You are hereIt's time to build the all Alaska pipeline
It's time to build the all Alaska pipeline
By Larry Wood
Alaska Standard Contributor
Here we are in 2010, another election year, with our gas still stranded on the North Slope.
Previously, the candidates who have declared for the office of governor could be characterized in one of three camps. 1. No declared pipeline preference; 2. AGIA or Denali; 3. the 2002 Prop 3 mandated all-Alaska natural gas pipeline to Valdez. Now, the Legislature and Ralph Samuels have added to the confusion.
HB 369 by Rep. Mike Chennault describes a pipeline from the North Slope to tidewater. However, the language of the bill clearly refers to the need to accelerate permitting. Therefore, the pipeline unstated is the bullet line championed by then Palin pipeline czar Harry Noah. This pipeline would come down through Denali Park, across 12 fish streams and parallel the Parks Highway to Port McKenzie.
We now have 4 projects to consider when we hear the polls speak. Two of which use similar descriptions: all-Alaska or in-state pipeline. This confusing language is purposeful and misleading. The intent is to confuse the public over the two in-state options: the all-Alaska pipeline to Valdez and the in-state bullet line to Port McKenzie.
Why is there a big push to build the bullet line in the face of not less than three major pipeline proposals being proposed by the Parnell Administration; Bill Walker of AGPA, a gubernatorial candidate; and BP/Conoco? One needs ask Rep. Jay Ramras, Sen. Charlie Huggins, Rep. Mark Neuman, Sen. Lesil McGuire, Rep. Bill Stoltze, Rep. Mike Chennault, former Rep. Ralph Samuels and . . . Enstar.
Ignoring AGIA and Denali, the “support Canadian petrochemical industry, tar sands recovery, and Canadian pipeline contractors” options, how do the all-Alaska pipeline to Valdez and the bullet line options compare?
Bullet Line
1. In-state route
2. Permits have yet to be applied for
3. Capacity is 500 million cubic feet per day (500mmcf/d)
4. Start of construction date: unknown due to lack of permits, potential litigation, financing
5. Environmental issues with route: crosses 2 parks and 12 fish streams
6. Will result in an increase in consumer gas prices due to low volume transported
7. Estimated cost in 2009: $4B
8. Unstated impact upon Cook Inlet gas exploration and development
9. Market: south central Alaska
10. State financing: up to 100% risk assumption by State
All-Alaska Natural Gas Pipeline mandated by voters in 2002
1. In-state route using TAPS corridor to Valdez
2. Permitting completed, including permits for 250mmcf/d spur from Glennallen to Palmer
3. Capacity is 3 billion cubic feet per day (3bcf/d)
4. Start of construction date: ASAP
5. Environmental issues with route: none, all permits have been issued
6. Consumer gas prices will not be increased due to spur line benefiting from higher volume of mainline
7. Estimated cost in 2009: $25B-$26B
8. No demonstrated impact upon Cook Inlet gas exploration and development
9. Market: South central Alaska, Asia, with all gas liquids and some gas being used in-state for fuels and industrial feed stock
10. State financing: 5% risk assumption by State
11. Mandated by the voters in 2002, as demonstrated under AS 41.41
Rep. Chennault’s bill is designed to increase the size of State government to no good purpose and to give Enstar a virtual monopoly on natural gas distribution in the State. His goal of the bullet line being in service by 2015 is simply election year hype.
Clearly, the voters were correct in mandating the all-Alaska gas pipeline in 2002. Now, it is time to build it. And, to remember by voting out those who ignored our will when we mandated the building of this pipeline. We the voters were correct then, and we are now vindicated by the economic realities of North American shale gas development and the higher prices of LNG in Asia.
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If developing a pipeline will help you to build such a positive output and will definitely benefit the people , you really need to make sure that this won't encounter some serious problems. Anyway, thank you for sharing this updates. Anyway, have you ever experience a bad debt?it isn't that incredibly hard to wind up with bad debt – miss a payment or two and you can be in the cycle of collections. It does happen – but there has to be a distinction made to people between a creditor and a collection agency – collection agencies collect debts, and that's about it.
Does anyone know if a Gas to Liquids option has been well thought out for NS gas? It seems that producing "white diesel" and shipping it thru TAPS makes sense for stranded gas while avoiding a lot of permitting issues. There could still be a bullet line for in-state use but GTL production would keep TAPS working a long time. Any thoughts?
Some recent headlines at The Alaska Standard:
"It's Time to Build the All-Alaska Pipeline"
"It's Time to Kill Bears"
"It's Time for Don Young to Go"
"It's time to Break Away from the Feds when it Comes to Educating Alaska Children"
"It's Time to Get Serious About Natural Gas"
"It's Time to Face the Reality of AGIA"
"It's time for Alaska to take back control of its forests from the feds"
"It's time to cut our losses on Palin policies"
"It's time for Alaska to help those in the bush"
Notice how none of those actually happened? Even though it was time for them to happen, according to Dan Fagan?
Either Dan Fagan has no influence or he can't tell time. I'm guessing both!
Signed,
Corpulent_Limbaugh_Clone
Thor - it appears you missed Exxon's press conference a few weeks back where they stated very clearly that LNG and a line to Valdez are economic. To make things very easy for you, here is a link that will tell you all you need to know about how Exxon feels about the viablity of an Alaskan LNG project:
http://www.thealaskapipelineproject.com/
Again, all it takes is 5 minutes of research (yes, sometimes opinions are based on facts) to see the multitude of LNG projects that are being pursued across the globe, many of them by the same companies that are claiming it doesn't make sense in Alaska.
As for the shipping committment, you might want to educate yourself on how oil and gas leases work in Alaska. If you take say... 20% of that 5 minute research time... and study the issue you will find that the producers are required to ship if they have a reasonable expectation of profit. They understand this very clearly, which is why they have stated on multiple occasions that if someone takes the pipeline risk, they will commit the gas.
After what we went through in 2006, it is laughable to suggest that the way out of this mess is to sit down and have a "rational" discussion with the producers. Frank Murkowski was kicked out of office for a reason - any politician dumb enough to pick up that baton does not even deserve to be part of the conversation.
If you want to secure Alaska's economic future on Exxon, BP or Conoco's time table, go right ahead but please don't expect the people of Alaska to follow.
Hey, Thor-zone, I have lived here virtually all of my life. I was raised in the Palmer area on the Butte side of the river. My family has mined and beat our heads against the wall of rape Alaska all of my adult life.
I am sick of those who want to take and leave nothing, including the oil companies.
Why cannot we have the gas liquids to use here? Why do BP and Conoco-Philips intend use Denali to send them to Alberta?
I am sick of the rape of Alaska!
We voted for that pipeline, we peasants were right, and Irwin et al, Murk, Knowles, Palin, Parnell, and those election year grandstanding at the last minute legislators are wrong.
The handwriting is on the wall Thor-zone. LNG is the future of Alaska's gas.
Otherwise, why did Conoco and Exxon invest around $20B in Qattar's LNG trains to export LNG to the U.S.? And, how about that shale gas thing, buddy?
Yeah, let's take the jobs, money, infrastructure, gas liquids and industry from those gas liquids and just give it all the Canucks. Wow. There's an idea!
Sean Parnell and that intellectual giant Sarah Palin, along with Frank I've a contract Murkowski all wanted to give it away to the Canadians. Last time I looked, Alaska was still a State in the Union!
ALASKA FIRST!
The producers have been pretty clear and pretty consistent going back to when ANGDA was being defined. They say the route through Valdez is not commercially viable. The state can build pipelines anywhere they want to build them. The producers will never sign up to send gas to market at a loss.
Walker's proposal developed through his work with Mitsubishi, Sempra and others, is to have a State owned line but to finance it using traditional project finance vehicles. That means the State and its partners will need to come up with about 20-25% of the roughly $30 billion project costs in equity (cash), and the rest can be financed with debt. Conservatively assuming no project partners, the State still has that amount on hand in the CBR and other non-PFD set aside accounts. And the State would get a 12-14% return on that equity just like other pipeline owners. So the State self-financing a large diameter pipe to Valdez is not only the way to break the log jam, it is a good investment.
But a bullet line, without subsidization, will not deliver gas to Alaskans at anything approaching gas prices South Central is used to because you still have to build a pipeline and GCP, but it's only to handle small volumes. We’d be allocating all the fixed costs of an ANS project over small volumes which makes the per unit economics expensive. This results in the State being on the horns of a dilemma when it comes to the bullet line. If the State uses project finance and only pays for a portion of the project out of pocket, and borrows the rest, ratepayers will be charged through the nose in the tariff so the State can pay back the debt. On the other hand, the State can reduce the cost to gas users by throwing in $5 billion or so (I use “or so” because there are no good cost estimates yet public for a bullet line) with no expectation of getting paid back. So either you have very expensive in-state gas, or the State blows its savings in a monster energy subsidy.
Thank you Craig for a well reasoned post without name calling. However, you mentioned possible partners and partner(s) would certainly be necessary to have the expertise to build the line. If I were a banker, I would want the builder to know what they were doing. There are any number of candidates for partnering up with, from TransCanada to Exxon, but it seems that the proponents of the in-state-line should have got their ducks in a row and made a deal with a partner before trying to sell the line to the public.
As fair disclosure. you should also have mentioned that the law firm you work for (Walker and Levesque) is also the Project Manager and General Counsel for the Alaska Gasline Port Authority, and as such would appear to have a financial stake in the project.
Chasm,
Again thanks for an informative post. The only problem I have is the last sentence where you say the producers won't sell them the gas. I believe that to be misleading. The producers have never said they would not sell the gas to a third party. It is when you ask the producers to sign 25 to 30 year shipping contracts that the problem arises and in that regard it is the same as AGIA. If someone builds the line, then the producers will certainly sell them the gas.
The line would cost $25-$30 billion, but the state would NOT have to pay this amount. The state would take a minimal risk position, either $0 or potentially up to the cost of the smaller volume bullet line. This is how LNG projects are funded worldwide.
Before you speak, it might be a good idea to read the articles you are presented with and maybe... just a thought here... do a maximum of 5 minutes research to understand the issue at hand. The only fantasy project here is the bullet-line which is without permits and require years of litigation before you can even think about construction.
Sitting down and having a "conversation" with the producers is 2006, Frank Murkowski all over again. Massive hand outs to the industry, and a rewriting of our constitution for the promise of maybe really thinking about building a gas pipeline. Good luck selling that one to the Alaskan voter...
And I don't believe in the tooth fairy either. Basic economics says that someone is going to have to finance that line to Valdez. And that someone is going to want solid loan guarantees or collateral. In the case of the large pipeline to the states, it is the producer's shipping contracts that finance the line. Who, if not the state, is going to guarantee the loans for a line to Valdez? If the state has little or no risk, why do they need the state? Just go ahead and build it.
How can you do that? AGIA is like a dead fish hanging around our neck that is beginning to stink. The All Alaska Pipeline is nothing but a fantasy kept alive by a handful of people. Just what we need, another Delta Barley project, fish processing plant, and Matt Maid. All abject failures. Except this time the state would be on the hook for 25 to 30 billion instead of a few tens of millions.
Can you imagine getting the legislature to agree to fund a 25 billion dollar pipeline? Think about herding 60 cats from Prudhoe Bay to Valdez. Not going to happen, it would be hard enough getting them to fund a 4 billion dollar bullet line.
It's time to look at this like a business and forget the sound bites and the state funding a pipeline dream. Sit down and talk to the producers and see what kind of deal can be made to start construction immediately on either a line to Valdez or the lower 48.
I really don't think the Gas line will happen, We listen to Politian's that say everything we want to hear and they walk on us..
I am going to re-elect NO ONE...
We have been lied too over and over again...
Until the Politian's see that we mean what we say, One chance..Thats it..Kick'em out..
Listen to the PEOPLE!!!
WE are upset!!
Thank you
--Dale--