Wagoner bill adds inlet to pipeline study

Posted: Sunday, January 04, 2004

Sen. Tom Wagoner, R-Kenai, has prefiled a bill to amend the Natural Gas Development Authority Act of 2002 to include specific reference to constructing a gas pipeline to tidewater at Cook Inlet.

The current language in the law charges the development authority with investigating the feasibility of a gas pipeline from Prudhoe Bay to tidewater at Valdez, as well as a "spur line" to Cook Inlet, a side project Wagoner said may prove unfeasible.

"Also, there is a lot of speculation that a line to Valdez is not economical either, which means the current gas pipeline proposal may be doomed," Wagoner said in a press release last Monday.

The proposed amendment would require that the project include study of a pipeline from Prudhoe Bay to either tidewater in Valdez or tidewater in Cook Inlet.

"We need to make sure that all Alaskans, including the residents of Southcentral, have viable options for our gas resources," Wagoner said.

Rep. Mike Chenault, R-Nikiski, has indicated he would be willing to introduce companion legislation in the Alaska House of Represen-tatives.

Debate over the feasibility of a pipeline project to bring North Slope natural gas to West Coast and Pacific Rim markets has been ongoing for years with major players in the oil and gas industry saying the potential profit margins were too narrow to justify investment and construction, at least not without substantial price supports and tax incentives. Those items, which would require state and federal legislation, have thus far proved elusive.

Last year, state voters elected to create the Alaska Natural Gas Development Authority, which, if such a project proved feasible, would construct, own and operate a line from the North Slope to Valdez.

Supporters argued an authority would not require the same level of profitability nor face the same tax environment as private industry, and thus might be able to bring gas to export markets, as well to domestic Alaska consumers, more quickly.

In early December, the authority board voted to try lobbying the Alaska Legislature for more state funding. The authority received $350,000 in the current state budget but wants an additional $2 million.

But questions arose over whether the authority could legally use public dollars to lobby for more public dollars. Among the skeptics was Steve Porter, deputy commissioner of the Department of Revenue.

Tuesday, Porter said there were two issues: whether the authority could use Alaska general fund dollars for lobbying costs, and whether they could use federal funds obtained last summer in a special grant for that purpose.

Porter said the authority would not be able to use the federal funds, and while it may be legal to use the general fund dollars, the Depart-ment of Revenue will recommend against it.

Instead, Porter said, the department will recommend that the authority work with Gov. Frank Murkowski's office and officials with the Department of Revenue to find the money necessary to produce a pipeline development plan. The authority has a June deadline to present such a plan to the Legisla-ture.

In an interview Tuesday, Wagoner said he doesn't think the gas authority needs a paid lobbyist. In his opinion, the development authority already has the best available spokesperson in its chief executive officer, Harold Heinze, who has all the background in gas development needed for that job.

"If you have Harold Heinze, why pay someone else to come down to lobby the Legislature?" he said.

Wagoner said adding his proposed language to the state law would put studying a rail belt route for a natural gas pipeline to the Cook Inlet Basin on an equal footing with study of a Prudhoe to Valdez route.

While Wagoner said he believes a main line to Cook Inlet, as opposed to a spur, makes more sense than a pipeline to Valdez, the financial dynamics of a gas pipeline to either location remain questionable. Pointing to successful natural gas production facilities around the world, none has an 800-mile pipeline figured into the costs, he said.

"The only way that it might work is to bring gas to the Cook Inlet Basin and use it as feedstock for Enstar and power generation plants. That would divert gas down here (on the Kenai Peninsula) to be available for industrial use," Wagoner said.

"It all has to do with how much it costs to bring gas here and what the market value is. We may look at both routes and say neither is feasible. At least it deserves a look as thorough as we can give it at this time."



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