Mat-Su borough, Anchorage chamber support Cook Inlet pipeline terminus

Posted: Tuesday, May 23, 2000

Local officials' work to promote Nikiski over Valdez as the terminus for a pipeline to export North Slope natural gas seems to be bearing fruit.

The Matanuska-Susitna Bor-ough Assembly and the Anchorage Chamber of Commerce both recently passed resolutions supporting a Cook Inlet pipeline terminus.

"It seems to make sense for where a lot of Alaska's population lives," said Joe Griffith, executive manager of finance and energy supply for Chugach Electric Associa-tion, who introduced the Anchor-age chamber resolution. "We're high users of gas for heat and electrical generation."

Logically, he said, anyone building the pipeline will have to take that into account.

"While we can market the gas to foreigners, we should take care of our own first," he said.

Bill Popp, president of the Kenai Peninsula Borough Assembly, said the Anchorage and Mat-Su endorsements are extremely important.

"Those are two of the largest population centers in the state, and they lie directly along the route of the pipeline," he said. "You've got to have local support all along the route of the pipeline to make this work."

Industry officials say the economics of marketing North Slope gas are marginal. Commercializa-tion may require tax breaks under the state Stranded Gas Act. Or, it could require formation of a state or municipal port authority that could move gas free of federal income taxes. Popp said the support of Anchorage and Mat-Su residents would aid the passage of any legislation required to build and operate the gas line.

Peninsula borough Mayor Dale Bagley said he soon will invite the Municipality of Anchorage and the Mat-Su borough to join the Cook Inlet Pipeline Terminus Group, a task force the Kenai borough formed to promote Nikiski as the pipeline terminus. To encourage its participation, the task force will hold its next meeting in Anchorage, he said.

"There are a lot of benefits for it to come here," Bagley said. "I'd hope they'd recognize those benefits."

For years, everyone assumed that if a gas line was built, it would follow the existing oil pipeline to Valdez, said former borough Mayor Mike Navarre. The city of Valdez and the North Slope and Fairbanks Northstar boroughs have formed a port authority to build a gas line to Valdez.

However, an industry group including BP Exploration (Alaska) Inc., Phillips Petroleum Co., Foothills Pipe Lines Ltd. and Marubeni Corp. is exploring the feasibility of a pipeline to either Valdez or Nikiski. The Kenai Peninsula Borough Assembly has appropriated $100,000 to promote Nikiski as the terminus.

The primary goal of a pipeline along either route would be a tidewater plant to produce liquefied natural gas for export to Asia. However, oil industry officials say that for technical reasons, an LNG plant could operate more efficiently if some of the gas could be sold in Alaska.

A pipeline to Nikiski could supply gas to homes and businesses in the Mat-Su borough, Anchorage and the Kenai Peninsula. It could ensure long-term supplies for Alaska Nitrogen Products in Nikiski, and for the LNG plant Phillips and Marathon Oil Co. own there.

"I can't imagine someone thinks they're going to put a pipeline to southern Alaska and Anchorage, Kenai and Mat-Su are not going to get a piece of it -- but I guess somebody does," Griffith said.

In endorsing a Cook Inlet terminus, he said, the Anchorage chamber considered the state's best interests.

"We were driven by the economics and the availability of a gas supply more than by whose back yard it's in," he said.

Supporters of the Valdez route say a spur could deliver North Slope gas to Cook Inlet communities. However, Mat-Su Borough Mayor Darcie Salmon said his community favors a Cook Inlet terminus.

"We imagine we'd get a spout off of that. It would benefit us for less cost than if we get a spur from a Valdez line," he said. "It will better serve the state, better serve the nation, better serve the globe."

Meanwhile, exporting LNG is not the only way to market North Slope gas. Exxon-Mobil and BP-Amoco are studying the feasibility of converting gas to a diesel-like fuel that could be shipped through the existing oil pipeline to Valdez. Other groups are studying the feasibility of piping North Slope gas through Canada to the midwestern United States.

Griffith said economics, not lobbying, will drive the decisions. Phillips Alaska Inc. spokeswoman Dawn Patience agreed.

"North Slope gas has to be economic to produce. Whatever project you choose has to be economic," she said. "But it's certainly nice to have community support."

The Cook Inlet Pipeline Termin-us Group will send a speaker to the June 21 meeting of the Eagle River-Chugiak Chamber of Commerce, said Betsy Arbelovsky, the pipeline group's executive director.

The Cook Inlet group also will join an Alaska State Chamber of Commerce panel discussion June 30 on commercializing North Slope gas. Arbelovsky said representatives of the industry LNG group, the Valdez port authority, Exxon-Mobil and Enstar Natural Gas Co. will participate.

She said she hopes the Cook Inlet group will be able to send a speaker to the Anchorage chamber. So far, though, she has been unable to arrange a date.

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