Former Arco Alaska president urges gas project diversity

KENAI (AP) -- Instead of pushing a single project, Alaskans should build a foundation for a broad natural gas business, according to a former head of Arco Alaska.

Ken Thompson, president of Pacific Rim Leadership Development, an Anchorage consulting firm, said he believes the first project to bring reserves of North Slope gas to market will be a pipeline to the Lower 48. But Alaskans must take a broader view, he said.

''If the state establishes a vision of a natural gas business, I think you'll have people working to make things happen,'' he said. ''But if the pipeline is the vision, when it is built, it's done.''

The industry is considering a pipeline to tidewater where gas could be cooled to a liquid and loaded onto ships; a pipeline to the Lower 48; or a plant to convert gas to synthetic crude oil, which could be moved through the trans-Alaska oil pipeline.

Thompson said he does not think the time is right for exporting liquefied natural gas. There is an abundance of gas around the world that can be delivered at much less cost than Alaska LNG.

U.S. demand is growing fast, he said, and a pipeline to the Lower 48 likely will be the first project. But he said the first step should be a pipeline to a hub near Fairbanks with the valves and plumbing to provide access for additional projects.

The Fairbanks hub could operate like the Henry Hub in Texas, which offers access to many pipelines and serves as a centralized trading point for natural gas futures, Thompson said.

A hub would provide a clear mechanism for setting prices, Thompson said. The state should own a share of the hub and the pipeline to it, he said, and it should take its 12.5-percent royalty share of the gas in-kind.

''If you own a 12.5-percent share in the hub and in the pipeline to the hub, you know the price, and you have a voice in setting the policies that determine the price,'' he said.

''One policy might be that if a producer signs a contract with a buyer in Chicago, the state has a right to know the contract terms and the transport costs to Chicago, so you know the price of the gas,'' he said.

A hub and a clear pricing mechanism would help entrepreneurs plan for plugging into the hub for residential gas, a power plant or fertilizer production.

Once gas is flowing to the Lower 48, he said, negotiating access for additional projects will be much more difficult. By then, the mechanism for setting prices may be unclear, he said.