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Vol. 14, No. 38 Week of September 20, 2009
Providing coverage of Alaska and northern Canada's oil and gas industry

In-state costs by route

Terrain differences, environmental issues a wash — miles the primary difference

Kristen Nelson

Petroleum News

In a first step at determining the economics of in-state gas projects, the state has completed an analysis of pipeline costs for different routes for three types of in-state gas delivery systems.

Harry Noah, project manager for the state’s in-state gas project, presented alternative route analyses for standalone, spur and pre-build gas pipeline projects to legislators in Anchorage Sept. 15.

This is the first phase of a project with what Noah described as a very aggressive schedule: a complete initial feasibility report June 1 of next year; selection of an owner pipeline operator by the first quarter of 2011; project sanction by June 1, 2011; and gas flow by 2015.

The project’s mission, Noah said, is to determine whether the project is economic and if it is to have gas flowing to Fairbanks and Southcentral by 2015.

Legislators got an overview of the routing analysis Sept. 15; complete reports were scheduled to be available on compact disc Sept. 17.

Six routes

Six routes were studied: A standalone line from the North Slope to Southcentral following the route of the trans-Alaska oil pipeline south from the North Slope to Livengood and then following either the Parks Highway or the Richardson Highway to Cook Inlet; spur lines from an Alaska-to-Canada mainline following either the Parks Highway from just north of Fairbanks to Southcentral or the Richardson and Glenn highways from Delta Junction to Southcentral; and the pre-build lines designed to take Cook Inlet gas north to Fairbanks along the Parks Highway to Murphy Dome or along the Glenn and Richardson highways to Delta Junction.

Mike Metz, senior routing engineer with Michael Baker Jr., said the southern end of all of the alternatives was at milepost 55 of the Beluga Pipeline in Southcentral.

The proposed standalone line along the Parks Highway would have a 12-inch offtake line from Nenana to Fairbanks; the Richardson Highway route would have a 12-inch feeder line to Glennallen.

The spur line along the Parks would start at Murphy Dome Road north of Fairbanks; the Richardson-Glenn highways route leaving the main line at Delta Junction follows the route proposed by the Alaska Natural Gas Development Authority, Metz said, with a few minor modifications to improve constructability and lower cost.

The pre-build routes, which push gas north to serve Fairbanks, are identical to the spur route along the Parks Highway; the Richardson route, with a 24-inch line to Delta Junction and a 12-inch line between Delta and Fairbanks, is the same as the Richardson standalone route.

Northern end studied for years

The common route for the standalone and spur lines — south along the trans-Alaska oil pipeline to Livengood — has been studied for years, Metz said, noting that he personally has studied it for 37 years, starting with the trans-Alaska oil pipeline and proceeding through proposed gas line projects.

The first big pinch point is at Atigun Pass, he said. At the Yukon River a new pipeline support bridge would be built or horizontal directional drilling would be used to run the gas pipeline under the river.

Along the Parks Highway there is a pinch point at Glitter Gulch, Metz said, and two routes along McKinley Park, one bypassing the park entirely and running on the east side of the Nenana River; the other paralleling the highway through the park.

$5.2 million per mile

Keith Meyer, senior petroleum engineer with Michael Baker Jr., said construction costs were broken up by terrain types with mountainous terrain the most expensive and rolling country the easiest and least expensive.

Material costs are the same per mile for each type of terrain, he said, but labor productivity is different. The overall average cost per mile came out at $5.2 million for 24-inch line.

For the standalone lines, the Parks Highway at 753 miles has an estimated cost of $3.93 billion; the Richardson Highway route at 845 miles, 92 miles longer, has an estimated $4.41 billion cost, $480 million more than the Parks route.

The Parks Highway spur line, however, is longer at 335 miles than the Richardson spur line at 304 miles, and the Parks spur would cost an estimated $1.71 billion, $170 million more than the Richardson spur at $1.54 billion.

The Parks Highway pre-build, at 335 miles and an estimated $1.76 billion, is shorter and cheaper than the Richardson Highway pre-build at 402 miles and $1.95 billion (67 miles longer and $190 million more for the Richardson route).

No environmental fatal flaws

Michael Sotak, principal environmental consultant with ASRC Energy Services, said there were no environmental fatal flaws for any of the alternatives, with the major difference between them the length of the pipe.

Pat Burden, principal economist with Northern Economics, said there are more customers along the Richardson route, but more demand along the Parks with two coal-fired plants. He noted, however, that it was not a given that coal-fired plants would switch to natural gas.

Demand in Southcentral is 356 million cubic feet per day, he said, with 27 million to 63 million cubic feet in Fairbanks demand once distribution lines were built, with the volume dependent on whether there was a switch from coal to gas.

For the standalone projects there are 1,400 residential customers along the Parks route, 190 commercial customers and three utilities, with a maximum possible gas use of 18.1 million cubic feet per day if the utilities switched to natural gas (17 million cubic feet per day is the utility demand).

On the Richardson standalone route there are 2,300 residential customers, 280 commercial customers and two utilities and a total demand of 2.4 million cubic feet per day.

These are customers along the routes only and do not include customers in the population centers that would be served by the line.

For the spur line projects the Parks route would have 2,400 residential customers, 300 commercial customers and three utilities and a total demand of 18.9 million cubic feet a day, if the utilities switched to natural gas (again, 17 million cubic feet per day is the demand if the utilities switched to natural gas).

The Richardson spur line would serve 2,300 residential and 280 commercial customers and two utilities with a total demand of 2.4 million cubic feet per day.

Pre-build projects would have the same number of customers and same amount of demand as the spur line projects.

Total cost?

Rep. Mike Doogan, D-Anchorage, asked Noah about costs in addition to the pipeline and Noah said looking at the pipeline routes was the first step.

Gas conditioning on the North Slope is the next cost consideration the group will address and then they’ll look at the hydraulic cost, where the compressor stations go. All the pieces will be put together with a logistics plan and once all of the costs are assembled the capital cost will be used to determine the cost of service, using four different flow rates.

Rep. Jay Ramras, R-Fairbanks, wanted to know when this backup plan, the standalone gas line, would become the real project.

Noah said everyone in the state benefits if the big line goes, but by June legislators will have numbers on the cost of service for the in-state options.

If the open season for the main line is successful, gas would be cheaper if it comes on the main line and then on a spur line, but once the administration and the Legislature have the numbers they can determine how to move forward, he said.

Ramras asked at what point this project can be rephrased as the energy solution for Alaska.

Noah said that was a policy question the governor and the Legislature would have to resolve.

In summarizing the pipeline route findings Noah said the major difference was length and that while the number of customers along the routes was generally comparable, Richardson had the larger number of customers while the potential demand along the Parks was greater.

Rep. Les Gara, D-Anchorage, said the first open season for the main line might fail and asked Noah “when do you decide to move ahead” rather than wait for AGIA, the Alaska Gasline Inducement Act project.

“The ‘you’ is actually you the Legislature and the governor,” Noah said.

He noted there are a whole group of things out of the state’s control, but said this project may be within the state’s control.

He suggested putting a standalone project on a schedule and looking at it every few months; if the only thing you can do is this, then put it on a schedule, Noah said.

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Serving western Alaska

As it looks at ways natural gas could be delivered to Alaska residents on the Railbelt, the state is also looking at ways to move natural gas to western Alaska, in-state gas project manager Harry Noah told legislators Sept. 15.

Donlin Creek would have the potential to be a big customer for natural gas going into the western part of the state, but having lower-cost energy could truly have a positive impact on residents in the area, Noah said.

And a winter road into the area would “dramatically” reduce the cost of putting in a pipeline.

While folks in the region worry about the effects of a road, Noah said, that winter road could gradually be improved to provide all-season travel, opening up an area which is highly mineralized.

—Kristen Nelson