Voices of the Peninsula: Gas pipeline needs additional scrutiny

Posted: Thursday, September 22, 2005

Not all communities support the resolutions the Alaska Municipal League (AML) and the Alaska Conference of Mayors recently passed supporting the so called "all-Alaska Gasline" project above all other projects currently under development.

The rationale for these resolutions of support were many. Jobs for Alaskans, revenues to municipalities and the state, "... and faster development timeline than competing projects ..." were just a few of the many reasons given for why this project stands out above all others, with the implication that the "all-Alaska gasline" project should now be given exclusive priority and support of the state as the preferred project over those currently proposed.

To say these AML resolutions were amazing leaps of logic is an understatement. To deliver any, let alone all of the benefits listed in these resolutions, a project must first and foremost be economically successful. That means a project must be taken through a responsible process of due diligence to be proven economically feasible before it is constructed. Otherwise, we could all be left in the unenviable position of losing millions, if not billions, of dollars building what could be one of the greatest boondoggles in history if we don't do our homework first.

Any proposed North Slope natural gas pipeline project faces four basic hurdles to overcome. Is there a market for North Slope gas, not only today but for the next 30 years or more? Is there a favorable government fiscal and regulatory environment? What is the total cost to build and permit the project and does it fit the economics of the market? And finally, do all of these pieces fit together to form an economically viable project? Any project must go through a full analysis as outlined here before anyone can make the claim that a project is economically feasible.

With these hurdles in mind, not one project proposed to date can legitimately make the claim that it is economic yet. This includes the $20 billion project proposed by Exxon, BP and ConocoPhillips, the $15 billion to $16 billion projects proposed by TransCanada and Enbridge, or the $24 billion proposed "all-Alaska Gasline" project. And none of the private companies proposing these projects make that claim. They know better than to do so at this stage of the game, having not completed a full analysis.

These resolutions were premature at best, and were poorly researched and rushed to a vote before it was appropriate to take a stand on such an important issue without all the facts being available yet. Needless to say, the Kenai Peninsula Borough does not support these resolutions. The Kenai Peninsula Borough has a long-stated policy position of not supporting any project until proven economic, with the caveat that any such project must make provisions to bring North Slope natural gas to Cook Inlet, either through a spur line or bullet line.

Support for any North Slope gas pipeline should not be based on political expediency or which proposals has the best media campaign. Support should be given to the pipeline project that ultimately proves it is economic and can successfully bring North Slope gas to the Cook Inlet.

Dale L. Bagley is the Kenai Peninsula Borough mayor.

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