August 22, 2000 --- Vol. 6, No. 39August 2000

Governor sees shovels hitting the dirt on gasline construction in two years

Lower 48 natural gas shortages and resulting high prices present an opportunity that Gov. Tony Knowles thinks could put Alaskans' hands on shovels for a natural gas pipeline project within the next two years.

Gov. Knowles told the Resource Development Council in Anchorage Aug. 22 that he is dedicating the remaining two years of his administration to see that groundbreaking for a gas pipeline takes place.

"Today, what's new for Alaska is a dramatically changed market for natural gas in the Lower 48," the governor said. While the state's focus has been on selling liquefied natural gas to the Far East -- the administration and Legislature have even enacted a fiscal regime for an LNG project -- Knowles said that there are six countries supplying the Asian market, all with an advantage over Alaska of proximity to market, and with supplies to meet project needs well into the future.

But with higher Lower 48 natural gas prices and expanding demand, Knowles said, "the competitive advantage of proximity to market now falls in Alaska's favor."

In addition to demand and price, Knowles said: "The realignment of ownership at Prudhoe Bay means the oil versus gas development is a debate of the past."

There are three things Alaska wants out of a natural gas pipeline project, the governor said: Alaska hire and use of Alaska businesses; Alaska access to gas; and revenue for Alaska.

"It's unacceptable for us to fuel America, or the world, while Alaskans freeze in the dark," Knowles said, indicating that the state probably would not be supporting a gas pipeline across the Beaufort Sea to Canada.

Knowles said the state has three tasks to achieve the goal of breaking ground on an Alaska natural gas project: rights of way; construction, financing and marketing agreements; changes to Alaska's fiscal system.

A gas pipeline will require both state and federal rights of way, the governor said, along with many other permits. "Several projects on the drawing board already have some of these permits," he said. He estimated that updating federal environmental impact statements on any of the permits and updating state right of way could take 18 or 24 months, and pledged that his administration would work hard to keep that work on track. The second task, the agreements, would include labor agreements to hire and train Alaskans and use Alaska suppliers.

On the third, the fiscal system, Knowles said the administration is taking "a hard look at Alaska's tax system to make sure it doesn't discourage gas development." And, the governor said, he will introduce legislation next session -- comparable to that two years ago for an LNG project, to cover any so-called stranded gas project, including a gasline to the Lower 48 and a gas-to-liquids facility.

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