In-state pipeline draws criticism

Posted: Thursday, February 17, 2011

The federal natural gas pipeline coordinator said Monday only a large pipeline to ship Alaska natural gas out of state will serve the state's needs, not the in-state line some have been advocating.

Persily said his report to the Senate Resources Committee was "not intended to pick a fight with the in-state gas line."

The report, by consultant Roger Marks, concludes the only way to provide inexpensive gas to Alaskans, boost the economy and provide revenue with which to run state government is with a large-diameter pipeline, likely carrying about 4.5 billion cubic feet of gas a day.

"The direct and indirect benefits of a large-volume pipeline would be substantial," Persily said.

Those include both tax and royalty payments to the state, as well as spurring increased exploration and development of oil on the North Slope. That could add new oil production through the trans-Alaska pipeline, he said.

Revenues from an in-state line would be substantially less, and could take an additional state investment of $4.2 billion just to keep gas rates in Southcentral where they are now, he said. With higher rates for consumers, the state investment could be less.

Persily's federal job is to help Alaska get a gas line, but it doesn't differentiate between the state-sponsored Alaska Pipeline Project that is being developed under the Alaska Gasline Inducement Act or the competing Denali project.

That pipeline is sponsored by ConocoPhillips Co. and BP PLC without a state subsidy.

Persily said it might be a better use of the state's money to, instead of subsidizing a bullet line, further support an interstate line.

"If you are prepared to write a $4 billion check, why don't you get something more for it than a small line," he said.

Sen. Bert Stedman, R-Sitka, said the information presented by Persily may not be useful until the Alaska Pipeline and Denali projects make public the results of their open seasons.

Both projects last year sought bids to ship gas through their projects in a formal process called "open seasons." Both said they received bids, but have yet to say what those bids are.

The big pipeline projects estimate gas would flow by 2020 at the earliest.

Persily warned that the small-diameter, in-state lines could be developed much more quickly.

Without a big natural gas pipeline, the state's economy would suffer and it wouldn't be able to fund state government, he said.

"We've had a great ride for 34 years off oil, but without a gasline were not going to get that again," he said.

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