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Is Alaska inching closer to funding a gas pipeline?

Amanda Coyne
Jill Burke photo

Gov. Sean Parnell's surprise announcement last week that he now supports an LNG pipeline project -- the first governor to do so since Wally Hickel was at the helm -- has many wondering what comes next in the decades-old quest to tap the state's vast Arctic natural gas reserves.

The latest twist in the gasline saga begs a slew of questions:

* If the pipeline runs from the North Slope oil and gas field to tidewater, as Parnell now advocates, will the terminus be in Valdez or somewhere else?

* Will the state assume a more active role in ensuring the line is built someday?

* And will Alaska decide to invest state money in building and owning the gasline?

What did Parnell mean by tidewater?

In his address to the Alaska Oil and Gas Association on Thursday, Parnell said he favors a natural gas pipeline running from the North Slope oil fields to a “tidewater” port. There the natural gas would be liquefied and shipped around the world on LNG tankers.

Parnell did not say where he thinks this LNG port should be located. Based on interviews Friday with several state officials and experts, it remains anybody's guess where the line could end up.

Timeline: Key events in Alaska's quest for another pipeline boom

Parnell spokeswoman Sharon Leighow said "the markets" would dictate the location. The LNG port might be built in Nikiski, on the Kenai Peninsula, or somewhere in the fast-developing Matanuska-Susitna Borough north of Anchorage. Or it could be located in Valdez, where the 800-mile trans-Alaska oil pipeline terminates.

All three regions have deepwater ports. It's unclear, however, if the ports in Nikiski or the Mat-Su could handle the LNG tankers that would serve the pipeline.

But practicalities have never held Alaska's politicians from engaging in turf wars, and this one will likely be no different.

Both the Mat-Su and Nikiski have powerful legislators representing them, and those lawmakers have much to gain in landing a pipeline project that would bring to their constituents thousands of construction jobs and possibly new industry.

Is support increasing for a state-owned pipeline?

Even before Parnell announced he was changing course with the pipeline route, some legislators had been pressing him to get the state more involved in the project.

Now with the possibility of the line being built through the heart of Alaska -- rather than from Alaska to Canada, as previously proposed -- some wonder whether Parnell would also support state ownership of the line.

State Sen. Lesil McGuire, R-Alaska, has been especially vocal on this issue.

"I've long held the position that the best thing the state of Alaska can do with its triple-A bond rating is to lend money to qualified projects," particularly energy projects, McGuire said in an interview.

She wants the state to take on an equity share in the project -- at least around 12.5 percent. That would reduce industry's financial risk and encourage them to build the line, as well as ensure the state could effectively monitor the transportation fees charged for shipping gas in the line.

"Owning a share of the line gives us skin in the game," she said.

In 2006 when former Gov. Frank Murkowski was hoping to get the gas pipeline project under way, he proposed the state own 20 percent. He also proposed decades-long tax breaks on the gas, which many Alaskans didn't care for.

Delegation throws support behind new plan

U.S. Sens. Lisa Murkowski and Mark Begich are also urging the state to invest in the pipeline.

Last month, Begich suggested to Parnell that the state help get a gasline off the ground by using a fund to guarantee loans to companies that invest in the construction. Begich noted the state should take on this role in part because federal support for the project could wane as Congress deals with the deficit.

In the wake of Parnell's announcement, Murkowski's office released a vague statement calling on the state to consider "the benefits of providing a level of support for accelerating construction of a large-diameter line as far as Fairbanks."

When pressed to elaborate, Murkowski energy spokesman Robert Dillon said Washington wasn't telling Juneau how to conduct its affairs. Rather, the senator was urging all sides to come together to discuss the best path forward to making a gas pipeline reality.

"Any gas line has to go to Fairbanks," he said. "Is there is a benefit in (a) state contribution? Will that help or not?" These are the kinds of issues Murkowski hopes to see discussed, Dillon said.

The mention of Fairbanks, however, sounded less an abstraction and more like a specific idea, as did the state getting involved in funding the line.

David Gottstein, an investment adviser and member of Alaska's famous Gottstein family, has pushed for the state to fund a gas pipeline that would run from the North Slope to Fairbanks. The state's investment, Gottstein said, would take the form of loan guarantees. In exchange for building the line, Alaska would own the excess natural gas -- gas the builder of the pipeline couldn't immediately sell.

Gottstein said he's been talking to Murkowski and Begich about his plan and has found a receptive audience with both.

Parnell has yet to say if he is willing to consider state ownership of a pipeline project. McGuire, who's spoken recently with the governor, believes Parnell's change of mind on the line's route shows his evolving thinking of the project.

For a pipeline to ever be built, it "is going to take state efforts, and the governor's announcement was a realization of that," she said.

Contact Amanda Coyne at amanda(at)alaskadispatch.com