Anchorage Daily News

A long-time skeptic of the state's approach to promoting a North Slope gas pipeline got some attention recently. In a peer reviewed academic article, he concludes the state's effort is likely to fail. Former state petroleum economist Roger Marks' paper relies heavily on familiar arguments. Most of his points were aired by critics and rejected by the Legislature when it granted a state pipeline license to TransCanada. That was not a snap political decision -- the Legislature spent two months in special session before approving the TransCanada contract.

In its state license, TransCanada agreed to a firm timetable and accepted key state terms for structuring the project -- terms that the North Slope gas holding companies had rejected. In return the state will help pay early phase project costs, committing up to $500 million for its share of expenses.

Marks thinks the state is asking for too much. His paper notes that the state received only one bid that met its specifications, from TransCanada. That "lethargic market response" shows that the state is asking for unrealistic terms.

"Creating additional commercial challenges ensures the process will not work," he wrote.

That would be news to Exxon, the world's largest corporation. It has broken ranks with BP and Conoco and joined TransCanada's effort as a full-fledged partner.

In his paper, Marks offers a fatalistic attitude. The gas producers, he writes, will "decide when they are comfortable proceeding" with a pipeline.

He doesn't recognize that the state can influence their comfort level by making it uncomfortable for them to stand pat. That's what the state has done with the license for TransCanada. The price of holding on to Alaska's best undeveloped resource has gone up -- considerably.

Before the state offered a license and up to $500 million of cost-sharing money, there was no competing Denali project, and no talk from Conoco and BP of spending $600 million on it.

Alaskans had never heard any company promise to formally solicit gas shipping commitments for a pipeline. That's the first step in doing a pipeline if you are serious. It requires spending a lot of money to develop a reliable construction cost estimate.

This step is known in the gas pipeline business as holding an "open season."

Both TransCanada/Exxon and Conoco/BP will hold an open season next year.

By passing the Alaska Gasline Inducement Act (AGIA), and signing a license with TransCanada, then-Gov. Sarah Palin and the Legislature decided that Alaska would do everything it could to push the big North Slope gas companies to develop Alaska's gas.

They rejected the passive colonial mentality that has afflicted Alaska for much of our time as an oil state. They decided to stop waiting for a gas line and start looking for ways to make it happen. And, yes, they put money on the table.

There's no guarantee the state's inducements, and the TransCanada/Exxon partnership, will produce a North Slope gas line. But after 30 years of waiting, it was long past time for Alaska to try a different approach.

BOTTOM LINE: The state's deal with TransCanada and Exxon may not produce a gas pipeline, but it's a bold attempt to break a 30-year deadlock on the project.

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