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Palin asks money for bullet line study Says AGIA designed to connect Alaskans with North Slope gas; bullet line one of a number of in-state energy options to be reviewed Kristen Nelson Petroleum News
Alaska Gov. Sarah Palin said April 4 that she would be asking the Legislature for $6 million to $8 million to update a bullet line study.
A bullet line, or small-diameter natural gas pipeline, would carry North Slope natural gas south for in-state use.
Interest in gas for in-state use has been growing as energy prices in the state skyrocket. Legislators rapidly implemented a decision to spotlight natural gas for in-state use April 2, when joint resolutions were introduced in the House and Senate, asking the governor to expand the call for the June special session to include a line for in-state gas delivery. Senate Concurrent Resolution 22 was approved by the Senate April 2 — the day it was introduced. The House approved the resolution April 6.
Palin, at a press conference featuring Alaska State Energy Coordinator Steve Haagenson, the executive director of the Alaska Energy Authority, said the Alaska Gasline Inducement Act was passed by the Legislature to “bring Alaska’s North Slope gas to market.”
AGIA “is all about ensuring that Alaska’s gas serves Alaskans,” the governor said, by ensuring that Alaskans have access to gas from a mainline “at the lowest possible transportation cost”; ensuring that new gas is developed; and helping to sustain Alaska’s economy by developing natural gas resources.
Alaska energy plan being developed Palin said her administration has been examining a bullet line — it’s a component of the Alaska energy plan Haagenson is developing, the governor said. The $6-$8 million request is to refine the bullet line study.
The Alaska Energy Authority is putting together an Alaska energy plan, Haagenson said, based on providing energy in a form that can be used in existing infrastructure; evaluating costs on a delivered basis; using low-profit business structures such as co-ops and port authorities; minimizing risk of technology failure; engaging Alaskans in finding solutions; and seeking the lowest-cost energy for each community.
Haagenson said the goal is rapid deployment of energy solutions: finding local companies that can implement quickly; looking for bankable agreements — contracts that utilities can take to a bank; looking for financial institutions that can help fund the projects; identifying cost by areas; evaluating technologies; coming up with the capital cost to build technologies and the money to operate and maintain them.
Rhonda McBride, the governor’s rural energy advisor, said in rural areas she often hears that the choice is between heating and eating. But it’s more than just that, with fuel costs rising in rural Alaska, fisherman in Bristol Bay are wondering how aggressively they can fish with oil prices so high. “There’s just a whole cascade of effects from the cost of high energy,” McBride said. As for energy plans for Alaska, she said a lot of people have already been motivated and predicted that Haagenson will be besieged with ideas.
It’s “about Alaskans pulling together to find solutions,” the governor said.
Bullet line study has been done Palin said there is already a Department of Natural Resources bullet line study: “We do have a work product,” she said, but it needs to be refined — that is what the $6-$8 million would do.
Deputy Commissioner of Natural Resources Marty Rutherford said the bullet line study has been updated, but it’s “at a very gross level” and “needs to be refined.” Costs for building such a line need to be “looked at more extensively,” as well as engineering design and markets. Rutherford said the presumption of the study, which was done under the previous administration, was that the line would have been underwritten by the state and that there were markets that could have generated enough income to repay the outlay.
One of the things that require more study, she said, is “whether or not the markets are actually there,” what the tariff would be and “after the costs whether it could be self-sustaining.”
As for providing affordable energy to Southcentral, Rutherford said one of the things that needs to be done is to compare a bullet line to alternatives such as a Susitna dam.
The 2007 data assumed the bullet line would cost $3.3 billion and carry less than half a billion cubic feet a day of natural gas.
Rutherford told Petroleum News the bullet line study was done under the Stranded Gas Development Act “and its associated confidentiality provisions” and was completed in 2005. Internal updates were done in 2007, Rutherford said.
A study which is public was done for the Alaska Natural Gas Development Authority in 2005 and discussed by Ward Whitmore, who authored the study for Michael Baker Jr. (See On the Web references.)
AGIA would link Alaskans to gas Palin said she wanted to reassure lawmakers that AGIA does include linking Alaskans with their North Slope gas: “That’s the number one goal of AGIA, is jobs for Alaskans and gas for Alaskans,” the governor said.
The state’s oil production is declining, Rutherford said, and “the point of AGIA was to move Alaska’s gas … line project through to FERC certification, so we can have a new revenue source to begin to backfill as our oil declines.”
AGIA’s emphasis on open access is to ensure exploration for and development of new gas, she said, and the lowest possible transportation costs ensure the highest revenues to the state, and low transportation costs for Alaskans who want to take gas off the mainline within the state.
Revenue Commissioner Pat Galvin said the market is shifting and with higher energy costs there may be more opportunity for Alaskans “to simply go with a line that would run gas directly to Alaska’s market and wouldn’t necessarily have to rely upon the economy of scale” of a large gas pipeline. He said a bullet line is something the state should look at, “in conjunction with other projects, to ensure that we look at a full list of options available to Alaskans to lower our energy costs.” It’s not an alternative to a mainline gas project, he said, but it is one of a number of in-state energy projects that should be considered.
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