Anchorage Daily News

The newest in-state gas pipeline plan for Alaska is based on a bet.

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Harold Heinze

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By connecting a region with a declining supply of gas to another region desperate for affordable fuel, the state is betting it can jump-start production of untapped Cook Inlet reserves by using demand from the Interior like a battery and a pipeline like a set of jumper cables.

What remains unclear is whether the jolt will do the trick.

The state, Enstar Natural Gas Co. and the Alaska Natural Gas Development Authority think it will. Those three parties announced a public-private partnership this month to explore a pipeline running from Cook Inlet to Fairbanks.

"We've always maintained that if you pre-build the pipeline, you would generate the market forces that would cause a lot of things to happen," said Harold Heinze, chief executive of the gas development authority, a state agency. "And in this case, just the commitment of the state to do this kind of a project ought to encourage the local exploration, because it does expand their market."

Although the plan is new and details remain sketchy, the state wants the pipeline to run from Cook Inlet to Fairbanks through Glennallen and Delta Junction to hit military installations and state leases on the way to the Interior's population center.

Those new markets could mean a 30 to 50 percent increase in demand over what's consumed now in Southcentral, according to Bill Popp, president of the Anchorage Economic Development Corp. and formerly involved with oil and gas issues for the Kenai Peninsula Borough.

Popp said the previous solutions for offsetting dwindling Cook Inlet supplies always involved bringing northern gas to Southcentral. Flipping the direction, he said, creates a "horse race," where the winner will be the first company to explore and produce gas -- whether in the Cook Inlet or another part of the state.

That scenario not only gives explorers across the road system equal access to the new pipeline and new markets, it also lifts an old burden from Cook Inlet producers, according to Kenai Peninsula Borough Mayor John Williams.

"There has been concern in the past that if we bring too much gas south from up north it probably would delay exploration for gas here," Williams said.

Williams believes a pipeline heading north out of Southcentral will "undoubtedly spur development in Cook Inlet."

IT COULD BE A STRETCH

Not everyone agrees, though.

How could more customers do anything but further strain the declining gas supply in the Cook Inlet?

"I can't quite understand the logic of shipping gas north out of Cook Inlet," said Dan Britton, president of Fairbanks Natural Gas, the only gas utility in Fairbanks. "The market in Fairbanks can't support that type of expense."

Fairbanks Natural Gas stands to lose if the pipeline is built. After struggling to buy gas from Cook Inlet, the company is building a North Slope liquefaction plant to truck supplies down to Fairbanks.

This newly proposed pipeline could make that plant unneeded. At least theoretically, once the pipeline reached Fairbanks it would connect to the distribution grid Fairbanks Natural Gas has spent the past decade building through the city.

WILL THE EXPLORERS EXPLORE?

The big question is whether the explorers and producers in the Cook Inlet would explore more.

So far, neither the state, nor ANGDA, nor Enstar have specifically asked the largest gas producers in Cook Inlet whether the new residential and industrial demand along the proposed route would be enough to stimulate exploration.

And those companies -- Chevron, Conoco Phillips and Marathon -- seem reluctant to commit to multimillion-dollar drilling programs based on a press conference.

"As an operator in the Cook Inlet, Marathon has consistently invested in exploring for and developing new gas resources which meet the needs of our customers, while helping create a foundation for further economic development," said Lee Warren with Marathon. "We will be reviewing the governor's gas line proposal as more details become available."

Conoco spokeswoman Natalie Lowman pointed to the company's busy Cook Inlet drilling program this year, one of the busiest in decades for the company, but said the company couldn't speculate on future demand.

Chevron spokeswoman Roxanne Sinz said her company didn't know enough about the pipeline proposal to comment on it.

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