Alaska News

Natural gas hub in Fairbanks a good start

No single issue will have more impact on Alaska's economic future, on in-state employment, on our kids' future, than energy security. Very soon Alaskans will be facing a real energy crisis. Southcentral Alaska is literally running out of gas. Interior and rural Alaskans are paying crushingly high prices for energy. And electric power generation up and down the Railbelt is at significant risk if new gas supplies don't become available as early as 2015.

Departing pipeline coordinator Harry Noah testified to a legislative hearing last December that Alaska had become "wrapped around the axle" on a gas pipeline. He said "civil war was brewing" between Alaska politicians on which way a pipeline should go. He might be right.

Right now politicians are lining up to support the "bullet line," or are hanging on to their support for the state's AGIA effort and the Denali pipeline, and still others are steadfastly supporting the gas pipeline to Valdez for LNG exports. But we have a moment, right now, to empower ourselves.

Each of Alaska's competing gas lines has two things in common. They all converge in Fairbanks and, before any of these pipelines can deliver even an MCF of gas, they each must travel 800 miles or more to the North Slope. To avoid civil war and get unwrapped from the axle, the state should solve their common impediment by building a large capacity gas line from Prudhoe Bay to Fairbanks, creating an all-Alaska gas hub there. Under the hub concept, the first and toughest 400 miles of gas line would be built through state investment, making each of the competing pipelines considerably shorter and easier to finance as they become ready.

Why? If we did this, Interior Alaskans would have access to badly needed gas. The hub would serve as a central connection point for multiple gas pipelines in Alaska like the Henry Hub in Louisiana. The "bullet line" to Southcentral Alaska could easily be supplied, and, when export contracts are reached, the needs of the "All Alaska Pipeline" to Valdez could be met. Shipping LPG on barges out of Nenana to Western Alaska would also be possible.

We could prepare for a possible line to the Lower 48 by building a wider pipeline corridor allowing for later parallel gas pipelines. Structuring financial credits into the deal could encourage the AGIA and Denali projects to move forward more quickly. Since North Slope oil producers make part of their revenue today from tariffs on TAPS, they likely will want to invest in the line between Prudhoe Bay and Fairbanks once they believe the state is serious about moving forward.

The state of Alaska currently owns all major highways, the Marine Highway System, the Alaska Railroad and the Railbelt (electric) Intertie. None of these provide revenue streams like an all-Alaska gas hub would, yet each is critical to the economic vitality of the regions they serve. A large capacity gas pipeline from the North Slope to an all Alaska gas hub in Fairbanks would simply be another state-owned transportation system.

ADVERTISEMENT

Fortunately, Alaskans have been prudent, saving almost $34 billion in the Permanent Fund and, nearly $12 billion in other state savings accounts. The state has low debt and well proven financing capabilities through AIDEA, AHFC, the Alaska Railroad and the Alaska Energy Authority -- today's oil prices are allowing us to run a budget surplus. And under a rational tax structure, gas produced and shipped from the North Slope would represent new royalty and tax revenue, as well as transportation tariff revenue, to Alaska.

Now is the time, Alaska, to seize our own future and to design our own destiny. Let's invest in ourselves and determine our and our children's bright future here by building the gas line from Prudhoe Bay to the all-Alaska gas hub in Fairbanks, bringing badly needed gas, jobs, and economic development opportunity to Alaskans.

Bob Poe has served as state commissioner of Administration, director of the Alaska Industrial Development and Export Authority and director of the Alaska Energy Authority. He also has worked extensively in the private sector. He is a Democratic candidate for governor.

By BOB POE

ADVERTISEMENT