Sen. Torgerson to head new pipeline committee

Posted: Thursday, June 07, 2001

Sen. John Torgerson, R-Kasilof, said he will chair a new joint legislative committee to promote construction of a pipeline to bring North Slope natural gas to market.

"The pipeline committee will be responsible to continue holding the hearings that we have on pipeline issues ... working with our congressional delegation, working with other members (of Congress) in Washington, D.C.," he told the Soldotna Chamber of Commerce on Tuesday.

"We've already hired some experts and consultants, but we'll probably hire a few more to track legislation in D.C. and in Ottawa. We are going to be working closely with the Canadian government, because we are assuming the line, in either direction they select, will be going down through Canada."

The Joint Committee on Natural Gas Pipelines will include four members from the House, four from the Senate and up to three alternates from each chamber, he said. It will work until January 2002.

He expected the Legislature to announce its members during the special session that begins today to consider a bill on pollution from cruise ships.

Torgerson, who chairs the Senate Resources Committee, said he spent most of his time last session on oil and gas.

"The gas line kind of dominated the Resources Committee," he said. "We heard presentations from all the major groups on routes, their costs, expenditures, markets, market experts ... ."

The committee heard from many Alaskans, including former Arco Alaska Inc. President Ken Thompson, who favors building a pipeline hub near Fairbanks, where new projects, such as a pipeline to Cook Inlet, could tap easily into the line to the Lower 48.

"We've tried to maintain the goals that we'd like to see with the new gas line," Torgerson said.

Those are:

n Making as much North Slope gas as possible available for new Alaska industries;

n Making as much as possible available to Alaska residents, "such as Cook Inlet and businesses that we have down here with the most immediate danger of being in short supply," Torgerson said;

n Employing as many Alaskans as possible to build the pipeline; and

n Adding state revenues. "A job of this size should bring back about $250 million per year to the Alaska treasury," he said.

The new committee will focus on the same goals, he said.

Torgerson said he plans to continue his visits to Washington, D.C., to work on President George W. Bush's energy plan. He is watching for provisions that could benefit a gas line, such as accelerated depreciation, alternative fuels credits for plants to turn gas to synthetic crude oil and federal help with financing if gas prices drop too low. He also plans trips this summer to meet with premiers of British Columbia, Yukon, Northwest Territories and Alberta.

Phillips Alaska Inc., ExxonMobil Production Co. and BP Exploration (Alaska) Inc. have formed a consortium to study two routes for a pipeline to Alberta:

n One through the Beaufort Sea to the Mackenzie River delta and south through Northwest Territories

n One to Fairbanks and down the Alaska Highway through Yukon and British Columbia.

From Alberta, North Slope gas could be shipped to the Lower 48, though that may require new pipelines, too.

The companies announced plans to spend $75 million on the first phase of the work. In April, the consortium hired VECO Corp. and Fluor Daniel to do engineering and conceptual design for the pipeline to Alberta.

To do conceptual engineering for a pipeline from Edmonton, Alberta, to Chicago, it hired a joint venture including Natchiq, Kellogg Brown and Root, Colt Engineering Corp., NANA/Colt Engineering and Michael Baker Corp.

A pipeline through the Beaufort Sea also could carry gas from the Mackenzie River delta. However, many Alaska politicians favor building along the Alaska Highway route, which could facilitate a pipeline to Fairbanks, Anchorage and Kenai. Last spring, the Legislature passed a bill banning state right-of-way leases for a pipeline through the Beaufort Sea.

Torgerson said the United States and Canada already have agreed by treaty to the Alaska Highway route. Congress picked that route with the Alaska Natural Gas Transport Act of 1977, and it would require an act of Congress to build along any other route.

He said he believes demand eventually will support a separate pipeline for the Mackenzie gas.

"The Mackenzie pipeline would cost $2.5 billion. Ours would cost $10 billion to $12 billion. We are actually ready to go. We have the gas. We have the conditioning plant," he said. "The Mackenzie delta has to do a lot of field development, yet, which they are doing. "

The Mackenzie fields are four or five years behind, he said.

"If we get delayed four or five years, they'll be in a position where theirs is cheaper," he said.

The pipeline fervor reached fever pitch last winter, when Lower 48 gas prices topped $10 per thousand cubic feet. Gas closed Tuesday on the New York Mercantile Exchange at just $3.89 per thousand. But the producers take a long-term view, Torgerson said, and the falling price does not nix the line.

"Everyone knew it would fall," he said. "What they didn't know was how far it would fall."

Numerous rigs are drilling for gas in the United States and Canada, he said, and what they find will determine how much more gas prices will fall.

Most producers believe the outcome will be clear by August, he said. Most believe a price of $3.25 per thousand would support a pipeline, he said, and researchers with Cambridge Energy Research Associates believe the price will stay higher than that.

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