AGIA IS DEAD!

Alaska has just been relegated to the back burner where any natural gas pipeline to the lower 48 is concerned. The Palin Administration and its predecessors bet the bank on a 4-4.5 billion cubic foot per day pipeline that will never be built. AGIA is now a dead end.

What happened?

200 TRILLION cubic feet of natural gas in shale deposits now being developed in northern Louisiana. Known as the Haynesville Shale deposit, this deposit has been known for many years. Some estimates put the potential reserves at 1,600 trillion cubic feet of natural gas. This formation is not unique.

The Barnett Shale in Texas and many other such formations that run throughout the continental U.S. may hold as much as 2,200 trillion cubic feet of natural gas. This is enough natural gas to fuel the U.S. demand for at least 100 years. Much longer if the upper end estimates for the Haynesville Shale prove to be anywhere close.

As with any of man’s endeavors, technology keeps improving and what was impossible a few years ago is now possible. This is the situation with the shale formations. The drilling companies previously lacked the technology to exploit these deposits.

With the potential of these shale formation now in hand, the U.S. now is awash in natural gas.

The potential for this gas coming into production is very real. Something that did not play into the planning of the big diameter pipelines our governors seem to favor. The technology and strategies used today were not in place when Tony Knowles first proposed his Alaska Highway route into the lower 48 states.

AGIA is now relegated to the dustbin of history by virtue of the magnitude of the shale formation potential physically located within the U.S. market. The Palin Administration must see this and move forward to develop the only market available to it: the world, more particularly, Asia, and, preferably, Japan and Taiwan.

The maximum amount of natural gas that can be moved off the North Slope and allow oil production to continue is about 2 billion cubic feet per day. This is because 2.5 billion cubic feet per day is required to keep the oil fields pressurized to maintain production.
Alaska must now focus on getting the 2 billion cubic feet of natural gas to market.

What Governor Palin must realize is that she had it right during the 2006 race. An all-Alaska pipeline of 1.5 billion cubic feet to 2 billion cubic feet capacity must be built from the North Slope to Valdez using the existing TAPS rights of way.

I understand that the permits are already largely in place to build the project.

Within 5 years this pipeline could be moving gas to markets in Asia and elsewhere.

Keeping the all-Alaska natural gas pipeline at a level of 1.5 billion cubic feet of gas per day would give the required 500 million cubic feet of natural gas for a bullet line from Glennallen to Enstar’s hub at Palmer. Fairbanks would receive natural gas from the main pipeline running down the TAPS right of way. Just as was proposed during the 2006 campaign.

How does the State finance the project?

The precedent is already there in the manner in which the Alaska Railroad is run.

The Alaska Natural Gas Development Authority is in place and ready to move forward.

Use the Permanent Fund to provide collateral for necessary bonding.

Selling the natural gas in the world market would allow us to get the highest price. The Russians have shown that they are unreliable, therefore, there is opportunity. The customer could benefit from a consistent and dependable supply.

Providing for a regulatory environment that would encourage oil and gas exploration would ensure that Alaska would have adequate in-state development of these resources and an ever expanding ability to use these resources to the maximum benefit of Alaskans.

It is going to take a leader to make such a shift in paradigm.

The choice is yours, Governor. You can either rewrite the paradigm, or your administration can continue to flounder and continue to make no headway. Or, you can decide to change the paradigm, and move this state to a place that those of us who backed you thought we were headed, until AGIA.