Gas authority's main hurdle: funding

Posted: Friday, March 19, 2004

The head of the Alaska Natural Gas Development Authority said Wednesday that the corporation's primary mission is finding a way to get North Slope natural gas to market at the lowest possible cost to both producers and consumers.

Harold Heinze, CEO of the state-run authority, made his remarks at the weekly luncheon of the Kenai Chamber of Commerce. He said the biggest benefit Alaska residents get out of having the authority is the corporation is more interested in the benefit to Alaskans than making profits for private shareholders.

"We're a business with no profit objective," he said. "We have a benefit objective and that's it."

ANGDA was created in 2002 through the statewide ballot initiative process. Heinze said people were simply tired of waiting around for private industry to bring Alaska's enormous gas reserves to market.

"People were frustrated by three decades of nothing happening," he said.

Now that the authority has been created, a number of private ventures have come forward with plans to bring the gas to market.

The main difference between the ANGDA plan and others is the desire to bring the gas to Cook Inlet. Other plans call for a pipeline to be built that either follows the Alaska Highway or crosses into Canada in the Beaufort Sea.

Heinze said the authority believes the best, most beneficial plan for Alaskans is to build a pipeline to Valdez that parallels the existing oil pipeline, then send a spur gas line to Cook Inlet.

"The only way we get the benefit in Alaska is to get the gas to tidewater," he said.

Although Cook Inlet has long been the major supplier of gas in the Southcentral region, that will soon no longer be the case. Heinze noted that since 1969, gas reserves in the Cook Inlet basin have dropped from nine trillion cubic feet to around two trillion.

That situation is well-known on the peninsula. In addition to using natural gas for home heating, the area also relies on Agrium's Kenai nitrogen plant and ConocoPhillips' liquefied natural gas facility as two of its major employers and taxpayers.

Getting new supplies of gas into the area is something local politicians have been working on for several years. Kenai Chamber of Commerce President Tim Navarre said Wednesday the gas issue is one of the most serious facing the local economy and that bringing gas to Cook Inlet is essential to the area's business community.

"We have to find a way to bring the natural gas to market," Navarre said.

Heinze told the chamber that the authority faces a number of hurdles before any definite plans to get the gas to market go forward.

The main stumbling block is funding. The cost of a pipeline from the North Slope to Valdez is estimated to be in the neighborhood of $10 billion.

"The reality of big projects like this is you need to get funding," Heinze said.

That funding, he said, could come from a number of places, though Heinze said the most attractive plan would involve borrowing money for the project and racking up low-interest debt. He stressed that in no way is the authority planning to raid the state's savings to build a pipeline.

"I want to assure you this is not the permanent fund," he said.

If the authority is successful, Heinze said, the benefits to Alaskans would be enormous. Not only would the state have a reliable source of energy for years to come, the state also would own the pipeline, which would provide substantial economic benefit.

Heinz said the the real beauty of the project, however, is that if Alaskans don't want to go forward with a state-sponsored pipeline, they don't have to.

"If you're not comfortable with going forward, we don't go."

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