Anyone following ANGDA and Enstar even over just the past few months might have been surprised to see the companies sitting at the same table to announce a partnership.
For nearly five years, Enstar has been looking at building either a spur line or a bullet line along the Parks Highway, while ANGDA has been exploring a similar project along the Glenn and Richardson Highways.
The two projects have progressed independently, and when they did cross paths, it was often due to some point of dispute.
Federal money for Parks routeAfter Enstar received a $2 million federal grant in 2005 to study the Parks Highway route, Alaska’s Congressional delegation sent a letter to state transportation officials clarifying that the money should only go toward studying the Parks Highway.
“The Glennallen-Delta route isn’t competing with the Parks Highway route,” the letter read. “ANGDA is fully cooperating with Enstar, and the goal is to have feasibility and conceptual engineering work done on two options for spur pipelines to South Central.”
Sen. Ted Stevens was one of the signatures on that letter, and some questioned the appropriation because Stevens’ son Ben, the former state senator, sat on the board of directors for Semco Energy, the company that owned Enstar at the time.
In early 2007, the Alaska Public Offices Commission fined Ben Stevens $630 for failing to disclose compensation he received as a member of the Semco board.
The state put the Parks Highway project out to bid late last year.
DOE compares two routesBetween 2006 and 2007, the U.S. Department of Energy compared the two routes: a 320-mile spur line running from Wasilla to Fairbanks up the Parks Highway and a 280-mile spur line running from Palmer to Delta Junction through Glennallen.
A draft report released in September 2006 found “essentially no difference in the price of gas delivered to Cook Inlet via either the Fairbanks or Delta Spur options.”
Enstar said it preferred the Parks Highway because it could piggyback on the busiest infrastructure corridor in the state. But ANGDA pointed to the legislative permission needed to pass through the state and federal parks along the highway.
ANGDA preferred the Glennallen route up to Delta Junction because it provided easy access for a future liquefied natural gas plant out of Valdez.
Transitions for both companiesAs work progressed on the two routes, both companies went through major transitions.
Semco asked state regulators in early 2007 to approve a sale of Enstar to the Texas utility holding company Cap Rock Holding Corp., and got that approval by the end of the year.
The sale turned Enstar from a public company into a private one, although state regulators still maintained oversight of the utilities operations and activities in Alaska.
Meanwhile, ANGDA struggled through the whims of two different administrations, each with a different philosophy on how best to get a large natural gas pipeline built. With the tremendous focus on that pipeline over the past two years, ANGDA found itself forced to re-examine its role in the state or face becoming irrelevant.
The original voter initiative that created ANGDA in 2002 revolved around an “All Alaska project” or a gas pipeline running from the North Slope to an LNG facility in Valdez, but that effort lost some momentum during the Murkowski administration.
Following a meeting with Palin after her inauguration in late 2006, then ANGDA board Chairman Andy Warwick told Petroleum News that the Murkowski administration was “very cool” toward an all-Alaska gas pipeline project.
In the final days of the Murkowski administration, ANGDA made a new business plan to help refocus its efforts. In addition to its spur line, ANGDA began taking on projects related to propane and other value-added industries that could be created from a large stream of natural gas moving across the state. It also looked at aggregating the demand from utilities and preparing local companies for an in-state open season.
There has also been shifting personnel. In the fall of 2006, Tony Izzo resigned as president of Enstar after five and half years in charge of the company. Izzo recently signed a one-year consulting deal with ANGDA.
Accelerated efforts in 2008Even with all the work ANGDA and Enstar put into their projects in the past, both companies seemed to be accelerating their efforts this year.
With the call for applications under the Alaska Gasline Inducement Act in late 2007, ANGDA unveiled two possible spur lines designed to fit with any pipeline project.
Around that same time, Enstar said a $700 million to $800 million spur line connecting Cook Inlet to Fairbanks and the Nenana Basin was still a viable option, even without an industrial anchor, and could be built in as little as four to five years.
During the regular legislative session in March, Enstar announced an expanded version of that project: a $3.3 billion bullet line running from Cook Inlet to the Gubik gas fields in the foothills of the Brooks Range. That project would need an industrial anchor and a large supply of natural gas.
ANGDA and Enstar both testified twice during the just-finished special session, updating lawmakers on the fieldwork going on this summer and the plans on the horizon.
Enstar planned to spend $6 million this year on engineering for the Parks Highway bullet line to Gubik, while ANGDA planned to spend as much as $2 million on a wetlands study of the route up the Glenn and Richardson Highways.
Enstar said it had the fastest plan for getting gas to Anchorage. And with a large industrial customer anchoring the end of the line, Enstar believed it could even make that gas affordable for residential customers.
ANGDA argued that the lowest price depended on connecting in-state gas to out-of-state markets, which is only possible through a spur line. ANGDA also said it could shave some construction time by pre-building its spur line.
As recently as late June, the companies seemed fairly at odds: ANGDA began looking for a contractor to study routes between the Gubik gas fields and Dalton Highway, covering the same potential corridor Enstar is currently examining.
State picks Richardson routeAt least in regard to the route, the new partnership favors ANGDA. The state wants the pipeline to run up the Richardson Highway, rather than the shorter Parks Highway route, in order to hit state leases in the Copper River basin.
“We have a public interest in reaching the populations and the communities and the military and the industrial facilities along the Richardson Highway,” Gov. Sarah Palin said on July 7. “In addition, as a resource owner in the Copper River Valley, the state has a significant interest in promoting the exploration and development of energy in that basin.”
But while Enstar agreed to look at the Richardson, it said it would return to the Parks Highway if that ultimately proved to be the best route.
“We’re going to do the right thing for the community. We’re sitting here right now finalizing that decision before digging a trench,” said Gene Dubay, chief operating officer for Continental Energy Systems, Enstar’s parent company.
Depending on how the partnership shakes out, the pipeline could also mean a lot for Enstar. In addition to possibly solving the supply problem that motivated the company to look at spur lines and bullet lines in the first place, owning a piece of the pipeline would mean a larger asset base for a company with a fixed rate of return.
Enstar said it was prepared to build the line without help from the state.
“With the state’s help, we believe that it’s a slam dunk to get this line done,” Dubay said.
ANGDA sees the partnership as the culmination of that voter initiative passed in 2002.
“This is the single biggest, boldest, most-positive thing that’s ever been done to help the in-state gas,” said Harold Heinze, chief executive officer of ANGDA.