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Paul Jenkins: Alaska needs a gas line - but at what price?

Paul Jenkins

It is another mega-dose of déjà vu all over again. A gas pipeline from the North Slope. Huge. Billions. Hope. Jobs. Finally. Yippee!

Is anything new under the sun?

This time, consultants say Alaska should consider investing billions to buy a piece of the action. It is not a new idea. State participation would brighten pipeline economics and spread risk, they say, but is it worth the gamble? Will the line be built anyway, with or without the state?

As North American gas prices have slipped, they skyrocketed in places such as Japan, which understandably is shying away from nuclear power. Natural gas demand is strong in Asia and is expected to grow in coming decades even as huge new fields come on line and others wane.

In October, liquefied natural gas brought $16.03 per million British thermal units in Japan compared to contract prices of less than $4 mmBtu at Henry Hub, a Louisiana distribution and pricing point for natural gas futures trading.

The plan this time has ConocoPhillips, Exxon, BP and pipeline company Trans-Canada Corp. joining to build a 42-inch straw to siphon off up to 3.5 billion cubic feet of natural gas daily from Prudhoe Bay and Point Thomson to an LNG plant and export terminal likely in Nikiski.

The price tag? Perhaps $65 billion.

Alaskans' pipe dreams started in the 1950s, when the Navy discovered gas in the Gubik Formation, 300 miles north of Fairbanks. Since, the dream has blossomed and faded In 1967, when huge gas reserves were found in Prudhoe Bay, Alaskans waited. In the mid-1970s, as the trans-Alaska oil pipeline was built, Alaskans waited. As governor after governor tried to entice somebody, anybody, to build a line to move Alaska's gas riches to market, Alaskans waited.

In 2007, then-Gov. Sarah Palin rammed through the Alaska Gasline Inducement Act, designed to keep North Slope producers from building a line. The state even promised TransCanada $500 million to get a line certified. Fracking and the flood of oil and gas it produced in the Lower 48 killed the main proposal in AGIA to sell gas in North America.

Alaskans waited while BP and ConocoPhillips formed the Denali pipeline project, done in by fracking, and then as TransCanada and ExxonMobil continued to work on the Alaska Pipeline Project.

Gov. Sean Parnell last year prodded North Slope producers and demanded planning and spending for yet another line. Some of his benchmarks were met; some not. The companies still have not committed.

What would Alaska's investment cost be for the proposed LNG project? Between $9 billion and $15 billion, depending on percentage share and eventual cost - and any return may be a long time coming. Lawmakers likely would have to appropriate a wad of cash and borrow the rest. Then, there is that fiscal terms bugaboo that pops up every time a pipeline is mentioned. The industry wants taxes and other costs etched in stone before committing.

Investing's advantage? It gives Alaska a seat at the table and a piece of the pie. It guarantees information access and a say. While the state would get only one vote at that table, it is one more than it had during construction and operation of the oil pipeline, something that still rankles many and drove Palin's peculiar AGIA.

In the wings, there is an $8 billion, 36-inch diameter in-state gas line that may be built by the Alaska Gasline Development Corp., now a state-funded corporation. It is a sideshow. Almost everybody agrees: If there is to be a line, there will be only one.

Since the Chinese in 200 BC delivered natural gas in bamboo pipes to evaporators making salt from brine, it has been a valuable commodity -- and Alaska has trillions of cubic feet more than most and needs to get it to market.

Unfortunately, the state -- as it has before -- could screw up the works. Bureaucrats are not businessmen. Do we need a gas line? Absolutely. Do we want state money involved? The threshold question: Is it absolutely necessary?

This is clear: If, in a swoon of masochistic myopia next year, we foolishly repeal Senate Bill 21, any pipeline question is moot. It will not happen.

It's like déjà vu all over again.

Paul Jenkins is editor of the AnchorageDailyPlanet.com, a division of Porcaro Communications, which is performing services for the "Vote No on 1" anti-repeal effort.



By PAUL JENKINS