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$4M okayed to study in-state gas options Alaska Legislature has appropriated funds for ANGDA to investigate options for early delivery of North Slope natural gas Alan Bailey Petroleum News
The jousting between Gov. Sarah Palin and the Alaska Legislature over funding to help fast-track new gas supplies in Alaska took a new turn at the end of the legislative session when the Legislature passed an appropriation of $4 million for an Alaska Natural Gas Development Authority study. If Palin approves the bill ANGDA will contract with an appropriate consulting firm to investigate options for the early delivery of North Slope gas for in-state use.
The purpose is to focus the discussions about gas delivery by presenting objective facts about the in-state gas options ANGDA CEO Harold Heinze told Petroleum News April 14.
“What this new money does is … it gives us a chance to focus down on something that delivers benefits to Alaskans much quicker … and it allows us to look at a whole bunch of variations on that (North Slope gas delivery) theme,” Heinze said. This has a completely different timeline from the main North Slope gas line project he said.
Bullet line Faced with questions over tight gas supplies in Southcentral Alaska and concerns about potential gas shortages in the region, Palin had asked lawmakers April 7 to fund an $8 million feasibility study into the development of a bullet line, or small-diameter natural gas pipeline that would carry North Slope gas south for in-state use. A line of this type could perhaps deliver gas into Southcentral Alaska long before the completion of a major North Slope gas line and an associated Southcentral spur line.
Alaskans have long debated the bullet line concept as a means of benefiting from the massive gas reserves known to exist under the North Slope. Most recently, in 2005, the Alaska Department of Revenue completed a confidential bullet line study; Palin wanted to fund an update to that study.
But the lawmakers baulked at Palin’s $8 million request.
“Eight million dollars is a lot of money,” said Anchorage Republican Rep. Ralph Samuels who chairs the Legislative Budget and Audit Committee. The state could take advantage of studies either already completed or under way on piping gas to locals, he said.
“I don’t know that we need to reinvent the wheel here,” added House Speaker John Harris, R-Valdez.
Heinze said that he has discussed the issues with the lawmakers and suggested a broader approach.
“The first thing you do is you broaden your thinking and decide what you think the preferred alternative is,” Heinze told Petroleum News. “… You think broadly and then narrow and then you do detail.”
Moving forward on a bullet line project would have resulted in delving into project details before determining whether the bullet line is the appropriate solution, he said.
Phased study And so the governor’s request for $8 in funding has morphed into a $4 million appropriation for a phased study that goes beyond the bullet line concept. The first phase of that study, lasting about six months and costing up to about $1 million dollars, would identify all of the various gas supply options. Then, having identified a small number of preferred options, the second phase would involve fleshing out specific implementation details. A third phase would entail investigating the economic and business viability of a project.
“What we are going to try to do with that money is develop at least one, if not more, concepts of projects that push the timeline and seem to yield considerable benefits for Alaskans,” Heinze said. “… We approach it with a very open mind and we will probably dredge out some ideas that are not even on the radar right now.”
Heinze characterized current thinking about short-term in-state gas options as anecdotal, rather than being based on objective analysis and comparison. ANGDA can present a perspective motivated by benefiting Alaskans and minimizing energy service costs, he said.
“What we’re proposing in this six-month period is not to throw out any ideas — to be very inclusive, but at the same time start to bring some discipline to how they’re expressed, how they’re evaluated, how you look at the benefits … really trying to put things on a realistic, comparative basis,” Heinze said.
Make sense And any option that ANGDA recommends needs to make sense both in the short term and after the North Slope gas line comes into operation. The question will be whether the option would deliver substantial short-term benefits or whether it’s just a “feel good,” Heinze said.
“At the same time, how do you fit that into something else that either has other phases or makes sense in the long term,” he said.
For example, it is important to understand how a short-term option might fit with concepts such as an eventual gas spur line into Southcentral Alaska.
“There’s a lot of different concepts that have floated around that people haven’t paid a lot of attention to,” Heinze said. “… With that kind of money now we can go hire a very legitimate contractor to evaluate these things.”
Heinze also thinks that there is a tendency for people to assume an overriding objective to bring North Slope gas to Cook Inlet for heating and electric power.
“I can see all kinds of variations off to the other side of that. … Say, for example, if I got gas as far as Healy I could turn that power plant on there … and ship those electrons south,” Heinze said. “If that was quicker and cheaper and reasonably effective, why wouldn’t I at least think about that kind of variation?”
On the other hand the evolving economics of potential Alaska gas-based industries also present the possibility of basing in-state gas line economics on industrial use.
“I’m not sure that’s a concept that other people have looked at,” Heinze said.
Heinze also sees opportunities for new thinking when it comes to phase two of the project, in which development details would be fleshed out. For example, a gas treatment plant on the North Slope might or might not be needed, depending on the eventual use of the gas.
“There are all kinds of specific detailed questions you’d ask yourself once you started to understand what you were doing,” Heinze said.
ANGDA will also have an opportunity to interact with the state energy policy concepts that Steve Haagenson, the state’s new energy coordinator, will be developing, Heinze said. And ANGDA has already been promoting the future distribution of North Slope propane for use in Alaska. Propane might be shipped by river or around the road system, Heinze said.
Steering committee Heinze is anxious to establish a steering committee of stakeholders for phase one of the ANGDA study. Stakeholders potentially include government agencies, utilities and pipeline companies, for example.
But time is of the essence — with many parts of Alaska hurting from the impacts of the high cost of energy, people may no longer be around by the time that a North Slope gas line comes on stream.
“The political system, the public system, the economic system right now is demanding some sanity in terms of how you deal with that question,” Heinze said. “It’s a rational question and it’s not going to get answered unless we sit down and do something like this (study).”
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