Energy

Alaska governor changes course on gas pipeline, calling for LNG project

Noting that market conditions aren't favoring an estimated $40 billion natural gas line to Canada, Alaska Gov. Sean Parnell told a gathering of oil and gas representatives Thursday he would support a new plan: building a pipeline to tidewater and shipping liquefied gas on tankers.

The current plan -- a line through Alaska to Canada, with permits secured by pipeline builder TransCanada Corp. -- doesn't look favorable anymore with a shale gas boom sweeping parts of the Lower 48. And progress seems to have stalled on Alaska's long-sought pipeline project, Parnell said at an Alaska Oil and Gas Association meeting in Anchorage on Thursday.

More promising is the increased market demand for natural gas in Pacific Rim countries, in part because the tsunami that struck Japan earlier this year cut the availability of nuclear power in the region, he said.

Parnell said he hopes the major players that hold leases to develop Alaska's natural gas on the North Slope -- BP, Conoco Phillips and ExxonMobil Corp. -- will work with TransCanada under the Alaska Gasline Inducement Act in pursuing a pipeline and LNG project, rather than competing.

"This is a very clear message to the companies, as governor of this state, that if they want to reconsider their tact and go with an LNG pipe from the North Slope to tidewater, I'll be flexible with that. But what I want to see from them is greater alignment," he said, speaking with reporters following the announcement.

For more than three decades, the state has tried to encourage oil and gas companies to develop the Arctic gas. When Sarah Palin was governor, the Alaska Legislature passed the Alaska Gasline Inducement Act (AGIA), which set up a framework to move along a project. Part of that process involved awarding a license to TransCanada, a Calgary-based pipeline builder that collected up to $500 million in subsidies to pursue the project.

AGIA allows for an LNG pipeline to Valdez -- also known among supporters as the "all-Alaska gasline."

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If oil and gas producers show interest in the LNG option, Parnell said he'd try to work a bill through the Legislature promising "fiscal certainty." Asked by Alaska Dispatch whether that meant locking in gas tax rates -- as former Gov. Frank Murkowski had proposed in 2006 under another failed pipeline bill -- Parnell said he wants a "tax regime that works for an LNG pipeline."

"I'm willing to enter into discussions with them before the Legislature (meets) and take legislation through this session or 2013 if we get greater alignment under these agreements," he said.

This is a developing story. Check back for updates.

Alex DeMarban

Alex DeMarban is a longtime Alaska journalist who covers business, the oil and gas industries and general assignments. Reach him at 907-257-4317 or alex@adn.com.

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