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Rumors swirl about looming Alaska natural gas project announcement

Amanda Coyne
Aaron Jansen illustration

Rumors from Fairbanks to Anchorage are flying about some sort of imminent announcement by the big three oil companies operating in Alaska -- Exxon Mobil, BP and ConocoPhillips -- involving liquefied natural gas (LNG) and a pipeline to Cook Inlet or Prince William Sound.

It couldn't be confirmed, but some in the know contacted by Alaska Dispatch weren't surprised by the rumors, which be warned, are just rumors.

But these rumors didn't just spring out of the air. Alaska Gov. Sean Parnell recently started laying the groundwork for a shift in the state's direction on marketing its natural gas. Instead of a pipeline to Canada, as is the current plan, Parnell is pushing for an LNG project. The idea would be for an 800- to 1,000-mile-long pipeline from North Slope oil fields to the Kenai Peninsula on Cook Inlet or the Prince William Sound town of Valdez, where the gas would be liquefied and shipped on refrigerated tankers, most likely to Asian countries.

At a Dec. 15 press conference, Parnell said there was a “six-week window” in which he expects to see new “alignment” between companies involved.

But what does “alignment” mean? Perhaps the companies have agreed with Parnell that an LNG pipeline and tanker terminal is the answer to developing Alaska's gas reserves -- the largest conventional natural gas deposits in America.

Alaskans have been struggling to persuade Big Oil to invest in a multibillion-dollar effort to tap the North Slope's vast natural gas reserves since the 1970s, when the state's Arctic oil fields were first developed. Under former Gov. Sarah Palin, the state offered up to $500 million in subsidies to TransCanada Corp. -- the same company spearheading the controversial Keystone XL Pipeline project in the Lower 48 -- to design and begin construction on an Alaska natural gas pipeline. The plan originally was to build the line from Alaska's Arctic oil fields to Alberta, Canada.

It's important to note that any new "alignment" by the companies, though, in no way changes the current economics or state policy in order to realize the fabled Alaska natural gas pipeline. Even if such an announcement takes place in coming weeks, it means only that the "big three" might think about building it. And that, in turn, probably means more years of studies, more years of haggling over how much the state should tax the natural gas on its lands that the companies want to develop.

Remember "Denali: The Alaska Gas Pipeline"? That was a deal BP and ConocoPhillips announced in 2008, in the heat of the state's political debate over Palin's efforts to produce a gas line. The companies proclaimed they would be building a gas pipeline to Canada. BP Alaska's president at the time dismissed skeptics, saying essentially, "Let our actions speak for themselves."

BP and Conoco gave up on Denali in mid-2011.

Perhaps the only tangible result that an announcement from BP, Conoco and Exxon would have on Alaska is to vindicate those who throughout the years have been saying that the LNG option was the best way to get Alaska’s gas to market. The "LNG crowd," as some circles once referred to those who proposed an all-Alaska gas line. They were often dismissed with a roll of the eyes, called "wing nuts" for daring to propose such a project.

But maybe the three big oil companies have another reason for some announcement, timed just before another contentious session of the Alaska Legislature, as Parnell rolls out his State of the State address.

The companies think that a Palin-era tax levied on them is too high. Parnell has been trying to get the tax lowered but has run up against resistance from Democrats and Republicans alike in the Alaska State Senate.

The oil companies could be taking a stick and carrot approach: "We'll build you a damn LNG project, but you must lower our oil taxes." And Parnell -- who could use a big project before his term ends, especially if he wants to run for a second term or another office (watch out, Sen. Mark Begich) -- may be pushing them along in this direction.

Indeed, the last time all three companies agreed to build a pipeline together was under Gov. Frank Murkowski in 2005-06. But for them to build a pipeline, they demanded that the state not raise oil and gas taxes for decades.

Even then, they were only committed in principle to build a line. There were no construction dates.

And look where that got Alaska.

Contact Amanda Coyne at amanda(at)alaskadispatch.com