Voices of Alaska: Gas line milestones being met

Posted: Monday, July 26, 2010

Alaska's natural gas development is in an unparalleled era of progress, with many key milestones already met in 2010.

We are aggressively pursuing three options: the Bullet Line option, the North American option, and the Valdez option. With an open season currently underway for the North American option and the Valdez option, and with preliminary engineering complete on the Bullet Line option, we have never been this close to developing our state's vast natural gas resources.

Because both the North American option and the Valdez option are complex and costly projects for the private sector, we are not placing all of our eggs in one pipeline basket. Under the direction of my administration, a team of experienced arctic engineers completed preliminary design work and filed major permit applications for the Bullet Line -- a smaller-diameter line, to determine the feasibility of serving in-state residential and industrial demand.

This engineering group finalized initial cost estimates and shipping rates for such a line. The information they produced was presented to the new Joint In-State Gasline Development Team created when I signed House Bill 369 into law in April.

The In-State Team will evaluate the economics of a smaller-diameter pipeline and create a project plan for such a line by July, 2011. To support this effort, the members of the Alaska Natural Gas Development Authority recently voted to collaborate in this work by sharing their design and geotechnical data with the new In-State Team.

I also instructed the In-State Team to take a fresh look at the proposed routing of a smaller line to make sure Interior Alaska is not disadvantaged when it comes to getting access to energy resources for current and future needs.

In addition to the Bullet Line progress, this year we've moved the ball down the court as never before. The Alaska Pipeline Project initiated the first-ever open season designed to market North Slope natural gas. This proposal by TC Alaska and ExxonMobil contains two alternatives. One would accommodate up to 3 billion cubic feet of gas per day shipped to Valdez for liquefaction. A second option would transport up to 4.5 bcf/d to Midwest markets of North America.

Primary design work has been completed on the option to Valdez as well as to other North American markets, and transportation tariffs have been announced. Parties interested in Alaska gas are participating in the open season, where prospective buyers and sellers negotiate and bid for pipeline capacity to ship Alaska gas to market on a private-sector pipeline.

This is the first time in Alaska's history that buyers have the opportunity to bid for Alaska's gas in large quantities. It is our first real market test of the North American or Pacific Rim demand for our natural gas resource.

A large diameter pipeline to North American markets or Valdez has tremendous benefit for Alaskans because it would also significantly reduce costs of transporting gas for Alaskans' consumption. If Alaskans use gas that moves on a pipeline as part of a much larger volume, the delivered price to our own homes and businesses will be dramatically lower. Lower prices will help Alaska attract new value-added industries, and that means jobs and economic opportunity.

To ensure that Alaskans have access to our resource, both the Alaska Gasline Inducement Act (AGIA) and federal regulation mandate in-state delivery access points along the pipeline route, and distance-sensitive shipping rates. These mechanisms are in place so Alaskans won't subsidize out-of-state buyers.

As we aggressively pursue development of a North Slope natural gas pipeline system, I remain focused on two important considerations: Alaskans' need for energy and requirements for future state revenue. By simultaneously advancing the North American option, the Valdez option, and the Bullet Line option, I intend to access our tremendous natural gas resources in a way that will encourage additional oil and gas exploration on the North Slope and other areas of the state.

We are powering through the process to determine which project is most viable and most beneficial for Alaska. Whether it's a bullet line, a Valdez line or North American line, we're making significant strides as a state to access the energy and develop financial resources we need to grow our economy and secure the economic prosperity of our citizens for generations to come.

More information on gasline options is available at: http://gov.alaska.gov/parnell/priorities/alaska-gasline-project.html.

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