Voters to decide state ownership of gas pipeline

Posted: Wednesday, October 23, 2002

ANCHORAGE (AP) -- A longshoreman is heading an effort to have the state build a natural gas pipeline from the North Slope to Valdez, saying Alaskans have waited too long for big oil to do it.

Ballot Measure 3 would set the wheels in motion for a state-owned natural gas pipeline.

But critics say the ballot measure will confuse voters Nov. 5 and create financial difficulties for the state in the years afterward.

The ''All-Alaskan Gasline Initiative'' would establish the office of Alaska Natural Gas Development Authority under the state Department of Revenue. That newly-created agency would be responsible for building the pipeline.

''The oil producers have been reluctant for the last 25 years to commercialize the gas. This is our opportunity to do it,'' said Scott Heyworth of Anchorage, the initiative's chief sponsor.

Heyworth said the initiative could result in a petrochemical business for Alaska, similar to the one in Alberta, Canada, which he said grosses $6 billion a year and employs 6,400 people.

''If Alberta, Canada, can do that with their natural gas, why can't Alaska?'' Heyworth asked.

The goal would be to have the pipeline in full production by 2007. Heyworth estimates the project would initially employ about 13,000 Alaskans.

State and industry officials have strongly criticized the proposal, saying it detracts from state and federal efforts to entice producers into building a natural gas pipeline to sell to Lower 48 markets.

Larry Houle, general manager for The Alliance, a trade group of oil and gas companies, said the initiative is deceptive. He said voters will likely approve it thinking the project is the much-discussed natural gas pipeline.

''It is an LNG (liquid natural gas) line to Valdez and there is no market for that gas,'' he said.

North Slope LNG can't compete with gas from other nations because of the added costs of getting it to tidewater, Houle said.

''You have more expensive gas. It is purely the transportation component,'' Houle said.

He also questioned how the state could own something it also would be required to regulate. ''I think it is a huge conflict,'' he said.

But Christy McGraw, who led efforts to fight BP's plan to take over ARCO in 1999, said Ballot Measure 3 makes much more sense than the huge project being discussed in Washington as part of a national energy plan. That project is estimated at between $20 billion and $30 billion.

''Alaskans would wind up with virtually nothing because of the cost, the risk,'' McGraw said.

An LNG line is smaller in scale, would be under state control and eventually would return more economically to Alaska, especially if it resulted in marketing petrochemicals, she said.

''The most economic way to do this project would be the LNG line,'' McGraw said.

Heyworth estimates the cost of the project at $12.4 billion. The authority would issue tax-exempt revenue bonds to pay for the project.

If the initiative passes, the newly-created authority in its first year would have to develop a more detailed estimate on the cost of construction, revenues to the state and municipal governments as well as a market plan to deliver the gas to consumers outside of Alaska.

Even if approved, the initiative could suffer from financing problems before it is built, said Larry Persily, state deputy commissioner of Revenue.

Lenders would likely require the state to pay some of the cost of such a project under any bond proposal and Alaska can't afford it, Persily said. If the state was required to come up with 30 percent of the costs, that's $3.6 billion, he said.

Persily said the Constitutional Budget Reserve will likely be empty by then and the Permanent Fund is losing value.

''The state just isn't sitting on $3.6 billion,'' he said.



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