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Pearce warns of infrastructure delays Federal coordinator says competition not biggest threat to gas line; says costly delays could kill it if needed work not done first Kristen Nelson Petroleum News
Of the things that could get in the way of an Alaska gas pipeline happening this time around some can be managed or will be taken care of by the markets, Drue Pearce told the Resource Development Council.
But, she said, one thing that could kill the project is under the state’s control — needed infrastructure upgrades.
Pearce, federal coordinator in the Office of the Federal Coordinator for Alaska Natural Gas Transportation Projects, told RDC’s annual conference Nov. 20 that she has “become a student of the previous failures on the pipeline,” including delays, cost overruns, natural gas demand dropping and prices tanking.
What it comes down to, she said, is that “pretty much any sector can stop this project.”
She said it isn’t unusual to have two projects competing at this stage. “The competition between Denali and TransCanada Alaska is a positive indication of serious interest by major industry players which should be resolved ultimately in the energy and financial marketplace,” she said.
Competing projects can be a challenge for federal regulators and the Federal Energy Regulatory Commission would “tell you that it’s their worst nightmare to be dealing with two applicants and two EISs, because of the enormous amount of resources that they’re going to have to put forward.”
But the good news is that two owners of natural gas on the North Slope and the largest North American pipeline company are both involved: “... We have all the right people in the room to make this project happen now.” Pearce said she is encouraging the applicants to work together when possible “with the shared objective of getting the project built.”
On the regulatory side she said she would do what she can “to ensure that regulatory stipulations, mitigation requirements and other things in control of the federal government don’t pile on costs to the point where the project is too expensive to build.” Pearce’s office is responsible for coordinating federal permitting for the Alaska gas pipeline project.
Infrastructure a big issue “But there’s a bigger issue,” Pearce said. “... And that’s the infrastructure pre-build that has to happen before this project can be built. It is imperative that we have the necessary infrastructure in place to bring in and stage all the materials that will be used during the construction.” She said there are infrastructure needs in Alaska and the Yukon, “all along the line to upgrade roads and bridges and ports and perhaps the railroad to ensure that we can begin building this pipeline when it is actually sanctioned and when the markets are ready.”
Frank Richards, deputy commissioner of the Alaska Department of Transportation and Public Facilities, told legislators in June that some $2 billion would be required for infrastructure work to prepare for gas pipeline construction.
At a State of Alaska gas line transportation needs meeting Nov. 19 in Anchorage, Richards focused on routes parallel to the gas pipeline and said needs included upgrading bridges, highway, material sites and maintenance camps; improving safety and drivability; and improving maintainability.
According to presentation materials from the Nov. 19 session Richards stressed that there are only six construction seasons, including the current fiscal year ending June 30, until gas line construction — too much work to be compressed into a two- to three-year construction window.
Bad roads add to cost He also stressed that bad roads will slow gas line construction and add to construction costs for the line. The Dalton-Elliott corridor has the highest cost, $1 billion, and includes 32 projects along 415 miles.
The Elliott Highway portion of the Dalton-Elliott corridor, 73 miles from the end of the Dalton into Fairbanks, includes four projects at a cost of $94.3 million.
The Richardson Highway corridor, 95 miles from Fairbanks to Delta Junction, includes 17 projects at a cost of $300 million.
The Alaska portion of the Alaska Highway, 200 miles from the Canadian border to Delta Junction, includes 22 projects at a cost of $600 million.
In addition, there are logistical routes that could be used to move pipe, freight, people and modules: the Parks Highway from Wasilla to Fairbanks, five projects at $384 million; the Glenn Highway from Anchorage to Glennallen, six projects for $67.5 million; the Haines Highway, two projects at $85 million; and the Klondike Highway, three projects at $46.2 million. The projects along the logistical routes total $583 million. Combined with the work along the gas line route, the total is a hefty $2.58 billion.
Pearce drummed home some of the same points.
“The lead time for material to begin to arrive is a lot shorter than some of us recognize: It’s as little as six years.”
She said that for projects to begin before the first gas line trucks start to roll means infrastructure construction needs to get under way next summer.
“Every day, week, month or year that we wait to complete the infrastructure ... will add cost to the project and could in fact be the main reason that this project doesn’t get built,” Pearce said.
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