: the 48-inch pipeline to Alberta, the spur line via Glennallen and now the separate 24-inch pipeline from the slope to Southcentral. About a billion dollars will have been spent among all these.
Other ideas have been proposed. Gas-to-liquids (GTL) is being increasingly looked at as a fallback in case all of the pipeline projects fail, or even in addition to a pipeline. A gas-to-liquids plant on the North Slope would get more fluids moving through the trans-Alaska oil pipeline, which is badly needed. A GTL plant in Southcentral Alaska would be a big industrial customer for a spur line or bullet line, which is absolutely necessary for the bullet line and helpful to a spur line.
The important thing about GTL is that it makes high-value liquid products, like diesel and jet fuel, and would sell into markets for these fuels, not LNG or natural gas markets.
To complicate things further, work is also starting on the large Watana hydro project. A $67 million commitment this year could lead to multibillion-dollar outlays by the state in just a few years.
If all of this is confusing, it's understandable. There's a lot of angst about all this in the Legislature and it's clearly a case in which leadership must soon be exerted to sort things out. Sean Parnell is the guy we elected to do that.
Some sensible advice is being offered, though. Anchorage businessman David Gottstein suggests we step back and do a careful analysis of all these options, including gas-to-liquids, to see where the public interest is best served. Gottstein is a financial guy and his idea is a straight analysis of the state's bottom line. Other factors should be in the matrix, though, such as the cost of energy to consumers.
Cool-headed analysis is needed so we don't make the wrong choices if big bucks from the state are needed.
The "bullet line" is basically insurance in case the big line doesn't go and we need the gas. Having this in our back pocket ready to go is important and getting the engineering done is wise. However, we are finding more gas in Cook Inlet thanks to new state incentives (good work, legislators), which could ease some of the urgency.
In fact, we should take care that talk of a state-funded bullet line doesn't actually discourage new Cook Inlet drilling, which it could. Likewise, a new plan to truck liquefied gas, or propane, from the North Slope to Fairbanks could take some of the edge off that community's energy crises.
If the big pipeline does wind up being built -- TransCanada says it does have at least some interested customers -- the more sensible pipeline to build to Southcentral might be the shorter pipeline from Delta through Glennallen, because it is shorter and it preserves the option of a pipeline leg to Valdez, to an LNG plant.
If I were the governor's energy czar, I would do these things: We should let TransCanada and Exxon Mobil continue work on the big pipeline and give them more support by establishing a framework for state taxes on gas production, which would help North Slope producers commit to the project; simultaneously, we need to take a really hard look at LNG exports, either through Valdez or Kenai, because LNG in Asia looks pretty good, at least now. We should encourage TransCanada and the gas producers to look at this too.
We need to take a hard look at what it will really take to get large new industrial customers in southern Alaska, like gas-to-liquids, LNG or sales of gas liquids like propane. This is crucial to the bullet line and it helps the spur line.
Above all, let's keep focused on what's really important, which is preserving the viability of the oil pipeline and revenues to our state. If the oil pipeline goes down, we really should just turn out the lights. Gas won't matter then.
Tim Bradner writes for an Alaska economic reporting service. He also consults for private clients and writes for business publications. His opinion column appears every month in the Daily News.
TIM BRADNER
ECONOMY