Building natural gas highway

Development authority answer to cheaper, long-term gas for Alaskans

Posted: Monday, April 05, 2004

There is no more cheap natural gas to be found in Cook Inlet. Over the next few years, the remaining cheap gas is going to be replaced proportionately by newly discovered, but much more expensive gas. There is very little disagreement that this is the current situation.

While the exact details and numbers are yet to be worked out, it is very clear we will all pay the Lower 48 indexed price for natural gas very soon.

It is not just residential consumers that are in this position. All the industrial, commercial, electric power and gas utilities in the Anchorage, Kenai and Mat-Su areas are in the same boat.

Therefore, this situation affects both your gas and electric bill.

Alaska is sitting on 35 trillion cubic feet of gas on the North Slope. Many folks have had the dream of getting that gas to Cook Inlet. The cost to build a pipeline into Cook Inlet has always penciled in as too high when built by private industry. The solution to this regional problem is to get that North Slope gas into Cook Inlet cheaper than industry can do it.

In 2002, 138,000 voters created the Alaska Natural Gas Development Authority. The words "... and the spur line from Glennallen to the Southcentral gas distribution grid" are in that ballot language. As a public corporation of the state, the development authority has a lawful mission to get gas to Southcentral Alaska.

In order to move freight, people and vehicles the state builds roads, not to make a profit, but to enhance commerce from point A to B and to improve citizens' quality of life. We need to build a "natural gas highway" from the North Slope to tidewater in Cook Inlet. Once the North Slope gas is to tidewater, we can use water transportation to also move gas to our coastal communities. All of Alaska benefits, not just Cook Inlet.

Using its unique financial and tax advantages, the development authority can be seen as a "super utility" of the state. These advantages (non-taxable by the IRS, debt financing and very low interest bonding) are the tools to lower the cost of that pipeline into Cook Inlet.

The development authority can borrow money more cheaply than any commercial entity and therefore it can build that infrastructure more cheaply than industry. A lower gas transportation cost within Alaska will assure that our gas prices will be less than Lower 48 prices for a long time.

All the interested major users of gas in Cook Inlet (the gas utility Enstar, industrial plants like Agrium, and electric utilities like Chugach Electric, Homer Electric, ML&P and MEA) should collaborate with the Alaska Natural Gas Development Authority to work together to build the infrastructure to bring North Slope gas into Cook Inlet. By combining all their buying power, we can get much cheaper gas into Cook Inlet.

The development authority could be viewed as a "gas aggregator" for all these Cook Inlet entities, buying and selling gas to them at a much cheaper price than any gas that could be found in future exploration here, only to be sold to us at Lower 48 indexed prices.

In conjunction with these pipeline construction cost financial advantages, the price of North Slope gas will also be cheaper into Cook Inlet because our pipeline is a much shorter distance than a 3,600-mile line to Lower 48 markets. The difference in that transportation distance cost (tariff), in conjunction with the development authority's financial advantages, will make gas coming into Cook Inlet cheaper than gas coming from the North Slope to the Lower 48.

While the development authority does not have a profit motive, it does have to recognize commercial economics when it borrows money.

The economics are improved if the spur line is combined with a larger pipeline coming off the North Slope. The exact vehicle Alaska needs to provide cheaper long-term future gas to all of us exists today in the Alaska Natural Gas Development Authority.

You, the voters, created this solution opportunity, and I believe that by working together we can make our energy future more secure and affordable than it has been in the past.

Scott Heyworth is the vice chair of the Alaska Natural Gas Development Authority.

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