Pipeline should be built now

Voices of the State

Posted: Sunday, April 16, 2006

It was widely reported April 4, that Gov. Frank Murkowski had endorsed sequential construction of Canadian and Alaska natural gas pipelines, with the Canadian line being built first. Alaska must not play second fiddle in deciding what is best for Alaska and should not be forced to wager on a mere second-place finish in the race to enter the Lower 48 natural gas market.

Gov. Murkowski’s new “Mackenzie-Canadian pipeline first, Alaska gas pipeline only second” policy lends unwarranted uncertainty to Alaska’s gas line construction timeline and threatens to unnecessarily diminish the eventual value of Alaska’s natural gas.

Though administration spokesman Chuck Logsdon stated in a March 29 KTUU interview that “the Mackenzie Valley project will be done by the time Alaska is ready to build its own gas line in 2014” (abrogating nearly a year’s worth of administration and producer statements assuring Alaska that its pipeline would be completed by 2014), neither the governor nor the Alaska people can have any way of knowing when or if an Alaska gas pipeline will be built once the administration’s policy of allowing Canada, Exxon, BP and ConocoPhillips to make sovereign economic decisions for the Alaska people is put into practice.

The Mackenzie line has significant hurdles its sponsors and Canada have yet to address. Much like our own experience, the Mackenzie project sponsors and the Canadian government are still negotiating the fiscal details necessary for the pipeline to progress.

The line has yet to be permitted. Environmental, regulatory and right-of-way issues are still outstanding. The sponsors have yet to fully engage the First Nations across whose land 40 percent of the proposed line must pass. Finally, and again like our own experience, Exxon, ConocoPhillips and the other project sponsors have not yet committed to constructing the line.

Nor is there any benefit for Alaska in delaying construction of an Alaska project. Waiting for construction of the Mackenzie line will necessarily diminish the expected well-head value of Alaska’s gas because increases in the cost of steel and labor over the intervening years will have made any Alaska project more costly to construct.

Our return will be further diminished because, over the course of our Alaska pipeline’s construction, ever increasing imports of the producers’ foreign LNG will have compounded with the producers’ newly introduced Mackenzie-Canadian gas and depressed the price of natural gas in our intended American market.

Alaska is at the crossroads. Southcentral Alaska says it needs North Slope gas — there’s a deepening shortage. The Lower 48 says it needs Alaska gas — supplies are tight and the price is high. The federal government says it wants Alaska gas — so badly it created an $18 billion loan guarantee to ensure it would get it. Pipeline companies have heard the call — MidAmerican, trans-Canada, the Alaska Gasline Port Authority and many more have approached Murkowski and the producers hungry for the opportunity to deliver Alaska’s gas.

The market has spoken. Alaska’s gas is economic now. Construction of a pipeline to move that gas to market is feasible now. Numerous companies stand ready to advance that pipeline now. The greatest opportunity to move Alaska’s natural gas to market in a generation — without tax breaks, overly generous incentive packages or unconstitutional contracts — is now.

If Exxon, BP, ConocoPhillips and Gov. Murkowski don’t want to develop an Alaska project now, they should get out of the way and let those who will move Alaska’s natural gas to market build an Alaska gasline — now.

Jomo Stewart is the communications director for the Alaska Gasline Port Authority.



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