Companies with rights to develop Alaska's vast natural gas reserves will be asked again whether they are interested in shipping their gas on a proposed multibillion-dollar pipeline.
This latest request by TransCanada Corp., which is licensed to study a natural gas pipeline under a state of Alaska contract, will differ from one held two years ago because it will be an informal process that seeks no binding commitment from interested parties.
Instead, this latest move by the Alaska Pipeline Project, as the companies have dubbed their effort, is sort of like placing an advertisement in a newspaper to gauge interest, said Larry Persily, the federal pipeline coordinator.
It's a smart idea before the companies spend hundreds of millions of dollars studying such a line. Much of that money could come from the state: Their agreement with the state, signed under former Gov. Sarah Palin, offers to reimburse up to $500 million of the cost to study a pipeline project. So far, the state has written checks of about $180 million to TransCanada.
"This is a logical step in the process and Alaskans should at least be happy knowing the project isn't dead," Persily said.
The long-anticipated gas pipeline -- estimated to cost $40 billion or more -- is considered key to Alaska's economic future, in part because of the construction frenzy the line would produce. More importantly, revenues from production could serve as an antidote to the North Slope's falling oil production and the massive cuts to state income that are expected to follow. Despite the enormous benefits, the initiative's been on hold for decades, a victim of its massive costs and uncertainty over the future of global demand for natural gas.
Time will tell if this latest effort will be more than another round of paper-pushing and political grandstanding.
One big obstacle now, it seems, is that companies are racing to build natural gas plants wherever they can, which could reduce the need for Alaska's gas.
On the other hand, natural gas demand could explode in coming decades, and utilities around the world will want a diverse supply, including from politically stable countries such as the U.S., said Persily. Those factors could create an opening for Alaska.
Huge potential
Natural gas in Alaska has risen to the surface with oil for more than three decades at Prudhoe Bay, the nation's largest oil field. But the oil producers have pumped nearly all of it back underground, in part because there's no gas pipeline to move it.
Some 35 trillion cubic feet of natural gas is said to be there, waiting to be tapped and shipped to market, mostly likely in the Lower 48 or Asia.
TransCanada, which is partnering with ExxonMobil Corp. on the pipeline work, will gauge interest for two weeks starting Aug. 31. Their request is a "mechanical" move required every two years under the state contract, said Mark Morones, outreach program manager for the state's Alaska Gas Pipeline Project office.
On the table under the contract are two possible routes. Both would start at the North Slope and extend to a community in Interior Alaska. But things would change significantly from there.
The "all-Alaska" route, as it's sometimes called, would extend 800 miles or so from the North Slope to a tidewater location in Southcentral Alaska, such as Valdez. There the gas would be processed into liquid for shipping by oceangoing tankers.
The second option, rather than slicing down the middle of the state, would head east into Canada, maybe at Livengood, Fairbanks or Delta. It would connect with a pipeline network near the border of Alberta and British Columbia.
The route to Canada was under consideration two years ago. That's when TransCanada and Exxon held a formal "open season" under the Federal Energy Regulatory Commission. No company committed to shipping natural gas then.
Morones said he's sure companies will step forward to express interest this time, because there is no binding commitment. Potential parties include the North Slope's major oil producers, BP, ConocoPhillips and also Exxon.
Gov. Sean Parnell has said this year that he prefers an-all Alaska pipeline because that would allow liquefied natural gas to be shipped to the growing Asian market, where demand and prices have soared.
Looking at that option is important to the governor, but "in no way, shape or form are we abandoning the Alberta option," Morones said.
Having multiple routes on the table gives interested parties more flexibility, and allows companies to voice their preference for the best option, he said.
Much of the information to gather, such as environmental data like the best river-crossing site, will be useful no matter which route is chosen because both paths are initially the same for hundreds of miles, said Morones.
Morones said the state has reimbursed TransCanada about $180 million for its work so far.
The solicitation, set to end Sept. 14, will come just in time to meet another of the governor's deadlines for the project. In his state-of-the-state speech in January, Parnell said he wants TransCanada and Exxon Mobil to produce a work schedule for a liquefied natural gas project.
Also moving forward, at least on paper, is another long-awaited project that some say needs to compel construction of the natural gas pipeline. That involves development of the Point Thomson field 60 miles east of Prudhoe Bay, where one-fourth of the North Slope's gas reserves are said to lie. The state has battled Exxon for decades because it has failed to bring that field into production, including with a lawsuit settled earlier this year.
Under the terms of the settlement, Exxon Mobil and PTE Pipeline of Houston are pursuing a project that's considered a precursor to producing Point Thomson's natural gas reserves, where extremely high pressure is said to be an obstacle to development.
In that project, Exxon and PTE would cycle gas to the surface to remove and transport 10,000 barrels a day of light oil to existing the trans-Alaska pipeline, then reinject the natural gas back into the ground.
The gas-cycling project could lay the groundwork for gas production when the natural gas pipeline gets built, according to the state's settlement with Exxon over the lack of production at Point Thomson.
On Friday, the U.S. Army Corps of Engineers released the final environmental impact statement for the Point Thomson project. The Corps will conduct a month-long review of the report, a key step before operations can begin.
Contact Alex DeMarban at alex(at)alaskadispatch.com