Legislators seek answers on gas pipeline

Posted: Friday, February 09, 2001

JUNEAU (AP) -- Lawmakers spent the last couple of days prodding major oil companies for assurances that Alaskans will benefit as much as possible from a proposed natural gas pipeline to the Lower 48.

But speaking to a Senate committee Wednesday and a House committee Thursday, representatives of Phillips Alaska, ExxonMobil Production and BP Exploration (Alaska) repeated what they've been saying for several months -- they're still studying whether a pipeline is even feasible and they don't know yet what route it will take.

The three companies have formed the North American Natural Gas Pipeline Group, which is spending $75 million to figure out whether they can make a profit piping gas from Alaska's North Slope to the Lower 48. They are looking at two possible routes -- a northern route that would go along the Beaufort Sea coast to Northwest Territories and then run south through Canada and a southern route that would follow the trans-Alaska oil pipeline route and the Alaska Highway into Yukon Territory.

Legislators as well as Gov. Tony Knowles prefer the southern route because more of it runs through Alaska, providing more jobs, more access to gas for Alaskans and other economic benefits. The House Special Committee on Oil and Gas introduced a bill to require a southern route and require the pipeline to have enough capacity to supply Alaska's own gas needs and perhaps shipments to Asia and the West Coast.

Joe Maruschack, vice president of Alaska North Slope gas commercialization at Phillips, said the group hasn't analyzed the bill and has no position on it.

But in the companies' formal presentation, Robbie Schilhab, manager of Alaska gas development for ExxonMobil said, ''We urge the Legislature to allow this critical work to be completed and not preclude any development options.''

They reminded legislators Alaska's not the only interested party. If it works, the project will require cooperation from Alaska, the U.S. and Canadian governments, as well as Canadian provinces, territories and aboriginal groups.

''This is an Alaskan project, but it's also an international project of enormous scale,'' Maruschack said.

Legislators wanted to know whether the companies have ruled out exporting liquefied natural gas to Asia or the West Coast.

Yukon Pacific Corp., a company planning to build a pipeline to Valdez to ship out liquefied natural gas, has touted that project as one with the greatest benefit to Alaska because it would be built entirely in the state and would provide more long-term jobs.

Maruschack said a separate group that includes representatives from BP and Phillips studied that and found it's not feasible. But, he said that group's next step will be looking at whether it makes sense to piggyback the project onto the Lower 48 pipeline.

Oil and Gas Committee Chairman Scott Ogan questioned whether the companies don't like the idea of an Alaska LNG project because they own natural gas in other countries closer to the Asian markets.

The company officials dismissed that suggestion. If BP could make more money selling LNG to Asia than building a pipeline to the Lower 48, it would do so, said Ken Konrad, the leader of the company's gas efforts in Alaska.

''Good projects get funded at BP,'' Konrad said.

Maruschack said the companies are looking at the Lower 48 because it is the largest market for natural gas in the world and demand is projected to grow from 56 billion cubic feet a day to 86 billion cubic feet a day by 2020.

The producers also dismissed claims by Yukon Pacific that the project can't succeed because a law dating to the 1970s limits the amount of gas that can be shipped from Alaska's North Slope to 2.5 billion cubic feet a day, while the producers have talked about shipping 4 billion cubic feet daily to make the project economical.

''As far as we know no options have been closed down,'' Konrad said. The producers have talked to regulators in the United States and Canada, he said.

''We've certainly had no doors slammed in our face,'' Konrad said.

Legislators also prodded the producers for assurances other, smaller producers would have access to the pipeline if new North Slope discoveries were made.

Company officials said they would expect to build a pipeline whose capacity could be expanded. For instance, they might build a line that can carry 4 billion cubic feet a day, but be able to accommodate another 2 billion cubic feet by adding compression.

Pipeline access would be regulated by the Federal Energy Regulatory Commission and the National Energy Board in Canada, they said.

Legislators also asked whether smaller, independent producers would have access to the facilities that will remove carbon dioxide from gas, compress it and chill it before it goes into the pipeline. Sen. John Torgerson, R-Kasilof, said he's worried the companies could lock out a competitor.

Maruschack said if it was a small project, its owners could negotiate with the owners of the facility, while a larger project's owners might have to build their own.

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