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State working exclusively with Enbridge on proposed small gasline

Alex DeMarban

Alaska’s long-sought mega-gasline project recently moved forward as three big oil companies, the state and a pipeline builder agreed to conduct some $500 million worth of preliminary engineering and design projects over the next year and a half.

But don’t forget the small gasline that might one day be built instead of its larger cousin.

An official with the Alaska Gasline Development Corp., which is simultaneously working on both projects, said the proposed $7.7 billion smaller line is alive and well.

Calgary-based Enbridge is exclusively talking with the state and weighing a possible partnership that includes building and operating the small line and some level of ownership, said Miles Baker, director of government relations and external affairs for the state gasline corporation.

There is no binding agreement with Enbridge, but the Alaska gasline board approved the exclusive discussions with Enbridge in May, said Baker. The company has signed a confidentiality agreement as it studies the corporation’s engineering and design work on the project.

“If Enbridge decides they’re not interested or things don’t come to fruition, there is nothing to prevent us from going to other companies we spoke with,” said Baker.

Enbridge was chosen from about 10 companies as the state gasline corporation sought a company with a strong balance sheet, a good safety and operational history and Arctic or sub-Arctic experience building and operating pipelines, Baker said.

Enbridge built and has successfully operated the Norman Wells Pipeline in Canada's Northwest Territories for close to 30 years, said Larry Springer, a spokesman with Enbridge.

“That is in the permafrost,” he said. “We have experience operating in rugged conditions.”  

The Legislature has so far appropriated about $420 million for the 727-mile, 36-inch diameter pipe from the North Slope to Point MacKenzie with a spur line to Fairbanks. The state may be a partial owner. It’s primarily seen as meeting in-state gas needs and is currently designed to provide about double the current in-state demand for natural gas.

The extra gas could be used for new industrial projects -- helping power mining operations, for example -- but there could also be some available for export. The size of the line could also grow, increasing the amount of gas it could carry, Baker said.

The state and another Canadian pipeline builder, TransCanada, recently agreed to end their partnership under the Alaska Gasline Inducement Act, which had limited the size of the small line to its current design: up to 500 million cubic feet of natural gas daily, about one-seventh the size of the big line.

TransCanada is now working on the big pipeline outside the auspices of the AGIA agreement, in partnership with ConocoPhillips, ExxonMobil, BP and the Alaska Gasline Development Corp. The parties recently inked a confidential agreement to move forward with preliminary engineering and design work. The state’s bill for the upcoming work is expected to cost about $50 million to $60 million, he said.

The oil companies are expected to soon file an application with the Department of Energy to export the North Slope’s massive natural gas reserves overseas.

That big line is expected to cost $45 billion to $65 billion or more and would not be operational until 2025 or 2026. The proposal includes a 48-inch, approximately 800-mile pipeline from the North Slope to Nikiski and a plant to super-chill the gas for export. By late next year, the companies must decide whether to carry on with the project and move onto costlier engineering and design work. The Legislature would also have to approve it.  

The smaller line is expected to cost $7.7 billion, and could be operational as early as late 2020. With less gas available for export under its current design, it would likely bring the state less revenue than the big line. 

The discussions between Enbridge and the state have been “substantive,” said Springer. Enbridge has been growing its operations in recent years, adding about $16 billion worth of transport projects since 2008, he said.

If the smaller line, known as the Alaska Stand Alone Pipeline, is viable, the final investment decision is proposed for late 2016 if regulatory approval falls into place, he said.

“We’re very early in this, but we’re looking to become the owner, builder and operator,” he said, adding that the level of ownership may yet be determined.