Keeping Agrium and other large consumers of natural gas in the Cook Inlet basin open improves the economic chances of building a pipeline to deliver North Slope gas to the region, Gov. Frank Murkowski said Thursday at the Kenai Visitors and Cultural Center.
However, when a member of the audience asked him why building a "bullet line" a direct pipeline from the North Slope to Cook Inlet was not "already halfway finished," Murkowski said there is nobody who wants to build it.
"The state is not in the business of competing with the private sector," Murkowski said.
Southcentral Alaska faces gas shortages as early as 2009.
Murkowski was in Kenai to talk about Agrium's North Kenai fertilizer plant and sign three bills. Agrium announced last week it postponed the plant's closure for one year because it negotiated a one-year supply of natural gas. The plant needs more gas to stay open.
The Alaska Natural Gas Development Authority, a state corporation, has focused its energy on building a spur pipeline that branches off of a main line to the Midwest. ANGDA has said it would be interested in building a bullet line as a fallback position.
The time frame for building a spur line depends on how soon a main pipeline can be built. In a June interview, ANGDA CEO Harold Heinze said a bullet line could be built in five to seven years.
The governor is aware that ANGDA is working on a spur line and the need to get gas to Southcentral Alaska is one of his priorities, Heinze said.
In an interview, Murkowski said he still sees North Slope gas as a good solution to projected gas shortages in the region, but that a spur line was more likely to be economical.
Murkowski spokesperson Becky Hultberg said Murkowski believes a spur line is a good option because there already would be an infrastructure in place if a main line to the Midwest is built. A bullet line would cost more because there are higher capital costs, she said.
"I think you have to try to develop the economics of a lateral line," Murkowski said referring to a spur line.
He said the economics of a spur line or bullet line dictate the direction of investment.
"We're going to do everything we can to maintain an adequate supply (of gas) out of Cook Inlet," he said in his remarks. "There's still plenty of gas to be found."
Echoing previous sentiments expressed by industry experts, Murkowski said there needs to be large consumers of natural gas to purchase North Slope gas to make it economical.
Agrium's ammonia plant and the ConocoPhillips and Marathon Liquefied Natural Gas plant consume about two-thirds of the natural gas in the region which includes Anchorage.
A spur or bullet pipeline would bring up to 1 billion cubic feet per day of natural gas to the region. Right now, a little less than half that amount is consumed in the region on a daily basis.
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