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Legislature may look at several aspects of gas line Sen. Pearce tells RDC that, in her view, producers shouldn't have ownership position in gas pipeline Kristen Nelson PNA News Editor
State Sen. Drue Pearce, president of the Senate in the last session of the Alaska Legislature and chair of the rules committee for the upcoming session, told the Resource Development Council's 21st conference Nov. 16 that the stars appear to be aligned to commercialize Alaska's North Slope gas, but warned that the state needs to protect its interests.
Pearce said she was “not speaking on behalf of either the Senate nor the entire Legislature, but I certainly will be playing a role as the Legislature goes to Juneau and starts dealing with the issues.”
Recent legislation has been directed toward a liquefied natural gas project, Pearce said, “simply because the project sponsors, the lessees, the administration, consultants and frankly all the legislators and most Alaskans, all believed that other alternatives — whether it be a GTL gas-to-liquids project or gas pipeline projects to the Lower 48 states … were even less likely to be commercially viable.
“But while all of us have been focused on LNG markets in Asia and on removing the economic and regulatory barriers to help Alaska gas penetrate those markets, major changes have been occurring in the domestic gas market that now completely reshape our thinking as we head back to Juneau about non-LNG alternatives.”
Pipeline now the focus The Legislature, she said, has “an obligation to ensure that the state's interests are fairly considered” when a choice is made between competing North Slope gas projects. “In fact I believe that the Legislature will insist upon that participation,” Pearce said.
One thing the Legislature will want to evaluate carefully, she said, is any requests for fiscal concessions from project sponsors. Economic circumstances for marketing gas have changed, and “concessions that were believed appropriate to encourage LNG export projects when no alternatives existed, are not necessarily appropriate for projects that appear to be economically viable on their own merits.”
Pearce noted that the Alaska Stranded Gas Development Act, which was passed to allow negotiation of fiscal terms for an LNG project only, “defined stranded gas as 'gas that is not being marketed due to prevailing costs or price conditions as determined by an economic analysis by the commissioner for a particular project.' If under current and projected price and demand conditions, North Slope gas turns out not to be stranded, the underlying rationale for revising the state's fiscal terms disappears.” Equity an issue Pearce also said she believes that the Legislature will want to look at having the state take an equity position in any project to commercialize North Slope gas, and also said it was her personal view “that producers should not control the pipeline, nor should there be construction management of the pipeline. But the actual control of the pipeline should be held outside of the producers.”
She said that while “the stars seem aligned, from the beneficial effects of the realignment of interests in the Prudhoe Bay unit, to the unanticipated developments in supply and demand relationships which have led to the historically high gas prices we are now experiencing” that if the state spends too much time studying and evaluating “too many non-starter options,” the state may miss this opportunity to get its North Slope gas to market.
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