Alaska News

Federal budget cuts hit gas pipeline liaison office

FAIRBANKS -- The federal office in charge of smoothing out permits for a natural gas pipeline from the North Slope has a much smaller budget.

Money for the Office of the Federal Coordinator for Alaska Natural Gas Transportation Projects was cut from $4 million to $1 million in the recently signed 2012 federal budget. The slashed budget comes on the heels of increased interest in developing an in-state natural gas pipeline for domestic use and foreign export to Asia. Gov. Sean Parnell, in October, said his administration would shift focus to such a line.

But the decrease in spending doesn't spell disaster for the pipeline or the office, said Larry Persily, the federal coordinator. Persily said the office has been running under budget, at about $3 million, for the last few years and has some money in reserves to continue working on the pipeline.

"It's certainly going to affect our office," he said. "We started the year with a couple million of unspent dollars; I can stretch that out, but we're going to have to cut."

Persily said the existing funds will prevent immediate cuts, but there will be some reductions in the 11-person staff. The office also will seek a smaller office in Washington D.C.

The changes won't hurt prospects for a gas line, he said.

"Any gas line is not going to depend on our budget," he said. "Whether we have $1 million, $2 million or whether we have nine or 10 or 11 employees doesn't matter. It's going to depend on the markets and state fiscal terms. I believe we're going to be able to do our job."

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What the funding cut, combined with changing interests, means for the future of a natural gas pipeline in Alaska is unclear, said Sen. Joe Paskvan, D-Fairbanks. The funding cut itself isn't enough to get worried about, he said, but the expanding production in the Lower 48 is a concern.

"The economics just don't add up," Paskvan said. "The shale gas revolution that started up in the Lower 48 will continue to exert downward pressure on the price of natural gas."

The TransCanada pipeline company is working with state government, under terms of the Alaska Gasline Inducement Act, to obtain permits to build a large-scale gas line. Paskvan said it's important to remember that, under AGIA, the state is barred from building a separate in-state pipeline with a capacity any greater than 0.5 billion cubic feet. Paskvan said a line that size is no longer economically feasible.

By MATT BUXTON

Daily News wire reports

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