(Background on the Alaska Natural Gas Pipeline situation. Written just prior to the 2006 election. Relevant to any Alaska Gas Pipeline discussion, the arguments against an LNG port at Valdez, Alaska to ship North Slope natural gas to the U.S. were answered here. )
The gas line route favored by Gov. Frank Murkowski and inherited from former Gov. Tony Knowles - "My Way is the Highway" - parallels the trans-Alaska oil pipeline right of way to Big Delta, and then goes east into Canada.
Murkowski's route differs from the original Knowles route in that it extends the pipeline through Canada into the United States near Chicago. This is the longest and most expensive route of any proposed thus far, some 3,500 miles with an estimated cost of $25 billion. This cost estimate has increased by $5 billion since Congress passed loan guarantees in 2004 totaling $18 billion.
Murkowski is seeking a $4 billion investment ownership by the state of Alaska. If built, the Murkowski-Knowles pipeline is to be a 48-, 52- or 54-inch pipeline with a capacity of 4.5 billion cubic feet per day and expandable to 6 bcf per day. Estimated completion date is 2016, if the producers decide the line is viable after another long five-year study.
Problems with the Murkowski-Knowles pipeline routes include: Rising cost estimates; North Slope natural gas reserves are insufficient to cover the financing cost over 30 years; steel for rolling the pipe requires a full year's world steel production quota; and new, and, as yet, untried pipe technology is also required.
The only viable alternative to the governor's Canadian pipeline is a liquefied natural gas project advocated so passionately over the years by Jeff Lowenfels. It is the same route originally permitted by Yukon Pacific Corp. The permits to build the Yukon Pacific natural gas pipeline have been in place since the mid-1980s.
In other words, if the producers would sell North Slope natural gas, construction on this line could begin almost immediately. This pipeline route parallels the existing trans-Alaska oil pipeline from Prudhoe to Valdez. Obviously, all jobs and construction generated by this route stay in Alaska.
Most importantly, this route would generate a spur line into the Matanuska Valley along the Glenn Highway or possibly down the Parks Highway. Alaskans recognized the logic and benefits of this route when we passed Proposition 3 in the 2002 election, which created the Alaska Natural Gas Development Authority.
The Yukon Pacific pipeline was designed to carry 2.2 bcf per day to a LNG plant to be constructed in Valdez. The liquefied gas was to be transported to other markets by LNG tankers. The economics for this pipeline was predicated on natural gas with a market price at or above $3 per million British thermal units (a million Btu equals approximately 1,000 cubic feet of natural gas). The current market price is still above $8 per million Btu and has recently been as high as $15 per million Btu.
ANGDA carefully assessed the original Yukon Pacific LNG project and found it both economical and feasible. ANGDA has included a spur line of 500,000 cubic feet per day into Southcentral Alaska via Palmer as part of its pipeline plans. The ANGDA pipeline could be moving gas within five years after the start of construction, including the necessary LNG plant at Valdez. The cost is estimated at $14 billion.
The Alaska Gas Port Authority is a consortium of Fairbanks, the North Slope Borough and Valdez to promote and build a natural gas pipeline using the Yukon Pacific route, but with a difference. The capacity of the pipeline that the port authority is advocating is now up to 4.5 bcf per day to match the Murkowski-Knowles pipeline. However, this increase in capacity also changes the dynamics of the original route permitting. This means that the port authority will have to acquire some new permits, and repermit others, meaning additional delays before construction would begin. The port authority also advocates and promises to build a spur line to Palmer.
Potentially, with the ANGDA or port authority pipeline proposals, Alaska gas could be flowing to market by 2012.
As noted by Pedro van Meurs in the Fairbanks Daily News Miner Jan. 30, in comparing Alaska's hydrocarbon resource development policy with that of Norway: "With the present system, wealth is slipping through the fingers of Alaskans and Norwegians hold on to it ... Norwegians are doing something right, and Alaskans are doing something wrong." Van Meurs is the Murkowski administration's chief consultant in the gas line negotiations with the major North Slope producers.
Why not an Alaska petrochemical industry stripping our gas of natural gas liquids - butane, ethane and propane - for use in Alaska to provide new industry and creating new jobs, before our natural gas leaves the state? Why do we have to keep doing it wrong and let the real wealth of using our resources to build industry in Alaska continue to slip through our fingers?
Alaskans need the opportunity, jobs and the industry our natural gas represents, not more government.