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Vol. 12, No. 34 Week of August 26, 2007
Providing coverage of Alaska and northern Canada's oil and gas industry

ANGDA on schedule with application

Plans to put AGIA in-state application addendum in public before anyone else has to submit to maximize chance of being picked up

Kristen Nelson

Petroleum News

The deadline for submittal of applications under the State of Alaska’s Alaska Gasline Inducement Act has been extended to Nov. 30.

But the Alaska Natural Gas Development Authority, which will be submitting an application for the in-state portion of the project only, intends to have its proposal available well before the new deadline to maximize the chance that it will be included with main-line applications, ANGDA CEO Harold Heinze told the authority’s board Aug. 15.

“There’s a real advantage to ANGDA and our application addendum being on the table, in the public realm, well before anybody else has to submit anything,” he said.

Heinze said the goal is “to assure that we have the maximum chance of being picked up” and included in main-project applications.

He said ANGDA’s application addendum should be in the public realm around the last week of October.

Many Southcentral utilities

The board got an update on various application-related contracts, including one on scenarios for Cook Inlet energy supply, to determine consumer benefits from a spur line.

Scenarios include: North Slope gas by spur line; other gas sources; coal; renewables; and a fifth plan in which electric utilities in Southcentral “cooperatively develop a mix of fuel sources to generate electric power” and Cook Inlet natural gas is used to meet residential gas demand.

Heinze said the intent of the integrated plan, scenario five, “is to execute the energy development of this area (Southcentral Alaska) as if it was all one,” with customers all paying the same rates.

Because there are a number of utilities in the area, Heinze said “there is no basis today for scenario five,” although there is a basis for some elements. He said that in a similar-sized area in the Lower 48, Southcentral would be served by “half a utility” — instead it is served by seven.

One reason that happened is that gas was “dirt cheap. It didn’t matter that we were inefficient. It does matter now and … how to transition from this very multiple, fractured setup to a combined setup is very difficult.”

Heinze said that is why current discussions between Chugach Electric Association and Municipal Light and Power are so important: If that merger is successful, he said, it’s a big step in the direction of integrating Southcentral’s power utilities.

Spur line issues

Consultant Steve Pratt described educational workshops he is preparing for ANGDA exploring the dynamics of North Slope gas transactions in Alaska concluding with a practice open season.

Topics which would be covered in the workshops include the gas transmission infrastructure that would be available including offtake points. “The whole purpose here is to emphasize the infancy of Alaska’s gas transmission network” and point out that infrastructure development reacts to market forces and if utilities don’t come to an open season, then the infrastructure that is built won’t reflect their needs, Pratt said.

There is an extensive gas pipeline infrastructure in the Lower 48 and because of that, he said, transactions in the Lower 48 are simplified both for buyers and sellers of natural gas.

Also covered in the workshop would be required transactions to get North Slope gas to Cook Inlet. To get North Slope natural gas to Beluga would require: North Slope gas purchase contracts; pipeline take-or-pay contracts in a Federal Energy Regulatory Commission open season; pipeline take-or-pay contracts in a Regulatory Commission of Alaska open season for the spur line; a shipping agreement between Palmer and Beluga; and a storage agreement at Beluga.

The changing paradigm

Pratt said people have to be able to envision, once the infrastructure is in place, that “it totally changes the paradigm for how people can continue to operate their businesses — it increases their options. It gives them different places to obtain energy supplies.” For example, if gas is found in the Copper River basin, gas could be put into the line there. The same would be true at Nenana, he said.

Tariff cost drivers will also be discussed, Pratt said: construction costs; financing; and committed throughput volume. There is very little local control over the first two costs in Southcentral, he said, but there is local control over throughput volume. “The more volume you put into the pipeline, the cheaper it is for everybody,” he said.

Collective action benefitting everyone will be a topic in the workshop, Pratt said.

“It’s actually likely that either everyone’s going to get cost-effective North Slope gas or nobody will,” he said. Chugach Electric Association, ML&P and Enstar are the major local gas purchasers: “If any one of those entities decides that they don’t want to participate in an open season, then it’s likely that nobody will,” he said. And then it would be very difficult to make a spur line happen.

The workshop will help utilities understand how the open season rules and processes work, Pratt said.

The other thing utilities need to think about, Pratt said, is whether they want to participate individually or collectively. There are high costs, he said, for participation. Does it make sense for multiple entities to do all these things, he asked, “or does it make sense for us to do something collectively?” That, he said, is a decision each entity will have to make.

Pratt said an example of an aggregator in the Lower 48 is Public Gas Partners Inc. out of Georgia which acquires long-term gas supplies for participating agencies and large public natural gas or power systems in six states in the Southeast.

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