Legislators see spinoffs from possible gas pipeline

Posted: Sunday, January 21, 2001

JUNEAU (AP) -- An Alaska natural gas pipeline runs to the Lower 48 only on paper at this point, but that isn't stopping Alaskans from imagining possible spinoffs from the line.

A subcommittee of the House Special Committee on Oil and Gas will look at the possibility of sending gas from the pipeline to communities along the Yukon River. The panel will also check on the feasibility of a spur line to Haines or Skagway so gas could be barged to Southeast Alaska communities.

Some lawmakers also talk of sending North Slope gas to Southcentral Alaska to replace declining Cook Inlet supplies. And perhaps, Eagle River Republican Rep. Fred Dyson suggests, a long-term supply might attract more industry there, such as an aluminum plant.

Are these just pipeline dreams?

The legislators looking at them stress they don't know yet.

''We don't know if any of that stuff is even within the realm of being cost-effective or what kind of economies of scale you'd need,'' said Rep. Scott Ogan, chairman of the Oil and Gas Committee.

But the Palmer Republican said he's always had an interest in providing natural gas to rural Alaska, and committee member Reggie Joule, D-Kotzebue, also wanted to investigate it.

Alaska's three major oil producers haven't even decided yet whether to build a pipeline, although high natural gas prices prompted them to form a task force to study it.

''This is a promising opportunity. It is not a slam dunk,'' said Ronnie Chappell, a spokesman for BP, one of the companies paying for the study.

The companies also haven't decided the most feasible route for the pipeline -- a southern route that follows the trans-Alaska oil pipeline, then the Alaska Highway to the Lower 48, or a more northern route that runs mostly through Canada.

Alaska politicians are pushing for the southern route. If it were built, it would intersect the Yukon River about 35 miles from the Interior community of Stevens Village.

Dan Zobrist, a petroleum economist with the state Division of Oil and Gas, said he doesn't know if delivering North Slope natural gas to Yukon River villages would be cheaper than barging in the fuel oil that currently heats village homes.

He assumes the gas would be liquefied at a plant where the pipeline or perhaps a spur line ends, then barged along the Yukon. A supplier would then need to build a facility in each village for storing and turning the liquid fuel back into gas, then lay pipe from the storage facility to the homes, Zobrist said.

That concept works in part of Fairbanks now, where liquefied natural gas from Cook Inlet is trucked up and put in a pipeline. That line runs along a commercial section of Fairbanks with a number of high-volume users, Zobrist said.

The question is whether demand would be high enough in villages with only a few hundred people and little industry to cover the fixed costs of such a system.

Zobrist said he doesn't know the answer.

''I will say this is a business opportunity. Folks have explored it in the past and I'm sure folks will continue to explore it as natural gas becomes available,'' Zobrist said.

BP's Chappell said he also doesn't know if gas line spinoffs such as a Yukon River supply would work.

''I'm not sure anyone here has looked at that,'' Chappell said.

Rep. Hugh Fate, chairman of the subcommittee that will examine the idea, said it's worth checking on. High power costs hinder economic development in rural Alaska, cost the state money through subsidies and eat up big portions of family budgets.

''It would almost revolutionize rural Alaska if it were, in fact, cost-effective,'' said Fate, a Fairbanks-area Republican.

Zobrist also doesn't know if it would be feasible to send North Slope gas to Southeast communities. Other proposals have looked at the possibility of moving gas from Prince Rupert, British Columbia, to Southeast communities, Zobrist said.

Moving North Slope gas to Cook Inlet is another possibility.

Kenai Peninsula fertilizer and liquefied natural gas plants, as well as other commercial and residential users throughout Southcentral Alaska, depend on Cook Inlet natural gas and would need a replacement supply if inlet gas runs out.

About 10-12 years of reserves remain there, based on current estimates, Will Nebesky, a Division of Oil and Gas petroleum economist, told a committee last week. New exploration may extend that supply.

The lack of a guarantee of a long-term supply has deterred energy-hungry industries such as aluminum manufacturers in the past, Zobrist said. Whether a long-term supply of North Slope gas would be priced right to attract those plants is another unanswered question.

The one certainty is that ideas will flourish amid the gas line speculation.

''All of a sudden you have vast gas resources on the North Slope potentially being available for in-state use,'' Zobrist said. ''There's going to be a lot of entrepreneurs looking at this.''

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